DATE: March 10, 2020
SUBJECT:
Title
PRESENTATION AND RESOLUTION AUTHORIZING AMENDMENT NO. 1 TO THE BLUE ECONOMY INCUBATOR AGREEMENT WITH SUNKEN SEAWEED LLC TO EXTEND THE PILOT PROJECT TO DEMONSTRATE THE FEASIBILITY OF SEAWEED AND SHELLFISH AQUACULTURE IN SAN DIEGO BAY FOR ECOSYSTEM SERVICES RESEARCH FOR AN ADDITIONAL FOUR YEARS UNTIL NOVEMBER 2023 AND INCREASING THE DISTRICT’S ROYALTY PERIOD FOR AN ADDITIONAL FIVE YEARS FOR A NEW ROYALTY PERIOD OF 25 YEARS UNTIL 2043 REQUIRING NO ADDITIONAL DISTRICT FUNDING
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EXECUTIVE SUMMARY:
On July 17, 2018, by Resolution No. 2018-0304, the Board authorized a pilot project with Sunken Seaweed LLC as part of the District’s Blue Economy Incubator to demonstrate the feasibility of seaweed aquaculture in San Diego Bay for one year. The work conducted during the pilot project assisted the company to determine the best seaweed species for commercialization based on growth rate, environmental conditions, and best management practices to optimize operations including pilot farm structure, growth methods, and harvesting techniques. The pilot project contributed valuable baseline information to inform future potential of seaweed aquaculture in California and will inform guidelines for future San Diego based seaweed aquaculture.
Sunken Seaweed LLC has leveraged the assets and results from the pilot project to obtain additional grant funding to continue operations and measure the ecosystem benefits and services provided by seaweed aquaculture. The proposed amendment to the agreement with Sunken Seaweed LLC, will allow the company to continue its current seaweed farming operations, and add shellfish to the existing pilot seaweed farming system, utilizing a 3D ocean farming method of aquaculture.
3D ocean farming is a vertical underwater agriculture technique that uses the water column to grow restorative species, such as seaweeds and shellfish, together in the same ocean space. Shellfish and seaweed are ecologically beneficial and sustainable species that absorb all their nutrient requirements from sunlight and the surrounding water. No added nutrients, fertilizers, pesticides, or freshwater inputs are required for maintenance and growth and no waste is produced. Farming shellfish and seaweed also provides valuable ecosystem services and products, such as:
• bioremediation to improve water quality via the absorption of contaminants, such as excess nitrogen from on-land runoff;
• fisheries enhancement by providing habitat, foraging opportunities, and refuge for local fisheries and non-fisheries species;
• carbon sequestration by storing atmospheric carbon in seaweed tissue;
• protection of coastal habitats and infrastructure by dampening storm surge caused by climate change-driven sea level rise;
• food production in the form of culinary seaweeds (e.g. ogo, sea lettuce, dulse), kelp (e.g. giant kelp, sugar kelp), and shellfish (e.g. oysters, mussels, clams); and,
• a range of other potential products including kelp-based biofuels, fertilizers, stabilizing agents, human food supplements, and livestock feed additives.
3D ocean farming also reduces the horizontal space and environmental footprint required compared to traditional land agriculture methods, thus maximizing yield.
The addition of shellfish to the existing pilot seaweed farming system will demonstrate the feasibility and water quality benefits of shellfish and seaweed aquaculture in San Diego Bay by incorporating the water-purifying capacity of mussels and oysters with the carbon-sequestering potential of seaweeds to create a restorative, climate-beneficial farming system. Staff recommends authorization of Amendment No. 1 to the agreement with Sunken Seaweed LLC (Attachment A) to extend the pilot project to demonstrate the feasibility of seaweed and shellfish aquaculture in San Diego Bay for ecosystem services research for four years until November 2023 and increasing the District’s royalty period by five years for a new royalty period of 25 years until 2043. No additional funds are required for this amendment.
RECOMMENDATION:
Recommendation
Adopt a Resolution authorizing Amendment No. 1 to the Blue Economy Incubator agreement with Sunken Seaweed LLC to extend the pilot project to demonstrate the feasibility of seaweed and shellfish aquaculture in San Diego Bay for ecosystem services research for an additional four years until November 2023 and increasing the District’s royalty period for an additional five years for a new royalty period of 25 years until 2043 requiring no additional District funding.
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FISCAL IMPACT:
This Board action has no additional expense to the District, but extends the District’s royalty period for five additional years potentially leading to additional revenue.
Compass Strategic Goals:
Advancing the Blue Economy directly aligns with the District’s core mission and with the Public Trust Doctrine and Port Act for the promotion of commerce, navigation, fisheries, recreation and environmental stewardship. This agenda item supports the following Strategic Goal(s).
• A Port with a healthy and sustainable bay and its environment.
• A Port with a comprehensive vision for Port land and water uses integrated to regional plans.
• A Port that is a safe place to visit, work and play.
• A financially sustainable Port that drives job creation and regional economic vitality.
DISCUSSION:
Blue Economy Incubator
In 2015, the District established the Aquaculture and Blue Technology Program to conduct studies, planning, and pre-development work to support and inform aquaculture and blue tech opportunities in and around San Diego Bay. Under this Program, in 2016, the District established the Blue Economy Incubator (BEI) to assist in the creation, early development, and initial scaling of new Blue Economy business ventures in and around San Diego Bay, focusing on aquaculture and blue technology. As the state-legislated trustee of tidelands around San Diego Bay, fostering sustainable domestic aquaculture and Port-related blue tech innovation helps fulfill the District’s public trust responsibility to promote fisheries and commerce, as well as aligning with our mission to enhance and protect the environment.
The BEI acts as a launching pad for sustainable aquaculture and blue tech ventures by removing barriers to early-stage entrepreneurs and providing key assets, access, and support services focused on pilot project facilitation. Through its BEI, the District is seeking innovative aquaculture and blue tech proposals to inform present and future Port challenges and opportunities; from environmental compliance and remediation, to asset management and security. By funding pilot projects, the Port is supporting entrepreneurship, fostering sustainable aquaculture, and helping drive port-related blue tech innovation. Ultimately, the goal of the program is to develop ‘innovation partnerships’ to build a Blue Economy portfolio of new businesses who can deliver multiple social, environmental, and economic benefits to the District and the region.
The BEI invites early stage and market-ready ventures that align with the incubator objectives to submit business and pilot project proposals. Incubator proposals are reviewed following a four-step cross-departmental due diligence process culminating in a staff recommendation to the Board of Port Commissioners (Attachment B). The selection process balances each proposal’s potential social and environmental benefit, alignment with the District’s core mission and Public Trust obligation, as well as the potential financial return on investment. Proposals are extensively vetted through the formal four-step competitive review process and any of the selected proposals are required to undergo California Environmental Quality Act and coastal review where applicable and obtain all necessary permits. To date, 85 companies have applied to the BEI and eight companies have been awarded contracts by the Board.
Seaweed Aquaculture Pilot Project / Sunken Seaweed LLC.
On June 20, 2017, by Resolution No. 2017-085, the Board authorized an agreement with Sunken Seaweed LLC. Sunken Seaweed LLC is an aquaculture start-up company led by two marine ecologists committed to pioneering sustainable seaweed aquaculture in San Diego Bay. The pilot project demonstrated the feasibility of seaweed aquaculture in San Diego Bay. The pilot project included cultivating, out-planting, growing, monitoring, and harvesting several species of native marine macroalgae, and exploring how to expand domestic markets for uses in human and animal food production, biofuels, and fertilizers, as well as exploring a variety of ecosystem services applications.
During the pilot project, Sunken Seaweed LLC, established a seaweed hatchery system at the San Diego State University (SDSU) Marine lab in partnership with SDSU macroalgae ecologists. The hatchery system was used to initiate seaweed settlement and grow-out of various native seaweed species onto spool lines. Once these seeded spool lines are between two to three millimeters in length, they are out-planted onto anchored marine-grade ropes (lines) installed at the pilot seaweed farm. The submerged pilot seaweed farm system is located at the northwestern end of Grape St. Pier No. 1 and consists of a three-dimensional rectangular grid system (25 feet depth) in which seaweed are grown from the anchored lines at two different depths, five feet and 20 feet below the surface. The top layer of lines float with the use of buoys and the bottom layer of lines remain in place with the use of temporary concrete mooring anchors. The top story lines at five feet below the surface are used for growing smaller, more delicate seaweed species such as Sea Lettuce (Ulva spp.), Nori (Porphyra spp.), Ogo (Gracilaria pacifica), and Sea Grapes (Botryocladia pseudodichotoma). The bottom story lines at 20 feet below the surface are used for growing larger, more robust seaweed species such Giant Kelp (Macrocystis pyrifera).
Throughout the pilot project, Sunken Seaweed LLC has been monitoring and collecting data at different stages of the operation, from the lab to the pilot farm site. The pilot farm area is being monitored and sampled by scuba diving and using a remote operated vehicle (ROV) to collect data such as growth rates, environmental conditions, fouling communities, and biomass yields. These data sets are being analyzed to understand how the pilot project is contributing to changes in the immediate ecosystem, and how the environmental conditions are affecting seaweed growth and physiology. Additionally, the data is being used to assess seaweed aquaculture as a tool for bioremediation, carbon sequestration, restoration, mitigation banking, habitat enhancement and otherwise improving water quality and ecosystem productivity.
The pilot project data assisted Sunken Seaweed LLC to determine the best seaweed species for commercialization based on rate of growth, environmental conditions, and best management practices for optimizing operations, including pilot farm structure, growth methods, and harvesting techniques. This pilot project contributed valuable baseline information to inform future potential seaweed aquaculture in California.
Next Steps
Sunken Seaweed LLC leveraged the assets and results from the pilot to obtain additional grant funding to continue operations and measure the ecosystem benefits and services provided by seaweed aquaculture. As such, Sunken Seaweed LLC requested a four-year extension to their existing pilot project to continue operations at their submerged seaweed farm.
The continuation of the pilot project includes the addition of shellfish, such as oysters (Ostrea lurida, Crassostrea gigas) and mussels (Mytilus spp.) to the existing pilot seaweed farming system using 3D ocean farming techniques. The purpose of adding shellfish is to demonstrate the feasibility and water quality benefits of shellfish and seaweed aquaculture in San Diego Bay by incorporating the water-purifying capacity of mussels, and oysters with the carbon-sequestering potential of seaweeds to create a restorative, climate-beneficial farming system. The addition of shellfish to the pilot project will require the addition of mussel longlines and baskets to the existing submerged farm system, which would involve minimal activity, as no existing structures need to be permanently modified.
Sunken Seaweed LLC would like to continue leveraging the assets and results from the pilot to obtain additional grant funding and explore new markets to expand their business. A recent market research conducted by Sunken Seaweed, in collaboration with SDSU School of Business and Marketing, highlighted new market trends for the company to pursue for customer acquisition. As noted by Sunken Seaweed in their quarterly report to the Port, “at this point we have a very high demand for our product and very little supply.”
Conclusion
Staff recommends the Board authorize a resolution for Amendment No. 1 to the agreement with Sunken Seaweed to continue supporting their pilot project. In exchange, a five-year extension to the royalty period was negotiated for a new royalty period of 25 years. No additional District funds are requested.
General Counsel’s Comments:
The Office of the General Counsel has reviewed and approved this agenda, the proposed amendment, and resolution, as presented, as to form and legality.
Environmental Review:
This Board item is Categorically Exempt pursuant to California Environmental Quality Act (CEQA) Guidelines Sections 15301 (Existing Facilities), 15303 (New Construction or Conversion of Small Structures), 15304 (Minor Alterations to Land), and/or 15306 (Information Collection) and Sections 3.a (1), 3.c (1)(2), 3.d, and/or 3.f of the District’s Guidelines for Compliance with CEQA because the pilot project involves operation of a small structure (a pilot project seaweed and shellfish farm) attached to an existing pier, that would involve negligible expansion of use beyond the existing uses at Grape Street Pier No. 1, would collect data and information on environmental factors and conditions around the farm, and would not result in a serious or major disturbance to environmental resources. Further, there would be no dredging or fill impacts and the project would not cause any disturbance to sensitive species or habitat. The District has determined none of the six exceptions to the use of a categorical exemption apply to this project (CEQA Guidelines Section 15300.2) because the project is not located in an area that would impact an environmental resource of hazardous or critical concern, would not have cumulative impact of successive projects of the same type in the same place, would not have a significant effect on the environment due to unusual circumstances, is not within a highway officially designated as a state scenic highway, is not located on a site which is included on any list compiled pursuant to Section 65962.5 of the Government Code, and would not cause a substantial adverse change in the significance of a historical resource.
This Board item complies with Section 87 of the Port Act, which allows for the establishment, improvement, and conduct of a harbor, and for the construction, reconstruction, repair, maintenance, and operations of wharves, docks, piers, slips, quays, and all other works, buildings, facilities, utilities, structures, and appliances incidental, necessary, or convenient, for the promotion and accommodation of commerce and navigation. The Port Act was established by the California Legislature and is consistent with the Public Trust Doctrine. Consequently, the proposed project is consistent with the Public Trust Doctrine.
Finally, this Board item is considered an “excluded development” pursuant to Sections 8.a (10) (Existing Facilities), 8.c (1)(3) (New Construction or Conversion of Small Structures), 8.d (Minor Alterations to Land), and/or 8.e (Information Collection); therefore, issuance of a Coastal Development Permit is not required.
Equal Opportunity Program:
Not applicable.
PREPARED BY:
Phil LeBlanc
Program Manager, Aquaculture & Blue Technology
Paula Sylvia
Program Director, Aquaculture & Blue Technology
Madelyn Roycroft
California Sea Grant State Fellow, Aquaculture & Blue Technology
Attachment(s):
Attachment A: Amendment No. 1
Attachment B: BEI Due Diligence