Douglas Island Pink and Chum has begun a two-phase expansion.
The hatchery has just broken ground on constructing its new storage warehouse, a project that could be completed by late winter to early spring.
Director of Operations Rick Focht said this will be a two-story building of about 6,900 square feet.
He said the work is being handled by local company North Pacific Erectors.
The second phase is still in development but could have the potential for production growth.
Focht said DIPAC is planning to start construction on a new raceway building next spring. It will house four new raceways to help expand chinook and coho production.
He said the general thought is it could allow increased production, up to a million additional smolts a year. He said DIPAC currently produces around 1.25 million smolts of chinook and coho annually.
The new raceway project will go out to bid later.