Hatchery Business Plan
Content
Alutiiq Pride Shellfish Hatchery Business Plan (FY 2009-2013)
Introduction and Overview
This document updates a business plan for the Alutiiq Pride Shellfish Hatchery (APSH) prepared in October 2004 by the Chugach Regional Resources Commission (CRRC). This plan is designed to provide a vision of how the hatchery will be managed to remain financially viable during the next five years. Driving the new plan is the recognition that the Alaska mariculture industry has great potential, but it will not grow quickly enough in the coming decade to support a shellfish hatchery the size of the Seward facility. Key to survival of the hatchery will be to attract and participate in the research and development programs necessary to help the industry reach its full potential while continuing to expand seed sales. The revenue generated by the Mariculture Technical Center portion of the facility has been vital to the operation of the hatchery over the past two years, and the work associated with the king crab enhancement project is likely to be an important source of funding for APSH over the next five years. Efforts to expand shellfish enhancement programs also will continue to be part of the hatchery’s financial strategy. The APSH staff recently solved many of the technical problems that had limited its production of geoduck clams and sales of spat increased sharply in 2007. Production and seed orders both increased dramatically in 2008, and the outlook for the next five years is very positive. However, the outlook for seed sales for other species is not so optimistic, at least in the short term. The Seward facility is very expensive to operate compared to its Lower-48 counterparts, and it is virtually impossible for APSH to compete against a company such as Coast at producing oyster spat. Our projections include only a small portion of the Alaska market for oyster spat. The potential for increasing spat sales for scallops, cockles, and littleneck clams over the next five years is very limited as much research and development work is necessary before farmers are prepared to purchase much seed for these developing species.
Another potential revenue source may be seed sales to growers and enhancement programs outside Alaska. Seed shortages in Washington, Oregon and B.C. have created a regional demand, and APSH also has received inquiries from potential Asian buyers. Opening these potential markets may be determined by regulatory decisions by Alaska and the receiving jurisdictions. A major challenge for the hatchery over the next five years will be to reduce its energy consumption as a method of dealing with rapidly rising fuel costs. Management is reviewing its operations and facility infrastructure to determine where saving might be achieved.
Background
One of the major challenges facing Alaska is economic development in the rural areas of the state. In an effort to encourage economic development in rural coastal Alaska, the legislature in 1989 approved the Aquatic Farm Act that gave aquatic farms better legal protection and defined permitting process. At the same time however, strict disease prevention and genetics regulations were put in place that are necessary for the long term health of the industry, but made it difficult for the industry to get started. The regulatory issues that caused the most problems were the prohibition from importing seedstock, except Pacific oysters, from outside the state, and an interpretation of the regulations that resulted in the virtual prohibition of bottom culture. Since there was no facility in the state capable of producing seedstock for the industry, Pacific oysters were the only species available for farming. It soon became clear that if the industry was to grow to anywhere near its potential additional shellfish species had to be made available to aquatic farmers. To address this problem, the Qutekcak Native Tribe (QNT) of Seward began operating a small pilot facility starting in 1994 on the grounds of the Institute of Marine Science, under a grant from the federal Bureau of Indian Affairs (BIA), to demonstrate the potential for producing Alaska shellfish seedstock. The first species attempted were the Pacific oyster and the littleneck clam. Both efforts were successful. This success lead to additional grants; the main one being a five year grant starting in 1995 from the Exxon Valdez Oil Spill Trustee Council (EVOSTC) for examining the potential for bivalve mollusk restoration in the oil spill region. The successful demonstration of seedstock production also led to the State of Alaska in funding the construction of a shellfish hatchery in the oil spill region using funds from the State's portion of the Exxon Valdez oil spill criminal settlement money. The legislature decided to combine the hatchery and a proposed Mariculture Technical Center into a single structure. Seward was selected as the site for the new shellfish hatchery/MTC and construction was completed in December 1997. The Qutekcak Native Tribe moved out of the pilot facility and into the new hatchery in January 1998 under a contract to operate it as a for-profit business. Once in the new facility the hatchery staff was faced with several tasks that needed to be accomplished in fairly short order: First, a shakedown of the hatchery systems needed to be conducted to ensure they were functioning properly. Second, littleneck clam seed production had to be increased to meet the objectives of the EVOSTC grant which was the major funding source for the hatchery at the time. Third, the hatchery needed to begin developing techniques for producing seedstock of species that had been identified as a high priority by Alaskan aquatic farmers.
Fourth, additional funding needed to be found to both replace existing operating funding that would soon run out, and to obtain essential equipment that wasn't purchased originally because of construction cost overruns. Because of problems encountered during the shakedown and the time involved in getting the additional equipment that was needed, the hatchery didn't come on line (except for some littleneck clam production) until late fall 1998. Most of 1999 was spent finishing out the EVOSTC grant, producing a limited amount of oyster and littleneck clan1 seed for sale and applying for additional finding. With the new hatchery on line a lot of interest began focusing on geoduck farming. The bulk of the applications for new aquatic farms in 1999 were for geoducks. The hatchery also began to gear up for seedstock production, especially geoducks, obtaining a grant from the Alaska Science and Technology Foundation (ASTF) for geoduck, rock scallop and cockle seedstock development as well as a grant from the Administration for Native Americans (ANA) for cockle and littleneck clam enhancement. It was thought that these grants, along with anticipated revenue from seed sales, especially geoduck seed, would make the hatchery self sufficient within three years. Unfortunately, that was not to be. In early 2000 the State rejected all geoduck farniing applications, along with applications for the bottom culture of other species, until two issues were resolved; 1) the environmental impact of bottom culture, and 2) ownership of the wild shellfish stock within an aquatic farm lease. This decision by the State had a major financial impact on the hatchery. It was estimated that it would take 3 to 5 years to resolve the issues the State raised with no guarantee of a favorable outcome. In the meantime the hatchery would be left with a limited demand for seed sales and a commensurate reduction in the grants it could obtain. For the next two years the hatchery survived on the existing ASTF and ANA grants, a BIA grant and a small amount of revenue from the sale of oyster seed. In 2003 the State discontinued the ASTF program and stopped payment on existing grants. QNT petitioned the State; advising it that the lost grant funds would likely result in the hatchery closing down. In response the State extended the ASTF grant through the end of FY 2003. For the remainder of 2003 QNT was able to keep the hatchery going with existing funds. By 2004 the funding was running out with a few weeks left before QNT would again be running a deficit. The tribe advised the State that would need to close if additional funding could not be found. The State responded by cobbling together sufficient funding to last through the end of 2004, and the state accepted an offer by CRRC to take over management of the hatchery. Since taking over hatchery operations in late 2004, CRRC has focused upon opening lines of communication with the industry and getting the MTC functioning. Shortly after taking office, former Governor Tony Knowles cut funds from the operating budget to run the MTC, and the space was unused for several years. The Alaskan Shellfish Growers Association and UA Marine Advisory Program developed a plan to create a nonprofit organization to run the MTC, but ADF&G failed to take action on the proposal. As a
result, the MTC portion of the physical plant was unused until CRRC took the initiative and attracted research projects into the vacant space. The hatchery received a devastating blow October 2007 when a major storm knocked out a nearby bridge and tons of mud and debris were swept into the hatchery, leaving three feet of mud and rocks in parts of the facility. However, the staff was able to respond quickly to the emergency and the hatchery was back in operation within weeks. The biggest challenge now facing the hatchery may now be energy costs. Over the past five years, fuel and power costs have risen from one-third to one-half of the hatchery’s budget.
Mission and Objectives
MISSION STATEMENT To operate the Alutiiq Pride Shellfish Hatchery as a non-profit business in an open and transparent manner, that encourages technical excellence and is dedicated to meeting its customers' needs as efficiently and inexpensively as possible. Recognizing that all facets of the Alaska mariculture industry share the same future, establish a close working relationship with all industry participants to ensure that the ultimate customer, the consumer, is provided with the highest quality product at the lowest possible cost. OBJECTIVES 1) 2) 3) 4) 5) 6) Become a self-sustaining business, Promote additional staff education and training to ensure that the hatchery maintains a high level of technical competence. Seek out technical expertise from consultants, other hatcheries, universities, etc in order to ensure productive and efficient culture techniques. Develop an easy and effective communications system with customers. Work with commercial nurseries and growers to develop techniques and procedures that will help make the Alaskan mariculture industry more competitive. Continue to look for additional species to culture including species other than bivalve mollusks. Any species development work done in the hatchery must pay its own way
Oversight and Management
The Chugach Regional Resources Commission (CRRC) is a 501(c)(3) non profit corporation serving the Alaska Native tribes in the Chugach region. CRRC has been in existence for over 20 years and was formed to collectively address natural resource issues and to assist member tribes in the economic development of the local natural resources. In natural resource development projects CRRC typically provides the participating tribe with administrative services, technical expertise and assistance in procuring finding.
CRRC is normally the lead tribal entity on development projects that include more than one tribe, and on research projects. Over the years CRRC has been involved in several mariculture projects including developing aquatic farms at Chenega, Tatitlek and Eyak, an oyster nursery operation at Chenega, the Alutiiq Pride Shellfish Hatchery, research on clam rehabilitation in the oil spill region, and subsistence clam enhancement programs at Chenga, Nanwalek, Tatitlek, Chenga and Eyak. CRRC has been involved with the hatchery from the beginning and is very familiar with hatchery operations and problems, and has the administrative and technical capacity to operate the hatchery successfully. Patty Schwalenberg and Jeff Hetrick comprise the management team for the hatchery. Ms Schwalenberg, Executive Director for CRRC, has overall responsibility for the hatchery. Her primary duties is to assure that the hatchery has adequate administrative support and funding. Hetrick is the primary contact and CRRC representative for the hatchery and is responsible for the day to day operations as well as planning and budgeting.
Hatchery Operations
The Alutiiq Pride Shellfish Hatchery is a state of the art facility located on the Seward waterfront. The hatchery is housed within a 10,920 ft2 building with space allocated as set out in the following table. The facility provides sound, reliable 2 Hatchery Use Specifications (in ft. ) water supply and drain systems for anticipated activities of both the Hatchery Tank Room 6,330 hatchery and MTC. Seawater is Mariculture Technical Center 1,550 pumped through an 8-inch HDPE Mechanical Room 840 underwater pipeline extended to a Offices. Restrooms, Hall 810 depth of 250 feet. The water is Shop 520 treated by a system of sand filters Algae Culture Lab 520 and UV, and both ambient and Dry Lab 200 heated seawater is distributed Electrical Room 150 throughout the facility through oversized header pipes. The MTC intake water can be separated and treated beyond hatchery specifications, as required for research projects. Processed water draining from shellfish culture tanks is collected in floor trenches and is routed through a heat recovery system. All effluent is treated with chlorine to eliminate the potential for disease organisms leaving the facility. The building provides flexible space that can be converted to a variety of configurations without major modifications. The production facilities are comprised of systems that provide food or meet the environmental requirements of the shellfish at the various stages of development and growth. The following is a brief description of each of these systems. Algal production system: This is the resource for producing food for broodstock and juvenile shellfish seed through its various stages of production. The steps involved
include starting a 250 ml culture in an axenic 500 ml flask for four days, using the flask culture to inoculate a 20 liter carboy that is cultured for five days and using the carboy culture to inoculate a 20,000 liter fiberglass tank containing 220 C seawater. The alga is then cultured for 4 to 6 days to reach 1 billion cells per liter before being fed out to the shellfish. The hatchery also has a continuous "bag culture system" that produces a mix of high density dinoflagellates. Feeding involves diluting the cell concentration by two-thirds by pumping 10,000 liters from the algae tank to a 30,000 liter tank containing 20,000 liters of seawater heated to between 160 C and 200 C depending on the species. This is then sent to the various systems containing the rearing shellfish and fed via a drip system at varying rates depending on the life stage. A 30,000 liter tank of the diluted algae will last about one day. Toward the end of the workday the tank is replenished with about 10,000 liters of heated seawater to ensure that it lasts throughout the night. Feed can also be pumped from the algae tanks directly to the rearing shellfish as opposed to the drip feed. Known as "pulse feeding" this method can be a more convenient method of feeding under certain configurations, but it is wasteful because the shellfish cannot consume all the algae at such a high concentration and a significant portion ends up going down the drain. Broodstock holding system: This is the system for inactive maintenance and isolation of broodstock in the hatchery. It consists of 1,000 liter fiberglass tanks that contain the tray setup for holding brood animals, and a system for supplying unheated, untreated seawater (except UV) at 1 to 4 liters per minute. The animals are typically pulse fed at varied times and amounts. Broodstock conditioning & spawning system: This is the system for ripening broodstock and spawning them. It has the same components as described for the broodstock holding system plus it includes periodically UV and 1 micron filtering and heating (about 100 C) the seawater to induce spawning. The purpose of this system is to produce a "controlled spawn." This involves including at least four individuals of each sex in the spawn to ensure genetic diversity and keeping the sexes separate as spawning is induced. The process involves close monitoring. As the animals spawn, the gametes are removed and placed in a fertilization bucket in a set egg to sperm ratio to help ensure a healthy spawn. After several cell divisions the eggs are inspected to get a measure of the success of the spawn. Fertilized eggs are removed from the fertilization buckets and placed in the larval rearing tanks. Larval rearing system: This is the resource for rearing larvae from spawn to the pediveliger stage. It involves UV treating, 1 micron filtering and heating to 160 C (200 C for oysters) enough saltwater to fill a 30,000 liter fiberglass tank. Hatched larvae are then placed in the tank and fed. Every 2.5 days on average the tank is drained. The larvae are collected in a screen placed underneath the drain cock. Growth, health and survival data are gathered before they axe transferred to another 30,000 liter tank prepared and operated in the same manner as described above. These steps are repeated every 2.5 days on average until the larvae reach the pediveliger stage, which differs with species and temperature but is usually complete within three to five weeks.
Intense nursery system: This is the system for taking shellfish larvae from the pediveliger stage to 2 millimeter seed. A single unit consists of an 80 cm x 2.5 m x 80 cm fiberglass tank within which three fiberglass upwelling trays 60 cm in diameter and 70 cm tall with plastic screened bottoms are placed with the bottoms about 10 cm off the bottom of the trough. The shellfish are located in the trays, which may be supplied with an artificial substrate for shellfish settlement. UV treated, 1 micron filtered and heated (to about 160 C, or 240 C for oysters) seawater flows into the tank and out a screened port. After the pediveligers have set (metamorphosed into tiny bivalves) an airlift system is initiated which efficiently circulates water and food. The system typically downwells (water/food in the top and out the bottom) until the animals reach about 1.2 mm in size at which point the system is reversed to upwell mode (water/food in the bottom and out through a screened standpipe). In the case of trays with substrate the water flows across the substrate. Long term nursery system: This is the outdoor system for taking 2 mm seed to 6 mm to 9 mm depending on the species. This system is similar to the larval settlement system except each trough is much larger (3.3 m x 1.6 m x 0.8m) and holds 10 upwelling trays instead of three. The algae for the system will come from the outside enclosed tank system. Water supply: The physical plant now has four different sources of salt water. The hatchery can draw water from four different sources: an 8-inch pipeline extending to a depth of 250 feet; a saltwater well; a connection to the primary intake line for the neighboring University of Alaska’s Marine Science Center; and a backup line from the hatchery. The primary source of water into the MTC is the connection to the university intake line, but it can be transferred to one of the hatchery sources as needed.
Hatchery Staff
The APSH has a permanent staff of three, including the hatchery director and two shellfish technicians, and employs 1-3 seasonal technicians, depending upon the production workload and needs of research projects under the hatchery’s control. Outside technical assistance also is secured through contractual agreements, including projects funded through the MTC. Following is a description of the core hatchery staff positions. Hatchery Director: This position is responsible for all hatchery operations, including budgeting, planning, permit acquisition, facility maintenance, personnel management and training, and sales. The hatchery director is the primary contact and representative for the hatchery, and is responsible for overseeing the research and development projects in the MTC. In addition to management responsibilities, this position will also be actively involved in shellfish seed/algae production and development work. Shellfish Culturist (2): These positions will assist the hatchery director in shellfish seed/algae production and development and be responsible for the day to day
maintenance needs. These positions are under the direct supervision of the hatchery director. Seasonal Technicians: These positions will work primarily during the summer months. They will work under the direct supervision of the hatchery director or shellfish culturist performing whatever duties are required. Contractual: APSH employs a bookkeeper part-time under a contractual agreement, and some physical plant maintenance also is performed under contract. Also working under contract will be a king crab research biologist to work on the MTC project.
Production Plan
With the notable exception of Pacific oysters, the species APSH has been producing or experimenting with since 1998 have been shellfish for which no standardized hatchery practices have been developed. In fact, with the exception of geoduck clams, these indigenous species of shellfish simply have never been cultured on a commercial scale. Only two species appear ready to support production in commercial quantities over the next five years: geoducks and Pacific oysters. Following is a discussion about these two target species and those in the “developing species” category (littlenecks, cockles, rock scallops, razor clams and giant red sea cucumbers). Geoduck clams Geoduck clams are one of the highest value seafood products of the West Coast of North America, and the giant burrowing clam is regarded as one the “hottest” new aquaculture ventures. The high value of geoduck spat ($.25 each) have made the species the answer to the hatchery’s continual fiscal problems. Unfortunately, development of geoduck farms in Alaska have sparked considerable controversy and the pioneering operations have become mired in court battles, legislative hearings and regulatory turmoil. APSH has continued working on developing hatchery techniques for producing geoduck seed, despite the continual delays in development of the farming operations, and the first significant crop of geoduck seed (300,000) was produced in 2007. By mid-2008, the hatchery had about 300,000 nearing market size and another batch of seed beginning to set, and the industry appears to be ready to purchase all the geoduck seed APSH can produce. One factor suggesting the demand for geoduck spat will remain strong over the next five years is the failure of geoduck seed crops in West Coast hatcheries outside of Alaska in 2007 and 2008. A species of vibrio has been devastating to shellfish hatcheries in Oregon and Washington, and it may take years before production rebounds to former levels. If so, it seems likely there will be increased interest in developing Alaska enormous potential for geoduck aquaculture.
It also appears there has been some recent progress in resolving the long-standing legal and regulatory problems plaguing Alaska’s geoduck farmers. In addition to agreeing to negotiate with farmers, ADF&G is working on an industry proposal to establish “geoduck aquaculture development zones” where farming will be encouraged. Enhancement of commercial wild beds of geoducks also is a potential market for APSH spat. Results from a test planting by the Southeast Alaska Region Dive Fisheries Association in 2007 may help determine the future of geoduck enhancement. A successful spawn for geoducks at APSH can result in 1-2 million shellfish, producing roughly 250,000-500,000 spat in the 6 mm range for sale to growers over a 4-5 month period. Consequently, APSH plans three-four spawning events per year to meet anticipated market demand. These schedules can be accelerated if growers can successfully move 2-3 mm spat into nurseries or plant the shellfish at the smaller size without an intermediate nursery phase. Experiments with nursery systems to date have resulted in high mortality rates and additional research is necessary before nurseries play a major role in spat production in Alaska. APSH also is exploring the potential for expanding the current geoduck production capacity of the facility to accommodate production of geoduck spat for sale to nonAlaska growers. Expansion of Washington’s successful geoduck farming industry has been hampered by insufficient supplies of spat to independent growers. Two large companies (Taylor United and Seattle Shellfish) have controlled the production of geoduck spat, leaving smaller farms competing heavily for the remaining few spat available to independent operators. In addition, only one farm in British Columbia has secured geoduck spat and no B.C. hatcheries current produce the seed. The biological problems encountered by West Coast hatcheries have compounded this shortage, and even Taylor and Seattle Shellfish are meeting their spat needs. In response to requests by Washington growers, APSH sought approval from the Alaska Department of Fish and Game to produce spat for Washington by importing Puget Sound broodstock and producing spat to send back under conditions necessary to protect local water and resources. This request was denied, but APSH is seeking reconsideration of that decision. In addition, one major potential customer company is considering challenging Washington State’s refusal to allow geoduck spat produced from Alaska broodstock to be imported into Washington. Oysters Oysters continue to be the predominant species of the Alaska mariculture industry, but APSH appears likely to supply less than one-fourth of the spat purchased by Alaska nursery operations over the next five years. Despite repeated efforts to appeal to Alaska oyster spat buyers, APSH has found it simply cannot compete with large, efficient companies specializing in producing Pacific oyster spat.
While the problems of West Coast hatcheries might seem to create an opportunity for APSH to sell oyster spat, the company that has dominated the Alaska oyster spat market over the past five years, Coast Seafood, has escaped the vibrio problem because of its location in Hawaii. Although Coast recently raised it prices, APSH still can’t compete on a price basis. Energy costs have been a major barrier in the past and rising oil prices will compound the problem. APSH is likely to continue to capture about 20-25% of the Alaska spat market. APSH cannot produce and sell oyster spat at a profit, but will continue to meet the needs of Alaska growers and nursery operators. The hatchery will continue to produce 3-5 mm oyster spat from small spat purchased from Coast or other Outside hatcheries. APSH can reduce its losses from oyster spat production by eliminating the energy-intensive production of spat from larvae. Developing Species These species are not ready for commercial scale production for a variety of reasons, primarily because there is little or no demand for seed. The creation of a new shellfish aquaculture research and development station in Ketchikan by Oceans Alaska may help solve some of the problems keeping these farming opportunities from developing. In the meantime, work will progress with these species to varying degrees. Following is a species by species summary. Littleneck clams - APSH appears to be the only shellfish hatchery ever to produce littleneck clams. Existing production of littlenecks in Washington, B.C. and Alaska is very small, and is totally reliant upon natural recruitment. This production from wild fisheries and farms appears destined to remain very small. Planting experiments with APSH-produced clam spat have shown a need to start with seed averaging 10 mm or larger, creating the need to carry them in a FLUPSY for several months. The result is a costly seed. ADF&G is helping finance a 2008 project under the guidance of the UA Marine Advisory Program the will purchase 200,000 littleneck clam seed from APSH. Spat in the 3-4 mm range will be transferred to the Naukati Shellfish Nursery where they will be cultured for several moths and planted by a local clam farmer. The project will analyze seed costs and test different growing methods. Other potential markets for littleneck clam spat might include smaller scale enhancement projects. APSH will attempt to provide seed for a pilot project in 2008 or 2009. Cockles – Basket cockles appear to have some promise, but a lot of R&D work is necessary before growers are prepared to purchase any seed. A recent experiment by the Alaskan Shellfish Growers Association to test the feasibility of culturing cockles in lantern nets or in bags on the beach confirmed the shellfish will grow quickly. However, the trials also revealed serious shelf-life issues and the need to explore freezing technology or some other value-added processing. ASGA’s experiment also underscored the need to start with fairly large spat, raising concern about the cost of seed.
APSH plans to produce modest numbers of cockles to help support R&D efforts and supply potential enhancement projects in Southeast and Southcentral. Rock scallops – Experiment with rock scallops in Southeast showed great potential for this species, but additional R&D work is necessary before the species can be commercialized. Difficulties have been encountered in obtaining rock scallop broodstock from Southcentral. APSH will continue to work on developing a source of broodstock for Southcentral and will work with the industry to produce spat for use in future R&D projects. Razor clams – APSH began working with razor clams in 2004 and early research has been promising, but it’s too early to tell if the species is a good candidate for enhancement projects or commercial development. Research level efforts will be continued as funding allows. Giant red sea cucumbers – The first sea cucumbers were moved to the hatchery in 2008 and it is too early to tell whether the species has potential for development. No commercial scale production is foreseen during the next five years.
Mariculture Technical Center/Research & Development
A primary source of revenue for the hatchery over the past three years has been a project testing the feasibility of enhancing depressed wild king crab stocks with hatcheryproduced juveniles. While the project is housed in the MTC portion of the facility, APSH plays a critical role in the project, testing the feasibility of scaling up research projects to the large-scale production necessary to support eventual enhancement efforts. The APSH portion of the project achieved tremendous success during early 2008 spawning trials. The project also involves researchers from the University of Alaska and National Marine Fisheries Service. Funding for the king crab project has come from a variety of federal, state and industry sources, and APSH has been able use a portion of the funds to support overall hatchery operating costs. The project is expected to continue throughout the fiveyear period covered by this business plan. If the project progresses to the stage of commercial production for large-scale enhancement efforts, APSH may become a major producer of juvenile king crab for the stocking programs. APSH initiated a separate effort in 2008 to bolster the king crab enhancement program and support the cost of running the hatchery facility through a grant application to the Administration for Native Americans (ANA). The project would have the hatchery working in partnership with the tribal council for Old Harbor, a small village on Kodiak Island. APSH would train village residents as crab research technicians and explore the feasibility of using the village as a nursery and a site for releasing juvenile crab. If approved, APSH would receive some operating funds over a three-year period.
APSH attracted another research project in 2007 to the MTC: a pilot project to test the feasibility of enhancing depressed herring populations in Prince William Sound. While initial efforts to spawn wild herring eggs were successful, the project was not funded for 2008. However, the project may be revived in 2009.
Alutiiq Pride Shellfish Hatchery Operating Budget (FY 20092013) Description 2009 Budget Item Personnel
Hatchery Manager $5,500/mo. (Contractual) 2 Shellfish Technicians $2,400/mo. + .28 fringe $66,000 $73,728
2010
$67,980 $75,940
2011
$70,019 $78,218
2012
$72,120 $80,565
2013
$74,284 $82,982
$139,728 Contractual
King Crab Culture Biologist $4,000/per month Bookkeeper $360/month Maintenance $1,200/month $48,000 $4,320 $14,400
$143,920
$49,440 $4,450 $14,832
$148,237
$50,923 $4,583 $15,277
$152,685
$52,451 $4,721 $15,735
$157,265
$54,024 $4,862 $16,207
$66,720 Utilities
Fuel Oil Use $4,800/month Electricity $6,200/month Water/Sewer $238/month $57,600 $74,400 $238
$68,722
$66,240 $77,376 $238
$70,783
$76,176 $80,471 $238
$72,907
$87,602 $83,690 $238
$75,094
$100,743 $87,037 $238
$132,000 Supplies
Program Supplies $2,200/month
$143,616 $27,192 $23,000 $19,000
$156,647 $28,008 $23,000 $19,000
$171,292 $28,848 $23,000 $19,000
$187,780 $29,713 $23,000 $19,000
$26,400 $23,000 $19,000
Insurance
Facility Insurance
Contingency
Miscellaneous/contingency
TOTALS
NOTES:
$406,84 8
Personnel, contractual and supplies increased by 3% annually. Electricity increased by $.02/kw over 5-year period. Fuel increased by 15% annually
$425,449
$445,675
$467,732
$491,853
Revenue Projections
APSH has two primary sources of revenue: (1) seed sales, and (2) research and development projects. The opening of the Mariculture Technical Center to research projects has resulted in a significant new revenue stream, and the early success of the king crab enhancement project promises to keep the MTC revenues flowing throughout the five-year period covered by this business plan. Seed Sales This plan assumes Alaska shellfish farmers will continue to focus almost exclusively upon oysters and geoducks between 2008 and 2012, and there will be only very limited spat markets for other species, such as littleneck clams, rock scallops, cockles, razor clams and sea cucumbers. In addition to pursuing the in-state market, APSH is attempting to explore the potential for seed sales to growers on the West Coast, British Columbia and Asia. APSH has been getting inquiries and it appears there may be expanding demand for shellfish seed over the next five years. Geoducks - APSH has been steadily improving its geoduck spat culturing techniques and production is increasing steadily. At the same time, geoduck farmers have shown increased interest in seed purchases as they move closer to resolving key policy disputes with the state. The potential for spat sales to enhancement projects and increased demand from new farmers attracted to Alaska because of problems with securing spat in Washington and B.C. makes the sales potential for geoduck spat very promising over the five-year period. APSH intends to gear up as much production capacity as possible to meet this increased demand. At current configurations and state of technology, the hatchery can realistically produce an estimated 750,000 6 mm geoduck spat per year. APSH is experimenting with space saving nursery technology and is considering other methods of increasing nursery capacity. The in-state market for geoduck spat appears to be strong enough to support that production. The five-year plan for geoduck spat production provides for first year sales of 400,000 seed, gradually stepping up production to about 860,000 in 2013. APSH hopes to surpass those goals through advances in nursery technology and or reconfiguration of floor space. Following are production goals and sales revenue projections for the target period.
Projected Geoduck Spat Sales and Revenues 2008-2012 Year 4.5-6 mm @$.15 6mm or larger @$.25 2008 150000 22500 250000 62500 2009 300000 45000 300000 75000 2010 345000 51750 345000 86250 2011 390000 58500 390000 97500 2012 435000 65250 425000 106250
Oysters – The role of the hatchery in the marketplace for Pacific oyster spat for the next five years appears to be one of a secondary source of small seed to Alaska nursery operations. Coast Seafood specializes in oyster production and has achieved tremendous cost efficiencies in locating seed production in Hawaii and sheer economy of scale. APSH simply can’t compete with Coast. Consider, for example, the cost of heating water by 10-150 C. at the Seward hatchery versus suitable ambient temperatures at Kona. Coast also has the ability to grow algae by natural sunlight, and many other advantages. Alaska’s nursery operators are understandably price conscious, and interest in higher cost spat is minimal. Likewise, APSH is reluctant to lose too much money producing oyster spat for buyers who are not dependent upon spat produced by a local hatchery. Consequently, APSH plans to continue to supply Alaska FLUPSY operators with all the seed they want to order. APSH will produce at least 2 million 3-5 mm oyster spat per year and will gear up additional production as necessary. If Coast runs into problems or the need for local production becomes necessary for some other reason, APSH can crank up its production in fairly short order. Following are projections of annual oyster production and anticipated sales revenue.
Projected Oyster Spat Sales/Revenues 2008-2012 Year 1000s of seed Price/1000 Value 2008 2000 6.5 13000 2009 2100 6.5 13650 2010 2200 6.5 14300 2011 2300 6.5 14950 2012 2400 6.5 15600
MTC/Research and Development The most significant source of revenue between Fiscal Years 2009-2013 will come from work in the Mariculture Technical Center portion of the physical plant. APSH has been able to cover about half of its operating costs over the past two years from revenues generated by the king crab enhancement project, and even larger revenues are expected over the next five years. In exchange for providing the physical plant space, utilities, maintenance and other support, APSH has been receiving funds to cover a portion of the hatchery’s overall operating costs. A portion of the hatchery director’s salary and some capital improvements also have been covered by a variety of grants from the legislature, federal government, University of Alaska, and crab industry. The crab project is experiencing impressive results during 2008, thanks in large part to the portion of the project led by APSH, and support for the hatchery is expected to increase as a result. In addition, APSH has partnered with the village of Old Harbor to apply for a three-year grant from the Administration for Native Americans to expand benefits from king crab enhancement to Native villages. If the grant is approved, it would bring significant new
revenues to the hatchery through the MTC. If that effort fails, APSH intends to work on other approaches to increase revenues from research and development projects. Following are projected annual revenues from research and development projects generated in the MTC.
Projected Revenues from Research and Development Projects in the MTC 2009 2010 2011 2012 2013 Research/MT 225,00 275,00 275,00 275,00 C 0 0 0 0 275,000
Financial Analysis
Close examination of the information pulled together for this business plan reveals that APSH can make a modest profit if revenues from use of the MTC continue to be strong. The following pro forma compares anticipated income and expenses for the next five years. Projected Expenses and Revenues (FY2009-2013)
Expenses Revenues Research/MTC Geoducks Oysters Other Seed State Grant Revenue Totals Balance 225,00 0 105,00 0 8,00 0 4,00 0 68,00 0 410,00 0 3,15 2 1 275,00 0 145,00 0 9,20 0 5,00 0 434,20 0 8,75 5 275,00 0 166,75 0 10,58 0 7,00 0 459,33 0 13,65 8 275,00 0 191,76 3 12,16 7 9,00 0 487,93 0 20,19 6 275,00 0 220,52 7 13,99 2 12,00 0 521,51 9 29,66 2009 406,84 8 2010 425,44 9 2011 445,67 5 2012 467,73 2 2013 491,85 3
Several factors have potential for changing this analysis: Energy Costs – The market cost of oil was skyrocketing as this business plan was being written, and it was virtually impossible to predict where those costs will be in one month, let alone five years. The federal Energy Department released a forecast in mid-June 2008 projecting world oil prices would plateau somewhere above $100 per barrel over the next several years. This analysis accepts that projection and assumes APSH will continue to become more efficient in culture practices and improve waste heat recovery, and that electricity rates will remain somewhat stable.
Spat Sales – If the Alaska mariculture industry expands at a faster pace than envisioned in this plan or export sales occur, seed sales may become a much more important source of revenues. Export sales of seed also could improve these revenues. MTC Revenues – If the king crab project folds prematurely, it will likely take months to get another project in place at the MTC, resulting in an operating loss during that period of time. However, the project is enjoying excellent early success and has attracted important support from the industry, NOAA and the University of Alaska.
Alutiiq Pride Shellfish Hatchery PO Box 369 Seward, AK
907 224-5181 224-5282 fax [email protected]
Introduction and Overview
This document updates a business plan for the Alutiiq Pride Shellfish Hatchery (APSH) prepared in October 2004 by the Chugach Regional Resources Commission (CRRC). This plan is designed to provide a vision of how the hatchery will be managed to remain financially viable during the next five years. Driving the new plan is the recognition that the Alaska mariculture industry has great potential, but it will not grow quickly enough in the coming decade to support a shellfish hatchery the size of the Seward facility. Key to survival of the hatchery will be to attract and participate in the research and development programs necessary to help the industry reach its full potential while continuing to expand seed sales. The revenue generated by the Mariculture Technical Center portion of the facility has been vital to the operation of the hatchery over the past two years, and the work associated with the king crab enhancement project is likely to be an important source of funding for APSH over the next five years. Efforts to expand shellfish enhancement programs also will continue to be part of the hatchery’s financial strategy. The APSH staff recently solved many of the technical problems that had limited its production of geoduck clams and sales of spat increased sharply in 2007. Production and seed orders both increased dramatically in 2008, and the outlook for the next five years is very positive. However, the outlook for seed sales for other species is not so optimistic, at least in the short term. The Seward facility is very expensive to operate compared to its Lower-48 counterparts, and it is virtually impossible for APSH to compete against a company such as Coast at producing oyster spat. Our projections include only a small portion of the Alaska market for oyster spat. The potential for increasing spat sales for scallops, cockles, and littleneck clams over the next five years is very limited as much research and development work is necessary before farmers are prepared to purchase much seed for these developing species.
Another potential revenue source may be seed sales to growers and enhancement programs outside Alaska. Seed shortages in Washington, Oregon and B.C. have created a regional demand, and APSH also has received inquiries from potential Asian buyers. Opening these potential markets may be determined by regulatory decisions by Alaska and the receiving jurisdictions. A major challenge for the hatchery over the next five years will be to reduce its energy consumption as a method of dealing with rapidly rising fuel costs. Management is reviewing its operations and facility infrastructure to determine where saving might be achieved.
Background
One of the major challenges facing Alaska is economic development in the rural areas of the state. In an effort to encourage economic development in rural coastal Alaska, the legislature in 1989 approved the Aquatic Farm Act that gave aquatic farms better legal protection and defined permitting process. At the same time however, strict disease prevention and genetics regulations were put in place that are necessary for the long term health of the industry, but made it difficult for the industry to get started. The regulatory issues that caused the most problems were the prohibition from importing seedstock, except Pacific oysters, from outside the state, and an interpretation of the regulations that resulted in the virtual prohibition of bottom culture. Since there was no facility in the state capable of producing seedstock for the industry, Pacific oysters were the only species available for farming. It soon became clear that if the industry was to grow to anywhere near its potential additional shellfish species had to be made available to aquatic farmers. To address this problem, the Qutekcak Native Tribe (QNT) of Seward began operating a small pilot facility starting in 1994 on the grounds of the Institute of Marine Science, under a grant from the federal Bureau of Indian Affairs (BIA), to demonstrate the potential for producing Alaska shellfish seedstock. The first species attempted were the Pacific oyster and the littleneck clam. Both efforts were successful. This success lead to additional grants; the main one being a five year grant starting in 1995 from the Exxon Valdez Oil Spill Trustee Council (EVOSTC) for examining the potential for bivalve mollusk restoration in the oil spill region. The successful demonstration of seedstock production also led to the State of Alaska in funding the construction of a shellfish hatchery in the oil spill region using funds from the State's portion of the Exxon Valdez oil spill criminal settlement money. The legislature decided to combine the hatchery and a proposed Mariculture Technical Center into a single structure. Seward was selected as the site for the new shellfish hatchery/MTC and construction was completed in December 1997. The Qutekcak Native Tribe moved out of the pilot facility and into the new hatchery in January 1998 under a contract to operate it as a for-profit business. Once in the new facility the hatchery staff was faced with several tasks that needed to be accomplished in fairly short order: First, a shakedown of the hatchery systems needed to be conducted to ensure they were functioning properly. Second, littleneck clam seed production had to be increased to meet the objectives of the EVOSTC grant which was the major funding source for the hatchery at the time. Third, the hatchery needed to begin developing techniques for producing seedstock of species that had been identified as a high priority by Alaskan aquatic farmers.
Fourth, additional funding needed to be found to both replace existing operating funding that would soon run out, and to obtain essential equipment that wasn't purchased originally because of construction cost overruns. Because of problems encountered during the shakedown and the time involved in getting the additional equipment that was needed, the hatchery didn't come on line (except for some littleneck clam production) until late fall 1998. Most of 1999 was spent finishing out the EVOSTC grant, producing a limited amount of oyster and littleneck clan1 seed for sale and applying for additional finding. With the new hatchery on line a lot of interest began focusing on geoduck farming. The bulk of the applications for new aquatic farms in 1999 were for geoducks. The hatchery also began to gear up for seedstock production, especially geoducks, obtaining a grant from the Alaska Science and Technology Foundation (ASTF) for geoduck, rock scallop and cockle seedstock development as well as a grant from the Administration for Native Americans (ANA) for cockle and littleneck clam enhancement. It was thought that these grants, along with anticipated revenue from seed sales, especially geoduck seed, would make the hatchery self sufficient within three years. Unfortunately, that was not to be. In early 2000 the State rejected all geoduck farniing applications, along with applications for the bottom culture of other species, until two issues were resolved; 1) the environmental impact of bottom culture, and 2) ownership of the wild shellfish stock within an aquatic farm lease. This decision by the State had a major financial impact on the hatchery. It was estimated that it would take 3 to 5 years to resolve the issues the State raised with no guarantee of a favorable outcome. In the meantime the hatchery would be left with a limited demand for seed sales and a commensurate reduction in the grants it could obtain. For the next two years the hatchery survived on the existing ASTF and ANA grants, a BIA grant and a small amount of revenue from the sale of oyster seed. In 2003 the State discontinued the ASTF program and stopped payment on existing grants. QNT petitioned the State; advising it that the lost grant funds would likely result in the hatchery closing down. In response the State extended the ASTF grant through the end of FY 2003. For the remainder of 2003 QNT was able to keep the hatchery going with existing funds. By 2004 the funding was running out with a few weeks left before QNT would again be running a deficit. The tribe advised the State that would need to close if additional funding could not be found. The State responded by cobbling together sufficient funding to last through the end of 2004, and the state accepted an offer by CRRC to take over management of the hatchery. Since taking over hatchery operations in late 2004, CRRC has focused upon opening lines of communication with the industry and getting the MTC functioning. Shortly after taking office, former Governor Tony Knowles cut funds from the operating budget to run the MTC, and the space was unused for several years. The Alaskan Shellfish Growers Association and UA Marine Advisory Program developed a plan to create a nonprofit organization to run the MTC, but ADF&G failed to take action on the proposal. As a
result, the MTC portion of the physical plant was unused until CRRC took the initiative and attracted research projects into the vacant space. The hatchery received a devastating blow October 2007 when a major storm knocked out a nearby bridge and tons of mud and debris were swept into the hatchery, leaving three feet of mud and rocks in parts of the facility. However, the staff was able to respond quickly to the emergency and the hatchery was back in operation within weeks. The biggest challenge now facing the hatchery may now be energy costs. Over the past five years, fuel and power costs have risen from one-third to one-half of the hatchery’s budget.
Mission and Objectives
MISSION STATEMENT To operate the Alutiiq Pride Shellfish Hatchery as a non-profit business in an open and transparent manner, that encourages technical excellence and is dedicated to meeting its customers' needs as efficiently and inexpensively as possible. Recognizing that all facets of the Alaska mariculture industry share the same future, establish a close working relationship with all industry participants to ensure that the ultimate customer, the consumer, is provided with the highest quality product at the lowest possible cost. OBJECTIVES 1) 2) 3) 4) 5) 6) Become a self-sustaining business, Promote additional staff education and training to ensure that the hatchery maintains a high level of technical competence. Seek out technical expertise from consultants, other hatcheries, universities, etc in order to ensure productive and efficient culture techniques. Develop an easy and effective communications system with customers. Work with commercial nurseries and growers to develop techniques and procedures that will help make the Alaskan mariculture industry more competitive. Continue to look for additional species to culture including species other than bivalve mollusks. Any species development work done in the hatchery must pay its own way
Oversight and Management
The Chugach Regional Resources Commission (CRRC) is a 501(c)(3) non profit corporation serving the Alaska Native tribes in the Chugach region. CRRC has been in existence for over 20 years and was formed to collectively address natural resource issues and to assist member tribes in the economic development of the local natural resources. In natural resource development projects CRRC typically provides the participating tribe with administrative services, technical expertise and assistance in procuring finding.
CRRC is normally the lead tribal entity on development projects that include more than one tribe, and on research projects. Over the years CRRC has been involved in several mariculture projects including developing aquatic farms at Chenega, Tatitlek and Eyak, an oyster nursery operation at Chenega, the Alutiiq Pride Shellfish Hatchery, research on clam rehabilitation in the oil spill region, and subsistence clam enhancement programs at Chenga, Nanwalek, Tatitlek, Chenga and Eyak. CRRC has been involved with the hatchery from the beginning and is very familiar with hatchery operations and problems, and has the administrative and technical capacity to operate the hatchery successfully. Patty Schwalenberg and Jeff Hetrick comprise the management team for the hatchery. Ms Schwalenberg, Executive Director for CRRC, has overall responsibility for the hatchery. Her primary duties is to assure that the hatchery has adequate administrative support and funding. Hetrick is the primary contact and CRRC representative for the hatchery and is responsible for the day to day operations as well as planning and budgeting.
Hatchery Operations
The Alutiiq Pride Shellfish Hatchery is a state of the art facility located on the Seward waterfront. The hatchery is housed within a 10,920 ft2 building with space allocated as set out in the following table. The facility provides sound, reliable 2 Hatchery Use Specifications (in ft. ) water supply and drain systems for anticipated activities of both the Hatchery Tank Room 6,330 hatchery and MTC. Seawater is Mariculture Technical Center 1,550 pumped through an 8-inch HDPE Mechanical Room 840 underwater pipeline extended to a Offices. Restrooms, Hall 810 depth of 250 feet. The water is Shop 520 treated by a system of sand filters Algae Culture Lab 520 and UV, and both ambient and Dry Lab 200 heated seawater is distributed Electrical Room 150 throughout the facility through oversized header pipes. The MTC intake water can be separated and treated beyond hatchery specifications, as required for research projects. Processed water draining from shellfish culture tanks is collected in floor trenches and is routed through a heat recovery system. All effluent is treated with chlorine to eliminate the potential for disease organisms leaving the facility. The building provides flexible space that can be converted to a variety of configurations without major modifications. The production facilities are comprised of systems that provide food or meet the environmental requirements of the shellfish at the various stages of development and growth. The following is a brief description of each of these systems. Algal production system: This is the resource for producing food for broodstock and juvenile shellfish seed through its various stages of production. The steps involved
include starting a 250 ml culture in an axenic 500 ml flask for four days, using the flask culture to inoculate a 20 liter carboy that is cultured for five days and using the carboy culture to inoculate a 20,000 liter fiberglass tank containing 220 C seawater. The alga is then cultured for 4 to 6 days to reach 1 billion cells per liter before being fed out to the shellfish. The hatchery also has a continuous "bag culture system" that produces a mix of high density dinoflagellates. Feeding involves diluting the cell concentration by two-thirds by pumping 10,000 liters from the algae tank to a 30,000 liter tank containing 20,000 liters of seawater heated to between 160 C and 200 C depending on the species. This is then sent to the various systems containing the rearing shellfish and fed via a drip system at varying rates depending on the life stage. A 30,000 liter tank of the diluted algae will last about one day. Toward the end of the workday the tank is replenished with about 10,000 liters of heated seawater to ensure that it lasts throughout the night. Feed can also be pumped from the algae tanks directly to the rearing shellfish as opposed to the drip feed. Known as "pulse feeding" this method can be a more convenient method of feeding under certain configurations, but it is wasteful because the shellfish cannot consume all the algae at such a high concentration and a significant portion ends up going down the drain. Broodstock holding system: This is the system for inactive maintenance and isolation of broodstock in the hatchery. It consists of 1,000 liter fiberglass tanks that contain the tray setup for holding brood animals, and a system for supplying unheated, untreated seawater (except UV) at 1 to 4 liters per minute. The animals are typically pulse fed at varied times and amounts. Broodstock conditioning & spawning system: This is the system for ripening broodstock and spawning them. It has the same components as described for the broodstock holding system plus it includes periodically UV and 1 micron filtering and heating (about 100 C) the seawater to induce spawning. The purpose of this system is to produce a "controlled spawn." This involves including at least four individuals of each sex in the spawn to ensure genetic diversity and keeping the sexes separate as spawning is induced. The process involves close monitoring. As the animals spawn, the gametes are removed and placed in a fertilization bucket in a set egg to sperm ratio to help ensure a healthy spawn. After several cell divisions the eggs are inspected to get a measure of the success of the spawn. Fertilized eggs are removed from the fertilization buckets and placed in the larval rearing tanks. Larval rearing system: This is the resource for rearing larvae from spawn to the pediveliger stage. It involves UV treating, 1 micron filtering and heating to 160 C (200 C for oysters) enough saltwater to fill a 30,000 liter fiberglass tank. Hatched larvae are then placed in the tank and fed. Every 2.5 days on average the tank is drained. The larvae are collected in a screen placed underneath the drain cock. Growth, health and survival data are gathered before they axe transferred to another 30,000 liter tank prepared and operated in the same manner as described above. These steps are repeated every 2.5 days on average until the larvae reach the pediveliger stage, which differs with species and temperature but is usually complete within three to five weeks.
Intense nursery system: This is the system for taking shellfish larvae from the pediveliger stage to 2 millimeter seed. A single unit consists of an 80 cm x 2.5 m x 80 cm fiberglass tank within which three fiberglass upwelling trays 60 cm in diameter and 70 cm tall with plastic screened bottoms are placed with the bottoms about 10 cm off the bottom of the trough. The shellfish are located in the trays, which may be supplied with an artificial substrate for shellfish settlement. UV treated, 1 micron filtered and heated (to about 160 C, or 240 C for oysters) seawater flows into the tank and out a screened port. After the pediveligers have set (metamorphosed into tiny bivalves) an airlift system is initiated which efficiently circulates water and food. The system typically downwells (water/food in the top and out the bottom) until the animals reach about 1.2 mm in size at which point the system is reversed to upwell mode (water/food in the bottom and out through a screened standpipe). In the case of trays with substrate the water flows across the substrate. Long term nursery system: This is the outdoor system for taking 2 mm seed to 6 mm to 9 mm depending on the species. This system is similar to the larval settlement system except each trough is much larger (3.3 m x 1.6 m x 0.8m) and holds 10 upwelling trays instead of three. The algae for the system will come from the outside enclosed tank system. Water supply: The physical plant now has four different sources of salt water. The hatchery can draw water from four different sources: an 8-inch pipeline extending to a depth of 250 feet; a saltwater well; a connection to the primary intake line for the neighboring University of Alaska’s Marine Science Center; and a backup line from the hatchery. The primary source of water into the MTC is the connection to the university intake line, but it can be transferred to one of the hatchery sources as needed.
Hatchery Staff
The APSH has a permanent staff of three, including the hatchery director and two shellfish technicians, and employs 1-3 seasonal technicians, depending upon the production workload and needs of research projects under the hatchery’s control. Outside technical assistance also is secured through contractual agreements, including projects funded through the MTC. Following is a description of the core hatchery staff positions. Hatchery Director: This position is responsible for all hatchery operations, including budgeting, planning, permit acquisition, facility maintenance, personnel management and training, and sales. The hatchery director is the primary contact and representative for the hatchery, and is responsible for overseeing the research and development projects in the MTC. In addition to management responsibilities, this position will also be actively involved in shellfish seed/algae production and development work. Shellfish Culturist (2): These positions will assist the hatchery director in shellfish seed/algae production and development and be responsible for the day to day
maintenance needs. These positions are under the direct supervision of the hatchery director. Seasonal Technicians: These positions will work primarily during the summer months. They will work under the direct supervision of the hatchery director or shellfish culturist performing whatever duties are required. Contractual: APSH employs a bookkeeper part-time under a contractual agreement, and some physical plant maintenance also is performed under contract. Also working under contract will be a king crab research biologist to work on the MTC project.
Production Plan
With the notable exception of Pacific oysters, the species APSH has been producing or experimenting with since 1998 have been shellfish for which no standardized hatchery practices have been developed. In fact, with the exception of geoduck clams, these indigenous species of shellfish simply have never been cultured on a commercial scale. Only two species appear ready to support production in commercial quantities over the next five years: geoducks and Pacific oysters. Following is a discussion about these two target species and those in the “developing species” category (littlenecks, cockles, rock scallops, razor clams and giant red sea cucumbers). Geoduck clams Geoduck clams are one of the highest value seafood products of the West Coast of North America, and the giant burrowing clam is regarded as one the “hottest” new aquaculture ventures. The high value of geoduck spat ($.25 each) have made the species the answer to the hatchery’s continual fiscal problems. Unfortunately, development of geoduck farms in Alaska have sparked considerable controversy and the pioneering operations have become mired in court battles, legislative hearings and regulatory turmoil. APSH has continued working on developing hatchery techniques for producing geoduck seed, despite the continual delays in development of the farming operations, and the first significant crop of geoduck seed (300,000) was produced in 2007. By mid-2008, the hatchery had about 300,000 nearing market size and another batch of seed beginning to set, and the industry appears to be ready to purchase all the geoduck seed APSH can produce. One factor suggesting the demand for geoduck spat will remain strong over the next five years is the failure of geoduck seed crops in West Coast hatcheries outside of Alaska in 2007 and 2008. A species of vibrio has been devastating to shellfish hatcheries in Oregon and Washington, and it may take years before production rebounds to former levels. If so, it seems likely there will be increased interest in developing Alaska enormous potential for geoduck aquaculture.
It also appears there has been some recent progress in resolving the long-standing legal and regulatory problems plaguing Alaska’s geoduck farmers. In addition to agreeing to negotiate with farmers, ADF&G is working on an industry proposal to establish “geoduck aquaculture development zones” where farming will be encouraged. Enhancement of commercial wild beds of geoducks also is a potential market for APSH spat. Results from a test planting by the Southeast Alaska Region Dive Fisheries Association in 2007 may help determine the future of geoduck enhancement. A successful spawn for geoducks at APSH can result in 1-2 million shellfish, producing roughly 250,000-500,000 spat in the 6 mm range for sale to growers over a 4-5 month period. Consequently, APSH plans three-four spawning events per year to meet anticipated market demand. These schedules can be accelerated if growers can successfully move 2-3 mm spat into nurseries or plant the shellfish at the smaller size without an intermediate nursery phase. Experiments with nursery systems to date have resulted in high mortality rates and additional research is necessary before nurseries play a major role in spat production in Alaska. APSH also is exploring the potential for expanding the current geoduck production capacity of the facility to accommodate production of geoduck spat for sale to nonAlaska growers. Expansion of Washington’s successful geoduck farming industry has been hampered by insufficient supplies of spat to independent growers. Two large companies (Taylor United and Seattle Shellfish) have controlled the production of geoduck spat, leaving smaller farms competing heavily for the remaining few spat available to independent operators. In addition, only one farm in British Columbia has secured geoduck spat and no B.C. hatcheries current produce the seed. The biological problems encountered by West Coast hatcheries have compounded this shortage, and even Taylor and Seattle Shellfish are meeting their spat needs. In response to requests by Washington growers, APSH sought approval from the Alaska Department of Fish and Game to produce spat for Washington by importing Puget Sound broodstock and producing spat to send back under conditions necessary to protect local water and resources. This request was denied, but APSH is seeking reconsideration of that decision. In addition, one major potential customer company is considering challenging Washington State’s refusal to allow geoduck spat produced from Alaska broodstock to be imported into Washington. Oysters Oysters continue to be the predominant species of the Alaska mariculture industry, but APSH appears likely to supply less than one-fourth of the spat purchased by Alaska nursery operations over the next five years. Despite repeated efforts to appeal to Alaska oyster spat buyers, APSH has found it simply cannot compete with large, efficient companies specializing in producing Pacific oyster spat.
While the problems of West Coast hatcheries might seem to create an opportunity for APSH to sell oyster spat, the company that has dominated the Alaska oyster spat market over the past five years, Coast Seafood, has escaped the vibrio problem because of its location in Hawaii. Although Coast recently raised it prices, APSH still can’t compete on a price basis. Energy costs have been a major barrier in the past and rising oil prices will compound the problem. APSH is likely to continue to capture about 20-25% of the Alaska spat market. APSH cannot produce and sell oyster spat at a profit, but will continue to meet the needs of Alaska growers and nursery operators. The hatchery will continue to produce 3-5 mm oyster spat from small spat purchased from Coast or other Outside hatcheries. APSH can reduce its losses from oyster spat production by eliminating the energy-intensive production of spat from larvae. Developing Species These species are not ready for commercial scale production for a variety of reasons, primarily because there is little or no demand for seed. The creation of a new shellfish aquaculture research and development station in Ketchikan by Oceans Alaska may help solve some of the problems keeping these farming opportunities from developing. In the meantime, work will progress with these species to varying degrees. Following is a species by species summary. Littleneck clams - APSH appears to be the only shellfish hatchery ever to produce littleneck clams. Existing production of littlenecks in Washington, B.C. and Alaska is very small, and is totally reliant upon natural recruitment. This production from wild fisheries and farms appears destined to remain very small. Planting experiments with APSH-produced clam spat have shown a need to start with seed averaging 10 mm or larger, creating the need to carry them in a FLUPSY for several months. The result is a costly seed. ADF&G is helping finance a 2008 project under the guidance of the UA Marine Advisory Program the will purchase 200,000 littleneck clam seed from APSH. Spat in the 3-4 mm range will be transferred to the Naukati Shellfish Nursery where they will be cultured for several moths and planted by a local clam farmer. The project will analyze seed costs and test different growing methods. Other potential markets for littleneck clam spat might include smaller scale enhancement projects. APSH will attempt to provide seed for a pilot project in 2008 or 2009. Cockles – Basket cockles appear to have some promise, but a lot of R&D work is necessary before growers are prepared to purchase any seed. A recent experiment by the Alaskan Shellfish Growers Association to test the feasibility of culturing cockles in lantern nets or in bags on the beach confirmed the shellfish will grow quickly. However, the trials also revealed serious shelf-life issues and the need to explore freezing technology or some other value-added processing. ASGA’s experiment also underscored the need to start with fairly large spat, raising concern about the cost of seed.
APSH plans to produce modest numbers of cockles to help support R&D efforts and supply potential enhancement projects in Southeast and Southcentral. Rock scallops – Experiment with rock scallops in Southeast showed great potential for this species, but additional R&D work is necessary before the species can be commercialized. Difficulties have been encountered in obtaining rock scallop broodstock from Southcentral. APSH will continue to work on developing a source of broodstock for Southcentral and will work with the industry to produce spat for use in future R&D projects. Razor clams – APSH began working with razor clams in 2004 and early research has been promising, but it’s too early to tell if the species is a good candidate for enhancement projects or commercial development. Research level efforts will be continued as funding allows. Giant red sea cucumbers – The first sea cucumbers were moved to the hatchery in 2008 and it is too early to tell whether the species has potential for development. No commercial scale production is foreseen during the next five years.
Mariculture Technical Center/Research & Development
A primary source of revenue for the hatchery over the past three years has been a project testing the feasibility of enhancing depressed wild king crab stocks with hatcheryproduced juveniles. While the project is housed in the MTC portion of the facility, APSH plays a critical role in the project, testing the feasibility of scaling up research projects to the large-scale production necessary to support eventual enhancement efforts. The APSH portion of the project achieved tremendous success during early 2008 spawning trials. The project also involves researchers from the University of Alaska and National Marine Fisheries Service. Funding for the king crab project has come from a variety of federal, state and industry sources, and APSH has been able use a portion of the funds to support overall hatchery operating costs. The project is expected to continue throughout the fiveyear period covered by this business plan. If the project progresses to the stage of commercial production for large-scale enhancement efforts, APSH may become a major producer of juvenile king crab for the stocking programs. APSH initiated a separate effort in 2008 to bolster the king crab enhancement program and support the cost of running the hatchery facility through a grant application to the Administration for Native Americans (ANA). The project would have the hatchery working in partnership with the tribal council for Old Harbor, a small village on Kodiak Island. APSH would train village residents as crab research technicians and explore the feasibility of using the village as a nursery and a site for releasing juvenile crab. If approved, APSH would receive some operating funds over a three-year period.
APSH attracted another research project in 2007 to the MTC: a pilot project to test the feasibility of enhancing depressed herring populations in Prince William Sound. While initial efforts to spawn wild herring eggs were successful, the project was not funded for 2008. However, the project may be revived in 2009.
Alutiiq Pride Shellfish Hatchery Operating Budget (FY 20092013) Description 2009 Budget Item Personnel
Hatchery Manager $5,500/mo. (Contractual) 2 Shellfish Technicians $2,400/mo. + .28 fringe $66,000 $73,728
2010
$67,980 $75,940
2011
$70,019 $78,218
2012
$72,120 $80,565
2013
$74,284 $82,982
$139,728 Contractual
King Crab Culture Biologist $4,000/per month Bookkeeper $360/month Maintenance $1,200/month $48,000 $4,320 $14,400
$143,920
$49,440 $4,450 $14,832
$148,237
$50,923 $4,583 $15,277
$152,685
$52,451 $4,721 $15,735
$157,265
$54,024 $4,862 $16,207
$66,720 Utilities
Fuel Oil Use $4,800/month Electricity $6,200/month Water/Sewer $238/month $57,600 $74,400 $238
$68,722
$66,240 $77,376 $238
$70,783
$76,176 $80,471 $238
$72,907
$87,602 $83,690 $238
$75,094
$100,743 $87,037 $238
$132,000 Supplies
Program Supplies $2,200/month
$143,616 $27,192 $23,000 $19,000
$156,647 $28,008 $23,000 $19,000
$171,292 $28,848 $23,000 $19,000
$187,780 $29,713 $23,000 $19,000
$26,400 $23,000 $19,000
Insurance
Facility Insurance
Contingency
Miscellaneous/contingency
TOTALS
NOTES:
$406,84 8
Personnel, contractual and supplies increased by 3% annually. Electricity increased by $.02/kw over 5-year period. Fuel increased by 15% annually
$425,449
$445,675
$467,732
$491,853
Revenue Projections
APSH has two primary sources of revenue: (1) seed sales, and (2) research and development projects. The opening of the Mariculture Technical Center to research projects has resulted in a significant new revenue stream, and the early success of the king crab enhancement project promises to keep the MTC revenues flowing throughout the five-year period covered by this business plan. Seed Sales This plan assumes Alaska shellfish farmers will continue to focus almost exclusively upon oysters and geoducks between 2008 and 2012, and there will be only very limited spat markets for other species, such as littleneck clams, rock scallops, cockles, razor clams and sea cucumbers. In addition to pursuing the in-state market, APSH is attempting to explore the potential for seed sales to growers on the West Coast, British Columbia and Asia. APSH has been getting inquiries and it appears there may be expanding demand for shellfish seed over the next five years. Geoducks - APSH has been steadily improving its geoduck spat culturing techniques and production is increasing steadily. At the same time, geoduck farmers have shown increased interest in seed purchases as they move closer to resolving key policy disputes with the state. The potential for spat sales to enhancement projects and increased demand from new farmers attracted to Alaska because of problems with securing spat in Washington and B.C. makes the sales potential for geoduck spat very promising over the five-year period. APSH intends to gear up as much production capacity as possible to meet this increased demand. At current configurations and state of technology, the hatchery can realistically produce an estimated 750,000 6 mm geoduck spat per year. APSH is experimenting with space saving nursery technology and is considering other methods of increasing nursery capacity. The in-state market for geoduck spat appears to be strong enough to support that production. The five-year plan for geoduck spat production provides for first year sales of 400,000 seed, gradually stepping up production to about 860,000 in 2013. APSH hopes to surpass those goals through advances in nursery technology and or reconfiguration of floor space. Following are production goals and sales revenue projections for the target period.
Projected Geoduck Spat Sales and Revenues 2008-2012 Year 4.5-6 mm @$.15 6mm or larger @$.25 2008 150000 22500 250000 62500 2009 300000 45000 300000 75000 2010 345000 51750 345000 86250 2011 390000 58500 390000 97500 2012 435000 65250 425000 106250
Oysters – The role of the hatchery in the marketplace for Pacific oyster spat for the next five years appears to be one of a secondary source of small seed to Alaska nursery operations. Coast Seafood specializes in oyster production and has achieved tremendous cost efficiencies in locating seed production in Hawaii and sheer economy of scale. APSH simply can’t compete with Coast. Consider, for example, the cost of heating water by 10-150 C. at the Seward hatchery versus suitable ambient temperatures at Kona. Coast also has the ability to grow algae by natural sunlight, and many other advantages. Alaska’s nursery operators are understandably price conscious, and interest in higher cost spat is minimal. Likewise, APSH is reluctant to lose too much money producing oyster spat for buyers who are not dependent upon spat produced by a local hatchery. Consequently, APSH plans to continue to supply Alaska FLUPSY operators with all the seed they want to order. APSH will produce at least 2 million 3-5 mm oyster spat per year and will gear up additional production as necessary. If Coast runs into problems or the need for local production becomes necessary for some other reason, APSH can crank up its production in fairly short order. Following are projections of annual oyster production and anticipated sales revenue.
Projected Oyster Spat Sales/Revenues 2008-2012 Year 1000s of seed Price/1000 Value 2008 2000 6.5 13000 2009 2100 6.5 13650 2010 2200 6.5 14300 2011 2300 6.5 14950 2012 2400 6.5 15600
MTC/Research and Development The most significant source of revenue between Fiscal Years 2009-2013 will come from work in the Mariculture Technical Center portion of the physical plant. APSH has been able to cover about half of its operating costs over the past two years from revenues generated by the king crab enhancement project, and even larger revenues are expected over the next five years. In exchange for providing the physical plant space, utilities, maintenance and other support, APSH has been receiving funds to cover a portion of the hatchery’s overall operating costs. A portion of the hatchery director’s salary and some capital improvements also have been covered by a variety of grants from the legislature, federal government, University of Alaska, and crab industry. The crab project is experiencing impressive results during 2008, thanks in large part to the portion of the project led by APSH, and support for the hatchery is expected to increase as a result. In addition, APSH has partnered with the village of Old Harbor to apply for a three-year grant from the Administration for Native Americans to expand benefits from king crab enhancement to Native villages. If the grant is approved, it would bring significant new
revenues to the hatchery through the MTC. If that effort fails, APSH intends to work on other approaches to increase revenues from research and development projects. Following are projected annual revenues from research and development projects generated in the MTC.
Projected Revenues from Research and Development Projects in the MTC 2009 2010 2011 2012 2013 Research/MT 225,00 275,00 275,00 275,00 C 0 0 0 0 275,000
Financial Analysis
Close examination of the information pulled together for this business plan reveals that APSH can make a modest profit if revenues from use of the MTC continue to be strong. The following pro forma compares anticipated income and expenses for the next five years. Projected Expenses and Revenues (FY2009-2013)
Expenses Revenues Research/MTC Geoducks Oysters Other Seed State Grant Revenue Totals Balance 225,00 0 105,00 0 8,00 0 4,00 0 68,00 0 410,00 0 3,15 2 1 275,00 0 145,00 0 9,20 0 5,00 0 434,20 0 8,75 5 275,00 0 166,75 0 10,58 0 7,00 0 459,33 0 13,65 8 275,00 0 191,76 3 12,16 7 9,00 0 487,93 0 20,19 6 275,00 0 220,52 7 13,99 2 12,00 0 521,51 9 29,66 2009 406,84 8 2010 425,44 9 2011 445,67 5 2012 467,73 2 2013 491,85 3
Several factors have potential for changing this analysis: Energy Costs – The market cost of oil was skyrocketing as this business plan was being written, and it was virtually impossible to predict where those costs will be in one month, let alone five years. The federal Energy Department released a forecast in mid-June 2008 projecting world oil prices would plateau somewhere above $100 per barrel over the next several years. This analysis accepts that projection and assumes APSH will continue to become more efficient in culture practices and improve waste heat recovery, and that electricity rates will remain somewhat stable.
Spat Sales – If the Alaska mariculture industry expands at a faster pace than envisioned in this plan or export sales occur, seed sales may become a much more important source of revenues. Export sales of seed also could improve these revenues. MTC Revenues – If the king crab project folds prematurely, it will likely take months to get another project in place at the MTC, resulting in an operating loss during that period of time. However, the project is enjoying excellent early success and has attracted important support from the industry, NOAA and the University of Alaska.
Alutiiq Pride Shellfish Hatchery PO Box 369 Seward, AK
907 224-5181 224-5282 fax [email protected]
