The economic impact of proposed effluent treatment options for production of trout Oncorhynchus mykiss in flow-through systems

Abstract The United States Environmental Protection Agency has considered several treatment options for flow-through systems in its Effluent Limitation Guidelines rulemaking effort on aquaculture. However, the economic effects of treating effluents can impose high costs on aquaculture businesses, depending upon the treatment option selected. Survey data from trout farmers in North Carolina and Idaho were used to develop enterprise budgets, a spreadsheet-based risk analysis, and mathematical programming models of medium-sized trout farms in North Carolina (68,182 kg/yr) and Idaho (90,909 kg/yr) and large trout farms in Idaho (1,136,364 kg/yr). These analyses were used to examine the effect of imposing five different effluent treatment options on the net returns of farms raising trout in raceways. Budget analyses showed that the trout farm scenarios considered were generally profitable, although the medium-sized farms exhibited low levels of profitability. All five proposed effluent treatment options resulted in negative net returns for the medium-sized farms in both North Carolina and Idaho. The large farm scenario showed positive net returns after adding costs associated with the affluent treatment options considered, but the risk of generating positive net returns decreased from 82–84% to 10–11%. Thus, financial risk increased considerably when treatment options were imposed. The mixed-integer mathematical programming model demonstrated sensitivities to the level of credit reserves both for operating and investment capital. The effluent treatment options imposed on the models were not economically feasible at the levels of capital available on most trout farms. Subsequent runs of the model used investment capital requirements of treatment options at 50% of the original estimates. The models showed that imposing effluent treatment options forced farms to substitute production units for treatment facilities. This results from a combination of: 1) the additional capital requirements of the treatment options; 2) limited availability of credit reserves; and 3) competing uses for land in trout farming areas that put upward pressure on land prices. Many of the proposed treatment options included substantial investment capital requirements that increased annual fixed costs. Limited availability of investment capital prevented the farm expansion that would be needed to spread the increased fixed costs; hence, the models were forced to remove units from production to meet treatment constraints. Net returns decreased because farms were forced to operate at inefficient levels.