We're in the Third Round, and won $5,000 for being first in the Clean Energy Track!
Thank you to everyone who voted for us in the Facebook poll!
In about a paragraph, describe what problem you are solving, how many people are experiencing the problem, and what your solution is.
Hydraulic fracturing (also called “fracking” or “fracing”) is a controversial natural gas extraction process that has increased the nation’s domestic energy supply, but many believe it may compromise drinking water sources near drilling sites. Companies have denied many suspected contamination cases and faced backlash from concerned landowners and environmental groups. According to a Halliburton white paper, an estimated 35,000 shale gas wells were drilled in 2006 alone, and we believe tthe number drilled per year is growing. Shale gas currently accounts for 23% of US natural gas production, but the EIA predicts that this share will expand to 49% by 2035. With growth comes growing pains. Reports of suspected contamination have surfaced in Arkansas, Colorado, New Mexico, New York, North Dakota, Ohio, Pennsylvania, Texas, West Virginia, and Wyoming. At the same time, state budgets for monitoring and regulation is shrinking. Our solution is SafeTNA (Safe Tracking of Non-native Aggregate), a service that provides DNA-based tracers that can be added to the hydraulic fracturing fluid, and also performs analysis to determine whether these well-specific tracers have ended up in drinking water.
Tell us more about the problem you are solving. Why is it a problem and how big of a problem is it?
Recent advances in hydraulic fracturing have transformed previously inaccessible shale gas into a $6 billion a year industry, and is predicted to keep growing rapidly. However, the environmental impact is uncertain. Hydraulic fracturing involves high-pressure injection of water, sand, and various chemicals deep underground. This process introduces a concern to the public: does hydraulic fracturing fluid contaminate the water supply? While the research is still inconclusive, recent studies out of Duke and the EPA show carbon isotopes from deep underground migrating near the surface at hydraulic fracturing sites. The scene of drinking water catching fire in the 2010 movie Gasland illustrates the fear of landowners living near these sites. The gas industry’s standing in public trust has fallen due to their attempts to keep secret multiple aspects of the hydraulic fracturing and drilling process. Without a definitive answer to the question of water safety, industry will worry about liability and policy-makers will worry about properly balancing economic benefits and environmental risks.
Who do you think your target customers are and how many are there?
We will target gas drillers that use hydraulic fracturing who look to continue using best practices in their operations. These clients want a tool that can increase accountability, improve corporate image, and reduce questions of liability. Currently there are a few hundred thousand hydraulic fracturing sites in the U.S. surrounded by countless communities experiencing the impact of hydraulic fracturing. The number of sites continues to grow, and these companies rely on permission from private landowners to gain access to areas for drilling. Therefore, these companies are the primary customer, and are incentivized to buy into the SafeTNA service to increase public trust, enhance their ability to pinpoint problem wells, and ensure certainty relating to liability. In fact, Colorado industry partnered with state regulators to institute a voluntary water testing program to allay those fears. Our team members have already generated interest in the North Carolina legislature with regard to SafeTNA tracer services as part of their new regulations allowing hydraulic fracturing.
Do you think your customers are looking for a solution?
Our customers, both private industry and public communities, are desperately searching for a solution. In hydraulic fracturing areas, communities have felt helpless—SafeTNA arms the public with tools allowing them to be more involved in safegaurding their drinking water supply. Companies such as Shell are already reimbursing residents up to $900 for outside water testing; SafeTNA provides a more systematic approach to water testing, increases corporate citizenship image, and enables companies to demonstrate innocence in cases where they are not liable for water contamination. SafeTNA may be the key to establishing a good relationship between communities and drilling companies, allowing a working relationship to occur where companies have previously been facing difficulties.
Tell us about your solution. How does it work and what are the benefits?
We aim to eliminate the current uncertainty surrounding hydraulic fracturing. Previously, tracers have been used in hydraulic fracturing exploration studies, but these tracers have various disadvantages in large-scale, regular contamination monitoring. Isotopic ratios vary in different geographies, dyes can have persistent environmental consequences, gaseous tracers are not unique enough, and radioactive elements emit radiation that may be harmful if ingested. SafeTNA provides non-toxic, reliable, well-specific tracking of fluids used in the drilling process. Using inexpensive, inert strands of resilient DNA mixed into hydraulic fracturing fluid, each well can have a chemical signature that is simple—and cheap—to identify. DNA is already being used as a reliable groundwater tracer, and SafeTNA is specially-engineered to form a strong structure that is able to withstand the salinity, acidity, and sheer forces that hydraulic fracturing fluid experiences.
Do you have any regulatory hurdles, and how will you get around them?
The federal UIC (Underground Injection Control) program requires that underground tracer tests not endanger drinking water sources, and the tracer use must be reported prior to the test. Implementation in various states differs drastically, but none seem to include DNA in any of their UIC permitting regulations. Furthermore, companies that perform hydraulic fracturing have already either filed permits or are exempt under specific rules for oil and gas exploration. Moving forward, we aim to work with state legislators and regulators to supplement existing liability regimes with the certainty provided by tracer technology. In North Carolina, the ball is rolling fast, with legislation to legalize extensive, statewide hydraulic fracturing expected to pass within the next several months. A safe, reliable tracer like SafeTNA is necessary for NC to move forward intelligently, as recommended by a recent Department of Environment and Natural Resources report.
Do you have intellectual property (IP) that can be protected? Is it protected?
As this is a new form of tracer as well as a novel application for a hydrogeologic tracer, we do expect to pursue patent protection for the idea. As inert DNA that is produced through human intervention, SafeTNA is patentable subject matter. Simultaneously, the scope of the idea is novel, non-obvious, and produced through methods that may make its “conception” the moment of its description. We will be spending the recent $5,000 Clean Energy track winnings to hire an IP lawyer and file a patent.
SafeTNA would serve as the exclusive source for tracer services and analysis once established in a region, even without utilizing patent protections. SafeTNA will maintain exclusive knowledge of which tracer sequences match up with which gas wells, and therefore be the only ones able to interpret whether water is contaminated in the region for at least as long as the tracer could potentially persist.
What's your plan for developing your product or service including some dates and milestones?
Currently the DNA tracer has proven successful in the lab, we have officially filed as an LLC, and we have raised $5,000 from the Clean Energy Track and plan to spend on an IP lawyer to obtain patent protection. Our next step before the end of 2012 would be securing partnerships with companies or government agencies to do further testing in the field. The pace of our actual production depends on both funding and regulatory conditions. We would also plan to compete in the next Bull City Startup Stampede for office space, pitch the idea to angel investors for funding to rent laboratory space and employees, and secure a client within the next two years.
How much funding to get to a company exit?
Initial investment requirements would be quite low, since currently we only require minimal infrastructure; as such, our exit would follow paying off leases for research and development equipment, working space, and reimbursements for travel costs. We feel that $200,000 would get us to a breakeven point where we would be able to generate enough sales to cover further research and development and marketing. Of that $200,000, $50,000 would be needed to make a commercially viable product while $150,000 would be needed for sales and marketing. At this point we would have a product that would allow us to be a candidate for acquisition or through initial public offering around a year after we secure our first client.
Left to Right: Paul, Adam, Justine, Jake, David
Use of Funds - if you won $50,000 how would you use it?
The main initial use of the $50,000 would be research and development. We believe this $50,000 can take us to the next level in having a commercially viable prototype that would allow us to scale up production and pursue client partnerships. We plan to license out large-scale production to specialized synthetic DNA companies further down the line. In addition, we would like to invest in data management and GIS (Geographic Information System) software to help with analysis.
Starting March 21st, vote for us on the Duke Start-Up Challenge Facebook Page! And be sure to join us for the Grand Finale on April 20th at 7:30pm ET in Geneen Auditorium at the Fuqua School of Business, or live on Duke's Ustream Channel. RSVP for the event on Facebook