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Technology Investing News Featured Stock
Bion Environmental Technologies Inc. – Efficient, Low-Cost Livestock Waste Treatment Technology
Overview
Bion Environmental Technologies Inc. (OTCQB:BNET) has developed a proprietary technology platform aimed at reducing costs and improving efficiencies in both the multi-billion dollar water treatment sector and dairy/meat/egg production industries.
Bion is well-positioned to capture a significant portion of the billions of dollars in spending that must come into this evolving cleantech space — the Company’s technology can reduce water pollution at a fraction of the cost U.S. taxpayers are currently spending on outdated water treatment strategies, while simultaneously improving efficiencies in livestock production, processing and distribution.
Bion’s Kreider Farms project demonstrates that the Company’s livestock waste treatment technology can resolve major environmental and public health issues, reduce costs to all stakeholders, spur economic growth in rural communities, and provide investment opportunities in a newly-developing sector.
Investment Highlights
- Groundbreaking technology developed and proven over the last 24 years
- Excess nutrients now recognized by US EPA as “greatest water quality problem in the US today”
- Bion conservatively estimates the market for nutrient reductions in the US alone at $8 to $10 billion annually
- There is no other known cost-effective technology that provides Bion’s level of treatment of wet livestock waste
- Bion’s treatment solutions are scalable, proven in commercial operations and have been accepted by EPA, US Department of Agriculture and other regulatory agencies
- It is currently the only wet livestock waste (dairy, beef, swine) management solution that provides verified nutrient reductions that can be used as a qualified offset to EPA-mandated requirements
- Bion currently holds 7 US and 6 international patents and has applied for new patents on its third generation technology
- Recently qualified by USDA/Rural Development Technical Assessment for programs that provide loan guarantees up to $250M
Costly Clean-Up of Unregulated Livestock Waste from U.S. Watersheds
“Bion’s technology platform provides a comprehensive cleantech ‘makeover’ for large-scale livestock production. We can substantially reduce, and in some cases almost eliminate, the environmental and health impacts associated with livestock waste, while simultaneously providing significant improvements in resource and operational efficiencies throughout the supply chain,” states Craig Scott, Bion’s Director of Communications.
Government expenditures on wastewater treatment are rising: from $1.7 trillion from 1956 to 2000 ($38 million/year) to $870 billion from 2001 and 2010 ($87 million/year) to $114 billion spent in 2010 alone. That figure is believed to be at least 10% to 20% higher in 2015.
The primary cost driver in wastewater treatment: nutrient removal
The EPA identified excessive levels of nitrogen and phosphorus as the greatest threat to water quality in the United States. More than a billion pounds of nitrogen and phosphorus need to be reduced in the Mississippi River Basin, Great Lakes and Chesapeake Bay watersheds to restore water quality.
Under the 1972 Clean Water Act (CWA), the large majority of the above spending has been spent successfully reducing waste from “point sources”, which are anything with a smokestack or a discharge pipe with measurable discharge (e.g., power, water treatment, food processing and manufacturing plants).
But the real problem today is excess nutrient run-off from the agricultural industry, which now accounts for 70% to 90% of the excess nutrients in most major U.S. watersheds. More specifically, livestock waste is one of the largest sources of nitrogen and phosphorus in most major watersheds and also contains high amounts of pathogens, ammonia, greenhouse gases, and antibiotics.
Since the passage of the CWA, the livestock industry has undergone tremendous expansion and consolidation, leading to ever-larger CAFOs (Concentrated Animal Feeding Operations). Today, well over 60 percent of U.S. livestock production comes from these large scale facilities. CAFOs still dispose of their waste the way small farmers have for centuries: by spreading it on the ground, essentially untreated, for its nutrient/fertilizer value. Although they are much like an industrial point-source manufacturing facility, CAFOs, because of their agricultural status, are considered non-point sources and operate under a ‘nutrient management plan’. Under the CWA, they enjoy significantly less regulation than a point source.
“Livestock production is one of the largest, if not THE largest, unregulated “man made” sources of pollution in the U.S. and in the world. In the U.S., it has been subject to very little regulation compared to point sources, so there is tremendous room for improvement. With onsite treatment like Bion’s technology provides, nutrient reductions can be achieved very cost-effectively,” added Craig Scott.
The U.S. livestock inventory includes more than 9 million dairy cows, 80 million cattle, 62 million swine and more than 2 billion poultry. These animals produce an estimated total of 1.5 billion tons in livestock waste each year; 300 million tons is produced just from feedlots according to a recent Bloomberg article. However, agriculture is considered a “non-point source” and is not regulated under the Clean Water Act.
“Currently, the problem is not being dealt with at its source,” said Craig Scott. “Instead, billions of dollars are being spent to upgrade downstream waste treatment plants and to construct large-scale stormwater projects that re-collect and treat the nutrients AFTER they have been released to contaminate the environment. This is not an acceptable solution – from either a cost or a common sense perspective.”
Mr. Scott added, “A critical recent development from our perspective is that a growing number of livestock industry producers, including most of the U.S. dairy industry, support a new market-driven strategy that encourages the industry to participate in more meaningful watershed cleanup. Engaging the private sector and especially livestock production will provide large-scale solutions that will accelerate cleanup and drive down current taxpayer-funded costs.”
Bion’s Efficient, Low-Cost Livestock Waste Treatment Technology
Bion Environmental Technologies’ proven comprehensive environmental management systems can recover up to 95% of nitrogen and phosphorus from livestock waste, reduce greenhouse gases and ammonia emissions by 90%, and substantially reduce pathogens, and antibiotics from the waste stream. Over $100 million has been invested in developing this technology over the past 24 years.
Bion’s second generation (2G) technology has been proven in commercial operations. At its core is a biological process that facilitates the growth of large populations of naturally-occurring bacteria that convert nitrogen and phosphorus in the waste stream to solid forms that are removable by other processes. Some of the nitrogen is released as a harmless and inert gas. Bion’s systems also create new revenue sources through the extraction of renewable energy and the production of value-added products such as fertilizer and soil amendment products and potentially feed additives.
Bion’s 2G treatment solution is protected by seven U.S. and six international patents, and have been accepted by the EPA, U.S. Department of Agriculture (USDA) and other regulatory agencies. Patents are pending in the European Union, New Zealand, Mexico, Brazil, Argentina and Australia. Bion began applying for patent protection for its next generation of technology in September 2014. The USDA, under their Technical Assessment review process, recently reviewed and qualified Bion’s technology platform.
“USDA’s Technical Assessment is the most rigorous technology vetting for anything to do with renewable energy production in the United States,” explained Mr. Scott. “The successful review indicates that Bion’s projects will qualify for federal loan guarantees of up to $250 million per project. Most of our projects would cost significantly less than that. However, the takeaway from this is that the USDA has confirmed the technology does what we claim. And it is the only technology today that can provide qualified offsets to U.S. EPA nutrient mandates from treatment of a wet livestock waste stream.”
No other wet livestock waste treatment technology can match Bion in efficiency and cost reductions.
Bion is finalizing R&D on its third generation (3G) technology, on which it has filed two patents and expects to file more. The company plans to build a commercial-scale pilot in the near future. The 3G technology provides substantially greater resource recovery, including pipeline-quality natural gas and a high-value ‘pure’ nitrogen product that Bion believes will meet OMRI (Organic Materials Research Institute) standards for certification in organic production. An organic certification would translate to substantially higher pricing in the fertilizer markets. According to the company, the 3G is a real ‘Game Changer’ that essentially eliminates the company’s dependence on policy change to establish a nutrient credit market.
Opportunities for Bion Technology
Chesapeake Bay: Strategic U.S. watershed at risk
The Chesapeake Bay is the largest estuary in the United States, with about 150 streams, creeks and rivers draining into the watershed. Chesapeake Bay is one of the most severely degraded watersheds in the nation, suffering from frequent algal blooms and declining fish, crab and oyster populations.
In 2010, under an Executive Order, the EPA established the Chesapeake Bay Total Maximum Daily Load (TMDL) – the maximum amount of pollutants that the water body can receive and still meet water quality standards. The TMDL calls for significant reductions in excess nutrients and sediment that flow into the Bay and includes heavy penalties for non-compliance. The reductions include approximately 78 million pounds of nitrogen annually. The TMDL requires that practices are in place by 2017 to meet 60% of the overall nitrogen, phosphorus and sediment reductions and that all pollution control measures needed to fully restore the Bay and its tidal rivers are in place by 2025.
Pennsylvania: Legislation to establish a program to acquire competitively-bid verified nitrogen reductions
Under the Chesapeake Bay TMDL, the state of Pennsylvania is responsible for reducing nearly half of the excess nitrogen in the Chesapeake Bay. However, Pennsylvania has fallen far behind in meeting its mandated nitrogen targets. The state acknowledged in will default on its 2017 nitrogen target by more than 14.6 million pounds and could face expensive sanctions from the EPA as detailed in a Special Report issued by the State’s Auditor General in April 2015. While there have been threats of federal funding cuts to the Bay efforts, the Trump Administration has also stated that there will be no rollback on Bay regulations, making it even more critical for Pennsylvania to acquire lower-cost alternatives.
PA Senate Bill 1401, the Watershed Improvement Act, was introduced at the end of the PA 2015-16 legislative session (see October 31, 2016 Bion news release). The Bill seeks to establish a competitive procurement program for verified nutrient reductions which will enable private-sector companies such as Bion to compete for public funding on an equal basis with public works and storm water authorities – based on cost. SB 1401 was in response to a 2013 PA legislative study that estimated 80 percent savings in Chesapeake Bay compliance costs if such a program were implemented. Recently, Bion has stated that it is highly confident that competitive bidding legislation will be enacted in the current session that ends in June 2017.
Bion Environmental Technologies is a founding member of the Coalition for an Affordable Bay Solution, formed to support the creation of a competitively bid nitrogen trading program in Pennsylvania. The Coalition includes JBS (the largest livestock processor in the world) and is headed by Ed Schafer, Bion’s Executive Vice Chairman, a former U.S. Secretary of Agriculture and former Governor of North Dakota.
“Adoption of the SB 724 strategy will create public policy that can help Pennsylvania meet Federal compliance mandates while reducing costs to the Commonwealth’s taxpayers,” said Mr. Schafer. “Economic studies show a savings of up to $1.5 billion annually and also, by offsetting nutrient reduction costs, more than $100 million will flow into the agriculture and rural communities.”
The cost of current strategies and their ineffectiveness, the market-driven concepts embodied in SB 1401, the need for local water quality solutions, and EPA sanctions coming in 2017 – all are being considered by Pennsylvania’s legislature, administration and stakeholders. Bion believes a market-driven strategy will be adopted by Pennsylvania by the end of June that allows the private sector to compete for public funding based on cost and effectiveness. Bion is equally confident the credits it can verify through livestock waste treatment represent the only large-scale low-cost solution at this time.
Kreider Farms: The only livestock facility that generates verified reductions from treatment of dairy waste
“A large part of Bion’s share value proposition rests in market validation of our technology,” explains Craig Scott. “We know the technology works. It is not valued by the Street because, to date, water quality efforts have been left to government and NGOs, so there has not been a private sector treatment strategy, so no corresponding ‘investment space’. With the obvious failure of our current strategy, we believe we are very close to the implementation of a market-driven strategy, as recommended by US EPA, USDA, and US OMB, as well as notable bi- or non-partisan studies. We also believe we are near the tipping point when the Street realizes these reforms must inevitably take place. What will our proven technology be worth then?”
Located in Pennsylvania, Bion Environmental Technologies’ Kreider Farms project is part of one of the largest dairy/poultry operations in the Chesapeake Bay watershed. The Phase 1 dairy waste treatment project at Kreider Farms has been in operation for nearly five years and includes a total of 1,200 dairy cows. The project was financed by PENNVEST (the Pennsylvania Infrastructure Investment Authority) and has been issued the first-ever full water quality permit for a livestock facility in the U.S.
Phase 2, which will include up to 9 million chickens, is currently slated for development in 2017. Combined, both phases of the Kreider Farms projects are expected to produce about 2 million pounds of verified nitrogen reductions annually to the Chesapeake Bay, based on calculations using the latest site-specific models. Further, the projects will provide significant additional environmental and economic benefits to the local area.
If Senate Bill 1401 or a similar market-driven strategy is adopted, Bion and other technology providers will compete to sell these reductions to Pennsylvania under long term contracts. Bion expects that verified credits will have a value of at least $8 per credit, consistent with the PA legislative study.
Once fully operational, the Kreider Farms projects are projected to generate revenues of approximately $13 million annually from nutrient reduction credits alone, assuming $8 per credit and using the latest site-specific models to calculate actual reductions to the Chesapeake Bay. Substantial additional revenues from energy, other credits and by-product sales are also expected to push revenues over $40 million.
Market-driven strategy best path to low-cost solution
A 2015 report by the University of Maryland’s Environmental Finance Center validates the need for a more efficient, market-driven approach to state compliance with the EPA-mandated reductions.
“There is no shortage of private capital available for financing environmental projects; what has been missing is the appropriate structure and risk profiles associated with the necessary investments,” state the report’s authors. “It is essential that financing and funding decisions be made based on efficiency and effectiveness of projects rather than political outcomes and motivations.”
Livestock waste is acknowledged as one of the largest sources of excess nutrients in the watershed as demonstrated by recent court cases including one in which a U.S. federal court in Washington ruled that manure from livestock facilities can be regulated as solid waste. While this case was settled, several others are ongoing in federal court. Innovative solutions like Bion’s waste treatment technology can provide large-scale reductions at dramatically lower cost than other sectors, such as municipal wastewater treatment and storm water.
Policies are changing now,” added Mr. Scott. “The strategies that are being developed today to restore the Chesapeake Bay can serve as a model for the many states in the Mississippi River Basin, Great Lakes and other watersheds that suffer from similar issues. Verified credits create a common currency that can be used to offset EPA-mandated requirements that will provide opportunity and stimulate investment from the private sector. The livestock industry is ready to engage; large-scale solutions from livestock waste treatment will drive down costs, speed implementation, spur rural economic growth and provide invaluable environmental benefits to those local upstream communities.”
Management
Mark A. Smith – Chairman & President
Mark A. Smith has been President, General Counsel, interim Chief Financial Officer and a director of Bion Environmental Technologies, Inc. since late March 2003. Since that time, he has also served as sole director, President and General Counsel of Bion’s wholly-owned subsidiaries including Bion Services Group. Since 1992 Mr. Smith has served Bion in various senior positions including director, Chairman and President.
Mr. Smith received a Juris Doctor Degree from the University of Colorado School of Law, Boulder, Colorado (1980) and a BS from Amherst College, Amherst, Massachusetts (1971). Mr. Smith has engaged in the private practice of law in Colorado since 1980. In addition, Mr. Smith has been active in running private family companies, Stonehenge Corporation (until 1994) and LoTayLingKyur, Inc. (1994-2002). Until returning to Bion during March 2003, Mr. Smith had been in retirement with focus on charitable work and spiritual retreat.
Dominic Bassani – CEO
Dominic Bassani was promoted to Chief Executive Officer in May 2011. He had previously served as the General Manager of Bion Integrated Projects Group (then Bion Dairy) (‘Projects Group’) from April 2003 through September 2006 and as a consultant (through Bright Capital, Ltd. (“Brightcap”)) on a full-time basis with focus on strategic planning and special projects. He has been an investor in and consultant to Bion since December 1999. As an independent investor, since 1990 he has owned and operated Brightcap, a management consulting company that provides management services to early stage technology companies.
Mr. Bassani was a founding investor in 1993 in Initial Acquisition Corp. that subsequently merged in 1995 with Hollis Eden Corp. (HEPH), a biotech company specializing in immune response drugs. From early 1998 until June 1999 he was a consultant to Internet Commerce Corp. (ICCA), a leader in business-to-business transactions using the Internet. He is presently an investor in numerous private and public companies primarily in technology related businesses. From 1980 until 1986, Mr. Bassani focused primarily on providing management reorganization services to manufacturing companies and in particular to generic pharmaceutical manufacturers and their financial sponsors.
Ed Schafer – Executive Vice Chairman
Ed Schafer joined Bion in August, 2010, as Executive Vice Chairman, to provide Bion with strategic advice, focusing on areas of public policy related to the livestock industry both domestically and internationally. Commencing in early 2011, Mr. Schafer became a key member of Bion’s three-person senior management team with direct management responsibility for Bion’s: a) state and federal government interfaces, b) relationships with the agriculture (including livestock) industry, and c) international initiatives in Asia and the Middle East.
Mr. Schafer was the US Secretary of Agriculture from 2008 to 2009 and Governor of North Dakota from 1992 to 2000. In addition to his public sector experience, he has successfully led a multi-national consumer products business and several entrepreneurial start-up companies. Mr. Schafer graduated from the University of North Dakota with a Bachelor of Science degree in business, earned a Master of Business Administration at the University of Denver, and has been awarded two honorary doctorate degrees. Mr. Schafer has served on public and private corporate boards of directors and held leadership positions in foundations and trade associations. He is also an active member of many civic and service organizations.
Craig Scott – Director of Communications
Craig Scott rejoined Bion Environmental Technologies as a full-time employee in June 2007 and is now the Director of Communications. Mr. Scott participated in several private placements for Bion in 1993 when he was then licensed with the National Association of Securities Dealers (NASD) as a registered representative. He left the securities industry in 1996 to take a position with Bion where he was instrumental in business development, capital raising and developing public and market awareness of Bion. Since 1996, Mr. Scott has held various full- and part-time, as well as consulting, positions with the Company.
Mr. Scott was licensed with the NASD in 1981 and primarily focused on marketing, but he is experienced in many facets of the securities industry, including investment banking, syndication, trading and compliance. He was successful in raising substantial capital and increasing institutional ownership and market awareness of two AMEX-traded energy companies from 2003 through 2006 and is experienced in dealing with large institutional investors and sell-side firms as well as investment advisors and brokers from smaller regional to large national firms.
Jon Northrop – Secretary
Jon Northrop has served as our Secretary and a Director since March of 2003. Since September 2001 he has been self employed as a consultant with a practice focused on business buyer advocacy. Mr. Northrop is one of our founders and served as our Chief Executive Officer and a Director from our inception in September 1989 until August 2001. Mr. Northrop has a bachelor’s degree in Physics from Amherst College, Amherst, Massachusetts (1965), an MBA in Finance 2 from the University of Chicago, Chicago, Illinois (1969), and spent several years conducting post graduate research in low energy particle physics at Case Institute of Technology, Cleveland, Ohio. Jon Northrop is the brother of Jere Northrop.
Before founding Bion Technologies, Inc., Mr. Northrop served in a wide variety of managerial and executive positions. He was most recently the Executive Director of Davis, Graham & Stubbs, one of Denver’s largest law firms, from 1981 to 1989. Prior to his law firm experience, Mr. Northrop worked at Samsonite Corporation’s Luggage Division in Denver, Colorado, for over 12 years. His experience was in all aspects of manufacturing, systems design and implementation, and planning and finance, ending with three years as the Division’s Vice President, Finance.
Jeremy Rowland – Chief Operating Officer
Jeremy Rowland transitioned to a consultant in December 2013. Mr. Rowland joined Bion in September 2006 as its Chief Operating Officer of Projects Group and Chief Operating Officer of Bion Services Group .Mr. Rowland earned his MS in Environmental Science in 1987 and his BS in Forest Ecology in 1985 from Southern Illinois University, School of Agriculture Science. Prior to joining Bion, he worked for URS Corporation, a major national engineering/consulting firm, for 16 years where he developed and lead URS’s efforts in the renewable energy marketplace. Mr. Rowland has eighteen years experience in multi-disciplinary energy and environmental project development and management throughout the U.S. and overseas. Mr. Rowland’s areas of expertise include renewable energy project development, distributed generation (mostly combined heat/power), large-scale power plant developments, and strategic energy management.