Bion's Technology Addresses Both Global Nutrient Problem And Industry Need

Nutrient pollution of vital watersheds has become an increasingly severe problem around the world; especially here in the United States. Nitrogen and phosphorus runoff from agricultural operations is one of the largest sources of excess nutrients. Of particular concern is animal waste fromover 89 million head of cattle and nearly 70 million hogs and pigs, typically spread on the ground untreated to fertilize crops. The resulting problems range from algal blooms, some that are toxic, that create oxygen deficiencies (dead zones) when the blooms die off and decompose, to sediment that reduces light penetration and subsequently starves aquatic plants leading to further die-off, decomposition, oxygen deprivation, and fish kills. The livestock industry is in the crosshairs.

The inefficiencies of our legacy public resource investment strategies for solving this problem and for satisfying growing EPA-mandated pollution reductions, was made strikingly clear by a recent report from the University of Maryland's Environmental Finance Center. The report indicated a sticker price of $66 per pound on average for nitrogen removal and $4.4 billion total needed for Maryland to achieve its 2025 targets. The stormwater treatment costs highlighted in the report, a whopping 859 percent more costly to remove nitrogen after it has escaped into the water supply, clearly demonstrate how important it is to solve the problem at the source where possible. The patented technology platform developed by Bion Environmental Technologies (OTCQB: BNET), which treats livestock waste onsite, can deliver verified reductions for as little as $8 to $12 per pound.

Locally Proven Solution Has Nationwide, Global Potential
Bion Environmental has already proven the verifiable capabilities of its patented livestock waste treatment technology at commercial scale to state and federal agencies, with an initial deployment that has been up and running in Pennsylvania at Kreider Farms since 2011. In 2012, the system received a full water quality management permit – a nationwide first – and its reductions were verified by the PA Department of Environmental Protection. In 2014, the technology was reviewed and qualified under an independent USDA technical review.

The results from the Kreider Farms installation have been central to the evolution of Pennsylvania Senate Bill 724, by demonstrating that verifiable large-scale solutions can be achieved using manure control technologies. SB 724 would establish a transparent competitive bidding process where verifiable pollution reductions could be acquired from any source, based on cost. The bill represents an affordable pathway to solving the pollution of the Chesapeake Bay and other watersheds and meeting EPA mandates.

Pennsylvania needs to reduce nitrogen pollution to the Chesapeake Bay by 31.4 million pounds by 2025. They missed their 2013 targets by 2 million pounds and are projected to miss 2017 by 14.6 million pounds. 2017 is when EPA sanctions, that could cost billions, can begin, as discussed in a 2015 Special Report from the PA Auditor General.

Legacy solutions for centralized wastewater treatment, which municipalities can contract out to companies like Pure Cycle Corp. (NASDAQ: PCYO) and Pennsylvania-based The York Water Company (NASDAQ: YORW), will continue to be part of an overall solution. However, the market has essentially been missing the story about the potential of revolutionary innovators like Bion Environmental to address the nutrient pollution problem at its source (upstream on the farm) at dramatically lower cost. The market-driven concept of SB 724 will enable Pennsylvania to purchase nutrient reductions from any source in a competitive bidding process that a bipartisan legislative study estimated would save the taxpayers 80 percent ($1.5B) in annual compliance costs. Bion's technology is approved to supply these reductions and can deploy large-scale solutions very quickly.

The Chesapeake Bay mandate is not going away and is expected to be replicated in the Great Lakes and Mississippi River Basin. The dead zone that forms every summer in the Gulf of Mexico from the mouth of the Mississippi River averages nearly 6,000 square miles and costs well upwards of $82M a year in lost tourism and commercial fishing alone, according to NOAA. A more dramatic example of the economic impact of excess nutrients can be seen in the Chesapeake Bay, where potential losses are estimated at around $22B, according to a Chesapeake Bay Foundation report. Direct and indirect costs from nutrient pollution impact everything from commercial fishing and tourism, to potable water costs, public health, and even real estate values.

Such losses are really just the tip of the iceberg and represent only the front end of a nationally, as well as globally, persistent problem that is directly addressable by Bion's technology.

NOAA has identified at least 166 marine dead zones in the U.S. and there are over 400 known worldwide, affecting an area over 94,000 square miles in size. These dead zones are expanding and most are impacted by livestock waste. Our current strategies, which have been implemented by government and NGOs, are clearly failing. The need for a market-driven strategy that reallocates spending based on cost-effectiveness can no longer be ignored.

Point Source Technology Addresses Antiquated, Centralized Approach
To date, the market has overlooked this emerging clean water space in favor of traditional centralized wastewater treatment solutions that leverage filtration technologies like the advanced membrane systems from companies like LiqTech International, Inc. (NYSE: LIQT), sediment-reducing sponge system from companies like Abtech Holdings, Inc. (OTC: ABHD), and catalytic/thermal oxidizers for abating VOCs (volatile organic compounds) and centrifuges/pumps from suppliers like CECO Environmental Corp. (NASDAQ: CECE). While these will always be an important element of clean water solutions, they may increasingly take a back seat in favor of non-point source pollution treatment solutions like Bion's comprehensive environmental management system.

Bion's platform removes most of the nutrients at the source and at dramatically lower cost, utilizing an ingenious core process involving naturally-occurring bacteria to convert the nitrogen into solid form that can be removed by centrifuges and other standardized processes. The system can produce high-grade organic fertilizers and soil amendment products and also separates out undigested cellulosic biomass in a highly efficient manner, which can then be utilized as fuel to generate renewable electricity. Bion will be field testing its third-generation technology this summer that should further increase efficiencies and byproduct values.

Bion's powerful waste treatment and refining platform incorporates a sophisticated combination of biological, chemical, mechanical and thermal processes to cost-effectively remove nutrients from the waste stream before they ever even get to the water supply. The technology is similar in some respects to a platform like N-Viro International's (OTCQB: NVIC) alkaline-based municipal biosolid processing technology, but highly unique and designed from the ground up as a comprehensive livestock waste solution.

Starting with an industrial screw press to separate solids, the resulting effluent is passed through a bioreactor system and eventually fine solids are separated out mechanically. Bion's platform can efficiently return usable clean water, value-added nutrient byproducts, and renewable energy, while significantly reducing ammonia, odor, greenhouse gases and VOC emissions. The Bion system also reduces pathogens by up to six orders of magnitude, reducing the potential for dangerous antibiotic-resistant bacteria that pose a significant downstream health risk.

First-Mover Advantage, Sustainable Branding Capabilities Set Stage for Growth
The company has a first-mover advantage in a developing market for which a regulatory architecture that incentivizes market-based solutions is taking shape. Bion is effectively the sole-source provider of an already-validated comprehensive solution that can provide large scale solutions from livestock waste treatment – one of the largest sources of excess nutrients in most watersheds – at dramatically lower cost than alternatives, while simultaneously improving on-farm efficiencies and marketing opportunities.

The traditional voluntary agricultural BMPs (best management practices) that have been relied on to mitigate agricultural runoff in the past have recently been shown to be substantially less effective than previously thought. In fact, the Pennsylvania Department of Environmental Protection moved in April this year to increase the 'uncertainty factor' (discount) for BMPs to 3:1, outstripping the EPA's own 2014 guidance of 2:1, that effectively cut their value in half. The writing is on the wall for the livestock industry: past strategies are not working and their status under the Clean Water Act is being closely scrutinized.

The resistance to change from a 200-year old agricultural industry is giving way to support, amid the growing realization by industry operators that a market-driven strategy that reallocates part of public spending to lower cost solutions will provide capital needed for technology adoption, and is vastly preferable to the increasing certainty of future regulation. Major sector players like the National Milk Producers Federation, Dairy Farmers of America, member-owned agricultural cooperative Land O'Lakes, and JBS, the largest producer of animal protein products in the world, are now embracing this developing paradigm, as evidenced by their public support of the SB 724 strategy.

These major industry stakeholders understand that a market-driven strategy presents several significant advantages to being tightly constrained by heavy-handed federal regulations. Meaningful improvements from voluntary actions could forestall or mitigate all but certain regulation, which could be a death blow to already cash-strapped small farmers in rural communities. Further, by-product recovery can provide economic benefits to the producer and responsible waste treatment enables branding that can up-sell the value of their agricultural products to consumers that are increasingly aware of and sensitive to sustainable production practices.

As retailers like Whole Foods (NASDAQ: WFM), Wal-Mart, Costco and McDonalds increasingly move to court sustainability-minded customers and feature products that are responsibly produced, Bion's technology will gain traction as a cost-effective way to realize this coveted status. The potential for sustainable branding to help drive a sea change in the industry is immense - not one solely dependent on government mandate but an industry-embraced voluntary strategy that encourages innovative solutions.

The problem of nutrient pollution, only part of Bion's opportunity, goes well beyond a state legislative issue involving at-risk resources like the Chesapeake Bay and states like Maryland and Pennsylvania. It is a national and, more fundamentally, a global issue. Bion Environmental's technology represents a proven and ready-to-deploy solution that investors should take note of, not just because increasingly stringent EPA regulations are becoming more and more of a challenge for states to contend with, but because its deployment will help the industry increase its efficiencies, decrease its impacts, and deliver to the consumer the sustainable practices they are increasingly demanding.

Craig Scott, Bion's Communications Director, stated, "We believe the market has either missed the trend here or has substantially overestimated the policy risk associated with this trend. The science and the economics are clear: cleanup of livestock waste is inevitable if we are to maintain the integrity of our ground and surface waters. The only real question left is how it gets paid for. Reallocating a larger part of our public clean water spending to agriculture, and especially the low-cost solutions represented by onsite livestock waste treatment, will speed the cleanup of our waters while simultaneously saving the taxpayers billions of dollars.

Further, the importance of the recent shift in the livestock industry's position cannot be overemphasized. A market-driven strategy not only benefits the environment and the taxpayers by accelerating implementation and reducing costs, it will help improve the economics of their industry that now suffers from logistical and operational inefficiencies and a consumer that is demanding change."

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