A more than two-decade old effort to turn Hawai'i's ocean waters into a thriving aquaculture industry appears to be paying off.

Hawai'i's two open-ocean fish farms have big expansion plans. Kona Blue Water Farms LLC plans to triple in size, while Cates International Inc. recently landed up to $4.5 million in financing from a company owned by AOL founder Steve Case.

Meanwhile, the federal government is pushing plans that would make it easier for companies to open fish farms in federal waters, which are three or more miles offshore. Interest in offshore fish farming comes amid increased concerns that wild fish harvests can't fulfill the world's growing appetite for seafood.

One alternative is to raise fish in offshore cages, a process being pioneered in Hawai'i where deep waters, strong currents and warm ocean temperatures make for ideal growing conditions.

"I think the timing is very ripe," said Neil Sims, president of Kona Blue. "People are coming to the realization that the wild seafood system can't sustain more pressure. At the same time, studies showing the health benefits of seafood are becoming increasingly apparent. All of this is coming together at the same time that the engineering is allowing us to move further into offshore waters."

Offshore fish farming is a promising component of Hawai'i's $28 million aquaculture industry, providing the potential for skilled jobs in rural areas of the state, according to proponents. Growing fish in their natural environment is more cost-effective than in tanks on land in part because there's no need to remove waste or drive pumps to aerate the water. In addition, offshore acreage represents a potentially cheaper and untapped area for aquaculture.

RAISED IN PENS

However, the push to grow fish in ocean cages also has fueled environmental concerns about concentrated waste discharge, the industry's reliance on fish meal to feed captive fish and potential conflicts with native species such as whales and recreational boating activities. Environmentalists also maintain that captive fish farms risk problems with parasites and disease.

State efforts to lease offshore lands for aquaculture started in 1981, but didn't really get underway until lawmakers agreed to lease offshore lands in the late 1990s. Currently the state leases 118 acres of ocean space to Kona Blue and Cates International. Cates International became the first company in the country to lease ocean space for commercial aquaculture in 2001, and Kona Blue was the second.

Hawai'i's leadership role in the industry's development is no fish story, said John Corbin, former manager for Hawai'i's state aquaculture development program.

"There's no doubt Hawai'i has been a leader," he said. "I think we're poised to capitalize on a policy commitment from the federal government to move aquaculture offshore."

Today, Kona Blue Water Farms LLC raises 50,000 fish in each of six underwater pens located in 200 feet of water off Keahole Point on the Big Island. Each of the pens generates about $1.2 million in annual revenues, the company has said. Kona Blue, which landed a $4 million investment in 2004 with help from state technology tax credits, currently employs 45 people.

EXPANSION PLANS

The company catches kahala, or amberjack, in the wild and uses eggs from the females to produce broodstock. At about three weeks of age, fish are transferred to offshore cages where they're fed a combination of fish meal and grain. Eight months to a year later, the fish, which weigh four to six pounds, are vacuumed from the pens and put on ice. The fish, which are sold under the trademarked name Kona Kampachi, can travel from ocean pen to dinner plate within 48 hours. The fish are sold in Hawai'i, on the U.S. Mainland and in Japan.

Kona Blue plans to add two more pens at its current location and in a month or so plans to seek state permission to install 12 more pens at a site a mile and a half away.

Kailua-based Cates International also is in expansion mode. Within months, that company also plans to seek a second ocean lease that would boost production capacity from about 1.5 million pounds to as much as 14 million pounds of moi annually, said Randy Cates, owner of Cates International.

"As we produce more fish there's less demand on ocean resources," he said.

The company harvests one-pound fish every six to seven months from four cages off 'Ewa Beach. However, Cates International has been operating at about 25 percent capacity because it has had difficulty stocking the cages with young fish, which are acquired from the Oceanic Institute at Makapu'u. Money received from Steve Case's Visionary LLC would be used to build a hatchery that could supply the operation with up to 18 million juvenile fish annually, Cates said.

The new operation will be called Grove Fish & Poi LLC, though the deal has yet to be finalized. The hatchery, which Cates hopes to complete within a year, would create at least 20 added jobs.

Cates International now employs seven people.

"Some people would say Hawai'i is sort of the laboratory if you want to look at where we're going," said William Hogarth, assistant administrator for the National Oceanic and Atmospheric Administration's fisheries service. "We think Hawai'i will be one of the foremost states to benefit moving forward."

UNCLE SAM INTERESTED

Currently, the United States does not have a regulatory structure in place to allow aquaculture operations in federal marine waters. NOAA recently resubmitted a bill to Congress that would permit fish farming up to 200 miles offshore. The program would not affect the state's authority to regulate operations within three miles of shore.

The push to permit offshore fish farms comes during a period of rising demand for seafood, Hogarth said. Meanwhile, wild fish captures are stable and can't continue to meet worldwide demand.

"I don't want the commercial industry to think the U.S. has given up on its commercial fishing," Hogarth said. "We're not. But we just know we can't produce" enough fish by catching them in the wild, he added. "And this is the way to complement it."

Reach Sean Hao at shao@honoluluadvertiser.com.