Regulatory Uncertainty Drives Fish Farmer to Foreign Waters

Feeding 7 billion people is no small challenge. As it has from time immemorial, high quality protein harvested from the sea plays a major role in avoiding Malthusian collapse. Commercial fishermen bring in a wild catch of roughly 90 million tons of fish each year, with another 70 million tons coming from aquaculture.

The latter number is the one to watch. While the world's wild fish catch has flattened over the past two decades, with many fishing grounds facing depletion and certain species being threatened with extinction, fish farming continues to grow at a sharp clip, doubling over the last decade. This should come as no surprise to anyone who understands the very different economic incentives that prevail under the tragedy of the commons versus those that yield the bounty produced under private property regimes.

Yet farmed fish still carries a bad rap, both from environmentalists concerned about the pollution caused by on-shore and near-shore farms, and from food snobs who favor the more robust taste of wild caught fish.

Enter a firm called Open Blue, a novel deep-water fish farm founded by entrepreneur and lifetime fish fancier Brian O'Hanlon. Brian figured that if he could solve the technology and logistics problems required to anchor a fish farm 10 or 20 miles offshore, where swift currents carry away and disperse the waste produced by concentrated fish stocks, it would allow the farmed fish to swim in the same fresh water as their wild cousins-the best of both worlds.

Open Blue farms a fish called Cobia, also known as black salmon, ling, or lemonfish. It's a tasty, fast-growing species especially amenable to being raised under controlled conditions. The economics are compelling-a mere 1.85 pounds of feed can yield a pound of Cobia. Compare this to the 2:1 ratio for poultry and anywhere from 5:1 to 20:1 for cattle, not to mention the thousands of gallons of water it takes to grow a pound of beef.

It took a while to figure out the proper siting, anchoring, and operating parameters required to run a fish farm so far from shore, but Brian, like any dedicated entrepreneur, was persistent. Resistance from local fishermen slowly turned into support when they realized they could get steady work delivering feed and materials to the farm sites while transporting harvested fish back to shore on a scheduled basis. But where did Brian set up shop, and why?

Panama. The reason? Regulations.

"Panama has a small and limited government, which made it easier to navigate the business and permitting process," explained Brian. "Deep water fish farming is so new that we wanted to work with agencies that were responsive and flexible. This was just not possible in the U.S."

Getting the required permits and licenses to operate a deep-water fish farm in the U.S. would require running the gantlet of dozens of federal and state regulatory agencies, some with overlapping jurisdictions and none with a mandate to lead the process. Agencies would include the Environmental Protection Agency, Army Corps of Engineers, Fish and Wildlife Service, Food and Drug Administration, and National Oceanic and Atmospheric Administration (NOAA). Regulations that would have to be complied with include the Magnuson-Stevens Fishery Conservation and Management Act, Jones Act, OSHA rules, and who knows how many others. Regional Fishery Management Councils and various state agencies involved in historic preservation and tourism would all have a say.

And all of this is before the courts get involved. Setting up deep-water fish farms in the U.S. would require a hefty budget for defending against lawsuits from NIMBY (Not In My Back Yard) activists and competing on-shore and near-shore fish farms, as well as paying an army of lobbyists to fend off opposition from states like Alaska and Maine where fishing fleet interests have considerable political pull. The cost and uncertainties introduced by dysfunctional crony capitalism, pay-to-play politicians, and misguided environmental activists would be deadly to any entrepreneur.

Hence Panama, which is great for Panamanians, as they get the jobs, the fish, and the export revenue, but not so great for us. Which is a shame, because the U.S. has the largest federal water zone in the world, with more ocean area suitable for deep-water fish farming than the country has arable land area. Different fish would have to be selected suited to the water temperature and conditions found in different regions, but there is no reason why you couldn't grow Cobia in the Gulf, striped bass up the mid Atlantic Coast, cod and halibut as far north as Maine, and a wide variety of species in the vast stretch between southern and northern California. That is, if anyone in their right mind would dare to start a business like this in California.

NOAA made several attempts a decade ago to promote a national aquatic farming initiative that would cut through the red tape and set up a one-stop-shop for deep-water fish farming permits. Bills were introduced in Congress twice but were shot down due to opposition from entrenched fishing interests. While this sort of short-term protectionism is always politically popular, the reality is that domestic fisheries continue to shrink due to catch limitations. A thriving deep water aquaculture industry could provide sustainable jobs for old fishing communities, repurposing much of the fishing fleet and dockside infrastructure to handle the new business.

Perhaps someday. As for now, Brian is focused on making his venture a success in a country that still understands the value of economic freedom.