FEASIBILITY STUDY FOR AN ALASKA SEA CUCUMBER AQUACULTURE FACILITY

PREPARED FOR: SARDFA

April 2019

FEASIBILITY STUDY FOR AN ALASKA SEA CUCUMBER AQUACULTURE FACILITY

PREPARED FOR: SARDFA

Research reported in this publication was supported by the Foundation for Food and Agriculture Research under award number- Grant ID: 554547. The content of this publication is solely the responsibility of the authors and does not necessarily represent the official views of the Foundation for Food and Agriculture Research.

March 2019

By

McDowell Group Anchorage Office 1400 W. Benson Blvd., Suite 510 Anchorage, Alaska 99503 This study was a joint effort between McDowell Group and Dr. Charlotte Regula-Whitefield McDowell Group Juneau Office 9360 Glacier Highway, Suite 201 Juneau, Alaska 99801

Website: www.mcdowellgroup.net Table of Contents

Executive Summary ...... 1 Introduction ...... 1 Study Objectives and Results ...... 2 Summary Conclusions of Facility Feasibility ...... 7 Other Study Components ...... 8 Sea Cucumber Wild Harvest ...... 12 Global Wild Harvest ...... 12 U.S. Wild Harvest ...... 12 U.S. Sea Cucumber Wild Catch Exports ...... 15 International Export ...... 15 Sea Cucumber Aquaculture Industry ...... 18 Global Production Volume ...... 18 Global Production Value ...... 19 Alaska Sea Cucumber Aquaculture Development ...... 20 Biology ...... 20 Summary of Research in Alaska ...... 22 Process of Raising Sea Cucumbers ...... 28 Hatchery Facility ...... 37 Facility Size ...... 37 Facility Spaces and Purpose ...... 37 Out Planting and Grow out Systems ...... 43 Potential Grow out Methods ...... 43 Aquaculture Facility Location ...... 46 Hatchery and Grow Out Site Locations ...... 46 Potential Hatchery Locations ...... 46 Potential Grow Out Site Locations ...... 47 Permitting ...... 48 Estimated Revenue and Expenses...... 49 Revenue Potential ...... 49 Estimated Survival Rates and Harvest Volumes ...... 49 Sea Cucumber Weight at Harvest ...... 49 Estimated Demand ...... 52 Estimated Revenue Potential ...... 53 Operational Expenses...... 54 Proforma Financial Cash Flow ...... 56 Normalized Cash Flow Year 4 ...... 56 Pro Forma Cash Flow Analysis ...... 56 Risk Assessment ...... 57 Estimated Construction Costs ...... 61 Total Hatchery and Grow Out Facility Cost ...... 61 Hatchery Construction ...... 61 Grow Out Facility Construction ...... 62 Float Construction Timing ...... 62 Dock Construction ...... 64 Tender Vessel ...... 64 Other Potential Capital Expenses ...... 65 Estimated Economic Impacts ...... 66 Economic Impacts of Operations ...... 66 Economic Impacts of Construction ...... 66 Recommendations for Future R&D ...... 68 Full Lifecycle Test Grow out ...... 68 Exploration of Polyculture ...... 68 Product Size and Value...... 69 Information Dissemination Plan ...... 70 Appendix A: Market History ...... 72 Appendix B: Commercially Important Species ...... 73 Commercial Species Wild Catch and Aquaculture ...... 73 Appendix C: Product Traits ...... 75 Key Characteristics of Sea Cucumber Desirability and Value...... 75 Appendix D: North American Aquaculture Efforts ...... 78 Aquaculture Development in the U.S. and Canada ...... 78 Appendix E: Growth and Harvest Cycles ...... 81 Estimated Growth and Harvest Cycles ...... 81 Appendix F: Increasing Facility Size and Production ...... 82 Doubled Production ...... 82 Quadrupled Production ...... 82 Appendix G: Data Sources and Cited Works ...... 83

Executive Summary

Introduction

Alaska is home to the largest sea cucumber fishery in North America, with Parastichopus californicus dive fisheries in Southeast Alaska and Kodiak. P. californicus, also known as giant red sea cucumber, is a large, spiny sea cucumber that averages 25 to 40 cm in length and about a pound in wet-weight. Highest densities of P. californicus are found at depths between ~30-60 m, but they have been documented in waters as shallow as 1 m. They are observed to prefer sand and gravel substrate. Sea cucumbers consume many types of primary producers and/or their detritus, from vascular plants to macro- and microalgae. P. californicus is a deposit- feeder that ingests surface sediment, digests the labile organic fraction, and excretes the inorganic and/or indigestible material.

Average de-watered weight (weight after cutting sea cumber open) is slightly less than half a pound, although average weights can vary significantly from area to area. P. californicus is the only commercially harvested sea cucumber in Alaska. The first commercial harvests began near Ketchikan in 1983; today commercial diving for sea cucumbers occurs through Southeast Alaska as well as in smaller fisheries around Kodiak and Chignik. Alaska sea cucumbers are typically harvested in late fall. Divers use scuba gear to hand pick sea cucumbers off the seafloor and transport them to the surface in mesh bags. About 200 divers participate in these fisheries annually. In addition to commercial dive fisheries, the species is a traditional subsistence food harvested using spears or by hand during minus tides.

Nearly all sea cucumbers harvested in Alaska are exported to Asia where it is viewed as a high-quality and desirable wild sea cucumber, similar to the more widely known species Apostichopus japonicus. While P. californicus is considered a high-value seafood product in Alaska, the value of Alaska product lags those attained by A. japonicus.

Although commercial harvest is well-regulated by the Alaska Department of Fish and Game (ADF&G), opportunities for sea cucumber harvests have declined in Alaska, thought to be primarily due to sea otter predation and reduced abundance. Declining harvest volumes have reduced incomes for industry participants in the region, and further declines are anticipated as additional fishing areas are impacted by growing sea otter populations. Sea cucumbers are an ideal candidate for aquaculture development and could be used to offset the negative economic impacts of a declining wild fishery.

Understanding the feasibility of developing a sea cucumber aquaculture facility in Alaska addresses the FFAR goal of market-based analyses for new species production in developing aquaculture regions. A sea cucumber hatchery and grow-out facility would result in positive economic impacts for Southeast Alaska residents and businesses including divers, boat tenders, processing facilities, and industry support businesses. Hatchery specifications and product development techniques identified in this study may also be transferable to coastal communities throughout the species range from Baja Mexico to the Aleutian Islands.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 1 The commercial divers, economic analysts, and scientific researchers engaged in this study have synthesized the best data available to assess the feasibility of developing a full-scale commercial sea cucumber aquaculture operation near Ketchikan, Alaska.

To date, the Southeast Alaska Regional Dive Fishers Association (SARDFA) has invested $335,000 in scientific research to develop sea cucumber aquaculture in Alaska, primarily focused on hatching and rearing of P. californicus. From 2008 to 2016, SARDFA, a graduate student from University of Alaska Fairbanks (Dr. Charlotte Regula-Whitefield), and the Alutiiq Pride Shellfish Hatchery collaboratively developed aquaculture protocols to produce P. californicus juvenile seed stock. The team achieved success in four areas, as described below.

 Adult spawning protocols were developed for P. californicus. This spawning method allowed the collection of large volumes of fertilized eggs for culture.

 Feeding protocols were developed for both larval and adult P. californicus. These protocols were developed to maximize adult egg production and growth rates in larvae.

 Preliminary tank type requirements were determined for the culture of P. californicus.

 A small test grow-out of cultured sea cucumbers out planted in cages adjacent to the Ketchikan road system from April through September 2016 showed promising survival and growth rates.

The successful development of these protocols and systems provides crucial information to inform this feasibility study. Nevertheless, key knowledge gaps remain, adding significant uncertainly to this assessment of the financial feasibility of a sea cucumber aquaculture operation in Alaska.

Prior to further investment in research and development, SARDFA needs to better understand the economic viability of sea cucumber aquaculture in Alaska. The primary objective of this study is to examine the financial feasibility of a system that would hatch sea cucumbers in a land-based facility for out planting in trays for marine grow out to a harvestable size. Where knowledge gaps exist, feasibility was modeled using the best estimates available.

This study has six primary research objectives. These objectives and a summary of the research conducted under each objective are presented below.

Study Objectives and Results

Objective #1 Define Sea Cucumber Market Size, Demand, and Prices

Market data was gathered for global sea cucumber wild catch and aquaculture industry production. The most recently available harvest and value data for the U.S. and Alaska were compiled, including 10-year trends for Alaska harvest and value.

WILD CATCH  Global sea cucumber wild catch averaged 40,241 metric tons (MT) annually between 2012 and 2016. The leading producers are Japan with average annual production of 8,828 MT between 2012 and 2016, Canada (6,873 MT), Indonesia (5,797 MT), and Russia (5,456 MT). The U.S. was the ninth largest producer averaging 1,515 MT and accounted for about 3.8 percent of average global harvest for the period.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 2  The U.S. produced 2.1 million pounds of wild catch sea cucumbers in 2016 worth $9.1 million (ex-vessel value).

 The U.S. exported an annual average of about 600,000 kilos between 2015 and 2017 with an annual average value of $18 million. More than half of export volume (52 percent) was sent to Hong Kong with most of that product destined for China. Other top export markets are Canada (12 percent), China (12 percent), and South Korea (11 percent). With the majority of product exported to Hong Kong and Canada ultimately ending up in China, the Chinese market is estimated to receive roughly three- quarters of all U.S. exports. The most common product form for export was frozen or salted (88 percent), followed by prepared or preserved (8 percent), and live or fresh (4 percent).

 In 2017, U.S. exports of frozen or dried product received the highest price per pound at $21.86, followed by live or fresh ($5.02/pound), and prepared or preserved ($4.64/pound). The average price per pound for all product forms was $14.73 in 2017.

 Analysis of the Hong Kong market for frozen or dried sea cucumber imports in 2017 show that product from Japan received by far the highest average value per pound at $67.91, followed by South Korea ($50.71/pound), U.S. ($15.03/pound), Mexico ($14.08/pound), and Canada ($13.44/pound).

 Statewide, Alaska divers harvested an annual average of 1.46 million pounds of sea cucumbers between 2008 and 2017. In 2016, the Alaska harvest of 1.43 million pounds represented about 1.5 percent of global wild caught sea cucumbers.

 Production in Southeast Alaska accounts for slightly more than 90 percent of statewide sea cucumber harvest and value.

 The average annual ex-vessel value of Alaska sea cucumbers was $5.7 million from 2008 to 2017. Average price per pound for the period was $3.94 pound, with a low of $2.55 in 2008, and a high of $6.03 in 2011.

 While Alaska harvest volume declined by 15 percent from 2013 to 2017, ex-vessel value increased by 7 percent.

AQUACULTURE  Annual global sea cucumber aquaculture production averaged 196,800 MT in volume and $1.2 billion in value between 2012 and 2016. Global production volume increased by 21 percent over this time period, while production value increased 39 percent. In 2016, China dominated the industry with 99 percent of production volume and 97 percent of total value.

 Globally, aquaculture accounts for 80-85 percent of total sea cucumber production volume.

Objective #2 Identify Hatchery and Grow Out Facility Type, Size, and Location

Sea cucumber aquaculture facility size was defined through an iterative process based on the space required to hatch and grow sea cucumbers to a stage ready for out planting, type and space requirements for a grow out facility, estimated revenue potential from harvested product, and estimated operational costs. This required simultaneous modeling for objectives #2, #3 (estimated revenues), and #4 (estimated expenses).

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 3  Preliminary analysis was conducted for multiple facility sizes and the ability of each to generate net revenue. It was determined that a two-story hatchery facility of 11,750 square feet could produce 780,000 harvestable sea cucumbers and likely generate adequate net revenue.

 Preliminary specifications for facility size and spaces were developed based on the estimated need to harvest approximately 780,000 sea cucumbers. Based on SARDFA research, estimated survival rates were developed for low-mid-and high-cases for broodstock, larval, and juvenile setting tanks. The number of tanks and space required to house two cohorts simultaneously was calculated. Appropriate support spaces were defined based on tank room size and other factors. Tank space requirements are estimated to be slightly more than half of total facility space.

 It was determined that the best method for a grow out facility is a float and tray system like those used for growing oysters in Southeast Alaska. This system is scalable and provides ready access to the product for maintenance and harvest. A model of the timeline for hatching, rearing, out planting, and harvest was developed to identify how many floats and trays would be needed throughout the cycle of multiple cohorts given estimated survival rates at each stage of development.

 Preliminary investigation was conducted for multiple hatchery and grow out facility locations near Ketchikan. Options for the land-based hatchery include leasing land from the Ketchikan Gateway Borough or the purchase of land. Factors considered include the need for a shore-based facility on the existing road system and located in reasonable proximity to potential grow-out facility locations.

 A marine grow out facility would require permitting by the Alaska Department of Natural Resources and the Alaska Department of Fish and Game. No barriers to permitting a sea cucumber aquaculture facility were identified. After review of various potential locations, the area of West Behm Canal (Northwest of Ketchikan) was identified as the most promising location for a grow out facility. A significant factor in this evaluation is the potential to locate the grow out facility in proximity to a large oyster farm where sea cucumbers could feed on oyster waste, likely resulting in accelerated growth.

 While multiple sites were reviewed for potential hatchery and grow out facilities, specific locations were ultimately not selected. However, if the grow out facility were located in West Behm Canal, it would be most efficient to locate the hatchery somewhere along North Tongass Highway.

Objective #3 Estimate Facility Revenue Potential

Revenue estimates were developed in low, mid, and high cases assuming the mid-case survival of 780,000 harvestable sea cucumbers. Two critical components drive estimated revenues: dewatered weight and price.

 A range of estimated dewatered weights at harvest (45 months from hatch) were developed based on the best data available from ADF&G harvest records for wild caught sea cucumbers. Across various harvest areas and years, ADF&G recorded average dewatered weights ranging from a low of 0.134 pounds to a high of 0.839 pounds with an overall average of 0.435 pounds. Weights for the West Behm Canal area averaged 0.35 pounds (based on 2012-2018 data).

 Considering historic harvest weights and the potential for a 45-month old sea cucumber to be smaller, de-watered weight estimates modeled in this study were conservative, ranging from a low-case of 0.20

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 4 pounds to a high-case of 0.30 pounds, with a mid-case scenario of 0.25 pounds. This estimate may be especially conservative if sea cucumbers are co-cultured in proximity to oysters.

 Predicating future prices for any commodity is inherently challenging. Historic ex-vessel value was analyzed to estimate potential future sea cucumber prices. Over the last decade, ex-vessel prices averaged $3.96 per pound and the five-year average price from 2013 to 2017 was $4.17 per pound. Ex- vessel value increased by 102 percent from $2.55 in 2008 to $5.15 in 2017. Preliminary in-season reports indicate that ex-vessel prices for the 2018 fishery ranged from $5.25 to $6.00 per pound. For this study, a range of $4.00 to $4.75 is used with a mid-case estimate of $4.25 pound (roughly equivalent to the 2013-2017 average price). These prices primarily reflect the value of product intended for processing as frozen meat and salted and partially dried skins. However, processing of a small amount of whole cooked and salted product has occurred in recent years.

 Production of 780,000 sea cucumbers (harvested by SARDFA and sold de-watered to processors) would represent about 14 percent of the average annual harvest over the last decade and would likely be absorbed by the market. However, there are some unknowns regarding market acceptance of a sea cucumber that will likely be somewhat smaller than the average wild P. californicus. A portion of the current wild harvest is significantly smaller than the average size and these sea cucumbers have been consistently purchased in the past. Further research regarding market acceptance of smaller sea cucumbers is recommended.

 Based on the mid-case estimates for dewatered weight and price, a facility producing 780,000 harvestable sea cucumbers could generate $830,000 in gross revenue annually.

Objective #4 Estimated Annual Facility Operating Expenses

Annual expenses were estimated for the first normalized year of production (year 4) for 19 expense categories. Estimates were developed based on a review of two similar Alaska facilities and project team knowledge of operating costs developed for other types of Alaska-based facilities.

 Total operational expenses in a normalized year are estimated to be $410,000. The most significant expense categories are payroll and benefits ($200,000), electricity ($75,000), supplies ($30,000), insurance ($20,000), repairs and maintenance ($15,000), and tender vessel fuel ($15,000).

 Facility staff would include a full-time manager, full-time assistant manager, and approximately 3,360 hours of seasonal staff time annually. Payroll and benefits would be about half of annual operating expenses.

Objective #5 Develop Pro Forma Cash Flow Statement

A 4-year proforma cash flow analysis was developed based on revenue and expense estimates. Estimates were not adjusted for inflation. Beyond year 4, the only expense projected to increase relative to revenues is facility maintenance.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 5 NET INCOME  Based on estimated revenue of $830,000 and operational expenses of $410,000 the facility could generate net income of $420,000 in year 4. This excludes debt service, depreciation, taxes, and amortization.

 The facility will need cash reserves of nearly $1.5 million to sustain operations until the first harvest near the end of year 4.

DEBT SERVICE  How SARDFA may choose to finance facility construction and cash reserves in unknown. Possible options include some combination of SARDFA capital, conventional bank loans, or investment from outside partners. There may also be some opportunities to seek low-cost loans or grant funding.

 Annual principal and interest payments will depend on the total amount borrowed, length of the loan, and interest rates. Financing for 10 years, at a rate of 8 percent, indicates a facility generating net cash flow of $420,000 annually could support debt service on roughly $3 million in loans.

RISK ASSESSMENT  Models were developed to assess the effect of risk factors related to estimated survival rates, harvest weight, and ex-vessel price. Survival rates at three developmental stages were modeled in the low-case estimates at each stage and in the high-case estimate at each stage. Both scenarios assumed the mid- case harvest weight and price scenarios. In the low-case scenario only 108,000 sea cucumbers would survive to harvestable size generating net revenue of $115,000 annually. In the high-case scenario, 2.2 million sea cucumbers would survive to harvest generating net revenue of $2.3 million annually.

 Additional modeling was completed to assess the effects of weight and price. This scenario used mid- case survival rates at all developmental stages (780,000 harvestable sea cucumbers). When modeled in the low-weight and low-price scenario, net cash flow would be $624,000 annually. In the high-weight and high-price scenario net revenue would be $1.1 million annually.

 The variability of survival rates has a much more significant effect on potential revenue than do weight and price. Additional research to refine survival rate estimates is warranted.

 Other risk factors to be considered include the disastrous effects of losing an entire cohort to disease, human error, or other calamity – as well as market concentration. With a majority of sales anticipated to go into the Chinese market, China’s economic conditions, tariffs, changing consumer tastes, or food safety concerns could have a significant effect on potential sales.

Objective #6 Estimate Capital Construction and Equipment Costs

Construction costs for the 11,750-sq. ft. hatchery and floating grow out facilities were estimated with the assistance of a Ketchikan-based engineering and construction firm.

 Total development costs for the hatchery and grow out facility are estimated at $6.5 million.

 The facility would include a metal frame building on a concrete slab. Per sq. ft. costs were estimated for hatchery facility design, site development, and construction. Total cost is estimated at about $2 million or $175 per sq. ft. (including labor and exclusive of equipment and fixtures).

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 6  Hatchery equipment and fixture costs and installation were estimated for tanks and associated fixtures, heating systems, work space fixtures, water pumps and filters, office and lab equipment, and equipment to raise algae. Equipment, fixtures, and installation labor cost are estimated at $750,000 or about $64 per sq. ft.

 The total estimated cost of hatchery construction including equipment, fixtures, and labor is $2.8 million or about $241 per sq. ft.

 Grow out facility costs were estimated for floats and trays, a tender vessel, and a shoreside dock – totaling about $3.6 million. Floats are the most significant expense at $2.1 million, followed by trays ($674,000), tender vessel with lift system ($635,000), and a shoreside dock ($211,000).

 Due to the uncertainty regarding site selection, land lease/acquisition costs and potential driveway construction costs were not estimated.

Summary Conclusions of Facility Feasibility

While there are knowledge gaps in the science required to hatch, rear, and grow sea cucumbers to marketable size, given time and additional investments, there is reasonable likelihood that these gaps can be bridged and that the biological process of P. californicus aquaculture is feasible in Alaska.

Global markets for wild caught and farmed sea cucumbers are strong and growing. Alaska’s annual wild harvest has ready markets and prices have been strong in recent years. Alaska’s clean waters combined with the desirable product traits of P. californicus will likely result in market acceptance of an Alaska aquaculture product even if farmed sea cucumbers are slightly smaller than the average wild P. californicus. Further declines in the wild catch harvest of P. californicus due to sea otter predation could also provide support for acceptance of a farmed product.

In a normalized year of operation, the proposed facility is estimated to generate net revenue of about $420,000; however, if SARDFA is required to finance a significant portion of facility construction, it is unlikely that this level of net cash flow is adequate to pay down principal and interest in a reasonable time period. Preliminary estimates of net revenue for a facility double or quadruple the size of the facility outlined above indicates that while there are improving economies of scale, loan repayment in a reasonable time-period may still be challenging. Whether a facility sized more than four times the facility reviewed in this study is feasible is unknown, but may be possible.

A final determination of whether a sea cucumber facility of any size is feasible will depend on refining the biological process to narrow the range of estimated survival rates, better understanding harvest weights for a 45-month product, and better understanding market acceptance of a farmed product smaller than wild catch product. Additionally, the potential to increase growth rates and weight at harvest by growing sea cucumbers in proximity to oysters is promising. With a better understanding of these factors, selection of a hatchery location, and further refinement of facility design specifications and engineering would allow for a higher degree of precision in estimating construction and operational costs. SARDFA will also need to fully investigate potential funding options with an eye towards minimizing debt.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 7 While the feasibility of a sea cucumber aquaculture facility in Alaska is inconclusive at this point, study findings indicate that it may be possible. The knowledge gained from this study provides SARDFA with an outline of the tasks required to move closer to realizing the development of sea cucumber aquaculture.

The information developed in this study will support the already high level of academic and aquaculture industry interest in P. californicus aquaculture on the U.S. West Coast. and in Canada, As Alaska works to overcome remaining hurdles to commercially-viable sea cucumber aquaculture, the technology and processes should be adaptable elsewhere.

Other Study Components

Economic Impacts

The indirect and induced economic impacts (multiplier effects) of facility construction and operations were modeled using IMPLAN, a widely used system for estimating the multiplier effects of employment, payroll, and spending for goods and services.

Ongoing operating impacts are based on estimated annual revenues of $830,000, once operations have normalized in year 4. Direct employment is estimated at 7 jobs with annual labor income totaling $200,000. Including multiplier effects, operation of the sea cucumber facility would account for 10 jobs and $300,000 in total annual labor income in the Ketchikan economy. Total output is estimated at $1.16 million, including all multiplier effects related to labor income and local expenditures for goods and services.

Based on expected hatchery construction costs of $6.5 million, construction is expected to directly support 30 temporary jobs and $2.6 million in labor income in Ketchikan. Including multiplier effects, construction is expected to support a total of 45 jobs and $3.8 million in labor income. Total output is estimated at $9.6 million.

Additional Research Needs

FULL LIFECYCLE TEST GROW OUT Review of the literature identified key knowledge gaps in Parastichopus californicus biology which will need to be determined prior to developing a full-scale commercial operation.

Risk testing shows that the wide range of survival rates results in significant variability in potential harvest value. While research conducted by Dr. Regula-Whitefield on behalf of SARDFA was successful and showed improved outcomes over her 7-year research period, further research to narrow the range of survival rates is warranted.

There is also a need to determine out planted sea cucumber growth rates from month 20 through 45. To this end, we recommend a small-scale grow out study of at least one complete harvest cycle. A 45-month test grow out is estimated to cost about $35,000 to $40,000, with $30,000 to hatch and rear sea cucumbers to 2mm and $5,000 to $10,000 for out planting and monitoring. Continuing the grow out test through month 57 would also provide valuable insights regarding growth rates and harvestable weights over an additional season. The incremental cost for an extra year of monitoring would be negligible.

EXPLORATION OF POLYCULTURE Polyculture and integrated multi-trophic aquaculture (IMTA) have expanded globally to decrease production waste (organic carbon and nitrogen compounds) and increase profitably of cultured species. P. californicus is

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 8 well-suited for co-culturing for several reasons. As a deposit feeder, P. californicus ingests settled organic wastes, thereby decreasing potential nitrogen loading and anoxia beneath co-cultured floats, pens, and cages. Lastly, co-culturing increases food availability and growth rates, and decreases juvenile predation. In the Pacific Northwest, small scale co-culturing of P. californicus has been conducted alongside oyster, salmon, and sablefish at hatcheries and farms.

It is likely that sea cucumbers grown in trays near oyster farms in Southeast Alaska will grow faster and perhaps reach a harvestable size sooner than sea cucumbers grown in locations providing only naturally occurring food. From a financial feasibility perspective, reducing the number of months to harvest and/or increasing weight by month 45, even slightly, could have a significant impact on the overall feasibility of rearing sea cucumbers by reducing operating expenses and/or increasing harvest weight and revenue.

Future research is recommended to better understand the potential benefits of locating sea cucumber grow out facilities near oyster farms. We recommend testing three sets of tray-grown sea cucumbers; one grown in close proximity to an oyster farm, a second set some distance from an oyster farm that would still allow for some deposition of oyster waste, and a third set at a site not influenced by the oyster farm.

As of mid-2018, there were approximately 35 permitted oyster farms in Alaska with about two dozen located in Southeast Alaska, most in Southern Southeast. Alaska’s largest oyster farm (first permitted in 2012) is located in West Behm Canal in relatively close proximity to the Ketchikan road system. This facility would be an ideal location for a test grow out of sea cucumbers co-cultured with oysters.

PRODUCT SIZE AND VALUE The degree to which market acceptance of farm-raised sea cucumbers that are likely to be smaller than wild caught P. californicus is unknown, as is the potential value of a smaller product. We recommend that interviews be conducted with as many sea cucumber buyers and retailers as possible to ascertain potential market acceptance and value of smaller P. californicus. A study of this nature would require close industry contacts and the use of interpreters.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 9 Dissemination Plan

Top-line study results have been or will be disseminated through informational presentations and a series of white papers shared throughout Alaska and the North Pacific region. These materials will be developed for a non-scientific audience. Ms. Sullivan, SARDFA Co-Executive Director will be responsible for coordinating the dissemination of study results.

PRESENTATIONS AND WORKSHOPS

 SARDFA sea cucumber committee and board of directors  Southeast Conference  SARDFA Sea cucumber aquaculture workshop  Alaska Shellfish Growers Association Annual Meeting  Pacific Coast Shellfish Growers Association  2019 Fish 2.0 workshop (Seattle, Washington)

CORRESPONDENCE

Dr. Whitefield has been responsible for developing a series of white papers on the scientific and economic benefits of sea cucumber aquaculture development and sharing these with the public (including those listed below). White papers will also be available as open access on the SARDFA website (www.SARDFA.org).

 Governor’s Alaska Mariculture Task Force  Alaska Shellfish Growers Association  Pacific Shellfish institute  Chignik Sea Cucumber Association  Washington Fish Gowers Association

To most effectively disseminate study results on a national and international level, a series of peer reviewed manuscripts will be developed. These materials will be focused on a scientific audience. Dr. Whitefield will be responsible for developing a peer-reviewed manuscript including a review of current sea cucumber husbandry science and an original study on the economic development of sea cucumber fisheries. This manuscript is in final stages of preparation for submission to the Journal of Aquaculture following the May 2019 SARDFA workshop.

Best Practices

Guidelines for best practices for sea cucumber husbandry in an Alaska aquaculture operation are included in two sections of this report; the summary of Alaska research and the section describing the process of raising sea cucumbers.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 10 Appendices

In support of project objectives, the study team gathered or generated a significant volume of additional information and research documentation. This supporting information is presented in Appendices A-G.

 Appendix A: Market History  Appendix B: Commercially Important Species  Appendix C: Product Traits  Appendix D: North American Aquaculture Efforts  Appendix E: Growth and Harvest Cycles  Appendix F: Increasing Facility Size and Production  Appendix G: Data Sources

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 11 Sea Cucumber Wild Harvest Global Wild Harvest

Global wild capture harvest of sea cucumbers averaged 40,241 MT annually between 2012 and 2016. By country, Japan harvested the most volume, averaging 8,828 tons annually over the period (22 percent of the global total). Other countries with significant harvests included Canada (6,873 tons), Indonesia (5,797 tons), Russia (5,456 tons), Sri Lanka (2,832 tons), and Korea (2,100 tons). The U.S. produced an average of 1,515 tons annually over the period. The U.S. harvest was about 3.8 percent of the global average harvest. For comparison, harvest in Japan was about 22 percent of global average harvest and Canada was about 17 percent.

Table 1. Global Wild Capture Sea Cucumber Harvest Volume (MT), 2012-2016 Country 2012 2013 2014 2015 2016 AVG. Japan 10,057 10,613 8,464 7,505 7,500 8,828 Canada 5,922 4,871 7,067 8,196 8,311 6,873 Indonesia 6,976 4,596 5,566 5,947 5,901 5,797 Russia 0 0 0 5,084 5,835 5,456 Sri Lanka 3,480 3,570 3,360 2,560 1,190 2,832 Korea 1,935 2,112 2,132 2,211 2,109 2,100 Mexico 1,585 2,762 1,428 762 2,035 1,714 Iceland 1,415 1,412 847 1,399 3,162 1,647 U.S. 2,408 1,695 1,150 1,348 976 1,515 Madagascar 700 2,562 2,122 1,598 535 1,503 Nicaragua 425 778 1,234 2,021 2,020 1,296 All other countries 5,727 4,160 2,898 3,741 3,231 3,951 Worldwide 40,630 39,131 36,268 42,372 42,805 40,241 Source: FAO Fish Stats. Note: Average annual production for Russia is based on 2015 and 2016 production. U.S. Wild Harvest

Between 2013 and 2016, U.S. sea cucumber harvests ranged from a high of 3.8 million pounds in 2013 to a low of 2.1 million pounds in 2016. Harvest value ranged from a high of $10.9 million in 2015 to a low of $9.1 million in 2016. In 2016, Alaska production accounted for 69 percent of total U.S. harvest volume.

Table 2. U.S. Sea Cucumber Harvest Volume (pounds) and Value ($ millions), 2013 to 2016

2013 2014 2015 2016 Pounds $Millions Pounds $Millions Pounds $Millions Pounds $Millions Alaska 1,658,000 $6.5 1,203,000 $4.8 1,631,000 $5.7 1,468,000 $5.8 Washington 667,000 $2.5 670,000 $2.6 851,000 $4.0 528,000 $2.6 California 384,000 $1.3 309,000 $1.3 261,000 $1.2 141,000 $0.6 Total West Coast 2,709,000 $10.3 2,182,000 $8.7 2,744,000 $10.9 2,137,000 $9.1 Maine 1,070,000 $0.3 487,000 $0.2 - - - - Florida - - 19,000 $0.02 500 - - - Total East Coast 1,070,000 $0.3 506,000 $0.02 500 - - - Total US 3,778,000 $10.6 2,688,000 $8.8 2,744,500 $10.9 2,137,000 $9.1 Source: National Marine Fisheries Service, Fisheries Statistics and Economics Division. Note: data was unavailable for Maine and Florida for some years.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 12 Alaska Sea Cumber Industry

In total, about 100 kilometers of Alaska shore line are managed for sea cucumber harvest. Parastichopus californicus are harvested by hand by divers using air tanks or via air lines from the surface. Commercial harvest of sea cucumbers in Alaska began in 1983 in the Ketchikan area, with the fishery expanding rapidly. In 1990, the State closed the fishery until a new management plan could be developed. Later that year, the fishery reopened under the Southeast Alaska Sea Cucumber Commercial Fisheries Management Plan. The Plan balances subsistence and commercial harvest for sustainability of the stock and harvest levels. The Plan requires abundance surveys and limits harvests to 6.4 percent of the annually estimated biomass.

From 2008-2017, on average, 206 divers in Alaska harvested 1.46 million pounds of sea cucumber statewide, receiving $3.94 per pound. Average ex-vessel value for the period was $5.7 million. An average of seven processors operated annually, producing a combined annual average of 752,000 pounds of finished product with an average value of $11.54 per pound and a total average first wholesale value of $8.75 million.

Table 3. Alaska Statewide Sea Cucumber Harvests, Ex-Vessel and Wholesale Value, Statewide, 2008-2017 First First # of Pounds Price per Ex-Vessel # of Pounds Year Wholesale Wholesale Divers Harvested Pound Value Processors Processed Value $/Pound 2017 199 1,442,704 $4.96 $7,162,704 7 986,481 $12,594,252 $12.77 2016 200 1,430,194 $4.07 $5,827,132 10 683,521 $8,890,684 $13.01 2015 205 1,582,868 $3.57 $5,643,835 7 665,417 $6,969,826 $10.47 2014 192 1,197,236 $4.02 $4,807,957 5 432,296 $5,628,947 $13.02 2013 225 1,665,253 $4.02 $6,696,554 10 874,193 $9,914,845 $11.34 2012 228 1,644,030 $4.95 $8,138,490 7 1,131,591 $15,565,379 $13.76 2011 207 1,149,126 $6.03 $6,924,743 10 555,969 $7,263,150 $13.06 2010 211 1,412,913 $2.64 $3,723,358 8 805,639 $8,712,949 $10.81 2009 188 1,758,197 $2.63 $4,621,747 4 723,085 $6,581,601 $9.10 2008 200 1,362,023 $2.55 $3,476,972 5 662,967 $5,328,688 $8.04 Average 206 1,464,454 $3.94 $5,702,349 7 752,116 $8,745,032 $11.54 Source: Commercial Fisheries Entry Commission and ADFG COAR. Notes: 2017 data is highly inconsistent between CFEC and ADFG. First wholesale value is defined as the price received at sale of product by a processor to a buyer outside their affiliate network.

On average, from 2008 to 2017, 91 percent of statewide sea cucumber harvest occurred in Southeast Alaska. Other harvest areas include Kodiak, Chignik, and areas in western Alaska. Commercial sea cucumber harvest began in the Kodiak area in 1991. Harvest levels in that area peaked at slightly more than 500,000 pounds in 2013 and have since declined to less than 140,000 pounds. Harvest guidelines for the eight Kodiak management areas are set annually based on ADF&G review of the prior season’s catch rate log book data. Kodiak area harvest guidelines have remained at 140,000 pounds since the 2001/2002 season. The Chignik area harvest is set at 15,000 pounds, while the Alaska Peninsula, Aleutian Islands, and Bering Sea each have allowable harvests of 5,000 pounds.

SOUTHEAST ALASKA PRODUCTION AND VALUE

Southeast quotas are managed for 46 areas that are harvested on a 3-year rotational basis. The average annual harvest guideline from the 2012/2013 season through the 2016/2017 season was slightly less than 1.4 million

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 13 pounds. Within Southeast Alaska, the state’s most productive sea cucumber region, annual harvests averaged 1.3 million pounds between 2008 and 2017, with an average of 181 divers receiving an average price of $3.88 per pound. Peak price per pound was received in 2011 ($5.99/pound), while peak harvest value ($7.4 million) was attained the following year due to an above average price ($4.89 pound) and harvest volume (1.5 million pounds). Average price per pound remained above the 10-year average from 2011 through 2017. The 2017 average price of $5.06 was 30 percent above the ten-year average.

Table 4. Southeast Alaska Sea Cucumber Harvest Ex-Vessel Value and Diver Participation, 2008-2017 Total Landed Average Ex-vessel Number of Season (Lbs.) Price/Lb. Value Divers 2017 1,305,757 $5.06 $6,613,410 174 2016 1,330,736 $4.08 $5,424,774 170 2015 1,496,646 - - 175 2014 1,072,264 $4.00 $4,289,648 172 2013 1,549,378 $4.03 $6,248,293 203 2012 1,507,321 $4.89 $7,365,037 200 2011 1,025,403 $5.99 $6,138,956 188 2010 1,269,537 $2.63 $3,339,270 182 2009 1,612,413 $2.35 $3,781,161 172 2008 1,095,969 $2.29 $2,508,481 175 Average 1,327,000 $3.83 $5,078,000 181 Source: CFEC. Note: CFEC ex-vessel value was unavailable for 2015. Average value and average price per pound exclude 2015.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 14 U.S. Sea Cucumber Wild Catch Exports

International Export

The majority of international sea cucumber trade is dominated by Hong Kong, which is a flourishing sea cucumber market itself as well as gatekeeper to the Chinese market. In 2017, the U.S. shipped $7.8 million worth of sea cucumbers to Hong Kong, or 44 percent of total export value. While $3.1 million of sea cucumber was exported to Canada, most of this product was likely re-exported to Hong Kong or China. The U.S. also shipped $2.3 million worth of sea cucumber directly to China in 2017. In total, approximately 75 percent of U.S. production was sent to Hong Kong and the greater Chinese market. In addition to China/Hong Kong, South Korea was a major importer of U.S. sea cucumber, importing $3.3 million in 2017.

Table 5. U.S. Sea Cucumber Exports, in Kilos and $Millions, 2015-2017 2015 2015 Total 2016 2016 Total 2017 2017 Total Avg Kilos Avg. Value Country Kilos Value Kilos Value Kilos Value 2015-2017 2015-2017 Hong Kong 335,527 $8.5 346,387 $12.6 261,013 $7.8 314,309 $9.6 South Korea 99,974 $3.1 29,272 $1.4 65,972 $3.3 72,503 $2.4 Canada 103,359 $1.8 33,691 $1.3 86,386 $3.1 74,479 $2.1 China 98,654 $1.9 74,638 $2.9 44,218 $2.3 65,073 $2.6 Vietnam 44,625 $0.8 30,117 $0.6 1,180 $0.2 25,307 $0.5 Other 28,116 $0.2 63,932 $1.2 57,277 $1.3 49,775 $0.9 Total 710,255 $16.3 578,037 $20.1 516,046 $17.7 601,446 $18.0 Source: National Marine Fisheries Service, Fisheries Statistics and Economics Division. Note: Value figures have been rounded.

Trade data separate US sea cucumber exports into three broad categories (with no additional detail available on the specific products within these categories): frozen/salted/dried, live/fresh, and prepared/preserved. Most of the exports fall under the frozen/salted/dried category (87 percent or $15.5 million), followed by prepared/preserved (9 percent) and live/fresh (4 percent). Average price per kilo for the period for all product types combined was $29.50 ($13.40/pound).

Table 6. US Sea Cucumber Exports, by Product Type, in Kilos and $Millions, 2015-2017

Kilos Value Kilos Value Kilos Value Total Kilos Total Value AVG. Value/ $/Kilo Product 2015 2015 2016 2016 2017 2017 2015-2017 2015-2017 2015-2017 form Frozen/ 435,009 $13.6 446,149 $18.60 322,367 $15.5 1,203,525 $47.7 $39.60 Salted/Dried Live/Fresh 95,985 $1.1 20,513 $0.30 63,372 $0.7 179,870 $2.1 $11.70 Prepared/ 179,261 $1.6 111,375 $1.20 166,480 $1.7 457,116 $4.5 $9.80 Preserved Total Exports 710,300 $16.3 578,000 $20.1 552,200 $17.9 1,840,500 $54.3 $29.50 Source: National Marine Fisheries Service, Fisheries Statistics and Economics Division. Figures have been rounded.

Sea cucumbers from Alaska are commonly sold in several forms including uncooked; vacuum-sealed frozen meat; salted and partially dried loose packed skins; whole cooked; salted; partially dried; and loose packed.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 15 Individual buyers are very explicit in their production requirements and processing techniques may vary from one buyer to the next to the point that a product prepared for one buyer may not be acceptable to another. The frozen/salted/dried category garnered the highest price per pound in 2017 at $21.86, the live/fresh product was valued at about $5.00 per pound and prepared/preserved $4.64 per pound.

Table 7. U.S. Sea Cucumber Exports, Price per Pound by Product Type, 2015-2017 Product form 2015 2016 2017 Frozen/Salted/Dried $14.21 $18.95 $21.86 Live/Fresh $5.21 $13.30 $5.02 Prepared/Preserved $4.06 $4.90 $4.64 Average $/Pound $10.43 $16.04 $14.73 Source: National Marine Fisheries Service, Fisheries Statistics and Economics Division.

Hong Kong Sea Cucumber Imports

As noted previously, Hong Kong is the world’s largest import market for sea cucumbers. While data preceding 2017 were not available and comparable data for China were not available, the table below provides context for relative product values and production levels by country.

Japan, with its production of high-quality A. japonicus, represented approximately 60 percent of the value of sea cucumber imported into Hong Kong, followed by Mexico, Turkey, Canada, and Nicaragua. The U.S. was the sixth-largest exporter of sea cucumber to Hong Kong, with $5.5 million in total value.

While an imperfect measure due to variations in production methods and product quality, looking at the average value per pound of frozen/dried product is a useful metric for evaluating the relative perceived quality and value of individual countries production.

Japanese product commanded the highest price of all sea cucumber exporters at $67.83 per pound in 2017. This is likely due to the quality of A. japonicus. Even though South Korea also produces A. japonicus, Japan’s price per pound is one-third greater than South Korea’s price per pound ($50.87). The price of U.S. product was $14.15 (roughly one-fifth the price per pound of Japanese product). The price differential between Japanese and Korean A. japonicus and P. californicus (the predominate US species) highlights the chasm that exists between good and best in terms of perceived sea cucumber quality and corresponding value.

(see table next page)

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 16 Table 8. Hong Kong Sea Cucumber Imports, Frozen/Dried, 2017 Value per Country Pounds Value Pound

Japan 989,596 $67,200,000 $67.91 South Korea 74,936 $3,800,000 $50.71 USA 365,864 $5,500,000 $15.03 Mexico 639,160 $9,000,000 $14.08 Canada 454,024 $6,100,000 $13.44 Honduras 222,604 $1,900,000 $8.54 Nicaragua 760,380 $5,600,000 $7.36 Turkey 1,038,084 $7,500,000 $7.22 Australia 357,048 $2,400,000 $6.72 Greece 178,524 $1,100,000 $6.16 Total Worldwide 5,469,669 $112,000,000 $20.64 Source: Global Trade Atlas.1 Note: Figures have been rounded. Total worldwide figures include all country’s production.

1 HIS Markit, Global Trade Atlas, https://ihsmarkit.com/products/maritime-global-trade-atlas.html, February, 2018. Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 17 Sea Cucumber Aquaculture Industry

At least three dozen countries have engaged in efforts to develop sea cucumber aquaculture, yet most of these efforts have yet to create globally significant industries. Grow out methodologies being developed include sea ranching, raceway, and pen rearing.2

More recently, countries with established aquaculture industries are beginning to explore how adding sea cucumbers as part of an integrated multitrophic aquaculture (IMTA) system could reduce environmental impacts and improve profitability. Temperate countries like the United States, New Zealand, Australia, Canada, and Chile have tremendous opportunities to expand, or develop, sea cucumber production alongside existing aquaculture activities. In places like China, the Philippines, and Vietnam, sea cucumbers are often grown as part of an IMTA plan in concert with additional species or as a rotational crop following the harvest of species like shrimp, fish, or crab, which are not always compatible with sea cucumber farming.

A table of the most recently available (2012) global aquaculture efforts by country for species, production methods, and program dates is included in Appendix A. Following are brief overviews of the status of sea cucumber aquaculture in China, the U.S. and Canada.

Global Production Volume

Global sea cucumber aquaculture production is dominated by China. Between 2012 and 2016. China produced an annual average of 195,000 metric tons for the period, 99 percent of global aquaculture production.

Global sea cucumber aquaculture production increased by 21 percent from 2012 to 2016 with Chinese production increasing by 20 percent. Production in Indonesia increased 321 percent for the period, followed by Russia with an increase of 123 percent.

While China’s production volume grew 20 percent over the 2012-2016 period, the bulk of growth occurred between 2012 and 2013. The post 2013 slowdown is due to weak prices caused by government austerity policies, reported production problems due to disease, fewer marine projects approved by the government, and the expansion of polyculture which has allowed companies to shift production to other species during periods of weak demand/low price. As pricing strengthened, stocked volumes of juvenile cucumbers increased approximately 250 percent from 2016 to 2017.3

(see table next page)

2 Purcell, S.W., et al., 2012. Sea Cucumber Culture, Farming and Sea Ranching in the Tropics: Progress, Problems and Opportunities. Aquaculture 368-369:68-81; and, Zamora, Leonardo Nicolas, et al., 2016. Role of Deposit-Feeding Sea Cucumbers in Integrated Multitrophic Aquaculture: Progress, Potential and Future Challenges. Reviews in Aquaculture 0 (2016), 1-18, https://epic.awi.de/41345/1/Zamora_2016.pdf 3 Food and Agriculture Organization, January 2018. Globefish Highlights, www.fao.org/3/I8626EN/i8626en.pdf

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 18 Table 9. Sea Cucumber Aquaculture Production Volume (Wet Weight, in MT), by Country, 2012-2016 Country 2012 2013 2014 2015 2016 Avg. China 170,830 193,705 200,969 205,791 204,359 195,131 Indonesia 475 206 138 2,029 2,000 970 Russia 110 136 817 805 245 423 Vietnam 100 100 100 100 100 100 Korea 100 100F 100 100 100 100 All Other 11 73 74 84 152 79 Global Production 171,625 194,320 202,200 208,910 206,955 196,800 Source: FAO Fish Stats. Note global total figures have been rounded.

Global Production Value

In 2016, China produced $1.3 billion worth of sea cucumbers; all other countries produced $33.9 million in sea cucumber products combined. Overall, global product value increased by 39 percent from 2012 to 2017, with China accounting for 37 percent of total growth.

Table 10. Sea Cucumber Aquaculture Production Value ($000s), by Country, 2012-2016 Country 2012 2013 2014 2015 2016 Avg. China $947,936 $1,160,874 $1,286,811 $1,273,943 $1,294,206 $1,192,754 Indonesia $6,324 $2,457 $18,791 $1,454 $18,635 $9,532 Russia $0.0 $0.0 $16.9 $0.0 $11,809 $2,365 Vietnam $572 $707 $4,830 $4,902 $1,470 $2,496 Korea $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 Other $366 $1,351 $987 $940 $1,027 $934 Total Value $956,200 $1,166,400 $1,312,400 $1,282,200 $1,328,000 $1,209,080 Source: FAO Fish Stats. Note total value figures have been rounded.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 19 Alaska Sea Cucumber Aquaculture Development

The following section reviews the biology of P. californicus and summarizes the SARDFA research that led to the successful hatching and rearing of P. californicus in Alaska. This section also serves as an outline of the process that would be used to hatch and grow P. californicus in the aquaculture facility described in this study.

Biology

Prior to the late 1980’s, Parastichopus californicus was referred to scientifically as Stichopus californicus. P. californicus are commonly referred to as the California sea cucumber, the giant red sea cucumber, or the California red sea cucumber. P. californicus are members of the phylum Echinodermata and are closely related to sea stars and urchins. There are four distinct species of the Parastichopus genera – P. californicus, P. johnsoni, P. leukothele, and P. parvimensis – with only P. californicus commercially harvested.4 Adult animals range in color, and can be multiple shades of dark brown to light tan to bright red. They are visually distinguished from the other sea cucumbers by their numerous long tissue-based spines (~10-50 per animal with each spine roughly 0.5-2 cm long).

P. californicus are widely distributed in sub-tidal waters from Baja California, Mexico to the Aleutian Islands, Alaska. Highest densities are found at depths between ~30-60 meters, but they have been documented in waters as shallow as 1 meter. They are observed to prefer sand and gravel substrate. Sea cucumbers consume many types of primary producers and/or their detritus, from vascular plants to macro- and microalgae.56 Sea cucumbers are limited in their ability to digest most macroalgae due to high cellulose content.7 P. californicus is a deposit-feeder that ingests surface sediment, digests the labile organic fraction, and excretes the inorganic and/or indigestible material. It has peltate oral tentacles with cauliflower-like structures that can actively select for food particles of different sizes and general morphologies.8

Sea cucumbers tend to be particularly susceptible to overfishing, especially P. californicus, because of its slow growth and naturally low recruitment rates. Maturity is reached at approximately 4 years post-hatching, and adult females spawn once per year in early summer. Adult animals average about 250 g in weight and 30 cm in length. Embryos develop into planktonic feeding larvae, which persist for 1 to 4 months before settling to the sea floor as juveniles (~1 mm in length). The length of time required for juveniles to reach harvestable size is unknown.

4 Lambert, P. 1986. Northeast Pacific holothurians of the genus Parastichopus with a description of a new species, Parastichopus leukothele (Echinodermata). Canadian Journal of Zoology 64:2266-2272. 5 Hudson, I. R., B. D. Wigham, and P. A. Tyler. 2004. The feeding behavior of a deep-sea holothurian, Stichopus tremulus (Gunnerus) based on in situ observations and experiments using a Remotely Operated Vehicle. Journal of Experimental Marine Biology and Ecology 301:75- 91. 6 Slater, M. J. and A. G. Jeffs. 2010. Do benthic sediment characteristics explain the distribution of juveniles of the deposit-feeding sea cucumber Australostichopus mollis. Journal of Sea Research 64:241-249. 7 Yingst, J. Y. 1982. Factors influencing rates of sediment ingestion by Parastichopus parvimensis (Clark), an epibenthic deposit-feeding holothurian. Estuarine, Coastal and Shelf Science 14:119-134. 8 Cameron, J. L. and P. V. Fankboner. 1984. Tentacle structure and feeding processes in life stages of the commercial sea cucumber Parastichopus californicus (Stimpson). Journal of Experimental Marine Biology and Ecology 81:193-209. Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 20 While sea ranching or habitat cages have not been attempted with P. californicus, several studies have attempted to grow out juveniles in polyculture with salmon9, oysters10, and sablefish11,12. Adult P. californicus move on average 1.8 meters per day13 to 3.9 meters per day 14; however, we assume that juveniles would move proportionally less based on their relative sizes. In captivity, juveniles have been recorded to grow 0.3-1.0 cm in length at 4 - 8 months post settlement and 0.5-1.9 cm length at 7-11 months post settlement.15,16,

Little is known of the natural ecology of juvenile P. californicus or of their nursery habitats. Juvenile P. californicus have been collected at Kelvin Cove, British Columbia on crevices in nearly vertical rock walls at depths of 2 - 20 meters. Additional observations have been infrequent, although most have been closely associated with various red algae species and the benthic polychaete Phyllochaetopterus prolifica or on oyster farm netting. The red coloration of the juveniles occurs early in their development, at about 3 mm and about 90 days post settlement. This red coloration is most likely a form of camouflage from predators (i.e. hermit crabs17 or sea stars18) or to “disappear” at depths below the depth where red light is completed attenuated. Light is scattered in seawater at different rates, with red light the first to become attenuated in depths as shallow as 5-10 meters.

With the rapid expansion of international sea cucumber markets, several issues have resulted, including species product mislabeling19. Several studies have already determined genetic biomarkers and species-specific loci for P. californicus 20,. These data have already been used to confirm commercial product identities and could also be used to determine dispersal among various areas where P. californicus are commercially fished. Recently, the complete genome of P. californicus has also been described,21 which could directly aid Alaska Department of Fish and Game genetic surveys which are currently underway.

9 Ahlgren, M. O. 1998. Consumption and assimilation of salmon net pen fouling debris by the red sea cucumber Parastichopus californicus: implications for polyculture. Journal of the World Aquaculture Society 29:133-139. 10 Paltzat, D. L., Pearce, C. M., Barnes, P. A., McKinley, R. S., 2008. Growth and production of California sea cucumbers (Parastichopus californicus Stimpson) co-cultured with suspended Pacific oysters (Crassostrea gigas Thunberg). Aquaculture 275, 124-137. 11 Hannah, L., N. Duprey, J. Blackburn, C. M. Hand, and C. M. Pearce. 2012. Growth rate of the California sea cucumber Parastichopus californicus: measurement accuracy and relationships between size and weight metrics. North American Journal of Fisheries Management 32:167-176., 12 Hannah, L., C. Pearce, and S. Cross. 2013. Growth and survival of California sea cucumbers (Parastichopus californicus) cultivated with sablefish (Anoplopoma fimbria) at an integrated multi-trophic aquaculture site. Aquaculture 406:34-42. 13 Cieciel, K., B. J. Pyper, and G. L. Eckert. 2009. Tag retention and effects of tagging on movement of the giant red sea cucumber Parastichopus californicus. North American Journal of Fisheries Management 29:288-294 14 Da Silva, J., J. L. Cameron, and P. V. Fankboner. 1986. Movement and orientation patterns in the commercial sea cucumber Parastichopus californicus (Stimpson)(Holothuroidea: Aspidochirotida). Marine & Freshwater Behaviour & Phy 12:133-147. 15 Strathmann, R. 1978. Length of pelagic period in echinoderms with feeding larvae from the Northeast Pacific. Journal of Experimental Marine Biology and Ecology 34:23-27. 16 Conand, C. 1984. Methods of studying growth in holothurians (beche-de-mer), and preliminary results from a beche-de-mer tagging experiment in New Caledonia. 17 Cameron, J. L. and P. V. Fankboner. 1989. Reproductive biology of the commercial sea cucumber Parastichopus californicus (Stimpson) (Echinodermata:Holothuroidea). II. Observations on the ecology of development, recruitment, and the juvenile life stage. Journal of Experimental Marine Biology and Ecology 127:43-67. 18 Margolin, A. S. 1976. Swimming of the sea cucumber Parastichopus californicus (Stimpson) in response to sea stars. Ophelia 15:105-114. 19 Lv, Y., R. Zheng, T. Zuo, Y. Wang, Z. Li, Y. Xue, C. Xue, and Q. Tang. 2014. Identification of five sea cucumber species through PCR-RFLP analysis. Journal of Ocean University of China 13:825-829. 20 Smith, M. J., A. Arndt, S. Gorski, and E. Fajber. 1993. The phylogeny of echinoderm classes based on mitochondrial gene arrangements. Journal of Molecular Evolution 36:545-554. 21 Zhang, Z., Xiangbo B., Dong, Y et al. 2016. Complete mitochondrial genome of Parastichopus californicus (Aspidochirotida: Stichopodidae). Journal Mitochondrial DNA Part A: DNA Mapping, Sequencing, and Analysis. 27(5): 3569-3570. Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 21 Summary of Research in Alaska

This section describes the history of Alaska sea cucumber aquaculture, highlighting lessons learned, progression of methods development, and best practices for hatching and rearing P. californicus.

In 2003, SARDFA requested proposals to provide information on the state of knowledge on enhancement of P. californicus wild fisheries. A research grant was awarded to Dr. Ginny Eckert at University of Alaska Southeast to provide a synthesis of known published information as well as offer suggestions on how to proceed with sea cucumber enhancement in Southeast Alaska.

From 2008 to 2016, SARDFA funded and collaborated with a graduate student from University of Alaska Fairbanks and the Alutiiq Pride Shellfish Hatchery (APSH) in order to develop aquaculture protocols for the production of P. californicus juvenile seed stock. Dr. Charlotte Regula-Whitefield received her PhD in Marine Biology from University of Alaska Fairbanks in spring 2017, her doctoral research was based on feeding ecology and husbandry protocols for P. californicus. Alutiiq Pride shellfish hatchery is Alaska’s primary shellfish hatchery, and the only invertebrate spawning hatchery in Alaska.

Figure 1: Overview of Parastichopus californicus life cycle.

One female can release up to 1 million eggs at once Adults are harvested at approximately 10 cm long and 250 grams Fertilized eggs are about the size of a sand grain

Eggs divide for 24 hours until a 128-cell Unknown time to reach stage is reached harvestable size

? BROODSTOCK

JUVENILE LARVAE First feeding larval stages develop within 3 days after fertilization 5 days after settling, juveniles form spines and begin feeding The feeding stage lasts for 10-110 days Tentacles form and larvae settle Feeding larvae transform out into benthic into a non-feeding stage juveniles lasting 24-48 hours

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 22 Timeline of Aquaculture Research in Alaska

2008 to 2010

In 2008, SARDFA collected the first broodstock, which was shipped to Alutiiq Pride Hatchery (APSH). Shipments were sent by plane from Southeast Alaska to Anchorage, and then transported by car to Seward. Transport took between 10 and 24 hours from the dock to the hatchery. During this time the hatchery received broodstock loose within sea water filled coolers. This method was found to be extremely unsuccessful, with adult survival rates of approximately 15 to 20 percent and evisceration rates of nearly 100 percent. Even with the addition of kelp, thought to reduce water turbulence during shipping, this method was still too stressful on broodstock. No spawning occurred in 2008.

In 2009, two small live spawning events were induced with a combination of temperature shock and feeding treatments, however only males spawned. In the hatchery, broodstock were fed a combination of ground macro-algae (Alaria marginata, Fucus gardneri, and Laminaria saccharina) and the micro-algae (Navicula spp. - diatom).

In 2010, a strip-spawning treatment was used with little success – due to low fertilization rates of extracted eggs and the use of the chemical 1-methyladenine. The extracted gametes are now thought to have not been fully developed at the time of the extraction since experiments occurred in early April, and gonads are thought to be ripe in late April to mid-May (Whitefield and Hardy in press). In 2010, dry spawning (removing animals from water and leaving them on rubber mats) was also used with little success, due to the development of skin abrasions on broodstock. Due to only having a small spawning event (~50,000 eggs), the hatchery at this time had limited experience culturing P. californicus larvae. Larvae were feed microalga (Chaetoceros mulleri – diatom; Pavlova lutherii and Isochysis galbana - flagellates), at a total density of ~20,000 cells/ml/day. No larvae reached juvenile stages.

2011

In 2011, the director of the APSH, J. Hetrick, asked C. Regula-Whitefield to provide a scientific perspective to their P. californicus production. During the first year of this collaboration, several major achievements were made: improving shipment protocols, understanding animal evisceration processes, establishing spawning protocols, and adult and larvae feeding trials.

To minimize evisceration, broodstock were transported in sealed plastic bags containing no more than five animals submerged in sea water. Bags were placed in ice-filled coolers and transported via air cargo. Limiting the number of animals per bag reduced exposure to chemical cues from other eviscerated broodstock during shipment, slowing down evisceration rates. Using the new method, broodstock shipment evisceration rates dropped from nearly 100 percent of animals, to roughly 20 - 60 percent of animals, with up to 10 percent also expelling gonads. Animal survival rates increased to 75 – 90 percent.

It was found that evisceration takes place in two stages, starting with the intestine and respiratory tree (i.e. viscera) being expelled, and then, with prolonged stress, a secondary evisceration of gonads. Experiments were conducted to examine the process of visceral regrowth. Eviscerated intestine and respiratory tree weight can

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 23 be up to 20 grams or 16 percent of total body weight. After evisceration, broodstock partially reabsorb their muscle and skin to reform their organs, resulting in reduced body weights of 2 to 5 percent. If collected at the peak of their reproductive season, when gonads can reach 26 g weight or 18 percent of their total body weight, broodstock may also partially reabsorbed their gonads resulting in a loss of up to 30 percent of the original gonad weight. Functional viscera were re-grown in approximately 8-10 weeks; however, animals did not reach pre-evisceration weight until 16 to 20 weeks. Lower fecundity rates for eviscerated animals were observed compared to un-eviscerated animals, regardless of waiting 10 weeks for full viscera regrowth and acclimation.

The first controlled spawning method was developed for P. californicus using a heat shock technique. P. californicus was previously thought to spawn once a year; however, males were observed spawning multiple times per season, almost always before females. The new method increased average egg yields and improved fertilization rates from ~5 to ~95 percent. The new method eliminated the need for chemicals, such as 10 M dithiothreitol (DTT) and 1-methyladenine, which increase fertilization rates, but cause reduced survival rates, stunted growth, and malformation of larvae.

After further literature review, it was found that P. californicus cannot digest macro-algae due to its high cellulose content (Yingst 1982). Feeding studies were then conducted on adult sea cucumbers using powdered fish feeds in order to determine whether natural variations in diet produce differences in reproductive output and larval survival. An enormous range in female fecundity was found between three feeding treatments: AlgaMac 3050, AlgaMac Protein Plus, and the combination diet of 3050 and Protein Plus. Broodstock fed 3050 had an average fecundity of ~300,000 eggs per female, whereas those fed Protein Plus produced about ~800,000 eggs per female. The combination diet, which contained equal portions of the two diets, average fecundity was ~500,000 eggs per female. It is expected that the proportions of fat, protein, and carbohydrate in each feed affected egg production.

Larvae were cultured at the ambient sea water temperatures (10° C) and fed one of four live hatchery-cultured algal diets: Pavlova sp., Isochrysis sp., Rhodomonas sp., or a combination of all three species. All diets were supplied at 30,000 cells/ml/day. Larvae were cultured using 190-L conical tanks. Larval feed treatments, and to a lesser extent broodstock feed treatments, had a large effect on larval survival. Larvae fed the combination diet ranged from 11 to 25 percent survival. Larvae fed only Pavlova spp. had a survival rate of zero. Larvae fed only Isochrysis spp. ranged from zero to 20 percent survival. Larvae fed only Rhodomonas spp. ranged from 1 to 24 percent survival. Larvae spawned from broodstock fed AlgaMac 3050 had 1 to 5 percent higher survival than those fed Protein Plus, regardless of the larval feed. Roughly 10,000 larvae were thought to have reached juvenile stages, combined across larvae and adult feed treatments. Larvae were moved from larval tanks, to 0.6 m x 0.45 m x 2.5 m raceway setting tanks as soon as at least 50 percent had reached dolioria (last larval stage in water). No juveniles survived past 12 months post-spawning.

Limited experimentation was also done on larval rearing temperatures (ambient 10º C, 17º C, and 20º C). Larvae in heated tanks (20º C) grew, on average, two times faster than at 17º C, and three times faster than at 10º C, regardless of the diet of the broodstock. However, even with extensive biosecurity measures for water quality, there was a much higher rate of contamination from ciliates and protozoans in both heated treatments, resulting in larval survival rates to setting juveniles ranging from 0 to 5 percent. As a result of these findings heated treatments as high as those used in this experiment are not recommended for enhancing larval growth rates.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 24 2012

Broodstock collection was shifted from mid-April to late February when viscera are naturally reduced in size (less than 1 percent of total body weight), and are being regenerated following annual winter-time reabsorption. Earlier collections yielded increased egg production by allowing the maximum possible time (about 10 weeks) for regrowth of viscera and feeding prior to peak spawning season. Spawning events occurred 6 weeks earlier than occurred in 2011, possibly due to broodstock shipments arriving earlier. Broodstock collected in February spawned in mid-May, while broodstock collected in early April spawned in early June.

Adult feed was switched to Reed Mariculture shellfish diets in order to further experiment with feed treatments. Experiments were conducted at the APSH over a 12-week period, with animals in each of 2 experimental tanks fed one of two algal diets: the diatom Thalassiosira sp. or the green algae Tetrasalmis sp. Aliquots of each feed were individually frozen and administered to experimental tanks at levels of carbon typically equal to that encountered by wild populations. Animals feed the diatom diet spawned ~543,000 eggs per female; while animals feed the green algae spawned ~177,000 eggs per female. Results from this experiment suggest a trade- off may exist between the number of eggs produced by each female and the energy density of each egg. Females fed a diatom diet spawned fewer eggs with greater larval survival, whereas a diet of the green alga yielded more eggs with lower larval survival.

There were 47,950 confirmed juveniles set in summer 2012. These animals ranged in size from ~600 µm to ~1000 µm. At ~35 days after fertilization, they were moved into setting tanks. Experiments were then conducted to test setting substrate and juvenile food. Setup 1 consisted of a 0.6 m x 0.45 m x 2.5 m tank with flow-through sea water filled with various experimental substrates. Substrates included artificial sea grass, netting, vertical corrugated plastic, “honey comb” PVC, and halved PVC. Juveniles were fed about 3 g of a combination diet of 3050 and Protein Plus every four days. Setup 2 consisted of setting larvae in the same 1200-L conical tank where the larvae developed. This setup investigated if juveniles could use naturally built-up biofilms on the sides of the tanks as a food source. No additional juvenile (powdered) food was added to setup 2. In setup 1, ~24 percent of larvae set. Of those, 47 percent settled on artificial sea grass, 42 percent on the tank floor, 9 percent on the vertical corrugated plastic, and the remainder settled on the suspended PVC. In setup 2, setting rates ranged from 10 to 15 percent. The two treatments also resulted in variable growth rates. Although juvenile guts were full, suggesting they were able to ingest the powdered feed, growth rates were very slow in setup 1 compared to setup 2. Juveniles from setup 2 were almost twice the size of those from setup 1 (~800 compared to ~1100 µm).

2013

A total of 65 animals were over wintered from 2012 - 2013, with minimal casualties (12 percent), though none of the broodstock developed mature gonads. On dissection, the gut was fully developed but no gonad was present in any of the animals. It is suspected that hatchery conditions, possibly temperature and light levels in late fall and early winter, were not adequate to stimulate gonad development. It was determined that new broodstock will need to be collected each season. Regardless, yearly collection of broodstock is recommended to ensure genetic diversity of larvae and juveniles.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 25 In order to track frequency of spawning, a florescent elastomer polymer tag was injected into the skin of each individual observed spawning. Females were tagged on the ventral surface, while males were tagged on their lateral surface. Although tags began to be absorbed into the skin within two weeks, this method was useful in tracking animals over short periods of time.

In 2013, as sea cucumber spawning increased, there was extensive space restrictions at the APSH resulting in the need to expand sea cucumber research into another building. Larger-scale adult experiments were conducted using the same feeds as 2012 in an effort to replicate observed results with improved statistical reliability as well as examine differences in fatty acid composition of the eggs from each feed treatment. Experiments were conducted at the University of Alaska Fairbanks, and the Seward laboratory located across the street from APSH. Experiments occurred over a 25-week period, with animals in each of 6 experimental tanks fed one of two algal diets: the diatom Thalassiosira sp. or the green algae Tetrasalmis sp. To ensure uniformity in feed treatments, both species were purchased as live concentrates in a single batch. Once again, a trade-off was observed that may be a result of differential allocation of fatty acids to triglycerides (egg energy density— fewer higher-quality eggs produced) and phospholipids (structural components of cell membranes—larger numbers of eggs produced). Intra-specific variations in egg quantity and quality could directly affect natural population stability. If environmental conditions are favorable to larvae, then producing a larger number of less energy-rich eggs would be beneficial because larvae could feed on plankton. In contrast, if larval food is less abundant, then producing a smaller number of more energy-dense eggs would be favored because larvae would be more dependent on egg resources.

Roughly half of the animals remained at the APSH, where larval tanks experienced three main contaminants: protozoans (small animal like organisms), copepods (similar to small shrimp), and artemia (similar to small shrimp). It was determined that protozoan and copepod contaminations at APSH were likely due to filtration malfunctions within the hatchery, which allowed these organisms to enter the hatchery from Resurrection Bay. Once a contamination occurs it is very difficult to separate out larvae from protozoans, resulting in most larvae within contaminated tanks dying within a week of the initial contamination. There were at least 5 species of protozoans that were identified from the larval tanks. These animals ranged in size from 20–150 µm, including some colonial groups that reached up to 300 µm (i.e. Vorticella spp.). Although species of protozoans within sea cucumber larval tanks were not observed feeding directly on larvae, their presence greatly decreased larval growth and survival rates, likely due to competition with larvae for microalga feed. Artemia contamination likely resulted from inadvertent interactions between sea cucumber and red king crab research spaces. Artemia are used as a food for late stage crab juveniles. Particularly, overlap in research tanks and supplies could have resulted in the introduction of Artemia eggs into sea cucumber larval tanks. Copepods and Artemia contaminates were observed feeding on smaller and/or deformed larvae. Copepods and Artemia are voracious predators, and are capable of consuming large volumes of soft bodied sea cucumber larvae. Therefore, once a contamination occurred of either Copepods or Artemia, sea cucumber larvae within the tanks were often quickly consumed. As a result of contamination, few larvae reached juvenile stages.

In addition to hatchery experiments in 2013, the Alaska Shellfish Nursery (a small floating hatchery located near Ketchikan) was shipped 2,550 juvenile sea cucumbers to conduct grow out trials. For shipping to the floating hatchery, juvenile sea cucumbers were placed in small containers filled with 200 ml of sea water, with approximately 75 animals per container. In order to keep animals at a consent temperature for shipment, two

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 26 gel ice‐packs were used within the 15-liter containment cooler. The hatchery was anchored to land and continuously pumped sea water from beneath the structure at a depth of roughly 10 feet. No water filtration system was used on inflow or outflow water at the hatchery.

2014

In 2014, Dr. Regula-Whitefield focused on biochemical (i.e., fat and protein) analysis of hatchery feeds as well as conducting research on wild sea cucumber fisheries. During this time, APSH continued to spawn sea cucumbers using methods developed in 2012 and 2013, with some success. While APSH was successful in spawning sea cucumbers in this year, there were extensive setbacks in juvenile growth and setting protocols. As a result, no new juveniles were shipped to the Alaska Shellfish Nursery.

At the Alaska Shellfish hatchery, 2013 juveniles were overwintered in natural seawater in several different tanks: bare tanks, tanks with sand tables, tanks with brown kelp, and deep tanks with structures (e.g., rocks and shells). The brown kelp (Saccharina latissimi or Laminaria saccharina) was collected from the edges of the nursery structure floats. Juvenile growth was slow for the first several months. Month 1 - juveniles had mostly clear bodies and were approximately 1mm in length. Month 2 – juveniles began to show bodies with white to yellow with dark spots, and were visible within tanks at approximately 3-5 mm in length. Month 3 – juvenile bodies darkened with tones of brown to red and fully resembled their adult counterparts. Subsequent months growth rates were not closely monitored. Air and water temperatures varied throughout growth, with the lowest measured temperatures in late-February and early-March at ‐2 Celsius air and 2.3 Celsius water and the highest temperatures were 24 air and 17 water and occurred in August. The temperatures averaged air 12 C and water 10 C.

2015

In 2015, SARDFA and APSH started actively collaborating on juvenile sea cucumber research gaps with researchers at the University of Washington-Kenneth Chew Shellfish Hatchery and the Pacific Shellfish Institute (PSI). This research was funded by a Saltonstall-Kennedy research grant to further develop juvenile aquaculture methods as well as determining the genetic stock of wild sea cucumbers from Alaska to California. This project has received an extension of research, which should be completed in 2018.

In 2015 and 2016, APSH conducted a small experiment to determine which marking protocols could be used to distinguish hatchery-reared from wild P. californicus juveniles by clipping one spine. Preliminary findings using ten 1-year old juveniles showed promising results in that every removed skin spine reformed as doubled spines. Based on observational data, double spines rarely, if ever, occur in wild collected animals, suggesting this technique could be an important step forward for stock enhancement. Previously, APSH experimented with Casein exposure, a phosphoprotein that binds to calcium carbonate in skin ossicles. Yet, skin is a major food product from holothurians, and the effects of Casein on human health are unknown; thus, use of Casein to mark hatchery-reared juveniles is not desirable and not recommended for further use.

2016

In 2016, Dr. Whitefield led successful juvenile grow outs in Alaska using 1-2 mm juveniles, which were spawned in April 2015. Through this process, SARDFA was issued state permits, showing practicality navigating the

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 27 permitting process for future sea cucumber stock-enhancement and co-culturing. Alaska outplant trials proved successful in determining how out planted juveniles grow when placed into natural environments. Cages were deployed intertidally around Ketchikan along the Tongass Highway road system in regions with different wave exposure and habitat characteristics. A total of 5 cage setups, each with three cages, were deployed.

Cages were deployed either horizontally in the subtidal zone or vertically hung off docks. Overall, the caged experiments showed promising results in both their physical design as well as in juvenile P. californicus growth and survival. While biofouling was an initial concern, cages only needed to be maintained once during the 6 months of deployment. Maintenance included a light cleaning of the 1mm screen lining as well as removing any crab predators that had settled within the cages. In future experiments, the cage design (two halves of Mexican trays) will be improved for maintenance purposes so that cages close more securely between inspections.

In all cages, crabs grew to 2–4 cm in carapace length and were large enough to begin preying on the juvenile sea cucumbers. Horizontal cages had zero juvenile P. californicus survival. There are multiple reasons this could have occurred; most probable is due to no microalgae biofilm formation. The flow rate at the test location was too low, while the location at Mt. Point boat launch had a flow rate that was too high. In contrast, the vertical cages that were hung off of docks had high growth (roughly 30 mm) and survival (~20 percent). All vertical cages also had high levels of natural sea urchin settlement. Vertical cages with higher sea urchin settlement rates also appeared to have higher juvenile P. californicus growth. Juvenile P. californicus tended to be found under the bio saddles which had been placed in the cages at the start of the experiment. In subsequent cage experiments we believe it may be beneficial to have the cages packed fully with bio saddles or other plastic spacers; this would increase surface area for biofilms, provide more area for sea cucumbers, and could limit growth of crab predators.

Juveniles that survived the experimental treatments were stored at Oceans Alaska aquaculture facility from 2016 to 2018, where they were housed in a down-flow mesh bottom oyster seed tank. Animals were feed a combination of natural detritus and kelp biofouling. Qualitative observations show that the juveniles grew well and with minimal mortality.

2017

APSH continued to spawn adult animals in late 2016 and early 2017; however, the overheating of larval grow out tanks resulted in a complete die-off and no juveniles were produced. As a result, no new experiments were conducted in 2017.

At this point SARDFA decided to cease research pending a better understanding of the potential feasibility of establishing a facility to produce and rear sea cucumbers to market size.

Process of Raising Sea Cucumbers

Broodstock Collection and Maintenance

A major consideration for broodstock collection is the general health of the wild stock. In 2016 and 2017, there were several observed animals with deteriorated skin and what appeared to be skin lesions similar to sea star

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 28 wasting disease (thought to be caused by the virus Densovirus spp. (SSaDV)). Concern over these observations attracted interest from researchers at Cornell University, who collected samples from sea cucumber fisheries in Washington state and Southeast Alaska. Although few results have been processed, there have been no detections of the virus SSaDV in the sea cucumber samples.

In the wild, California sea cucumbers are found at roughly a 1:1 male to female ratio; however, it is not possible to externally sex sea cucumbers. When collecting broodstock, animals are collected that are larger than 150g and approximately 25cm long at relaxed live length. It is the generalized policy of the Alaska Department of Fish and Game that no less than 30 females are needed for an invertebrate breeding program to ensure genetic diversity of offspring, resulting in no less than 60 animals needed per collection. However, maximum collection quantities are dependent on the number of juveniles needed and can be back calculated through female fecundity rates, larval survival, juvenile setting rates, out planting survival rates. According to the Alaska Department of Fish and Game, broodstock collection must occur within 1,000 nautical miles from the site of potential release or cage culture.

Hatchery broodstock tend to have low mortality rates, with a small level of disease mortality. The most common forms of disease that occurs in Alaskan broodstock is skin lesions which spreads quickly when animals are held in high densities (greater than 8 animals m2). However, the colder culture temperatures that California sea cucumbers are held at (roughly 10-12°C) are thought to slow the development of many diseases. If an outbreak is occurs, the best course of action is to isolate and sterilize all tanks with cleaning agents (such as bleach) and discard all animals within the infected tank. To further slow the spread to other tanks, decrease holding tank water temperatures.

Although it does not appear to cause direct mortality, broodstock can also contain a parasitic worm-like organism, which replaces their internal organs and results in the animal not spawning. This parasite is not frequently found (roughly 2 percent of sampled animals per year). Samples have been sent to regional experts and cannot be identified past being a form of snail. There are no other documentations of this parasite in this species, or any other species of sea cucumber. It is not possible to detect the parasite externally, it can only be identified through dissection.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 29 Figure 2: Broodstock internal parasite, found in animals absent of guts and gonads.

In the hatchery, broodstock were stocked at densities of 15 individuals in 1m x 1m x 2.5m flow-through sea water tanks that contained 5 cm sand on the bottom to facilitate broodstock feeding. Artificial seaweeds can be added to tanks to increase feeding surface areas and to provide habitat. Animals were acclimated for up to 10 weeks prior to spawning, with the hatchery lights set to mimic day/night cycles for the collection location. Males and females in spawning tanks tend to separate with females closer to water flow, which can sometimes be used as an indicator of an animal’s sex.

Each sea cucumber will consume an average 0.369 g Carbon/day-1 (Yingst 1982), calculated as ash free dry weight. There are two primary types of adult sea cucumber feeds that have shown good spawning success: Powered fish meals (AlgaMac 3050, AlgaMac Protein Plus) and liquid shellfish diets (Reed Mariculture Tetraselmis and TW). The sea cucumbers are provided powdered or liquid feed as frozen pellets, incorporating sterilized sand and a premeasured amount of feed. Powdered feed is mixed with sterilized sea water to make a paste, then added to sand and frozen in ice cube trays. Frozen pellets melt slowly on the bottom of tanks, allowing the sea cucumbers to eat at a measured pace rather than flooding the tank with too much food at one time, limiting feed loss. Frozen pellets can be made in advance and stored for several months in a freezer.

Liquid feeds can be purchased from: http://reedmariculture.com/product_instant_algae.php Table 11. Liquid Algae Feeds Wet Dry Carbon/g Carbon % Feed wt./ml wt./ml Dry wt. Dry Tetrasalmis sp. 1.0490 g 0.1080 g 0.3801 g 38.0 Thalassiosira weissflogii 1.0190 g 0.0540 g 0.2259 g 22.6

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 30 Powdered feeds can be purchased from: http://www.aquafauna.com/Diets&Feeds.htm

Table 12. Algaemac Powdered Feeds. Full Biochemical Profiles Carbon Carbohydrate Feed % Dry % Dry AlgaMac 3050 90.8 15.9 AlgaMac Protein Plus 88.6 17.5

Gamete Collection and Fertilization

Water temperatures in holding tanks should be increased approximately 1ºC per week, until temperatures reach approximately 11-12ºC. This slow increase is designed to mimic natural temperatures of Southeast Alaska during peak spawning periods in mid to late May. It should be noted that Dr Regula-Whitefield has successfully spawned sea cucumber at various times between March and May. Prior to spawning attempts, water temperatures were slowly dropped 1ºC every 2.5 hours for 12 hours, down to approximately 8ºC overnight. This drop in short-term water temperature aids in spawning treatment temperature shocks; however, it is not always needed to induce spawning.

Spawning treatments occurred within multiple sterilized fiberglass tanks (0.75m × 0.75m × 1.25m) filled with filtered sea water heated to approximately 19-20ºC. A mixture of Pavlova spp. and Isochrysis spp. (5,000-10,000 cells/ml per tank) should be added to each tank. This sudden temperature shock of 12ºC was thought to initiate spawning. Bright lights should be placed above each spawning tank to simulate a bright sunny day during an algae bloom. We found that limiting the number of broodstock within tanks reduces rates of polysemy (eggs fertilized by more than one male), which causes embryo death.

It is not uncommon that spawning treatments need to occur several times in order to condition broodstock to spawn. If spawning trials are unsuccessful after several weeks, a subsection of the broodstock should be dissected to determine gonad indices. Gonad indices (the proportion of wet gonad weight to whole animal drained body weight) should be above 10 percent to indicate mature gonad. A visual inspection of the egg masses can also be used to determine gonad ripeness – eggs should look large, round, and roughly 2-3 wide in a gonad tubule to indicate peak spawning timing.

Prior to spawning, all broodstock exhibited “cobra” behavior, characterized by rising of the anterior half of the body, opening of oral tentacles, and swaying. Males almost always spawned first, shortly followed by females. Spawning can be sometimes be sped up by strip-spawning animals (removing gonads from animals and releasing gametes into the spawning tanks). Although, strip spawned gametes are not viable, the chemical cues they provide in tanks often triggers spawning in other animals.

Broodstock are left in spawning tanks for 3 hours or until all broodstock had ceased spawning. After spawning, broodstock should be returned to holding tanks and holding tank temperatures should be slowly reheated to 11ºC. Gametes were left in spawning tanks to fertilize for approximately 1 hour. Broodstock fecal matter (mainly sand) should first be isolated on a 100-µm mesh screens and then eggs should then be isolated onto 47-µm mesh screens. Mesh screens should remain in a water bath, with continuously flowing sea water, to ensure egg quality.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 31 Algae Room Production

Live algae are used in broodstock spawning protocols, larval feeding, and juvenile setting substrate biofilms. Algae starter samples are bought from the National Center for Marine Algae and Microbiotia in small 100ml viles with roughly 20,000–40,000 cells/ml sea water22.

Like all plants, growing algae for aquaculture production involves specific combinations of light, nutrients, carbon dioxide levels, and space depending on the type and age of the algae culture. Throughout the growth of the culture, algae are transferred from vile to beaker to carboy to algae tank over a roughly 6-week growth cycle. Algae are transferred using sterile techniques in order to limit contamination of samples – the primary reason for algae culture crashes.

Specific, step by step algae room production protocols can be found in the Southern Regional Aquaculture center (SRAC) Publication No. 5004, September 2010, entitled Phytoplankton Culture for Aquaculture Feed by LeRoy Creswell. 23

LARVAL FEEDS

There are three main types of microalgae that are used live to feed larval sea cucumbers: Chaetoceros mulleri; Pavlova lutherii or Isochysis galbana; and Rhodomonas sp.). These feeds are used to maximize the size and nutritional content (fats and proteins) fed, including the relative amounts of fatty acids EPA, DHA, and ARA.

The following table shows feeding protocols at various post-spawn stages. Days “post-spawning” roughly corresponds with the larval stage. When 50 percent or more of the larvae reach the next stage, target feeding density is changed to match that stage. Table 13. Larval Feeding Schedule and Target Density Larvae Stage Post Spawn Target Feeding Density (Reference Figure 7) Days 1-2 Dividing cells (A-C) None Day 3 Gastrula (D) 2,000 cells of each algae Day 4 Early auricularia (E) 5,000 cells of each algae Days 5-20 Auricularia (F) 10,000 cells of each algae Days 20-30 Doliolaria (G) 5,000 cells of each algae Days 25-45 Metamorphosing doliolaria (H) 5,000 cells of each algae Note: The amount of feed is determined by multiplying tank size in liters by the target feeding density, divided by the number of larvae cells per ml.

22 https://ncma.bigelow.org/ 23 http://www2.ca.uky.edu/wkrec/PhytoplanktonAlgaeCulture.pdf Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 32 Juvenile Setting Substrate Biofilms

Benthic pennate diatoms Nitzschia spp. are used for bio filming sheets of corrugated plastic. To prep plastic, it should be cleaned of any residues using salt water, and lightly sanded to increase adhesion of the diatoms. Culturing Nitzschia spp. is difficult and cultures tend not to grow past carboy stages, due to cell clumping and eventual crashing. It is best to transfer cells into tanks containing the corrugated plastic early in their growth cycles, at the beginning of exponential growth curves. The corrugated plastic should be placed into tanks, fully submerged with filtered sea water, in a warm well lighted room. Air stones should be used to continue to aerate water with the setting substrate. Cultures of Nitzschia spp. will need to be added to the corrugated plastic several times to ensure a thick, roughly 0.5–1mm layer of biofilm evenly on the setting substrate. This process can take several weeks. Films should look even and “fuzzy” and have little to no smell, if tanks begin to have a sulfur rotten smell, or the film is not even and clumps occur, discard the culture and begin with cleaned corrugated plastic sheeting.

LARVAE GROWTH

Larval tank sizes can vary, depending on the space requirements of the facility. Tank water flushing should occur for 3 hours per day, with a consistent but gradual flow – ensuring a flow rate that replaces half of the tank water with each flush. Filters (30um banjo) should be installed on each tank to ensure larvae do not escape but algae feeds can be removed from tank water. Watch tanks carefully during water exchanges, as filters often clog. Filters should be wiped clean, but not removed after each water exchange. The sides of the larvae tanks should not be cleaned during a growth cycle, as the natural biofilms that develop promote larvae settlement onto the tanks. At the bottom of each tank, a rubber stopper, with a string handle should be placed in the bottom drain of each tank to ensure larvae do not enter the bottom fittings of the tanks.

Larvae appear to develop in cohorts, where not all larvae will reach each developmental stage at one time. It is not unusual to observe both late Doliolaria and early Auricularia in the same tank from the same spawning event. While larvae can be graded through screens to separate out smaller earlier developmental stages, this practice is time extensive and may actually cause harm to developing larvae as they are handled. Larvae sometimes appear to clone, which may increase observations of cohort development. Larval cloning can come in the form of twinning, one body with two developing larvae, which can occur on both the vertical and the horizontal access. Or larvae can clone using budding.

Light and heat both affect larvae growth and survival rates. Light is the easiest variable to control and should be kept on natural light cycles for the region. It is not known where in the water column sea cucumber larvae tend to be located, so it is not advised to keep strong lights over tanks. Temperature is a more difficult variable to access, one that takes some consideration. The higher the larval water temperature, the faster the growth rates, but often with a higher mortality rate due to animal stress and risks of contamination. The opposite occurs with colder water temperatures. The ideal water temperature range for developing larvae is between 8-12°C. Larvae growth temperature should be consistently monitored to ensure maximum growth and limit contamination.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 33

Figure 3: Larvae development within the hatchery. A) unfertilized egg; B) fertilized egg beginning cell division; C) two 36 cell stages; D) gastrula; E) early auricularia; F) auricularia; G) doliolaria; H) metamorphosing doliolaria.

JUVENILE SETTING

Once at least 50 percent of larvae in a tank have reached the late Doliolaria stage, the tank should be drained over a 60um screen to isolate developing larvae. The sides and bottom of tanks should be carefully washed with sea water to remove any larvae that have set on the sides and bottom of the tanks. If set juveniles are present, they will be roughly 500um in length and resemble small grains of sand.

Setting tank growth conditions should be kept at or near larvae growth conditions but can be cooled in winter to save on heating costs. Juveniles can be maintained in setting tanks until animals reach ~2 mm in length. Bio filmed corrugated plastic should be placed into large juvenile setting tanks to increase setting substrates. The bottom of setting tanks should be lined with plastic bio-saddles (such as the ones often used in water treatment plants) to increase setting substrate and to allow for easy subsampling of the tank. Bio-saddles can be easily removed from tanks to observe juvenile development. The sides of the setting tanks should not be cleaned, although water exchanges should occur using the same methods used in larvae tanks. Filters (50um banjo) should be installed on each tank to ensure that juveniles do not escape the tank during water exchanges.

The addition of adult feeds can increase growth rates, but also can cause anoxic conditions. Feeding volumes should be considered on a tank by tank basis depending on animal sizes and growth rates. Additionally, adding

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 34 Nitzschia spp in concentrations of ~20,000 cells/ml of tank water every fourth day will encourage the continued growth of biofilms.

Figure 4: Example of hatchery scale juvenile setting tanks (0.9m × 0.75m × 2.1m) with flow-through sea water, 85µm banjo filter, and air stones. Each tank contains 15 corrugated plastic sheets (0.66m × 0.55m) to maximize settling surface area.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 35 Figure 5: Juvenile summer development within the hatchery setting tanks. A) ~20 days post hatching; B) ~25 days old post hatching; C) ~ 50 days old post hatching, at a rough size of 1mm.

A) B)

200µ 200µ

C)

200µ

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 36 Hatchery Facility

Facility Size

At the outset of the study, efforts were undertaken to determine the appropriate size for a sea cucumber aquaculture facility based in or near Ketchikan, Alaska. Throughout the study, facility size changed several times as new data was acquired. Ultimately, it was determined that a land-based, 11,750 sq. ft. two-story metal building should be adequate to hatch and rear enough sea cucumbers to generate a reasonable return on investment.

The first floor of the hatchery would provide space for hatching and rearing sea cucumbers, a shop, mechanical and electrical systems, and outside storage. Second floor spaces would include administrative space, dry lab, a room to grow algae, bathrooms, and inside storage. Professional design and engineering will be required to develop a final facility size and layout.

Based on the mid-case survival rates detailed in this study, a facility of this size will have the capacity to hatch 200 million eggs and ultimately rear approximately 5.2 million juvenile sea cucumbers to ~2 millimeters ready for out planting. Following are brief descriptions of each planned space.

Table 14. Estimated Sea Cucumber Aquaculture Facility Size, by Space Estimated sq. ft. Tank room 6,500 Pumps and filters 350 Algae lab 525 Office/dry lab 500 Shop/electrical room 700 Bathroom/halls 800 Storage (inside) 875 Storage (outside) 1,500 Total 11,750

Facility Spaces and Purpose

Tank Room

An estimated 6,500 sq. ft. will be required to house tanks for broodstock conditioning, larval holding tanks, and juvenile setting tanks. Whether this space is one large area or is subdivided is yet to be determined. Sources and costs have been identified for all the tanks required for the proposed facility.24

24 Tank source: Red Ewald, Inc. Karnes City, Texas. [email protected], 800-242-3542. Prices as of 2/15/2018. Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 37 BROODSTOCK TANKS

Approximately 1,600 adult sea cucumbers would be needed to hatch 200 million eggs. FRT-24 rectangular tanks measuring 28” wide by 10’ long by 24” deep (with a footprint of ~23 sq. ft.) would be used for broodstock conditioning. A stocking density of 7 cucumbers per m2 would require about 230 m2 of tank space (about 2,500 sq. ft.). About 105 tanks would be required to hold all 1,600 adults simultaneously.

It is anticipated that broodstock would be collected over a period of about 8 weeks, with dive harvesting once every other week. Therefore, it is anticipated that roughly half of the total tank volume would be needed at any given time, reducing the floor space needed to approximately 1,250 sq. ft. (55 tanks).

LARVAL TANKS

Once eggs are hatched, they are immediately transferred to conical larval holding tanks (60” diameter x 30” high). At a stocking density of 2 eggs per milliliter, about 65 FCT-340-gallon conical tanks would be required to hold all 200 million eggs. As the hatches will be staggered over 30 days it is anticipated that only 32 tanks will be required at any given time, requiring 800 sq. ft. of floor space. The larvae will grow in the tanks until about half reach the Dolioaria stage (an average of about 60 days).25 Dr. Regula-Whitefield and Mr. Hetrick’s research showed survival rates ranging from 6 percent to 20 percent. At an average survival rate of 13 percent, about 26 million larvae would be available for transfer to setting tanks.

JUVENILE SETTING TANKS

The setting tanks (FRT-44) are 9.5’ long x 2.5’ wide x 2.5 feet high. Each tank will hold approximately 30-25” x 24” corrugated roofing panels. Each panel (both sides) equals 8.3 sq. ft. of surface space. Tank walls will provide an additional 48 sq. ft. of surface space each. Total panel and tank surface per tank equates to 300 sq. ft.

At 1 juvenile per cm2 of surface area, the facility will need 26 million cm2 of surface space for one cohort. This equates to 28,000 sq. ft. At 300 sq. ft. per tank, the facility would need a total of about 93 FRT-44 tanks for one cohort with a floor space requirement of 2,215 sq. ft. There is an overlap of about three months where cohort #1 will still be in setting tanks and cohort #2 will need space for setting. Due to a relatively low survival rate, it will be possible to condense a portion of Cohort #1 into fewer tanks. It is estimated that an additional 30 setting tanks will be needed to accommodate cohort #2. In total, the facility will require about 123 setting tanks covering 2,930 sq. ft. of floor space.

Juveniles would remain in the setting tanks for about 16 months until reaching ~2mm. The midrange survival rate from Dolioaria to about 2mm is estimated at 20 percent. This would result in about 5.2 million ~2mm juvenile sea cucumbers ready for out planting.

25 Total time from egg to Dolioaria can range from 25 to 120 days. Average time is 60 days. Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 38 TANK SPACE SUMMARY

An estimated total of 4,990 sq. ft. will be required for the three types of tanks. Additional space, estimated at about 30 percent of tank sq. ft., will be required for walkways, pipes, drains, and other fittings (estimated at 1,500sq. ft). Total tank room space required is nearly 6,500 sq. ft.

Table 15. Estimated Tank Space Requirements Type of Tank Estimated sq. ft. Broodstock (footprint) 1,250 Larval (footprint) 810 Juvenile (footprint) 2,930 Tank Total 4,990 Walk ways, pipes, drains, etc. (~30%) 1,500 Total Tank Space Required 6,490 Note: Tank space sq. ft. has been rounded.

Saltwater Intake/Pumps/Filters

Space for water pumps, filters, and water heating, will require about 350 sq. ft. of floor space and will be adjacent to the tank room.

SALTWATER INTAKE

The seawater source for a hatchery must deliver clean seawater of stable temperature and salinity. Seawater should be drawn from below the thermocline, where temperature and salinity are relatively constant and therefore suitable for broodstock holding and larval and juvenile rearing. Water temperature should vary by less than 1ºC and salinity less than 1 percent daily. Clean, clear seawater is required, though the hatchery seawater filtration system will remove some turbidity. The seawater must not contain toxic compounds such as pesticides, herbicides, creosote, petrochemicals, or heavy metals. The length of pipe and the specific depth will be determined by the facility location.

SEAWATER FILTRATION

Seawater filtration requirements typically vary depending on the water quality from site to site. Seawater pumped from the intake is passed in sequence through a sand filter, 25 µm bag filter, 5 µm bag filter, UV sterilizer, and finally a carbon filter before being piped to the spawning and rearing tanks. The sand filter removes particulates from seawater larger than approximately 100 µm. The 25 and 5 µm bag filters then remove smaller particulates. The UV sterilizer then acts to deactivate a portion of potential pathogens such as protozoans, fungi, bacteria, and viruses. Finally, the activated carbon filter removes by adsorption, low levels of substances including organic contaminants,

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 39 pesticides, polyaromatic hydrocarbons, trihalomethanes, phenols, chlorine, ozone, perchlorates, hydrogen peroxide, bromine, some heavy metals, and other chemicals which can potentially harm broodstock, larvae, and juveniles.

SYSTEM MAINTENANCE

The seawater filtration system must be properly maintained to ensure good water quality and stable flow rates. Over time, particulates removed by the filtration system reduce the flow rate of seawater through the system. For this reason, sand and bag filters must be periodically cleaned. Sand filters are typically cleaned daily by back-washing for several minutes. This is done by resetting the valves on the sand filter to temporarily reverse flow through the filter and thereby flush accumulated particulates such as silt out of the filter and down a drain. Likewise, the bag filters need to be periodically removed from their housings and rinsed clean with a freshwater hose. Usually, a bag filter can be cleaned and reused for about a month before needing replacement. UV bulbs in the sterilizer typically are effective for about eight months before needing replacement. Bulbs should be checked daily through the indicator windows to make sure none have prematurely burned out and extra bulbs should be available on site for immediate replacement when needed. The activated carbon in the carbon filter should be changed about every three months to ensure it is functioning properly. If the activated carbon is replaced too infrequently, it can become saturated with adsorbed contaminants and can no longer effectively remove harmful materials from the seawater. A filtration system maintenance schedule is summarized below.26

Table 16. Filtration System Maintenance Schedule Component Maintenance Schedule Sand filters Back wash daily Bag Filters Rinse daily UV sterilizer Check daily, replace bulbs every 8 months Carbon filter Replace every 3 months Source: Alutiiq Pride Shellfish Hatchery.

HEAT PUMP

A heat pump such as a Water Furnace Envision NDW will be installed for water warming after passing through the filtration system.

26 Information on intake, pumps, and filtration was adapted with permission from Alutiiq Pride Shellfish Hatchery, Purple-Hing Rock Scallop Hatchery Manual, Swingle, Mahmood, Saindon, Hetrick, 2015. Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 40 Algae Lab

Microalgae for feeding broodstock, larvae, and juveniles will be cultured onsite using standard algae culture methods. The algae laboratory will require about 525 sq. ft. and will be adjacent to the tank room. The room will need to be plumbed with both fresh and salt water intakes, and contain a freshwater work sink for glassware preparation. The room will need air lines connected to a compressor to allow for aeration of the algae cultures. Extensive power input will be required to accommodate rows of 3-foot halogen grow lights. The algae lab will also require space for a ductless fume hood to allow for sterile technique of culture transfers as well as counter top space to setup industrial sized pressure cookers to sterilize sea water. Ventilation will need to be installed in this area in order to help control room temperatures, which will need to be maintained at 65-75°F to allow for optimal algae growth.

Storage racks will need to line at least 2 sides of the room to accommodate various stages of algae tank sizes. Stock cultures are maintained in unaerated 20 ml screw cap test tubes and 500 ml flasks. From these, the microalgae is transferred into 1-L aerated flasks and then moved into 18-L carboys and then finally into 100 and 400-L cylindrical fiberglass Kalwall tubes. The central portion of the algae lab will be devoted to large culture tubes.

Office and Dry Lab

The 500 sq. ft. office and dry lab will be co-located on the second floor, with separation between these two spaces. The administrative office will include desks, computers, printers, a break area, and lockers for staff gear. The office will require internet access.

The dry lab will provide solid surface workbenches equipped with both a compound and a dissecting microscope, a chemical storage refrigerator and chest freezer, and a work sink for glassware preparation. Basic lab equipment requirements include glassware, cleaning supplies, slides, petri dishes, well counter, oxygen and pH sensors, light meters, and infrared thermometers.

Lab safety equipment will include goggles, gloves, fire extinguisher, first aid kit, foot water bath, eye wash station and chemical safety shower. A corrosive resistant chemical storage cabinet will also be needed.

Bathroom and Hallways

Bathrooms and hallways will require about 800 sq. ft. The bathroom, adjacent to the second-floor office space, will include a staff shower.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 41 Shop and Electrical Room

The shop and electrical room will be 700 sq. ft. Electrical requirements for the facility will include 110, 220, and 4-phase. The shop will include work stations and the tools necessary for facility maintenance and to conduct day-to-day tasks related to systems operations.

Storage

About 875 sq. ft. is allocated for inside dry storage, and 1,500 sq. ft. for covered, unheated storage outside. The outside storage will be primarily used to store trays and other gear and will include a work station for gear maintenance and tools.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 42 Out Planting and Grow out Systems

Potential Grow out Methods

Preliminary investigation of sea cucumber grow out systems includes the possibility of using raceways, net pens, beach ponds, or floats and trays.

Raceways/Tanks

Consideration was given to raising hatchery reared sea cucumbers in tanks or raceways rather than in a natural ocean environment. The sea cucumbers would remain in the tanks or raceways from hatch through harvest. The cucumbers’ diet would include nutrients from the natural saltwater combined with supplemental feeding. This grow out methodology was eliminated as likely too expensive due to the cost of maintaining a large number of tanks/raceways in a covered and heated (air and water) environment for 3 to 4 years. As with other potential grow out methods, the number of months/years needed to grow a cucumber to a “harvestable” size using this methodology is unknown.

Beach Ponds

Beach ponds are used extensively in some areas of Southeast Asia, but the ponds used in these locations are repurposed shrimp rearing facilities. Rearing sea cucumbers in beach ponds was reviewed and excluded as a potential grow-out methodology for Southeast Alaska. Permitting for the installation of beach containment devices would likely be challenging. The devices would be semi-permanent and highly visible, likely resulting in significant concerns from residents. Beach pond grow out would need significant predator exclusion controls and would be susceptible to storm damage. Water temperatures could also be somewhat lower in a beach pond versus underwater, and potentially resulting in slower growth. Additionally, while not explored, the cost of constructing beach ponds would likely be prohibitive.

Net Pens

Net pens, both floating and those that sit on the bottom are used in China and elsewhere. Preliminary research into the cost and availability of net pens was conducted for this study. Floating net pens were excluded from further research due to the potential of rough sea conditions in Southeast Alaska and potential sea otter predation.

While not immune from sea otter predation, sea cucumbers reared in net pens located on the ocean floor offer a slightly higher level of resistance. All sides as well as the top and bottom of ocean bottom pens would need to be fully netted with robust material. A source of netting was identified with the estimated cost for a net to fully enclose a pen frame 25’x25’x12’ about $3,000 FOB Seattle. A source of commercially-made bottom pen frames was not identified. Pen frames would likely need to be custom made from PVC or other materials. The estimated total cost of a pen frame, net, weights, lines, and floats is likely in the range of $6,000 to $10,000 each. In the harsh ocean environment, the annual cost of maintenance and periodic net replacement, while unknown, would likely be a significant component of operating expenses.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 43 Net pen maintenance and sea cucumber harvest would require a significant amount of dive time. Contract divers in Ketchikan average about $150 per hour. The volume of pens needed to establish a feasible operation may require having a diver on staff for routine pen maintenance and hiring multiple contract divers for harvest.

The overall cost of pen construction and maintenance, the high cost of dive time, uncertainties regarding stocking density and concerns over sea otter predation resulted in net pens being excluded from further consideration.

Float and Tray System

A system using floats and trays was selected for this study as the most cost effective and easily scalable. Float and tray systems are widely used in the Alaska oyster industry and the operating systems are familiar to most participants in the Alaska mariculture industry.

There is a Ketchikan-based float manufacturer that currently produces high-quality oyster floats using yellow cedar and hard plastic flotation cells that are 25’ 2” by 24’ 6”. This float design modified for larger sea cucumber trays would accommodate 56 stacks of 7 sea cucumber trays (1-meter x 1-meter x .33-meters deep) or a total of 392 trays per float.

A stack of 7 trays would be 7.6 feet-high. This is a reasonable height that will allow for easy stacking and unstacking by facility staff. At an assumed maximum stocking density of 8 sea cucumbers per m2, each tray (3.33 m2) would hold 27 mature sea cucumbers. Studies conducted in British Columbia, as well as SARDFA funded research demonstrated that growing sea cucumbers in trays is a viable methodology given appropriate densities.27 The total estimated number of floats and trays need for the operation is included in the capital costs section of this study.

The following drawings show the design for the proposed sea cucumber float and tray system with anchors and rigging.

27 Lucie Hannah, Nicholas Duprey, John Blackburn, Claudia M. Hand & Christopher M. Pearce (2012): Growth Rate of the California Sea Cucumber Parastichopus californicus: Measurement Accuracy and Relationships between Size and Weight Metrics, North American Journal of Fisheries Management, 32:1, 167-176. Charlotte Regula-Whitefield, Final Report for P. californicus October, 2018, SARDFA. Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 44 NORTH 24'-6" 32" 32" 68" 94" 68" 45" 8' 42" 42" 25' 2" 24' 6" 42" 42" 42" 45" FIGURE 1

SOUTH 24'-6"

2' 3' TYPICAL STACK OF TRAYS

FIGURE 2 EHW RAFTS PER PLAN 0 MLLW

-25

-50 ANCHOR SYSTEM PER DETAIL -75 THIS SHEET

-100 SECTION VIEW 1"=50' HORIZ. 1"=50' VERT.

36" BUOY

6' RAFTS

1 1/2" SHACKLE

1 1/2" CHAIN SHACKLE 1 1/2" CHAIN

CHAIN SHACKLE 1 1/2"

1 1/2" RING

40"

6000 DANFORTH ANCHOR 3000 LB CEMENT BLOCK ANCHOR DETAIL FIGURE 3 Aquaculture Facility Location

Hatchery and Grow Out Site Locations

A preliminary investigation was conducted to determine potential locations for a sea cucumber hatchery and grow out facility located near Ketchikan.

The optimal location for a land-based hatchery facility would be on the waterfront with access to clean water. The facility will need a dock. The optimal shore-based location would be adjacent or near the grow out facility, resulting in a short boat ride through relatively sheltered waters.

There are two recommended options for acquiring or leasing a shore-based facility site:

 Purchase land on the open market.  Lease or purchase land from the Ketchikan Gateway Borough (KGB).

Potential Hatchery Locations

The KGB owns a number of parcels within the borough that have at least some potential as a hatchery location, including George Inlet, Blank Inlet, along North Tongass Highway between Salmon Falls and Settlers Cove, and Moser Bay.

KGB Waterfront Parcels

GEORGE INLET

This 29-acre site along South Tongass Highway is currently fully leased by Oceans Alaska but could become available in the future. Oceans Alaska recently constructed a new building on the site. George Inlet has good potential for a hatchery site but the surrounding area is not promising for a co-located grow out facility due to heavy local use of the area.

SALMON FALLS TO SETTLERS COVE

The KGB owns a stretch of waterfront property in this area. The site has good potential for a waterfront hatchery facility. A roughly 500-foot driveway would need to be constructed from North Tongass Highway to access the site. Unfortunately, this site is not an optimal site for co-locating a grow out facility immediately adjacent to the hatchery because of heavy local boat traffic and harsh Northwest winds. This site does, however, provide close marine access to potential grow out locations including potential sites near Marble Seafood’s large oyster farm. The farm is located approximately 2 water miles from the KGB parcel.

Land Purchase

It was beyond the scope of this study to identify potential private land for a hatchery location. Land within the Borough is limited, especially waterfront properties. The most likely grow out locations are located north and west of Ketchikan. This would indicate that a property along North Tongass Highway may be optimal.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 46 Potential Grow Out Site Locations

In all locations, a state tideland lease will be required for the grow out facility. The State of Alaska Department of Natural Resources (DNR) and ADF&G are the permitting agencies for mariculture operations (see permitting section below for more details).

The grow out facility needs to be in an area with clean water and good tidal movement that is not susceptible to run-off that may be contaminated with human waste or other pollutants. As discussed elsewhere in this study, co-locating the grow out facility in close proximity to an oyster farm is likely desirable.

KGB Lease Potential

The KGB owns various remote parcels where a grow out facility might be located. KGB has a cooperative agreement with DNR that may allow for favorable lease rates.

BLANK INLET

KGB owns parcels on both sides of Blank Inlet approximately 8 water-miles Southeast of downtown Ketchikan. With site access only via water and a lack of utilities, this location is not suitable for the hatchery, but may be suitable for a grow out facility. There is some local use of this area, but boat traffic is not heavy. Exposure to Southeast winds may be a concern at this site. Movement of staff, supplies, and sea cucumbers from wherever the land-based hatchery is located would add significantly to annual operating expenses. This location is not optimal if the hatchery is located along North Tongass Highway.

MOSER BAY

Moser Bay sees relatively light recreational use and boat traffic and has potential as a grow out site. KGB owns parcels located on the west side of the bay. The east shore of the bay may also have potential for a grow out site, but is more exposed than the relatively protected west side. Steep shorelines are present in the area. This location is approximately 8 water-miles from the KGB parcels on North Tongass Highway.

HUMP ISLAND/BACK ISLAND

There is likely room for a 40 to 50-acre grow out facility between Back Island and Hump Island near Marble Seafoods’ large oyster farm. This area sees little boat traffic and has been permitted by DNR for the oyster farm. This location is relatively sheltered and close to a dock located along North Tongass Highway. A facility near the Marble Seafoods oyster farm offers the potential for polyculture benefits. This location is approximately 2 water miles from the KGB parcels on North Tongass Highway.

OTHER LOCATIONS

Other locations that might be considered include the following:

 Upper George Inlet past the end of the road  Carrol Inlet  Smugglers Cove  Helm Bay

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 47 Permitting

ADF&G

An interview was conducted with ADF&G Mariculture Program Director Sam Raybung.28 The potential grow out operation was described as well as potential locations. In the opinion of Mr. Raybung, the facility described in this study is likely permittable under current regulations. There may be a biomass fee that can range from $2,000 to $5,000 associated with the ADF&G permit. Mr. Raybung did mention that there may also be some fee for broodstock acquisition.

DNR

An interview was conducted with Karen Cougan, Program Coordinator for DNR’s Aquatic Farm Program.29 The grow out operation was described as well as potential locations. Ms. Cougan stated that facility would need to go through the regular permitting process but believes that this type of facility is likely permittable under current regulations. Applications are accepted annually but due to current backlogs can take up to two years or more to permit. There is a permit application fee of $100. DNR requires a $2,500 bond for cleanup and site restoration. Annual lease fees for a permitted site are $450 for the first acre and $125 for each additional acre.

Permit and Fee Total Cost

The grow out facility described in this study would require approximately 25 to 35 acres depending on location and site configuration. Total fee and permit costs are estimated to range from $5,000 to $10,000 annually, plus any fees associated with broodstock collection.

28 Telephone interview with Sam Raybung, Director, ADF&G Mariculture Program, June 2018. 29 Telephone interview with Karen Cougan, DNR Aquatic Farm Coordinator, January 2019. Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 48 Estimated Revenue and Expenses

Revenue Potential

Revenue potential is determined by the estimated total annual pounds of dewatered sea cucumbers harvested and the estimated ex-vessel value per pound. Annual harvest is based on the survival rates estimated in this study. Estimated harvest weight assumptions are outlined below. Future prices are estimated based on historic commercial harvest value adjusted for a potentially smaller product. There are a variety of key variables that could result in variances from the following revenue estimates, including survival rates, average weight at harvest, and average market price. The study team used the best available data to generate conservative low, mid, and high estimates for each variable. The mid-case revenue estimate is based on the mid-case estimate for each variable.

Estimated Survival Rates and Harvest Volumes

Based on SARDFA-funded research into hatching and growing juvenile sea cucumbers, out planted sea cucumber survival rates are estimated to range from a low of 5 percent to a high of 25 percent, with a mid-case rate of 15 percent. A facility with a beginning stock of 5.2 million ~2mm sea cucumbers out planted for 26 months is estimated in the mid-case to result in a harvest of approximately 780,000 sea cucumbers at month 45.

Table 17. Estimated Survival Rates and Harvest Volume for Tray Grown Sea Cucumbers Beginning Stock Survival Rate Surviving to

(~2mm Juveniles) Harvest Low‐case 5.2 million 5% 260,000 Mid‐case 5.2 million 15% 780,000 High‐case 5.2 million 25% 1,300,000 Source: Study team estimates.

Sea Cucumber Weight at Harvest

The average weight and length of tray-grown sea cucumbers harvested on a 45-month cycle (19 months at hatchery and 26 months at grow out facility) is unknown. Size is a critical variable in determining annual revenue potential and the financial feasibility of an aquaculture operation. There have been no scientific studies to gather information regarding the average age of commercially harvested P. californicus on the west coast of the U.S or

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 49 Canada. There is a small amount of data regarding growth rates of P. californicus.303132 However, the growth data collected in these studies is limited and does not provide enough evidence to accurately determine the weight of a tray-grown cucumber at 45 months. This study recommends additional research to determine tray-grown sea cucumber average weights at 45 and 57 months.

For the purpose of this study, it is assumed that tray-grown sea cucumbers harvested at 45 months will be smaller than the average commercially harvested sea cucumber in Southeast Alaska. How much smaller is uncertain. ADF&G cucumber dive surveys by harvest area were conducted from 2012 to 2018. Depending on the area, ADF&G recorded average weights ranging from a low of 0.134 pounds to a high of 0.839 pounds – with an overall average of 0.435 pounds per sea cucumber.33 The data revealed significant variability in the weight of individual sea cucumbers within the same area, from area to area, and from year to year. A review of the ADF&G survey data for the West Behm Canal area (a likely location for a sea cucumber grow out operation) shows a lower than average, average weight of 0.350 pounds in this location. These average weights are for wild sea cucumbers feeding on a natural diet. The study team believes there is significant potential to increase average sea cucumber growth rates and overall size by 45 months by growing sea cucumbers near an oyster farm.

All factors considered, for the purpose of this study, it is assumed that at 45 months a dewatered, tray-grown sea cucumbers will range from a low-case weight of 0.2 pounds (roughly half of the average weight of wild harvest), to a high-case of 0.3 pounds (about two-thirds of average wild harvest weight), with a mid-range of 0.25 pounds. This estimate may be conservative if the facility allows for co-culturing sea cucumbers in proximity to oysters.

Table 18. Estimated Average De-Watered Weight at Harvest, (Month 45) Harvest Weight Dewatered (Pounds) High‐case 0.30 Mid‐case 0.25 Low‐case 0.20 Source: McDowell Group estimates.

30 Email from Andy Suhrbier, Pacific Shellfish Institute, Saltonstall-Kennedy program (grant no. NA15NMF427032). 31 Lucie Hannah, Nicholas Duprey, John Blackburn, Claudia M. Hand & Christopher M. Pearce (2012): Growth Rate of the California Sea Cucumber Parastichopus californicus: Measurement Accuracy and Relationships between Size and Weight Metrics, North American Journal of Fisheries Management, 32:1, 167-176 32 Charlotte Regula-Whitefield, Final Report for P. californicus, October 2018, SARDFA. 33 Alaska Department of Fish and Game sea cucumber biomass and GHL models 2012 to 2018. Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 50 Estimated Future Ex-Vessel Value

The historical value of Alaska’s wild harvest sea cucumbers provides a basis to estimate future price trends. However, as with all seafood products, prices can fluctuate significantly depending on supply, market demand, quality, and other factors such as tariffs. Over the last decade, ex-vessel prices for Alaska sea cucumbers ranged from a low of $2.55 per pound in 2008 to a high of $6.03 in 2011. The ten-year average price was $3.96 per pound and the most recent five-year average was $4.17. In October 2018, at the beginning of the season, processors were reportedly paying $5.25 per pound. As of November 2018, reported prices paid to divers had ratcheted up to $6.00 per pound.34,35 Processors reported that competition for limited product was the primary factor in the late season price increases. Processors also expressed concern with the potential effects of a 25 percent Chinese import tariff on sea cucumber products.

Table 19. Ex-Vessel Sea Cucumber, Price per Pound, 2010-2017 Price per pound*

2008 $2.55 2009 $2.67 2010 $2.64 2011 $6.03 2012 $4.95 2013 $4.02 2014 $4.02 2015 $3.57 2016 $4.07 2017 $5.15 2018 $5.25‐$6.00 10‐Year Average (2008‐2017) $3.96 5‐Year Average (2008‐2017) $4.17 Source: COAR. Note: Price is statewide average for dewatered product. 2018 data is preliminary based on in-season processor interview.

A significant majority of Alaska’s sea cucumbers are sold into the Chinese market. Ex-vessel prices have generally mirrored broader Chinese market trends. Due to strong economic growth following the economic crisis of 2008- 2009, sea cucumber prices in China rose rapidly along with the broader Chinese economy36. Prices peaked in 2011 but began to decline in 2012 due partially to a government crackdown on lavish government spending that negatively impacted consumption of luxury items across China.37 The recent rebound in Alaska pricing is

34 Telephone interview with Jim Erickson, Alaska Glacier Seafood, December 2018. 35Telephone Interview with Jeffery Green, Operations Manager, EC Phillips & Sons., November 2018. 36 From 2007-2009, China’s GDP growth slowed from 14.2 to 9.4 percent. While there was a slight bump in 2010 (10.6 percent), China’s GDP growth has been slowly declining as its economy matures, reaching 6.7 percent in 2016. 2018 growth is projected at 6.6 percent. (sources: World Bank, International Monetary Fund) 37 https://www.reuters.com/article/us-china-luxury/chinas-corruption-crackdown-takes-shine-off-luxury-boom-idUSBRE88M0F020120923

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 51 consistent with the overall Chinese sea cucumber market, which also bottomed out in 2015 and has grown consistently since.

Additionally, during this 2012-2015 time-period there was a broader decline in the Chinese sea cucumber industry, with some farms going out of business due to stagnant demand and declining production. A recovery took hold in 2016 and 2017 with prices rising rapidly.38 This study does not take into account trade tariffs implemented in 2018 on seafood products imported into China. The effects of the tariffs on price and demand are not fully understood as of early 2019. It is also likely that tariffs will end at some point in the future.

It is unknown how buyers will value tray-raised sea cucumber that are smaller than wild harvest. One processor reported that some buyers have requested sea cucumbers graded by size with a greater desire for larger specimens.39 However, A. japonicus, the most valuable sea cucumber, averages 20 cm in length, smaller than the average P. californicus. Industry reports indicate that smaller grades of A. japonicus have seen market acceptance, possibly due to a decline in large sea cucumbers due to exploitation.40

While the average ADF&G dewatered weight from 2012 to 2018 surveys was .435 pounds, sizes ranged from less than .10 pounds to slightly more than .8 pounds. Nearly half of the areas surveyed by ADF&G (48 percent) had average dewatered weights less than the .435 average with, 10 percent of areas averaging less than .3 pounds. There appears to be at least a tolerance, if not a desire, for buying smaller than average Alaska sea cucumbers.

All factors considered, the ex-vessel price of a farm-raised sea cucumber is estimated to be $4.00 per pound in the low-case, $4.25 in the mid-case, and $4.75 in the high-case. As previously mentioned, a variety of factors can influence price and future ex-vessel value could ultimately prove to be lower or higher than this estimate.

Table 20. Estimated Ex-Vessel Price Range for Tray-Grown Sea Cucumbers Average Price

High‐case $4.75 Mid‐case $4.25 Low‐case $4.00 Source: McDowell Group estimates.

Estimated Demand

Mid-case survival of 780,000 sea cucumbers at the mid-case weight of 0.25 pounds (de-watered weight) would result in a harvest weight of 195,000 pounds. This annual production volume would represent 13 percent of historic annual average harvests in Alaska (1.46 million pounds). Processors have consistently purchased all available sea cucumber harvests in Alaska. Sea cucumber processing does not require specialized equipment and there are no known constraints on the volume of sea cucumbers that processers can process.

38 Food and Agriculture Organization, January 2018. Globefish Highlights, www.fao.org/3/I8626EN/i8626en.pdf 39 Telephone interview with Jim Erickson, Alaska Glacier Seafoods, October 2018. 40 The Sea Cucumber Apostichopus Japonicus History, Biology, and Aquaculture. Yang, Hamel, Mercier, Development of Aquaculture and Fisheries Science, Vol. 33, 2015 Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 52 As previously mentioned, one unknown is how buyers will value tray-raised P. californicus sea cucumbers that are smaller than those harvested in the wild harvest. Based on strong worldwide demand for many varieties and sizes of sea cucumbers, it is assumed that the market would readily absorb the estimated volume of sea cucumbers described in this study. It is recommended that prior to facility construction, a series of interviews be conducted with potential buyers to better understand market demand for Alaska farm-raised sea cucumbers.

As wild stocks continue to decline from sea otter predation, the annual statewide harvest is anticipated to further decline. A significant decline in wild stocks may present increased market opportunities for farmed P. californicus sea cucumbers.

Estimated Revenue Potential

Combining the mid-case production of 780,000 sea cucumbers with the mid-case average weight (0.25 pounds) and price ($4.25 per pound), results in an estimated revenue of roughly $830,000 per cohort.

The high-case scenario for dewatered weight and price indicates revenue potential of $1.1 million. The low-case for weight and prices indicates potential revenue of $585,000. Table 21. Estimated Revenue Potential Average Harvest Total Dewatered Average Estimated Volume Dewatered Weight Price Revenue (Individuals) Weight (pounds) High‐case 780,000 0.30 234,000 $4.75 $1,110,000 Mid‐case 780,000 0.25 195,000 $4.25 $830,000 Low‐case 780,000 0.20 156,000 $3.75 $585,000 Source: McDowell Group estimates. Figures have been rounded.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 53 Operational Expenses

Operational expenses are estimated to total about $410,000 in Year 4, the first year of normalized operations. Payroll and benefits are estimated to be the most significant annual expense at $200,000 or about 49 percent of total expenses. Details of estimated staffing and payroll are provided below.

All other expenses were estimated based on a review of operational expenses for the Alutiiq Pride Shellfish Hatchery and Oceans Alaska, as well as study team experience with estimating operational expenses for other types of facilities in Alaska. Table 22. Estimated Annual Operating Expenses, Year 4 Category Expense Payroll and benefits $200,000 Electric 75,000 Supplies 30,000 Insurance 20,000 Repair and maintenance 20,000 Vessel fuel 15,000 Site lease and fees 7,500 Sea cucumber food 6,500 Divers 5,000 Tools and equipment 3,000 Algae production 3,000 Accounting 3,000 Telephone and internet 3,000 Postage and shipping 2,000 Auto and vessel insurance 2,000 Vehicle fuel 2,000 Water 2,000 Trash 1,000 Contingency 10,000 Total expenses $410,000 Source: McDowell Group estimates. Figures have been rounded.

Payroll and Benefits Summary

The facility would be operated by two full-time and five seasonal staff. Full-time positions would include a facility manager and an assistant manager. These are skilled positions requiring a background in biology and specifically mariculture. In addition to the technical aspects of facility operations, staff will be expected to perform routine facility and equipment maintenance. Total full-time staff payroll and benefits are estimated at about $150,000 annually.

The exact mix of full-time and part-time seasonal labor and total annual hours will need to be refined as the facility gains operational experience. For planning purposes, two full-time seasonal positions are budgeted for 120 days and three part-time seasonal positions for 60 days. The three part-time positions will work in the late fall during the harvest and out planting the next cohort. The two full-time seasonal positions will be responsible for basic hatchery maintenance tasks, equipment maintenance (including monitoring and cleaning floats and

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 54 trays), harvest, out planting, and other tasks. At $15 per hour with no benefits, seasonal staff costs would be about $50,400.

Total full- and part-time staff payroll and benefits are estimated to be about $200,000 in year 4. Table 23. Estimated Payroll and Benefits Position Annual Full time staff Facility manager $70,000 Assistant manager $50,000 Total fulltime staff payroll $120,000 Benefits (25%) $30,000 Total fulltime payroll and benefits $150,000 Seasonal staff 2 FT for 120 days, 8 hours per day, $15 per hour $28,800 3 PT for 60 days, 8 hours per day, $15 per hour $21,600 Total seasonal staff payroll $50,400 Total wages $200,400 Source: McDowell Group estimates.

Employing at least one staff that is also a certified diver would be beneficial to the operation. While diving would not be their primary job, being on-site would provide the facility with quick response capabilities to deal with issues such as detached anchor cables as well as provide routine inspection, maintenance, and broodstock collection. The staff diver would need to be compensated beyond the $15 hourly rate. Staff dive compensation is not included in total estimated payroll and benefits.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 55 Proforma Financial Cash Flow

Normalized Cash Flow Year 4

A normalized year is the first year a facility is fully operational with annual revenue and expenses at long term average levels. This study assumes that year 4 is the first year of normalized operations. Based on estimated annual revenue of $830,000 and expenses of $410,000, the facility would generate annual net income of about $420,000 in year 4.

Table 24. Estimated Net Income, Normalized Year

Estimated Revenue $830,000 Estimated Expenses $410,000 Net income/loss $420,000 Source: McDowell Group estimates.

The analysis of net income does not include debt service, taxes, depreciation, or amortization. It is unknown how SARDFA might finance the estimated $6.4 million cost of the hatchery and grow out facility (see next section for a description of estimated facility costs). SARDFA may choose to seek conventional financing through a bank or seek investment from outside partners. There may also be some opportunities to seek low-cost loans or grant funding.

Annual principal and interest payments will depend on the total amount borrowed, length of the loan, and interest rates. Financing for 10 years, at a rate of 8 percent, indicates the facility could support debt service on roughly $3 million in loans at break even.

Pro Forma Cash Flow Analysis

The table below outlines estimated facility cash flow in year 1 to year 4 (normalized operations). Figures are not adjusted for inflation.

Expenses in years 1 to year 3 have been adjusted based on the anticipated developmental stages of cohort #1. For example, the vessel will not be needed until month 20 when the first cohort is out planted so there will be no expense for vessel operations in year 1. Payroll and benefits in year 1 reflect full-time staff with minimal hourly labor. In year 2 and year 3, when cohort #1 and cohort #2 are out planted, additional hourly staff time will be required. The use of contract divers in year 1 will be for broodstock collection only, in years 2-4 divers will also be required for float maintenance. Overall, expenses in year 1 are estimated to be 85 percent of normalized (year 4) expenses, growing to 91 percent and 93 percent for years 2 and 3, respectively.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 56 With no revenue in months 1 to 45, the facility will need enough working capital to maintain operations until the first harvest. Deficits are estimated to be $350,000 in year 1, $373,000 in year 2, and $381,000 in year 3. In total, the facility will need cash reserves of approximately $1.5 million to carry the operation from start-up through the first harvest near the end of year 4. Table 25. Estimated Pro Forma Cash Flow Analysis, Year 1 to Year 4 Year 1 Year 2 Year 3 Year 4 Revenue Sea cucumber sales 0 0 0 $830,000 Expense Payroll and benefits 160,000 170,000 170,000 200,000 Electric 75,000 75,000 75,000 75,000 Supplies 25,000 25,000 30,000 30,000 Insurance 20,000 20,000 20,000 20,000 Repair and maintenance 20,000 20,000 20,000 20,000 Vessel fuel 0 10,000 15,000 15,000 Site lease and fees 7,500 7,500 7,500 7,500 Sea cucumber food 6,500 6,500 6,500 6,500 Divers 2,500 5,000 5,000 5,000 Tools and equipment 6,000 5,000 3,000 3,000 Algae production 3,000 3,000 3,000 3,000 Accounting 3,000 3,000 3,000 3,000 Telephone and internet 3,000 3,000 3,000 3,000 Postage and shipping 2,000 2,000 2,000 2,000 Auto and vessel insurance 500 2,000 2,000 2,000 Vehicle fuel 2,000 2,000 2,000 2,000 Water 2,000 2,000 2,000 2,000 Trash 1,000 1,000 1,000 1,000 Contingency 10,000 10,000 10,000 10,000 Total expenses $349,000 $372,000 $380,000 $410,000 % of year 4 expenses 85% 91% 93% - Net profit/(loss) ($349,000) ($372,000) ($380,000) $420,000 Source: McDowell Group estimates. Figures have been rounded.

Risk Assessment

Factors that could result in potential positive or negative impacts on revenue include survival rates at various developmental stages, dewatered weight at harvest, and ex-vessel price.

Survival Rates

Mid-case survival estimates used for this study to model sea cucumber hatching and rearing are considered conservative by Dr. Regula-Whitefield. Higher than estimated survival rates would increase estimated net profits. Conversely, lower rates would negatively impact net revenues.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 57 The following tables show potential revenues at the low-and high-case extremes. It is unlikely that either of these results would occur, however, an understanding of the potential range of revenue is helpful in assessing risk related to investment in the facility.

LOW-CASE SURVIVAL RATES

An analysis of hatchery operations using low-case survival rates at all three developmental stages shows that only 108,000 sea cucumbers would survive to harvest, generating $115,000 at the mid-case dewatered weight and price.

Table 26. Low-Case Survival Growth stage Starting count Survival Rate (%) Survivors Eggs hatched to Doliolaria stage Low 200,000,000 6 12,000,000 Mid 200,000,000 13 26,000,000 High 200,000,000 20 40,000,000 Larval stage to ~2mm Low 12,000,000 18 2,160,000 Mid 12,000,000 20 2,400,000 High 12,000,000 22 2,640,000 Out planted at ~2mm to harvest Low 2,160,000 5 108,000 Mid 2,160,000 15 324,000 High 2,160,000 25 540,000 Source: McDowell Group estimates. Figures have been rounded.

Table 27. Estimated Revenue Potential, Low-Case Survival Average Harvest Total Dewatered Average Estimated Volume Dewatered Weight Price/lb. Revenue (Individuals) Weight (#'s) Low-case 108,000 0.20 21,600 $4.00 $86,400 Mid-case 108,000 0.25 27,000 $4.25 $115,000 High-case 108,000 0.30 32,400 $4.75 $154,000 Source: McDowell Group estimates. Figures have been rounded.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 58 HIGH-CASE SURVIVAL RATES

High-case survival rates at the three developmental stages indicate that 2.2 million juveniles would survive to harvest. Assuming the mid-case dewatered weight and price, the harvest would generate about $2.3 million in revenue.

Table 28. High-Case Survival Growth stage Starting count Survival Rate (%) Survivors Eggs hatched to doliolaria stage Low 200,000,000 6 12,000,000 Mid 200,000,000 13 26,000,000 High 200,000,000 20 40,000,000 Larval stage to ~2mm Low 40,000,000 18 7,200,000 Mid 40,000,000 20 8,000,000 High 40,000,000 22 8,800,000 Out planted at ~2mm Low 8,800,000 5 440,000 Mid 8,800,000 15 1,320,000 High 8,800,000 25 2,200,000 Source: McDowell Group estimates. Figures have been rounded.

Table 29. Estimated Revenue Potential, High-Case Survival Average Harvest Total Dewatered Average Estimated Volume Dewatered Weight Price/lb. Revenue (Individuals) Weight (#'s) Low-case 2,200,000 0.20 440,000 $4.00 $1,760,000 Mid-case 2,200,000 0.25 550,000 $4.25 $2,338,000 High-case 2,200,000 0.30 660,000 $4.75 $3,135,000 Source: McDowell Group estimates. Figures have been rounded.

Weight and Price

Assuming mid-case hatchery survival rates, scenarios were developed where both weight and price were at low- case levels. The low-case weight and price scenario would result in annual revenue of $624,000. The high-case scenario for weight and price would result in revenues of $1.1 million.

Table 30. Estimated Revenue Potential, Mid-Case Survival Average Harvest Total Dewatered Average Estimated Volume Dewatered Weight Price/lb. Revenue (Individuals) Weight (#'s) Low-case 780,000 0.20 156,000 $4.00 $624,000 Mid-case 780,000 0.25 195,000 $4.25 $828,750 High-case 780,000 0.30 234,000 $4.75 $1,112,000 Source: McDowell Group estimates. Figures have been rounded.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 59 Other Risk Considerations

LOSS OF AN ENTIRE COHORT

There is potential for loss of an entire cohort, particularly in the hatchery phase. Risks include disease, water temperature issues, and human error. Loss of an entire cohort would be a devastating event and result in a future year with no revenue. Whether the operation could financially manage this situation is unknown.

MARKET DEMAND

There is market demand-related risk, especially concerning dependence on the Chinese market. Changes in household economics, consumer tastes, tariffs, or food safety concerns (like the recent geoduck ban) could have significant negative effects on market demand. Additionally, Alaska processors report that there are a limited number of buyers for Alaska wild product. It is unclear how these buyers will receive a farm-raised product.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 60 Estimated Construction Costs

Total Hatchery and Grow Out Facility Cost

The estimated total cost of construction of a land-based hatchery and a remote grow out facility is $6.5 million. This estimate excludes land purchase or lease and development of driveway access. Following are detailed tables of estimated costs by category.

Table 31. Estimated Total Hatchery and Grow Out Facility Cost Estimated Costs Hatchery $2,834,000 Grow out facility $3,620,000 Total cost $6,454,000 Source: R&M Engineering and McDowell Group estimates.41 Note: Figures have been rounded.

Hatchery Construction

Building Construction

Construction of the 11,750 sq. ft. hatchery facility is estimated to cost $2.8 million or roughly $241 per sq. ft. The facility would be an insulated metal building on a concrete slab. Building construction is estimated to cost about $1 million, with site development costs of about $282,000 and foundation construction costs of about $264,750. Facility construction costs include building materials; equipment and fixtures; mechanical, electrical, and plumbing systems; and labor for installation. Site development costs may be higher depending on location and terrain.

Table 32. Estimated Hatchery Design, Construction, and Equipment Costs Estimated Category Estimated Cost Cost/sq. ft. Facility construction $1,034,000 $88 Equipment and fixtures 750,000 64 Site development 282,000 24 Foundation 246,750 21 Contingency (15%) 345,000 29 Design, permit, project management 176,250 15 Total cost $2,834,000 $241 Source: R&M Engineering and McDowell Group estimates. Note: Figures have been rounded

41 R&M Engineering estimate, September 2018. Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 61 Hatchery Equipment and Fixture Cost

The total estimated cost of equipment, fixtures, and installation is $750,000. Broodstock, larval, and setting tanks are the most significant expenses, estimated at a combined $335,000. Associated costs for piping, fittings, and screens is $75,000. Labor costs for installation are estimated at $150,000, with a significant portion related to the installation of tanks, pipes, and fittings.

Table 33. Estimated Hatchery Equipment and Fixture Costs Category Estimated Cost Tanks/setting panels $335,000 Piping, fittings, screens 75,000 Heat system 50,000 Work benches/shelves/fixtures 30,000 Water pumps/filters 10,000 Office equipment/furniture 10,000 Totes 8,000 Algae gear 5,000 Microscope 2,000 Contingency 75,000 Installation labor 150,000 Total cost $750,000 Source: McDowell Group estimates. Note: Figures have been rounded.

Grow Out Facility Construction

The total cost of a grow out facility, dock, and associated equipment costs are estimated at $3.6 million. Float construction, anchors, fittings, and buoys costs are estimated at $2.1 million. Other expenses include trays and associated fittings at $674,000, dock construction ($211,000), and a tender vessel with lift system ($635,000).

Table 34. Estimated Grow Out Facility and Associated Costs Estimated Cost Floats, anchor, hardware, buoys $2,100,000 Trays and fittings 674,000 Dock 211,000 Tender vessel 600,000 Lift system 35,000 Total cost $3,620,000 Source: R&M Engineering and McDowell Group estimates. Note: Figures have been rounded.

Float Construction Timing

The following analysis of the number of floats and trays needed, and the timing of float deployment, is based on the best estimates of mortality at various stages of growth and assumed optimal out planting densities. The timeline established below is intended to inform the timing of capital requirements to construct floats and purchase trays. Once the sea cucumbers are out planted, the number of floats and trays needed will increase as

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 62 the cucumbers are thinned out to decrease stocking densities and allow for optimal growth. Actual growth and mortality rates, as well as optimal densities, could vary significantly. Actual float construction and deployment may occur sooner or later than anticipated.

COHORT #1

The first out planting of juvenile sea cucumber would occur at month 20. At initial out planting, 5.2 million ~2mm sea cucumbers will require approximately four floats holding 1,560 trays at an assumed stocking density of 1,000 per m2. Mortality is likely to be significant in the first six month of out planting and is assumed to be 65 percent by the end of month 25 resulting in 1.82 million survivors. At a reduced stocking density of 400 per m2, four floats will still accommodate the entire cohort. An assumed mortality rate of 40 percent from month 25 through 30 will leave slightly more than 1 million survivors. It is anticipated that the sea cucumbers would grow significantly from month 25 to 30 (during the warmer spring and summer months when more food is available). Stocking density at month 31 is assumed to be 75 sea cucumbers per m2 and will require a total of about 11 floats and 4,370 trays. Mortality from month 32 through month 37 is assumed to be 25 percent, leaving about 820,000 survivors. Another growth spurt is anticipated beginning in month 38. The sea cucumbers would be stocked at the final density of 8 per m2 until cohort #1 is harvested in month 45 – requiring approximately 78 floats and 30,750 trays. An estimated 780,000 sea cucumbers will survive to harvest, resulting in a survival rate of about 15 percent from out planting to harvest.

COHORT #2

Cohort #2 will be ready for out planting in month 32 and require 4 additional floats and 1,560 trays. No additional floats and trays would be needed until month 43 when cohort #2 would require a total of 11 additional floats and 4,370 trays (beyond those deployed for cohort #1). No additional floats would be required as cohort #1 is harvested in month 45, freeing up float and tray capacity as cohort #2 grows.

There will be an overlap of about one year after cohort #2 is out planted and before cohort #1 is harvested. The maximum number of floats and trays required to house both cohorts during this period is estimated to be 86 floats and 33,650 trays. This maximum number would not change with future cohorts. Table 35. Estimated Maximum Number of Floats and Trays Needed Floats Trays Cohort #1 75 29,280 Cohort #2 11 4,370 Total 86 33,650 Source: McDowell Group estimates.

Estimated Float Cost

A Ketchikan float manufacturer (Marble Construction) estimates that the cost of one float with anchors, shackles, chains, ropes, and buoys would be in the range of $24,000 to $26,000, with a mid-point estimate of $25,000. Several factors could reduce or increase this cost. For example, deeper water would result in higher anchoring system costs. Additionally, depending on the float configurations, there may be some cost savings if a single anchor is shared by two floats.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 63 Estimated Tray Cost

A commercial source of 3.33 m2 trays was not identified during this study. It is assumed that a manufacturer would custom build trays for this project because of the significant volume needed. Tray and fitting costs are estimated to be in the range of $18 to $22 each, with a mid-point cost of $20.

Dock Construction

A dock will be required at the hatchery facility as a base for the work vessel and to transfer staff to and from the grow out facility. For loading sea cucumbers for out planting, the vessel dock needs to be near the hatchery to minimize transfer times and limit mortality. The length (and cost) of the dock, gangway, and approach ultimately depends on site characteristics. A dock that has a 30’ x 8’ approach, a gangway 70’ x 8’, and a 50’ x 12’ floating dock would cost about $211,000 including freight and installation. The most significant factor effecting dock cost would be the grade of the terrain from the top landing to the float. This estimate assumes a modest grade.

Table 36. Estimated Dock Expense Description Units Quantity Unit Rate Cost Furnish wood float FOB Seattle dock SF 600 $90 $54,000 Install wood float SF 600 20 12,000 Furnish 12" diameter steel piling EA 5 4,000 20,000 Install 12" diameter steel piling EA 5 5,000 25,000 Furnish 8'x30' aluminum walkway EA 1 20,000 20,000 Set gangway and ramp LS 1 4000 4,000 8'x70' aluminum gangway EA 1 40,000 40,000 Concrete bulkhead CY 10 1,200 12,000 Freight to Ketchikan LB 25,000 0.17 4,300 Mobilization LS 1 20,000 20,000 Total cost $211,300 Source: R&M Engineering, Ketchikan. Estimate as of 9/10/2018. Figures have been rounded.

Tender Vessel

There are two options for accessing sea cucumbers for routine maintenance and harvest. A work platform can be brought to the anchored floats or the floats can be detached and brought to a stationary work barge. Either approach requires the following:

 Systems to lift and move stacks of trays.  Wash down system including pumps, hoses, and sinks or basins.  Enough deck space to work multiple stacks simultaneously, and during harvest, enough room for totes to hold harvested product.  Work tables.  Gear storage space.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 64 WORK BARGE CONSIDERATIONS

An anchored barge would provide more work and storage space than a mobile vessel. The cost of a barge will vary depending on overall size and equipment, but would likely be significantly more expensive than a mobile vessel. The barge would need a lift and a rail system to move the stacks from the floats to the work area.

Detaching the floats from the mooring system to move them back and forth from the barge would require, at a minimum, a work skiff. If the grow out facility is located some distance from the hatchery facility, a vessel stout enough to transit potentially rough waters and big enough to transport harvested sea cucumbers would also be required.

MOBILE TENDER VESSEL CONSIDERATIONS

A mobile vessel would move from float to float. Stacks of trays would be lifted on deck for cleaning and tending to the sea cucumbers. There would need to be enough work space and appropriate tanks to hold the sea cucumbers as they are thinned out and transferred from one float to the next.

The vessel would need to be robust enough to operate in Southeast’s rough waters, likely in the range of 35 to 45 feet. The vessel would need a crane with enough reach to access the middle of the float and lift the stacks on deck. The vessel would also transport work crews to and from the site, as well as harvested sea cucumbers to the processor.

Due to the likely lower overall cost, a mobile vessel appears to a better option than a stationary barge system.

The cost of an aluminum vessel could be in the range of $500,000 to $700,000 or more. Factors to consider are overall vessel size and whether to acquire a new or used vessel. The initial investment in a used vessel will be lower than a new one, however ongoing maintenance costs will likely be higher. For the purposes of estimating capital costs, a mid-point of $600,000 is used with an additional $35,000 estimated for installation of a lift system.

Other Potential Capital Expenses

Land

Due to the uncertainty regarding specific hatchery location, estimating the cost of land lease or acquisition is not possible at this time.

Driveway Construction

Depending on the location of the facility, driveway construction may be required to reach the hatchery and/or the dock from the Ketchikan road system. Due to the unknown nature of the site location, no road construction costs have been included in this study but will need to be considered once a site has been selected.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 65 Estimated Economic Impacts

Economic Impacts of Operations

Economic impacts are generally measured in terms of employment, labor income, and output, and are typically defined as either direct, indirect, or induced:

 Direct impacts: aquaculture jobs and labor income earned by workers holding those jobs. Owners and their income are included in direct impacts.  Indirect impacts: jobs and labor income generated as a result of the aquaculture operation purchasing goods and services in support of operations.  Induced impacts: jobs and labor income generated as a result of aquaculture workers and owners spending their earnings in support of their households.

The economic impact multipliers used in this analysis are McDowell Group estimates based on review of employment, wage and spending practices for existing aquaculture operations in Alaska, analysis of aquaculture’s multiplier effects in other states, review of economic impacts models such as IMPLAN, and the firm’s many years of studying local and regional economies in Alaska.

Ongoing operating impacts are based on estimated annual revenues of $830,000, once operations have normalized in year 4. Direct employment is estimated at 7 jobs with annual labor income totaling $200,000. Including multiplier effects, operation of the sea cucumber facility would account for 10 jobs and $300,000 in total annual labor income in the Ketchikan economy. Total output is estimated at $1.16 million, including all multiplier effects related to labor income and local expenditures for goods and services.

Table 37. Annual Economic Impacts of Aquaculture Operations, Year 4 Year 4 Direct employment 7 jobs Direct, indirect and induced employment 10 jobs Direct labor income $200,000 Direct, indirect and induced labor income $300,000 Direct, indirect, and induced total output $1,160,000

Economic Impacts of Construction

Facility construction will also impact the Ketchikan economy at three levels:

 Direct impacts include direct employment and wages paid to those who design and construct the facility.  Indirect impacts include employment and income generated when the contractor purchases goods and services in Ketchikan.  Induced impacts include employment and wages generated when those employed in facility construction and vendor employees spend their income in the local economy.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 66 Based on expected hatchery construction costs of $6.5 million, construction is expected to directly support 30 jobs and $2.6 million in labor income in the Ketchikan economy. Including multiplier effects, construction is expected to support a total of 45 jobs and $3.8 million in labor income. Total output is estimated at $9.6 million and includes labor income and the impacts of local expenditures for goods and services.

Table 38. One-Time Construction Impacts in Ketchikan Impact Direct employment 30 jobs Direct, indirect and induced employment 45 jobs Direct labor income $2.6 million Direct, indirect and induced labor income $3.8 million Direct, indirect, and induced total output $9.6 million

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 67 Recommendations for Future R&D

Full Lifecycle Test Grow out

Review of the literature identified key knowledge gaps in Parastichopus californicus biology which will need to be determined prior to developing a full-scale commercial operation.

Risk testing shows that the wide range of survival rates results in significant variability in potential harvest value. While research conducted by Dr. Regula-Whitefield on behalf of SARDFA was successful and showed improved outcomes over her 7-year research period, further research to narrow the range of potential survival rates is warranted.

There is also a need to determine out planted sea cucumber growth rates from month 20 through 45. To this end, we recommend a small-scale grow out study of at least one complete harvest cycle. A 45-month test grow out is estimated to cost about $35,000 to $40,000, with $30,000 to hatch and rear sea cucumbers to 2mm and $5,000 to $10,000 for out planting and monitoring. Continuing the grow out test through month 57 would also provide valuable insights or growth rates and harvestable weights over an additional season. The incremental cost for an extra year of monitoring would be negligible. Exploration of Polyculture

Polyculture and integrated multi-trophic aquaculture (IMTA) have expanded globally to decrease production waste (organic carbon and nitrogen compounds) and increase profitably of cultured species. P. californicus is well-suited for co-culturing for several reasons. As a deposit feeder, P. californicus ingests settled organic wastes, thereby decreasing potential nitrogen loading and anoxia beneath co-cultured floats, pens, and cages. Lastly, co-culturing increases food availability and growth rates, and decreases juvenile predation. In the Pacific Northwest, small scale co-culturing of P. californicus has been conducted alongside oyster, salmon, and sablefish at hatcheries and farms. Sea cucumbers have been tested in polyculture systems that include oysters, mussels, scallops, abalone, shrimp, clams, and fin fish. A Canadian study in the late 1990s used P. californicus to clean fouling from salmon net pens.42

It is likely that sea cucumbers grown in trays near oyster farms in Southeast Alaska will grow faster and perhaps reach a harvestable size sooner than sea cucumbers grown in locations providing only naturally occurring food. From a financial feasibility perspective, reducing the number of months to harvest and/or increasing weight by month 45, even slightly, could have a significant impact on the overall feasibility of rearing sea cucumbers by reducing operating expenses and/or increasing harvest weight and revenue.

Future research is recommended to better understand the potential benefits of locating sea cucumber grow out facilities near oyster farms. We recommend testing three sets of tray-grown sea cucumbers; one grown in close proximity to an oyster farm, a second set some distance from an oyster farm that would still allow for some deposition of oyster waste, and a third set at a site not influenced by the oyster farm.

42 Ahlgren, Molly O. (1998, June). Consumption and Assimilation of Salmon Net Pen Fouling Debris by the Red Sea Cucumber parastichopus californicus: Implications for Polyculture. Journal of the World Aquaculture Society Vol. 29, No. 2. Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 68 As of mid-2018, there were approximately 35 permitted oyster farms in Alaska with about two dozen located in Southeast Alaska, most in Southern Southeast. Alaska’s largest oyster farm (first permitted in 2012) is located in West Behm Canal in relatively close proximity to the Ketchikan road system. This facility would be an ideal location for a test grow out of sea cucumbers co-cultured with oysters.

Product Size and Value

The degree to which market acceptance of farm-raised sea cucumbers is less than wild caught P. californicus is unknown, as is the potential value of a smaller product. We recommend that interviews be conducted with as many sea cucumber buyers and retailers as possible to ascertain potential market acceptance and value of smaller P. californicus. A study of this nature would require close industry contacts and the use of interpreters.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 69 Information Dissemination Plan

Top-line study results have been or will be disseminated through informational presentations and a series of white papers/one-pagers which will be shared throughout Alaska and the North Pacific region. These materials will be developed for a non-scientific audience as well as regional business, resource managers, and seafood communities. Ms. Sullivan has been responsible for coordinating the dissemination of top-line study results. Correspondence through email will also be used as a primary mode for disseminating information. The following lists of activities have been or will be completed as a part of this research study:

Presentations and Communications

SARDFA SEA CUCUMBER COMMITTEE AND BOARD OF DIRECTORS (KETCHIKAN, ALASKA)

Informal presentations and informational updates were provided to SARDFA at their quarterly meetings. (September 14, 2018, February 15, 2019)

SOUTHEAST CONFERENCE (JUNEAU, ALASKA)

 Informal updates were provided by Ms. Sullivan to interested participants. No formal presentation was made. (September 12 to 14 2018)  Ms. Sullivan plans to present a study update at the fall 2019 SE Conference.

SARDFA SEA CUCUMBER AQUACULTURE WORKSHOP (KETCHIKAN, ALASKA)

 This small workshop, roughly 20 participants, has been organized to include regional resource managers, business community, and dive fisherman. A formal presentation of data findings will be provided followed by ample time for a group planning session on the next steps. Remote participation will be provided to all interested people who cannot attend in person. (May 6, 2019)

ALASKA SHELLFISH GROWERS ASSOCIATION ANNUAL MEETING (DATE AND LOCATION TBD)

 Ms. Sullivan plans to present a study update at the ASGA meeting in fall 2019.

PACIFIC COAST SHELLFISH GROWERS ASSOCIATION (PORTLAND, OREGON)

 An abstract has been submitted for a presentation at this annual conference, which is heavily attended by regional researchers and business owners. (September 17 to 19, 2019).

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 70 2019 FISH 2.0 WORKSHOP (SEATTLE, WASHINGTON) APRIL 30 – MAY 1, 2019.

 Although not within the original design of the research study, as a direct result of this study SARDFA assistant director Kate Sullivan has been accepted to participate in the 2019 Fish 2.0 workshop. Participation in this workshop is by application only and was made possible by this research study. This venue will be used as another information dissemination tool for this study to share our findings with a wider range of interested researchers, aquacultures, and businesses. Fish 2.0 is an annual global workshop of seafood innovators focusing on U.S. West Coast, Alaska, and Hawaii aquaculture. This year’s workshop is being held at the University of Washington in Seattle and will provide a forum for educating investors and industry experts about emerging innovations. This event is supported by NOAA Fisheries and Washington Sea Grant and will be used as a community-building exercise for developing aquaculture businesses and investors.

Correspondence

Dr. Whitefield has been responsible for developing a series of white papers on the scientific and economic benefits of sea cucumber aquaculture development and sharing these with the public (including those listed below). White papers will also be available as open access on the SARDFA website (www.SARDFA.org).

• Governor’s Alaska Mariculture Task Force • Alaska Shellfish Growers Association • Pacific Shellfish institute • Chignik Sea Cucumber Association • Washington Fish Gowers Association

To most effectively disseminate study results on a national and international level, a series of peer reviewed manuscripts will be developed. These materials will be focused on a scientific audience. Dr. Whitefield will be responsible for developing a peer-reviewed manuscript including a review of current sea cucumber husbandry science and an original study on the economic development of sea cucumber fisheries. This manuscript is in final stages of preparation for submission to the Journal of Aquaculture following the May 2019 SARDFA workshop.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 71 Appendix A: Market History

Sea cucumbers have long been considered a delicacy and health food in Asian countries, with China by far the world’s largest market. While mainland China is the most important in terms of consumption, the vast majority of sea cucumber is imported through Hong Kong. In addition to food consumption, sea cucumbers are also increasingly used in consumer health products, biomedical products, and pharmaceutical applications. Sea cucumbers are naturally rich in polysaccharide chondroitin sulfate, which has been shown in humans to reduce pain, aid in rebuilding cartilage and collagen, and inhibit viruses; because of these properties, sea cucumbers are now used in numerous pharmaceutical applications from nutritional supplements, collagen for cosmetics, to the primary ingredient in a new AIDS medication.

Records of sea cucumber consumption date back to the Ming Dynasty (1368-1644 BC). Today, sea cucumber meals are consumed particularly during the Chinese Spring Festivals (e.g., Hungry Ghost Festival), and on other special occasions. As a result of concerted marketing efforts by major sea cucumber producers and the increasing affluence of the Chinese middle class, sea cucumber consumption is also increasing beyond holidays and special occasions.

In Asia, there are 52 species of commercially exploited sea cucumbers and 36 more in the Pacific region.43 All of these sea cucumber species are priced and graded by size, species, and imperfections, and differences create great price variability. Sea cucumbers are traded most commonly in dried forms that vary in preparation and names by region – such as bêche-de-mer (New Guiana and surrounding island chains), trepang (Indonesian), and balat (Phillipines and Malaysia). Known as a luxury item that commands high prices, the most widely harvested/produced and valuable species of sea cucumber is Apostichopus japonicus. After A. japonicus, there is generally a significant drop-off in value and great variability in pricing for the many other sea cucumbers species, whether wild-caught or farmed.

Due to the high value of sea cucumbers, growing Chinese demand, and declining wild stocks due to over- fishing, sea cucumber aquaculture is seen as an economic opportunity to help preserve wild stocks and drive economic development in coastal communities.

43 Hamel, Jean-Francois, et al., 2008, Population Status, Fisheries and Trade of Sea Cucumbers in Temperate Areas of the Northern Hemisphere. In V. Toral-Granda, et. Al., Sea Cucumbers. A Global Review of Fisheries and Trade. FAO Fisheries and Aquaculture Technical Paper. No. 516. Rome, FAO. pp. 257-291. http://www.fao.org/tempref/docrep/fao/011/i0375e/i0375e09a.pdf Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 72 Appendix B: Commercially Important Species

Commercial Species Wild Catch and Aquaculture

There are many species of sea cucumber that are harvested or grown throughout the world. However, three species are of most interest for this study, Apostichopus japonicus, Holothuria scabra, and Cucumaria frondosa, due to market demand and their ability to be used to inform aquaculture and market development.

Apostichopus japonicus (formerly Stichopus japonicus)

Figure 7: Apostichopus japonicus A. japonicus is the highest value sea cucumber in the market, with high- quality specimens retailing for more than a thousand dollars per pound. The main production areas are northern Japan on the island of Hokkaido, southern Hokkaido and Aomori, Kansai, and Kyushu. Within China, Japanese sea cucumbers, specifically those from northern Hokkaido, are prized as the highest quality sea cucumbers available, along with those from Liaoning. All Japanese stocks are enhanced with releases of juveniles. Additional wild fisheries occur in Korea and Russia although it is unclear how much of their harvest is A. japonicus versus other species such as Cucumaria japonica (known as “kinko” in Japanese).44

The Japanese sea cucumber is a spiky cucumber with thick flesh and numerous large wart like tissue spines (podia) arranged in 5 rows. Reaching 30 cm, the average specimen harvested weighs 200g and is 20 cm in length. There are three color variations of A. japonicus—red, blue, and black—with the red variety used for pickling for local Japanese consumption, the blue variety for export to China, and the black variety for commercial use in soaps and dyes. In terms of commercial importance, the blue and red varieties are far more valuable overall than the black. In Hokkaido (apart from the very south) sea cucumbers take 3.5-4.5 years to grow to 100g and 5-6 years to grow to 200g while in southern Hokkaido and Aomori, it takes 1-2 years less to reach these size categories. However, A. japonicus harvested in northern Hokkaido carries a price premium over specimens harvested further south, with cucumbers harvested in Kyushu fetching the lowest prices.

44 Hamel, Jean-Francois, et al., 2008, Population Status, Fisheries and Trade of Sea Cucumbers in Temperate Areas of the Northern Hemisphere. In V. Toral-Granda, et. Al., Sea Cucumbers. A Global Review of Fisheries and Trade. FAO Fisheries and Aquaculture Technical Paper. No. 516. Rome, FAO. pp. 257-291. http://www.fao.org/tempref/docrep/fao/011/i0375e/i0375e09a.pdf

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 73 Holothuria scabra

Figure 8: Holothuria scabra Also known as sandfish or Garlic bread sea cucumber, H. scabra is the highest value tropical sea cucumber species and is commonly found across the tropics in the Pacific and Indian Oceans, and even into the Red Sea. Harvesting H. scrabra has been a traditional activity for centuries by coastal peoples in many parts of the world ranging from Madagascar to the Philippines. However, due to high market price harvests rapidly increased over the last 20 years. Many populations of this sea cucumber are listed on the United Nations RED LIST as endangered as many natural populations are rapidly declining. As a result of declining wild populations, aquaculture reared H. scabra is now commonly used to enhance wild fisheries (ranching) and is increasingly farmed due to its high market value.

H. scrabra are smooth, have variable colors, and reach a maximum length of 40 cm (up to 2 kg wet weight), with an average harvested length of 24 cm and wet weight of 300-580 g, depending on harvest location. The upper side is darker and often has little folds. The underside is flat and pale or white45.

Cucumaria frondosa

Figure 9: Cucumaria frondosa Also known as the orange-footed or pumpkin sea cucumber, C. frondosa is widely found across the Northern Atlantic from the Northeastern U.S. into Canada, Greenland, Iceland, and Northern Europe, including the Barents Sea and Russia. C. frondosa fisheries were slow to develop in many areas, mostly due to low market potential. Fisheries for this species began in the Gulf of Maine in 1988, off the coast of Newfoundland as early as the 1990s, and in Atlantic Canada in 1996. Unlike harvests of H. scrabra, most of C. frondosa fishing is industrialized, and conducted using dragging equipment. 46

Reaching a maximum of 50 cm in length, the average fresh length of 25-30 g with average fresh weights of 500 g in the Barents Sea and US, and 850 g in Canada. C. frondosa is not a spiky cucumber and is a low-value/high-volume species (harvested primarily by dredging/trawling) that is sold as bêche-de-mer as well as for commercial applications (e.g., powders, medicines).47

45 Hamel, J. F., Conand, C., Pawson, D. L., & Mercier, A. (2001). The sea cucumber Holothuria scabra (Holothuroidea: Echinodermata): its biology and exploitation as beche-de-mer. 46 Hamel, Jean-François, and Annie Mercier. "Early development, settlement, growth, and spatial distribution of the sea cucumber Cucumaria frondosa (Echinodermata: Holothuroidea)." Canadian Journal of Fisheries and Aquatic Sciences 53.2 (1996): 253-271. 47 Food and Agriculture Organization, FAO Species Catalogue for Fishery Purposes, No. 6, 2012. Commercially Important Sea Cucumber Species of the World, www.fao.org/docrep/017/i1918e/i1918e.pdf

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 74 Appendix C: Product Traits

Key Characteristics of Sea Cucumber Desirability and Value

In general, the species that are the most commercially desirable, and of highest value, share many characteristics like product origin, collection and grow out, length and weight, taste, condition, and product form. This section briefly discusses the key characteristics that can affect sea cucumber market value.

Product Origin

Due to recent food safety scares and negative perceptions surrounding the reliability of Chinese-produced food products (e.g., water pollution and production facility hygiene), Japanese sea cucumber products tend to be seen as a more trusted source and higher quality, thus commanding a premium price.48 Within Japan, sea cucumber from Hokkaido is most valuable, followed by Aomori, Kanto, and Kansai. Sea cucumber from Hokkaido is worth roughly double sea cucumber from Kansai. A. japonicus is generally the highest market-value sea cumber. Generally, A. japonicus increases in price the further north it is harvested.

North American sea cucumber products, consisting primarily of P. California, are considered desirable, due to low levels of water pollution and high standards for health and safety. Alaskan sea food products in general, are often prized in Asian markets as wild, natural, and sustainable.

Length and Weight

Specimen size is one of the most important factors in determining value. For any aquaculture endeavor, having a key understanding of how size impacts price is essential to maximizing return on investment. In general, there is a 300-400 g fresh weight preference for the Chinese market; however, note that A. japonicus is an obvious exception, with an average market weight of 200 g.

While data is not available for all species, H. lessoni, H. fuscogilva, and H. scabra demonstrated clear correlations between size and price. In a 2016 study, dried specimens of H. scabra that were less than 10 cm in length sold for US $213/kg in Hong Kong, whereas specimens greater than 10 cm sold for $570/kg.

For North American species, this trend also held true. In the case of Holothuria mexicana, 10 cm long (dried) specimens yielded half the value of 14-cm specimens. For Isostichopus badionotus, 10-cm long dried specimens were double the value of 7 cm specimens. Both of these species are considered high-value, with the average price of I. badionotus being $284/kg in Hong Kong.49 The average weight of P. californicus harvested in Alaska is about 200g. However, nearly half of the harvest averages less than 200g, with 10 percent less than 135g.

48 It is unclear if Fukushima has had any impact on the brand value of Japanese sea cucumbers. Note also that many Japanese sea cucumber are sold as product from Liaoning. 49 Purcell, Steven W., et al., 2018. Market Price Trends of Latin American and Caribbean Sea Cucumbers Inform Fisheries Management, Marine Science 17, 127-132 Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 75 Physical Characteristics

Traits such as “spikeyness” play a significant role in value. A. japonicus from Hokkaido command a premium over their southern counterparts in part due to their having more rows of thicker spikes than in Aomori and Kansai. Some of this may be due to selective breeding, which should be evaluated as a possible strategy to maximize value of any sea cucumber aquaculture initiative.50

In North American, there are two primary species of sea cucumbers collected, P. californicus and Cucumaria frondosa. Unlike Cucumaria frondosa, P. californicus possess thick spins similar to A. japonicus, which aids in its desirability in Asian markets.

Taste

Sea cucumbers are often considered tasteless and are prized for their texture and ability to absorb other flavors. Texturally, sea cucumbers are a combination of rubbery and gelatinous, with different species having different mouth feels. In Chinese culture, there are several unique words for the texture of sea cucumber, which do not directly translate into English. Certain species are used for certain dishes. While sea cucumbers are traditionally thought of as a food for special occasions, convenient preparation as well as the growth of Chinese consumer affluence has made sea cucumber much more attainable, with national brands that conduct retail promotions, marketing campaigns, and promote consumption growth.51

The sea cucumbers from the U.S. are wild caught so antidotal stories from consumers’ state they think that they taste much better than sea cucumbers from China which are all farmed. P. californicus have unique nutritional properties, which aid their market values and in taste. Muscle bands contain a considerable amount of high-quality marine protein, while the body wall has a higher percent of lipids than some other species. Longitudinal muscle bands have high levels of zinc compared to other seafood. Muscle bands also have a high proportion of nutritionally important long-chain n-3 fatty acids, and exceptionally high content of eicosapentaenoic acid (20:5n-3).52

Product Forms

Sea cucumbers sold at retail have historically been sold in the dried, non-perishable bêche-de-mer product form. While this product form is still readily available, consumers may now purchase their favorite dried sea

50 Brown, Nicholas, et al., 2015. Sea Cucumber Farming in Japan, Echinoderm Aquaculture, Chapter 13, John Wiley & Sons 51 USDA Foreign Agricultural Service, Global Agricultural Information Network, Beijing Agricultural Trade Office, 2012. Sea Cucumber Market Brief, https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Sea%20Cucumber%20Market%20Brief_Beijing%20ATO_China%20- %20Peoples%20Republic%20of_12-10-2012.pdf 52 Bechtel, P. J., A. C. M. Oliveira, N. Demir, and S. Smiley. 2013. Chemical composition of the giant red sea cucumber, Parastichopus californicus, commercially harvested in Alaska. Food Science & Nutrition 1:63-73. Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 76 cucumbers in gift boxes and other modern packaging that conveys the value of the product via the relative luxury of the packaging. Due to the time involved with rehydrating dried sea cucumber, frozen, once-cooked sea cucumbers are now commonly found in bulk containers where individual specimens may be selected by the consumer as well as in vacuum-packed bags. Additionally, sea cucumbers are sold in bulk packaging with each individual sea cucumber vacuum packed inside.

Though it is unclear what the difference is, Japan-produced sea cucumbers are reported to rehydrate faster and require less or no salting, thereby increasing their price. Nevertheless, salted, half-dried, and frozen sea

cucumbers receive a higher value than those that are eviscerate d, boiled, and frozen. Salting is also the preferred processing method because it is more efficient and allows for larger batches of sea cucumbers to be processed at the same time.5354

Other products commonly found are extracts of sea cucumbers and are seen as health items. Some examples o f these include sea cucumber water/tonic (believed to assist in healing cuts, increase blood flow, promote good health); sea cucumber jelly; sea cucumber soap; and other emulsions and essences. These products are consumed not only in China but across Chinese communities around the world.

The majority of P. californicus harvested in Alaska are sold as frozen uncooked meat, and cooked, salted skins. A smaller amount is sold fresh or whole cooked. It is unknown if Alaskan sea cucumbers are being used for other food or pharmaceutical products. 55

53 Brown, Nicholas, et al., 2015. Sea Cucumber Farming in Japan, Echinoderm Aquaculture, Chapter 13, John Wiley & Sons 54The Sea Cucumber Apostichopus Japonicus History, Biology, and Aquaculture. Yang, Hamel, Mercier, Development of Aquaculture and Fisheries Science, Vol. 33, 2015 55Jeffery Green, Operations Manager, EC Phillips & Sons, telephone interview, November 2018. Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 77 Appendix D: North American Aquaculture Efforts

Aquaculture Development in the U.S. and Canada

Following are brief reports on the state of sea cucumber aquaculture in the U.S. and Canada.

Washington State

The Washington State Department of Natural Resources (DNR) along with Western Washington University (WWU) and the Puget Sound Restoration Fund (PSR) are undertaking a two-year feasibility investigation of IMTA in Washington using mussels, sea cucumbers (P. californicus), and sugar kelp (Saccharina latissima). They expect to start small scale experiments in the fall of 2018 and field experiments in 2019.56

The Pacific Shellfish Institute (PSI), along with the University of Washington, SARDFA, Alutiiq Pride Shellfish Hatchery, Taylor Shellfish Farms, the Ken Chew Center, and others began research in 2016 under a Saltonstall- Kennedy grant. The study is investigating population genetics, hatchery, and nursery techniques; mortality; growth weights; stocking density; and water chemistry related to potential aquaculture of P. californicus alongside existing shellfish farms in Washington and Alaska.57,58 As part of this research grant, this group has been successful in hatching and rearing P. californicus, but have not yet out planted hatched sea cucumbers. An 18-month grow out study was conducted using wild stock. Final growth rate data has been collected but not tabulated as of September 2018.59

Northern Atlantic

Research into IMTA is ongoing, with only limited research done into experimentally farming sea cucumbers (Cucumaria frondosa) alongside kelp, mussels, and Atlantic salmon. One study examined the viability of C. frondosa as an aquaculture species from Maine to Atlantic Canada. Since these sea cucumbers are suspension feeders (not deposit feeders like P. californicus) they might be a valuable aid in enhancing suspended water quality, as well as biofouling, in IMTA sites, but they are slow growing and have a relatively low high market value.60

Similar findings were noted in the Maine Sea Grant report that examined current sea cucumber (Apostichopus japonicus) hatchery techniques in Korea and the potential in applying those methods in the raising of C.

56 Washington State Department of Natural Resources. "Integrated Multi-Trophic Aquaculture (IMTA)." https://www.dnr.wa.gov/sites/default/files/publications/aqr_aamt_imta.pdf?co15c. 57 "Culturing the giant red sea cucumber for U.S. export". 2018. Pacific Shellfish Institute. http://www.pacshell.org/seacucumber.asp. 58 Saltonstall-Kennedy project # NA15NMF4270322, Progress report 11/30/2016. 59 Telephone interviews with Ryan Crim and Andy Suhrbier September 2018. 60 Nelson, Emily J., Bruce A. MacDonald, and Shawn M. C. Robinson. 2012. "A Review of the Northern Sea Cucumber Cucumaria Frondosa (Gunnerus, 1767) as a Potential Aquaculture Species." Reviews in Fisheries Science 20 (4): 212-219. doi:10.1080/10641262.2012.719043. https://doi.org/10.1080/10641262.2012.719043. Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 78 frondosa in Maine and Atlantic Canada. The report anticipated five to ten years of research and field testing to develop practical techniques in the Northern Atlantic region.61

Research has also been conducted at Memorial University of Newfoundland in the Department of Ocean Sciences exploring C. frondosa as an aquaculture species. One project examined holding conditions to optimize transit of live hatchery broodstock and determined that iced seawater (equal parts seawater and freshwater flake ice) resulted in almost no deterioration of sea cucumbers after 48 hours in cold storage. After 30 days in flow-through recovery tanks, the same sea cucumbers had a 100 percent survival rate. This could have implications for transporting not only sea cucumber seed, but also improve the shipping quality of harvested sea cucumbers.62

British Columbia

A promising study funded in part by the Fisheries and Oceans Canada, Aquaculture Collaborative Research and Development Program, published in 2008, examined the growth of co-cultured P. californicus alongside Pacific oysters (Crassostrea gigas) at two oyster farms in the Strait of Georgia. Sea cucumbers were suspended in trays under oyster floats and monitored over the course of a year. Results showed that sediments were significantly lower in trays with sea cucumbers than in empty control trays. Additionally, the sea cucumbers showed positive growth rates in the timeframe (indicating the oyster culture sediment was a good food source) but did not reach market size in the monitoring year. This study also reported a 100 percent survival rate of the monitored sea cucumbers, supporting feasibility of sea cucumber aquaculture.63

The results of a year-long study published in 2013 concluded that co-culturing P. californicus with black cod (Anoplopoma fimbria) by suspension under finfish net pens not only protected the sea cucumbers from bottom- predators, but the co-located sea cucumbers also grew significantly faster that the bottom-dwelling control group kept away from the IMTA site. The study also determined that sea cucumbers had the potential to reduce waste from fish farms while providing a valuable cash crop.64 Additional research examined stocking densities of P. californicus to maximize hatchery production65.

Another study in 2014, conducted mathematical modelling to examine the role of sea cucumbers and other deposit feeders at IMTA sites. This study focused on aquaculture sites in British Columbia and concluded that

61 Pietrak, M., J.K. Kim, S. Redmond, Y.D. Kim, C. Yarish, and I. Bricknell. 2014. Culture of Sea Cucumbers in Korea: A guide to Korean methods and the local sea cucumber in the Northeast U.S. Orono, ME: Maine Sea Grant College Program. seagrant.umaine.edu/extension/korea-aquaculture 62Lainetti Gianasi, Bruno. 2015. "Fisheries and Aquaculture Related Biometrics of the Sea Cucumber Cucumaria Frondosa: Tagging, Resistance to Stress and Influence of Diet on Lipid Composition, "Memorial University of Newfoundland. http://research.library.mun.ca/9791/. 63 Paltzat, D. L., C. M. Pearce, P. A. Barnes, and R. S. McKinley. 2008. Growth and Production of California Sea Cucumbers (Parastichopus Californicus Stimpson) Co-Cultured with Suspended Pacific Oysters (Crassostrea Gigas Thunberg). Vol. 275. doi://doi.org/10.1016/j.aquaculture.2007.12.014. http://www.sciencedirect.com/science/article/pii/S0044848607012070. 64 Hannah, L., C. M. Pearce, and S. F. Cross. 2013. Growth and Survival of California Sea Cucumbers (Parastichopus Californicus) Cultivated with Sablefish (Anoplopoma Fimbria) at an Integrated Multi-Trophic Aquaculture Site. Vol. 406-407. doi://doi.org/10.1016/j.aquaculture.2013.04.022.http://www.sciencedirect.com/science/article/pii/S0044848613001993. 65 Yichao, Ren, Liu Wenshan, and M. Pearce Christopher. 2018. "Effects of Stocking Density, Ration and Temperature on Growth, Survival and Metamorphosis of Auricularia Larvae of the California Sea Cucumber, Parastichopus Californicus." Aquaculture Research 49 (1): 517- 525. doi:10.1111/are.13482.https://doi.org/10.1111/are.13482. Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 79 not only can sea cucumbers contribute to the financial success of IMTA systems, but aid in preventing build of waste from finish and other species.66

The Canadian Science Advisory Secretariat issued interim advice for culturing P. californicus sea cucumbers in British Columbia in 2014. The report cites the increase in interest in sea cucumber aquaculture in British Columbia, as evidenced by seven hatchery sites licensed by DFO.67 The DFO has hatched and reared P. californicus but to date has not conducted any out planting studies. Reportedly, several farmers are actively growing wild stock alongside oyster floats.68 There are currently fourteen shellfish license holders authorized for sea cucumber harvesting in British Columbia.69 The recommendations of the report include mitigation measures including hatchery and breeding controls, monitoring genetic diversity, and reporting on disease and mortality incidences to reduce risks to wild populations of sea cucumbers.40

The Aquaculture Collaborative Research and Development Program (ACRDP), a DFO initiative designed to promote collaboration between the government and industry in conducting research and development related to aquaculture across Canada. Their broad objectives are aquatic species health and environmental sustainability, Research priorities for 2018-2019 include pest and pathogen management for aquaculture, ecosystem interactions, and species diversity and sustainability. The ACRDP also publishes the Canadian Aquaculture R&D Review every two years, in conjunction with the Aquaculture Association of Canada.70

The Canadian Integrated Multi-Trophic Aquaculture Network (CIMTAN), a division of the Natural Sciences and Engineering Research Council (NSERC) of Canada, formed a network of universities, labs, researchers, and DFO offices to conduct research into developing sustainable aquaculture practices. Active from 2010-2017, the network shared research and information across Canada, and published articles about best practices for IMTA including: systems design, ecological impacts, economic viability, and regulations.71

Coastal First Nations

In the Haida Gwaii Marine Plan, published in 2015, the Marine Planning Partnership Initiative lays out the strategic plan for marine economic development in Haida Gwaii, including shellfish aquaculture management. The report mentions proposed sea cucumbers aquaculture projects. Farming sea cucumbers is listed as having potential economic and employment benefits for the area.72

66 Cubillo, A.M., J.G. Ferreira, S.M.C. Robinson, C.M. Pearce, R.A. Corner, and J. Johansen. 2016. "Role Of Deposit Feeders In Integrated Multi-Trophic Aquaculture — A Model Analysis". Aquaculture 453: 54-66. doi:10.1016/j.aquaculture.2015.11.031. 67 DFO. 2014. Interim Advice for the Development of Sea Cucumber (Parastichopus californicus) Aquaculture in British Columbia. DFO Can. Sci. Advis. Sec. Sci. Resp. 2014/005. 68 Telephone interviews with Dr. Chris Peacre, DFO, Canada, and Troy Bouchard, Viking Bay Venutures, Quadra Island BC Canada, September 2018. 69 Fisheries and Oceans Canada. Shellfish BC aquaculture license holders (for processors). "Current Valid British Columbia Aquaculture Licence Holders - Open Government Portal". 2018. Open.Canada.Ca. https://open.canada.ca/data/en/dataset/522d1b67-30d8-4a34-9b62- 5da99b1035e6. 70 Aquaculture Collaborative Research and Development Program (ACRDP). 2018. Fisheries and Oceans Canada. http://www.dfo- mpo.gc.ca/aquaculture/acrdp-pcrda/index-eng.htm. 71 "NSERC Canadian Integrated Multi-Trophic Aquaculture Network". 2011. CIMTAN. http://www.cimtan.ca/index.php. 72 Marine Planning Partnership Initiative. 2015. Haida Gwaii Marine Plan. http://mappocean.org/haida-gwaii/haida-gwaii-marine-plan/ Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 80 Appendix E: Growth and Harvest Cycles

Estimated Growth and Harvest Cycles

A timeline for sea cucumber growth from hatch to harvest was developed in order to understand hatchery tank space requirements and the total number of floats and trays needed. The facility will need to house two cohorts at different stages of development simultaneously. There will be a 4-month overlap in the hatchery where the first cohort is nearing the end of the setting stage and the second cohort has reached the end of the larval stage and is ready to be placed in setting tanks which will require additional tanks. Float and tray deployment will also be affected by 13-month overlap, requiring additional floats and trays.

Based on research conducted for this study it is assumed that a single cohort of sea cucumbers will take about 45 months from the harvest of broodstock to the harvest of marketable size adults. Broodstock harvest will occur in month 1, hatching and larval development in months 2-3, setting in months 4-19, and planting cohort months 20-44 and harvest in month 45.

Harvest in month 45 (November) would align the harvest of tray-grown sea cumbers with the winding down of wild harvest in November. At harvest, the tray-grown sea cucumbers would be dewatered and sold to processors. During the wild harvest (primarily October through mid-November) processors report being at capacity keeping up with harvest volume. One processor in Juneau works full crews for two, 12-hour shifts, for about 6 weeks in order to process the sea cucumbers in a timely manner. Harvesting tray-raised sea cucumbers after the bulk of the wild harvest has been processed would not impinge on an already busy time for processors and would allow them to extend their season with skilled crews readily available. There may be some potential to harvest tray-grown sea cucumbers at other times of the year in response to seasonal demand from buyers It is beyond the scope of this study to investigate potential markets at other times of the year but may warrant further research in the future.

A second cohort would be hatched in month 13/14 and remain in the hatchery through month 31. The sea cucumbers would be out planted from month 32 through 56, with harvest in month 57. Table 39. Sea Cucumber Production and Harvest Schedule, Cohorts 1 and 2, Month 1-Month 57 Capture Larval/Juvenile

Broodstock/Hatch Stage Out Plant Harvest Cohort 1 Month 1/2 Month 3‐19 Month 20‐44 Month 45 Cohort 2 Month 13/14 Month 14‐31 Month 32‐56 Month 57 Source: McDowell Group and study team estimates.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 81 Appendix F: Increasing Facility Size and Production

Following are preliminary estimates of a facility scaled twice and four times the size of the facility detailed in this study.

Doubled Production

A preliminary analysis of a facility capable of producing twice as many harvestable sea cucumbers (1.56 million) as the size of the facility detailed in this study, shows that the hatchery facility would need to be increased to roughly 18,000 sq. ft., an increase of about 54 percent. The grow out facility would double to about 67,000 trays and 170 floats and cover 50 to 60 acres.

In the mid-case scenario, a facility this size could generate about $1.66 million in revenue in year 4. Expenses adjusted for this size operation are estimated be about $663,000. Annual net income would be about $1 million.

Facility construction costs for this size facility are estimated at $11.7 million.

Estimated cash reserves of $2.5 million would be needed to cover operating expenses from start up through the first harvest near the end of year 4.

Financing for 10 years, at a rate of 8 percent, indicates the facility could support debt service on roughly $7 million in loans at break even.

Quadrupled Production

A preliminary analysis of a facility capable of producing four times as many harvestable sea cucumbers (3.1 million) would require a 30,000 sq. ft. hatchery facility, 134,000 trays, 340 floats, and cover about 100 to 120 acres.

The facility could generate revenue of about $3.3 million in the mid-case scenario with expenses of about $1.2 and net income in year 4 of $2.1 million.

Hatchery and facility construction costs slightly less than $20 million.

Estimated cash reserves of $4.4 million would be needed to cover operating expenses from start up through the first harvest near the end of year 4.

Financing for 10 years, at a rate of 8 percent, indicates the facility could support debt service on roughly $15 million in loans at break even.

While the study team has not identified any potential biological or operational issues related to scaled-up operations, further detailed analysis should to be conducted to better understand potential issues and economies of scale related to hatchery or grow out operation scaled at two, four, or more times the size of the facility detailed in this study.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 82 Appendix G: Data Sources and Cited Works

Books

Brown, N. and E., Eddy (2015). Echinoderm Aquaculture. Part III Sea Cucumber Aquaculture. John Wiley & Sons Aquaculture Research. 289.

Yang, Y. et al. (2015). The sea cucumber Apostichopus japonicus: history, biology and aquaculture. Academic Press. 39.

Business Statements and Pictorial References

Alaska Department of Fish and Game. (2017). Southeast Alaska Sea Cucumber Commercial Fishery Status Map I, II, III, & IV. Retrieved from www.adfg.alaska.gov/.

Alaska Department of Fish and Game. (2017). Southeast Alaska Sea Cucumber Commercial Fishery Area Status Map Fishery Area Rotation. Retrieved from www.adfg.alaska.gov/static/fishing/PDFs/ commercial/seacucumber_fisherystatusmap _rotation_south.pdf.

Alutiiq Pride Shellfish Hatchery. (2018). Basic Management Plan. a division of Chugach Regional Resources Division (CRRC).

Canadian Aquaculture Systems Inc. (2012). Financial Feasibility of Geoduck Aquaculture in British Columbia. Aquaculture Policy Branch, Fisheries & Aquaculture Management Directorate, Fisheries and Oceans Canada, Ottawa. Retrieved from http://www.manateeholdings.com/wp- content/uploads/2014/05/Feasibility-of-Geoduck-Aquaculture-BC.pdf.

Gourmet Ocean Products Inc. (2014). Business Overview. Retrieved from www.gourmetoceanproducts.com/business-overview/.

Marble Seafoods. (2017). Operations, Business & Marketing Plan.

Oceans Alaska. (2018). Financial Statements.

Oceans Alaska. (2017). Statements of Activities and Changes in Net Assets.

Oceans Alaska. (2014). Mariculture Shellfish Hatchery Schematic Design Plan Summary. R&M Engineering.

Conferences and Presentation Abstracts

Bruckner, A. (2004). Proceedings of the CITES workshop on the conservation of sea cucumbers in the families Holothuriidae and Stichopodidae. International Union for Conservation of Nature. 1-8.

Cheney, D., et al. (2016). Development of Red Sea Cucumber (parastichopus californicus). Poly-aquaculture for Nutrient Uptake and Seafood Export. Saltonstall-Kennedy Program, National Marine Fisheries Service. (grant no. #2004246). Presented at World of Aquaculture Society Annual conference, Las Vegas 2016.

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 83 Kingzett, B. (n.d.). Production Trends and Best Practices for Better Oyster Culture. Blue Revolution Consulting Group. Retrieved from seagrant.uaf.edu/map/aquaculture/shellfish/ resentations/Alaska%20shellfish%20farming%20production%20trends.pdf

Dissertations and Thesis

Lainetti-Gianasi, B. (2015). Fisheries and Aquaculture Related Biometrics of the Sea Cucumber cucumaria frondosa: Tagging, Resistance to Stress and Influence of Diet on Lipid Consumption. Memorial University of Newfoundland. Retrieved from research.library.mun.ca/9791/.

Regula-Whitefield, C. (2016). Effects of Variable Maternal Diet Conditions on the Reproductive Success and Development of the California Sea Cucumber (parastichopus californicus). University of Alaska Fairbanks, PhD dissertation. Retrieved from scholarworks.alaska.edu/handle/11122/7308

Grants and Proposals

Chen, Y., et al. (2003). A Preliminary Study of the Marine Sea Cucumber (Cucumaria Frondosa) Fishery. Northeast Consortium Program Development. (grant no. 03-686).

Cheney, D., et al. (2015). Culturing the Giant Red Sea Cucumber for U.S. Export. Saltonstall-Kennedy Program, National Marine Fisheries Service. (grant no. 2004246).

Decker, J. (2009). Proposal to Lead Sea Cucumber Enhancement Project. Prepared for Southeast Alaska Regional Dive Fisheries Association.

Pacific Shellfish Institute. (2014). Parastichopus californicus aquaculture development. Saltonstall-Kennedy program (grant no. 2004246).

Correspondence

(Telephone interview unless otherwise stated)

Bouchard, T. (September 2018). Viking Bay Adventures Quadra Island BC Canada. Oyster farmer.

Cougan, K. (January 2019). Alaska Department of Natural Resources. Aquatic Farm Coordinator.

Crim, R. (September 2018). Ken Chew Center. Sea cucumber researcher.

Donnellan, M. (November 2018). Alaska Department of Fish and Game, Ketchikan. Regional Dive Project Leader.

Eckert, G. (November 2011). University of Alaska Fairbanks, College of Fisheries and Ocean Sciences Fisheries Division. Associate Director for Research – Alaska Sea Grant. (email)

Eckholm, C. (April 2018). Oceans Alaska. Hatchery operations.

Erickson, J. (October 2018). Alaska Glacier Seafoods. Sea cucumber processor. (email follow-up December 2018)

Feasibility Study for an Alaska Sea Cucumber Aquaculture Facility McDowell Group  Page 84 Erickson, J. (October 4, 2018 and October 10, 2018). Alaska Glacier Seafoods. On-site visit to observe sea cucumber processing - Acquired weights and measurements. Sea cucumber processor.

Green, J. (November 2018). EC Phillips & Sons sea cucumber processors, Ketchikan. Operations Manager.

Harney, R. (June 2018). Ketchikan Gateway Borough. Planning Director.

Morin, K. (June 2018). Alaska Shellfish Hatchery. 30-year commercial diver. (Initial email May 2018)

Pearce, C. (November 2018). Department of Fisheries Canada. Sea cucumber researcher.

Pring-Ham, C. (June 2018, October 2018). Alaska Department of Fish and Game. Aquatic Farming Coordinator.

Raybung, S. (June 2018). Alaska Department of Fish and Game. Director, Mariculture Program.

Sande, T. (numerous emails and telephone interviews April 2018-January 2019). R&M Engineering, Marble Construction, Marble Seafood. General contractor and aquaculture production manager.

Suhrbier, A. (September 2018). Pacific Shellfish Institute. Senior biologist.

Thomas, R. (November 2018). Gateway Seafoods, Ketchikan. Sea cucumber processor.

Walker, S. (November 2018). Alaska Department of Fish and Game, Ketchikan. Area biologist.

News and Articles

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5m Editor. (2010, May 18). New Hatchery for Sea Cucumber At SEAFDEC. The Fish Site. Retrieved from thefishsite.com/articles/new-hatchery-for-sea-cucumber-at-seafdec.

5m Editor. (2011, February 17). Sea Cucumber Aquaculture to Deliver Real Benefits. The Fish Site. Retrieved from thefishsite.com/articles/sea-cucumber-aquaculture-to-deliver-real-benefits.

5m Editor. (2011, April 14). Vertical Integration Key to Sea Cucumber Success. The Fish Site. Retrieved from thefishsite.com/articles/vertical-integration-key-to-sea-cucumber-success.

5m Editor. (2011, May 20). Conapesca Announces Sea Cucumber Fishing Ban. The Fish Site. Retrieved from thefishsite.com/articles/conapesca-announces-sea-cucumber-fishing-ban.

5m Editor. (2016, April 1). Sea Cucumbers Raise Red Flags for Threatened Global Fisheries. The Fish Site. Retrieved from thefishsite.com/articles/sea-cucumbers-raise-red-flags-for-threatened-global- fisheries.

5m Editor. (2016, December 28). First Evidence that Deep-Sea Animals Are Ingesting Microplastics. The Fish Site. Retrieved from thefishsite.com/articles/first-evidence-that-deepsea-animals-are-ingesting- microplastics.

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Andrews, S. (2016, September 27). ACCH2016: Diversification Necessary for Canadian Aquaculture Development to be Successful. The Fish Site. Retrieved from thefishsite.com/articles/acch2016- diversification-necessary-for-canadian-aquaculture-development-to-be-successful.

Banrie. (2012, October 8). How to Farm Japanese Sea Cucumber. The Fish Site. Retrieved from thefishsite.com/articles/cultured-aquatic-species-japanese-sea-cucumber.

Chen, M. (2012, December 10). Sea Cucumber Market Brief. Global Agricultural Information Network, Beijing Agricultural Trade Office. Retrieved from www.globaltrade.net/international-trade-import- exports/f/market-research/pdf/China/Agriculture-Animal-Husbandry-Hunting-Fishing-Sea- Cucumber-Market-Brief.html.

Davis, B., et al. (2018, June 15). China Issues Retaliatory Tariffs as Trade Fight Heats Up. Wall Street Journal. Retrieved from www.wsj.com/articles/white-house-announces-tariffs-on-50-billion-of-goods-from- china-1529065534.

Food and Agriculture Organization. (2018). Globefish Highlights: A Quarterly Update on World Seafood Markets. Retrieved from www.fao.org/3/BU674EN/bu674en.pdf.

Food and Agriculture Organization. (2018). Globefish Highlights. Retrieved from www.fao.org/3/I8626EN/i8626en.pdf.

Haris, C. (2013, March 18). Aquaculture Hatchery Completes C$2 Million Expansion. The Fish Site. Retrieved from thefishsite.com/articles/aquaculture-hatchery-completes-c2-million-expansion.

Jaynes, B. (2016, August 2). Sea Cucumber Aquaculture Project Researches Ways to Make Money from Sustainable Farming. Kaselehlie Press. Retrieved from www.kpress.info/index.php?option=com_content&view=article&id=365:sea-cucumber-aquaculture- project-researches-ways-to-make-money-from-sustainable-farming&catid=8&Itemid=103.

Jiji Press. (2018, June 15). Japan to Create Catch Certificate System for Sea Cucumber. The Daily Manila Shimbun. Retrieved from manila-shimbun.ph/japan_news/exclusive-japan-to-create-catch-certificate- system-for-sea-cucumber.html.

Kai, G. (2018, August 6). High Temperature Leaves Sea Cucumbers Dead, Farmers Devastated. China Daily. Retrieved from www.chinadaily.com.cn/a/201808/06/WS5b67d0d0a3100d951b8c8d5f.html.

Lei, L. (2018, October 7). Heat Wave Devastates Sea Cucumber Farmers. China Daily. Retrieved from www.chinadaily.com.cn/a/201808/07/WS5b68f137a3100d951b8c8f2c.html.

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Mayol, T. (2013, June 13). Farming Sea Cucumbers in Madagascar. For Economic Hope and Conservation. National. Retrieved from blog.nationalgeographic.org/2013/06/13/farming-sea-cucumbers-in- madagascar-for-economic-hope-and-conservation/.

Osaka Action Agenda Staff. (2018, August 6). China Announces Supplemental Tariffs in Response to U.S. 301 Tariffs. USDA Foreign Agricultural Service, Global Agricultural Information Network Report. Retrieved from gain.fas.usda.gov/Recent%20GAIN%20Publications/China%20Announces%20Supplemental% 20Tariffs%20in%20Response%20to%20U.S.%20301%20Tariffs_Beijing_China%20- %20Peoples%20Republic%20of_8-6-2018.pdf.

Schachar, N. (2018, October 8). How a Seafloor Blob Became Mexico’s ‘Black Gold.’ The New York Times. Retrieved from www.nytimes.com/2018/10/05/science/sea-cucumbers-mexico.html.

Towers, L. (2012, June 3). China Aquaculture Industry Report, 2011-2012. The Fish Site. Retrieved from thefishsite.com/articles/china-aquaculture-industry-report-20112012.

Towers, L. (2013, May 15). National Prawn Company Makes Advances in Sea Cucumber Aquaculture. The Fish Site. Retrieved from thefishsite.com/articles/national-prawn-company-makes-advances-in-sea- cucumber-aquaculture.

Towers, L. (2014, June 23). New Technique Developed to Measure Sea Cucumber. The Fish Site. Retrieved from thefishsite.com/articles/new-technique-developed-to-measure-sea-cucumber.

Towers, L. (2014, December 5). Sea Cucumber Hatchery Project Expands to Fiji. The Fish Site. Retrieved from thefishsite.com/articles/sea-cucumber-hatchery-project-expands-to-fiji.

Towers, L. (2014, December 11). Sea Cucumber Farmers Demand Compensation Over 2011 Oil Spill. The Fish Site. Retrieved from thefishsite.com/articles/sea-cucumber-farmers-demand-compensation-over- 2011-oil-spill.

Towers, L. (2016, December 13). Chinese Investors Eye $200 Million Russian Seafood Aquaculture Project. The Fish Site. Retrieved from thefishsite.com/articles/chinese-investors-eye-200-million-russian-seafood- aquaculture-project.

Walker, T. (2017, June 27). Efforts Underway to Farm Sea Cucumbers. Aquaculture North America. Retrieved from www.aquaculturenorthamerica.com/research/efforts-underway-to-farm-sea-cucumbers-1435.

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Technical Reports

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Hebert, K. (2017). 2018 Report to the Board of Fisheries, Miscellaneous Shellfish Fisheries. Alaska Department of Fish and Game. Fishery Management Report No. 17-59. Retrieved from www.akleg.gov/basis/get_documents.asp?session=30&docid=42262.

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