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The False Promise of Ocean Aquaculture in Hawai`i

The False Promise of Ocean Aquaculture in Hawai`i

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For the past 10 years, Hawai`i’s state-controlled waters have been a testing ground for the industrial ocean fish farming industry. But after a decade and an investment of millions in taxpayers’ dollars, it is clear that the industry has not lived up to its promises of both economic and environmental sustainability. Instead, industrial fish farming has damaged ocean ecosystems, infuriated native Hawaiian rights groups and contributed little to the local economy.
For the past 10 years, Hawai`i’s state-controlled waters have been a testing ground for the industrial ocean fish farming industry. But after a decade and an investment of millions in taxpayers’ dollars, it is clear that the industry has not lived up to its promises of both economic and environmental sustainability. Instead, industrial fish farming has damaged ocean ecosystems, infuriated native Hawaiian rights groups and contributed little to the local economy.

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Published by: Food and Water Watch on Feb 18, 2010
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01/06/2013

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The False Promise of Ocean Aquaculture in Hawai`i
Viable alternatives to open-ocean aquaculture exist,including local and culturally appropriate methods such astraditional ish ponds (
loko i`a
) and land-based recirculatingaquaculture systems (particularly aquaponics). Legislatorsshould consider prohibiting the expansion of commercialopen ocean aquaculture to conserve state resources andprotect them for future generations. Resources should beredirected to the restoration of 
loko i`a
and development of land-based recirculating aquaculture.
Ocean Aquaculture in Hawai`i
The United States Department of Commerce promoteddevelopment of an open-ocean aquaculture industry asa priority in the 1990s, and Hawai`i became the nation’stesting ground. As part of the experiment, in 1998,the federal government inanced the Hawai`i OffshoreAquaculture Research Project (HOARP) off Ewa Beach,O`ahu.
1
After only one year of experimentation and muchlobbying from industry enthusiasts, Hawai`i amended itsoceans leasing laws to allow commercial development of ocean ish farms. Shortly thereafter, despite documentednegative environmental impacts, HOARP was sold to aprivate, for-proit venture and became the nation’s irst commercial ocean ish farm.
2
It is now owned by HukilauFoods, LLC — a subsidiary of Grove Farm Fish & Poi LLC— which plans to increase the site from 28 to 61 acres andquadruple its production of 
moi
(Paciic threadin) from 1.5million pounds to 5 million pounds by 2013.
3,4
The second existing commercial ocean aquacultureoperation is Kona Blue Water Farms Inc. (KBWF) whichrecently transferred lease ownership and operation of theoffshore aquaculture aspects of its business to a newlyformed company, Keahole Point Fish LLC.
5
The 90-acre siteis located off Unualoha Point, Hawai`i Island, and visiblefrom the International Kailua-Kona Airport.
6
KBWF’sfacilities are in “Class AA” waters — determined by statelaw to be kept in their “natural pristine state. ”
7,8
Although“the support and propagation of shellish and other marinelife” is an allowed use under the law, it is doubtful that lawmakers had intended such facilities to be factory ishfarms.
9
 
F
or the past 10 years, Hawai`i’s state-controlled waters have been a testing groundfor the industrial ocean sh farming industry. But after a decade and an investmentof millions in taxpayers’ dollars, it is clear that the industry has not lived up to itspromises of both economic and environmental sustainability. Instead, industrial shfarming has damaged ocean ecosystems, infuriated native Hawaiian rights groups andcontributed little to the local economy.
FISH
Ocean sh farming, also known as open-ocean aquaculture andother, similar terms, is the mass production of sh in large oat-ing net pens or cages in ocean waters. Photo courtesy of NOAA.
 
Three further ventures are in the works for Hawaiianwaters, including: Hawai`i Oceanic Technology Inc. (HOT),Indigo Seafood (IS) and Maui Fresh Fish LLC (MFF). BothHOT and IS are proposing operations off of the north KohalaCoast, Hawai`i Island.
10,11
MFF requested a lease for a siteoff of Lana`i Island in 2007 but met with resistance fromlocal ishermen and it is unclear at this time if the venturewill move forward.
12
HOT’s goal is the production of 12million pounds of yellowin and big eye tuna annually at a 247-acre proposed ocean lease site, using 12 enormouscages.
13
Two contested cases iled by native Hawaiiansagainst the Board of Land and Natural Resources decisionto award HOT a Conservation District Use Permit areawaiting judgment.
14,15
 Should the HOT operation move forward, it would expandthe industry’s current overall production by 530 percent.
16
 Factoring in the projected increase in production at Hukilau Farms, industry production would increase by780 percent.
17
Given the demonstrated negative impactsof operations at the current production capacity, sucha drastic increase is cause for great concern and shouldbe addressed by the legislature. But, because permittingis done on a case-by-case basis, the overall cumulativeimpacts of increased production on ocean ecosystems arenot being considered.
Economics
The ocean ish-farming industry in Hawai`i has been therecipient of much government investment and promotionat both the state and federal level. Unfortunately, it isquestionable whether the return to the local Hawaiianeconomy is comparable to the costs paid by taxpayersand the environment, especially when weighed against alternative ish farming methods such as land-basedrecirculating aquaponic systems.
Public money for private prot 
KBWF (now owned by Keahole Point Fish LLC) and HukilauFarms combined plan to create 39 jobs by 2013. Thesejobs will cost taxpayers more than $84,000 each whenfactoring in over $3.3 million in public subsidies that thecompanies have beneited from directly or indirectly — not including Hawai`i Act 221 High Tech tax credits.
18,19, 20,21
Thestate derives only a small percentage in rent from oceanleases — with a base around $2,000 per year or 1 percent of revenue, whichever is greater, that is funneled back intothe administrative costs of the aquaculture development program.
22,23,24
But despite ongoing inancial support andlow lease costs, both of the ocean ish farms in Hawai`i havebeen delinquent in rent payments.
25,26
Economically unsustainable
KBWF has demonstrated that its model of commercialaquaculture is not proitable. In January 2010, KBWF soldits ocean ish farm to Keahole Point Fish LLC.
27,28
Despite$1.8 million in funding from NOAA, nearly $200,000 infederal stimulus grants and contracts, Hawai`i high-techtax credits, nearly $10 million from investors and a product sold only in high-end restaurants and retailers, KBWF didnot achieve a level of proitability to sustain its grow-out operations.
29,30,31,32,33
On January 8, 2010, the Board of Landand Natural Resources unanimously approved the transferof KBWF’s lease for 90 acres of Hawaiian waters to acompany registered just two months prior as a foreign LLCin Delaware — Keahole Point Fish LLC.
34,35
The board failedto question the applicants who were present at the meetingabout their experience and how they proposed to turn thefailing KBWF into a proitable enterprise.
36
KBWF willcontinue to manage sales and marketing of Kona Kampachias well as conduct research at their land-based hatchery at Natural Energy Laboratory of Hawai`i Authority.
37
 
Economic comparison between ocean sh farming and land-based aquaponics
Because the existing ocean ish farms in Hawai`i are privateventures, their inancial records are not accessible tothe public. Therefore, the total amount required to fundone farm is unknown. However, what is known is that $13 million is being invested in the expansion of HukilauFoods.
38
This number does not account for the moneyinvested in starting HOARP or Cates International.Viable alternatives such as recirculating aquaculturesystems could provide a better investment. A comparison
Pacic threadsh off the Hawaiian coast. Photo courtesy of NOAA.
 
between the Premier Organic Farms’ recirculatingaquaponic system in Memphis and Hukilau Foods showsthat the ventures expect to have similar sales in ishproducts (with Premier Organic expecting 9 percent morein sales).
39
However, Premier Organic Farms will provide
11 times as many jobs
and more than
twice the amount of ish —
 
plus 43 million pounds of produce.
It will alsobe far more proitable, recuperating start-up costs withinthe irst year and perhaps achieving over
11 times therevenue
that Hukilau Foods will in year one.
Hukilau Foods
1
Ocean Fish FarmingPremier Organic Farms — Memphis
2
Recirculating Aquaponics
Sales in sh(per year)
$20 million (projected) for moi$22.3 million (projected) for tilapia
 Jobs
25 for hatchery and administration282 full-time operations and production jobs
Fish production(per year)
5 million pounds11.44 million pounds
 Additional  products(per year)
None7.7 million pounds of Boston lettuce/arugula16.9 million pounds of baby greens/spinach/mixed greens6 million pounds of herbs12 million pounds of tomatoes
 Additional sales(per year)
None$114.5 million in vegetables(Total sales $136.8 million, sh and produce)
Initial capital investment 
$13 million now being invested (fromprivate investors and federal sheriesloans) to scale up from 1.25 million poundproduction levels.
3
$4.2 million to build sh production unit and tilapiangerlings and sh food$50 million total costs (including land, greenhouseconstruction, cafeteria and daycare facility for employees’children)
Potential prot 
Less than $7 million in the rst year
4
$78 million in rst year (earnings before tax, depreciationand amortization)
Space used 
61.59 acres of seaoor plus the watercolumn100 acres of land
Water used 
15.9 million gallons will be constantlyowing through the cages at a rate of 0.5-2.0 kts40 million gallons of captured rainfall (for tilapia andplant production)
Energy used 
Numbers unavailableZero-impact operation — the system is in alliance withother industries. It will provide heated rain/wastewater forenergy plants to use and will get excess energy from theplants to use for its operation
1
Information drawn from: Aquaculture Planning & Advocacy, LLC. “Final Environment Assessment: Proposed Expansion of Hukilau Foods Offshore FishFarm, Mamala Bay, Oahu, Hawai`i.” July 29, 2009. Sales, Jobs, Fish Production and Initial Capital Investment at p. 22; Space Used at 8; Water Use at 3(volume of cages) and 28 (current speeds) with calculations conducted by Food & Water Watch for gallons of water based on volume of cages. 1 cubicmeter = 264.172052 U.S. gallons
2
Information provided by Susan Bedwell, CFO, Premier Organic Farms, September 15, 2009. Information on le at Food & Water Watch.
3
The company plans to invest $13 million, as quoted in Aquaculture Planning & Advocacy LLC, Op cit. This gure does not include the money thatwas invested in starting up the Hawaiian Offshore Aquaculture Research and Demonstration Project or Cates International, the predecessors of HukilauFoods. $13 million does not necessarily represent the money that would be needed to start Hukilau Foods from scratch.
4
This is a generous calculation. Hukilau Foods projects a total wholesale value of $20 million when the operation is at full capacity, but it doesnot actually plan to reach full production until year three. $7 million would be the maximum revenue possible after recuperating the $13 millioninvestment if the company did reach $20 million in sales that rst year (a lower revenue is actually expected). Plus, because nancial gures prior tothis expansion were not available, this calculation does not gure in the nancial status, or debt, Hukilau was in prior to this expansion.

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