Hawai'i's first commercial open-ocean fish farm is seeking to quadruple the size of its operation raising moi off 'Ewa Beach.

Grove Farm Fish & Poi LLC, previously known as Cates International, is seeking to expand its state ocean lease from 28 acres to 61 acres, and quadruple the volume of its submerged pens to boost annual fish production from 1.2 million pounds to 5 million pounds.

The plan, if realized, would be a dramatic expansion in an industry that has huge potential but remains constrained despite Hawai'i being one of the pioneers for raising fish in offshore cages.

The Kailua-based company, which does business as Hukilau Foods LLC, is pursuing expansion three years after partnering with the Hawai'i-born founder of AOL, Steve Case, who bought Kaua'i's Grove Farm Co. nine years ago.

Hukilau Foods estimates that its expansion plan will result in $20 million in annual revenue. That's nearly half the $25 million in sales for Hawai'i's entire aquaculture industry in 2007, the latest year for which data is available.

"We have such a small industry when we get down to it," said Todd Low, manager of the state Department of Agriculture's Aquaculture Development Program, which supports the Hukilau Foods expansion plan.

HUGE DEMAND

The company's ambitious attempt comes at a time when Hawai'i's only other open-ocean fish farm was recently forced to downsize because of efficiency issues raising amberjack off the Big Island, while a third company hopes to get into the business raising bigeye tuna off the Big Island within two years.

Low said there is huge demand from consumers for local farm-raised fish, though open-ocean aquaculture faces economic, environmental and cultural issues that have challenged the industry from revolutionizing how people get the seafood they eat.

On the Big Island, Kona Blue Water Farms earlier this year said it would scale back annual production by 40 percent, from about 1 million pounds to 600,000 pounds.

Kona Blue has been losing money, partly because of transportation costs for exporting most of its product to the Mainland. The company uses eight 3,000-cubic-meter pens, and began commercial production in 2005 of amberjack, which is marketed as Kona Kampachi and also known as kahala or Hawaiian yellowtail.

A company called Hawaii Oceanic Technology Inc. formed in 2006 is seeking to lease 247 acres off the Big Island to raise bigeye tuna, or 'ahi, trademarked as King Ahi. The firm submitted a draft environmental impact statement to the state in February for a farm plan using 12 cages with an annual production capacity of 12 million pounds.

Hukilau Foods was established as Cates International by former commercial fisherman Randy Cates about nine years ago, and started with one submerged cage and a lease for up to four cages each measuring 3,000 square meters.

CAPACITY LIMITED

In 2003, the company received approval to deploy all four cages, but in recent years had run into difficulty obtaining enough young fish from a hatchery operated in partnership with the Oceanic Institute at Makapu'u, which limited capacity to 25 percent.

Cates said the problem was solved over the past two years after studying hatchery methods in Europe and improving the ability to produce large numbers of young fish economically.

"When you start to get up to large numbers, that's a big step," he said. "Now we need more cage space."

Hukilau Foods estimates its expansion will require $13 million in capital expected from private funds and a federal loan program.

The company is seeking approval from the state Department of Land and Natural Resources to amend its ocean lease to allow replacing the four cages with eight larger cages each measuring 6,000 square meters. The company also has submitted a draft environmental assessment to the department detailing its plan.

Though the size of the ocean lease area is more than doubling, the area for the cages will move relatively little, remaining about two miles off shore.

CHANGES SOUGHT

Among the changes sought is a restriction on diving and anchoring boats within the lease area, though boat traffic and fishing would still be allowed within the area.

The moi cages are submerged about 40 feet below the surface, and have acted somewhat like a natural reef attracting other fish to any area that previously had little life because of the sand bottom about 140 feet below.

Cates said there have been few instances of diving at the site, but that the company has concerns about the potential for entanglement or inexperienced divers being attracted to a deep dive site.

One commercial dive operator that doesn't take divers to the site said prohibiting diving in a public area leased from the state is a concern.

"No one owns the ocean," said Nick Fidelibus of Waikiki Dive Center and a board member of the Hawaiian Islands Recreational SCUBA Association.

Other concerns about the industry in general include caged fish producing concentrated waste, risks of disease and the reliance on fish meal to feed captive fish.

Hukilau Foods in its environmental assessment said water sampling over the past eight years has found no significant harm to the environment, largely because of the volume of water passing through the cages.

REALIGN CAGES

The company said its expansion plan will realign cages to the prevailing ocean current pattern to increase dilution of waste, while anchoring the cages in deeper water from 140 feet to 250 feet.

Cates also said the company has received no complaints since it began research testing at the site 10 years ago.

Hukilau Foods has attracted support from a variety of fishermen, fish distributors and chefs.

Case also has been a big supporter, investing more than $4.5 million and acquiring the company founded by Cates, who is now a part owner and chief executive officer.

"The quality, consistency and availability of your finfish product means a lot to our seafood program and the growing image of Hawai'i and its ocean products," Brooks Takenaka, assistant general manager of United Fishing Agency Ltd., wrote in a letter of support for Hukilau Foods.

CHEF'S SUPPORT

Roy Yamaguchi, chef and founder of Roy's Restaurant, also submitted a letter of support to bring more sustainable fish showcasing Hawai'i to consumers.

"Responsible farming of fish not only brings more product to the market, it takes the pressure off of the fragile ecosystem of the ocean that surrounds us," Yamaguchi said.

Hukilau Foods said the reported annual wild catch of moi, or Pacific threadfin, has averaged 690 pounds from 1997 to 2005. In cages, the company grows young fish a couple of inches long into one-pound market size in about seven months. The fish wholesales for about $4 a pound.

Cates said he's unsure how big the local demand for farmed moi can become, but he aims to supply the local market first. Presently, about 97 percent of the farmed moi is consumed in Hawai'i.

Cates estimates that the permitting process could take nine months, after which Hukilau Foods would expect to quickly deploy new cages. A new hatchery is about half built that will give the company a maximum capacity of producing 14 million pounds of fish a year. Though present cage plans allow for 5 million pounds, future expansion at other sites would be possible.

"There's a big market out there," Cates said. "Everybody is not going to eat moi, but I think we have a pretty good market to fulfill."