Trying to make wastewater less wasteful: Carmel startup sees big potential in new treatment

January 16, 2006

The yellow-hued liquid in a jar that business partners Bud Harmon and Timothy Ortman tote with them to tout their venture often is mistaken for urine.

But the pair is pretty sure the chemical compound, which treats wastewater at food-processing plants, carries much more promise. A second-place finish in a November business plan competition hosted by Purdue University helped bolster their belief.

Harmon, a past chairman of Purdue's Department of Animal Sciences, and Ortman, an aerospace engineer who cut his teeth at the former McDonnell Douglas Corp., are the brains behind Agri Processing Services LLC.

The upstart is transitioning from the research and development stage to the marketing stage. They plan this year to unveil their product, which they think can eventually produce at least $100 million in annual revenue in a $1.5 billion industry.

"This has all been done on a shoestring," Harmon said. "We might work on it for a couple of weeks and then we would back off, because we were never officially funded with a grant."

According to the business plan, APS wants to manufacture and market its patented compound to the largest 1,500 food-processing plants in the nation.

These plants generate billions of gallons of wastewater that contain proteins, fats, carbohydrates and phosphorus expelled during food processing. To meet environmental standards, the facilities must extract the materials from the wastewater before it can be discharged or pumped back to a municipal wastewater operator.

Some material pulled from wastewater can be sold to animal feed manufacturers. But many of the treatments used in the process contain iron, which is not compatible with animal diets. The material is either shipped to a landfill or spread on the ground as a waste product.

The compound Harmon patented, however, is magnesium-based and contains no iron, so it can be fed to livestock and swine. Moreover, it removes the phosphorus from the material-something the other products don't do-making it more environmentally friendly.

Plant discharges, or runoffs from phosphorus-containing materials spread on fields, can cause algae blooms that deplete oxygen in rivers and streams and may lead to fish kills.

"Anything that can minimize phosphorus is ultimately looking out for the environment," said Alan Grant, current head of Purdue's Animal Sciences Department. "That technology has promise, and it's certainly tackling an important issue in the industry."

While iron-based compounds may be cheaper, APS' product offers its own cost savings, Harmon and Ortman say. The food-processing plants that use it can produce revenue by selling the leftover nutrients for animal feed and eliminating landdisposal fees.

Harmon and Ortman tested their compound at several food-processing plants, including Indiana Packers Corp. in Delphi.

Russ Yearwood, the plant's vice president of quality assurance, said the product performed well but he also said its expense outweighed the benefits during its test run.

Agri Processing Services hopes to begin a 60-day trial at a meat processing plant in the spring-a final step before marketing the product-that will help determine cost. Ortman declined to divulge a potential price, pending the trial.

Kevin Custer, vice president of technical services at rendering company American Proteins Inc. in Cumming, Ga., helped the two with a test at a poultry processing plant in Georgia. Custer has known Harmon for years and was a colleague of his while the two worked together at Ralston Purina Co. years ago.

"With Bud's background, they won't go to the market without anything that hasn't been thoroughly researched," Custer said. "He is a brilliant guy who should have retired a number of years ago, but he loves research. He can't get himself out of the lab."

Agricultural pedigree

Harmon, 74, has an extensive agricultural background. The Carroll County native earned a bachelor's degree in agriculture from Purdue in 1958 and a doctorate in animal nutrition from Michigan State University in 1962.

He left the University of Illinois as a professor of animal science in 1975 to become Ralston Purina's director of swine research. In 1986, he returned to Purdue to lead the Department of Animal Sciences. He stepped down in 1997 and currently serves as a professor emeritus within the department. He spends much of his time in Missouri.

Ortman, 45, is a Kokomo native who received a bachelor's degree in aerospace engineering from Purdue in 1983. He worked on flight control systems and aircraft accident investigations while at McDonnell Douglas, before its purchase by Boeing.

He returned to Purdue in 1990 and earned a master's in business administration in 1992. He took his business acumen to the family company, Kokomo Grain, where he ascended to general manager of swine-breeding operations.

Investments sought

APS was founded in 2000 and received a $115,000 investment from Harmon, Kokomo Grain and about a half-dozen individuals the following year, Ortman said. The pair now is seeking a $1.5 million infusion to launch two plants to blend their compound later this year.

Ortman keeps a small laboratory in the garage of his Carmel home, but most of the compound is stored at Kokomo Grain. Two gallons of the mixture can treat 1,000 gallons of water, Ortman said.

The two think they can be profitable after the first year and reach $7 million in annual revenue by the fourth. The company's customer base would be animal protein, fruit and vegetable, and beverage processors that could include such heavyweights as Tyson Foods, Smithfield Foods Inc., Frito-Lay and National By-Products LLC. Arkansas-based Tyson, Iowa-based National By-Products and Frito-Lay, a division of New York-based PepsiCo, all have operations in Indiana.

APS might locate one blending plant near Lafayette, but others would be situated among large concentrations of food processors in Arkansas, Georgia, North Carolina and Iowa.

Their second-place showing in the Purdue business plan competition netted them $15,000 in cash and $3,000 in business services from Ernst & Young.

Timothy Ortman works in a small lab in the garage of his Carmel home.
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