Secret and lucrative plans for the world’s biggest salmon farm around Orkney or Shetland would “abjectly” fail pollution limits and make “fools” of Scotland’s environmental watchdog, according to internal documents seen by the Sunday Herald.

The Scottish Environment Protection Agency (Sepa) has been privately considering proposals for a 6,000-8,000 tonne caged fish farm that its own expert says would be “utterly unsustainable”, threaten Sepa’s credibility, and profit the fish farm industry to the tune of tens of millions of pounds.

The amount of waste from the two-million-fish mega-farm proposed by multinational companies would be equivalent to the sewage from between 400,000 and 800,000 people, one Sepa report estimates. The population of Glasgow city is about 600,000.

The revelations have been greeted with shock and horror by environmentalists, who question why such a hugely damaging scheme is even being countenanced by Sepa. The fish farming industry, however, defends the plan as an “alternative approach” that would bring jobs, benefit the economy and improve sustainability.

Memos and emails released by Sepa under freedom of information law reveal that active proposals for a large “innovation” salmon farm were discussed with companies and the Scottish Government in 2015 and 2016. Orkney and Shetland were suggested as locations.

The proposal would smash Sepa’s current 2500-tonne limit on fish farms, the documents pointed out. “The best available predictive models suggest it will be utterly unsustainable,” said an internal Sepa briefing in May 2016.

Sepa’s fish farming specialist based in Orkney, Douglas Sinclair, pointed out that such a mega-farm would “clearly make the operator involved a large profit”. That could amount to an eight-figure sum over two years, he estimated.

“Sepa has been supportive of such a proposal in the past,” he said. It may be possible “to set aside the concerns and authorise a site that does not comply with existing policy requirements,” he added. “This might especially be the case where the proposal was in some sense experimental.”

Although such a plan would normally be advertised “this may be set aside in certain circumstances”, Sinclair said. The plan would be likely to stir “considerable public interest” and could be called in by Scottish ministers.

If it got the go-ahead and was found to fail pollution standards “then Sepa’s credibility would suffer,” he warned.

In an earlier memo to the government’s Marine Scotland in November 2015, Sinclair went further. “A site of the scale of that discussed or even some substantial fraction of that tonnage would likely abjectly fail to meet seabed quality standards,” he wrote.

“Establishing a site on a deploy and monitor basis with a biomass of 6,000 tonnes when sites around 1,000 tonnes are often seen to fail would make fools of us all but in particular Sepa.”

The Sunday Herald reported in January that Sepa was proposing to scrap limits on the mass of salmon that can be kept at fish farms in order to support the industry’s “growth agenda”. The fish farming industry is planning to double its business from £1.8 billion in 2016 to £3.6 billion by 2030.

A giant experimental farm has been dismissed as “crazy” by the campaigner who obtained the documents, Don Staniford from the Global Alliance Against Industrial Aquaculture. “If Sepa sanctions such stupidity in Scotland's already overcrowded coastal waters they would lose all credibility,” he said.

"Faced with increasing problems of sea lice infestation, chemical pollution and infectious diseases, common sense would dictate that salmon farming production decreases not increases. Sadly, common sense is not a currency Sepa or the Scottish Government is used to dealing with when it comes to their unflinching support for salmon farming.”

Dr Richard Luxmoore, senior nature conservation adviser for The National Trust for Scotland, warned that the proposed farm would emit “truly eye-watering” quantities of effluent. “I’m shocked to hear that Sepa is even considering a farm that they acknowledge would breach current pollution controls,” he said.

The Scottish Wildlife Trust is concerned about the risks of a mass escape of salmon. “It is hard to imagine anywhere on our coast where an 8,000 tonne installation could be placed without having an acute impact on the local environment,” said the trust’s marine planning officer, Dr Sam Collin.

The angling group, Salmon and Trout Conservation Scotland, was worried about the lice that can infest salmon cages. "Our primary concern would be the risk that such huge farms produce billions of parasitic sea lice, which then infect and seriously compromise the survival chances of wild salmon and sea trout,” said the group’s aquaculture campaigner, Guy Linley-Adams.

The fish farming industry, however, argued that companies had to innovate and explore options that were good for the Scottish economy. “If broad ranging discussions to look at new ideas and innovations are constantly viewed with suspicion then it will be extremely difficult for Scottish salmon to develop any further,” said Scott Landsburgh, chief executive of the Scottish Salmon Producers' Organisation.

Scottish Sea Farms said that it had proposed a site location that “could be used to demonstrate an alternative approach to how fish farms are regulated and operated today”. The idea was to invest in new technology to allow the industry to become more competitive and improve sustainability.

“The prize for Scotland was increased jobs, further investment with suppliers in Scotland and the development of modeling to inform improved environmental performance and regulation,” the company’s managing director Jim Gallagher told the Sunday Herald.

Another firm, Marine Harvest, confirmed it had been in discussion with Sepa, Marine Scotland and others to lift the 2,500-tonne limit on fish farms. “We launched details of our expansion plans back in 2009,” said the company’s manager, Steve Bracken.

“We outlined our aim to develop a number of larger farms in more exposed locations where there is a strong water flow. Ultimately decisions on the size of salmon farms will rest with Sepa.”

Sepa stressed that so far its assessment was that the environment could not be adequately protected from mega-farm pollution. “Sepa has therefore been unable to approve such proposals to date,” said the agency’s head of regulatory services in the north, Anne Anderson.

“There has been some discussion about the development of truly innovative techniques to substantially reduce the environmental impact of cage fish farms…If a future proposal included such breakthrough techniques, Sepa would always be willing to assess it.”

The Scottish Government backed Sepa’s work for a more sustainable aquaculture industry. “Following discussion with Sepa and Marine Scotland no application was made,” a spokesman pointed out.

Scotland’s fish farming industry “must strive to be a world leader in innovation and create a global model for sustainable growth but also learn from others and to be adaptable in our approach,” he added.