Fisheries Committee on Nov. 24th, 2011

[The Chair, Conservative, Rodney Weston]

I call this meeting to order.

I apologize for the late start. We had some technical difficulties, but we're ready to go now.

I'll take this opportunity to welcome our guests here this afternoon. Thank you, on behalf of the committee, for taking the time out of your busy schedules to appear.

Our committee has been studying closed containment salmon aquaculture. We certainly look forward to hearing your thoughts this afternoon and to having the opportunity to ask you some questions.

On that note, I'm sure the clerk has already explained to you that we have certain time constraints to work within. All committee members have timeframes they have to adhere to for questions and answers. We try to stick as closely as possible to these timeframes to allow fair opportunity for all to ask their questions.

I didn't ask who was going to go first with a presentation today. I'll let you decide who wants to proceed first.

You can proceed, Mrs. Aubrey. Thank you once again.

[Maria Aubrey, Senior Vice-President, Operations, Sustainable Development Technology Canada]

Thank you, Mr. Chair, for inviting Sustainable Development Technology Canada, SDTC, to appear before this committee.

My name is Maria Aubrey. I'm the senior vice-president of operations at Sustainable Development Technology Canada. Accompanying me is Keith Watson, who is SDTC's screening and evaluation manager focusing on technology solutions for soil and water, including aquaculture.

As you are aware, SDTC is an arm's-length foundation, a not-for-profit foundation created and funded by the federal government. Our mandate is to develop and demonstrate clean technologies that have the potential to provide environmental benefits in clean air, water, land, and/or climate change for Canada.

SDTC's portfolio is currently comprised of over 220 projects. These projects are from all across Canada and have a total portfolio project value of $2 billion. This is comprised of $548 million from the Government of Canada through SDTC, with the balance coming primarily from the private sector.

The selection process we follow is a two-stage, decision-gated process that maximizes the use of public funds for the development of Canadian technologies while minimizing development and demonstration risk. Our selection is based on rigorous due diligence and a merit-based assessment process. This process integrates the reviews and recommendations from SDTC staff, experts--both technical and business--and an independent investment committee and the final decision by the SDTC board.

These reviews take into account a number of key criteria, including technical innovation and market and environmental potential. In addition, of course, the evaluation includes the capacity of the team to deliver on the scope of the project. All projects must be done on a consortium-based approach. This is to ensure validation by the key players in the supply chain.

The projects are structured in a milestone-deliverable base, with a go/no-go decision-based approach that allows adjustments to the technology as actual data and findings become available, thus maximizing the chances of success while mitigating the risk of failure and protecting public investment. A typical project takes about three to five years.

At the stage of technology development when SDTC invests, venture capital and other sources of traditional funding are typically not available. During the project execution, potential technology adopters, future investors, and regulatory bodies are able to follow the results and be better informed while the de-risking is done in a mitigated fashion and It's made ready for market entry, also raising private expansion capital.

SDTC prioritizes its funding based on the needs of industry, in consultation and alignment with government priorities. One of the sectors that industry identified a technology gap in is aquaculture. Salmon farming is an important industry for Canada, with a strong domestic and foreign demand for Canadian product. However, the industry has been engaged in a debate around the ecosystem and environmental implications, such as risks of disease outbreaks, discharge of waste and pollutants into the water supply, escapes of non-indigenous species, and transfer of disease from farmed salmon to wild salmon.

Closed containment has the potential for major environmental benefits in salmon farming by reducing the risk of spread of disease, improving feed conversion rates, and reducing environmental discharges such as solids, nitrogen, and phosphorous, but these technologies are not yet proven at a commercial scale in a real-world application. That's why SDTC has chosen to invest in this area. If successful, closed containment provides the aquaculture industry with alternative means to address this economic potential in an environmentally sustainable fashion.

SDTC has received seven aquaculture salmon-rearing-related applications through the course of the last six years and we have committed funding to two of those: the Middle Bay Sustainable Aquaculture Institute floating closed containment technology in 2007, and the 'Namgis First Nation land-based recirculating system, RAS, in 2011.

Total SDTC committed funding for these two projects is $8.2 million. About another $15 million in investment is being contributed by other sources. The SDTC funding has leveraged industry funding as well as contributions from the Gordon and Betty Moore Foundation, Tides Canada, the Department of Fisheries and Oceans, and Western Economic Diversification.

I'll keep my remarks about each of these projects brief, given that both proponents have presented or will be presenting to the committee. My colleague, Keith Watson, can answer project-specific questions.

The Middle Bay floating solid-wall technology is a significant technical innovation with a novel design. It is a floating solid-wall tank, 25 metres in diameter, that contains 3,000 cubic metres of water. Think of it as a massive fish aquarium floating in water.

This technology is intended to increase isolation of the salmon-rearing process from the aquatic environment beyond what is possible with the commonly used open net-pen salmon grow-out technology. The technology minimizes the potential for disease spread. The waste associated with rearing the salmon is collected. The conditions in the tanks can also be controlled to increase the growth rate of the fish and to reduce the mortality rate, thereby increasing production efficiency.

The proposed technology is a variation on the land-based tank technology, redesigned to float in the ocean. The project started with construction of an initial tank. It was followed by a subsequent tank once the operation of the initial tank was confirmed. The materials used in the construction of the tanks have evolved to meet the aggressive nature of the open ocean sites along the Canadian coast.

The project remains in its early stages, with one tank deployed and a second under construction. The tank was installed in Campbell River and was stocked with smolts in January 2011. The smolts have grown significantly, from 35 grams in January to over 800 grams by the end of September 2011, which has exceeded expectations.

The project partners have also secured an MOU with an industry distributor for purchase of the salmon, which completes the supply chain.

The project of the 'Namgis First Nation, from whom you recently heard, has been approved for funding by SDTC. They will develop and demonstrate a commercial-scale recirculating aquaculture system salmon-rearing module near Port McNeill, on Vancouver Island.

The 'Namgis will build on their expertise operating DFO's Gwa'ni hatchery. The RAS system and technology has been used in raising other fish species, such as tilapia and catfish, and is now, through this project, adapting to the larger, more sensitive salmon. The technology aims to improve isolation during the rearing process by establishing land-based rearing tanks that replace 20% of the water per day.

The environment can be controlled to provide optimum growing conditions for the fish. The benefits of the technology include the elimination of discharge into the aquatic environment and soil benefits from the production of compost. The development of the technology is supported by the Freshwater Institute in West Virginia. Our contracting of this project is currently under way, and pre-project design has commenced.

Both of these projects show great potential for new, innovative salmon-farming techniques.

In conclusion, industry has identified the challenges of current salmon-farming methods and has brought forward closed containment as a potential solution to address this need. While these technologies offer promising environmental and economic returns, this can only be proven through demonstrations in real-life settings.

The reality is that industry and private investors consider these types of early stage investments to be too risky, with uncertain economic returns; however, if the economic viability of these technologies is demonstrated, they are quite willing to invest in the deployment of these technologies. Public funding through SDTC, in partnership with industry, helps to fill this gap and gives Canada a leadership position in closed containment.

Thank you.

[The Chair, Conservative, Rodney Weston]

Thank you, Ms. Aubrey.

Ms. Emrick.

[Catherine Emrick, Senior Associate, Aquaculture Innovation, Salmon Aquaculture Innovation Fund, Tides Canada Foundation]

Thank you, Mr. Chairman and honourable members, for this invitation to speak with you today.

My name is Catherine Emrick. I'm the senior associate for aquaculture innovation with Tides Canada. I'm a fellow of the Certified General Accountants Association, a designation that I'm proud to share with Mr. Hayes and Mr. Allen. I hold an M.B.A. and a Bachelor of Laws from the University of Calgary. In addition to my work with Tides Canada, I practise environmental, administrative, and regulatory law, primarily in northern Canada.

Tides Canada creates opportunities to pool ideas and resources to solve complex environmental and social problems.

The salmon aquaculture innovation fund was created to help develop alternative models and technology to traditional open-net aquaculture in B.C. Our goal is to protect B.C.'s wild salmon while building an aquaculture industry that's viable and sustainable. This work involves close collaboration with governments, industry, environmental organizations, and first nations to explore and advance the adoption of closed containment production systems as a means to foster protection of the environment and of wild salmon.

The objective of the innovation fund is to support research into the following aspects of closed containment technology: biological factors affecting fish growth and welfare; technological innovations to optimize growing conditions and minimize costs of production; technology to maximize the value of the waste stream; assessment of the economic feasibility; the environmental performance; and the social impacts.

The concept of the innovation fund came from early work to assess the feasibility of land-based closed containment aquaculture. For many years, a number of reports, studies, and commissions have considered the idea of moving salmon aquaculture to closed containment.

At a workshop hosted in 2010 in conjunction with Simon Fraser University's “Speaking for the Salmon” series, while agreeing that closed containment technology was technically feasible, two different views of the economic potential for closed containment were put forward in presentations by the Department of Fisheries and Oceans and by Dr. Andrew Wright.

At that workshop, there was considerable discussion about the differences in assumptions in these theoretical exercises. It became increasingly clear that there was a need for and value in a full and transparent assessment of the technical, biological, and economic feasibility of closed containment.

Since that time, the innovation fund has raised $4.8 million through the generous support of the Gordon and Betty Moore Foundation and a group of committed Canadian donors. This funding is used to match industry and government funding to projects directly, as well as to provide a broader range of projects with technical advice and to deliver workshops that help to disseminate research and project information to achieve the objective of the innovation fund.

The innovation fund supports projects in different ways. For example, in partnership with several funding programs, including Sustainable Development Technology Canada, the fund provided direct funding for the early feasibility study and detailed design work, and has approved funding for the construction and operation of the 'Namgis First Nation's K'udas pilot project.

The fund supports Marine Harvest Canada's closed containment salmon aquaculture pilot project through the administration and funding of an independent project review board designed to support the planning, development, operation, independent evaluation, and communication of the results of that project, in a manner that ensures the critical components of transparency and credibility.

To help create an industry cluster in B.C., following on Western Economic Diversification's lead, the innovation fund is currently considering an application for support of the University of British Columbia's InSEAS aquatic research facility and a related research program into optimization of production environments for recirculating aquaculture systems.

Our interest in this UBC project comes from first-hand experience with how important the research programs conducted at the U.S. Department of Agriculture-funded Freshwater Institute and the Nofima Centre for Recirculation in Aquaculture in Norway are to developing closed containment capacity, and we think it's important to develop similar research capacity in B.C. and in Canada.

As we learn more from demonstration projects, we are also interested in supporting specific innovations. For example, we know there is significant potential for innovation to reduce energy costs, and we want to encourage research in this area.

There are other ways in which the innovation fund supports the achievement of the fund's objective. In addition to providing direct funding to selected projects, the innovation fund is committed to providing technical fish husbandry and project management training and mentoring support to a range of projects under development in B.C.

Tides Canada has contracted the U.S.-based Conservation Fund's Freshwater Institute, the leading research institution for recirculating aquaculture systems, to extend design and fish husbandry resources to stakeholders such as the 'Namgis First Nation and Marine Harvest Canada and others who are working to implement land-based closed-containment systems for salmon grow-out in B.C.

Our funding agreements require that funded projects share the information gained with a broad range of stakeholders. To support this requirement, in early 2011 the fund's technical advisory committee completed the development of a comprehensive set of performance metrics to gather data about the technical, biological, environmental, economic, and social performance of closed containment salmon aquaculture projects.

We have reported research outcomes from projects supported by Tides Canada, and the adoption by other funding programs of Tides Canada's performance metrics as reporting requirements, in whole or in part, has created consistent, comparable, and streamlined reporting of project outcomes across multiple projects and funders.

These performance metrics will help to inform assumptions in a number of economic models and in the cost-benefit analysis that is being undertaken. To support the dissemination of relevant research and to create a forum to share information about closed containment projects globally, Tides Canada, in partnership with the Freshwater Institute and the Gordon and Betty Moore Foundation, offers semi-annual aquaculture innovation workshops.

The most recent workshop was held in September 2011. We had over 100 participants from countries including Chile, Norway, the U.S., Denmark, and Canada come together in Campbell River, B.C., to discuss the latest developments in closed containment technology for salmon aquaculture.

Through these activities, Tides Canada stands behind the practice of bringing together a broad and diverse range of stakeholders and leading researchers in the field. Workshop agendas and presentations are available through the Tides Canada website.

Going forward, I believe the greatest opportunities for the innovation fund, our funding partners, and projects are in these areas: innovation to further reduce energy costs; research into improved feed formulation for water quality and conversion rates; optimization of water quality; increased reuse of water and the maximization of production density; taking advantage of the value of the waste streams, for example through aquaponics; and supporting commercialization through mechanisms such as branding and market access programs.

I would also like to take this opportunity to talk a little about how I think we can help better support this work. Working with funding partners such as SDTC and the Department of Fisheries and Oceans aquaculture innovation and market access program has been a very positive experience. While we share many common goals, each program also has slightly different objectives and mandates. There is value in this. For example, SDTC's excellent due diligence process assists projects like the 'Namgis one to consider all of the commercial components and potential of the project, as well as to prepare to obtain the venture capital that will be necessary for scale-up.

While these processes are useful, multiple applications, due diligence, and reporting requirements create a burden on project proponents whose expertise is likely not in preparing applications or in grant management. Accordingly, it is important that as funding partners we have flexibility within our programs to work together to minimize the administrative burden on project proponents. We hope the work that Tides Canada has done to create common performance metrics and the willingness of federal funders to adopt these to the extent consistent with their mandates are good steps forward and that there are more opportunities like this to collaborate with our funding partners.

Having worked with the 'Namgis First Nation over the past two years, we know that a commitment to early feasibility and design funding is important to lay the foundation for a successful project going forward. Through the conceptual design and detailed design phases, we have learned a great deal, particularly about on-site requirements, production strategy, and heating options. This information is now being shared with other projects that are under development, and it helps to provide significantly more certainty as the 'Namgis project moves forward into construction and operation.

It is important, therefore, that funding programs provide for this flexibility both in their timelines and in the funding needs in the early stages to support this process. As the demonstration projects provide information that we hope will lay the groundwork for commercialization, we can also help prepare for this next phase. We can do that by clarifying and streamlining environmental assessment and aquaculture licensing processes, by building capacity and incentives to assist projects with accessing expansion capital, by supporting applied research programs, and by building branding programs.

Thank you very much for your time today and for undertaking this important study.

[The Chair, Conservative, Rodney Weston]

Thank you very much, Ms. Emrick.

We will move to the questions now.

Mr. Sopuck.

[Robert Sopuck, Conservative, Dauphin—Swan River—Marquette, MB]

Thank you very much.

Thanks to our presenters for being here.

Ms. Aubrey, my first question is for you. In your remarks, you talked about the environmental issues with current salmon-farming methods and the challenges facing current salmon farming--the environmental challenges. Did your evaluators put forward any opinion on the scientific accuracy of the claims of the damage of open-net aquaculture?

[Maria Aubrey]

I will pass this over to Mr. Watson for the detailed answer.

Just as an initial comment, the reviewers focus on evaluating the information presented and whether there is substantive documentation and material to be able to get to an analysis of it. Sometimes they are not necessarily able to reach a conclusion. We need to make sure we have sufficient information to be able to start that evaluation.

[Keith Watson, Manager, Screening and Evaluation, Sustainable Development Technology Canada]

Our reviewers looked at the technical information provided by the proponents. Each of the reviewers has expertise in their own area. One has a master's degree in aquatic toxicology, and the other has a Ph.D. in aquaculture. Both are very familiar with aquaculture issues. They are familiar with the technical and scientific issues related to that, and they apply these to their analysis.

Their scientific information is based on the information available on various websites and in various technical government documents that are publicly available, and they're also watching with interest, as are the rest of us, the information provided by the Cohen commission. We will see the definitive information come out of a lot of the results of these scientific reviews.

[Robert Sopuck, Conservative, Dauphin—Swan River—Marquette, MB]

Thanks.

Again, I think we really need to be careful about statements that automatically assume something, because what flows from an assumption is often a program and contrary to a lot of people.... To me, on any topic, the science is never settled.

Ms. Emrick, do you believe that wild salmon populations are being negatively affected by net-pen aquaculture? Is that the position of Tides Canada?

[Catherine Emrick]

The focus of the salmon aquaculture innovation fund is specifically on a transparent assessment of closed containment technology and, underlying that, there is the debate on what are the nature and extent of the impacts of open-net aquaculture on the marine environment.

The turning point, in terms of looking specifically at closed containment, came at the workshop I talked about, and it came from the work that the Department of Fisheries and Oceans did on assessing whether there were potentially alternative technologies and on whether those alternatives should be evaluated. Really, the focus of the work we do is on looking at whether this is a viable alternative.

[Robert Sopuck, Conservative, Dauphin—Swan River—Marquette, MB]

I understand that, but again, the assumption behind all of these efforts is that there are environmental issues with net-pen aquaculture, and I think the science on that is clearly not settled.

Let me just point out to you.... I was given a quick e-mail from DFO. They talked about how in 2010 the Fraser River sockeye returns were 30 million, the best return since 1913. In 2011 that return was 4.5 million, which is an average return. They noted that 2011 was a good year in general for all salmon species, with Skeena River sockeye above expectations and Barkley Sound sockeye the same. Salmon Inlet on the central coast had a sockeye fishery for the first time in 15 years. The pink salmon return was doing very well, and 2011 was the best recreational salmon fishery.

I just hope that what we are doing is not a solution in search of a problem. Again, I find that all our witnesses gloss over the central issue, which is: does this affect wild fish and is this effort going to bear fruit?

Ms. Emrick, do you think the goal ultimately should be the complete elimination of net-pen aquaculture and a move strictly toward closed containment?

[Catherine Emrick]

We need to see the results of the demonstration projects in terms of understanding what the opportunity is with closed containment.

From the work I have seen to date and from the economic analysis I've seen to date, which has to be verified through these demonstration projects, where could I potentially foresee it going...? I think there are siting and density issues with some of the farms, so there is an opportunity to help better manage those farms through new technology.

[A voice]

Through new net-pens?

[Catherine Emrick]

Yes. I think there is some opportunity to better help manage those farms through technology as it evolves. In an ideal world.... Closed containment offers an opportunity to not just protect the marine environment, but also to farm fish in a better way in terms of giving them the best growing environment possible and creating the kind of growing environment where there are better feed conversion rates so there's a better use of feed.

As we start to explore the technology and look at it, I can foresee that in 10 years' time it becomes the production technology of choice, but we need to take this one step at a time, and the transparent and full assessment of the technology is the step that we need to take.

[Robert Sopuck, Conservative, Dauphin—Swan River—Marquette, MB]

One thing that really concerns me is that in terms of coastal communities, current net-pen aquaculture supports 6,000 full-time jobs in remote coastal communities.

The thing about closed containment, which is both good and bad, is that it can be done almost anywhere. Prairie Canada, where I come from, has very inexpensive land, hydro rates are low, and we're fairly close to markets. I can see that if we ever were to move to closed containment aquaculture only, there would be some serious employment impacts on remote coastal communities. Would you care to comment on that?

[Catherine Emrick]

I will. In terms of the salmon projects that I've been involved in, it appears that the optimum conditions are going to be slightly saline water. The best locations for those so far, both in terms of Marine Harvest Canada's assessment for their project and also in terms of the 'Namgis project, have been in remote coastal communities.

I know of other first nation communities that are assessing the potential for their communities. One of the witnesses that the committee might to hear from is someone from Coast Opportunity Funds, because I know they have been monitoring and have a significant interest in the potential for the technology.

[Robert Sopuck, Conservative, Dauphin—Swan River—Marquette, MB]

I think my time is up.

Thank you very much.

[The Chair, Conservative, Rodney Weston]

Mr. Tremblay.

[Jonathan Tremblay, NDP, Montmorency—Charlevoix—Haute-Côte-Nord, QC]

Thank you, Mr. Chair.

My thanks to the three of you for coming to help us with our study.

My first question is for the representatives from Sustainable Development Technology Canada. You have recently supported two projects, including one by William Cranmer of the Namgis First Nation.

Can you tell us about the second project, known as Middle Bay? You talked about it a little, but could you please tell us why you were interested in that project?

[Maria Aubrey]

Certainly. From a general project prospective, as I indicated earlier, the project was funded in 2007. It was one of the first projects that SDTC approved in this area. At the time, we utilized the information that was available in working with DFO.

One of the other things we also brought to bear was to make sure that the regulatory bodies and the people who were interested in the information were participating in the steering committees, so that we could have as much knowledge going in and understanding of the issues as possible.

That project is a $17-million project. SDTC has invested $5.7 million and, as I indicated before, it has been an evolution. That project is on water--not land--for closed containment.

Maybe I could pass this over to Keith, who can get a little more technical, since I'm definitely not on the technical side of the equation.

[Keith Watson]

Thank you.

The closed containment floating system is very unique in that it has a solid-wall system that floats in the ocean and isolates the salmon from the surrounding environment. It takes water in--you'll get this information, as I believe AgriMarine is going to present to you later next week--at depth, which avoids a lot of the potential contaminants, brings it into the tanks, circulates it in the tanks so that it has a current to keep the fish active, and then creates almost a vortex, a mild vortex, if you will, that's like a bathtub. It draws the waste out the bottom, takes the water away, separates out the solids, and recirculates the water back into the ocean.

It keeps the fish contained. It avoids a lot of the potential for contamination and transfer of disease. Of course, it's a multi-tank system, so you can stage the growth of the fish through various tanks. If for some reason or other you happen to come across a problem in one of the tanks, you can simply isolate it and move to another tank. It's an evolution, if you will, from the net-pen process to a solid-wall process, working on a lot of similar theories.

[Jonathan Tremblay, NDP, Montmorency—Charlevoix—Haute-Côte-Nord, QC]

If I understood correctly, the mission of your organization is to fund and support the development and demonstration of clean technologies and to act as a kind of catalyst for the establishment of technological infrastructures and sustainable development. You just explained those two aspects.

Can you tell us in more detail why those two projects in particular meet your criteria?

[Maria Aubrey]

When we evaluate a project, we look at it from all aspects of sustainability. The first thing it must have is innovation.

Innovation can be that it's new intellectual property being developed, or it can be that you're taking a technology that exists today and redeploying it to address a need. That's the very first thing. If there is no innovation, the SDTC does not fund it.

The second but equally important point is that there has to be a market and a need. Sometimes it's a push; sometimes it's a pull. It is up to the proponent to be able to express that--and also for us to validate that there is indeed a need.

The next one, of course, is that even though there may be a push or a pull, there must be the economics that will make it feasible. So having a business plan and a pro forma of how they're going to arrive at that are the things that need to be demonstrated.

The last one, which is equally important, is that it has to have environmental benefits. If it's just a technology that is good for the economy, we would not address it because of our mandate. It has to be clean water, clean soil, clean air, or reductions in greenhouse gas emissions. Our preference would be that it's a combination of those, because you get more for your investment.

When you take a look at each of those criteria, you can see that both of these projects have met them. The argument is whether there is sufficient requirement for the investment or industry can do it on its own. That's where we evaluate whether the investment is there, the level of risk required, and also whether industry is willing to step up to the table to evaluate it and say that if this is demonstrated they'll adopt it and take it to market.

[Jonathan Tremblay, NDP, Montmorency—Charlevoix—Haute-Côte-Nord, QC]

In your opinion, are the funding programs and levels currently available from the Government of Canada sufficient? If not, what should the Government of Canada do to help make things easier?

[Maria Aubrey]

Mr. Chair, am I allowed to make a pitch for SDTC at this point?