Ahi farm’s ocean lease OK’d

Hawaii’s two open-ocean fish farms raising moi and kahala may be struggling financially, but a similar endeavor to raise ahi is advancing.

Honolulu-based Hawaii Oceanic Technology Inc. recently received state approval to lease ocean waters below 247 acres of sea surface three miles off Kawaihae on the Big Island.

The Board of Land and Natural Resources tentatively approved a 35-year lease for the company, which hopes to begin producing bigeye and yellowfin tuna in 2013.

The approval represents another major advance for the plan led by local entrepreneur Bill Spencer and former University of Hawaii oceanographer Paul Troy.

However, the research-stage company, which was established in 2006 and completed an environmental impact statement report last year, still has a ways to go before joining Hawaii’s fledgling industry of offshore aquaculture production.

Hawaii Oceanic estimates it will need $5 million to deploy the first of 12 envisioned underwater cages, each of which measures 177 feet in diameter and is designed to hold 20,000 fish growing up to 100 pounds each.

The company also has yet to perfect rearing fish from eggs.

With help from Syd Kraul of Pacific Planktonics Inc., Hawaii Oceanic, according to Spencer, has achieved the first of three major steps in the captive-breeding process: harvesting eggs from the fish.

The other two steps — producing fingerlings from eggs and then growing the fish in the cages to harvest size — have yet to be perfected by anyone for commercial bigeye and yellowfin production, though Japanese producers have accomplished the feat for bluefin tuna that live in colder waters.

"We know it can be done, and we think we have the best people to help us do it," Spencer said.

The challenge of raising fish and financing dashed earlier expectations for Hawaii Oceanic starting commercial production next year and expanding to full production in 2014.

Spencer said he’s not deterred by such challenges or the difficulties experienced by existing Hawaii open-ocean fish farms Hukilau Foods and Kona Blue Water Farms.

Hukilau, which raises moi off Oahu, filed Chapter 11 bankruptcy last week through parent company Grove Farm Fish & Poi LLC after running into trouble expanding what had been a profitable operation. Business continues for Hukilau during the effort to restructure its debts.

Kona Blue, which raises kahala under its Kona Kampachi brand off Kailua-Kona on the Big Island, is pursuing plans to farm fish off the coast of Mexico, where costs are cheaper. The company also is reconfiguring its Big Island ocean cages and hasn’t harvested fish since last November, though resumption of harvests is anticipated in the next few months.

"I don’t consider them to be down and out," Spencer said of Hukilau and Kona Blue. "It’s a challenging business and it requires substantial investment."

Spencer said the industry is still in an early stage in Hawaii, which he regards as the Silicon Valley of aquaculture due to the state’s offshore aquaculture lease law, wealth of fishing and marine science experts, and 200,000-square-mile exclusive economic zone.

One industry opponent, Food & Water Watch, has lobbied against expanding the industry in Hawaii and argues that advancing open-ocean aquaculture is "senseless" given that existing operations have failed to live up to their economic promise.

The Washington, D.C.-based group contends in a report released in April that there are insufficient industry and government safeguards for the environment.

One of the main concerns of open-ocean fish farming critics is concentrations of uneaten food and fish waste fouling the ocean.

The local fish farms say testing has demonstrated that water quality isn’t significantly harmed and argue that farming fish in giant ocean cages is a sustainable and environmentally friendly answer to dwindling wild fish stocks.

Spencer said that while Hukilau and Kona Blue may be struggling, open-ocean aquaculture internationally is big business.

"People are making money," he said.

Spencer believes Hawaii Oceanic will be in a better position than Hukilau or Kona Blue because of its focus on big, high-value fish with well-established popularity and demand.

"The demand in Japan is voracious," he said.

Hawaii Oceanic plans to export most of its product, trademarked as King Ahi, to Japan and the U.S. West Coast at prices easily absorbing shipping costs.

Even though ahi caught in Hawaii waters supply just 20 percent of local consumption, Hawaii Oceanic intends to supply no more than 10 percent of local demand so as not to affect local prices and fishermen. In a shortage, though, more could be provided to the local market, Spencer said.

Hawaii Oceanic projects that with 12 cages it can produce 12 million pounds of ahi a year, harvesting half the cages annually and generating $108 million in revenue based on an average price of $9 a pound.

If successful, the company could produce substantial revenue for the state, which typically charges a portion of ocean lease rent as a percentage of revenue.

The Board of Land and Natural Resources is expected to set rent in part based on a fair-market appraisal before finalizing the lease with Hawaii Oceanic. The tentative agreement provides the company with an initial year rent-free given that commercial production isn’t anticipated to begin until after that period.