### 1 Project No.: 0172.08.030.033

Project Name: Alaska Seafood

TELEPHONE CALL RECORD Date: 12

- 16

- 2010 Time: 2

– 3 PM EST

Call placed by: Betsy Bicknell, ERG Contact Name: Peter Stitzel

Company Name: Sitka Meal, Oil, and Technology

Phone No.: 206

- 781

- 7219

GENERAL SUBJECT : Plans for byproduct recovery plant in Sitka Alaska



### TOPICS DISCUSSED AND ACTION TAKEN

Peter Stitzel contacted Don Anderson in September 2010 to express his concerns about the how discharge limits are applied to Alaska seafood processing facilities. He noted that at present, processors in the same processing center have different discharge requirements. For example, in Sitka

, Sitka Sound Seafoods is required to haul some

of its wast e for off shore disposal while Silver Bay Seafoods can discharge all of its waste through the City/Borough

of Sitka Sawmill Cove Industrial P ark outfall. This discrepancy leads to an advantage to Silver Bay Seafoods, who

have lower waste management costs.

In his September 2010 email Mr. Stitzel wrote, “ Were the discharge regulations applied across the board, the processors would work together to combine volumes and finances to build and operate [byproducts] plants... ” Mr.

Stitzel further explained that hi s company, Sitka Meal, Oil, and Gelatin , is developing a new seafood byproducts plant for Sitka, Alaska. He offered to answer EPA questions about the technology and his business plans. I called him in response to this request.

Mr. Stitzel explained that he is working with Peter Nicklason and others from NOAA Fisheries Northwest Science Center to commercialize a seafood waste stabilization process they call the “Montlake Process.” There are no patents on this process. Alaska Fisheries Development Foundation ( AFDF) has funded Stitzel and Nicklason’s work to advance the technology. The key element of the commercialization scheme is stabilizing the waste using a mild acid treatment and ship ping it to a centr ally located processing facility. Fish waste stabilizati on consists of grinding the waste and adding formic or other food grade acid. The stabilized waste can be stored for up to three months before further processing, though processing within 30 to 45 days gives the best quality product.

Stabilization allows f or equalization of the waste volume that flows into the byproducts recovery process. Alaska seafood harvesting is characterized by short (1

– 3 month) seasons of high produc tion and longer periods of low producti on . Stabilization means that waste generated during high production periods can be stored and processed during periods of lower production. Also, waste generated during periods of very low production can be stored until sufficient waste is accumulated to run the byproducts plant.

In addition to equalization of the waste flow, stabilization will permit shipment of waste to central locations from processing centers that are not large enough to support a commercial byproducts plant. Mr. Stitzel explained that the barge lines that serv e Alaska fishing areas (including southeast, central, Prince William Sound, and Bristol Bay) ship liquid materials in “ISO tanks 1

1 An ISO Tank is a term used to describe a steel "pill shaped" container within a standard ISO (International Standards Organization) frame. 20' x 8' x 8'6" is the most standard size found within the US. This tank container is used to haul up to 6,600 gal or 25,000L of bulk liquid. The products can range from food

- grade products such as orange juice or wine to haz ardous chemicals such as hydrochloric acid. From Answers.com .” According to Mr. Stitzel, stabilized waste could be shipped from Ocean

### 2 Beauty’s plants in Petersburg and Excursion Inlet (near Juneau) for significantly less than 10 ce nts per pound, a much lower cost than disposing of the waste with a “gut boat, ” which he estimated at 5 cents per pound. Mr. Stitzel has been trying to obtain funding for a new byproducts plant in Sitka 2 from the Alaska Industrial Development and Export Authority (AIDEA). If AIDEA decides to go forward with the project, they will build and own the facility and Sitka Meal, Oil, and Gelatin will operate it

. The c ost of the plant is estima ted at 8 to 10 million dollars. Mr. Stitzel has been unable to get Silver Bay Seafoods to agree to participate in the byproducts plant because they can discharge their waste through the Saw Mill Cove Industrial Park outfall at bas ically no cost. The Saw Mill Cove outfall is not near the airport and is not the cause of the bird

- st rike problem. I t is caused by the waste from the other two plants. According to Mr. Stitzel , Silver Bay Seafoods is using its lower waste disposal costs as a competitive advantage, possibly offering fishermen higher prices than the other Sitka processors.

In order to get AIDEA to agree to finance the project, Stitzel had to find sufficient raw material. Without Silver Bay, there was not enough waste in Sit ka. Stitzel talked to Ocean Beauty Seafoods, who suggested shipping the stabilized waste from their Excursion Inlet facility (which has a very short season) and possibly from their Petersburg facility 3

. Ocean Beauty provided Stitzel with information about ISO tanks and the Alaska barging costs. With the Ocean Beauty waste, Stitzel thinks he will have sufficient volume to go ahead with the Sitka project. He estimates he will get 2 million pounds/yr from Seafood Producers Cooperative, 4

- 6 million pounds/yr fr om Sitka Sound, and 10 million pounds/yr from Ocean Beauty.

Market Analysis

. Mr. Stitzel noted that worldwide supplies of fish meal have been constant over the last 20 to 30 years. Pet food producers are willing to pay up to 1/3 more for meal from “Wild Alaska” salmon. Further,

demand for f armed fish (aquaculture) is increasing and fishmeal is the key to getting high productivity in aquaculture because of its balanced amino acid profile.

Planned Sitka Operations

. In addition to salmon meal, the by

- products plant would produce salmon oil (from waste managed in a food grade manner) , a nd chondroitin sulfate

- rich gelatin derived from the salmon head cartilage. Bones will be removed from the fish solids in a convention al bone separator. The salmon oil will be a food grade product; the meal and gelatin will be pet food or aquaculture grade.

The plant could take whitefish or salmon. The barge company would truck ISO tanks to the participating processors, pick up the fil led tank, barge it to Sitka, and truck it to the byproducts plant. The tanks would be owned by the barge company.

Electric Power Requirements. Stitzel noted that a $100 million expansion of the hydroelectric plant that serves Sitka will be completed in 2013. The 8,000 people in the town will not use all of the additional electricity , so the Sitka power company will need new customers

. Stitzel anticipates being able to purchase electricity at reasonable rates (8 cents per KWhr or lower). He expects to pay 3 cents/pound for steam and notes that it takes 1.3 lb steam to remove 1 lb of liquid from the de

- oiled fish solids.

2 According to annual NPDES discharge reports, as of 2009, Sitka had three seafood processors that discharged waste:

Plant Name NPDES

number Typical Annual Raw Pounds/ year Current Waste Management Practices

North Pacific Seafoods

- Sitka Sound Seafoods AKG520065 13.5

- 14.8 million 2005/6 waste to APR barge

2007/8/9 waste tender and outfall
City/Borough of Sitka

- Sawmill Cove Industrial

Park AKG520547 2007: 24 million

2009: 4.9 million 06: Baranof Frozen Foods; some waste to APR and Omega, some dumped 07: no details 08: no report 09: Silver Bay Seafoods, waste discharged via outfall

Seafood Producers Cooperative AKG520101 13

- 16 million salmon and bottom fish; grind and discharge

3 Ocean Beauty did not operate its Petersburg plant in 2010.

### 3 Future. After the profitability of the Sitka operation is demonstrated, Stitzel envisioned plants in other hubs, taking stabilized waste from nearby processing plants. Another hub would likely be Seward. Waste could be trucked to Seward from Kenai, Homer, and Anchorage. A hub in Cordova could take waste barged from Valdez. Recovery operations in Bristol Bay would likely be best suited for mobile containers because of the very short

season.

Perceptions. Mr. Stitzel explained that Alaskans, including the AIDEA B oard of Directors , are very protective of their fishing industry. AIDEA wants to be a friend of fishing. Mr. Stitzel suggested that they would not invest in his project if they thought EPA would use the project to justify more stringent discharge limits for seafood processors. AIDEA do not want to invest in something that would make them a “bad guy” to the fishing industry. They want to be welcome by the fishing industry.

On the other hand, Mr. Stitzel acknowledged that if EPA made an across

- the

- board prohibition of discharging seafood processing waste via outfall, it would be a substantial motivation for processors to recover the

va lue from the wastes and not throw it away.

Further Communications. Mr. Stitzel repeated the offer he made in his September 2010 email to Don Anderson, of providing capital budgets and plant designed. I suggested that it would be useful to talk to Don Anderson directly, in a 3

- way call next week. Mr. Stitzel said he would be available December 20

– 22.