### 1 Meeting Report: University of Alaska Fa irbanks, Fishery Industrial Technology Center (FITC), Kodiak, AK.

8/17/10

10:00 AM – 12:15 PM

Participants Scott Smiley Professor, University of Alaska Fairbanks, Fishery Industrial Technology

Center (FITC) Don Anderson U.E. EPA Washington, DC

Peter Bechtel US Department of Agriculture Agricultural Research Service FITC Affiliate Faculty Lindsay Guzzo U.S. EPA Region 10

Betsy Bicknell ERG Kathleen Wu ERG, Chantilly, VA Anne Jones ERG, Lexington, MA

Betsy Bicknell (ERG) and Lindsay Guzzo (EPA) met with Scott Smiley and Peter Bechtel on Tuesday morning, August 17, 2010 at the Fishery Industrial Technology Center (FITC), Kodiak, Alaska. Other participants listed a bove joined the meeting by phone.

Preliminary Discussion. Prior to the teleconference, Ms. Bicknell and Ms. Guzzo had some general conversation with Dr. Sm iley. He knew of our interest in by-product recovery for southeast Alaska seafood processing facilities and mentioned that the equipment (including the barge) that Alaska Protein Recovery uses had itself been through two previous bankruptcies. Originally the property of a British Columbia n governmental spin off, the equipment was purchased in a bankruptcy sale by Cossack Caviar, an Alaskan company who later also ran into fiscal troubles. Smiley also mentioned that the w aste handling systems in Icicle’s plants in Petersburg and Seward were both designed and put together by the same firm. It was Smiley understands that Cowger had specialized in de veloping systems based on the used equipment market. Compared with the standard Atlas Stor d systems, the Cowger systems are relatively inexpensive.

Atlas-Stord sells integrated seafood processing waste systems, scaled appropriately for large processing plants, for example those in along the Alaska Peninsula and the Bering Sea. The Atlas Stord wet reduction systems allow for the productio n of four major products from the processing

waste: Fish Protein Meal, Fish Bone Meal, Fish Oil and Fish Solubles or Stickwater. In the processing plants operated in Dutch Harbor (easter n Aleutians) fish to be processed can be held on board the harvest vessel in refrigerated seawater during the 2- to 3-day trip from the harvest site to the processing plant. During this time th e fish can pick up excess salt from the sea water. For this reason, during the handling of seafood processing waste from these fish, the stickwater – containing soluble proteins and small molecules, cannot be added back to the drying fish meal because the resulting meal would exceed consum er standards being too salty. Stickwater produced in Atlas Stord wet reduction plants from seafood processing waste can reach BOD levels of upwards of 150,000 ml/L.

The Kodiak Fishmeal Company plant also u ses Atlas-Stord equipment. Kodiak Fishmeal Company is owned by a consortium of major seafood processors from Kodiak. Not all seafood processors in Kodiak are members of the consortiu m and those that are not must pay a tipping fee to deliver their processing waste to the plant. According to Dr. Smiley, Kodiak Fishmeal

### 2 Company plant originally had a capacity of 800 tons of processing waste per day but over the years improvements have raised this to between 1200 and 1600 tons/day. The fish meal that the plant makes runs at 70 to 75% protein. This level is achieved from processing waste by sifting out the fish bone. Their fair average quality (FAQ) fish meal runs at 65-67% pr otein and is generally sold on long term contracts to aquaculturists in Southeast Asia.

Another supplier of equipment used in eff ectively handling seafood processing waste is the Danish dairy concern Alfa Laval. They developed a system that can handle from 25 to 250 tons of processing waste per day. This assemblage of equipment, called the Con-Kix system, was used in the plant operated by International Seafood of Alaska (ISA) in Kodiak. ISA was not a member of

the consortium that owned the Kodiak Fishm eal Company. The Con-Kix byproduct process

involved a Brown finisher to remove skin and bone , an Alfa Laval Contherm to heat the material, an Alfa Laval Decanter Centrifuge to separate solids, the aqueous stream and the lipid stream, Disc Polishers to help purify the fish oil and a Kix Cyclone dryer to dry the fish protein meal. The system worked well and ISA was able to supply food-grade protein daily to over 600,000 children in Peru. Disagreements between ISA and Alfa Laval eventually led to the Con-Kix processing system being removed from the ISA plant. Th e equipment was eventually purchased by BioOregon a fish processing waste concern in Warrenton OR.

Smiley noted that the largest single source of the world’s fish meal is the industrial anchovetta fishery in Peru. The harvest from this fishery is variable with about 15 million tons/year landed except during El Nino years when the Humboldt Current fails and there is virtually no catch at all. Other important industrial fisheries (those involved in making fish protein meal and fish oil for sale as other than human food) include the menhaden fishery off the Gulf coast of the U.S. and forage fish harvests in Iceland. The variability in the Peruvian anchovetta harvest can lead to wide fluctuations in fish meal prices. When Peruvian production is down, world fish meal prices are at a premium.

Alaska Protein Recovery and a few other byproducts producers use enzyme hydrolysis to produce a hydrolyzed protein product. Dr. Smiley noted that hydrolysis can be problematic. If strong mineral acid is used to hydrolyze the proteins, the proteins are completely broken down to individual building blocks, amino acids. The r esulting product is quite bitter and animals will avoid eating it. Material made this way, especially if acidified with phosphoric acid, can be used as fertilizer, but this is a relatively low-value product. If enzymes are used to hydrolyze the seafood processing waste, a product suitable for animal feed can be produced. Animal feed is relatively a higher-value product. However, enzymatic hydrolysis is hard to control. Further, it is difficult to measure the extent of the process a nd to recognize when a suitable endpoint has been reached. FITC researchers are working on simple methods for measuring the extent of enzymatic hydrolysis.

Another problem with the hydrolyzed protein products is that the process will liquefy the processing waste due to one molecule of water being produced for every peptide bond cleaved. One consequence of this is that shipping the fina l product will be quite costly because one is also shipping the weight of the excess water. Dryi ng hydrolysates poses problems because of the tendency of hydrolysates to dry in clumps that are hard on the outside while remaining fluid on the inside. Spray drying is probably the most effective method of drying hydrolysates but care must be taken to keep the spray nozzles from cloggi ng. One effective alternative is to co-dry the protein solution with a solid substrate, such as distillers’ grains or canola seeds (the solids left after the production of canola oil). He noted that there is a large canola oil operation in Prince Rupert, British Columbia. Of note is the fact that drying or evapora ting these products is relatively more expensive in Alaska because of the price of energy in these remote locations.

### 3 Dr. Smiley explained that Alaska shipping costs ar e affected by the Jones Act (Merchant Marine Act of 1920), which “requires that all goods transpor ted by water between U.S. ports be carried in U.S.-flag ships, constructed in the United States, owned by U.S. citizens, and crewed by U.S. citizens and U.S. permanent residents. The purpose of the law is to support the U.S. Maritime industry.” [Source: Wikipedia, accessed 9-2-2010] One result of this act is to increase shipping costs from Alaska. Dr. Smiley suggested that sh ipping costs are many times higher than they would be if Alaska shippers could u se internationally flagged vessels.

Background. When telephone participants joined th e meeting, Don Anderson (EPA/OW/EAD) provided a retrospective of the national regula tions that apply to seafood processing facilities in Alaska. In 1974-5, EPA established regulations for seafood processing in the U.S., including regulations that were specifically crafted for Alaska. For certain parts of the Alaska seafood processing industry, EPA set two le vels of limits. Less stringent limits required that waste be ground to less than 0.5” prior to discharge. EPA set more stringent limits in the regulations for seafood processing or population cente rs called “non-remote” areas. For “non-remote” processing centers, EPA set limits for TSS and oil and grease, based on screening solids from the wastewater and their off-shore disposal. The list of processing centers in the regulations includes Anchorage, Cordova, Juneau, Ketchikan, Kodiak, and Petersburg.

Mr. Anderson explained that Alaskan seafood pr ocessing industry representatives challenged the regulations in court. The court upheld EPA. In 1980, exercising its right to petition, industry petitioned EPA to change the regulations becau se they were too costly. All “non-remote’ locations except Kodiak were included in the pe tition. EPA suspended the regulations in June 1980, while considering the petition, and has neve r lifted the suspension. In January 1981, EPA published a proposed a response to the petition. Wh ile evaluating the petition, EPA analyzed two alternatives for managing the seafood processing w astes: 1) screening and barging for ocean disposal and 2) byproduct recovery. EPA found th at costs were higher for Juneau than other processing centers. For this reason, in the pr oposed response to the petition, EPA found that

Juneau should be reclassified as “remote,” while Anchorage, Ketchikan, Petersburg, and Cordova

should retain the classification of non-remote a nd the more stringent regulations. EPA also indicated its preference for byproduct recove ry in lieu of off-shore disposal for solids

management.

EPA Region 10 developed a General Permit for seaf ood processing industry in 2001, noting that EPA would re-evaluate the suspended regulations . EPA has started the re-evaluation process, beginning with collecting information reflecting the current state of the industry. In April 2010, EPA sent a questionnaire to nine seafood processing companies. These companies operated at least one facility in Ketchikan, Petersburg, Cord ova, Juneau, Kenai, or Dutch Harbor and were required to provide information for all of their Alaska facilities. Mr. Anderson noted that at the industry’s request, the deadline for responding to the questionnaire has been delayed from 45 after receipt until October 1, 2010. Early in 2011, EPA will publish a Notice of Data Availability, probably with an explanation of what it mean s with regard to the petition response. He emphasized that the public will be provided with opportunity to comment on the data and EPA’s explanation.

Dr. Smiley noted that in the 30 to 35 years since the regulations for non-remote processing centers were suspended, EPA should be able to fi nd data on damage to the environment, if any. Mr. Anderson explained that according to the Clean Water Act, the effluent guidelines are technology-based, so EPA does not consider envi ronmental impacts during their development. Water quality standards are used in the development of NPDES permits.

### 4 Dr. Smiley explained that of the information EPA needs for its analysis, information about the volume of waste generated will be the most diffi cult to estimate. The amount of waste generated varies by the species processed and the product form. For fish that are just headed and gutted (H & G), about 65% of salmon by weight is retain ed as product, while for pollock the amount is considerably smaller. For fillets, about 50% of the salmon by weight is retained as product; while for pollock fillets, it is 20%; and for the produc tion of surimi, its <20%. In Southeast Alaska, some herring roe producers only retain about 10% of the landed weight of the fish in the final product.

Dr. Smiley noted that even with byproduct rec overy, processors still need to dispose of some waste. In Dutch Harbor, for example, during su mmer months, the stickwater produced during wet reduction of seafood processing waste must be barg ed offshore because local inshore currents are too weak to effectively disperse the material.

Dr. Smiley provided some background on the Alaska fishing industry, including a list of species that are fished commercially. He explained that harvest depends on local weather conditions. For pink salmon – a two year old fish when it returns to spawn, the impact may be up to two out. Other species of Pacific salmon are at least 4 year fish generally with 2 years in fresh water and 2 years in the ocean. For them impacts of weather may not reveal themselves for up to four years. Examples include dry streams or exceptionally cold weather that result in low fry survival. Dr. Smiley also explained that while there are roughly 800 seafood processors with Alaska Department of Environmental Conservation Processing Permits, only 80 to 90 facilities statewide actually produce 80 to 90% of the seafood processed.

Key factors for determining the affordability of byproduct recovery are the volume of waste produced and the duration of the fishing season. If a season is only 30 days long, investment in recovery systems are less likely to be afford able, especially large volume units such as those produced by Atlas Stord.

Dr. Smiley suggested a source of information about the price of fishmeal and fish oil is the Hammersmith Report, which provides an update ev ery two weeks. This commodities price report includes prices for salmon fish meal and salmon oil.

Although Dr. Smiley considered the enzymatic hydrolysis process (used by Alaska Protein Recovery) to be scalable for the seafood processing pl ants in southeast Alaska, he suggested the marketability of the end products was kind of if fy. Products such as fish oil being used for cosmetics also may be feasible on a much smaller scale. However, he suggested that using enzymatic hydrolysis to produce protein products fo r animal feed or human supplements may not pay for itself depending on the qua lity of the final produc t, not to mention the skillfulness of the

marketers.

Dr. Smiley recalled that there was formerly a seafood processing waste rendering plant in Valdez. This plant used phosphoric acid to produce a liqui d fertilizer (2-10-2). Although it operated for a number of years, eventually it became only marginally profitable and was closed. Dr. Smiley explained that fertilizer is about the lowest value product that has been made from seafood processing waste and it takes higher value products to produce a reasonable return on investment required for a sustainable byprod ucts recovery operation.

Dr. Smiley suggested that the economics of bypr oduct recovery depend on product marketability and whether the market could absorb all the fish oil that could be recovered by the seafood

### 5 processors. He mentioned that Dr. Fereidoon Shah idi, with Memorial University, Newfoundland was the North American authority on the fish o il industry. While almost all of the cold water marine fish species harvested in Alaska have s ubstantial levels of omega 3 fatty acids the amounts of each fatty acid differ. In addition some fish, including Alaska pollock contain relatively high levels of other important nutrien ts including vitamin D. The value of fish oil produced by the Atlas Stord operations in Alaska, coupled with the high price for transportation mean that the best value to the processing ope rations in the Bering Sea and along the Alaska

Peninsula is to use the fish oil as a boiler fu el saving the cost of purchasing and transporting petroleum to their processing operations.

The discussion turned to the cost of the byproduct recovery facilities. Meeting participants did not know what Icicle paid for its recovery plants in Petersburg and Seward. Betsy Bicknell mentioned that she and Ms. Guzzo had met with repr esentatives of GEA Westfalia Separator, Inc. 1 in Juneau. At a meeting with Dr. Smiley, Stefan Kirchner had described two processes they have available. The process costing approximately $500,00 0 fits in a 40 foot van and is designed for salmon oil recovery. The process costing approximately $1 million also fits in a van and is designed for both oil and protein recovery. The pr ice for the Atlas Stord wet reduction systems used by the large processing facilities in western Al aska has to be quite high, with local estimates for the Kodiak Fishmeal Company being greater than $20 million.

Dr. Smiley repeated that drying of the protein component in these systems will be a significant cost. The challenges are 1) how to stabilize the protein until it is dry; and 2) how to dry it inexpensively.

Peter Bechtel reflected that in th e last five years there has definitely been more secondary product recovery in Alaska. This is because prices ha ve increased. He mentioned the Bimbo economic development report, prepared for the Alaska Fisheries Development Foundation 2

.

Dr. Bechtel and Dr. Smiley explained that the proceedings from the symposium A Sustainable Future: Fish Processing Byproducts , held February 25-26, 2009, in Portland, Oregon, were now

available on the Alaska Sea Grant website. 3

They also noted that the salmon waste stream is changing as a result of increased production of skinless, boneless canned salmon and increased production of fillets.

Because of the impact of the type of product on the amount of waste generated, Dr. Smiley suggested EPA refer to work published by Chuck Crapo et al., in 1993, Recoveries and Yields from Pacific Fish and Shellfish . He noted that seafood processors don’t look at waste recovery as a profit center. Dr. Smiley and Dr. Bechtel listed seafood byproducts currently made in Alaska (in descending value):

 Nutraceutical oils;

1 http://www.westfalia-separator.com /applications/renewable-resources/fish-oil-fish-meal-recovery.html

2 See Alaska Seafood By-Products: Potential Products, Markets and Competing Products. Revised 2008. Report prepared for Alaska Fisheries Development Foundation Anchorage, Alaska. January 8, 2009 Anthony P. Bimbo.

3 http://seagrant.uaf.edu/bookstore/pubs/AK-SG-10-02.html

### 6  Pet foods;

 Animal foods (including food used in aquaculture); and

 Fertilizer/compost.

Ms. Bicknell asked if they were aware of anaerobic digestion of seafood processing waste for methane recovery. Dr. Smiley described a pa per study of co-processing of beetle-killed trees (wood waste) and fish waste to make methane gas. It was not economical on paper, so was never pursued.

Mr. Anderson asked about the use of crab shells for chitin. Dr. Smiley explained that Alaska has not been a major player in the chitin industry b ecause financial considerations make it more cost effective to ship the shells to China and to pro duce products there. He mentioned that Henry Cole, of University of Alaska, Fairbanks, was an e xpert on chitosan. Dr. Smiley explained that other commercially viable products can be made with crab shell (such as crab flavoring), while salmon livers can be made into a shrimp dietary ingredie nts and pollock skins can be used to make fish gelatin. However, design and scale-up of the pro cesses required to make these potential products would require biochemistry skills in addition to entrepreneurial capital.

Dr. Smiley speculated that a spoke and hub c onfiguration for drying hydrolysates made in southeast Alaska might be economically feasibl e. Under this scenario, seafood processing plants would make protein hydrolysate and stabilize it by lowering the pH. The preserved hydrolysate could be shipped to a hub for drying. One possible hub would be the former pulp plant in Sitka Alaska or near the canola presses in Prince R upert, British Columbia, where the hydrolysate could be co-dried with canola presscake.

Available financing. Dr. Smiley described two federal agencies involved with the seafood industry-

 National Marine Fisheries Service (part of NOAA, in the Department of Commerce).

The fisheries service has administrative authority but does not provide grants.

 USDA Although it has a grant program, it won’t provide funding for seafood project because it does not have administrative authority.

Dr. Smiley asked if EPA could provide grant money for byproducts research. Ms. Bicknell

mentioned that EPA’s Office of Research and Development has a grant program.

References. After the meeting, Dr. Smiley provided the following references.

Hammersmith Marketing Ltd

Website Scroll down for listings for specific commodities

Crapo, C. B. Paust and J. Babbitt 1993. Recoveries and Yields from Pacific Fish and Shellfish Alaska Sea Grant College Marine Advisory Bulletin No. 37 http://seagrant.uaf.edu/bookstore/pubs/MAB-37.html

Quentin Fong, FITC, Economics of fish oil production