Proven Comprehensive Treatment and Resource Recovery for Livestock Waste

cleaner farms…cleaner water…cleaner air…better economics

Executive Summary – the Opportunity

Bion’s technology largely eliminates the environmental impacts of livestock waste, while significantly improving the economics of production. The $190B animal protein industry now faces a perfect storm of operational and logistical challenges, looming regulation and eroding consumer trust, all a result of the environmental and public health impacts of its waste. Major national livestock interests have recognized the need to be proactive and support key policy changes proposed by Bion. Policy reform, coupled with technology, will provide the recurring revenues needed to give the industry a pathway to sustainability without bankrupting them.

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Livestock production is a fragmented business with low margins and very limited pricing power, if any. For decades, a commodity industry culture of ‘greater scale = lowest cost’ has dominated, while issues such as environmental impacts have been largely ignored. Even the largest CAFOs (Concentrated Animal Feeding Operations) have been successful at (legally) socializing their environmental costs, mostly by keeping their ammonia emissions exempt from federal regulation. The livestock industry is now hostage to its own political success.

Livestock production is the single largest source of nutrient pollution to both interior surface- and ground- waters, and downstream estuaries. The cumulative effect is now apparent in the increasing numbers of algae blooms (sometimes toxic), dead zones and contaminated water wells and aquifers. Ammonia nitrogen, accounting for approximately 70 percent of the nitrogen in livestock waste, is very difficult and expensive to recapture, once released. We now know that nitrogen from ammonia leaches into groundwater, bypassing conservation practices used to reduce agricultural runoff that we have spent billions of taxpayer dollars on, to find they are only half as effective as previously thought.

In arid climates such as California, airborne ammonia emissions from livestock manure contribute to PM2.5, small inhalable particulate matter that is a regulated air pollutant with significant public health risks. Whether airborne or dissolved in water, ammonia can only be effectively controlled at the source and the industry’s exemption from the Clean Air Act is now being examined. Livestock is also one of the largest sources of greenhouse gases, due in large part to high levels of methane and nitrous oxide from manure. Livestock production and waste have also been directly linked to growing antibiotic resistance.

For years, the industry has largely ignored consumer groups’ criticisms of its environmental impacts. Now, national and international advocacy campaigns are recommending reduced meat consumption for both environmental and health reasons. The public is listening. The industry faces declining demand and certain future regulation if it does not adopt a sustainable solution.

Bion’s patent-pending third generation technology platform was designed for large-scale livestock production facilities to generate significant new recurring revenues. New revenues from four broad categories below will offset technology adoption and operations costs, which will resolve both the regulatory and consumer issues with the environment, while maintaining and even improving the industry’s competitive position in global markets.

  1. Renewable energy production and generation of renewable energy credits
  2. High-value byproducts: specialty fertilizer products and feed additives (application for organic fertilizer products expected Q1 2018).
  3. Sale of verified nutrient reductions (credits – see policy reform below)
  4. Pricing power/ premium from USDA-certified sustainable brand

Bion’s technology platform was developed to allow third-party party verification of the actual reductions in environmental pollutants, in order to meet EPA requirements and allow Bion to sell nutrient reductions (credits – see policy reform below). That same capability provides third-party verification for a USDA-certified sustainable brand, for which Bion was conditionally approved, pending final inspections. The brand will initially certify dramatic improvements in the three hot-button issues – nutrients (and ammonia), greenhouse gases, and pathogens – under the USDA’s Process Verified Program (PVP), the gold-standard in food certification.

Today, major retailers, such as Walmart, and food chains, such as McDonald’s, are responding to consumers, advocacy groups and activist investors by evaluating sustainability throughout their supply chains. The livestock industry, now under a microscope, finds itself in search of livestock waste treatment technology and new sources of recurring revenue to pay for it. Absent both, the industry is faced with unsustainable costs, declining domestic markets, and possible loss of international markets.

Policy Reform Legislation proposed and supported by Bion is now pending in the PA Senate (SB799) to create a competitive bidding program for nitrogen reductions (credits), which will supplement the state’s failing efforts to meet its Chesapeake Bay compliance mandates. The PA legislature’s own study has projected that a competitive bidding program, enabling private sector livestock agriculture competition, could reduce the taxpayer-funded costs by up to 80% ($1.5B annually). EPA has publicly stated that it supports credit trading and competitive bidding, provided the nutrient credits are verified. Bion’s approach, a competitive bidding program to identify and buy the lowest-cost solutions, just as the state acquires almost all goods and services it consumes, is inevitable for the taxpayer-funded Bay mandates.

The emphasis on clean water in PA has begun to shift from downstream obligations to the Bay, to PA’s internal drinking water quality issues. The link between concentrated livestock production and high nitrate levels in local groundwater has been clearly demonstrated. Of the 293 public water sources in PA with nitrogen concentrations that fail to meet federal drinking water standards, 231 are in six counties in the lower Susquehanna watershed that also have large concentrations of livestock production. One-third of the public water sources in Lancaster County are contaminated and require pretreatment to remove nitrogen, at costs up to $35 per pound.

The current state of PA’s local waters, including their impacts to the Bay, results from a failure to adequately address livestock agriculture. The consequences are clear: failure to meet the Bay targets after spending billions of taxpayer funds; local public health issues for homeowners with private wells in nitrogen-impaired water districts; billions in unnecessary future costs to continue funding a failed strategy. These are the drivers for policy reform that will engage the private sector to provide low-cost alternative solutions. A PA Senate vote on the legislation is expected early in Q1 2018.

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The animal protein industry – the pinnacle of US agriculture – is based on waste management practices from the 1800’s. It’s a significant problem that creates tremendous opportunities. Many in the industry have recognized the need for change and are ready to engage. Abrupt regulation of the industry is a political ‘nonstarter’ and would be highly disruptive to producers in the international export markets. An incentive-based approach that encourages agriculture to supply low-cost credits will significantly lower taxpayer costs and accelerate cleanup with high-impact solutions. And it will help supply the recurring revenues needed to offset the investment that will be needed to answer these challenges.

Bion’s ‘envelope’ of policy reform and technology enables a voluntary incentive-based strategy that has been endorsed by both national and state livestock agriculture groups. Successful adoption in PA will create a national model that will be supported by the industry, as well as states in search of affordable solutions to similar local and downstream clean water issues.  Policy reform, coupled with technologies whose implementation costs are offset by recurring revenue sources, will represent an opportunity for consolidation and integration in the food supply chain on a massive scale.

The early adopters will capture an inordinate percentage of this economic opportunity and will have significant long-term advantages as the government will surely begin to withdraw incentives.  Those that have successfully captured and translated a sustainable brand down the supply chain, and have established robust markets for the production of byproducts, will be the biggest winners.

“Again and again in business history, an unknown company has come from nowhere and in a few short years overtaken the established leaders without apparently even breathing hard.  The explanation always given is: superior strategy, superior technology, superior marketing and/or lean manufacturing. But in every single case the new company has a tremendous advantage … The reason is always the same:  The new company manages the costs of the entire chain, rather than its costs alone.”

Peter Drucker, Harvard Business Review Jan/Feb 1995

 

This document includes forward-looking statements based on Bion management’s current reasonable business expectations. In this document, the words ‘will’, ‘targeting’ 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.