Massachusetts Executive Office of Environmental Affairs

MASSACHUSETTS ENVIRONMENTAL VENTURES

Quarterly Newsletter About the Massachusetts Strategic Envirotechnology Partnership
Fall, 1997

IN THIS ISSUE:

Viewpoint
Technology Verification: Faster Track to New Markets
Marketwatch: No Shortage of Environmental IPOs
Massachusetts Developments

STEP recieves $2 million for FY 1988
NETI and industry partners to fund 10 projects at $790,000
ETBC pilot project focuses on reducing mercury in hospital waste streams

Company Updates

Ariano Technologies
Twin Rivers Technologies
Parlex Corp

VIEWPOINT

Seismic Shift Shakes the Environmental Industry

by Steve Maxwell
TechKNOWLEDGEy Strategic Group

In the late 1970s and 1980s, the overall volume of environmental business grew rapidly--a swiftly rising tide lifting all ships. The last few years, however, have witnessed the effects of a falling tide, and the industry has suffered through the wrenching problems of excess capacity and declining demand.

Delays in re-authorizing the Superfund legislation and other environmental laws, a fundamental change in U.S. environmental policy, and an increasing emphasis on the economic--as opposed to regulatory--drivers for improved environmental management practices are adding to the environmental industry's woes. Yet amidst adversity lies opportunity, and efforts by environmental companies to take advantage of the changing market are prompting a slow but seismic shift in the nature of the industry.

The forces that are causing this industry redefinition are worth reviewing. Key among these fundamental and longer-term changes are the following:

A clearer distinction between "perceived" and "real" environmental risks: With increased political scrutiny, and with an improved understanding of environmental risks, environmental protection priorities are shifting away from permanent treatment towards solutions that mitigate only the most substantial threats. Spurred by the change in the control of the U.S. Congress in 1994, this trend is already leading to major shifts in legislative focus and regulatory control.

Increased client focus on economic gain, and decreased focus on regulatory pressure: Environmental firms that can help their clients reduce operating expenses or capital expenditures will achieve greater success than firms that simply facilitate regulatory compliance. The winds are shifting against the proliferation of environmental regulations, and as a result, new regulations can no longer be counted on to ensure the success of an environmental business. The environmental industry in the future will be driven by a sharper focus among clients on a more efficient utilization of resources.
Evolution in environmental management from a pollution-control orientation to a pollution-prevention orientation: Sky-rocketing prices for waste management services during the 1980s forced U.S. industry to re-examine its raw material usage, waste management practices, manufacturing processes, and the products themselves. As a result, the regulated community has retooled in the direction of preventing the wastes in the first place.

Increasing consolidation in the environmental industry: As the environmental industry continues to mature, the consolidation process will gain momentum, putting increasing pressure on smaller players to respond.

Economics Leads the Way

To survive and thrive in this changing--and more competitive--marketplace, environmental service firms must develop new services that build on these evolving industry drivers and meet the new needs and changing demands of their clientele. Areas like property redevelopment, strategic environmental management (SEM), and environmental outsourcing are some of the most widely mentioned examples of this more economically driven industry.

The emerging field of property redevelopment--or"brownfields"--is a good example of the shift away from regulatory requirements to economic value enhancement. In the past, regulators have forced the cleanup of contamination with little attention to the property's intended future use or its likely economic value. Today, a growing number of programs rely on risk-based analysis of contaminated sites and promote the cleanup of sites to levels consistent with intended future uses.

SEM, while subject to great confusion and many different definitions, is nevertheless emblematic of a shift away from "end of pipe," or pollution control, thinking towards a more interactive business approach to environmental management. SEM will be a highly specialized management consulting business, and will never be large in absolute dollar terms; however, for the firms quick and clever enough to establish a competitive beachhead in this important area, it will be a lucrative business and can constitute a critical avenue for the marketing of more traditional environmental services.

In the area of environmental outsourcing, clients are turning to specialized third parties to manage their environmental problems. As American business has become more locked in a global fight for survival, it has increasingly focused on developing core strengths and capabilities. As a result of this trend, many ancillary and supporting functions--such as environmental, health, and safety functions--are increasingly being contracted out. Parties looking to outsource their environmental responsibilities range from local municipalities--particularly drinking water and wastewater treatment plants--to major industrial corporations.

Beyond the Traditional

Apart from generating these new business opportunities, the changes in the fundamental drivers of the environmental industry are prompting a redefinition of the industry. Specifically, the pursuit of a more efficient utilization of resources means that the industry will embrace firms that heretofore had not been regarded as "environmental."

These "resource extension" companies protect the environment in a broad sense, by minimizing the need for raw materials or extending the life of those raw materials and infrastructure components already in use. Going beyond recycling and resource recovery, these companies actually reduce the need for recycling by making a material last longer or work better--a kind of "planned non-obsolescence." As the environmental industry continues to undergo a redefinition and a transition from pollution control to pollution prevention, companies that contribute to the extension of product life or the prevention of a problem will increasingly come to be called "environmental" companies.

Steve Maxwell is managing director of TechKNOWLEDGEy Strategic Group, a Boulder, Colorado-based management consulting firm specializing in strategic planning, mergers and acquisitions support, and marketing advisory services to the environmental industry. For further information, call Tel: 303-442-4800.

Technology Verification: Faster Track to New Markets?

During the past few years, several states and the U.S. Environmental Protection Agency (EPA) have launched programs to provide independent verification of innovative environmental technologies. Although each of these programs has a different focus and structure, they share an important objective: to provide reliable data on the performance of new environmental technologies.

This data is designed to meet the needs of the regulators who are responsible for evaluating and approving the use of new technologies, as well as potential customers who want detailed information about product performance before they buy. By providing reliable data that is acceptable to regulators and consumers alike, verification programs may help technology developers enter new markets more easily.

Six-State Partnership

Massachusetts has been a leader in the technology verification effort. In April 1995, state environmental officials from Massachusetts, California, Illinois, and New Jersey signed a memorandum of understanding (MOU) that committed the states to cooperate in promoting the use of environmental technologies in those four states. One year later, New York and Pennsylvania joined this innovative interstate agreement, and signed an amended MOU forming the Six-State Partnership for Environmental Technology.

The key element of this expanded partnership is a technology review pilot project, under which the states have undertaken a joint evaluation of 12 environmental technologies (two from each state). This pilot project has given the state environmental agencies an opportunity to learn about one another's technology evaluation procedures, and identify areas where their procedures differ or overlap.

STEP Firms Participate

The technologies selected from Massachusetts for the pilot project were a trickling filter developed by AWT Bioclere (New Bedford) for enhanced wastewater treatment, and an in-process, closed-loop treatment system developed by Cellini Purification Systems (Ludlow) for the metal-finishing industry. Both AWT Bioclere and Cellini are also participants in the Massachusetts Strategic Envirotechnology Partnership (STEP) program, the state's initiative to facilitate the commercialization of environmental technologies developed by Massachusetts firms.

The technology review project was designed to identify the common data and protocols that the states use in evaluating environmental technologies, and to reduce redundancies and inconsistencies in their testing programs. This knowledge will be used to streamline the evaluation, acceptance, and approval of environmental technologies among the six participating states.

After an initial review, the states decided to conduct a more detailed evaluation of eight environmental technologies, using a novel approach dubbed "Applicant for a Day." In this approach, each environmental agency took on the role of a company from its state that was applying for a Technology Verification technology permit or certification in another state.

The state "applicants for a day" had to answer all the questions and provide all the information required by the reviewing state's environmental agency. For example, officials from the Massachusetts Executive Office of Environmental Affairs submitted information about Cellini's treatment system to the New Jersey Department of Environmental Protection and gained first-hand experience of that state's permitting process.

Streamlining State Criteria

According to Gina McCarthy, director of the Massachusetts STEP program, the process has revealed substantial differences in state requirements that will prevent states from simply "rubber stamping" one another's permit approvals. She noted, however, that significant areas of overlap should make it possible for each state to reduce the requirements imposed on companies that have already completed the full technology evaluation and permitting process in another state.

For example, in the case of remediation technologies, the pilot program has shown that the different state permitting authorities require much of the same information from a technology demonstration. McCarthy said that, as a result, a firm should be able to avoid redemonstrating its remediation technology if it applies for a permit in another state. A site-specific review of the technology should be sufficient to provide whatever supplemental information might be needed for a permit approval.

McCarthy said that the Six-State Partnership for Environmental Technology is considering several options for future collaboration, such as establishing an"expertise network" for the exchange of technical information on different state permitting processes, setting up systems to facilitate the flow of technical information, and developing "permit templates" to streamline procedures for obtaining permits in different states.

For information on participating in the Six-State Partnership, call Gina McCarthy at Tel: 617-727-9800, ext. 214.

MARKETWATCH: No Shortage of Environmental IPOs

"Environment" can be a dirty word on Wall Street these days, but investors have not given up on the industry by any means. While the stock prices of environmental companies in several sectors of the industry have languished, and while some Wall Street analysts have ceased their research coverage of the industry, investors remain bullish about several key sectors. That positive feeling has been evident in a series of environmental initial public offerings (IPOs) during 1996 and 1997.

While the list of environmental IPOs during the past 18 months shows some variety in the types of companies that are going public, certain sectors of the environmental industry are clearly in favor. "The two areas where companies are still successful in raising public money are solid waste and water," according to Hugh Holman of Environmental Capital Associates (ECA) in Baltimore, Maryland.

Water and Solid Waste

The fragmented water sector encompasses thousands of companies providing water and wastewater treatment equipment and services, and should present substantial opportunities for companies looking to grow through consolidation and seeking public equity to finance that growth. "Few publicly traded companies are specializing in that field," Holman points out. "I suspect that you'll see more IPO activity in the water area."

In solid waste, "the third generation has arrived," according to Holman. The first-generation giants--Waste Management and Browning-Ferris Industries--are shedding unprofitable operations and buying back their stock, while the second-generation firms such as Allied Waste Services and USA Waste Services have grown aggressively during the past few years to become billion-dollar firms.

"The third generation--Waste Industries, American Disposal, and Eastern Environmental--seems to have come out of the nest," says Holman. "These companies can grow like Allied and USA Waste, although it is more likely that they will become acquisition targets."

Recovery and Reuse

The solid waste and water sectors have been the initial targets of the Environmental Opportunities Fund, launched in early 1996 by the investment banking firms Sanders Morris Mundy and Quirk Carson. The fund, which primarily invests in privately held companies with an IPO exit strategy, has raised $38 million to date and has invested about $20 million.

"Solid waste is clearly strong--and has been strong through 1996 and 1997--and water/wastewater has been hot as well," according to Kenneth Leung of Sanders Morris Mundy, the fund's chief investment officer. "Our fund has emphasized those sectors, but we're seeing interest in other areas,"such as resource recovery, he notes.

In addition to co-managing Waterlink's IPO in June, Sanders Morris Mundy co-managed the U.S. Liquids offering in August, reflecting the growing interest in resource recovery and product recovery. "We're starting up a second fund, and we're going to look at other universes--industrial services, for example," Leung says. The second fund, and increasingly the first fund, "will be geared toward the product-recovery area, at the mid-cap level," according to Leung.

Still Some Untouchables

Not all sectors of the environmental industry enjoy continuing investor interest. "We don't see any more of the engineering/consulting/remediation plays," says ECA's Holman. Environmental technology stocks have taken a major hit as well. A group of five environmental companies known as the"class of 1993"--Catalytica, Energy BioSystems, Ensys, Molten Metal Technology (MMT), and Purus--went public that year and have seen their stock prices plummet from the original IPO prices as the drawn-out process of developing their respective technologies has caused earnings to fall far below initial expectations.

The biggest blow to the environmental technology sector came in late 1996. On October 19, MMT--which had been the darling of the environmental technology firms--announced that its combined revenues for the third and fourth quarters of 1996 would be $8 million less than the company had projected. On October 20, MMT's stock plummeted by 49 percent from $28.125 to $14.25 per share, taking other environmental technology stocks with it. To be sure, the other firms had their own problems, but MMT's stock disaster put the environmental technology sector in general on notice with investors.

MEV 16 Thrives

MMT is one of the MEV 16 Index group of companies (previously the MEV 15), and has had a substantial negative impact on the group's overall performance this year. According to Jack Robinson, president of Boston-based Winslow Management, the MEV 16's performance had been "significantly below the major indices, including the Russell 2000 and the S&P 500" for much of the year, but that performance has bounced back.

Fueling the MEV 16's growth have been Whole Foods Market, Spire Corp., Thermo Power, and Thermo Fibertek. Whole Foods, whose stock has increased more than 100 percent this year, is the market leader in the rapidly growing natural/organic foods industry, Robinson points out.

Spire Corp. (Bedford)--the new addition to the MEV list--develops the technology for the equipment that makes photovoltaic cells. According to Robinson, Spire's business has been "picking up significantly" as the economics of photovoltaic cells improve worldwide. Massachusetts Environmental Ventures will profile Spire in an upcoming issue.

Thermo Fibertek, a maker of systems and equipment for paper recycling, and Thermo Power, a developer of cooling, industrial refrigeration, and power cogeneration systems, have seen their stock prices increase by more than 20 percent each this year, Robinson says. The companies are units of Thermo Electron in Waltham, which has a strategy of developing technologies, building firms around those technologies, and then spinning the firms out as public companies.

Despite the continuing interest in environmental IPOs--including those in instrumentation, the Thermo Electron family's specialty--Thermo Electron has been slowing down the frequency of its new offerings. During 1996, the company flooded Wall Street with spin-outs at a dizzying pace-six in total-and investors began to lose interest in the Thermo Electron family, as following all of the newly public Thermo companies became more difficult because of the sheer number of companies and the overlap of their business areas.

Thermo Electron realizes that it overextended itself during 1996. "The company has figured out that it can't flood the market with too many offerings," says Winslow's Robinson. "They've done only one this year--Metrika."

In general, investors are shunning environmental companies whose markets are driven by regulations rather than economic factors. "But where the financial story is strong, the new issues have come," according to Robinson.

MEV 16 COMPANIES (Data as of 11/13/97)

Company $/Share Market Value ($Millions) Price Change (%YTD) P/E Ratio 1997

Fluor Daniel GTI 8 7/8 73.9 +12.7% ----

Gallileo 9 1/2 65.1 -62.2% ----

Gillette 90 1/16 50,400 +15.8% 30.1

Ionics 36 5/16 579 -24.3% 18.2

Millipore 37 1/2 1,600 -9.4% 15.9

Molten Metal Technology 1 7/32 28.8 -89.6% NM

Opta Food Ingredients 5 1/2 60.4 -4.3% NM

Polaroid 42 3/16 1,900 -3.0% 13.1

Spire 17 1/2 53.1 +677.8% ----

Stride Rite 11 7/8 575 +18.8 22.4

Thermo Ecotek 13 318 -14.8% ----

Thermo Electron 37 9/16 5,600 -8.9% 22.1

Thermo Fibertek 11 3/16 680 +20.1% 20.0

Thermo Power 9 3/4 116 +22.8% ----

Watts Industries 26 705 +8.9% ----

Whole Foods Market 45 5/8 1,100 +102.8% 27.8

MEV 16 25 15/64 3,990 +41.4% 21.2

S&P 500 916.66 50,900 +23.7% 18.9

RUSSELL 2000 423.39 ---- +16.8% ----
Source: Baseline Services; NM = Not Material; YTD = Year to Date

MEV 16 COMPANIES (Data as of 11/13/97)
Company	$/Share	Market Value ($Millions)	Price Change (%YTD)	P/E Ratio 1997
Fluor Daniel GTI	8 7/8	73.9	+12.7%	----
Gallileo	9 1/2	65.1	-62.2%	----
Gillette	90 1/16	50,400	+15.8%	30.1
Ionics	36 5/16	579	-24.3%	18.2
Millipore	37 1/2	1,600	-9.4%	15.9
Molten Metal Technology	1 7/32	28.8	-89.6%	NM
Opta Food Ingredients	5 1/2	60.4	-4.3%	NM
Polaroid	42 3/16	1,900	-3.0%	13.1
Spire	17 1/2	53.1	+677.8%	----
Stride Rite	11 7/8	575	+18.8	22.4
Thermo Ecotek	13	318	-14.8%	----
Thermo Electron	37 9/16	5,600	-8.9%	22.1
Thermo Fibertek	11 3/16	680	+20.1%	20.0
Thermo Power	9 3/4	116	+22.8%	----
Watts Industries	26	705	+8.9%	----
Whole Foods Market	45 5/8	1,100	+102.8%	27.8
MEV 16	25 15/64	3,990	+41.4%	21.2
S&P 500	916.66	50,900	+23.7%	18.9
RUSSELL 2000	423.39	----	+16.8%	----

ENVIRONMENTAL INDUSTRY IPOs since June 1996

COMPANY/HQ EXCHANGE/SYMBOL OFFERING DATE/PRICE $ PER SHARE (AS OF 11/13/97) % CHANGE BUSINESS

Casella Waste Systems, Inc., Rutland, VT Nasdaq CWST 10/29/97 $18/share $21.25 +18% Provides solid waste management services

U.S. Liquids, Inc., Houston, TX AMEX USL 8/20/97 $9.50/share $15.50 +63% Manages nonhazardous wastes from the food and oil-field industries

Hagler Bailly, Inc., Arlington, VA Nasdaq HBIX 7/3/97 $14/share $19.375 +38% Provides management consulting services to the environmental, energy and utlity industries

Waterlink, Inc., Canton, OH NYSE WLK 6/25/97 $11/share $19.00 +73% Provides water purification and wastewater treatment equipment and services

Mertrika Systems Corp., San Diego, CA AMEX MKA 6/20/97 $15.50/share $15.25 -2% Makes systems for analyzing raw-materials content in manufacturing processes

Waste Industries, Inc., Raleigh, NC Nasdaq WWIN 6/13/97 $13.50/share $20.75 +54% Provides solid waste management services

Commodore Separation Technologies, Inc., New York, NY Nasdaq CXOT 4/3/97 $5/share $2.25 -55% Makes systems for removing contaminants from liquid and gaseous streams

Mercury Waste Solutions, Inc., Mankato, MN Masdaq MWSI 2/28/97 $5/share $4.50 -10% Recycles fluorescent and other mercury-containing lamps

Thermo Fibergen, Inc., Bedford, MA AMEX TFG 9/12/97 $12.75/share $9.125 -28% Removes paper-making residues for the production of new paper and other products

Stericycle, Inc., Deerfield, IL Nasdaq SRCL 8/23/96 $9/share $11.875 +32% Provides medical waste management services

American Disposal Services, Inc., Burr Ridge, IL Nasdaq ADSI 7/25/96 $9/share $33.50 +272% Provides solid waste management services

Commodore Applied Technologies, Inc., New York, NY AMEX CXI 6/28/96 $6/share 2.5625 -57% Develops technologies for decontaminating solids, sludges and other media

Thermatrix, Inc., San Jose CA Nasdaq TMXI 6/20/96 $12/share $2.375 -80% Provides technology for removing VOCs from air streams

**ENVIRONMENTAL INDUSTRY IPOs** since June 1996
COMPANY/HQ	EXCHANGE/SYMBOL	OFFERING DATE/PRICE	$ PER SHARE (AS OF 11/13/97)	% CHANGE	BUSINESS
Casella Waste Systems, Inc., Rutland, VT	Nasdaq CWST	10/29/97 $18/share	$21.25	+18%	Provides solid waste management services
U.S. Liquids, Inc., Houston, TX	AMEX USL	8/20/97 $9.50/share	$15.50	+63%	Manages nonhazardous wastes from the food and oil-field industries
Hagler Bailly, Inc., Arlington, VA	Nasdaq HBIX	7/3/97 $14/share	$19.375	+38%	Provides management consulting services to the environmental, energy and utlity industries
Waterlink, Inc., Canton, OH	NYSE WLK	6/25/97 $11/share	$19.00	+73%	Provides water purification and wastewater treatment equipment and services
Mertrika Systems Corp., San Diego, CA	AMEX MKA	6/20/97 $15.50/share	$15.25	-2%	Makes systems for analyzing raw-materials content in manufacturing processes
Waste Industries, Inc., Raleigh, NC	Nasdaq WWIN	6/13/97 $13.50/share	$20.75	+54%	Provides solid waste management services
Commodore Separation Technologies, Inc., New York, NY	Nasdaq CXOT	4/3/97 $5/share	$2.25	-55%	Makes systems for removing contaminants from liquid and gaseous streams
Mercury Waste Solutions, Inc., Mankato, MN	Masdaq MWSI	2/28/97 $5/share	$4.50	-10%	Recycles fluorescent and other mercury-containing lamps
Thermo Fibergen, Inc., Bedford, MA	AMEX TFG	9/12/97 $12.75/share	$9.125	-28%	Removes paper-making residues for the production of new paper and other products
Stericycle, Inc., Deerfield, IL	Nasdaq SRCL	8/23/96 $9/share	$11.875	+32%	Provides medical waste management services
American Disposal Services, Inc., Burr Ridge, IL	Nasdaq ADSI	7/25/96 $9/share	$33.50	+272%	Provides solid waste management services
Commodore Applied Technologies, Inc., New York, NY	AMEX CXI	6/28/96 $6/share	2.5625	-57%	Develops technologies for decontaminating solids, sludges and other media
Thermatrix, Inc., San Jose CA	Nasdaq TMXI	6/20/96 $12/share	$2.375	-80%	Provides technology for removing VOCs from air streams

Other Technology Verification Efforts

The Six-State Partnership for Environmental Technology and the Massachusetts STEP program are just two of a growing array of environmental verification initiatives on the state, national, and international levels. The following is a sampling of other verification efforts that are now under way:

The U.S. EPA launched the Environmental Technology Verification (ETV) Program in 1995 to verify the environmental performance of "commercially ready" technologies. According to ETV program director Penelope Hansen, the program's primary goal is to provide objective, quality-assured performance information to technology vendors, permitting agencies, and potential purchasers of environmental technologies.
The California Environmental Protection Agency (Cal/EPA)-one of the participants in the Six-State Partnership-has established a $3.5-million-per-year program for certifying environmental technologies in that state. Under the program, Cal/EPA engineers evaluate the effectiveness and reliability of a wide range of environmental technologies and certify when a product meets the manufacturer's claims. Since the Cal/EPA program began in 1995, it has certified the performance of more than 50 technologies.
Canada has established its own Environmental Technology Verification Program, which is a joint initiative of Environment Canada and Industry Canada, in cooperation with the Canadian Environment Industry Association and other stakeholders. Like the Cal/EPA program, the Canadian verification initiative certifies the claims that companies make about their products. The Canadian program issued its first verification certificates to nine companies in June.
EPA and Environment Canada have entered into a cooperative agreement to examine ways for harmonizing their verification programs. This effort could prove challenging, however, because of the substantial differences between the two national programs, according to EPA's Hansen. She noted that the main focus of the Canadian program is to certify companies' claims about their products, while the cornerstone of the EPA program is the development and application of standard verification protocols. Despite these differences, EPA and Environment Canada have agreed to share data from their respective programs and will try to learn whatever they can from each other, Hansen said.
In June, NAFTA's Commission for Environmental Cooperation (CEC) convened a meeting of environmental ministers and other interested parties to discuss verification programs in Canada, Mexico, and the United States. The meeting marked the growing recognition that incompatible verification standards can be a major hindrance to international trade in environmental technologies, according to William Brah, director of the Environmental Business and Technology Center (EBTC) at UMass-Boston. Brah expects that representatives from the three nations will soon begin meeting regularly to discuss strategies for coordinating their verification strategies. "If these efforts are successful, we won't have to repeatedly demonstrate a technology when it is ready for export," Brah noted.

MASSACHUSETTS DEVELOPMENTS

Legislature appropriates record $2 million for STEP in FY 1998
In July, the Massachusetts legislature allocated $2 million to support the Massachusetts Strategic Envirotechnology Partnership during the state's 1998 fiscal year, which began on 1 July. The appropriation, which is the highest in STEP's three-year history, represents a 33-percent increase from the $1.5 million in funding provided in FY 1997, according to William Brah, director of the Environmental Business and Technology Center at UMass-Boston. Brah noted that the increased funding was needed "to meet the growing demand from the private sector for partnerships with the university and state" that will help companies commercialize new environmental and energy technologies.
The STEP funds will be used, in part, to support a wide range of research and development partnerships involving the private sector and UMass research centers at the Amherst, Boston, Dartmouth, and Lowell campuses. The following two articles summarize research at EBTC and UMass-Amherst's National Environmental Technology for Waste Prevention Institute. The next issue of Massachusetts Environmental Ventures will provide a summary of projects at the Toxics Use Reduction Institute at UMass-Lowell, and the Advanced Technology Center for Business, Textiles, and Manufacturing at UMass-Dartmouth.

NETI and Industry Partners To Fund 10 Projects for FY 1998
The National Environmental Technology for Waste Prevention Institute (NETI) at UMass-Amherst recently announced that it would support a total of 10 faculty-industry research projects during the university's 1998 fiscal year, which began on 1 July. Funding for the projects will total nearly $790,000 during FY 1998, with about $503,000 provided by NETI and about $287,000 in cash and in-kind contributions from its industry partners. NETI Director Joseph Larson said that increased state appropriations will allow NETI to fund all of the proposals that have passed the review process.
The listing below summarizes the five new projects that NETI has selected for funding, and then describes five ongoing projects for which NETI is providing continued support in FY 1998. (The academic departments given are all at UMass-Amherst.)
Reducing isocyanate demand: Alan Lesser of the Department of Polymer Science and Engineering and three industry partners will develop an approach for reducing the use of isocyanates in the fabrication of polyurethane composites and decreasing the amount of solid waste generated by the fabrication process. This project will receive about $55,000 from NETI and $55,000 from the industry partners--GE Plastics (Selkirk, NY), GI Plastek (Newburyport), and Shell Chemical Co. (Houston, TX).
Solvent-free production of polymers: James Watkins of the Department of Chemical Engineering and Procter & Gamble (Cincinnati, OH) will evaluate the use of polymer supercritical carbon dioxide for processing and synthesizing polymers without solvents. NETI funding for the project will amount to $50,000, while Procter & Gamble will provide $21,000.
Reducing waste by-products in methane oxidation processes: Dionisios Vlachos and Michael Tsapatsis of the Department of Chemical Engineering and Praxair (Tarrytown, NY) will study the potential of a thin-film wheel microreactor design for improving reactor efficiency while minimizing waste by-products during the oxidation of methane to larger hydrocarbons. NETI and Praxair will provide $50,000 and $5,000, respectively, for the project.
Preventing waste during semi-conductor manufacturing: Kei May Lau of the Department of Electrical and Computer Engineering and Morton International (Danvers) will focus on the development of state-of-the-art sensors for detecting chemical leaks in certain semiconductor manufacturing operations. Improved detection should allow the industry to achieve better control of leaks, thereby minimizing the treatment and disposal of unused chemicals. NETI will contribute $50,000 to the project, while Morton will provide $10,000.
Microbial production of polyesters: Robert Lenz of the Department of Polymer Science and Engineering, Steve Goodwin of the Department of Microbiology, and industry partner 3M Co. (St. Paul, MN) will evaluate the use of bacterial fermentation techniques to make biodegradable polyesters for pressure-sensitive adhesives. Project funding will consist of $46,500 from NETI and $13,000 from 3M.
VOC recycling: W. Curt Conner and Robert Laurence of the Department of Chemical Engineering and ChemDesign Corp. (Fitchburg) will conduct the third phase of a study evaluating the use of microwave radiation and zeolite pore sieves to enhance the sorption and recycling of volatile organic compounds (VOCs) in chemical processes. Funding for the project during FY 1998 will consist of about $55,000 from NETI and $25,000 from ChemDesign.
Hydrogen and VOC recovery: Michael Tsapatsis and Jan van Egmond of the Department of Chemical Engineering and DuPont Central Research and Development (Wilmington, DE) will conduct the second phase of a project studying the use of honeycomb silica films in the recovery of VOCs and hydrogen. NETI and DuPont will provide $50,000 and $5,000, respectively, for the project during FY 1998.
Controlling nitrogen oxide emissions during combustion: Phillip Westmoreland of the Department of Chemical Engineering and United Technologies Research Center (East Hartford, CT) will continue their research into kinetics-based approaches for controlling nitrogen oxide emissions during fuel-rich combustion. NETI will contribute $50,000 for the project in FY 1998, while United Technologies will provide $10,000.
Waste prevention in multiphase reactors: Ka Ng of the Department of Chemical Engineering and three industry partners will continue a study of waste prevention in industrial gas-liquid-solid reactors, using modeling to select optimal reactor designs and optimal internal parts. This project will receive about $50,000 from NETI and a total of $95,000 from the industry partners--Mitsubishi Chemicals America (San Jose, CA), Morton International, and Searle (Skokie, IL).
Green cooling techniques: Stephen Malkin of the Department of Mechanical and Industrial Engineering and three industry partners will continue their research into environmentally sound cooling techniques for grinding processes. This year, researchers will evaluate cold-air-gun and liquid-nitrogen cooling techniques. The project's funding consists of about $47,000 from NETI during FY 1998 and a total of $47,500 from Chand Kare Technical Ceramics (Worcester), Norton Co. (Worcester), and The Torrington Co. (Torrington, CT).
NETI's faculty-industry research partnerships recently received national recognition when the U.S. EPA and the American Chemical Society selected UMass to exhibit materials at the 1997 Green Chemistry and Engineering Conference held in Washington, D.C., during late June. The conference focused on government, academic, and industry research on the prevention and minimization of wastes generated during chemical manufacturing processes.
For further information on the recent NETI-funded projects, contact Joseph Larson: NETI, at Tel: 413-545-2842.
EBTC funds pilot project for controlling mercury in hospital waste streams
The Environmental Business and Technology Center at UMass-Boston will conduct a pilot project during FY 1998 to evaluate innovative technologies for reducing mercury discharges in hospital waste streams. The project will support an ongoing initiative of the Massachusetts Water Resources Authority (MWRA) to improve water quality by controlling mercury emissions from area hospitals--a major source of pollution in Boston Harbor.
Four technology vendors have qualified to participate in pilot tests on the basis of bench-scale tests: ICET, Inc.(Norwood); SolmeteX, Inc. (Billerica); a joint venture of Prosys (Billerica) and DuBois Chemicals (Providence, RI); and Aqua Terra Aero (Cleveland, OH). Newton Wellesley Hospital and Brigham and Women's Hospital have accepted the invitation of Environmental Affairs Secretary Trudy Coxe to participate in the year-long pilot project for evaluating mercury removal technologies.
Gordon Wallace of UMass-Boston's Department of Environmental, Coastal, and Ocean Sciences will evaluate how effectively the mercury-removal units are able to handle both high-flow waste streams with relatively low mercury concentrations and low-flow waste streams with high mercury concentrations. The STEP program will provide $120,000 in funding for the project, and the technology companies and participating hospitals are expected to contribute funding, equipment, and services with a total value of at least another $120,000, according to EBTC's Brah.
Brah said that data from the pilot project should allow hospitals to compare the cost and performance of the different units and select appropriate technology for meeting MWRA's mercury-discharge standards, which are among the most stringent in the United States. Brah noted that the research could also lead to the application of promising mercury-reduction technologies elsewhere--particularly in California and the Great Lakes states, which are considering the adoption of tough mercury regulations that might necessitate the use of advanced removal technologies.

STEP annual report highlights program accomplishments
In its 1996 annual report, STEP announced that a total of 68 environmental and energy technology companies received assistance last year from STEP's three partner agencies-the Massachusetts Executive Office of Environmental Affairs, the Department of Economic Development, and the University of Massachusetts. STEP provided funding and services in a variety of areas, including technology assessment and demonstration, business support, and applied research and development.
For example, in 1996, STEP agencies entered into 13 new applied R&D partnerships with Massachusetts companies to develop and demonstrate process technology for cleaner manufacturing. The industry partners contributed more than $450,000 in matching funds for these projects. STEP provided extensive business and technical assistance to many companies, including AirXpert Systems (Lexington), AWT Bioclere (New Bedford), Brittany Dyeing and Printing (New Bedford), Cellini Purification Systems (Ludlow), Ion Signature Technology (Concord), and SolmeteX (Billerica). For a copy of the report at no cost, contact: David Lutes, Massachusetts Office of Business Development, at Tel: 617-727-3206, or visit STEP's home page on the World Wide Web at www.magnet.state.ma.us/step.

Company Updates
The fiber-optic chemical sensor system developed by Ariano Technologies, Inc. (Cambridge) "is competitive with, and in many cases more cost-effective than, competing technologies" for detecting subsurface hydrocarbon vapors in the soils surrounding underground storage tanks (USTs), according to a recently published technology and business assessment report from the STEP program. Ariano's vapor-monitoring system "is able to detect leaks at an earlier stage than they would typically be detected in the liquid state," the report noted. "Since the Ariano monitoring system is continuous, it gives the earliest possible warning of a leak." The system responds to all hydrocarbon vapors, and detects hydrocarbon at concentrations as low as 1,000 parts per million.
In its assessment, STEP found that Ariano's "performance claims are backed up with both bench-scale and beta site data," and that "the core technology is afforded patent protection from a variety of standpoints." The system is in direct competition with the traditional approach for detecting tank leaks, which involves tracking tank inventory and sounding an alarm if there is an unexpected loss of petroleum products. The market for UST leak-detection technology is substantial, totaling about $900 million per year in the United States alone, according to STEP. For further information, contact: Richard deFilippi, Ariano Technologies, at Tel: 617-661-6110.
The use of biodiesel--a clean-burning alternative fuel made by Twin Rivers Technologies (Quincy)--could reduce air emissions and thereby extend the useful life of urban buses that might otherwise have to be retired because of stringent pollution requirements, according to a newly issued STEP technology and business assessment report. STEP found that "biodiesel is a potentially desirable fuel [for urban buses] because, under the right conditions, it reduces emissions of particulate matter, unburned hydrocarbons, and carbon monoxides." Made from natural animal or vegetable oils, biodiesel is biodegradable, has minimal sulfur content, and is less toxic than petroleum diesel.
Biodiesel can be used in diesel engines either in its "neat"-that is, undiluted-form or as part of a blend with petroleum diesel. "There are a number of large companies that have the knowledge and resources to manufacture biodiesel, but they are currently not doing so,"according to the STEP report. "The biodiesel market is still small and provides too low a rate of return on investment for these companies to find it attractive." The report noted that Twin Rivers' goal "is to develop their product and manufacture biodiesel from alternative sources, and thus gain a competitive advantage over companies that are trying to enter the market." Because biodiesel is more expensive than petroleum-based fuels, it is generally used in a 20-percent biodiesel/80-percent petroleum blend called B20 for transportation applications. Under the Clean Air Act's Urban Bus Retrofit/Rebuild program, EPA has certified Twin Rivers' biodiesel as an alternative fuel for urban buses. For further information, contact: Gene Gebolys, Twin Rivers Technologies, at Tel: 617-472-9200.
The Parlex Corp. (Methuen), a printed-wiring-board (PWB) manufacturer, has developed two new approaches for increasing PWB production while reducing manufacturing costs and the use of both raw materials and hazardous chemicals. In its High Speed Interconnect Additive (HSI+) process, Parlex uses conductive layers of copper or silver epoxy-rather than the usual thicker layers of metallic copper and dielectric materials-in the manufacture of flexible circuits. The HSI+ process has cut Parlex's use of ammonia by 9,000 pounds per year and copper by 7,100 pounds per year, and has saved the company a total of nearly $210,000 per year.
As an alternative to electroless copper plating, Parlex has used its Shadow process to deposit conductive graphite on up to 25,000 square feet of PWBs per week. In the Shadow technique, PWBs are immersed in graphite colloid, processed to remove excess graphite, and baked dry. Parlex's Shadow process has a throughout of up to 200 PWBs per hour, compared to 40 PWBs for electroless copper plating. Implementation of the technique has reduced the company's use of sulfuric acid, nitric acid, sodium hydroxide, and other chemicals by more than 43,000 pounds per year, and has led to a relatively modest increase--1,000 pounds per year--in the use of phosphoric acid and other chemicals. By using the Shadow process for most of its plating operations, Parlex has reduced water consumption for plating from 11.5 million gallons per year (gpy) to 2.6 million gpy. The annual savings from reduced chemical and water use have totaled about $94,000 per year. For further information, contact: Darryl McKenney, Parlex Corp., at Tel: 978-685-4341, ext. 221.

MASSACHUSETTS ENVIRONMENTAL VENTURES - The Quarterly Newsletter of the Massachusetts Envirotechnology Partnership (STEP) - is published for the business community by the Environmental Business and Technology Center located at the College of Management, University of Massachusetts-Boston. The STEP program is an innovative effort begun in 1994 by the Massachusetts Executive Office of Environmental Affairs, the Department of Economic Development, and the University of Massachusetts to promote the growth of new environmental and energy-efficient technologies in Massachusetts. Inquiries and contributions for publication are welcome. Publisher: William J. Brah, Director, Environmental Business and Technology Center; Managing Editor: George Stubbs; Contributing Editors: Eric Brus and Ivan Rudnicki; Production: Lisa Jasak; Editorial Advisory Board: Eric Hayden, Dean, College of Management, University of Massachusetts-Boston; Tom Churma, Vice President, University of Massachusetts; Richard Golob, President, World Information Systems; and Gina McCarthy, Director, Massachusetts Toxics Use Reduction Administrative Council. For further information, please contact: University of Massachusetts-Boston, College of Management, 100 Morrissey Boulevard, Boston, MA 02125-3393; Tel: 617-287-7723; Fax: 617-287-7757.