Former lawyer starts largest kelp farm in North America
Two years ago, Markos Scheer was sitting pretty. He had a comfortable job working as an attorney at the Williams, Kastner & Gibbs law firm, representing seafood companies and fishermen that operated from California to the Bering Sea. His family was living quite happily in Seattle, Washington, U.S.A.
Then he started learning about the potential of mariculture in Alaska.
Now, Scheer is the CEO of Premium Aquatics, which just received a lease from the state of Alaska on 1 April to open a 127-acre kelp and shellfish farm in Doyle Bay, off Prince of Wales Island, near Craig, Alaska.
“I believe that this is a transformational moment and advancement of the Alaska mariculture industry, which has a great future for sustainable, renewable, and non-extraction based economic development for coastal Alaska and Alaskans,” he said.
In an interview with SeafoodSource, Scheer said that after getting increasingly interested in mariculture as a board member of the Alaska Fisheries Development Foundation, which helped to launch the Alaska Mariculture Initiative in 2013, he felt a calling to get more personally involved in the industry.
"I moved to Prince of Wales Island in 1982 with my mother, who was working in reforestation. From 1985 to 1997, I worked for a seafood company in Alaska, and for 20 years, I represented seafood companies [with interests in Alaska],” he said. “All of this fits together. Those interests brought me into the creation of the Alaska Mariculture Initiative, and that’s what opened the pathway to starting [Premium Aquatics].”
In a 2014 concept paper, the Alaska Mariculture Initiative concluded the mariculture sector in Alaska could become a USD 1 billion (EUR 892.9 million) industry within the next 30 years. Scheer said by delving deep into the data contained in the report, he saw “incredible potential” waiting to be unlocked.
“The elements are all there for success,” Scheer said. “Coastal Alaska is a perfect place for mariculture. Existing infrastructure – primarily processing plants for salmon – are under-capacity. There are 8,000 fishing vessels registered in Alaska that are only used for a short period in the summer for the salmon runs. And people in Alaska know how to work on boats and use fishing gear.”
Seaweed and bivalve aquaculture – the proposed usage for Premium Aquatics’ farm – is also one of the most sustainable types of seafood production, Scheer said.
“It has such a good message of blending economic development and stewardship. I saw mariculture had this incredible ability to help build an industry that is sustainable and renewable and helps the people and economic development of coastal Alaska,” he said. “I spent a number of years studying it, and I saw there was just this need for someone to go out and do it. Eventually, I started thinking that maybe that guy ought to be me.”
Scheer founded Premium Aquatics in December 2016 and filed for his site lease in April 2017, meaning it took nearly two years to obtain his permit. But getting the state to approve the lease was not the hardest task Scheer had to achieve; fundraising was by far the trickiest part of the process.
“Start-ups are hard. Raising capital is hard. It took a lot of time. I knocked on a lot of doors,” Scheer said. “Everybody thought it was a great idea, but I was proposing doing something that has never done before in a place that has never seen this before.”
Some of Scheer's earliest investors were Jeb Towne and Bob Desautel and his company, Global Seas LLC. Though the capital round closed in December 2018, they joined in the spring of 2017.
“They saw the vision I had for the company and have been great partners, supporters, and were instrumental in helping the company get capitalized,” he said.
Of his other investors, all are familiar with operating in Alaska, which was key for Scheer.
“They had to know what that meant. We’re talking higher costs, the realities of the weather the area often experiences, the distance to market,” he said. “I understood that and wanted them to as well. They’re aware of the challenges and opportunities and they’ve all reached a point where they want to participate in this.”
Now that his lease is in hand, Scheer said he hopes to begin production this year. Scheer said Premium Aquatics will remain the parent company for both the shellfish and seaweed production divisions, while Seagrove Kelp Co. will be the brand that the kelp will be marketed under. At 127 acres, the Premium Aquatics farm is the largest mariculture lease ever issued by the state by a large margin – the previous largest was 23 acres. About 100 acres of the site will be dedicated to growing bull kelp (nereocystis Luetkeana), sugar kelp (saccharina Latissimi), and ribbon kelp (alaria Marginata), making it what Scheer believes is the largest kelp farm in North America. Scheer said his development plan also calls for production of Pacific oysters (Magallana gigas) on 27 acres as early as 2020.
Scheer is limited what he can grow by a state law that requires all mariculture products to be indigenous to Alaska. The one exception to the law is the Pacific oyster, which was grandfathered in as it was under cultivation before Alaska became a state.
“These three kelp species grow in significant amounts near our site, so we can grow any of them, and we can grow them to spec. The goal is to find what the end user needs and do that,” Scheer said.
Scheer said his professional legal background helped him clear the complicated path toward starting his farm. He said Alaska’s mariculture laws, which were enacted in 1988, weren’t impossible to navigate, but “could be better.”
“There are always policy things that can be worked on to make the process more efficient and effective, but I think the system is pretty good overall,” he said.
Scheer said a new kelp hatchery is perhaps the most exciting part of the project. The nursery is the result of another law that requires a mariculture company to source seed from within 50 kilometers of the location the farm site. He describes it as a “greenhouse for baby kelp plants,” and it’s being built near Ketchikan in conjunction with OceansAlaska, a nonprofit marine science and seed production facility. Premium Aquatics signed a 10-year-deal OceansAlaska to work with it to produce kelp seed, and Scheer he’s hopeful the project will provide his farm with enough seed to cover his entire acreage.
“We are currently constructing the kelp nursery and it should be operational by June. That will allow us to test our systems over the summer. The goal is to have seeded line in the water starting 1 October,” Scheer said. “All the species we’re growing are annual plants, meaning we plant them in the fall and harvest them the following spring.”
The seasonality of kelp and oyster farming is perfectly timed with Alaska’s existing fishing seasons, particularly salmon, Scheer explained.
“We’re busiest early spring – from early April to early May, which great timing because it’s pre-salmon runs, meaning all the infrastructure – the processing facilities, fishing boats, and fishermen, aren’t engaged at the time and can be used to support kelp production,” he said.
The most difficult challenge Scheer foresees is marketing.
“The global kelp industry is massive – around 30 million tons of kelp is sold worldwide every year. But the vast majority of that is grown and sold in China, Korea, and Japan,” he said. “Domestically, there’s a commodity market for kelp, but the value isn’t as high as it could be. There’s also carrageenan production and kelp meal. Ideally, we can get into foodie circles and market our products as high-end and boutique, which they will be. I’m working on it – there are conversations happening, but I don’t have any product to sell yet, and I can’t sell something I don’t have yet.”
Scheer said that he and his investors have run the numbers many times, and if the operation reaches an appropriate economy of scale, it should be profitable.
“The economics work. We were very thorough in our business plan in doing sound financial analysis,” he said. “Even without counting on future oyster production, there’s a place in there where the economics play out with the kelp, though multitrophic farms with kelp and oysters add to more profitability because of the benefits of them being in the same location – there’s efficiency in doing both products at the same site.”
Many eyes are watching the project to see how it does, Scheer said.
“There’s lots of interest in the economic model, but somebody’s got to go prove it works first, and I guess that’s got to be me,” he said.
Now, as the project get underway in earnest, Scheer said he’s excited for the challenges that lie ahead.
“This is just a such a paradigm shift for Alaska and coastal Alaska. It’s a big challenge. In a way, it’s a culmination of everything I’ve done. And I feel ready,” he said, adding after a pause. “Maybe I am a little crazy.”