Bion Environmental: Uniquely Positioned to Capitalize on SB 724

OLD BETHPAGE, NY / ACCESSWIRE /
April 29, 2015 / The introduction of Pennsylvania Senate Bill 724 – known as the
Watershed Improvement Act – is the culmination of several years of
environmental and economic studies that have identified an affordable
pathway to help meet the state’s Environmental Protection Agency (“EPA”)
mandates to clean up the Chesapeake Bay. Besides providing dramatic
savings to the state’s tax and ratepayers and accelerating the Bay
cleanup, the new regulations could provide a dramatic boost to Bion Environmental Technologies Inc. (OTCQB: BNET).

Bion Environmental Technologies’ livestock waste treatment technology platform was developed to bridge
the gap between the livestock industry and environmental concerns.
Livestock and their waste have been recognized as one of the largest
unregulated (mostly) sources of both air and water pollution in the
Chesapeake Bay, as it is in most of the U.S.

Bion’s patented livestock waste
treatment systems can provide large-scale, low-cost nutrient reductions
to meet Pennsylvania’s mandated reductions as an alternative to
high-cost downstream water treatment and other approaches that are used
today. As an expert in the space for 25 years and responsible for
helping guide much of the policy evolution today, the company has the
credibility needed to ensure its solution sees the light of day.

In this article, we’ll take a look at the genesis of SB 724 and why Bion Environmental Technologies is well positioned to capitalize on the opportunity.

Environmental Policy 101

The Chesapeake Bay has experienced steep declines in marine life and
water quality over the past several decades. After many years of failed
voluntary cleanup programs, the EPA took matters into its own hands in
December of 2010 by implementing the Chesapeake Bay Total Maximum Daily
Load (“TMDL”), which established a scheme to regulate and enforce rules governing the entire watershed. The TMDL calls for significant reductions in excess nitrogen, phosphorus and sediment flowing to the Bay.

Traditional options under the Clean Water Act (CWA)
to handle the cleanup process are notoriously high-cost – estimated at
between $30 and $50 billion per year by some experts. Pennsylvania has
the largest obligation under the TMDL,
as the Susquehanna delivers most of the water to the Bay. In 2012,
Pennsylvania’s bipartisan Legislative Budget and Finance Committee (LBFC)
commissioned a study to identify alternative solutions to the problem,
concluding in 2013 that a competitively bid procurement program for verified
reductions from all sources, could save the state’s tax and ratepayers
$1.5 billion annually by 2025 and beyond, an 80 percent reduction in
cost. Note that these savings projections, if accurate, mean that PA
will still be spending $375 million annually in 2025 and beyond on the
Chesapeake Bay cleanup (and if the savings are only 60%, which is
probably more realistic, PA would be spending $750 million annually)
which provides a huge market for a company like Bion Environmental Technology.

Pennsylvania lawmakers responded by introducing SB 724 that would
establish a procurement program to enable point sources that face high
pollution control costs to meet their regulatory requirements by
acquiring verified equivalent pollution reductions (credits) from
another source at a lower cost. The bill establishes a competitively-bid
request for proposal (RFP) program,
where verified credits would be offered, based on cost and the value of
their local benefits. Further, the bill requires that in the future,
traditional infrastructure projects will have to demonstrate that they
are cost-effective compared to the credits, or forgo state and federal
cost sharing money – usually two-thirds of public project funding.

SB 724 will create accountability and transparency in a space where
it has been lacking. Escalating costs and declining overall water
quality are symptoms of a failed strategy and highlight the need for
change. Naturally, the bill is opposed by those entrenched and invested
interests that thrive in today’s status quo, despite the clear failure
of clean-up efforts over the last decade. A similar bill, SB 994 was
introduced in 2013, and stalled from a lack of understanding of
potential and alternative costs, a lack of industry support, and
opposition from the status quo.

Things have changed: a Special Report,
issued this month by the Pennsylvania Auditor General, highlighted the
potentially dire economic consequences of EPA-imposed sanctions if the
state fails to meet the 2017 TMDL
targets, which could include ‘no growth’ limits being placed on
Pennsylvania’s entire Chesapeake Bay watershed. The report also
supported using low-cost solutions and technologies as alternatives to
higher-cost public infrastructure projects, where possible. The report
specifically mentioned direct investment in manure control technologies.

Recently, the opposition to SB 724 has marginalized itself to a
degree, reducing themselves to desperate tactics aimed at deflecting
attention away from the key issues. Because the independent studies are
clear: the decades-old approach has failed, Pennsylvania is facing
tremendous costs, and a new market-based strategy will not only reduce
those costs, but actually accelerate implementation, the status quo
opposition to SB 724 has lost credibility. Further, the bill is now
supported by large state and national agricultural interests, which also
increases its likelihood of passing.

Bion’s Innovative Solution

Bion Environmental’s
proven and patented technology platform provides verifiable,
comprehensive environmental treatment of livestock waste and recovers
renewable energy and valuable nutrients from the waste stream. In other
words, the technology provides large-scale reductions in pollution at dramatically lower cost than traditional solutions from both the public and private sector.

Currently, the company’s platform is the only technology approved to
supply verified credits that can be used as a qualified offset to
EPA-mandated reductions from wet livestock waste (which includes most
beef, dairy cattle and hogs)- one of the largest sources of nutrients in
the watershed. Unlike traditional agricultural Best Management Practice
(“BMP”) credits, Bion’s credits can be measured, just like a point source, which increases their ‘certainty’ and value (see below).

Bion’s showcase system at Kreider
Farms has been operating since 2012. The company has been active in
Pennsylvania since 2009, both proving its technology and helping to
craft and guide the policy framework represented by SB 724. The
company’s technology and its benefits were discussed in detail within
the state’s bipartisan 2013 LBFC study. Bion’s
deep understanding of the issues, the acceptance of its proven and
verifiable technology, and the respect they have built over years of
perseverance through bureaucratic and political hurdles, places them in a
unique position in this emerging opportunity.

It Comes Down to Cost

A market-based strategy is inevitable, and it is clearly in process,
as evidenced by federal policy guidance and recent activities in several
states. Further, as the largest pollution source in the watershed, it
will be impossible to solve our water quality problems without
addressing agriculture and livestock.

Last year’s establishment of the verified credit created a ‘common currency’ and nutrient reductions can now be acquired from any
source. Credits can, and will be ‘procured’, as with any other
commodity or service that is acquired on behalf of the taxpayer, by
cost.

Data from two recent independent studies of the economics of nutrient
removal in the Chesapeake Bay, demonstrated the following annual
nutrient reduction costs (per pound) by source:

– Point source (municipal wastewater) $43
– Agriculture* $44 – $54
– On-site (septic) $311
– Urban stormwater $386 – $633

*Based on EPA’s 2014 guidance: BMPs
will now be subject to 2 to 1 ‘uncertainty factor’ that will cut their
value as pollution reduction methods in at least half. Note that PADEP in April 2015 has increased the ‘uncertainty factor’ for PA trading market to 3:1 for BMPs. – As a result ‘modeled’ agriculture pollution reduction costs will likely double or more.

Bion’s patented technology
platform can provide large-scale, verified equivalent reductions as low
as $8 to $12 per pound, depending on livestock type, location, and
scale.

Measuring the Potential

Bion Environmental is uniquely
positioned as the only company with a proven and verifiable solution to
wet livestock waste sources. And the stakes are tremendously high as our
clean water strategy evolves to deal with livestock. Nine million dairy
cows, 92 million beef cattle, 62 million swine, and several billion
poultry, create a billion tons of manure each year – providing Bion a tremendously large opportunity.

According to recent data from EPA, Pennsylvania will need to reduce
well over 10 million pounds of nitrogen from existing levels to reach
its 2017 targets or, as the AG’s Special Report said, face costly sanctions that will force the very expensive stormwater
reductions. There are enough potential low-cost reductions to be tapped
with livestock waste treatment and other solutions to reach that goal.
However, with the lag time involved with permitting and constructing
large-scale projects, they will have to hurry to meet the deadline.

It should be mentioned that Bion has already proven that its technology works through its commercial dairy operation at Kreider
Farms that has operated since 2012. The company is waiting on the
policy change that SB 724 represents to begin Phase 2, treatment of Kreider’s poultry operations, which will bring the total credits that Bion
produces from the farm to nearly two million annually. The company has
been active since 2012 refining the technology, improving effectiveness
while reducing cost and footprint.

In terms of the newly addressable market, the company’s management
believes that a national reallocation of spending will reach at least $8
to $10 billion annually. Legislation including SB 724 and Wisconsin’s
Clean Waters Healthy Economy act are setting precedent for the more than
30 other states experiencing the same problems, as evidenced by similar
problems in the Great Lakes and Gulf of Mexico.

These bills represent the final steps in establishing a pathway to reduce our clean water costs, and more importantly to Bion,
the ‘funding’ of a new, multi-billion dollar space to stimulate
low-cost, market-based solutions. There has traditionally been very
little private-sector participation in the clean water space, as it has
been dominated by government entities and NGOs
and its lack of transparency and accountability has not been conducive
to free-market involvement. When it becomes clear it is being opened to
the private sector and the spending is coming… like the telecom and biofuels spaces, institutional investment will follow.

In many ways, investors might compare Bion
to a pharmaceutical company with a blockbuster drug in late-stage
clinical trials. A long and capital-intensive R&D phase is followed
by a steep revenue ramp upon approval. While there may be substantial
technology risk, the potentially large market is understood and
justifies the risk and the high market cap. However, in Bion’s
case, the ‘drug’ is approved – there is no technology risk. Rather, it
is the market-size potential that is not well understood. Bion believes that policies are near enough to completion that the institutional investment is not far behind. Portola Pharmaceuticals Inc. (NASDAQ: PTLA), Opthotech Inc. (NASDAQ: OPHT), and Achillion Pharmaceuticals Inc. (NASDAQ: ACHN) are three examples of pharmaceutical plays in this situation. But unlike these, Bion Environmental trades at a fraction of its potential valuation with a market cap of only approximately $25 million.

The technology works, regulations are coming, and the Street is ready
to take notice – three trends suggesting investors may want to take a
closer look.

Forward looking Statement

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

For more information regarding BNET please contact:

UPTICK Newswire
Everett Jolly
602-441-3474
everett@upticknewswire.com
www.upticknewswire.com

SOURCE: Bion Environmental Technologies Inc.

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