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Item 1. Business

2023-05-15 compared with 2022-04-05 · 86 added, 89 removed, 91 unchanged (66% of the section changed)

We are an environmental services and technologies company developing and delivering patented and proprietary solutions to the global power industry.

Our leading-edge services have been shown to achieve mercury emissions removal at a significantly lower cost and with less operational impact to coal-fired power plants than currently used methods, while maintaining and/or increasing power plant output and preserving the marketability of byproducts for beneficial use.

We are also developing new technologies to improve the capture rate and environmental concerns of processing rare earth elements (REEs).

Background and Acquisition of Patent Rights

We are an environmental services and technologies company developing and delivering patented and proprietary solutions to the global power industry, specializing in mercury emissions removal technologies.

Products and Services

We provide mercury capture solutions driven by our patented two-part Sorbent Enhancement Additive (SEA®) process using a powerful combination of science and engineering.

Our leading-edge services have been shown to achieve mercury emissions removal at a significantly lower cost and with less operational impact to coal-fired power plants than other used methods, while maintaining and/or increasing power plant output and preserving the marketability of byproducts for beneficial use.

We design systems and materials tailored and formulated specifically to each customer’s coal-fired units.

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Our products have been shown to be successful across a myriad of fuel and system types, tunable to any configuration, and environmentally friendly, allowing for the recycling of fly ash for beneficial use.

Our SEA® technology provides total mercury control with solutions that are based on a thorough scientific understanding of actual and probable interactions involved in mercury capture in coal-fired flue gas.

A complete understanding of the complexity of mercury-sorbent-flue gas interactions and chemisorption mechanisms allows for optimal control strategy and product formulation, resulting in effective mercury capture.

Combined with a thorough proprietary audit of the plant and its configuration and instrumentation, we believe our complete science and engineering approach for mercury-sorbent-flue gas interactions are well-understood, highly predictive, and critical to delivering total mercury control.

The SEA® approach to mercury capture is specifically tailored for each application to match a customer’s coal type and boiler configuration for optimal results.

Our two-pronged solution consists of a front-end sorbent injected directly into the boiler in minimal amounts combined with a back-end sorbent injection solution to ensure maximum mercury capture.

We believe our two-part process uses fewer raw materials than other mercury capture systems and causes less disruption to plant operations.

We believe our sorbent line, which is designed to meet or exceed the mercury mitigation requirements of our customers, offers superior performance and the lowest possible feed rates when compared to other solutions on the market.

Our processes also preserve fly ash which can be sold and recycled for beneficial use.

In order to evaluate each customer’s needs, we finely tune the combustion chemistry using our technologies and specially formulated products.

In order to achieve optimal results, we bring mercury emission analytics to the field for our demonstrations as opposed to collecting samples for laboratory analysis while our team analyzes the entire plant’s performance once compliance testing has begun.

As a result, we are able to offer customers:

Assessment of existing systems and suggested improvements;

Assessment and guidance of mercury capture and emissions;

Optimal design of the injection strategy and appropriate equipment layout and installation;

Sorbent optimization using flow modeling for a customized, low-cost plan for each unit;

Emission testing for mercury and other trace metals with our mobile laboratory;

Ongoing research toward improved technology for mercury capture and rapid-response scientific support for emission or combustion issues as operations and regulations change.

We are also developing new technologies to improve the capture rate and environmental concerns of processing rare earth elements (" REEs ").

See “ Description of the Business - Additional Business Opportunities ” below.

Patents and Trademarks

Our SEA® technology was originally developed by the University of North Dakota’s Energy and Environmental Research Center.

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On April 24, 2017, we acquired from The Energy and Environmental Research Center Foundation all such patent rights, including all patents and patents pending, domestic and foreign, relating to the foregoing technology.

We have a patent portfolio consisting of 37 active patents throughout the U.S., Canada, Europe, and China and 3 patents pending applications.

We believe that our patent position is strong in the U.S., Canada and Europe.

Industry Background

The markets for mercury removal from power plant emissions have largely been driven by federal regulations.

The market for mercury removal from power plant emissions have largely been driven by federal regulations.

On December 21, 2011, the EPA announced MATS for power plants in the U.S.

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Existing power plants were granted three years (plus a potential one-year extension in cases of hardship, ruled on by state EPAs where the plant is domiciled) from April 16, 2012 to comply with the new emission limits.

The MATS rule applies to EGUs that are larger than 25 MW that burn coal or oil for the purpose of generating electricity for sale and distribution through the national electric grid to the public.

They include investor-owned units, as well as units owned by the Federal government, municipalities, and cooperatives that provide electricity for commercial, industrial, and residential uses.

At the time of MATS being promulgated, there were approximately 1,250 coal-fired EGUs affected by this new rule.

Since that time, many of such EGUs have been shut down as a result of this regulation and due to competitive disadvantage to newer or gas-fired EGUs and renewable energy sources (e.g.

The MATS rule applies to EGUs that are larger than 25 MW that burn coal or oil for the purpose of generating electricity for sale and distribution through the national electric grid to the public, and includes investor-owned units, as well as units owned by the federal government, municipalities, and cooperatives that provide electricity for commercial, industrial, and residential uses.

At the time of MATS being promulgated, there were approximately 1,250 coal-fired EGUs affected by this rule.

Many EGUs have since shut down as a result of regulation and competitive disadvantages to newer or gas-fired EGUs and renewable energy sources (e.g.

wind, solar).

We believe that at the end of 2022, there are approximately 225 coal-fired EGUs remaining in the power market which make up the large mercury-emissions control market into which we sell.

The final MATS rule identifies two subcategories of coal-fired EGUs, four subcategories of oil-fired EGUs, and a subcategory for units that combust gasified coal or solid oil (integrated gasification combine cycle “IGCC” units) based on the design, utilization, and/or location of the various types of boilers at different power stations.

The final MATS rule identifies two subcategories of coal-fired EGUs, four subcategories of oil-fired EGUs, and a subcategory for units that combust gasified coal or solid oil (integrated gasification combine cycle or "IGCC" units) based on the design, utilization, and/or location of the various types of boilers at different power stations.

The rule includes emission standards and/or other requirements for each subcategory.

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Mercury is also removed as a co-benefit by special pollution control equipment installed to remove SOX and NOX.

To achieve very high levels of SOX reduction, large, complex, and expensive (capital costs in the hundreds of millions of dollars for a medium-sized EGU) systems called scrubbers can be installed in the plant exhaust system, typically just before the flue-gas goes up the stack for release.

To achieve very high levels of SOX reduction, large, complex, and expensive (with capital costs in the hundreds of millions of dollars for a medium-sized EGU) systems called scrubbers can be installed in the plant exhaust system, typically just before the flue-gas goes up the stack for release.

As a co-benefit to their primary mission, scrubbers have been shown to remove significant quantities of oxidized mercury.

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The amount of each form varies in any given seam of coal and is affected by the other natural elements (such as chlorine) which might also be present in the coal.

We believe about 30-40% of the mercury in the post-combustion flue-gas exists in the oxidized state for power plants burning low-rank coal and about 60-70% for power plants burning high-rank coals.

We believe that about 30-40% of the mercury in the post-combustion flue-gas exists in the oxidized state for power plants burning low-rank coal and about 60-70% for power plants burning high-rank coals.

Mercury is found in only trace amounts in coal making it difficult to remove from coal or from the flue-gas when combusted with the coal.

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As a co-benefit, SCRs have been shown to oxidize a considerable percentage of the elemental mercury in many types of coal.

If the EGU then has a combination of an SCR and a scrubber, we estimate that the EGU might achieve an overall reduction of 80-85% of the mercury in power plants that burn high-rank coals.

If the EGU then has a combination of an SCR and a scrubber, we estimate that the EGU might achieve an over-all reduction of 80-85% of the mercury in power plants that burn high-rank coals.

The exact level of mercury emission reductions depends on the designs of these systems, the types of coal being burned and the operations of the power plant.

We believe that the large majority of the coal-fired EGUs in the U.S.

employ some sort of sorbent injection system to achieve the very low mercury emission levels required by the MATS rule.

Either the sorbent injection system is the primary removal method or such a system is employed as a supplemental system to SCR/scrubber combinations to achieve the emission limits.

Our Mercury Technology

SEA® Technology

The SEA® approach to mercury capture is specifically tailored for each application to match a customer’s coal type and boiler configuration for optimal results.

Our two-pronged solution consists of a front-end sorbent injected directly into the boiler in minimal amounts combined with a back-end sorbent injection solution to ensure maximum mercury capture.

We believe our two-part process uses fewer raw materials than other mercury capture systems and causes less disruption to plant operations.

Our processes also preserve fly ash which can be sold and recycled for beneficial use.

Customized Emissions Services

In order to evaluate each customer’s needs, we finely tune the combustion chemistry using our technologies and specially formulated products.

As a result, we are able to offer customers:

Assessment of existing systems and suggested improvements;

Assessment and guidance of mercury capture and emissions;

Optimal design of the injection strategy and appropriate equipment layout and installation;

Sorbent optimization using flow modeling for a customized, low-cost plan for each unit;

Emission testing for mercury and other trace metals with our mobile laboratory;

Ongoing research toward improved technology for mercury capture and rapid-response scientific support for emission or combustion issues as operations and regulations change.

Our Growth Strategy for Mercury Emissions

employ some sort of sorbent injection system to achieve the very low mercury emission levels required by the MATS rule, with either the sorbent injection system as the primary removal method or such a system being employed as a supplemental system to SCR/scrubber combinations to achieve the emission limits.

Growth Strategy for Mercury Emissions

North American Markets for Our Mercury Technologies

North America is currently the largest market for our emissions technologies.

market, our success depends, in part, on the success of demonstrations performed with utility customers and the resulting contract awards to meet the MATS requirements in the long-term period and our operational performance with EGUs under contract.

market, our success depends, in part, on the success of demonstrations performed with utility customers and the resulting contract awards to meet the MATS requirements in the long-term period and its operational performance with EGUs under contract.

In Canada, there are the 2000 Canada-wide Standards for Mercury Emissions and the 2006 Canada-wide Standards for Mercury Emissions from Coal-Fired Electric Power Generation Plants among all the provinces which was initially implemented in 2010, with caps in mercury emissions for each of the provinces.

We believe we have the most effective technology for the EGUs in Canada and a strong patent position there, given our various registered patents all in the field of reducing and removing mercury emissions.

We believe that we have the most effective technology for the EGUs and that we maintain a strong patent position for our mercury emissions technologies in Canada.

In 2010, we were awarded our first commercial contract to design, build, and install our solution on two large (670MW each) coal units in the western part of the U.S.

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We believe that a significant percentage of coal-fired power plants in the United States have adopted and are infringing upon our two-part Sorbent Enhancement Additive (SEA®) process for mercury removal from coal-fired power plants.

Since 2018, we have engaged a Dallas-based intellectual property and business litigation firm to oversee and spearhead our efforts to protect our intellectual property.

Beginning in 2019, we began to actively enforce our patent rights against unauthorized use of our patented technologies (i.e., infringers).

In July 2019, we initiated our first patent litigation against four major owners and/or operators of coal-fired power plants in the United States and certain of their affiliates, along with certain other third parties in which we have claimed infringement of our patents related to our two-part process for mercury removal from coal-fired power plants.

We have entered into agreements with four of the major defendants.

Such litigation is continuing against the other parties.

See Part I, Item 3 Legal Proceedings.

Beginning in 2019, we began to actively enforce its patent rights against unauthorized use of our patented technologies.

We initiated our first patent litigation in July 2019 against four major owners and/or operators of coal-fired power plants in the United States and certain of their affiliates, along with certain other third parties in which we have claimed infringement of its patents related to its two-part process for mercury removal from coal-fired power plants.

We subsequently entered into agreements with four of the major defendants.

Litigation against the remaining parties is ongoing.

We expect to pursue other infringers and have communicated our position to a significant number of them.

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It is expected that over the next few decades, this international agreement will enhance the reduction of mercury pollution from the targeted activities responsible for the major release of mercury to the environment.

In addition, in July 2017, the European Union, through the European Commission, adopted certain BREF standards for large coal-fired electric generating units.

In July 2017, the European Union, through the European Commission, adopted certain BREF standards for large coal-fired electric generating units.

The BREFs are a series of reference documents covering certain industrial activities and provide descriptions of a range of industrial processes and their respective operating conditions and emission rates.

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As a result of the EU’s adoption of these BREF conclusions, specific emissions limits are currently being developed.

We previously attempted to pursue the European market and had entered into an agreement with one of our suppliers in 2018 to allow them to commercialize our technology throughout Europe.

Such agreement was terminated in 2020.

Prior to its termination, no revenues had been generated from such agreement.

We intend to continue to pursue the European market although no assurance can be made that any such efforts will be successful.

The European market is significant although not as large as the market in the U.S.

We believe more coal-fired EGUs operate throughout Europe than in the U.S.

but are generally smaller EGUs.

We previously attempted to pursue the European market and had entered into an agreement with a supplier in 2018 to allow them to commercialize our technology throughout Europe.

Such agreement was terminated in 2020 and no revenues had been generated from such agreement prior to its termination.

We intend to pursue the European market, although no assurance can be made that any such efforts will be successful.

The European market, although significant, is not as large as the market in the U.S.

With regard to business opportunities in China and other Asian countries, there currently exists no specific mandate for mercury capture that requires specific control technology.

Nevertheless, we are optimistic of the prospects for mercury emissions regulations in China and Southeast Asia in the coming years, and because we have very broad patent rights in China, this has the potential to become a large business opportunity for us in future years.

Nevertheless, we are optimistic of the prospects for mercury emissions regulations in China and Southeast Asia in the coming years.

It is estimated that China represents approximately 50% of the world’s electric production from coal compared to the United States which represents 14%.

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in regulating mercury emissions.

Additional Business Opportunities

In October 2019, we entered into a license and development agreement with a nonrelated third party located in Alabama pursuant to which the parties have been developing a plan to commercialize and market certain technology owned by such entity related to the removal of mercury from air and water emissions generated by coal burning power plants.

Although no assurance can be given, we are optimistic that this arrangement will lead to a new revenue stream for us in the future.

During the first quarter of 2021, we announced that we are in the process of developing a proprietary methane gas emissions control technology which we believe can be adopted within the oil and gas industry.

Methane is emitted from oil and gas operations worldwide and is believed to be a contributor to global warming.

Methane is considered a greenhouse gas, like carbon dioxide.

We have not established a timeline for the introduction of our technology.

In addition, during the first quarter of 2021, we announced new technologies under development intended to improve the processing of REEs in North America.

Currently, most of the demand for REEs in the United States is purchased from China.

REEs are commonly used today in automobile catalysts and petroleum refining catalysts, televisions, magnets, batteries and medical devices.

Our new technologies are under development in conjunction with our collaboration with the Alabama third party entity mentioned above and its affiliates.

Such technologies focus on coal ash remediation by improving the cost of extracting rare earth minerals along with improving the environmental footprint of extracting those REEs from their solvent state.

In October 2021, we announced that we had completed phase 1 testing of our REE technology with Pennsylvania State University’s College of Earth and Mineral Sciences confirming 80-90% efficiency rate in extracting select REEs.

While there is no established timeline for the introduction of these technologies after further testing is performed, we hope that if such further testing is successful, these technologies can be commercialized in 2022 and thereafter.

Our Sales and Marketing

Our marketing strategy is designed to grow our mercury capture solutions in the North American region by building and maintaining the reputation and trust of our work among our customers—specifically by carrying out successful demonstrations performed with utility customers and the resulting contract awards to meet the MATS requirements in the long-term period and sustaining our operational performance with EGUs under contract—and developing new, and refining our existing, unique emissions technologies.

In April 2023, we entered into an exclusive agency agreement with an unrelated company located in Hong Kong pursuant to which such company has been appointed our exclusive agent in various countries located in Southeast Asia (including but not limited to Singapore, Indonesia, Malaysia and Vietnam) to locate and solicit third parties in such territory interested in obtaining rights to use our technologies and purchasing product supply from us.

There can be no assurance that we will be successful in obtaining any significant business in Southeast Asia from such arrangement.

Sales and Marketing

Our marketing strategy is designed to grow our mercury capture solutions in the North American region by building and maintaining the reputation and trust of our work among its customers – specifically by carrying out successful demonstrations performed with utility customers and the resulting contract awards to meet the MATS requirements in the long-term period and sustaining our operational performance with EGUs under contract – and developing new, and refining our existing, unique emissions technologies.

We believe that by offering proven and innovative service offerings, we can attract more customers and partners to our services, creating a network growth effect.

We also expect that the continuing pursuit of infringers of our patented technologies will yield further licensing and supply agreements.

We believe that these targeted marketing initiatives are the most efficient and cost-effective strategy to sustain the growth of both our new and existing customers.

Our Operations

We expect that the continuing pursuit of infringers of our patented technologies will yield further licensing and supply agreements.

We believe that these targeted marketing initiatives are the most efficient and cost-effective strategy to sustain the growth of both new and existing customers.

Additional Business Opportunities

We are also developing new technologies to improve the capture rate and environmental concerns of processing REEs.

During the first quarter of 2021, we announced new technologies under development intended to improve the processing of REEs in North America.

Such technologies were under development in conjunction with a collaboration with a third party and pursuant to a license and development agreement entered into in October 2019.

In October 2022, such license and development agreement expired and has not been extended or renewed.

Prior to expiration, such technologies were being evaluated and tested but had not yet been commercialized.

We plan to evaluate and test other related technologies for the extracting of REEs from their solvent state which we have developed and do not involve any of the technologies subject to the expired license and development agreement.

In tandem with our efforts in REEs, we have been exploring remediation technologies for wastewater and coal ash from coal-fired power plants, as well as water treatment.

We believe the market for water treatment is large and significantly growing both in the United States and abroad.

This expansion in water treatment and wastewater remediation will allow us to support the growing needs of the energy sector, as well as provide vital technologies for considerable environmental concerns.

There can be no assurance that we will be successful in the development of these technologies.

On January 31, 2023, we entered into a License and Supply Agreement with Dakin Holdings Ltd., a company incorporated in Barbados (“Dakin”), effective as of January 1, 2023 (the “Dakin Agreement”), pursuant to which Dakin has granted to the Company (i) a limited license to manufacture and produce for Dakin products comprising certain intellectual property owned by Dakin as described below (the “Dakin IP”), and (ii) an exclusive license to commercialize the Dakin IP in the United States.

Dakin is a company owned and controlled by Richard MacPherson, the Company’s Chief Executive Officer and President.

The Dakin IP consists of a proprietary compound of materials engineered to treat a boiler to improve the combustion process and thereby reduce overall emissions, while improving boiler efficiency during the combustion of all types of fuels at power plants.

We believe the Dakin IP can be an effective supplement to our core business of mercury emissions removal at coal-fired power plants and provide an additional revenue stream utilizing our present infrastructure.

Nevertheless, there can be no assurance that the Dakin Agreement will lead to any significant revenues.

For additional information, see Part III, Item 13.

“Certain Relationships and Related Transactions, and Director Independence”.

Our major competitors in the U.S.

and Canada include companies such as Advanced Emissions Solutions, Inc., Cabot Corporation, Calgon Carbon Corporation, and Nalco Company.

Some of these companies employ large sales staff and are well positioned in the market.

However, in most head-to-head tests with competitor products, our SEA technology has consistently performed better in mercury removal, at lower projected costs.

We believe that our SEA technology is superior to offerings of our competitors and, with its highly experienced staff, we have shown that we can compete effectively in these markets.

Raw Materials

We buy all the raw materials needed to implement our technologies and provide uniquely formulated products for effective mercury removal.

Material components of our proprietary SEA® technology are readily available from numerous sources in the market.

We buy all the raw materials needed to implement our technologies and provide uniquely formulated products for effective mercury removal from third-party suppliers.

Suppliers of our raw materials include large companies that have provided materials for decades and have an international presence.

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We believe that we have excellent relationships with our current suppliers.

If any of our suppliers should become unavailable to us for any reason, there are a number of other suppliers that we believe can be contracted with expeditiously to supply the raw materials that we need, ensuring a continued supply of our products to our customers.

The power market has changed over recent years, creating a greater proportional residential load demand.

With this shift in demand and load, we have experienced some seasonal changes in our billing cycles due to our current customer concentration in the Southwestern United States, where many of our customers decrease capacity in such winter months.

Our Competition

Our major competitors in the U.S.

and Canada include companies such as Advanced Emissions Solutions, Inc., Albemarle Corporation, Cabot Corporation, Calgon Carbon Corporation, Carbonxt, Inc., Environmental Energy Services Inc., and Nalco Company.

Some of these companies employ large sales staff and are well positioned in the market.

However, in most head-to-head tests with competitor products our SEA® technology has consistently performed better in mercury removal, at lower projected costs.

We believe that our SEA® technology is superior to offerings of our competitors and, with our highly experienced staff, we have shown that we can compete effectively in these markets.

Our Intellectual Property

We have a patent portfolio consisting of 37 active patents throughout the U.S., Canada, Europe, and China and 5 patents pending applications.

We believe that our patent position is strong in the U.S., Canada, and Europe.

Our Employees

If any of our suppliers should become unavailable to us for any reason, there are a number of other suppliers that we believe can be contracted with to supply the raw materials that we need.

However, the availability and price of those raw materials can be impacted by factors beyond our control including any price increases due to inflation.

If such suppliers cannot meet our demand for such raw materials on a timely basis or at acceptable prices or if we are unable to offset any such increases that might occur with price adjustments to our customers, such could have a negative effect on our operations.

Our products and services are connected to the power market.

This market has changed over recent years, creating a greater proportional residential load demand.

With this shift in demand and load, we have experienced some seasonal changes in billing cycles as our current customer concentration is in the Southwestern United States, where many of our customers decrease capacity in such winter months.

The price and availability of natural gas can also influence the amount of generation provided by coal-fired plants.

We currently have 11 full-time employees.

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We changed our name to Midwest Energy Emissions Corp.

in September 2011.

effective on October 7, 2011.

ME2C Environmental is a trade name of Midwest Energy Emissions Corp.

Our wholly owned subsidiary, MES, Inc., was originally incorporated in December 2008 in the State of North Dakota.

On June 23, 2011, we completed a merger transaction (the “Merger”) whereby MES, Inc.

Effective on June 21, 2011, we completed a merger transaction (the “Merger”) whereby MES, Inc.

(then called Midwest Energy Emissions Corp.) became our wholly owned subsidiary.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business