Powering Innovation: Pittsburgh’s Tech Community Amps Up Innovation in the Region’s Shale Gas Industry

Tom Joseph (left) and Ron Pettengill (center) of Epiphany Solar Water Solutions are working with Nick DeIuliis (right) and CONSOL Energy to test and bring to market a solar-powered waste water management system.

By Matt Pross, TEQ Staff Writer

Innovation is the most important driver of our  economy. The current boom in shale gas exploration and development is a perfect example of this reality as it was made possible through innovations in the natural gas extraction process, namely horizontal drilling and hydraulic fracturing techniques. Just as these advancements in drilling methodology kick-started the shale gas rush of the past decade, current and future innovations will sustain this lucrative industry for decades to come. In terms of location, resources, infrastructure and existing talent, southwestern Pennsylvania really couldn’t have it better to take advantage of this enormous opportunity. The region’s existing technical competencies in energy and transportation, steel production and waste water treatment coupled with its convenient location in the middle of the Marcellus footprint has made southwestern Pennsylvania a popular locale for out-of-state companies to set up shop. Although the industry is relatively new to the region, area tech companies are already hard at work. From a partnership between an energy industry leader and a tech start-up to a hundred-year-old electrical contractor to small and medium-sized manufacturing and engineering firms building solutions for the industry, these companies are actively redefining the next iteration of the shale gas industry through innovation and collaboration.

Pure Power

In typical entrepreneurial fashion, several regional companies have grabbed this opportunity and are focused on creating solutions that increase the efficiency and profitability of the industry, while also lessening its environmental impact. The solution that New Castle-based Epiphany Solar Water Systems (ESWS) has developed addresses all three concerns and is poised to make a serious impact in the industry. Founded in 2009, ESWS created the world’s first concentrated solar-powered water purification system. While the technology wasn’t originally designed for treating waste water from the energy industry, ESWS has partnered with
industry giant CONSOL Energy to modify and test the efficacy of its solution in shale gas applications. Under the agreement between the two companies, CONSOL acquired a minority equity interest in ESWS for its initial investment of $500,000 in the startup and will make available one of its Marcellus gas well locations in Greene County to serve as the pilot test site for the solar-powered water purification technology.

“We have adapted the drinking water technology to address the waste water challenge of the natural gas industry,” said Ron Pettengill, Executive Vice President of Epiphany’s Oil, Gas & Coal division. “Our closed-loop, solar-powered solution could cut the physical volume of waste produced from the hydro-fracturing process dramatically, while also limiting the amount of water transport that is currently involved.”

As explained by Epiphany’s founder and CEO Tom Joseph during a press conference announcing the partnership, the technology will break down hydraulic fracturing flowback water into benign components with marketable value – distilled water, salt and other minerals – plus a small amount of waste materials that will be safely contained in solid form until safe disposal is possible. By harnessing the power of the sun, Epiphany’s solution is capable of distilling and purifying up to 100,000 gallons of waste water every day. To say this will have a positive impact on an industry that currently manages billions of gallons of waste water every year would be a vast understatement.

“Opportunities for natural gas and coal extraction are brighter than they’ve ever been,” said Nicholas DeIuliis, President of CONSOL Energy, at the press conference announcing the partnership with Epiphany. “But, one of the main challenges is the waste water produced by the hydraulic fracturing process. In this region, we have a distinct opportunity to get it right with water and this technology is the bridge that can start to solve some of these
challenges.”

“CONSOL is the largest single consumer of water in the state of Pennsylvania and has already invested hundreds of millions of dollars in water management infrastructure,” he continued. “Needless to say, this investment in Epiphany made perfect sense for our regional and global vision. We view Epiphany as another facet of our water management growth strategy, and are very excited about the potential of this green technology and its application to multiple water treatment opportunities.

“With CONSOL’s growing footprint in both coal and natural gas extraction, the demand on the water side of our business will continue to increase,” DeIuliis explained. “Increasingly strict regulations are also putting pressure on us to improve our waste water management. I view this as a joint challenge for our industry, as well as an opportunity. The wider energy industry will succeed to the extent that CONSOL and Epiphany succeed with this project because water management affects everyone.”

The pilot test began at the Greene county location in July and is expected to produce results by early fall 2012.

Remote Control

Epiphany is not the only regional tech firm using solar power to benefit the oil and gas industry. Charleroi-based CONSPEC Controls has gained a foothold in the Marcellus space by reengineering its gas monitoring and detection technology to function at remote drilling sites using solar power. The company’s solution enables well site operators to monitor levels of methane and hydrogen sulfide gas from remote control centers using localized Wi-Fi networks generated by CONSPEC’s detection technology.

“We have developed a product based on a customer’s need in the Marcellus Shale industry,” Rob Albinger, President of CONSPEC, said. “Our solution allows the rig operator to monitor the site for dangerous levels of methane and hydrogen sulfide gas, pinpoint a problem should a leak occur and shut down the process remotely, if necessary.

“We’ve been very successful with this product and are currently doing more research and development to improve it by making it less cumbersome and more portable,” Albinger explained. “In designing our monitoring solution for this industry, it was necessary to design a power source and communication gateway for the data. We were able to address this issue by designing a 900 megahertz wireless gas sensor network powered by batteries and solar panels.

“Because of our solution, our clients in the industry have realized two additional benefits,” he continued. “Now, with functioning Wi-Fi at each well site, remote employees have secure access to their corporate networks, allowing them to share files and communicate with team members at other locations.”

Albinger said that it took his team four to five months to develop the initial monitoring solution for the shale gas industry and the first unit was deployed into the field in November 2011. CONSPEC now has 11 monitoring systems in the field, with a 12th currently in production.

“The opportunity in the shale gas space has definitely helped our business,” he said. “We are working with several of the big companies in this space and will look to grow our involvement accordingly moving forward.”

 It’s Electric!

Sargent Electric Company, a 105-year-old electrical construction contractor headquartered in the Strip District, is another great example of a local company enjoying new business because of the regional shale gas boom. Founded in 1907 and family-owned until 2006, Sargent was able to become one of the region’s leading industrial construction contractors through its involvement in the booming steel, glass and coal industries of the early 20th century. Now, more than a century later, Sargent has once again reinvented itself to serve another thriving regional industry and is finding much success in doing so.

“The rapid regional growth of the oil and gas industry has been a real boon for us,” Stephan Dake, President and CEO of Sargent Electric Company, said. “Because of the sluggish economic recovery and lack of capital available for new and retrofit construction, we would really be slow right now if our business was dependent on office and commercial contracts.

“But, because of the energy industry, we actually have a growing backlog of business right now,” he continued. “When you look at all of the revenue that comes in for us week over week, 75 percent of our overall revenue is derived from the energy space right now. This has really helped us to have a great year when we weren’t expecting double digit growth because of the current economic climate.”

Sargent is working on several significant Marcellus-related projects, including the construction of the new $650 million state-of-the-art rolling mill that V&M Star Steel is building next to its existing plant in Youngstown, Ohio. Once completed in late 2012, the 1,000,000+ square-foot mill will produce 350,000 tons of steel tubing annually for use in shale drilling across the US and employ about 350.

“As the main electrical contractor for the first phase of V&M Star’s new drill pipe production facility in Youngstown, we gained a very important credential project in the shale gas space,” Dake said. “In addition to this project, we also do work with many of the other major players in the Marcellus and Utica markets, including MarkWest and CONSOL Energy. We also have reactivated our Instrumentation and Calibration Group to better serve the industry on maintenance and service work.”

While his company has seen huge benefits already because of its involvement in the industry, Dake foresees an even brighter future ahead for Sargent and other regional companies alike.

“As the economy loosens and more capital is available for new construction, I think there will be a wave of new regional development driven by the role that Marcellus/Utica shale plays,” he explained. “Over the next three to five years, I think the region is going to see significant investment from the industry in the form of construction of new office buildings and research facilities.

“The proposed ethane cracker facility that Shell Oil wants to build on the current Horsehead Industries manufacturing site in Beaver County is just one example of the future opportunities this industry could create for our region,” he continued. “The construction of all of these new plants will require high quality union jobs, which is one of our greatest strengths.”

Exploring the Cosmos

With the amount of success Sargent Electric has realized in the oil and gas industry, it’s not hard to see why so many companies are actively adapting their service portfolio to provide innovative solutions to common challenges in the shale gas space. For local environmental services company Cosmos Technologies, it was a no-brainer to dive in headfirst. For more than a decade, Cosmos has developed cost-effective waste water treatment solutions for several different industrial applications. The North Shore-based engineering firm is currently developing a specialized solution to treat wastewater produced from Marcellus Shale drilling and acid mine drainage.

“We have developed a simple and cost-effective catalytic process that removes a significant amount of the metals found in frack fluid,” explained Frederick Douglas, President of Cosmos Technologies. “With our process, we are able to achieve greater than 90 percent barium removal and total iron removal. However, we cannot remove sodium chloride with this process.

“The simplicity of our process is the main advantage,” he continued. “All that is entailed are some mixing tanks and a catalyst, which are incredibly cheap. With our process, it only costs about five cents to treat a gallon of Marcellus Shale brine water and only about two cents to treat a gallon of flowback water. These prices demonstrate the inherent simplicity of our process.”

Douglas explained that he hasn’t officially broken into the shale gas industry yet, but is currently scheduling demonstrations, which he hopes to start by this fall.

“While we haven’t cracked into the market yet, several companies have contacted us about our process for demonstration processes,” he said. “We are hoping to start on-site demonstrations by September 2012.”

This wide-angle snapshot of the tech industry’s participation in the Marcellus natural gas play merely provides a cross-sectional view of related activity within the region. Many more regional companies not mentioned here are actively developing new, innovative technologies as well that will, without a doubt, contribute to the future shape of the natural gas industry, not just in Pennsylvania but across the entire country. While it’s not possible to know exactly what complexion the industry will take in the ensuing decades, one thing remains a certainty: innovation will continue to shape the face of the shale gas industry and enable domestic energy production to begin solidifying the United State’s energy independence.

“The role innovation will play in defining the future of this industry cannot be overstated,” said Mark Luschini, Chief Investment Officer at Janney Montgomery Scott. “The key to the profitability of companies in this space is finding the technology that will enable the largest profit. It is in these companies’ best interest to continue to invest in new technologies that will allow them to lower their break-even price for drilling and extraction in shale gas plays.

“Solutions developed 10 years ago, such as horizontal drilling and hydraulic fracturing, made shale gas drilling economically viable in the first place,” Luschini continued. “Ten years from now, there will be another innovation that we aren’t even thinking of now that will allow us to capture more of the energy available to us in this country, moving us closer to energy independence.”

CONSOL Energy Bolsters Water Division to Market Resources and Capabilities; Acquires an Equity Interest in Epiphany Solar Water Systems

CONSOL Energy has acquired a minority equity interest in New Castle-based Epiphany Solar Water Systems and hopes to use the startup’s solar-powered water distillation technology to purify waste water from its Marcellus Shale operations.

At a press conference today held at the Pittsburgh Technology Council, CONSOL Energy, Inc. (NYSE: CNX), the leading diversified fuel producer headquartered in the Eastern U.S., announced that it is taking steps to formalize its current water operations into a vertically integrated Water Division that will  market the company’s extensive water resources as well as its water treatment and management expertise.

“Given our extensive water assets and successful water management experience, we believe we have a valuable service to offer to the natural gas industry’s growing need for water resources.  Our fresh water and acid mine drainage (AMD) sources are strategically located in the fairway of the Marcellus Shale and can serve as a reliable source of water supply for gas producers whose operations are constrained because of water withdrawal restrictions during certain dry periods,”  commented Nicholas J. DeIuliis, president of CONSOL Energy.  “CONSOL Energy treats over 36 billion gallons of water per year.   We are currently testing use of this water in our own drilling and well operations and are negotiating AMD off-take agreements with several leading gas operators who see the value of a reliable water supply.”

CONSOL Energy is also completing construction of a second state-of-the-art Reverse Osmosis Zero Liquid Discharge water treatment plant in northern West Virginia.  This facility will serve as a water source for the company and possibly as a water source for third parties.  In addition, the company is exploring the potential of the facility to treat Marcellus Shale flowback water.

CONSOL Energy also announced that it acquired a minority equity interest in Epiphany Solar Water Systems, a privately-held company founded in New Castle, PA in 2009 that has invented the world’s first concentrated solar powered water purification system.   Under the agreement, CONSOL Energy has made an initial investment of $500,000 and one of its Marcellus gas well locations in Greene County will serve as the site to pilot test this solar powered water purification system.

“We view Epiphany as another facet of our water management growth strategy, and are very excited about the potential of this green technology and its application to multiple water treatment opportunities,” added Mr. DeIuliis.

Epiphany Solar Water Systems’ proprietary, solar powered water purification system has the potential to combine a renewable energy source – the sun – with the development of clean-burning natural gas from the Marcellus shale while reducing an operator’s environmental footprint.   The process breaks down flowback water into benign components with marketable value — distilled water, salt and other minerals — plus a small quantity of waste materials that can be safely contained in solid form and readied for safe disposal.

“CONSOL Energy was quick to recognize the potential positive impact that our water remediation technology can have on natural gas drilling production and we are grateful that they are willing to let us test the efficacy of this solution,” commented Tom Joseph, founder and chief executive officer of Epiphany Solar Water Systems.  “During this pilot test, Epiphany will also work to determine the potential of our technology to lower the cost of energy needed to process wastewater by using alternative energy, reduce the risk of waste disposal by processing water on site and recovering the resultant water, salt, minerals and disposable waste materials, minimize the volume of materials that must be transported off-site for safe disposal, and reduce the amount of truck traffic associated with this aspect of development.”

Ron Pettengill, executive vice president of Epiphany’s Oil, Gas & Coal division added, “This technology is an example of the next generation of alternative energy solutions that work under the premise that green energy must be competitive with other choices.  We believe you can have both environmental safety and economical operation in the same package.”

Epiphany has selected PMC Biotec of Exton, PA, as its technology partner for the CONSOL Energy pilot project.  Epiphany and PMC Biotech are part of a growing group of Pennsylvania-based companies providing solutions for the state’s newly reinvigorated energy industry. PMC provides cutting edge biological conversion technology that is an important component of Epiphany’s water remediation process.

Epiphany’s pilot test is scheduled to begin in July with initial results expected in early fall.

About CONSOL Energy

CONSOL Energy Inc. (NYSE: CNX) is a Pittsburgh-based producer of coal and natural gas. It has 12 bituminous coal mining complexes in four states and reports proven and probable coal reserves of 4.5 billion tons.  The company’s premium Appalachian coals are sold worldwide to electricity generators and steelmakers. In natural gas, CONSOL has transformed itself from a pure-play coal bed methane producer to a full-fledged exploration and production company. The company is a leading producer in the Marcellus Shale, has an active exploration program in the Utica Shale and has proved natural gas reserves of 3.5 trillion cubic feet. Operational safety is the company’s top core value and CONSOL boasts a record of almost two times better than the industry average for underground bituminous coal mines.  In 2011, the company recorded its best safety record since it was founded in 1860.  CONSOL Energy is a member of the Standard & Poor’s 500 Equity Index and the Fortune 500. Additional information about CONSOL Energy can be found at its Web site: www.consolenergy.com.

About Epiphany Solar Water Systems

Epiphany Solar Water Systems, a privately-held company founded in 2009 in New Castle, PA, invented the world’s first concentrated solar powered water desalination and purification system. The company’s goal is to use solar energy to provide water purification solutions at a price which is cost-competitive with conventionally powered systems. Epiphany also operates a 501(c)(3) non-profit, Project EviivE, whose sole purpose is to provide water desalination/purification systems to communities in the developing world.