Cantech Letter interviews Richard Buchanan, CEO of Agrimarine

The capabilities of many electronic devices, for instance, are governed by the number of transistors that can be placed on a circuit. Moore’s Law, a surprisingly accurate rule of thumb attributed to Intel co-founder Gordon Moore, says chip capabilities double every eighteen months. This may not be readily apparent on a daily basis, but compare the price and processing power of your shiny new MacBook Pro or Sony Vaio to the computer you had in 1997 and it’s easy to understand.

There’s no Moore’s Law for the cleantech industries, but simply comparing eras yields similar results. We no longer smoke on airplanes, but this wasn’t banned by the FAA until 1989. The Clean Water Act, which has prevented billions of pounds of pollutants from entering rivers, wasn’t enacted until 1972. Leaded gasoline, which has been described as “one of the greatest public health failures of the 20th century” wasn’t entirely banned in the US until 1991, and not until 2000 in the EU.

One environmental issue that seems to be nearing a tipping point is fish-farming. In a recent editorial, The David Suzuki Foundation’s Jay Ritchlin, citing the risk of disease and parasites, and environmental impacts from escapes, pollution and predator control, called for the removal of open net-cage salmon farms a transition to closed-containment technologies.

Founded in 1993, Vancouver-based Agrimarine’s (TSXV:FSH) corporate history is something of a catalogue of the collective knowledge and history of commercial aquaculture. The company has quietly become a world leader in closed containment systems that operate in the marine environment and replicate natural conditions more closely than has ever been done before. With successful harvests underway and key business relationships solidified, Agrimarine has emerged from a lengthy R&D stage with technology that may be the better mousetrap that fish-farming needs in the 21st century.

Cantech Letter’s Nick Waddell sat down with Agrimarine CEO Richard Buchanan recently to discuss what’s next.

Richard, since the last time we talked a lot of things that were concepts for AgriMarine have now become reality. Could you catch us up on what the company has achieved in the past twelve to eighteen months?

Sure, Nick. As you may recall, the engineering and development of our technology was undertaken in Campbell River, British Columbia. We commercialized this technology, initially, in China, building a farm with trout production in Liaoning Province. We subsequently implemented our project in Campbell River in 2010 with the assistance of the Moore Foundation and Sustainable Technology Development Canada (SDTC), who has partly funded this project. As per our agreement with SDTC, we will be installing three additional tanks in Campbell River by the end of June of this year. We’re expecting one tank delivery from China in May and two from Seattle in June to complete the demonstration facility.

What happened recently with the tank in Campbell River?

When we finished installing the first tank, we put approximately 50,000 Chinook salmon fry in the marine-based, floating closed containment tank and commenced the grow out. This pilot tank served to prove the technology for salmon rearing and allowed us to test the life support systems, backup systems and mooring systems in the marine environment. Unfortunately, we had an incident in March of this year with a severe storm which compromised some of the wall panels. We were concerned about the structural integrity of the tank, so although we had planned to harvest after fifteen months, we decided to harvest the salmon at thirteen months old. We delivered the Chinooks to Safeway, USA.

Do you know what was deficient with the tank and how you can improve it?

Yes. The failure occurred due to inadequate resin infusion in the fibreglass. We have since been able to improve on that deficiency with a different manufacturer with wind-blade fabrication expertise. The wind power industry uses similar resin infusion techniques. We have also improved the quality of construction materials and we’re now using a marine grade resin, which is much stronger. We have also redesigned the whole tank to resemble a large barrel with overlapping flanges. We located a fabricator in Seattle that manufactures parts for Boeing that can produce the tanks parts cheaper and faster than currently at the plants in China. We have also changed the design so the water enters the centre of the tank, and thus gives buoyancy in the centre.

So there are positives you can take out of this?

Yes, and we know that the husbandry worked very well. In thirteen months, we reared fish that are six to eight pounds, which is just unheard of in conventional systems. Safeway was subsequently able to use all the fish we produced. We were also pleased with the AgriMarine System as we proved that the tank was an effective barrier between the marine environment and the cultured fish – there were no marine mammal predation or conflicts. We had no sea lice infestation. Although sea lice were in the tank, only 3 sea lice were found on two salmon, out of the entire crop. The salmon had no antibiotics and were pesticide-free, reared in a stress-free environment. The AgriMarine System Waste Collector worked as designed, showing no waste deposition on the surrounding sea floor. We also validated the back-up, alarm, monitoring and mooring systems which all worked as designed as well. Finally we were pleased to prove the environmental benefits of our systems in terms of waste collection and fish health.

The scale of your Campbell River project is much smaller than what you have in China. What do you have going on over there right now?

As I mentioned, we commercialized the technology in China first, and we have developed a full scale farm there. The cost of implementation in China is much lower than in Canada, even such things as the licensing process takes less time, is more cost effective, and less bureaucratic. We send Chinook eggs from a Vancouver Island hatchery to our hatchery in Benxi and grow them out in our reservoir farm in China. We don’t have the same storm condition concerns in China that we do here in British Columbia. The area is sheltered by mountains, the tanks are lower in the water, there are no predators; it’s a much more controlled environment. We have some pretty ambitious plans in China. Our objective is to have a hundred tanks in production within five years. That will bring our annual harvests up to 30,000 metric tonnes, which is the amount of salmon that is presently imported from Norway and other countries.

What kind of harvests have you had in China?

We have had harvests over two years there. First, we harvested steelhead trout and Pacific salmon this year. We have a million fish in our hatchery and farm system in China. Each production tank, like here in BC, has about fifty-thousand fish in it. We have five tanks running, and a sixth being installed in the spring. We are currently selling our fish in China to Japanese restaurants and five star hotels mainly, through distributors in Shanghai and Beijing.

On a scale basis, what happened in Campbell River is minor compared to the total size of your operation…

You’re right. But it’s important to remember that our initial business is to deploy the technology ourselves and produce the salmon for commercial sale, but our long term objective is to be a technology enterprise. Our Campbell River site is a demonstration site for marine applications. It was important for us to gather a lot of data from the site, and the storm event has shown us the kinds of conditions we can expect worldwide.

When you talk about AgriMarine as a technology company, who are the potential buyers of your technology?

The existing industry, 60% of which is based in Norway. We have signed letters of intent with three companies there, and we have a plan to deliver test tanks to these customers this fall. They have been to Campbell River to see our tank in operation, and they know we are making improvements to the design. We need to have these tanks certified for Norwegian applications, which we are doing now. We expect to enter into supply agreements this summer, and have tanks running at three different sites in Norway this fall.
What’s motivating the industry to adopt new technology?
I would say it is a combination of improved efficiency in their existing production of salmon and government regulations requiring the industry to move to closed containment in some regions.

Can you quantify the improvements you deliver over open-containment?

Certainly. There are two applications which the Norwegians are considering. One is to produce yearling salmon for their net cage operations, which shortens the time of exposure to sea lice. As I mentioned, we have no sea lice at our operations in Campbell River, and that is a significant improvement. And we have shown that, in a single year, we can grow fish that are almost two kilograms, because of our controlled feeding and ideal oxygen conditions. The second application is for a full grow-out. There are some sites where they will test our technology for growing Atlantic salmon to production size. We now have two customers; one is for an extension of their hatchery production and the other is for full-scale production.

It occurs to me that some things investors might have critiqued about AgriMarine have become advantages. What I mean is that the difficult regulatory environment and the capital intensive nature of the business may deter others from entering the space…

I agree. The feedback we are getting from our potential customers in Norway is that we have the leading technology in closed-containment. There are examples of closed-containment working on land, but it simply isn’t as scalable as what we have. There’s no other technology in the world that is sea-based or in situ, and we enjoy huge energy advantages. We also experienced the difficulties of husbandry in net cages, and our trials in Campbell River reveal improved growth rates and improvement of husbandry conditions; our mortality rate is very low and the feed conversion is excellent. We also have zero interaction with predators such as sea lions, which attack net cages. The other aspect of our technology that we have experienced is in the waste production. About 15% of the feed provided to the fish becomes a valuable waste product. And we have learned, through our testing in Campbell River, how to collect the waste and thicken it for use as a fertilizer. This waste capture system in the base of our tanks is a proprietary technology. It’s very high value fertilizer, and some experts we have talked to believe the value of this waste may offset 10% of our feed costs.

You mentioned the Norwegians are being motivated by profit, but also government. Do you find the push from government is still strong?

Absolutely. Governments realize the current density of production has a negative impact on the environment. They have very high production densities in places similar to conditions in Chile. Closed containment simply allows the industry to have less impact on the environment. Our footprint is simply smaller.

How would the capital cost of a super-scale build out of your technology be funded?

One alternative is by the Norwegian financial institutions that presently fund the industry. Most of the Norwegian operations are funded through leasing companies. We’ve had discussions with those companies and they may fund the capital costs of the tanks. The discussions are ongoing at this point. This also may be a way for us to collect royalties; by leasing our facilities rather than direct payment of biomass.

There are still some people in the fish-farming business that are in favour of net cages, but you have had success in converting at least one fish-farming skeptic and thought leader, David Suzuki to your side. Why do you think closed-containment farming is inevitable?

It’s akin to the history of the BC forest industry. The old companies such as MacMillan-Blodel and Weyerhaeuser harvested old growth forest. There was an environmental movement that caused them to change. It took a new generation and environmental movement, but I think that is about to happen in the aquaculture industry as well.