Bion Environmental Technologies, Inc., has developed innovative waste management solutions for the livestock industry since 1989. Our patented third-generation technology platform largely eliminates the environmental impacts of large-scale livestock production, while recycling resources in the waste stream into high-value commercial products. We have simultaneously advanced public policy initiatives that are supported by national livestock interests, which will help the industry offset the costs of adopting waste treatment technology. The strategy provides both meaningful clean air and clean water improvements, as well as with dramatic savings to taxpayers.
Technology, coupled with policy change, will generate the recurring revenues needed to support the industry’s transition to clean production. Clean production technology is a catalyst for transformational opportunities in the food industry, including the integration of environmentally-sustainable large-scale livestock production with downstream processing and distribution to produce a truly sustainable brand.
Our current clean water strategy is clearly failing. For centuries we have used raw, untreated manure for fertilizer. Today, about half of the crops grown in the U.S. are fertilized this way. The practice cannot continue at current levels, as evidenced by widespread algae blooms that are increasingly toxic, dead zones, and contaminated groundwater. While the livestock industry is one of the largest contributors to our water quality problems, it is also their low-cost solution. Many producers have recognized this opportunity to provide high impact clean water solutions. Large-scale facilities, where concentration and scale enable the most cost-effective cleanup, offer the best opportunities to begin. It is no longer a question of if it gets cleaned up, it is a question of how it gets funded.
The $200B U.S. animal-protein industry is a fragmented, low-margin commodity business. Cleaning it up will have to be orderly and contain a path to sustainability that does not cause U.S. food costs to spike or bankrupt the industry. Global export is a significant part of the U.S. livestock production industry; an abrupt increase in federal regulation would create costs that could not be absorbed by the industry and remain competitive in international markets. Selective state regulation would have a similar chilling effect within the U.S., since regulated producers in one state would be unable to compete with unregulated producers in adjoining states. Subsidies and/or new revenue sources are required.
Reallocating some part of the $110 billion in U.S. taxpayer-funded clean water spending to lower-cost alternative solutions in agriculture is inevitable. It will provide the taxpayer with accelerated and substantially lower-cost verified air and water quality solutions, compared to our current strategy. In return, it will provide the livestock industry with the recurring revenues that are needed to offset technology adoption without major disruption to the industry. To date, a wide range of entrenched and opposed interests have fought policy change that might reallocate spending to more cost-effective alternatives; but this common-sense approach is being accepted by a widening group of stakeholders.
A bipartisan 2013 Pennsylvania legislative study projected that creating a competitive bidding program, to procure nitrogen reductions to meet federal Chesapeake Bay mandates, regardless of source, could reduce the state’s tax- and ratepayer-funded compliance costs by up to 80% ($1.5B annually). The legislative study was updated in 2018 to reflect new policies; it now projects savings of nearly 95 percent – $340 million in costs versus $6.5 billion. As discussed in the original study, much of the savings were due to low-cost high-impact manure control projects, like Bion’s technology provides.
Pennsylvania Senate Bill 799 was introduced to establish a competitive procurement program to unlock the opportunities identified in the LBFC study. The bill was supported by national livestock interests, key stakeholders and legislative leadership. In February 2018, the Pennsylvania Senate voted 47 to 2 in favor of Senate Bill 799. The bill was in the House when the legislative session ended in November 2018. SB 575 is the bill’s 2019 successor; it was introduced in the Senate in early June 2019, and has been unanimously approved in both the Environmental and Appropriations Committees. Bion is optimistic that the bill will be adopted by the Assembly and signed by the Governor in the current 2019 session.
In a 2017 Letter of Expectation to PA’s Dept of Environmental Protection, US EPA demonstrated its support of a procurement strategy to engage the private sector, as long as the credits are verified. In February 2019, US EPA issued a water quality trading memorandum that seeks “to modernize the agency’s water quality trading policies to leverage emerging technologies and facilitate broader adoption of market-based programs.” It is noteworthy that US EPA and national livestock industry representatives are in agreement on this strategy. A procurement strategy is also consistent with USDA and EPA support of Public Private Partnerships and OMB guidance that supports acquiring verified results vs. financing projects with uncertain outcomes and taxpayer risks. Strategies being developed in Pennsylvania and the Chesapeake Bay are expected to serve as a model for the 40 other states now seeking solutions to similar water quality problems.
Bion’s technology platform is focused on maximizing the value of the assets in the waste stream, along with verification of the pollution reductions that result from recovering and converting those assets to commercial products. Recurring revenue sources generated in Bion’s business model include the capture of renewable natural gas and nutrients that are currently being wasted or underutilized. Bion’s platform converts the nutrients into high-value commercial fertilizer and/or feed additive products. Natural gas can be used on-site or cleaned and injected into a pipeline.
Third-party verification, throughout asset recovery and production of commercial products, will generate revenues from renewable energy and nutrient credits. Adoption of a procurement strategy, like SB 799 in PA, will open a large market for nutrient credits. Under certain conditions, high-value credits (RINS) for converting biogas to transportation fuel are available under the federal Renewable Fuel Standard, as well as additional credits under the west-coast’s Low-Carbon Fuel Standard.
The same data used for the credit-verification process provides the basis for a USDA-certified sustainable brand. Bion has received conditional approval from USDA PVP (Process Verified Program), based on final inspections, for certification of its second-generation system’s dramatic reductions in nutrients, greenhouse gases and pathogens in the waste stream. Bion will apply for the same certification on its third generation technology.
What is sustainability? Sustainable food production encompasses an expanding portfolio of regulatory and consumer concerns over food safety; environmental footprint related to water and air; and shared values, such as humane treatment of animals. Sustainability will evolve into a standardized rating/scoring framework that will be backed by the kind the quantitative metrics that Bion’s technology platform can supply today. Those metrics can be conveyed to the consumer at the point-of-sale with a bar-coded brand backed by data that is certified by USDA.
Various independent market studies demonstrate that consumers will pay premium prices for safe and sustainably-produced products. The USDA’s Process-Verified-Program (PVP) is the gold standard in food production. Further, the food industry cannot successfully address sustainability without dealing with the production side of the supply chain, where most of the environmental and public health impacts occur.
Technology adoption will create many opportunities, including a retrofit market for technology providers. In the U.S. alone, there are approximately 90 million cows, 60 million swine and more than 2 billion poultry that produce 1.5 billion tons of manure waste annually. This market opportunity is essentially untapped. Today, most U.S. production takes place on large-scale facilities. Bion’s technology is best suited to the largest operations, where increasing scale and concentration drives lower treatment costs and higher asset recovery efficiencies.
Bion’s business model significantly expands on the clean up opportunity by focusing on the transformational opportunity for integration that will result. Integration of large-scale sustainable production with processing and distribution, creates the opportunity to control a sustainable brand down the supply chain to the consumer. Bion models – developed with industry representatives – indicate successful integration of production, processing, and distribution, will increase the enterprise value of the integrated production component by a factor of two to three (or more).
Early adopters in the transition to clean practices will benefit inordinately for several reasons: dramatic improvements in operational efficiencies; front-loaded policy-driven incentives; capturing the highest-value byproduct markets; and first to market with a sustainable brand. As a technology and policy leader, Bion is positioned to be among the first in this evolving opportunity. Bion is now poised to initiate its Kreider project, to provide waste treatment and recovery for up to nine million egg-layer chickens.
The animal protein industry now faces a perfect storm of operational and logistical challenges, looming regulation, eroding markets and declining consumer trust – all a result of the environmental and public health impacts of its waste. Bion’s assets – the third-generation technology, the policy framework, the key industry relationships and credibility, the Kreider project – are a result of more than 25 years of work and R&D.
Bion’s platform allows truly sustainable production, with verified metrics that can be translated down the supply chain to the consumer. Major national livestock interests are ready to embrace sustainable production. They support key policy changes proposed by Bion that are also supported by US EPA and USDA. The transition has already begun – Bion is positioned for success as it evolves.
This document includes forward-looking statements based on Bion management’s current reasonable business expectations. In this document, the words ‘will’, ‘optimistic’, ‘inevitable’ and similar expressions identify certain forward-looking statements. These statements are made in reliance on the Private Securities Litigation Reform Act, Section 27A of the Securities act of 1933, as amended. There are numerous risks and uncertainties that could result in actual results differing materially from expected outcomes. Potential investors should carefully review the materials and disclosures on Bion’s website www.biontech.com and its SEC filings.