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2026.09.30 | TB | Energy | US Energy Waste Disposal & Milestone

原标题：US Energy Waste Disposal Market & Milestone Environmental – Former Senior Executive, Corporate Development at Milestone Environmental Services Inc

#energy

Third Bridge · 2026-09-30

Client-led • 16 Sep 2026

Companies: COP US, CVX US, XOM US

Expert Former Senior Executive, Corporate Development at Milestone Environmental Services Inc

Agenda

Introduction

Client [00:03:48]: We're doing some work around the energy waste disposal industry and taking a look at a few different names. One that has popped up is Milestone Environmental. It seems to have a unique set-up within the space. It's not really a business model that we've come across before.

Questions

00:03:48] To start, I'm trying to understand the value proposition of Milestone's slurry injection sites. They seem different from what most of the rest of the space is doing. It seems to be landfill or reserve pits. Can you clarify the differentiation?

Expert [00:06:09]: When it comes to managing waste, there are different models. There's the land disposal model, there's the injection model, and each of them has different segments that come off. The land disposal model branches off into waste pits and it branches off into landfills. Milestone does play in those spaces within their sites. They operate three E&P waste landfills, and they incorporate the idea of a permitted waste pit within their waste handling operations for their slurry sites. However, the slurry sites branch off in different avenues. They branch off into what's known as a saltwater disposal well, commonly referred to as an SWD or in Milestone's case, a slurry well, which coincidentally is also an SWD, but it's obviously different. I equate it to the idea that an SWD, in a slurry sense, is a thumb while the rest of the saltwater wells are fingers. All SWDs are fingers, but not all fingers are thumbs, if that makes any sense right there.

00:07:22] Could you explain why the slurry is different from the SWD [saltwater disposal well] that's receiving water?

Expert [00:07:41]: In the Permian Basin specifically, you're going to have four barrels of water generated for every barrel of oil that's extracted out of the ground. In that sense, you're going to have 4x the amount of water that you're going to have to manage and dispose of compared to oil extracted out. That creates a large waste that has to be managed. SWDs are only permitted to take saltwater and it's to manage that high volume of saltwater that runs throughout the area. Those sites run low margin. They run low staff. Typically, those sites maybe have one or two full-time employees, but for the most part, they're automated systems where truckers pull up, they'll unload their truck using an automated computer system and then they'll drive off. Milestone being a slurry site, they're taking saltwater, but they're also taking other low-viscosity material that may have some entrained solids in the mix, where a saltwater well is going to be completely reliant on exploration to feed their site its waste. A slurry well is going to be spread across the broad spectrum, if you will, of oil and gas extraction, meaning that a slurry well can handle waste that's developed during production. It's also handling the waste at the start of the project within the exploration part. The main driver is cost because there's so much saltwater in the market. Saltwater sites tend to really undercharge the per-barrel cost of the waste disposal.

Milestone and other similar slurry operators tend to balance and match that number in order to bring the waste into their site. Most saltwater sites, and for that matter, slurry sites, are charging pennies on the barrel. The last I remember, about USD 0.02-0.05 per barrel for waste disposal. There's about 42 gallons of water in every barrel if you equate that out. These saltwater sites need higher saltwater volumes in order to be profitable. You're talking about having a permit that would range anywhere from 35,000 to 50,000 barrels a day capacity, in some extreme cases, 100,000 barrels a day, but you're needing that higher volume in order to turn a profit for the saltwater wells. If you ever look up or you drive through the Permian, you'll see a saltwater well every few miles in some location, but you won't see a ton of people there working or they're unloading because they're just dependent on when exploration happens in these areas. A slurry well is going to charge various prices for the different types of slurry they're bringing in. In our space, we used to call the dirtier solids, the dirtier slurries, that price per barrel disposal is going to be a lot higher because of just there's more effort it takes to manage it. There's a higher cost to deal with that waste. Then there's an additional disposal cost that Milestone has to take on as they're managing the waste in the way they do.

Your margins are going to be higher based on price per barrel, but you're also still dependent on that mix. I've described this before to folks. If you're trying to move a thick milkshake up a straw, you tend to hit resistance when the milkshake is too thick. That's what happens with the slurry when you're trying to inject it is if it's too thick, you're not able to push downhole or you're exerting more force to get it downhole, and that can create problems within your well integrity. You need that thinning mix of that saltwater to thin out the mix of your slurry and to make it easier to move through the space of the injection well.

00:11:41] I was going to ask why Milestone Environmental also takes water when it seems like there are tonnes of other sites where that can be injected, but it sounds like the company needs it to run the business. Is it essentially charging a low rate and using that to offset its water costs, but the actual water disposal part isn't necessarily a profitable side of the business?

Expert [00:12:20]: Correct. The actual water disposal part is not a big profitability side, but the thing is, at the end of the day, Milestone needs water to manage the waste they have on site as far as injecting this waste downhole. The other thing that Milestone uses the water for is they use the water for cleaning out trucks, because there are companies and a lot of trucking companies that rely on Milestone to provide a truck clean-out after their services have been performed in order to ensure that there's no commingling of waste to the truck that could create an issue. Milestone uses the saltwater that they get in. In a sense, they're being paid to clean out these trucks and they're being paid to take the saltwater. It's an additional benefit of being able to take saltwater is, in a sense, you're getting some free water, if you will, to better manage your waste on site.

00:13:18] When I think of water disposal, I think of big businesses with giant pipeline systems delivering water to SWDs. Is Milestone Environmental's infrastructure to receive water competitive with that? Is it mainly receiving water from the closest operators? Is that enough to cover what it needs? Is there a risk that its water volumes decline and then the company has to bring on additional water to run its operations?

It seems like there are way more places the water could go. The slurry makes sense. It seems like Milestone Environmental is one of only a few companies that can take the solid waste slurry combination, but for water, it seems like anybody could take it. I want to understand how competitive Milestone is in water disposal.

Expert [00:14:28]: Milestone doesn't have the storage capacity or the transportation capacity to transfer water to a client like some of these bigger companies do. Not only that take storage capacity, but it takes additional land agreements for your pipeline network to run and supply customers. Milestone is not a water distributor in that sense. It's just there's too much logistical hurdle for them to get there. They do run into instances where they are short on water, and they have to pay to have water brought onto their site. Basically, I've been on calls where we're calling oil and gas customers just saying, "Hey, do you have any saltwater you can send us? We'll pay you to take the water because we are desperate to get water for this particular site." They're not fun calls to have because the customer may be saying, "No, I was going to use that water for X, Y or Z," but at the end of the day, you're just trying to help yourself and help them in the long run.

00:15:34] Do you view that as a risk moving forward? Has that changed? Are the volumes of water Milestone Environmental is receiving down over the last couple of years? Is it just that every once in a while, the company runs short and has to have a delivery (ph)?

Expert [00:15:55]: It's twofold. The first part of that question is that Milestone, their overall bottom line, if you look at them annually, they're averaging somewhere around a 50/50 split of waste coming in across their various sites of saltwater to slurry waste. At the end of the day, millions of barrels of saltwater have come through all the Milestone sites, but on a productive and positive monthly basis, Milestone is shooting for a 70/30 mix of slurry to saltwater because that's where the profitability is going to lie in having more slurry than saltwater. However, what's going on in the industry right now is the state agency that the EPA has vested interest in, which is the Texas Commission on Environmental Quality or the TCEQ, they have come out with an avenue for oil and gas companies to complete a water treatment service within their own cost, so long as they achieve a certain concentration of water, they're able to discharge this water off of the rig onto the neighbouring water systems around wherever they're drilling at.

There are additional complications with that, primarily that this saltwater that they're going to be treating takes a lot of energy and takes a lot of heat to remove the salinity from the water because this saltwater solution is about 10x saltier than ocean water. It's very highly concentrated salt, and then you still have to deal with the byproduct of the salt, the material that's created out of the saltwater extraction. Again, there are people pursuing options to better treat and discharge, but those are still going to the technology in front of us, and it's going to be probably another decade before people get to the point where they're successfully able to do that, but the avenue exists. When the avenue exists, operators are going to find a way to pursue it and try to find a way to decrease their bottom line and reliance on other operators.

00:18:14] When a customer is deciding to use Milestone or a competitor, are they making that decision for each individual well? Are they making that decision every day? How often is a truck going from a well to a Milestone location? Is this one of those decisions that customers are constantly revisiting, or is it, "Hey, we just put in this new well. It's going to be producing for the next X number of years. Unless there's some crazy change to pricing, we expect to always be using the same disposal site for this well"?

Expert [00:19:25]: Most customers sign a general service agreement with Milestone where it's not specific to rig-to-rig reasons. They're going to sign with multiple waste providers. They're not just going to limit themselves to one, because in their space, that doesn't make a ton of operating sense to limit yourself to just one disposal site, but they're going to sign with multiple disposal sites. Milestone is going to have various agreements with exploration operators. They're going to have agreements with some of the rigs that may be moving around. Maybe there's a guy whose job is the company man on that rig, and he really likes a person at Milestone. He's going to continue to use them wherever his rig is moving. Then you'll have relationships with trucking companies that have some sway and pull in where they want to take the waste to. At the end of it all, those contracts are going to have a various cost structure associated with them, meaning that Milestone may charge Exxon maybe USD 5 for slurry, but then charge another company USD 12 for slurry. It just depends on the customer, the volume of waste that's anticipated and the ongoing work that can be expected out of that customer.

Client [00:20:42]: Do they charge on a barrel of slurry basis?

Expert [00:20:49]: Typically, the charge is going to be per barrel, and that's where the trucks are going to be coming in at about 20,000 barrels of waste or whatever that number equates to after about 42 gallon per barrel, whatever the number works out to be, but they're working on a per-barrel cost. That's solely for slurry and water waste. If you're talking solid waste like in a landfill or a waste disposal pit, those costs will increase because they're coming in at different intervals and different volumes.

00:21:29] I'm imagining Milestone trucking the waste in. Is the customer telling the company what's in the truck? Is that how Milestone charges it? Is it evaluated on-site each time? What if there's a mix of multiple different types? How exactly does Milestone set the price and determine what's what?

Expert [00:22:08]: Several months ago, the Texas Railroad Commission, which is the governing body of the oil and gas exploration industry in Texas, enacted some new policy rules. These rules have been in place since the 1980s. Developing these new rules was pretty groundbreaking for them. Part of the new rules, they really took to the electronic manifesting system that's at everybody's disposal. What they started doing was requiring operators to prepare the manifest prior to waste going to a site. When you're a Milestone and you're accepting waste in from a customer, there's going to have a manifest that comes through. The manifest is going to describe the location that the waste was generated from, the volumes of waste, it's going to describe the type of waste. Currently, it's going to describe if there's an SDS or a safety data sheet associated with this waste. Then it's likely going to have some pre-sampling done by the customer to show that the waste meets the acceptance criteria. In the past, and when I say the past, like three years ago, it was on Milestone's own dime and liability to review and correct all this information in real time.

If Milestone in the past should get a truck in that the truck may say it's saltwater and they open it up and it's pure oil, then they've got a discrepancy and they've got to rectify within their own data. Now, it works out to where Milestone gets a truck in and the electronic manifest does not read that it's the product that the company is saying it is, they can call the company and say, "Hey, you guys listed it as this, but we believe it's this," and they can work it out over the phone. By the end of the day, they can get it corrected in both systems where in the past, Milestone was the sole party responsible. Now, the customer is responsible and the customer can be the one that takes on the liability and the liable harm if they're reporting the wrong waste to the wrong customer.

Client [00:24:17]: Is that a positive for the Milestone business?

Expert [00:24:23]: It's definitely a positive, but it also represents a very difficult slope if you're not prepared for this digital system.

00:24:52] How many different classifications can there be? When you look at the manifest, does it say where it's coming from and what it is? When it says what it is, is it either water, oil or a mixed slurry? Are there more detailed classifications that would change how it's priced?

Expert [00:25:25]: Before, Milestone could basically call a waste what it is in their view and mindset and charge X for it. The new rules have actually outlined what classifications of waste are there. I believe there are about six or seven, but the new rules have outlined what waste is called now. Milestone and other companies who are doing disposal have all had to use the same set of rules, if you will, in order to appropriately apply this waste to places.

00:26:09] When Milestone Environmental talks about the two different main streams, waste from active production vs waste from new drilling and completion, how accurate can the company be in the determination? It sounds like, especially now with the electronic manifest, if the customer is telling the company where the waste came from, it should have a pretty good idea of what is truly new drilling vs current production. Does that seem right to you?

Expert [00:26:57]: Yes, that does pencil out in that direction. Also, there are all sorts of public access tracking systems. There's Enverus, there's B3 that they can look up some of these locations and say, "Oh, this is a new drill. It's clearly showing on here. It's a new drill." They can incorporate with AI, they can incorporate that data into their subset, and it makes it easier to fill out. If their team on site is filling out information, it's a simple tab, a pull-down on some digital platform instead of trying to hand-look up stuff.

00:27:38] I assume Milestone Environmental would probably prefer more volumes from the active or current production side vs the drilling side, because in a weak commodity cycle, production volumes should theoretically hold up better than drilling volumes. Is that how the company has viewed it? Is that how you view it? Is the drilling and completion volume much higher margin? Is there anything to offset that idea?

Expert [00:28:34]: Yes. It's funny you say it that way because for the longest time, Milestone never really viewed production as being a high-volume or a highly profitable service line because production isn't guaranteeing you an ongoing stream of waste. It's guaranteeing you milk-running waste where you're getting waste sporadically throughout a period of time. Milestone never looked at production as being the best source of getting waste into their site. What occurred over the last three years is Milestone acquired a company named Return Disposal, who Return was very active in the oil extraction business of waste disposal. They did what Milestone did, but they really focused on taking the oil out of the product. The only way you get that high cut of oil is if you're going through a production recession. Prior, Milestone was only cutting oil from saltwater-related to saltwater waste of exploration. They weren't really focused on what was coming in with the other waste streams. Since they purchased Return, they had a big shift in their viewpoint and really focused on bringing those production waste streams in because those wastes contain things like tank bottoms and other higher viscous waste that likely have a higher cut of oil in them.

When Milestone switched to that, they saw their oil intake increase. That's passive income for these companies because they don't have to really do anything to extract this oil. It's just running it through some physical separators and then allowing some time for the oil pad in the waste to thicken. Every month, they can unload the oil. Sometimes you can average anywhere from USD 50,000 to USD 120,000 per month in just passive oil sales.

00:33:27] On the production side, you get the waste delivered sporadically. I would have thought it was the opposite, namely that the production side was more repeatable, given that they are consistently producing barrels of oil, whereas the drilling side would be more sporadic. Why does that dynamic exist?

Expert [00:34:14]: Yes. The production side, the reason why I'd say it's more sporadic is that, instead of relying on the real-time involvement of the exploration work, you're relying on these guys to go through a certain schedule of O&M and review of their asset out there. Typically, the people that are doing that are maybe a small team of 1-5 guys who are milk-running the checks of all these assets that are under production. They may not be able to get to certain places at certain times. They don't know if there's been a build-up of tank bottoms or something else in the system. They're just as unaware as anyone else is. That waste could be trending upward if there's more focus and more interface with the teams. On the exploration side, I mean, they're only working in a small plot of land in most of these locations. There's a real need to move waste fast and find avenues to get this waste out of there. It's why they have so many agreements with so many different companies because at the end of the day, the more waste sits, the more difficult it is to operate around some of these rigs.

00:35:29] On the production side, it's not so much that waste is created with every barrel that comes up through the well, but more that it builds up over time and then, ultimately, when you decide to replace something, that's where the waste is created, right? Is it a mix of both? I want to make sure I'm understanding what the actual driver is of, "Hey, we've hit X amount, now we need to truck it to the site" vs "We can just let it sit."

Expert [00:36:10]: Yes. In a sense, they're checking tank levels, and some of that is automated. They have a digital system that allows them to check tank levels. They're checking tank levels, but they're also screening for radioactive material from their tanks and they're ensuring that there's not a build-up because this waste is from the ground where it does contain naturally occurring radioactive material. There does tend to be a build-up of that if you let it sit for too long in a confined space. These companies are trying to avoid both the liability and then the other cost of cleaning up these tank batteries that have a high concentration of NORM because it takes a certain company and crew to clean them out and only certain places can accept this waste in. Again, it is on them to be active in managing their production assets, but it doesn't mean they all do that, and everybody works at different frequencies. If every operator was the same, it would be a lot easier to predict, but every operator tends to be a little different.

Client [00:37:14]: I think I may have misunderstood it. I thought it was more the same way like water comes up with oil. There was waste that's involved in that process, but it seems more like it's the natural deterioration or whatever you want to call it, of assets on the site. Then once they decide to clean house, that's when they would truck it to a site.

Expert [00:37:48]: If you think about your own house, if you're going to slowly accumulate stuff over time and then you have certain moments where you have to go in and purge areas and clean up areas. Everybody has that one drawer or that one counter in their kitchen that just accumulate stuff during the week. Then at the end of the week, you've got to clean it up and make it nice again for the weekend.

00:38:12] As an example, if I'm thinking about a producing well or a producing pad of wells, assuming they're running the operation smoothly, how many times a year might a well produce enough waste to be trucked out? When a truck is delivering, is that waste from one site? Is it a truck that may have driven to five nearby locations, picked up waste, combined it and delivered it to Milestone?

Expert [00:38:55]: Yes, both are possible. Sometimes it's quarterly, sometimes it's every two months. It just depends on the frequency at which they're going around it. Both options are possible. We used to get waste in from a site that would say the X and Y tank batteries. You would look it up in the system, be like, "What is the X and Y tank battery?" Then you would do a little research and say, "Oh, the X and Y tank battery is not the X and Y, it's X and it's the Y tank battery and they're right across the street from each other. That's why they just commingled the name on there."

00:39:41] In a downside case, a low-oil price environment where E&P customers are not looking to spend as much, I could think about that in two ways. On the waste build-up, does it build up on a time basis, regardless of exactly how much actual production there is? Is it a function of volume produced or more a function of time elapsed at a given site? How much could they defer offloading that waste if they are trying to reduce costs?

Expert [00:40:40]: Yes, it's a little bit of both. You'll see customers are going to try to defer as long as they can to offload that waste in the down market. Vice versa, you'll see customers that are withholding some exploration because of the down market. Where Milestone tends to run into some hiccups is that customers will try to delay doing any type of O&M on their tank batteries and their production batteries, and they'll try to slow-play some of that. It doesn't matter if it's a phase of the well that's producing or it's a phase of just what to the tank battery, it's going to have to occur. That clean-up is going to have to occur because there are certain liability regulations and there are certain contractual obligations with landowners that these areas need to be addressed in a certain timeframe and manner. Where the exploration side starts to take into some effects, you'll have a bunch of the companies that will go out and drill a bunch of wells, but they won't complete them, and so because you're not completing them, there's some additional exploration that needs to be done in order to finish those wells off. You'll hear the term DUCs, drilled but uncompleted.

You'll have that first half of waste, but all that waste is primarily saltwater waste at that point because you haven't gotten the completion side that's going to have a lot more of the slurry waste, the mud drilling, if you will. You'll have more of the cooling water drilling that's going to be the one that you're getting out of it, the frac drilling, if you will. Milestone is going to get maybe 30-40% of that uncompleted well waste, but they're not going to be able to capture more than that just because of the nature of what the matrix is of that waste. There's a give and take to both sides. Milestone tries to position their sites to be in a location that can service ongoing production needs of their clients in a location that's going to have future rig development and well development in the area, so they can be within a 45-minute proximity of driving distance. That's usually the sweet spot number right there. Then they're going to be in areas where if operators have a need to close out or to get rid of old assets, Milestone is an option for them to come and deliver the waste to.

Client [00:43:20]: Thinking about the downside case, if you see a 2020-type environment repeat for the oil and gas industry where drilling gets cut pretty significantly and production declines a bit, would you think about the waste volume that Milestone Environmental is receiving as matching the decline in production and the decline in drilling, respectively, for each of the two segments? It sounds like maybe the drilling would get hit even harder than the decline in rig counts, because you're saying even the drilling that's going on, they're maybe not completing it, so they're missing out on some of the revenue, but on the production side, is it not declining as much as production is declining because there's still a time factor where the tank is going a certain amount of time and has to be replaced even if volume is a little bit lower?

Expert [00:44:38]: That all is tracking right there. You're on the right path there.

00:44:42] We know that some customers are using their own on-site waste pits or reserve pits. Is there ever a situation where a customer uses the reserve pit for the majority of the waste on its site and then says, "We've exceeded our own capacity, so we're going to flip to using Milestone or a competitor for overflow capacity"? Is it typically a decision between full-cycle use of the customer's own reserve pit vs using a third party?

Expert [00:45:41]: When the Texas Railroad Commission, the oil and gas governing body, updated their rules, the initial update restricted customers from land application or developing waste pits. If they were developing waste pits, they had to go through certain permitting hoops, maintaining a groundwater monitoring system if the waste is going to be held above a certain depth, marking it out on a plot plan and then deed recording that within the county and then maintaining other engineering controls over these pits because, in most cases, these operators were simply drilling an S-shaped pit or a C-shaped pit and they would install maybe a couple of feet of clay and then that's how they would just use that to fill and then go. In Texas, when they updated the rule, that was the initial push was to really force operators to be on the level of a waste disposal provider like a Milestone. What ended up happening at the 11th hour, somewhere, somehow, I believe it was some of the tier 1 operators like Exxon, this is their common practice, were able to get that rule taken out. In Texas, you can still develop waste pits and land apply your waste. There are new rules, however, with landowners that give them a little bit more power in order to dictate how their property is managed by these oil and gas companies.

For example, there's a group called the University Land Development, which is an endowment by the University of Texas. Both the University Lands and the Texas Ag lands, which is the endowment by Texas A&M, both of those groups in all of their verbiage, if you sign a contract to drill on their land, you cannot use a waste pit. You have to go to a third-party waste provider. It's just in their rules, but if you're a landowner and Exxon comes to you and says, "Hey, you have oil, we want to drill X amount of wells and we'll give you X amount of cut," you're not going to think, "Oh, how are you managing the waste?" You're just going to see the dollar sign from the mailbox money. These landowners were signing agreements, not really considering what the waste was going to be going on. Now, they've gotten more savvy and so they've been granted more power to step in. That's what's referred to as an open loop, where they're simply looping all the waste into this waste pit and they're using natural remediation, for example, evaporation with the sun or some other drying method to just simply dry out this waste.

Then they may scrape out some of the sludgier stuff and send it to a landfill. At the end of the day, all they're going to do is backfill it with the material that came out of the hole. They're going to cover it and they're going to call it good. There's no real obligation for them to engage with a third party like a Milestone to send their waste to. There are companies who used to do that practice.

What Milestone has done is they do have hard assets, these Adler tanks or these mud tanks that they can bring to a rig site and they can place on the site and the rig companies can use them to fill up. Then Milestone will send one of their third-party trucking companies who they have contractual relationships with to pick up that Milestone tank and bring it back for disposal.

00:50:13] Some operators don't seem to care, while others are worried about long-term liability risk. It seems the appeal is that you send it to Milestone and the company assumes the risk, essentially injecting it or putting it in its own landfill. Is there a lot of remaining potential environmental liability for Milestone? Are those considered the safest methods, with little expected future pushback?

Expert [00:50:54]: They certainly always retain some environmental liability. For example, Milestone's permits all outline the limits of the waste in which they can take in. There is some waste that may come in that may have an additive that Milestone has to examine a little further to ensure that this waste is acceptable. For example, we're going to take this waste. It contained an additive that I hadn't heard of before. I asked the customer to send me what's known as an SDS sheet, or a safety data sheet, on that additive because the company that makes the additive will have that sheet. On that sheet, it will give me certain factors. It will give me what the chemical nature of the waste is. It will give me what it runs in a lab, but it will also give you reactives and things that will cause the waste to react. The waste they wanted to bring in had this agent in it that was flammable upon contact with CO2, which if you're thinking in a construct that, "Oh, it's going to go into a landfill. That's not a big deal," but once that waste starts to get covered, carbon dioxide build-up occurs because it's just the way waste starts to decompose. We had to reject the waste because there was a risk that all that fluid will start catching on fire and explode. We didn't want to deal with any of that. Those risks all exist.

In the big, (inaudible) point of things, you're not really finding reasons to reject it. You're trying to always find a reason to accept it. At the end of the day, if you're having a strong environmental group that understands waste and how the waste is coming in, you're not going to run a huge liability risk, especially with the way the new rules are structured where the exploration operator is required to know their waste and to profile their own waste. It's mirroring the industrial standard of hazardous and non-hazardous waste where the customer is responsible for running laboratory data before the waste gets to a disposal site. The disposal site can look at it and say, "Yes, our permit allows us to accept this," or, "No, this is considered a hazardous waste, and you have to take it somewhere else."

00:53:23] The permit really dictates what you can take, so as long as you're taking what's permitted, you should be in the clear. Assuming all of that is green-lit, is the only risk a resurfacing of the waste? I don't know exactly how the geology works. Is that a real concern or not something to worry about?

Expert [00:53:56]: It's not as big of a concern. There are certain wastes that Milestone may be more sensitive to take. For example, they may not want to take waste that has a high acidic content because it could damage their well infrastructure, but Milestone will also be a customer of well clean-out that will use acid to clean out the well. It's one of those where it depends on who you're asking at the time, if it's a good thing or a bad thing. Some people will say, "No, it's great that we have a customer willing to bring us acid because it will help to descale the well." Just like in your own home, if you've got water scale build-up on your shower, you've got to use some CLR or something else that has some acid in it like a strong vinegar. When you're dealing with that, you're going to want to reduce the scale build-up. That's how Milestone focuses their wells to say, "What's the way we can reduce the scale build-up?" A lot of times, it's just, "Hey, let's just have some acid trucked in. That will help us out."

00:55:12] The business has seemingly grown a lot over the last few years. It looks to be in excess of how general production and drilling volumes have grown in the Permian. It would appear that Milestone Environmental is winning share or that more and more volume is getting outsourced. Does that check out with your understanding? Is that mostly the regulatory drivers? Is it that more activity has hit nearby locations? What exactly is driving the company's outsized growth?

Expert [00:56:03]: A lot of their outsized growth is driven by their relationships. Their sales team is focused in the Permian. You have sales teams split between the basin. You're not having the guys running back and forth because that's almost a two-hour drive, sometimes a four-hour drive depending on where the rigs are at. They've got a bifurcated sales team that are focusing on specific jobs in Midland or in the Delaware side, which is the west Permian side. The other thing they're doing is they have relationships at a higher level to where those edicts can get pushed down to people to say, "Hey, we're going to use Milestone in this region no matter how far away it is." What's really driving their growth is just how they've built all their relationships up and the dedication of their sales team. The other thing that Milestone does, and a lot of companies have started doing this, but as soon as a rig comes on to a well, you're tracking it ahead of time.

Once you see that rig move into place, whether you're going out there with your booklets to do your manifesting or you're giving them the QR code to log in on Milestone's digital manifesting system. You're giving them a reason to make their job a little bit easier by pre-filling off some of the stuff to where when they're getting it, they can easily just say, "It's going to Milestone, here's the manifest or here's the online thing, let's go over here."

00:57:39] It's not as if having a rig or well extremely close to the Milestone site necessarily guarantees that customer's business. I'm trying to understand. It seems like this is low cost to the E&P customer overall. Is it really just location that's making the big difference? Is there more on top of that?

Expert [00:58:16]: In a lot of ways, it's location. You'll have customers that will reject waste going to certain locations because it may be five miles too far, and customers become sensitive to their drivers being on the road for that long. The decision drivers from the customers tend to be what's the regulatory history of the site, because most of the bigger customers, before you can start taking waste, you have to have an established business for at least two years. You have to show two years of financial history for the company. You have to show them all your permits and then they have to send somebody on site to essentially do a site assessment of your own property to say, "Okay, that looks good." "This looks bad. This is a risk. This is the issue here," and essentially vetting the site before they can bring any waste. Just because you may know somebody at Chevron, let's say, it doesn't mean Chevron is going to come to you. You've got to go through Chevron's approval process. All these companies operate the same way where just because you're having a site coming online in the next six months, they're not going to pre-review your site. They're going to make sure the site comes online first and then they're going to come out and review it. No matter how hard you work to try to get ahead of that, they're going to take their time going through their normal processes.

Again, at the end of the day, that's an existing process that works. Customers, when they've seen one Milestone site, they know they're going to see the same thing at the next site. It makes it easier for them to digest what's going on. It allows them less questions. You're giving a customer, who's dealing with thousands of waste streams and other issues, less questions for them to ask, it's going to make their life a lot happier. I can tell you right now, I've dealt with several customers who are global environmental leads who are like, "I love working with you guys because you guys are organised. You give me the information I need from the beginning, but also, I know what your sites look like, and I know how you guys maintain them. I know I don't have to worry about our waste being at risk when I bring it to your site."

01:00:32] On slurry injection vs the landfill model, Milestone Environmental seems to say it's one of the only providers of the slurry injection method, and that almost everybody else taking energy waste uses either the reserve pit or the landfill. Is that true? Are slurry injection and the landfill model directly competing against each other, or are they partially different? Is the slurry method cheaper, as the company claims?

Expert [01:01:19]: Yes. The slurry method is cheaper to do. Overhead is a lot cheaper. All the other infrastructure build-out is cheaper for a slurry site. You can build a slurry site for about USD 800,000-1m on 10 acres of land. A landfill is going to cost you USD 10m on 100 or 200 acres of land. There's a larger separation there, but they're going to work in symbiosis, if you will. Landfills are going to need slurry or some injection or discharge support because they're going to generate leachate from the material that's going in the landfill. All material has an organic basis at some point, especially oil and gas waste. That's going to create a liquid that has to be managed because landfills can't operate fully liquefied. It's the idea of trying to make a spaghetti sandwich, if you will. If the sauce is too thin, you squeeze that bread together, all that sauce is going to squirt out. What a lot of companies do, if they're not a Milestone where they have the network of slurry wells, is they'll have an SWD on their site just to manage the leachate or they'll have a system in place to where they can reuse the leachate in some process or dispose of it in some other manner. All the landfills will need that support by handling the water at some point, but landfills can take waste that would further complicate a slurry site.

For example, most slurry sites will shy away from waste that may contain a gel or a completion fluid because that fluid can harden over time and create issues in your well that would cause you problems down the road. I equate that to when you're eating some food and it gets stuck in your teeth. You have to do an intervention to unstick that food. Sometimes it's a little bit more difficult to get than other times. Sometimes you use your tongue. Other times, you got to use the floss or sometimes it's got to be with your own fingers to do it. If you're getting that type of material in a slurry well, you could do maybe a simple acid job to acidify it and then get it out of there, but you may have to do a further intervention by having tools that come in, and then you're shut down for a period of time. If you're shut down, you're not going to have the storage infrastructure to maintain any waste coming in. You're going to be reliant on using that well frequently, but you want to reduce your downtime in that well by any way necessary.

01:04:00] To clarify, it seems like landfills have SWDs, while Milestone has slurry injection sites and some landfills. Is there anything Milestone is doing that is unique or a big value-add differentiator vs competitors? Do competitors simply run a good business, and that's the bottom line?

Expert [01:04:30]: The bottom line, the value-add difference that Milestone brings is that Milestone understands the waste. They understand how the customers tend to think. They're very proactive when it comes to dealing with some of these products. I've been around competitors that we looked at acquisition at Milestone where you're scratching your head going, "How are they operating?" It just seems like there's a lot of risk in operating the way they are, whether it be they're running really loose on the regulation or they're running really loose on the health and safety. That's why you'll see tier 1 customers not deal with those types of companies because they see a risk there. They're like, "We'd rather avoid dealing with those customers and that risk." That's what Milestone will kick in and say, "Hey, we can easily help to settle this out here. That's not a big deal for us. This is how we'll help you, customer, in doing this because at the end of the day, our success is dependent on you bringing us waste and your success is us handling it for you in a manner that keeps you guys continuing to operate and keeps everybody happy." A lot of the questions you asked are questions that it took Milestone years to figure out.

Client [01:06:22]: It's a really interesting space.