### 1 Project No.: 0172.08.030.033

Project Name: Alaska Seafood

TELEPHONE CALL RECORD Date: 12

- 22

- 2010 Time: 1

– 2 PM EST

Conference Call participants:
EPA: Donald F. Anderson ERG: Anne Jones and Melanie Sands, Lexington, MA Betsy Bicknell, Chantilly, VA Contact Name: Peter Stitzel

Company Name: Sitka Meal, Oil, and Technology

Phone No.: 206

- 781

- 7219

GENERAL SUBJECT : Relationship between EPA action on 1980 Seafood Processing petition and SMOG Plans for byproduct recovery plant in Sitka Alaska



### TOPICS DISCUSSED AND ACTION TAKEN

Background. As a follow up to the December 16, 2010 telephone call between Betsy Bicknell, ERG and Peter Stitzel, Sitka Meal, Oil, and Gelatin (SMOG)

, Mr. Stitzel joined EPA and ERG in a teleconference. The purpose of

the call was for Mr. Stitzel to discuss with EPA his concerns about how his potential funding source would react to

EPA ’s analysis of the affordability of limits on the oil and solids conte nt of seafood processing discharges in certain

areas of Alaska.

Don Anderson began the call by providing background on EPA’s response to the 1980 industry petition. See http://www.epa. gov/waterscience/guide/seafood/index.html for background documents including the petition and EPA’s draft response. Mr. Anderson explained that EPA’s draft response described a change in the seafood waste management from screening and barging to screening and byproducts recovery. He noted that if EPA re

- classified

Sitka as a non

- remote processing center, NPDES permits for the Sitka seafood processors would include limits for total suspended solids (TSS) and non

- petroleum oil & grease (O&G) . The processors w ould be free to meet these limits as they chose.

Mr. Anderson said that sometime in 2011, EPA would publish a “Notice of Data Availability” describing the information it had collected in 2010 in preparation for responding to the 1980 industry petition. H e noted that to respond to the petition

, EPA would decide if Ketchikan, Petersburg, Juneau, and Cordova should be identified as

remote or non

- remote processing centers. The policy basis would likely include waste utilization and byproduct

recovery.

Bypr oducts from Alaska seafood processing waste. Mr. Stitzel described the 300 million pounds of seafood processing “waste” currently disposed of by on

- shore Alaska seafood processors as an unused resource. Retailers, such as Whole Foods, prefer products made from fishmeal derived from this already

- harvested material to fishmeal

made from menhaden or anchovies harvested to be made into meal. Mr. Stizel noted that seafood processors don’t want to invest in byproducts recovery. They are more interested in “value added” investments, such as filet machines, etc.

Mr. Stitzel pointed out that the name of his comp any i s Sitka Meal, Oil, and Gelatin (SMOG 1

1 Stitzel explained that in addition to describing the three products he plans to make, the acronym of the name highlights that the Sitka plant will be emission

- free. Sitka has a large hydroelectric plant and Stitzel plans to use electric

- powered boilers (not diesel powered boilers). Thus, there will be no combustion sources needed to run the plant. ) , because they plan to recover those three byproducts from salmon waste. They plan to produce crude (6%) condroitin sulfate gelatin by passing salmon heads through a bone separator and recovering chondroitin

- rich cartilage. Mr. Stitzel anticipates selling the gelatin for $2 to $3/lb. Overall, he expects the value of seafood waste material is $0.25/lb, so for 300

### 2 million pounds of waste, Alaska has a resource worth $75 million that they are throwing away. Mr. Stitzel estimated to recover $75 million/year in from the waste would require an investment of $50 to $60 million.

Funding for planned Sitka plant. The first trial of his process will be in Sitka. He is waiting for the Alaska Industrial Development and Export Authority (AIDEA) to approve $8 to $10 mill ion of financing for a byproducts plant in Sitka. He expects the AIDEA board to decide on the financing at their meeting the first or second week in February 2011 , or possibly a month later. The Sitka plant will operate with waste from two Sitka seafood pr ocessors and Ocean Beauty plants in Petersburg and Excursion Inlet. His estimates show SMOG paying $0.05/lb to the processors for their waste. He noted that the “due diligence” required to obtain AIDEA financing has taken 10 months, that $10 million is the smallest size of a project that AIDEA will finance

, and the period of the loan will be 15 years. He noted that AIDEA likes the SMOG project because it will benefit several small towns (Petersburg, Excursion Inlet, and Sitka, to start). Also, the state likes to encourage many seafood processors. They don’t like a consolidated business because they think that many processors means competition for fish, getting higher prices to

Alaska fishermen.

Concerns about EPA actions. Mr. Stitzel related that an AIDEA attorney had expressed concern about EPA identifying a technology as BAT. The attorney noted that for the mining industry, once EPA had said a certain technology was BAT all the mining operations were required to use that technology. The attorney was concerned that a similar thing would happen with the Montlake seafood waste stabilization process.

Mr. Anderson repeated that effluent guidelines, as implemented in NPDES permits, require dischargers to meet their permit limi ts. In this case, the seafood processors would be required to meet limits for TSS and O&G. The processors could meet the limits by any means they chose (at sea disposal, byproducts recovery, or other means).

Mr. Stitzel thought it would be helpful for AI DEA to hear that message directly from EPA. Mr. Anderson agreed to

talk to AIDEA and noted that EPA’s endorsement of byproducts recovery (rather than waste disposal) was stated in their January 1981 draft response to the industry petition. (see http://www.epa.gov/waterscience/guide/seafood/index.html for a link to this draft response).

Beyond Sitka. Mr. Stitzel explained that Sitka will be the first trial of the scheme to stabilize sea food processing waste and barge it to a centralized location for conversion into byproducts. He envisions additional byproducts processing centers:

- Seward: for wastes trucked from Valdez and barged from Prince William Sound;

- Cordova, if Seward can’t handl e wastes from all of PWS;

- Ketchikan, if Sitka can’t handle all of the wastes from southeast;

- Bristol Bay (Naknek, etc); and

- Chignik.

Don Anderson asked whether Dutch Harbor would be another byproducts production hub . Mr. Stitzel said he thought that eve ry processor in Dutch Harbor has a massive fishmeal plant. They may discharge stickwater,

however. Mr. Stitzel noted that construction costs for Bristol Bay were very high and Bristol Bay is an expensive place to do business. He suggested he was somewhat less confident in the economics of a byproducts plant in Bristol Bay than in other locations.

Managing waste from floating processors. Mr. Stitzel noted that the large Pollock factory ships are equipped with fishmeal/fish oil plants. In contrast, m ulti

- species factory trawlers throw away most of their waste. Ships that are 120’ to 220’ long are too small for a fishmeal plant. Stitzel would like to capture their waste and envisi ons equipping

these ships with grinders and mixers to acid

- stabilize their waste. The ships would then store the waste in floating bladder tanks for retrieval by another ship and transport to the byproducts processing center. In his estimates, fishmeal pri ces would need to increase to $2500/ton for this scheme to be economically feasible.

Fishmeal as animal and aquaculture feed. Mr. Stitzel explained that fishmeal is a very useful animal feed. Animals (hogs, chickens, fish, etc) fed with soy meal suppleme nted with a small percentage of fishmeal grow much more quickly than animals fed with soy meal alone. For this reason he considers recovery of Alaska seafood processing wastes an important element of world food production. He explained that for its salmon hatcheries,

### 3 Alaska buys 2,000 to 3,000 tons/year of fishmeal made in Canada from Peruvian anchovies. He thinks an economical alternative is to make fishmeal from Sitka and Bristol Bay herring. Herring are harvested for their roe. With a high volume sex sor ting machine, male herring could be diverted to the fishmeal plant and used to make feed

for Alaska salmon hatcheries.

Waste disposal costs. Mr. Stitzel explained that waste can be shipped around Alaska at reasonable costs. As an example, he said that so lid waste from southeast Alaska is loaded into containers, barged to Seattle/Tacoma, off

loaded onto trains, and hauled by rail to eastern Washington or Oregon for disposal. He was told by staff from one of the towns in southeast Alaska that this costs $0. 06/lb of waste.

He noted that disposal of seafood processing waste at

- sea can be costly. This is usually done using a fishing boat that is for some reason no longer licensed to fish. The boat is staffed with a captain, maybe an engineer, and a

deckhand o r two. Daily charter runs $1,200 to $3,000, even if the boat is on stand

- by because there is no waste to dispose of. For a 90 day season, this would run $108,000 to $270,000.

Confidential Business Information. ERG explained to Mr. Stizel that he can clai m information provided to EPA as “Confidential Business Information,” and that this would mean that EPA would not make information identified as CBI available to the public. Mr. Anderson noted that Mr. Stitzel should not claim information as CBI that was

a lready publicly available, for example price information that Westfalia would provide to the public.