Ecosphere Technologies Inc., a Stuart-based company that created an eco-friendly way to treat fracking wastewater, is demanding $300 million from Halliburton Energy Services Inc. for breach of a nondisclosure agreement.
Ecosphere is represented by two Palm Beach Gardens law firms, Leopold Law and McHale & Slavin. Halliburton was given notice of Ecosphere’s intent to take them into arbitration Wednesday.
Over a 10-year period ending in 2007, Ecosphere spent more than $70 million to develop an advanced water recycling process, which it trademarked as Ozonix.
In fracking, water is used to create pressure and release oil and natural gas. However, the backflow coming up from hydraulic fracturing operations is contaminated with heavy metals, volatile organic compounds and bacteria.
Halliburton has been a major supplier of liquids used to frack carbon fuels and is under political pressure to find an environmentally stable system. Since 2009, bills have been introduced in Congress, notably the Fracturing Responsibility and Awareness of Chemicals, or FRAC Act, to close what is called the "Halliburton loophole."
In December 2008, Ecosphere successfully field-tested its process at horizontal shale wells near Coalgate, Oklahoma. A conference paper describing the results was published for the Society of Professional Engineers in March 2009under the title "Breakthrough mobile water treatment converts 75 percent of fracturing flowback fluid to fresh water and lowers CO2 emissions."
"Ecosphere’s technology broke all conventional wisdom in the hydraulic fracturing industry by … treating and recycling flowback and produced water, without the use of liquid chemicals, for use as hydraulic fracking fluid," Ecosphere stated in its arbitration complaint. "The breakthrough business model was poised to both greatly reduce the environment impact traditionally associated with hydraulic fracking, and, more importantly, provided significantly increased productivity in hydraulic fracking operations."
Within months of the field test, Ecosphere and Halliburton entered a joint confidentiality agreement that barred Halliburton from any unauthorized disclosure of Ecosphere’s trade secrets. In exchange, Halliburton had unfettered use of the technology.
Halliburton then tried to purchase Ecosphere, but when negotiations broke down "Halliburton wrongfully used Ecosphere’s trade secrets to immediately market itself as an environmentally friendly company, (and) form a venture known as Blu Energy Solutions," Ecosphere alleged in announcing its intent to go to arbitration.
According to Blu Energy Solutions, the company provides "well-site recycling technologies and holistic water management solutions to the oil and gas industry with the goal of reducing disposal costs and minimizing waster volumes."
Halliburton spokeswoman Susie McMichael said the company believes the allegations are unfounded and without merit. "We well vigorously defend our interests in the appropriate forum," she added.
"Halliburton clearly saw our client’s innovative product as both a valuable asset and a threat to their own business model," said Gregory Weiss, a shareholder at Leopold Law. "We believe they deliberately ignored their obligations under the confidentiality agreement and misappropriated Ecosphere’s highly guarded trade secrets for their own use."
Ecosphere filed its notice with the American Arbitration Association.
The company is publicly traded over the counter as ESPH. Its shares have declined from a high of 75 cents last March to 40 cents in recent days.