DATE: September 12, 2018
SUBJECT:
Title
RESOLUTION AUTHORIZING BLUE ECONOMY INCUBATOR AGREEMENT WITH PACIFIC OCEAN AQUAFARMS, LLC (POA) FOR DISTRICT TO COOPERATE IN POA’S FEDERAL PERMIT APPLICATION AND NATIONAL ENVIRONMENTAL PROTECTION ACT (NEPA) REVIEW PROCESSES FOR POA’S PROPOSED PROJECT DEMONSTRATING SUSTAINABLE OFFSHORE AQUACULTURE IN FEDERAL WATERS
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EXECUTIVE SUMMARY:
On October 10, 2017, the Board of Port Commissioners directed staff to begin negotiating agreements for the second round of proposals under the District’s Blue Economy incubator contingent on further due diligence. Of the four proposals presented to the Board, an agreement with Zephyr Marine Debris Removal LLC for a pilot project for marine debris removal was subsequently approved on January 8, 2018 (Resolution 2017-0628), and, based on further due diligence Staff has not recommended agreements for the proposals related to sensor technology to prevent oil spills from vessels and real-time ocean monitoring technology for recreational maritime applications. The fourth proposal presented to the Board in October 2017 was related to a proposed project to demonstrate sustainable offshore aquaculture in federal waters by Rose Canyon Fisheries, Inc., an entity partially owned by Hubbs-SeaWorld Research Institute.
Since then, Hubbs-SeaWorld Research Institute has joined with new partners and has continued its same proposal under a new entity, Pacific Ocean Aquafarms, LLC (POA). Staff has negotiated a proposed agreement with POA, and recommends the Board authorize an agreement for District to cooperate in POA’s federal permit application and National Environmental Protection Act (NEPA) review processes for POA’s proposed project demonstrating sustainable offshore aquaculture in federal waters, and, if such federal permits are granted, allow POA to use the District’s Tenth Avenue Marine Terminal for loading and offloading of fish and other materials for the project in exchange for a certain share of POA’s revenue. (Attachment A).
RECOMMENDATION:
Recommendation
Adopt a resolution authorizing an agreement with Pacific Ocean Aquafarms, LLC (POA) for District to cooperate in POA’s federal permit application and National Environmental Protection Act (NEPA) review processes for POA’s proposed project demonstrating sustainable offshore aquaculture in federal waters.
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FISCAL IMPACT:
The District’s potential revenue share under the proposed agreement does not begin until POA’s fifth year of operation, and this is only if POA receives the needed federal permits. Therefore the likelihood and amount of District revenue cannot be accurately predicted at this time.
Compass Strategic Goals:
Exploring aquaculture opportunities and advancing the Blue Economy Incubator directly aligns with the District’s core mission and with the Public Trust Doctrine and Port Act for the promotion of commerce, navigation, fisheries, and recreation. 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 Port with an innovative and motivated workforce.
• A financially sustainable Port that drives job creation and regional economic vitality.
DISCUSSION:
AQUACULTURE OPPORTUNITIES AND THE BLUE ECONOMY INCUBATOR
Aquaculture is a growing opportunity for new business development in Southern California. The aquaculture opportunity is being driven by the need to support development of sustainable domestic marine aquaculture industry. The U.S. currently imports over 91 percent of the seafood it consumes. In economic terms, these imports consistently contribute to over a $14 billion domestic seafood trade deficit each year. Globally, 50 percent of seafood produced comes from aquaculture. Domestically, only three percent of seafood produced is from aquaculture. While there is a clear food production component to this demand, aquaculture offers multiple co-benefits, such as fisheries enhancement, ecosystem restoration, mitigation banking, bio-fuel/medical purposes, bioremediation, and education and outreach.
Ports can and are increasingly playing a critical role in the development of aquaculture, given their expertise, as well as the availability of land and water at ports. As the state-legislated trustee of tidelands and submerged waters of San Diego Bay, developing sustainable domestic aquaculture helps fulfill the District’s public trust responsibility to promote fisheries and commerce, as well as aligning with its mission to enhance and protect the environment.
At the December 8, 2015 Board meeting, staff provided an overview of aquaculture; its potential benefits and opportunities for the District and the San Diego region; and provided a preview of next steps to advance development of aquaculture. Since 2015, the District has been conducting studies, planning and completing pre-development work to support and inform aquaculture opportunities including:
• Coastal marine spatial planning to inform future development for aquaculture
• Baywide feasibility study to assess landside infrastructure capable of supporting aquaculture
• Research to support the development of permit ready infrastructure
• Stakeholder outreach for the San Diego Ocean Planning Partnership
Blue Economy Incubator
The District is a long-time champion and catalyst of the region’s Blue Economy with its shipbuilding, commercial fishing, marine research, cruise, and cargo business lines. Since 2016, the District began exploring new Blue Economy opportunities as a way to further support its core mission, diversify its portfolio of business lines, and strengthen its collective economic impact. To support this effort, the District established a Blue Economy Incubator and strategic investment fund to assist in the creation, development, and scaling of new business ventures on San Diego Bay, focusing on aquaculture and blue technology. The formation of a Blue Economy Incubator directly aligns with the District’s core mission; the Public Trust Doctrine, and the Port Act for the promotion of commerce, navigation, fisheries, and recreation.
The District’s Blue Economy Incubator represents a launching pad for innovative projects by providing aquaculture and blue tech entrepreneurs with key assets and services focused on pilot project facilitation such as permit-ready infrastructure, entitlements, market access, and strategic funding. The Blue Economy Incubator is leveraging the commitment from a strategic investment fund of $1,000,000 per year, over 5 years, to build a sustainable portfolio of new businesses and partners who can deliver multiple benefits to the whole Port community such as fisheries enhancement, ecosystem restoration, water quality improvement, environmental monitoring, education and outreach, and economic development.
Since the launch of the Blue Economy Incubator, staff has received over 80 inquiries and 25 officially submitted proposals. Proposals are reviewed following a four step cross-departmental due diligence process culminating in a staff recommendation to the Board. To be selected for review the proposals need to provide the required business plan information for staff to analyze the market feasibility, operational/financial viability of the proposal, and alignment with the incubator objectives. 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 project feasibility and potential financial return on investment. All companies that apply to the Blue Economy Incubator 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 review and coastal review where applicable, and obtain all necessary permits.
Recommended Project Proposal
Pacific Ocean Aquafarms LLC / Submitted 8-1-2017
POA is a locally-based, aquaculture company proposing to locate an aquaculture operation in federal waters offshore of San Diego. This project, with its proximity to a major U.S. city and an extensive seafood market, has the potential to be a regional-based model and an early proving ground that can provide an invaluable data base of information that could advance the aquaculture industry nationwide. POA is led by Hubbs SeaWorld Research Institute (HSWRI) that is dedicated to pioneering sustainable, offshore aquaculture in the United States. The POA team combines over 30 years of unique experience and expertise as a scientific marine conservation organization.
While it is unknown whether the federal agencies will grant POA the required permits, if they do, the project will be located in federal waters and will not be located on land or water within the jurisdiction or ownership of the District. Further, POA does not require approval from the District for the project, and the District does not have legal authority over the proposed project in federal waters and the property it would utilize. Given this, the District’s proposed involvement will be to cooperate in, and consult related to, POA’s federal permit applications and National Environmental Protection Act (“NEPA”) process, and, if such permits are granted, allow POA to use the District’s Tenth Avenue Marine Terminal for loading and offloading of fish and other materials for the project in exchange for a certain share of POA’s revenue. Furthermore, the Tenth Avenue Marine Terminal has adequate capacity to accommodate the loading and offloading of fish and other materials for the project and such activities are within the scope of the certified Final Environmental Impact Report for the Tenth Avenue Marine Terminal Redevelopment Plan and do not require any discretionary action on the part of the District’s Board of Port Commissioners.
Previously, the District’s Incubator Committee offered comments in support of the proposal including:
• Provided strategic mission alignment and multiple co-benefits;
• Proposal offering new, scalable line of business that is complementary to fisheries mission; and
• Proposer team is well-qualified and experienced.
Furthermore, the Ad Hoc Committee of the Board previously supported the proposal being brought to the full Board for consideration. In October 2017, the full Board directed staff to negotiate an agreement for this proposal after further due diligence.
Conclusion
Therefore, staff now recommends the Board authorize an agreement with POA LLC for District to cooperate in POA’s federal permit application and National Environmental Protection Act (NEPA) review processes for POA’s proposed project demonstrating sustainable offshore aquaculture in federal waters, and, if such federal permits are granted, allow POA to use the District’s Tenth Avenue Marine Terminal for loading and offloading of fish and other materials for the project in exchange for a certain share of POA’s revenue.
General Counsel’s Comments:
The Office of the General Counsel has reviewed and approved this agenda and the proposed agreement with Pacific Ocean Aquafarms, LLC as to form and legality.
Environmental Review:
The proposed Board action does not constitute a “project” under the definition set forth in California Environmental Quality Act (CEQA) Guidelines Section 15378 because the Application/NEPA Review Process and the Project do not constitute “projects” within the meaning of the California Environmental Quality Act (CEQA) because it does not have the potential to result in a direct or indirect physical change in the environment within the jurisdiction of the District and does not require discretionary decision of the District in order to be approved or carried out. No further action under CEQA is required.
Additionally, the proposed Board action does not allow for “development,” as defined in Section 30106 of the California Coastal Act, or “new development,” pursuant to Section 1.a. of the District’s Coastal Development Permit Regulations in areas within the jurisdiction of the District. Therefore, issuance of a Coastal Development Permit or exclusion is not required.
Equal Opportunity Program:
Not applicable.
PREPARED BY:
Philippe LeBlanc
Program Manager, Aquaculture & Blue Tech
Paula Sylvia
Program Manager, Aquaculture & Blue Tech
Simon Kann
Acting Principal, Aquaculture & Blue Tech
Attachment(s):
Attachment A: Pacific Ocean Aquafarms, LLC - Agreement