a novel technology for fracking wastewater treatment

CONFIDENTIAL – ADIVO ASSOCIATES 20151


• Early stage, privately held biotechnology company

• Incorporated as a California LLC

• Mission - Develop innovative products, methodologies, and intellectual property relative to detection, removal, and recovery of toxic or precious/rare metal.

• Core technology - Based on a protein known as metallothionein (MT) that selectively binds toxic and precious/rare metal.

MGP Biotechnologies


Hydraulic Fracturing Market


Since 2010, capital expenditure into upstream production for oil and gas decreased. Despite the setback in exploratory drilling to tap into new reserves, demand for natural gas and extraction of shale gas is still growing.

Decrease in Investment Dollars


In 2007 -2014, U.S. demand for natural gas has steadily increased, thus requiring increased production and withdrawal of shale gas. Even though drilling in shale gas declined In 2015, a 13.9% growth of shale gas production is observed.

Demand for Natural Gas

Natural Gas Consumption US Shale Gas Production

•Source: •U.S. Energy Information Administration

20

21

22

23

24

25

26

27

28

2007 2008 2009 2010 2011 2012 2013 2014 2015

Trill

ion

Cu

bic

Fee

t

Year

U.S. Natural Gas Total Consumption

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2

4

6

8

10

12

14

16

2008 2009 2010 2011 2012 2013 2014 2015

Tri

llio

n C

ub

ic F

eet

Year

U.S. Shale Gas Production

U.S. Production ofShale Gas


Gas rig counts declined, as E&P companies reduced exploratory drilling budgets. However, production volume increased showing a higher efficiency for established wells.

Rig counts decreased as production volume increased

•Source: •U.S. Energy Information Administration


In 2014, North America constituted 85% of the $41 billion global fracking market.

Hydraulic Fracturing Market

Market overview

• Global market estimated to be $41 billion in 2014.

• North America constitutes 85% of total market revenue.

Main players

• Source: • Sider, Alison. “Fracking firms face new crop of competitors.” Wall Street Journal, 9 July 2013. • “Hydraulic Fracturing Market by Geography & by Well Type and Shale Play in the U.S. & Geography - Global Trends and Forecasts to

2019.” Report by MarketsandMarkets, Nov 2014.

Halliburton28%

Schlumberger22%

Baker Hughes13%

FTS4%

Weatherford5%

Trican4%

Calfrac4%

Nabors3%

Cudd Pumping2%

Petterson-UTI2%

C&G2%

Others11%

North America Fracking Market Share


Shale gas development is key to meeting future energy demand but produces toxic waste water.

The Future of Shale Gas in the US and waste production

Waste water from shale in US annually ~116 billion Liters

10x more waste water per wellfor fractured (shale) gas vs.

traditional gas wells 12

“Shale gas can be expected to play an important future role in supplying about a third of U.S. energy demand, possibly even more, over the next several decades.”

US Department of Energy, “Modern Shale Gas Development in the United States: An Update”, 2013

Shale gas production • Increases the waste water volumes • Changes the geographic distribution of where waste water is generated and disposed. 13

• Source; • Clark, C., and J. Veil (2009), Produced water volumes and management practices in the United States,, Argonne Natl. Lab., Argonne, Ill• Department of Energy (US DOE) (2013), Modern shale gas development in the United States: An Update


In 2014, 116 billion liters of fresh water was used and estimates show an annual waste water production of 77 billion liters.

Waste Water Market Size

*waste water includes

• flowback of the fracking fluid

• produced water, i.e. water previously

locked in the rock formation

*Definition of flowback includes water

that surfaces up to several weeks or

months after drilling, depending on the

source.

• Sources:

• Water Footprint of Hydraulic Fracturing , Andrew Kondash and Avner Vengosh, Nicholas School of the Environment, Duke University

• The Environmental Costs and Benefits of Fracking ,Robert B. Jackson et al., School of Earth Sciences, Stanford University

• Shale Gas Production: Potential versus Actual GHG, Emissions, O’Sullivan and Paltsev (2012): MIT Joint Program on the Science and Policy of Global Change Report

• Bluefield Research

0

20

40

60

80

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120

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180

Annual Water Use Per Year Wastewater Generated Per Year

Bill

ion

Lit

ers

Water Usage Breakdown

Adivo Estimate

Bluefield Research Estimate


Hydraulic fracturing for shale gas not only produces more waste water, but also increases fresh water utilization.

Growth of Annual Water Use for Shale Gas

0

20

40

60

80

100

120

140

2005-2011 2012-2014

Bill

ion

Lit

ers

Average annual water use for shale gas per year

Average annual water use for shale gas per year

Annual water use for shale gas

• 2005 – 2011: 51 billion liters• 2012 – 2014: 116 billion liters

• Source:

• Water Footprint of Hydraulic Fracturing (2015) , A. Kondash and A. Vengosh, Nicholas School of the Environment, Duke University


The concentration of many chemicals in the fracturing waste water exceeds EPA standards even for irrigational use by more than 10x.

Fracturing water composition

ChemicalWaste Water (mg/L) EPA Standard (mg/L)

Range Median Irrigation Drinking Water

Arsenic 0.004 - 0.5 0.057 0.10 0.010

Barium 0 - 16,000 19 - 2

Boron 0.018 - 150 14 0.75 -

Cadmium 0 - 1.2 0.0086 0.01 0.005

Chromium 0.0066 - 260 0.3 0.1 0.1

Cobalt 0.0045 - 25 0.5 0.05 -

Iron 0.95 - 810 39 5 0.3

Lead 0 - 5 0.03 - 0.015

Lithium 0.5 - 430 52 2.5 -

Manganese 0.12 - 43 1.7 0.2 0.05

Molybdenum 0.003 - 13 0.038 0.01 -

Radium 10-5830 pCi/L - - 5 pCi/L

Selenium 0.0043 - 0.5 0.05 0.02 0.05

Thallium 0 - 8 0.19 - 0.002

Vanadium 0.063 - 40 0.63 0.1 -

•Source: 1) Geochemical evaluation of flowback brine from Marcellus gas wells in Pennsylvania, USA Lara O. Haluszczak, Arthur W. Rose ⇑ , Lee R. Kump. 2) U.S. EPA


Federal regulations, disposal costs and public awareness have become the key market drivers.

Market drivers for treatment of waste water

Market for waste water treatment

Government mandates

• Safe Drinking Water Act

• Arsenic Rule

• Copper and Lead Rule

Regulatory compliance costs

• EPA fines for non-compliance $25,000/day

Upgrading municipal treatment plants

• Estimated $150 billion investment over next 20 yrs

Disposal costs

Environmental and public awareness

Issues that arise due to toxic waste water:• Deterioration of infrastructure (e.g. roads, municipal water treatment facilities)• Increased public awareness e.g. due to lawsuits against waste water violations• Contamination of environment and risk to human health (e.g. heavy metals)

Alleviation of these issues drives demand for innovative water treatment systems.


Finding a sustainable – and cost effective – solution for fracking waste water has so far remained elusive.

Challenges of Waste Water Disposal in the Fracturing Market

Current Solutions Expenses

Short-term options do not address critical long-term issues

• Diminished water sources• Increasing regulations

limiting waste water disposal

• Growing safety and environmental concerns from government and the public


Current technologies are not applicable due to technical deficiencies preventing an application in the fracking industry

Current deficiencies in tech solutions


MGP Technology


MT’s unique properties allows for the selective capture of toxic/precious metals.

MGP’s Technology - Principle

Toxic/precious metal retained by MT

MT MT MT

Sodium

Calcium

Metal contaminated solution

MT can be loaded on any solid phase:

- membranes- beads- silicon particles- nanoparticles- polystyrene particles- magnetic beads

Toxic / precious heavy metal


MT’s unique properties allows for the selective capture of toxic/precious metals.


Toxic/precious metal retained by MT

MT MT MT

Sodium

Calcium

Metal - free solution

Metal contaminated solution

MT can be loaded on any solid phase:

- membranes- beads- silicon particles- nanoparticles- polystyrene particles- magnetic beads



Metal can be recovered by rinsing the MT with weak acid.


Metal Recovery

MT MT MT


Sodium

Calcium

Metal Collection -Recycle

Solid phase


MT is linked to resin using proprietary technology. A colorless solution of copper is slowly passed through the resin over one hour. The change in color reflects the binding of metal to the resin. The resin is regenerated by flushing with weak acid.

MGP’s working prototype

1 2 3 4 5

One Hour Real Time Acid Wash-60 Sec

1 - MT Bound to Resin (Proprietary) 2 - Pumping 10-4 M CuSO4 through column for 15’3 - Pumping 10-4 M CuSO4 through column for 60’4 - Acid wash for 30 seconds5 - Acid wash for 1 minute


MT’s unique properties come from its metal selectivity and recovery. MGP technology reduces cost, increases flexibility and efficiency.

Unique Properties of MT

Binds a wide variety of metal

• Toxic heavy metals: aluminum, cadmium, chromium, cobalt, copper, europium, gallium, indium, lanthanum, lead, mercury, nickel, thimerosal, titanium, tributyl tin, uranium, and zinc.

• Precious & rare metals: gold, palladium, palladium nanoparticles, platinum, rhodium, ruthenium, and silver.

Unique Properties

Binding occurs instantaneously

Efficient at low metal concentration – able to meet current EPA standards

Selectivity

• MT does not bind biologically essential metals such as sodium or calcium.

• Efficient in situations where concentration of metal is low

MT binds metal under extreme conditions:

• Wide range of pH (4 to 10)

• Extreme temperature (4ºC - 100ºC)

Metal is easily recoverable

Reusable, cost effective production of columns

Diminishes overall cost of metal remediation

• Specificity

• Decreased volume of recovered metal waste

• Low cost production

High capacity and small footprint

• 100x smaller than ion exchange


MGP has both domestic and international patents.

Intellectual Property Portfolio

• Patent Number 6,750,056 - Issued 6/15/04





Five US patents issued to MGP

• Australia Patent Number 2002316183 – Issued 7/18/08

• Japan Patent Number 2003-526941 – Issued 6/18/10

• Canada Patent Number 2,471,838 – Issued 7/10/12

• Canada Patent Number 2,637,564 – Issued 10/26/12

• China Patent Number 02822019.6 – Issued 8/22/12

• Germany Patent Number 1976610 – Issued 5/1/13

• Switzerland Patent Number 1976610 – Issued 5/1/13

• UK Patent Number 1976610 – Issued 5/1/13

Eight international patents issued to MGP

Patent Attorney, Louis Cullman, K & L Gates


Contact Information

Maik Klasen, PhD Roger Acey, PhD

Board Member – VP of Business Development, MGP Founder, MGP

Managing Director, Adivo Associates President and CEO

Phone: +1 (415) 992-449 Phone: +1 (562) 805-0192

[email protected] [email protected]

Gwen Jordaan, MS

Board Member – Chief Scientific Officer, MGP

Phone: +1 (213) 316-6447

[email protected]