EBI Report 2020B US Environmental Industry Overview

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EBI Report 2020B

U.S. Environmental Industry Overview

An Executive Summary by

September 2019

Environmental Business International, Inc. 4452 Park Blvd. #306, San Diego CA 92116 619-295-7685; ebionline.org; environmentalbusiness.org climatechangebusiness.com

EBI Report 2020-B U.S. Environmental Industry Overview

Table of Contents 1 U.S. Environmental Industry Overview ...... 1-7 1.1 Authors and Sources ...... 1-7 1.2 EBJ’s Market Research Method...... 1-7 1.2.1 Company Databases ...... 1-9 1.2.2 Survey Instruments...... 1-9 1.2.3 Disclaimer...... 1-10 1.2.4 Copyright ...... 1-11 1.2.5 About Report 2020B...... 1-12 1.3 Definition of the Environmental Industry ...... 1-13 1.3.1 Environmental Industry Segments...... 1-13 1.3.2 Environmental Industry Customers and Buyers ...... 1-31 1.3.3 Growth Outlook by Client, Service & Media in 2019 ...... 1-36 1.3.4 Historical Perspective on Growth & Forecasts...... 1-43 1.3.5 Historical Framework of the Environmental Industry...... 1-59 1.3.6 Impact of Recession and Regulatory Uncertainty on a Maturing Industry ...... 1-64 1.3.7 Transition to Sustainability and a Value-Based Environmental Industry...... 1-65 1.3.8 The Great Recession and The Recovery...... 1-72 1.4 Annual Reports and Trend Analysis, 2006-2019...... 1-76 1.4.1 2019 Environmental Industry in Context ...... 1-76 1.4.2 2018 Report and Trend Analysis...... 1-83 1.4.3 2017 Report and Trend Analysis: Trump Era Forecast...... 1-97 1.4.4 2016 Industry Overview Report and Trend Analysis ...... 1-112 1.5 Segment Review ...... 1-122 1.5.1 Environmental Service Segments ...... 1-122 1.5.2 Environmental Testing and Analytical Services...... 1-124 1.5.3 Solid Waste Management...... 1-135 1.5.4 Environmental Contracting: HWM & R/IS...... 1-144 1.5.5 Hazardous Waste Management ...... 1-145 1.5.6 Remediation and Industrial Services ...... 1-155 1.5.7 Environmental Contracting Overview 2016 ...... 1-155 1.5.8 Industrial Services...... 1-159 1.5.9 Environmental Consulting & Engineering...... 1-171 1.5.10 Environmental Equipment Segments...... 1-183 1.5.1 Water Industry Overview ...... 1-183 1.5.2 Water & Wastewater Treatment Equipment and Chemicals...... 1-193 1.5.3 Environmental Instrumentation & Information Systems...... 1-199 1.5.4 Air Pollution Control Equipment...... 1-207 1.5.5 Waste Management Equipment...... 1-213 1.5.6 Environmental Resource Segments...... 1-217 1.5.7 Water Utilities ...... 1-217 1.5.8 Resource Recovery...... 1-221 1.5.9 Clean Energy Systems & Power...... 1-226 1.6 Climate Change Industry Definition and Context...... 1-232 1.7 Trends in the Climate Change Adaptation Industry...... 1-235 1.7.1 Strategy for Consultants...... 1-236 1.8 Healthy Products, Healthy Planet (HP2) Market ...... 1-237 1.9 Exports and International Business...... 1-241 1.10 Employment ...... 1-245 1.11 2019 Snapshot Survey...... 1-246 1.12 Conclusion ...... 1-251

EBI Report 2020-B U.S. Environmental Industry Overview

List of Exhibits Exhibit 1-1 Environmental Industry Segments...... 1-13 Exhibit 1-2 Environmental Industry Segments and Numbers of Companies: USA (2008) ...... 1-15 Exhibit 1-3 Environmental Industry Segments and Numbers of Companies: USA (2014) ...... 1-15 Exhibit 1-4 U.S. Environmental Industry 2016: Companies, Employment & Exports ...... 1-16 Exhibit 1-5 The U.S. Environmental Industry 2006-2011 ($bil)...... 1-17 Exhibit 1-6 The U.S. Environmental Industry in 2012-2017 ($bil)...... 1-18 Exhibit 1-7 The U.S. Environmental Industry: Share of Small Companies 2018 ...... 1-19 Exhibit 1-8 The U.S. Environmental Industry: Revenue Segment Detail 2014-2017...... 1-20 Exhibit 1-9 The U.S. Environmental Industry: Growth Segment Detail 2014-2017...... 1-21 Exhibit 1-10 Jobs in the U.S. Environmental Industry 2007-2016...... 1-22 Exhibit 1-11 The U.S. Environmental Industry by Decade: 1970-2010, 2020e...... 1-24 Exhibit 1-12 The U.S. Environmental Industry Economic Profile for 2012 ...... 1-26 Exhibit 1-13 The U.S. Environmental Industry 2013...... 1-26 Exhibit 1-14 The U.S. Environmental Industry 2014...... 1-27 Exhibit 1-15 The U.S. Environmental Industry 2015...... 1-27 Exhibit 1-16 U.S. Environmental Industry 2016: Companies, Employment & Exports ...... 1-28 Exhibit 1-17 U.S. Environmental Industry Segments by Competitor 2013...... 1-29 Exhibit 1-18 U.S. Environmental Industry Segments by Competitor 2014...... 1-29 Exhibit 1-19 U.S. Environmental Industry Segments by Competitor 2015...... 1-30 Exhibit 1-20 U.S. Environmental Industry Segments by Competitor 2016...... 1-31 Exhibit 1-21 U.S. Environmental Industry Segments by Customer Type 2013...... 1-32 Exhibit 1-22 U.S. Environmental Industry Segments by Customer Type 2014...... 1-32 Exhibit 1-23 U.S. Environmental Industry Segments by Customer Type 2015...... 1-33 Exhibit 1-24 U.S. Environmental Industry Segments by Customer Type 2016...... 1-34 Exhibit 1-25 U.S. Environmental Industry Revenues from Industry Clients ...... 1-35 Exhibit 1-26 Historical Growth of the U.S. Environmental and C&E Industry, 1992 – 2018 ...... 1-43 Exhibit 1-27 Environmental Market Trends 2014-16...... 1-44 Exhibit 1-28 Ranking of Environmental Industry Client Sectors in 2015-16 ...... 1-45 Exhibit 1-29 Ranking of Environmental Industry Client Sectors in 2014-15 ...... 1-46 Exhibit 1-30 Client Sectors Rated by 2015 Survey Respondents for Growth in 2015-2016 ...... 1-47 Exhibit 1-31 Client Sectors Rated by 2017 Survey Respondents for Growth in 2017-2018 ...... 1-49 Exhibit 1-32 Client Sectors Rated by 2011 Survey Respondents for Growth in 2011-2013 ...... 1-50 Exhibit 1-33 2008: Best Rated Client Markets for Growth ...... 1-51 Exhibit 1-34 Customer Markets Ranked for 2009-2010 ...... 1-52 Exhibit 1-35 Service Categories Rated by Growth by Survey Respondents in 2009...... 1-54 Exhibit 1-36 Ranking of Growth Prospects by Service/Media Category: 2013-2014...... 1-55 Exhibit 1-37 Service Sectors Rated by Survey Respondents for Growth in 2010-2012 ...... 1-56 Exhibit 1-38 Ranking of U.S. Regional Markets...... 1-57 Exhibit 1-39 Ranking of Growth Prospects by Service/Media Category: 2015-16...... 1-57 Exhibit 1-40 Ranking of Growth Prospects by Global Geographic Region: 2015-16 ...... 1-58 Exhibit 1-41 USA Geographic Regions Rated by Respondents for Growth in 2011-2013...... 1-58 Exhibit 1-42 Geographic Regions Rated by Survey Respondents for Growth in 2010-2012 ...... 1-59 Exhibit 1-43 Environmental Industry Segments vs. GDP Growth...... 1-60 Exhibit 1-44 U.S Environmental Industry by Media: 1970 – 2020 ($bil)...... 1-60 Exhibit 1-45 Historical Growth of the U.S. Environmental Industry, 1992 – 2018e ...... 1-63 Exhibit 1-46 U.S. Environmental Industry: Revenues by Function 2016 ...... 1-66 Exhibit 1-47 U.S. Environmental Industry: Revenues by Function 2014 ...... 1-67 Exhibit 1-48 U.S. Environmental Industry: Revenues by Function 1997-2016...... 1-68 Exhibit 1-49 U.S. Environmental Industry: Revenues by Media in 2016 ...... 1-69 Exhibit 1-50 U.S. Environmental Industry: Revenues by Media in 2014 ...... 1-70 Exhibit 1-51 U.S. Environmental Industry: Revenues by Media in 2013 ...... 1-71 Exhibit 1-52 Historical and Projected Growth in the Environmental Industry in Services, Equipment and Resources, 1970-2020...... 1-71

Exhibit 1-53 Historical and Projected Growth in the Environmental Industry in Infrastructure & Non- Infrastructure Segments, 1970-2020...... 1-72 Exhibit 1-54 How Goes the Recovery as of Mid-Year 2013...... 1-75 Exhibit 1-55 Environmental Industry Segments vs. GDP Growth: 2000 - 2018...... 1-84 Exhibit 1-56 U.S. Environmental Industry and Forecast: 2016-2020 ...... 1-85 Exhibit 1-57 U.S. Environmental Industry: Revenues by Function: 1997 - 2016...... 1-85 Exhibit 1-58 Environmental Industry Segments vs. GDP Growth ...... 1-86 Exhibit 1-59 U.S Environmental Industry by Media: 1970 – 2020 ($bil) ...... 1-90 Exhibit 1-60 U.S Environmental Industry by Segment: 1970 – 2020 ($bil) ...... 1-91 Exhibit 1-61 Environmental Industry: Key Growth Factors: 2004-2019 ...... 1-91 Exhibit 1-62 Environmental Industry: Key Growth Factors: 2004-2022 ...... 1-92 Exhibit 1-63 U.S. Environmental Industry and Forecast: 2016-2020 Revenues in $Billion...... 1-95 Exhibit 1-64 Environmental Industry as a Percentage of GDP: 1980 - 2018...... 1-96 Exhibit 1-65 U.S. Environmental Industry 2016: Companies, Employment & Exports ...... 1-96 Exhibit 1-66 U.S. Environmental Industry: Revenues by Function in 2016 ($Billions & Share)...... 1-97 Exhibit 1-67 Selected Materials Discarded* in the Municipal Waste Stream (1960-2012) ...... 1-118 Exhibit 1-68 2012-2014 ENR Top 200 Environmental Firms: Performance by Groups ...... 1-119 Exhibit 1-69 Historical and Projected Growth in Environmental Testing & Analytical Services...... 1-126 Exhibit 1-70 Historical Growth in the US Analytical Services Market, 1988 - 2018 ...... 1-126 Exhibit 1-71 Distribution of Companies and Revenues in Environmental Testing & Analytical Services, 1993...... 1-127 Exhibit 1-72 Distribution of Companies and Revenues in Environmental Testing & Analytical Services, 2003...... 1-128 Exhibit 1-73 Distribution of Companies and Revenues in Environmental Testing & Analytical Services, 2016...... 1-128 Exhibit 1-74 Leading Companies in Environmental Testing & Analytical Services, 2001...... 1-129 Exhibit 1-75 Leading Companies in Environmental Testing & Analytical Services, 2008...... 1-130 Exhibit 1-76 2017 Universe of Solid Waste Companies ...... 1-136 Exhibit 1-77 2016 Top Solid Waste Companies...... 1-137 Exhibit 1-78 2015 Top 40 Solid Waste Companies...... 1-137 Exhibit 1-79 Size of the Solid Waste Market by Industry Segment, 2009 ...... 1-138 Exhibit 1-80 Distribution of Solid Waste Management Revenues, 2009 ...... 1-139 Exhibit 1-81 Historical and Projected Growth in Solid Waste Management ...... 1-140 Exhibit 1-82 Distribution of Solid Waste Management Revenues, 2006 ...... 1-140 Exhibit 1-83 Leading Companies in Solid Waste Management, 2001 ...... 1-141 Exhibit 1-84 Leading Companies in Solid Waste Management, 2007 ...... 1-141 Exhibit 1-85 Top Solid Waste Companies 2008-2010 Revenues...... 1-142 Exhibit 1-86 Number of Solid Waste Facilities by Region, 2013 ...... 1-143 Exhibit 1-87 Materials Recovery Facilities ...... 1-143 Exhibit 1-88 Number of Landfills in the United States, 1988 - 2010...... 1-144 Exhibit 1-89 U.S. Environmental Contracting Markets in 2016-2018 ($bil) ...... 1-145 Exhibit 1-91 Hazardous Waste Management Market, 2012 – 2017 by 5 Sub-Segments...... 1-146 Exhibit 1-92 The U.S. Hazardous Waste Management Market 1987-2016 ...... 1-151 Exhibit 1-93 Distribution of Companies in Hazardous Waste Management, 1995...... 1-152 Exhibit 1-94 Leading Companies in Hazardous Waste Management, 1995 ...... 1-152 Exhibit 1-95 Leading Companies in Hazardous Waste Management, 2001 ...... 1-153 Exhibit 1-96 Leading Companies in Hazardous Waste Management, 2005 ...... 1-154 Exhibit 1-97 Leading Companies in Hazardous Waste Management, 2010 ...... 1-154 Exhibit 1-98 U.S. Environmental Contracting Markets in 2000-2017 ($bil) ...... 1-155 Exhibit 1-99 Transactions in Environmental Services 2008-2015 ...... 1-156 Exhibit 1-100 The U.S. Hazardous Waste Management Market 1987-2016 ...... 1-157 Exhibit 1-101 Remediation/Industrial Services Revenues ($mil) 2011‐2020...... 1-158 Exhibit 1-102 Growth in US Remediation/Industrial Services, 1988 – 2020...... 1-159 Exhibit 1‐103 Industrial Services Market, 2007‐2016 ($billion) ...... 1-160

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1‐104 Industrial Services Market, 2017e‐2020e ($billion) ...... 1-160 Exhibit 1‐105 Top Industrial Services Firms, 2016 ...... 1-161 Exhibit 1‐106 Distribution of Site Remediation Companies, 2016 ...... 1-163 Exhibit 1-107 Historical and Projected Growth in Remediation & Industrial Services ...... 1-163 Exhibit 1-108 Leading Companies in Remediation, 2003...... 1-165 Exhibit 1-109 Leading Companies in Remediation, 2006...... 1-168 Exhibit 1-110 Leading Companies in Remediation, 2008...... 1-169 Exhibit 1-111 Leading Companies in Remediation, 2013...... 1-170 Exhibit 1-112 Top Remediation Companies, 2016...... 1-171 Exhibit 1-113 Historical and Projected Revenue (in $billion) & Growth in Environmental Consulting & Engineering ...... 1-172 Exhibit 1-114 Environmental Consulting & Engineering: Annual Growth Rate, 1975-2022...... 1-173 Exhibit 1-115 U.S. C&E Market by Media Type, 2010-2020e...... 1-174 Exhibit 1-116 Revenue Performance of U.S. Environmental C&E Firms in 2015-2017...... 1-174 Exhibit 1-117 Distribution of U.S. Environmental Consulting & Engineering Firms in 2017 ...... 1-175 Exhibit 1-118 Environmental Services: Key Growth Factors 2019 ...... 1-175 Exhibit 1-119 Environmental C&E Industry vs. GDP Growth: 1991-2020...... 1-176 Exhibit 1-120 Top 5 & 10 U.S. Environmental C&E Firms (Gross Environmental C&E Revenues in $mil) ...... 1-176 Exhibit 1-121 Top 20 Companies in Environmental Consulting & Engineering, 2001-2005...... 1-177 Exhibit 1-122 Leading Companies in Environmental Consulting & Engineering, 2015 ...... 1-181 Exhibit 1-123 Leading Companies in Environmental Consulting & Engineering, 2016 ...... 1-182 Exhibit 1-124 Growth in Water & Wastewater Treatment Equipment and Chemicals...... 1-194 Exhibit 1-125 Water & Wastewater Treatment Equipment and Chemicals Industry, 2002-2010...... 1-195 Exhibit 1-126 Water & Wastewater Treatment Equipment and Chemicals Industry, 2011-2018...... 1-196 Exhibit 1-127 Leading Companies in Water & Wastewater Treatment Equipment, 2006...... 1-197 Exhibit 1-128 EBJ’s Top U.S. Water Equipment & Chemicals Companies: 2015 Revenues...... 1-199 Exhibit 1-129 U.S. Environmental Instruments & Information Market by Product, 1998-2020 ...... 1-200 Exhibit 1-130 Environmental Software & Information Service Companies, 2006 ...... 1-201 Exhibit 1-131 Environmental Software & Information Service Companies in 2014 ...... 1-201 Exhibit 1-132 Top Environmental Software & Information Service Companies in 2010...... 1-202 Exhibit 1-133 Top Environmental Software & Information Service Companies in 2014...... 1-203 Exhibit 1-134 Top 30 Analytical and Life Science Instrument Companies, 2005 ...... 1-204 Exhibit 1-135 Leading Companies in Environmental Instrumentation, 2000 ...... 1-205 Exhibit 1-136 Historical and Projected Growth in Environmental Instruments & Information...... 1-206 Exhibit 1-137 Mobile Source vs. Stationary Source, 2000-2014 ...... 1-208 Exhibit 1-138 APC Segment Revenues 1970-2020: Air Pollution Control Equipment...... 1-210 Exhibit 1-139 Distribution of Companies in Air Pollution Control Equipment, 2004...... 1-211 Exhibit 1-140 Leading Companies in Air Pollution Control Equipment, 2004 - 2006 ...... 1-212 Exhibit 1-141 Historical and Projected Growth in Waste Management Equipment ...... 1-213 Exhibit 1-142 U.S. Waste Management Equipment Industry: 2001-2020 ($mil) ...... 1-214 Exhibit 1-143 Historical and Projected Growth in Water Utilities Revenues ...... 1-218 Exhibit 1-144 U.S. Community Water System Summary: 2015 ...... 1-219 Exhibit 1-145 Historical and Projected Growth in Water Treatment Works...... 1-220 Exhibit 1-146 U.S. Wastewater System Summary: 2008...... 1-220 Exhibit 1-147 Sales of Recovered Materials in/from U.S., 2002-2016 ($bil) ...... 1-222 Exhibit 1-148 Historical and Projected Growth in Resource Recovery ...... 1-224 Exhibit 1-149 Leading Companies in Resource Recovery, 2002...... 1-225 Exhibit 1-150 Historical and Projected Growth in Clean Energy Systems & Power...... 1-226 Exhibit 1-151 Low-Carbon Power: Renewable & Conventional Power Sales; Specialty Equipment & Services: 2014-2020e ($bil) ...... 1-227 Exhibit 1-152 Leading Companies in Wind Energy in 2009...... 1-230 Exhibit 1-153 Leading Companies in Wind Energy in 2015-2016: MW Capacity Added ...... 1-230 Exhibit 1-154 Leading Companies in Solar Energy in 2009...... 1-231

Exhibit 1-155 Solar PV Leaders: PV Module Shipments in MW 2011-2013...... 1-231 Exhibit 1-156 The U.S. Healthy Products, Healthy Planet Market 2006-2009 ...... 1-239 Exhibit 1-157 The U.S. Healthy Products, Healthy Planet Market ($bil)...... 1-241 Exhibit 1-158 Global Environmental Market by Region, 2011 - 2016 ...... 1-241 Exhibit 1-159 Global Environmental Market by Segment, 2011 – 2020 ...... 1-242 Exhibit 1-160 U.S. Environmental Trade Balance, 2016 ...... 1-242 Exhibit 1-161 Global Environmental Market by Region, $1,156 Billion in 2016...... 1-243 Exhibit 1-162 U.S. Environmental Industry Export Performance, 2010-2015...... 1-244 Exhibit 1-163 Companies and Exporters in the U.S. Environmental Industry ...... 1-244 Exhibit 1-164 The U.S. Environmental Industry 2016...... 1-245 Exhibit 1-165 Employment in the U.S. Environmental Industry 2013-2018 ...... 1-246 Exhibit 1-166 Ranking of Environmental Markets by Client...... 1-247 Exhibit 1-167 Ranking of Environmental Markets by Media...... 1-248 Exhibit 1-168 Ranking of Environmental Markets by Service...... 1-249 Exhibit 1-169 Ranking of Environmental Markets by Geography...... 1-250

EBI Report 2020-B U.S. Environmental Industry Overview

1 U.S. Environmental Industry Overview

1.1 Authors and Sources

The principal author and editor of Environmental Business Journal’s Report 2020 (and the segment summary version EBJ Report 2020B) is Grant Ferrier, EBJ Founder and Editor-in- Chief from 1988 to the present; Editors and significant contributors included George Stubbs, Lynette Thwaites and Jim Hight. Laura Carranza and Helene Monkarsh managed the 2019 update. EBJ acknowledges a number of secondary sources of information, which are cited in this report. Most importantly, we thank all of the companies EBJ has interviewed since we published our first issue of in 1988 and the companies that have participated in our annual surveys over the years. Our ability to collect, compile, analyze and present data and information is a function of the cooperation of the companies in the industry, and we are grateful for their participation. EBJ’s principle research team operates out of EBI’s original office in San Diego, California.

1.2 EBJ’s Market Research Method

Over the years, EBJ and its founding company EBI Inc. has established a method for performing research on environmental companies that is both efficient and comprehensive. A quantitative approach of data collection on revenues, growth, market breakdowns, etc. is balanced with an ongoing qualitative approach of interviews with executives and experts. The cost for performing this work has been borne by the private sector through the purchase of EBI’s subscriptions, products and services. For this reason, the data, interpretation and analyses have been primarily crafted to directly serve the needs of environmental industry executives and owners in the private sector for their use in developing marketing and strategic plans for business operations and expansions. EBI researchers have therefore been conscientious in collecting, processing and interpreting the data and assuring its application to short- and long-term business planning and corporate development exercises.

Any market can be viewed as a population of sales events between a buyer and a seller.

From that perspective, a market research analyst can either count purchases by individual buyers or, alternatively, can count the revenues or sales of the sellers. Since buyers typically out-number sellers, and since buyers don’t always keep good track of their purchases, it is usually easier to study revenue generated, rather than purchases made, in a given market. That is, it’s typically less costly and more accurate to survey the sell side of a market. This has been the method employed by EBJ in surveying the environmental industry. In this way, we survey actual, existing markets.

Basically, EBI “adds up” revenues generated by companies/entities in each of its 14 environmental business segments to determine individual segment and subsequently total industrial size. It does this in distinct steps: 1. Generation and maintenance of company databases in defined segments 2. Development of survey instruments and survey execution 3. Identification of top 30-100 companies in each segment 4. Margin analysis modeling; estimates of un-surveyed populace by sampling 5. Editorial research (executive interviews)

Databases: EBI collects and updates proprietary lists of product and service companies in defined segments of our target industries. Generally companies larger than $5 million in sales are all captured, however, there are hundreds and sometimes thousands of companies or departments and divisions of companies that are smaller than $5 million.

Proprietary Survey Instruments: EBI designs and implements its own company surveys. Typically surveys are aimed at executives in business development, marketing and/or accounting. Surveys form the backbone of EBI’s primary research data. Secondary data collection is focused on revenue of individual companies, in addition to estimates or reviews of similar markets by private, government or academic researchers.

Market Models: EBI creates market size models by compiling the revenue contribution of the top 30-100 companies and modeling the survey responses and remaining unsurveyed populace based on estimates of number of companies in each size category. These figures are

EBI Report 2020-B U.S. Environmental Industry Overview

reconciled against existing estimates, buy-side data or other sources.

The key to this method is that EBJ continually collects primary data from companies, using that data to model industry size. While opinions are of value, EBJ only rarely uses “industry expert” opinion to derive its market, sub-segment or niche market numbers.

1.2.1 Company Databases EBI continuously collects and updates its lists of environmental product and service companies classified by segment. These databases are derived from industry directories, websites, reputable published materials, trade associations, electronic down-loads from third- party databases, list trades from other information companies and exhibitor and attendee lists from environmental industry conferences. Generally companies larger than $10 million in sales are all captured, however, there are many thousands of companies or departments and divisions of companies that are smaller than $10 million in sales in this industry. It is these companies that are the most challenging to find and to survey, or to estimate in the absence of a survey. EBI maintains segment databases and list-serves for surveys and estimates that there are over 30,000 private environmental companies in the fourteen segments in the U.S. alone. Databases are coded by company type (the fourteen segments), and some companies participate in multiple segments. Segment databases and their email lists are generally used as the source databases for performing survey emails, faxes and still occasional mail-outs. Typically BD or Marketing Directors, Chief Financial Officers or owner/CEOs are the ones who fill out EBI surveys. Completed surveys form the backbone of the EBI primary research, with company data collection and estimations and interviews augmenting survey results to form and industry model in each key segment.

1.2.2 Survey Instruments EBI designs and implements its own surveys on the environmental industry. Based on years of experience in performing these surveys it has evolved a method to receive revenues and some financial data from companies that are willing to fill out and return surveys. A brief review of the surveys will reveal that we routinely collect at least the following information from each company in the business segments tracked by EBI. • Financial Information

- Company information - Gross revenues - past two years, most recent year and one year future estimate - Segment specific revenues - Operating Income or Margins and Trends - International Revenues • Product or service line revenue breakdown - this revenue breakdown is specific to the environmental business segment • Market or client type revenue breakdown -This often includes detail on government and private client breakdowns • Media breakdown: Air, water, waste, etc. • Geographic revenue breakdown: USA and Global • Expectations of growth in client, service and geographic markets

These surveys are sent out with a cover letter that describes the survey, why we’re doing it and what respondents can expect to receive for filling out their survey. Aggregated data is used to form market size, growth, breakdowns and forecast estimates Survey data on individual companies is kept confidential in EBJ’s files, with the exception of total gross and environmental revenues, which may be used in segment rankings or top 50 lists. This is explained in the cover letter.

1.2.3 Disclaimer While EBJ has made every effort to be accurate in its data collection and presentation, it is impossible to be perfect, and we ask for your understanding regarding any inaccuracies that may appear in this report. In addition, EBJ’s data is constantly updated given best available information, so in some cases previously published data may be slightly inconsistent with the data printed in this report. Conversely, data printed in EBJ issues after June 2019 or in subsequent reports will represent best available data at that time. Questions regarding data

sources and/or methodology may be addressed to Grant Ferrier ([email protected] ).

EBJ understands that some of the categorizations or analysis in this report may not agree with that of our readers. EBJ conducts a variety of surveys and interviews with companies

EBI Report 2020-B U.S. Environmental Industry Overview

and accesses data in many forms to help provide sales figures for as many companies as possible. Sales figures printed for each company are not always the result of a direct contact with or response from that company, and in some cases estimates are derived from secondary sources or estimates. EBJ has made every reasonable effort to ensure the accuracy of this report. However, information in this report is not guaranteed to be accurate and should not be construed as investment advice. Any errors and omissions are unintentional.

1.2.4 Copyright © 2019 Environmental Business International, Inc., 4452 Park Blvd. #306, San Diego CA 92116. All rights reserved. This report, or any part, may not be duplicated or reproduced in any form without the written permission of the publisher. Likewise, no part of this report may be given, lent, resold or disclosed without written permission. For more information on duplicate copies, reproduction rights and proprietary research services, please call (619) 295- 7685 x 15, email report author Grant Ferrier at [email protected], or visit ebionline.org.

1.2.5 About Report 2020B Report 2020B presents EBI’s segmentation and business review of the U.S. environmental industry and its 14 segments. This report is the detailed Executive Summary to Report 2020: The U.S. Environmental Industry (3,400+ pp., 900+ exhibits), a research compendium that contains in-depth sections on each of the 14 U.S. environmental industry segments summarized in 2020B. These sections can also be purchased individually or in groups as segment reports. Visit www.ebionline.org to view all EBI research reports on the U.S. Environmental Industry, Global Environmental Industry and the Climate Change Industry.

Environmental Business International, Inc. (EBI) has been analyzing and tracking the environmental industry since 1987 and was the first to define the environmental industry in a full quantitative manner in internationally renowned monthly Environmental Business Journal. In the absence of any accepted Standard Industry Classification (SIC) or other codes for environmental companies, EBJ’s segmentation and quantification of the environmental industry has been adopted by the U.S. Department of Commerce in reference materials and used or adapted as the basis of industry classification by OECD, the EU (Eurostat), the UN and numerous other government and private sector sources.

Each segment in this review is characterized in terms of the range of products and services offered, the size of the market, including historical and projected growth, the number of companies participating in the segment and a list of top firms in comparative time periods. EBJ’s basic methodology for market quantification has been annual surveys of revenues generated by companies, broken down three or four different ways such as by customer, by product of service, by media and by geographic region. Each year, EBJ compiles revenue information on almost 2,000 environmental companies and public sector entities generating environmental business revenues. While most of the revenues cited in the lists of top companies result from primary research and direct surveys performed by EBI, some of the revenues listed for firms are estimates. Although EBJ has made every reasonable effort to be accurate, the revenues cited are not the result of external or internal audits and the accuracy of the figures is not guaranteed. Any errors and omissions are unintentional.

EBI Report 2020-B U.S. Environmental Industry Overview

1.3 Definition of the Environmental Industry

EBJ defines the environmental industry as all revenue generation associated with environmental protection, assessment, compliance with environmental regulations, pollution control, waste management, remediation of contaminated property and the provision and delivery of environmental resources.

The environmental industry represents total revenues of $400+ billion, generated by about 30,000 private sector companies and more than 80,000 public sector entities in the United States, employing 1.7 million Americans. The global environmental market is about $900 billion.

1.3.1 Environmental Industry Segments

The following exhibit briefly describes EBI’s 13 environmental industry segments.

Exhibit 1-1 Environmental Industry Segments

Segment Description Examples of Clients Environmental Services Environmental Testing & Provide testing of “environmental Regulated industries, Gov’t, C&E, Analytical Services samples” (soil, water, air and some Hazardous waste and remediation biological tissues) contractors

Wastewater Treatment Works Collection and treatment of residential, Municipalities, Commercial commercial and industrial wastewaters. Establishments & All industries Facilities are commonly known as POTWs or publicly owned treatment works. Water Utilities Selling water to end users: Municipal Consumers, Commercial, All entities and private companies industries, Institutions Solid Waste Management Collection, processing and disposal of Municipalities & All industries solid waste & commercial collection of recyclables Hazardous Waste Management Collection, processing and disposal of Chemical, Petroleum, Mfgrs hazardous, medical waste, nuclear waste Government agencies Cleanup of contaminated sites, buildings Government agencies Remediation and Industrial and environmental cleaning of operating Property owners, Developers Services facilities Industry Environmental Consulting & Engineering, consulting, design, Industry, Government Engineering (C&E) assessment, permitting, project Municipalities management, O&M, monitoring, etc. Waste Mgmt. companies, POTWs

Environmental Equipment Water Equipment & Chemicals Provide equipment, supplies and Municipalities & All industries maintenance in the delivery and treatment of water and wastewater. Instruments & Information Produce instrumentation for the analysis Analytical services, Gov’t Systems of environmental samples. Includes info Regulated companies systems and software. Air Pollution Control Equipment Produce equipment and tech. to control Utilities, Waste-to-energy air pollution. Includes vehicle controls. Industries, Auto industry Waste Management Equipment Equipment for handling, storing or Municipalities transporting solid, liquid or haz. waste. Generating industries Includes recycling and remediation Solid waste companies eqmnt. Environmental Resources Water Utilities Selling water to end users Consumers, Municipalities & All industries Resource Recovery Selling materials recovered and Municipalities converted from industrial by-products or Generating industries post-consumer waste Solid waste companies Clean Energy Systems & Power Solar, wind, biomass, fuel cell, Utilities geothermal, and wave & tidal: Systems / All industries and consumers equipment sales and Power value

Source: Environmental Business International Inc. (San Diego, Calif.)

Within the scope of this definition, EBJ has identified 13 segments of business activity in the environmental industry (summarized and discussed in detail below) which it divides into three broad categories: services, equipment and resources. These segments are neither classifications of environmental problems in a media sense, such as air pollution or solid waste, nor are they market segments centered around solutions like the cleanup of contaminated sites that typically involve the contributions of many types of companies. EBJ's environmental industry segments are classifications of types of businesses from the perspective of what the companies sell along the lines of the SIC system, whether it be engineering services or environmental laboratory services (which may relate to any number of environmental problems) or specific equipment manufacturers or resource providers. Simply put, service revenues are those generated as fees paid for service, equipment revenues are sales of hardware, and resources are sales materials, water or energy. The following chart depicts the number of companies in each segment (note that the figures for Wastewater Treatment Works and Water Utilities are in italics, indicating that these segments are heavily dominated by public sector entities and not private companies).

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-2 Environmental Industry Segments and Numbers of Companies: USA (2008)

Companies Environmental Industry Segment or Entities Services Analytical Services 1,050 Wastewater Treatment Works (mostly public sector) 26,400 Solid Waste Management (just private companies, not including public sector) 9,950 Hazardous Waste Management 580 Remediation & Industrial Services 2,140 Environmental Consulting & Engineering 3,570 Equipment Water & Wastewater Equipment & Chemicals 2,110 Instrumentation & Information Systems 780 Air Pollution Control Equipment 1,850 Waste Management Equipment 890 Process & Prevention Technology Equipment 380 Resources Water Utilities (mostly public sector) 61,900 Resource Recovery 5,090 Clean Energy Systems & Power 1,930 Total 118,620

Exhibit 1-3 Environmental Industry Segments and Numbers of Companies: USA (2014)

Companies or Environmental Industry Segment Entities Services Analytical Services 910 Wastewater Treatment Works 26,470 Solid Waste Management 9,950 Hazardous Waste Management 510 Remediation/Industrial Svcs. 2,020 Consulting & Engineering 3,310 Equipment Water Equipment & Chemicals 2,030 Instruments & Info. Systems 860 Air Pollution Control Equipment 1,610 Waste Management Equipment 740 Resources Water Utilities 61,800 Resource Recovery 4,550 Clean Energy Systems & Power 2,370 Total 117,130

Source: Environmental Business Journal; italics signifies mostly public sector. © EBI Inc.

Exhibit 1-4 U.S. Environmental Industry 2016: Companies, Employment & Exports

Revenues Companies Exports 2016 avg $bil Entities 2015 $mil Jobs 2016 $/FTE Analytical Services 2.0 980 126 16,200 121,492 Wastewater Treatment Works 59.1 26,870 282 195,900 301,633 Solid Waste Management 61.0 9,550 206 295,200 206,797 Hazardous Waste Management 10.9 540 162 48,500 223,932 Remediation/Industrial Svcs. 13.7 1,980 821 99,800 137,081 Consulting & Engineering 30.1 3,270 5,645 232,300 129,574 Water Equipment & Chemicals 32.2 2,090 12,469 175,900 183,229 Instruments & Info. Systems 7.0 1,080 3,360 44,400 158,266 Air Pollution Control Equipment 16.8 1,310 2,476 97,800 171,858 Waste Management Equipment 15.1 680 4,836 93,900 161,022 Water Utilities 56.7 62,220 118 208,800 271,743 Resource Recovery 25.6 3,950 17,118 81,900 312,026 Clean Energy Systems & Power 39.8 2,820 4,100 135,100 294,467 Totals: 370.0 117,340 51,720 1,725,700 214,410

Source: EBJ, Environmental Business International, Inc., San Diego, Italics indicate public sector entities, Copyright EBI Inc.

It is important to remember that market size numbers presented in the following analysis are in terms of revenues generated by public and private sector entities and not total expenditures made by buyers. As an illustration, a chemical company or municipal government may account for $30 million in environmental expenditures, but not all of this results in revenues for vendors of environmental products and services. Whereas in some segments this portion of “outsourced” expenditures is high (such as specialized equipment or remediation of contaminated sites), in other areas it is considerably lower (water quality testing or pollution prevention design services).

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-5 The U.S. Environmental Industry 2006-2011 ($bil)

ENVIRONMENTAL 2005‐06 2006‐07 2007‐08 INDUSTRY SEGMENT 2006 Growth 2007 Growth 2008 Growth Environmental Services Analytical Services 1.84 1.2% 1.89 2.8% 1.95 3.0% Wastewater Treatment Works 37.35 5.0% 39.34 5.0% 41.07 4.4% Solid Waste Management 49.79 4.1% 51.80 4.0% 53.45 3.2% Hazardous Waste Management 9.92 4.0% 10.08 1.6% 10.20 1.2% Remediation/Industrial Services 11.45 3.1% 12.08 5.4% 12.52 3.6% Consulting & Engineering 24.10 7.9% 25.87 7.3% 27.09 4.7% Environmental Equipment Water Equipment and Chemicals 26.11 5.3% 27.29 4.5% 28.46 4.3% Instruments & Info. Systems 4.93 5.5% 5.20 5.5% 5.34 2.8% Air Pollution Control Equipment 18.54 ‐1.1% 18.31 ‐1.3% 17.97 ‐1.8% Waste Management Equipment 12.22 5.3% 12.80 4.7% 13.31 4.0% Resource Management Water Utilities 35.99 2.9% 37.71 4.8% 39.42 4.5% Resource Recovery 24.25 15.0% 31.35 29.2% 28.22 ‐10.0% Clean Energy Systems & Power 10.42 18.0% 14.38 38.1% 18.98 32.0% TOTALS: 266.9 5.5% 288.1 7.9% 298.0 3.4% ENVIRONMENTAL 2008‐09 2009‐10 2010‐11 INDUSTRY SEGMENT 2009 Growth 2010 Growth 2011 Growth Analytical Services 1.79 ‐8.4% 1.88 5.5% 1.94 2.8% Wastewater Treatment Works 44.03 7.2% 45.53 3.4% 48.53 6.6% Solid Waste Management 51.07 ‐4.4% 53.38 4.5% 54.60 2.3% Hazardous Waste Management 9.63 ‐5.6% 9.99 3.7% 10.30 3.1% Remediation/Industrial Services 11.99 ‐4.2% 12.65 5.5% 12.96 2.5% Consulting & Engineering 26.23 ‐3.2% 26.83 2.3% 27.80 3.6% Environmental Equipment Water Equipment and Chemicals 26.62 ‐6.5% 26.93 1.2% 27.73 3.0% Instruments & InfoSystems 5.20 ‐2.7% 5.38 3.5% 5.58 3.6% Air Pollution Control Equipment 15.85 ‐11.8% 14.94 ‐5.7% 15.07 0.9% Waste Management Equipment 12.32 ‐7.4% 12.65 2.7% 13.03 3.0% Resource Management Water Utilities 41.44 5.1% 43.46 4.9% 45.87 5.5% Resource Recovery 24.23 ‐14.2% 28.52 17.7% 32.46 13.8% Clean Energy Systems & Power 22.61 19.1% 21.19 ‐6.3% 24.34 14.9% TOTALS: 293.0 ‐1.7% 303.3 3.5% 320.2 5.6%

SOURCE: Environmental Business Journal, units in $bil. © EBI Inc.

Exhibit 1-6 The U.S. Environmental Industry in 2012-2017 ($bil)

SEGMENT 2012 Growth 2013 Growth 22014 Growth Environmental Services Analytical Services 1.94 0.4% 1.88 ‐3.1% 1.89 0.4% Wastewater Treatment Works 51.10 5.3% 53.66 5.0% 55.86 4.1% Solid Waste Management 55.26 1.2% 56.69 2.6% 57.94 2.2% Hazardous Waste Management 10.57 2.6% 10.69 1.2% 10.80 1.0% Remediation/Industrial Services 13.46 3.8% 13.87 3.0% 13.59 ‐2.0% Consulting & Engineering 29.03 4.4% 28.63 ‐1.4% 28.99 1.3% Environmental Equipment Water Equipment and Chemicals 28.66 3.4% 29.69 3.6% 30.69 3.4% Instruments & InfoSystems 5.79 3.9% 6.05 4.5% 6.36 5.1% Air Pollution Control Equipment 15.52 3.0% 15.71 1.2% 15.96 1.6% Waste Management Equipment 13.39 2.8% 13.82 3.2% 14.23 3.0% Resource Management Water Utilities 48.29 5.3% 50.15 3.9% 51.98 3.6% Resource Recovery 30.36 ‐6.5% 30.82 1.5% 29.11 ‐5.6% Clean Energy Systems & Power 29.73 22.1% 25.89 ‐12.9% 32.11 24.0% TOTALS: 333.1 4.0% 337.6 1.3% 349.5 3.5%

INDUSTRY SEGMENT 2015 Growth 2016 Growth 2017e 17‐19 Avg Environmental Services Analytical Services 1.93 2.1% 1.97 1.9% 2.01 2.2% Wastewater Treatment Works 57.59 3.1% 59.09 2.6% 61.51 4.0% Solid Waste Management 58.98 1.8% 61.05 3.5% 63.43 3.8% Hazardous Waste Management 10.91 1.0% 10.86 ‐0.5% 10.90 0.5% Remediation/Industrial Services 13.51 ‐0.6% 13.68 1.2% 14.04 1.8% Consulting & Engineering 29.69 2.4% 30.10 1.4% 31.03 3.0% Environmental Equipment Water Equipment and Chemicals 31.33 2.1% 32.23 2.9% 32.99 2.5% Instruments & Info aSystems 6.71 5.4% 7.03 4.8% 7.36 4.4% Air Pollution Control Equipment 16.29 2.1% 16.81 3.2% 17.41 0.8% Waste Management Equipment 14.66 3.0% 15.12 3.1% 15.61 3.4% Resource Management Water Utilities 54.35 4.6% 56.74 4.4% 59.21 4.3% Resource Recovery 26.10 ‐10.3% 25.55 ‐2.1% 26.83 5.0% Clean Energy Systems & Power 34.94 8.8% 39.78 13.9% 45.51 14.7% TOTALS: 357.0 2.1% 370.0 3.6% 387.8 4.8%

Source: Environmental Business Journal, units in $bil.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-7 The U.S. Environmental Industry: Share of Small Companies 2018

INDUSTRY SEGMENT BY NUMBER OF COMPANIES BY REVENUE % small big SERVICES business business munis small biz big biz munis rev $bil Analytical Services 810 6 0 59% 41% 0% 2.1 Wastewater Treatment Works 11,400 6 14,780 3% 1% 96% 63.1 Solid Waste Management 10,730 16 80,000 4% 65% 31% 64.6 Hazardous Waste Management 630 15 0 29% 67% 4% 11.0 Remediation/Industrial Svcs. 2,110 26 0 34% 66% 0% 14.2 Consulting & Engineering 3,230 77 0 27% 73% 0% 32.7 EQUIPMENT 0% 0% 0% 0.0 Water Equipment & Chemicals 2,020 33 0 24% 76% 0% 32.8 Instruments & Info. Systems 590 13 0 33% 67% 0% 7.7 Air Pollution Control Equipment 1,570 17 0 36% 64% 0% 17.3 Waste Management Equipment 750 11 0 47% 53% 0% 15.8 RESOURCES 0% 0% 0% 0.0 Water Utilities 26,700 20 34,200 20% 22% 58% 61.8 Resource Recovery 5,530 22 0 28% 55% 17% 23.0 Clean Energy Systems & Power 2,460 19 0 36% 61% 3% 48.5 Totals: 68,530 281 128,980 21% 48% 31% 394.3

INDUSTRY SEGMENT BY REVENUE % SERVICES small biz big biz munis Analytical Services 1.2 0.8 0.0 Wastewater Treatment Works 2.0 0.6 60.4 Solid Waste Management 2.7 41.8 20.0 Hazardous Waste Management 3.1 7.4 0.4 Remediation/Industrial Svcs. 4.8 9.4 0.0 Consulting & Engineering 8.8 23.8 0.0 EQUIPMENT 0.0 0.0 0.0 Water Equipment & Chemicals 7.8 24.9 0.0 Instruments & Info. Systems 2.5 5.2 0.0 Air Pollution Control Equipment 6.2 11.1 0.0 Waste Management Equipment 7.4 8.4 0.0 RESOURCES 0.0 0.0 0.0 Water Utilities 12.4 13.6 35.8 Resource Recovery 6.4 12.7 3.9 Clean Energy Systems & Power 17.4 29.6 1.5 Totals: 82.9 189.4 122.0

Source: EBJ, Environmental Business International, Inc., San Diego, Copyright EBI Inc. Note: Small business designations vary by segment, but generally the top end are in the $40-100 million range.

Exhibit 1-8 The U.S. Environmental Industry: Revenue Segment Detail 2014-2017

ENVIRONMENTAL 2014 2015 2016 2017 Revenues Revenues Revenues Revenues INDUSTRY SEGMENT $bil $bil $bil $bil SERVICES Analytical Services Total 1.89 1.93 1.97 2.01 Wastewater Treatment Works 55.86 57.59 59.09 61.51 Solid Waste Management Collection 39.9 40.9 41.9 42.9 Disposal/Processing 18.06 18.10 19.17 20.55 Hazardous Waste Management Industrial/Commercial Haz Waste Management 3.19 3.15 3.13 3.21 Solvent Recovery & Parts Cleaning 0.54 0.51 0.54 0.57 Medical Waste Management 2.58 2.65 2.63 2.61 Utility/Commercial Nuclear Waste Management 1.12 1.14 1.16 1.18 Federal Waste Management (DOE & DOD) 3.37 3.47 3.41 3.33 Remediation/Industrial Services Site Remediation Construction 5.11 5.16 5.24 5.36 Industrial Services 6.59 6.46 6.56 6.79 Abatement (asbestos, radon, lead, mold) 1.89 1.89 1.88 1.89 Consulting & Engineering 28.99 29.69 30.10 31.03 EQUIPMENT Water Equipment and Chemicals Treatment Equipment 12.40 12.67 13.09 13.38 Delivery & Infrastructure Equipment 13.37 13.64 14.02 14.43 Chemicals 4.92 5.02 5.12 5.18 Instruments & Information Systems Instruments 4.05 4.20 4.36 4.52 Info Systems/Software 2.31 2.51 2.67 2.84 Air Pollution Control Equipment Mobile/Vehicular APC 11.44 11.50 11.73 12.02 Stationary Source APC 4.52 4.79 5.08 5.38 Waste Management Equipment 14.23 14.66 15.12 15.61 RESOURCES Water Utilities 51.98 54.35 56.74 59.21 Resource Recovery 29.11 26.10 25.55 26.83 Clean Energy Systems & Power 32.11 34.94 39.78 45.51 TOTALS: 349.52 356.99 370.01 387.83

Source: Environmental Business Journal, Environmental Business International Inc., San Diego, units are revenues generated in $bil.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-9 The U.S. Environmental Industry: Growth Segment Detail 2014-2017

ENVIRONMENTAL 2014 2015 2016 2017 INDUSTRY SEGMENT Growth Growth Growth Growth SERVICES Analytical Services Total 0.4% 2.1% 1.9% 2.3% Wastewater Treatment Works 4.1% 3.1% 2.6% 4.1% Solid Waste Management Collection 2.6% 2.5% 2.4% 2.4% Disposal/Processing 1.4% 0.2% 5.9% 7.2% Hazardous Waste Management Industrial/Commercial Haz Waste Management 3.5% ‐1.5% ‐0.5% 2.5% Solvent Recovery & Parts Cleaning ‐3.0% ‐5.0% 6.0% 5.0% Medical Waste Management 4.0% 2.5% ‐0.8% ‐0.6% Utility/Commercial Nuclear Waste Management 2.0% 2.0% 1.5% 2.0% Federal Waste Management (DOE & DOD) ‐3.0% 3.0% ‐1.8% ‐2.2% Remediation/Industrial Services Site Remediation Construction ‐2.0% 1.0% 1.4% 2.3% Industrial Services ‐2.5% ‐2.0% 1.6% 3.4% Abatement (asbestos, radon, lead, mold) 0.0% 0.0% ‐0.5% 0.5% Consulting & Engineering 1.3% 2.4% 1.4% 3.1% EQUIPMENT Water Equipment and Chemicals Treatment Equipment 4.0% 2.2% 3.3% 2.2% Delivery & Infrastructure Equipment 3.2% 2.0% 2.8% 2.9% Chemicals 2.3% 2.0% 2.0% 1.2% Instruments & Information Systems Instruments 3.5% 3.6% 3.7% 3.8% Info Systems/Software 8.0% 8.7% 6.6% 6.2% Air Pollution Control Equipment Mobile/Vehicular APC 0.5% 0.5% 2.0% 2.5% Stationary Source APC 4.5% 6.0% 6.0% 6.0% Waste Management Equipment 3.0% 3.0% 3.1% 3.2% RESOURCES Water Utilities 3.6% 4.6% 4.4% 4.4% Resource Recovery ‐5.6% ‐10.3% ‐2.1% 5.0% Clean Energy Systems & Power 24.0% 8.8% 13.9% 14.4% TOTALS: 3.5% 2.1% 3.6% 4.8%

Source: Environmental Business Journal, Environmental Business International Inc., San Diego, units are revenues generated in $bil.

Exhibit 1-10 Jobs in the U.S. Environmental Industry 2007-2016

ENVIRONMENTAL INDUSTRY SEGMENT 2007 2008 2009 2010 2011 2012 SERVICES Analytical Services 17,700 18,000 16,300 17,000 17,200 17,000 Wastewater Treatment Works 153,700 158,400 166,700 170,100 177,300 182,700 Solid Waste Management 273,400 278,800 267,100 278,000 283,200 285,400 Hazardous Waste Management 50,700 50,500 47,400 48,500 49,300 49,800 Remediation/Industrial Services 103,200 105,900 101,900 106,800 107,600 109,900 Consulting & Engineering 233,900 240,800 237,400 240,400 242,600 246,900 EQUIPMENT Water Equipment and Chemicals 164,400 169,400 159,400 160,100 162,700 166,000 Instruments & Info Systems 37,100 37,500 36,300 37,100 37,900 38,800 Air Pollution Control Equipment 118,900 115,900 102,600 96,400 96,500 98,600 Waste Management Equipment 89,200 91,200 85,900 86,600 87,700 88,700 RESOURCES Water Utilities 153,000 158,300 165,100 172,100 179,400 186,500 Resource Recovery 112,800 101,200 89,400 102,600 107,500 99,900 Clean Energy Systems & Power 59,700 76,500 89,400 80,900 89,800 106,200 Totals 1,567,700 1,602,400 1,564,900 1,596,600 1,638,700 1,676,400 Added jobs 85,700 34,700 (37,500) 31,700 42,100 37,700

EBI Report 2020-B U.S. Environmental Industry Overview

ENVIRONMENTAL INDUSTRY SEGMENT 2013 2014 2015 2016 SERVICES Analytical Services 16,200 16,000 16,100 16,200 Wastewater Treatment Works 189,100 192,800 194,800 195,900 Solid Waste Management 291,000 291,400 290,800 295,200 Hazardous Waste Management 49,700 49,500 49,400 48,500 Remediation/Industrial Services 111,400 105,600 101,700 99,800 Consulting & Engineering 237,400 234,500 234,500 232,300 EQUIPMENT Water Equipment and Chemicals 169,900 172,800 173,700 175,900 Instruments & Info Systems 39,900 41,300 43,000 44,400 Air Pollution Control Equipment 99,100 97,900 97,300 97,800 Waste Management Equipment 90,000 91,200 92,500 93,900 RESOURCES Water Utilities 191,300 195,900 202,400 208,800 Resource Recovery 100,700 94,500 84,200 81,900 Clean Energy Systems & Power 93,300 113,300 121,100 135,100 Totals 1,679,000 1,696,700 1,701,500 1,725,700 Added jobs 2,600 17,700 4,800 24,200

Source: Environmental Business International, Inc., San Diego, includes public sector entities, © EBI Inc.

Exhibit 1-11 The U.S. Environmental Industry by Decade: 1970-2010, 2020e

ENVIRONMENTAL 70‐80 80‐90 90‐00 INDUSTRY SEGMENT 1970 1980 Growth 1990 Growth 2000 Growth Services Analytical Services 0.1 0.3 300% 2.1 523% 1.8 ‐14% Wastewater Treatment Works 5.8 10.3 78% 18.4 78% 28.7 56% Solid Waste Management 8.3 14.6 76% 26.1 79% 39.4 51% Hazardous Waste Management 0.1 0.6 339% 7.1 1082% 8.8 23% Remediation/Industrial Services 0.3 1.6 401% 9.9 534% 10.1 3% Consulting & Engineering 0.1 1.3 1492% 12.5 856% 17.4 39% Equipment Water Equipment and Chemicals 1.7 6.9 306% 13.4 93% 19.8 48% Instruments & Information Systems 0.1 0.4 265% 2.0 404% 3.8 88% Air Pollution Control Equipment 0.4 4.5 1122% 11.1 144% 19.0 72% Waste Management Equipment 2.0 4.7 134% 9.1 95% 11.1 22% Resources Water Utilities 7.4 12.0 61% 19.8 66% 29.9 51% Resource Recovery 2.3 6.1 161% 13.1 114% 16.0 22% Clean Energy Systems & Power 0.7 4.1 467% 3.0 ‐28% 4.4 49% TOTALS: 29.4 67.5 129% 147.5 119% 210.3 43%

EBI Report 2020-B U.S. Environmental Industry Overview

ENVIRONMENTAL 00‐10 10‐20 INDUSTRY SEGMENT 2010 Growth 2020e Growth Services Analytical Services 1.9 7% 2.1 14% Wastewater Treatment Works 45.5 58% 69.3 52% Solid Waste Management 53.4 35% 70.5 32% Hazardous Waste Management 10.0 14% 11.1 11% Remediation/Industrial Services 12.7 25% 14.6 16% Consulting & Engineering 26.8 54% 33.8 26% Equipment Water Equipment and Chemicals 26.9 36% 35.5 32% Instruments & Information Systems 5.4 44% 8.3 55% Air Pollution Control Equipment 14.9 ‐22% 17.1 15% Waste Management Equipment 12.7 14% 17.3 37% Resources Water Utilities 43.5 45% 67.1 54% Resource Recovery 28.5 79% 29.9 5% Clean Energy Systems & Power 21.2 377% 63.0 197% TOTALS: 303.3 44% 439.7 45%

Source: Environmental Business International, Inc., San Diego, CA, units in $bil. Copyright EBI Inc.

Exhibit 1-12 The U.S. Environmental Industry Economic Profile for 2012

Exports Revenues Cos./ 2011 Employment 2012 avg $bil Entities $mil 2012 $/FTE Analytical Services 2.0 940 123 19,800 98,688 Wastewater Treatment Works 51.1 26,270 254 182,700 279,693 Solid Waste Management 55.3 10,150 249 285,400 193,606 Hazardous Waste Management 10.6 520 121 49,800 212,208 Remediation/Industrial Svcs. 13.5 2,080 816 110,600 122,449 Consulting & Engineering 28.8 3,370 4,861 261,600 110,015 Water Equipment & Chemicals 28.7 1,990 10,776 166,000 172,651 Instruments & Info. Systems 5.8 660 2,882 38,800 149,342 Air Pollution Control Equipment 15.5 1,710 2,453 98,600 157,432 Waste Management Equipment 11.4 820 4,225 75,600 151,058 Process & Prevention Tech. 2.0 390 158 29,400 67,043 Water Utilities 48.3 61,500 107 186,500 258,928 Resource Recovery 30.4 4,950 19,428 99,900 303,870 Clean Energy Systems & Power 26.0 2,120 3,360 95,600 271,807 Totals: 329.2 117,470 49,812 1,700,300 193,613

Source: EBJ, Environmental Business International, Inc., San Diego CA Exhibit 1-13 The U.S. Environmental Industry 2013

Revenues Companie Exports Employment $bil s Entities 2012 $mil 2013 avg $/FTE Analytical Services 1.9 940 128 19,400 99,762 Wastewater Treatment Works 53.7 26,270 266 189,100 283,765 Solid Waste Management 56.7 10,150 238 291,000 194,817 Hazardous Waste Management 10.7 520 139 49,700 215,101 Remediation/Industrial Svcs. 13.9 2,080 766 112,000 124,466 Consulting & Engineering 28.3 3,370 4,886 255,300 111,007 Water Equipment & Chemicals 29.7 1,990 11,435 169,900 174,750 Instruments & Info. Systems 6.1 660 3,047 39,900 151,689 Air Pollution Control Equipment 15.7 1,710 2,419 99,100 158,530 Waste Management Equipment 11.8 820 4,444 77,000 153,506 Process & Prevention Tech. 2.0 390 180 29,400 68,027 Water Utilities 50.2 61,500 110 191,300 262,154 Resource Recovery 30.8 4,950 20,390 100,700 306,050 Clean Energy Systems & Power 26.1 2,120 2,939 95,600 273,001 Totals: 337.6 117,470 51,387 1,719,400 196,347

Source: EBJ, Environmental Business International, Inc., San Diego CA

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-14 The U.S. Environmental Industry 2014

Revenues Cos./ Exports Employment 2014 avg $bil Entities 2014 $mil 2014 $/FTE Analytical Services 1.9 910 132 19,300 100,822 Wastewater Treatment Works 55.9 26,470 279 192,800 289,730 Solid Waste Management 57.9 9,950 226 291,400 198,830 Hazardous Waste Management 10.8 460 152 49,700 218,217 Remediation/Industrial Svcs. 13.7 2,020 821 106,100 128,713 Consulting & Engineering 28.8 3,310 5,020 257,000 111,984 Water Equipment & Chemicals 30.7 2,030 11,887 172,800 177,604 Instruments & Info. Systems 6.4 860 3,156 41,300 153,989 Air Pollution Control Equipment 16.0 1,610 2,394 97,900 163,043 Waste Management Equipment 12.2 740 4,628 78,100 155,954 Process & Prevention Tech. 2.1 420 205 29,700 69,024 Water Utilities 52.0 61,800 120 195,900 265,339 Resource Recovery 29.1 4,550 18,919 94,500 308,016 Clean Energy Systems & Power 33.4 2,370 3,064 98,900 337,940 Totals: 350.8 117,500 51,005 1,725,400 203,303

Source: EBJ, Environmental Business International, Inc., San Diego CA Exhibit 1-15 The U.S. Environmental Industry 2015

Revenues Companie Exports Employment 2015 avg $bil s Entities 2014 $mil 2015 $/FTE Analytical Services 2.0 880 132 19,300 102,332 Wastewater Treatment Works 57.6 26,670 279 194,800 295,637 Solid Waste Management 59.0 9,750 226 290,800 202,827 Hazardous Waste Management 10.9 400 152 49,400 221,203 Remediation/Industrial Svcs. 13.6 1,960 821 102,100 132,907 Consulting & Engineering 29.5 3,250 5,020 260,800 112,998 Water Equipment & Chemicals 31.3 2,070 11,887 173,700 180,368 Instruments & Info. Systems 6.7 1,060 3,156 43,000 155,948 Air Pollution Control Equipment 16.3 1,510 2,394 97,300 167,423 Waste Management Equipment 12.6 660 4,628 79,200 158,586 Process & Prevention Tech. 2.2 450 205 30,900 69,955 Water Utilities 53.8 62,100 120 200,300 268,447 Resource Recovery 25.9 4,150 18,919 83,700 309,880 Clean Energy Systems & Power 41.8 2,620 3,064 103,800 403,044 Totals: 363.1 117,530 51,005 1,729,100 209,996

Source: EBJ, Environmental Business International, Inc., San Diego CA

Exhibit 1-16 U.S. Environmental Industry 2016: Companies, Employment & Exports

Source: EBJ, Environmental Business International, Inc., San Diego, Italics indicate public sector entities, Copyright EBI Inc.

It is important to note that EBJ does count public sector revenues as part of the environmental industry. (And in some cases, the estimate may not be actual revenues generated by the public sector but total cost allocation to a function like wastewater treatment that may be only covered 70-75% by user fees.) What have traditionally been municipal services in the U.S. like water delivery, wastewater or sewage treatment and, to a lesser extent, garbage collection in the United States, are counted in our model of the industry. In the case of water, treatment and delivery services are largely or completely privatized in some other nations like France and the United Kingdom, and new projects around the globe have a distinct bent toward private operation and ownership, or at least private or private/public financing and often private management under contract. Services centered around attending to basic environmental needs represent the majority of environmental business opportunities in the developing world, so it is important not to underemphasize them, nor the competitive aspect of foreign and global companies with integrated service offerings honed in their domestic market.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-17 U.S. Environmental Industry Segments by Competitor 2013

ENVIRONMENTAL Revenue Generator ($Bil) INDUSTRY SEGMENT 2013 pub% priv% pub$ priv$ Analytical Services* 1.9 4% 96% 0.1 1.9 Water Treatment Works 53.2 96% 4% 51.0 2.1 Solid Waste Management 56.7 25% 75% 14.0 42.7 Hazardous Waste Management 10.7 5% 95% 0.5 10.2 Remediation/Industrial Services 13.9 0% 100% 0.0 13.9 Consulting & Engineering 28.3 0% 100% 0.0 28.3 Water Equipment and Chemicals 29.7 0% 100% 0.0 29.7 Instruments & Information Sys. 6.1 0% 100% 0.0 6.1 Air Pollution Control Equipment 15.7 0% 100% 0.0 15.7 Waste Management Equipment 11.8 0% 100% 0.0 11.8 Process & Prevention Technology 2.0 0% 100% 0.0 2.0 Water Utilities 52.6 77% 23% 40.7 11.9 Resource Recovery 31.1 17% 83% 5.3 25.8 Clean Energy Systems & Power 31.3 12% 89% 3.6 27.7 Total 345.1 33% 67% 115.2 229.9

Exhibit 1-18 U.S. Environmental Industry Segments by Competitor 2014

ENVIRONMENTAL Revenue Generator ($Bil) INDUSTRY SEGMENT 2014 pub% priv% pub$ priv$ Analytical Services* 1.9 4% 96% 0.1 1.9 Water Treatment Works 55.9 96% 4% 53.6 2.2 Solid Waste Management 57.9 25% 75% 14.3 43.6 Hazardous Waste Management 10.8 5% 95% 0.5 10.3 Remediation/Industrial Services 14.2 0% 100% 0.0 14.2 Consulting & Engineering 28.9 0% 100% 0.0 28.9 Water Equipment and Chemicals 30.5 0% 100% 0.0 30.5 Instruments & Information Sys. 6.3 0% 100% 0.0 6.3 Air Pollution Control Equipment 16.0 0% 100% 0.0 16.0 Waste Management Equipment 12.2 0% 100% 0.0 12.2 Process & Prevention Technology 2.1 0% 100% 0.0 2.1 Water Utilities 54.6 77% 23% 42.2 12.4 Resource Recovery 29.1 17% 83% 4.9 24.2 Clean Energy Systems & Power 33.3 12% 89% 3.8 29.5 Total 353.7 34% 66% 119.5 234.1

*Note: Commercial revenues only; governments do provide testing services but rarely generate revenues from external sources.

Exhibit 1-19 U.S. Environmental Industry Segments by Competitor 2015

ENVIRONMENTAL INDUSTRY SEGMENT Revenue Generator ($Bil) 2015 pub% priv% pub$ priv$ Analytical Services* 2.0 4% 96% 0.1 1.9 Water Treatment Works 57.6 96% 4% 55.3 2.3 Solid Waste Management 59.0 28% 72% 16.7 42.2 Hazardous Waste Management 10.9 6% 95% 0.6 10.3 Remediation/Industrial Services 13.6 0% 100% 0.0 13.6 Consulting & Engineering 29.5 0% 100% 0.0 29.5 Water Equipment and Chemicals 31.3 0% 100% 0.0 31.3 Instruments & Information Sys. 6.7 0% 100% 0.0 6.7 Air Pollution Control Equipment 16.3 0% 100% 0.0 16.3 Waste Management Equipment 12.6 0% 100% 0.0 12.6 Process & Prevention Technology 2.2 0% 100% 0.0 2.2 Water Utilities 53.8 77% 23% 41.3 12.5 Resource Recovery 25.9 17% 83% 4.4 21.5 Clean Energy Systems & Power 41.8 13% 87% 5.4 36.4 Total 363.1 34% 66% 123.8 239.3

*Note: Commercial revenues only; governments do provide testing services but rarely generate revenues from external sources.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-20 U.S. Environmental Industry Segments by Competitor 2016

ENVIRONMENTAL INDUSTRY SEGMENT Revenue Generator ($Bil) 2016 pub% priv% pub$ priv$ Analytical Services* 2.0 4% 96% 0.1 1.9 Water Treatment Works 59.1 96% 4% 56.7 2.4 Solid Waste Management 61.0 28% 72% 17.3 43.7 Hazardous Waste Management 10.9 6% 95% 0.6 10.3 Remediation/Industrial Services 13.7 0% 100% 0.0 13.7 Consulting & Engineering 30.1 0% 100% 0.0 30.1 Water Equipment and Chemicals 32.2 0% 100% 0.0 32.2 Instruments & Information Sys. 7.0 0% 100% 0.0 7.0 Air Pollution Control Equipment 16.8 0% 100% 0.0 16.8 Waste Management Equipment 15.1 0% 100% 0.0 15.1 Water Utilities 56.7 77% 23% 43.6 13.2 Resource Recovery 25.6 17% 83% 4.3 21.2 Clean Energy Systems & Power 39.8 13% 87% 5.2 34.6 Total 370.0 35% 65% 127.8 242.2

*Note: Commercial revenues only; governments do provide testing services but rarely generate revenues from external sources.

Municipalities in the water treatment works segment (96%), the water utilities segment (about 77%) and the solid waste management segment (about 25%) account for considerable revenues, but the remainder of industry is virtually all in the private sector. Some testing services (mostly local water quality labs), a few hazardous waste disposal sites, some biomass, wind and solar installations and some public-sector power utility energy conservation programs contribute revenues. The chart above illustrates total environmental industry revenue generation by public and private sector.

1.3.2 Environmental Industry Customers and Buyers EBI’s annual updates address industry revenues, and below are the most recent customer- area conclusions: First the entire U.S. environmental industry divided by public sector and private clients or by revenue source, with private environmental client revenue divided by industrial versus commercial.

Exhibit 1-21 U.S. Environmental Industry Segments by Customer Type 2013

ENVIRONMENTAL Revenue Source ($Bil) priv$ priv$ Com’l/ INDUSTRY SEGMENT 2013 pub% priv% pub$ priv$ Ind’l Other Analytical Services 1.9 54% 46% 1.0 0.9 0.8 0.1 Water Treatment Works 53.2 66% 34% 35.1 18.1 12.7 5.4 Solid Waste Management 56.7 56% 44% 32.0 24.7 7.8 16.9 Hazardous Waste Management 10.7 43% 57% 4.6 6.1 5.4 0.7 Remediation/Industrial Services 13.9 42% 58% 5.9 8.1 7.0 1.1 Consulting & Engineering 28.3 52% 48% 14.8 13.6 12.6 1.0 Water Equipment and Chemicals 29.7 57% 43% 16.9 12.8 10.6 2.2 Instruments & Information Sys. 6.1 25% 75% 1.5 4.6 4.3 0.3 Air Pollution Control Equipment 15.7 6% 94% 0.9 14.8 13.6 1.1 Waste Management Equipment 11.8 21% 79% 2.5 9.3 3.7 5.6 Process & Prevention Technology 2.0 8% 92% 0.2 1.8 1.7 0.1 Water Utilities 52.6 65% 35% 34.2 18.4 8.3 10.1 Resource Recovery 31.1 23% 77% 7.2 24.0 7.2 16.8 Clean Energy Systems & Power 31.3 20% 80% 6.3 25.0 17.4 7.7 Total 345.1 47% 53% 163.1 182.1 112.9 69.1 Exhibit 1-22 U.S. Environmental Industry Segments by Customer Type 2014

ENVIRONMENTAL Revenue Source ($Bil) priv$ priv$ Com’l/ INDUSTRY SEGMENT 2014 pub% priv% pub$ priv$ Ind’l Other Analytical Services 1.9 53% 47% 1.0 0.9 0.8 0.1 Water Treatment Works 55.9 67% 34% 37.1 18.7 13.1 5.6 Solid Waste Management 57.9 55% 45% 32.1 25.8 8.2 17.6 Hazardous Waste Management 10.8 42% 58% 4.5 6.3 5.6 0.8 Remediation/Industrial Services 13.7 41% 59% 5.6 8.1 7.0 1.1 Consulting & Engineering 28.9 50% 50% 14.4 14.5 13.4 1.1 Water Equipment and Chemicals 30.5 59% 42% 17.8 12.6 10.5 2.2 Instruments & Information Sys. 6.3 24% 76% 1.5 4.8 4.5 0.4 Air Pollution Control Equipment 16.0 5% 95% 0.8 15.2 14.0 1.1 Waste Management Equipment 12.2 22% 78% 2.6 9.5 3.8 5.8 Process & Prevention Technology 2.1 8% 93% 0.2 1.9 1.8 0.1 Water Utilities 54.6 66% 35% 35.8 18.9 8.5 10.4 Resource Recovery 29.1 24% 77% 6.8 22.3 6.7 15.6 Clean Energy Systems & Power 33.3 19% 81% 6.3 27.0 18.7 8.3 Total 353.2 47% 53% 166.7 186.5 116.4 70.0

Source: Environmental Business Journal (EBJ), Environmental Business International, Inc., San Diego, Revenues generated by private and public sector entities, Copyright EBI Inc.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-23 U.S. Environmental Industry Segments by Customer Type 2015

ENVIRONMENTAL Revenue Source ($Bil) priv$ priv$ Com’l/ INDUSTRY SEGMENT 2015 pub% priv% pub$ priv$ Ind’l Other Analytical Services 2.0 53% 47% 1.0 0.9 0.8 0.1 Water Treatment Works 57.6 67% 34% 38.3 19.3 13.5 5.7 Solid Waste Management 59.0 55% 45% 32.7 26.3 8.3 18.0 Hazardous Waste Management 10.9 42% 58% 4.5 6.4 5.6 0.8 Remediation/Industrial Services 13.6 41% 59% 5.6 8.0 6.9 1.1 Consulting & Engineering 29.5 50% 50% 14.7 14.8 13.7 1.1 Water Equipment and Chemicals 31.3 59% 42% 18.3 13.0 10.8 2.2 Instruments & Information Sys. 6.7 24% 76% 1.6 5.1 4.7 0.4 Air Pollution Control Equipment 16.3 5% 95% 0.8 15.5 14.3 1.2 Waste Management Equipment 12.6 22% 78% 2.7 9.8 3.9 6.0 Process & Prevention Technology 2.2 8% 93% 0.2 2.0 1.9 0.1 Water Utilities 53.8 66% 35% 35.2 18.6 8.3 10.2 Resource Recovery 25.9 24% 77% 6.1 19.8 5.9 13.9 Clean Energy Systems & Power 41.8 19% 81% 7.9 33.9 23.5 10.4 Total 363.1 47% 53% 169.8 193.3 122.3 71.1

Source: Environmental Business Journal (EBJ), Environmental Business International, Inc., San Diego, Revenues generated by private and public sector entities, Copyright EBI Inc.

Exhibit 1-24 U.S. Environmental Industry Segments by Customer Type 2016

ENVIRONMENTAL Revenue Source ($Bil) priv$ priv$ Com’l/ INDUSTRY SEGMENT 2016 pub% priv% pub$ priv$ Ind’l Other Analytical Services 2.0 53% 47% 1.0 0.9 0.8 0.1 Water Treatment Works 59.1 67% 34% 39.3 19.8 13.9 5.9 Solid Waste Management 61.0 55% 45% 33.9 27.2 8.6 18.6 Hazardous Waste Management 10.9 42% 58% 4.5 6.3 5.6 0.8 Remediation/Industrial Services 13.7 41% 59% 5.6 8.1 7.0 1.1 Consulting & Engineering 30.1 50% 50% 15.0 15.1 14.0 1.1 Water Equipment and Chemicals 32.2 59% 42% 18.9 13.4 11.1 2.3 Instruments & Information Sys. 7.0 24% 76% 1.7 5.3 4.9 0.4 Air Pollution Control Equipment 16.8 5% 95% 0.8 16.0 14.8 1.2 Waste Management Equipment 15.1 22% 78% 3.3 11.8 4.7 7.2 Water Utilities 56.7 66% 35% 37.2 19.6 8.8 10.8 Resource Recovery 25.6 24% 77% 6.0 19.5 5.8 13.7 Clean Energy Systems & Power 39.8 19% 81% 7.6 32.2 22.4 9.9 Total 370.0 47% 53% 174.7 195.3 122.3 72.9

Source: Environmental Business Journal (EBJ), Environmental Business International, Inc., San Diego, Revenues generated by private and public sector entities, Copyright EBI Inc.

The $120-odd billion in industrial environmental client revenue is estimated below, divided by major industry or by SIC code and by media, using the last collected data from the U.S. Department of Commerce’s Pollution Abatement and Control Expenditures (PACE) survey.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-25 U.S. Environmental Industry Revenues from Industry Clients

% Share $ Mil. Env'l Industry Rev % of total Sol/Haz Sol/Haz SIC Manufacturing Industry-(SIC 20-39) ($bil) industrial Water Air Waste Water Air Waste 20 Food & Kindred products 6.11 5% 62% 15% 23% 3.79 0.92 1.41 21 Tobacco products 0.00 0% 21% 58% 20% 0.00 0.00 0.00 22 Textile Mill products 1.22 1% 58% 19% 24% 0.71 0.23 0.29 24 Lumber & Wood products 1.22 1% 20% 43% 37% 0.24 0.53 0.45 25 Furniture & Fixtures 1.22 1% 12% 37% 51% 0.15 0.45 0.62 26 Paper & Allied products 9.78 8% 44% 31% 25% 4.30 3.03 2.45 27 Printing & Publishing 1.22 1% 12% 42% 46% 0.15 0.51 0.56 28 Chemicals & Allied products 23.23 19% 46% 28% 26% 10.69 6.51 6.04 29 Petroleum & Coal products 19.57 16% 24% 67% 9% 4.70 13.11 1.76 30 Rubber & Misc. Plastics products 1.22 1% 21% 33% 46% 0.26 0.40 0.56 31 Leather & Leather products 0.00 0% 66% 8% 27% 0.00 0.00 0.00 32 Stone, Clay & Glass products 2.45 2% 19% 55% 26% 0.46 1.35 0.64 33 Primary Metal Industries 8.56 7% 28% 50% 22% 2.40 4.28 1.88 34 Fabricated Metal Products 2.45 2% 39% 22% 39% 0.95 0.54 0.95 35 Industrial Machinery & Equipment 2.45 2% 32% 25% 43% 0.78 0.61 1.05 36 Electronic & Other Electric Equipment 3.67 3%44% 26% 31% 1.61 0.95 1.14 37 Transportation Equipment 4.89 4% 28% 33% 39% 1.37 1.61 1.91 38 Instruments & Related products 1.22 1% 26% 28% 46% 0.32 0.34 0.56 39 Miscellaneous Manufacturing Industries 0.00 0% 22% 33% 45% 0.00 0.00 0.00 10 Mining 3.67 3% 41% 29% 29% 1.50 1.06 1.06 49 Electric Utilities * 28.13 23% 18% 66% 16% 5.06 18.56 4.50 Total 122.29 100% 39.45 55.00 27.84 Share 32% 45% 23%

Source: Environmental Business International, Inc., San Diego, CA, units in $bil, revenues generated from industrial environmental markets. Industrial breakdowns derived from US DOC surveys on PACE= Pollution Abatement Capital Expenditures and PAOC= Pollution Abatement Operating Costs. These surveys were discontinued after results were collected for 1997 and subsequent years were modeled based on proportional breakdowns for the combined three years prior to the end of the survey.

1.3.3 Growth Outlook by Client, Service & Media in 2019 OUTLOOK LESS OPTIMISTIC IN 2019 In the middle of 2019, the outlook for environmental companies is decidedly and measurably less optimistic than it has been at the same point the previous two years, according to Environmental Business Journal annual snapshot survey respondents. EBJ’s survey is conducted between February and April of each year. Respondents expect growth for their own company to be as much as 3-4 points less FROM the vantage point of mid-2019 compared to their outlook from the past two surveys in 2017 and 2018, and about 1-2 points less for their segment of the industry. Comparing results reporting recent growth and forecasting (exhibited on the charts in the appendix), show a relatively stable growth in previous years of 4.1% in 2016 from the 2017 survey, 4.3% in 2017 from the 2018 survey, and 4.0% in 2018 from the 2019 survey. However, the exact same respondents expected their current year growth to be over 7% in the 2017 survey, over 5% in the 2018 survey, but only 3.6% in this year’s survey. Segment growth responses showed a similar curve with 2017 and 2018 responses being 0.5 and 0.7 percentage points of growth for the current year ahead of the previous year, but a decline of 0.1 point for 2019. So, what are the factors for this less optimistic outlook and how real are they in their likely sustained impact on the environmental industry? While employment numbers remain generally high, there is consensus that the economy is cooling due to trade wars and their direct and indirect impacts. There is also evidence of slowing in construction activity and energy production investments, both in conventional and renewable energy sources. Also, consumer confidence, which is discussed in our political outlook and infrastructure forecast on pages 38-41, has climbed to what many analysts believe is a peak, with the likelihood of a drop off ahead. Nevertheless, the EBJ forecast for environmental services growth is declining only modestly in the consulting & engineering segment to 3% from 3.4%, and environmental contracting in the 0-1% range. The client category outlook has energy production remaining a strong bet with mid-stream oil & gas at number one and oil & gas representing 3 of the top 9 categories of 33 sectors ranked on the table on page 3. The chemical industry has moved up to number 2 on the list as low natural gas prices as a feedstock continue to support U.S. global

EBI Report 2020-B U.S. Environmental Industry Overview competitiveness. Utilities in power, water, transportation and port authorities are also solidly in the top 10 in terms of client rankings, rated by respondents based in prospects for growth in the next two years. Ranking of Environmental Markets by Client Client Sector 2019 Rank 2018 Rank 2019 Change in Rank Oil & Gas Midstream (pipelines/terminals) 1 2 1 Chemical 2 10 8 Healthcare 3 1 -2 Water utilities 4 4 0 Power utilities 5 3 -2 Transportation authorities 6 15 9 Port authorities 7 11 4 Oil & Gas Downstream (refineries) 8 13 5 Oil & Gas Upstream (E&P) 9 8 -1 Property developers: residential 10 12 2 Renewable energy development 11 5 -6 Property developers: commercial 12 17 5 State government 13 24 11 Local government 14 25 11 Electronics/IT mfg. & service 15 6 -9 Other manufacturing 16 23 7 Hospitality 17 7 -10 Transportation mfg (auto & aero) 18 16 -2 Mining 19 26 7 Education 20 27 7 Consumer products 21 18 -3 Solid waste utilities & companies 22 22 0 Food & beverage 23 19 -4 Petroleum retail/gas stations 24 28 4 Primary metals 25 20 -5 Metals fabricating/coating 26 21 -5 Banks & Law Firms 27 9 -18 Federal government: DOD 28 14 -14 Major retailers 29 30 1 Pulp & paper 30 31 1 Federal government: DOE 31 29 -2 Federal government: Other 32 32 0 Federal government: EPA 33 33 0

Source: Environmental Business Journal annual EBJ Snapshot Surveys (2018 & 2019); "prospects for growth in the next two years"

The biggest jump in the client rankings in 2019 compared to the rankings one year ago were state and local government client areas—driven by what could kindly be called the

devolution of regulatory authority from the federal government, which others may characterize as abandonment. Regardless of whether they feel the burden of regulatory authority in the absence of federal leadership, many states have taken initiative to accelerate efforts on backlogged and some pioneering initiatives. Also, the expectation of increased funding for infrastructure projects across-the-board is likely a contributor to the higher ranking. The biggest fall in the client ranking list were law firms and financial institutions, which remarkably slipped 18 places in the 33 categories, presumably with less regulatory unwinding for law firms that involve the contribution of environmental consultants, and some curtailment in the pace of property development. The Department of Defense also moved down the list by 14 spots as project delays continue, and while the expectation is that many or most will not be canceled, the slowdown is likely to persist given department priorities. One observer felt that with the specter of PFAS, there may be a sort of ‘PFAS paralysis’ where work on contaminated sites is suspended until resolution is reached. Ranking of Environmental Markets by Media 2019 2019 2018 Change Rank Rank in Rank Water 1 1 0 Wastewater 2 3 1 Sustainability/corporate responsibility 3 8 5 Environmental information 4 4 0 Renewable energy 5 5 0 Energy mgmt/efficiency 6 2 -4 Hazardous waste mgmt. 7 9 2 Climate adaptation/resilience 8 13 5 Solid waste mgmt 9 10 1 EHS/Industrial hygiene & safety 10 6 -4 Remediation 11 7 -4 Climate/carbon: mitigation 12 14 2 Natural resources 13 12 -1 Air quality 14 11 -3 Source: EBJ 2018 & 2019 Snapshot Survey. Question was: Please rate the following media market areas in terms of prospects for growth in the next two years.

Media and service growth rankings reveal fewer swings with understandable strength in resources like water and energy, and weakness in regulated categories like environmental

EBI Report 2020-B U.S. Environmental Industry Overview

health & safety and air quality. Notable gainers where in sustainability and Corporate Social Responsibility and resilience. While most environmental consultants would agree that sustainability is not ‘back’, a more connected approach to a company's environmental strategy and reputation is increasingly in demand to inspire and retain each new generation of customers, partners and employees—and strategic consultants are increasingly successful at inserting themselves in the process of figuring this out for companies and then communicating it to stakeholders.

Specialty service category ratings tilted towards project execution, and a hint of the coming of artificial-intelligence-enabled automation with compliance, in plant services and outsourcing EHS moving up the rankings. The most notable drop off is water recycling as sustained precipitation rates have filled reservoirs and mostly lifted short term drought fears, but most experts would warn have not restocked groundwater supplies. If anything would be immune to short-term dynamics, one would think it would be water reuse, but service category rankings indicate that environmental service companies feel their clients do not have a long term vision to engage in short term investment commitments on a more circular water infrastructure.

Margins are also a trend captured in EBJ's annual snapshot surveys. Margin changes in 2018 show that 31% of environmental companies suffered a drop, but the mean was a positive 1 percentage point gain in 2018 over 2017. Margin trends have been notably consistent over the last 4 years, as depicted on the table at the right with the exception of 2014 that was a recovery year from sequestration-depressed 2013. The 2019 EBJ survey repeated a ‘Trump Effect’ question rating the impact of the federal government on infrastructure and environmental markets. Infrastructure markets were almost universally rated higher, with oil & gas and roads & highways separating from the pack (see tables). Falling deeper in negative territory were renewable energy and climate change, as well as markets associated with traditional environmental regulations like air quality and remediation.

No outlook is complete without some discussion of the horizon beyond the year 2020. At EBJ's Environmental Industry Summit meetings held so far in 2019, prevailing themes are

the periods of disruption we anticipate in the future. We view years 2019 and 2020 as the short-term planning horizon, the focus of most of the data and survey responses presented thus far in this review. After some political disruption anticipated by the 2020 election, we view the decade of the 2020s as an era of industry disruption, with a significant emphasis on infrastructure disruptions. A question that remains for the environmental industry is to what extent it will participate in these industry transformations.

Transportation is perhaps the most obvious opportunity where the shift to autonomous vehicles and networks is widely anticipated, and the world’s most valuable corporations Alphabet, Microsoft, Apple and a number of automobile manufacturers and tech companies that are all heavily investing in this prospect. However, designing, delivering, and implementing infrastructure and ‘grids’ that will support autonomous vehicles, and managing the transition period (which will include planning, permitting, community outreach and other services provided by the consulting engineering community) are functions almost universally under-appreciated by the big players, and hence a big opportunity for the integrated project management community and specialty consultants of the environmental industry.

Transformation in electricity in the 2020s should be less monumental, with the continued evolution of distributed power and the fuel source mix, and an existing grid that will be modified rather than built from scratch. Rapid change in energy storage technology could serve to revolutionize more accelerated change, but the entrenched interests of institutionalized power utilities make it less likely for full-scale transformational disruption in electric power. The gradual transformation from the internal combustion engine to electric vehicles is also expected to rapidly accelerate in the 2020s with implications for both transportation and electricity industry disruptions.

The water industry also provides potential for disruption but EBI’s belief is that the gradual transition in water-scarce communities to reuse of secondary water is the likeliest path, and this is most likely an engineering exercise driven by cost rather than disruptive technological innovation. More onsite water independence on a smaller scale represents a major opportunity, as it does in energy, but likely offers less opportunity for major institutional

EBI Report 2020-B U.S. Environmental Industry Overview change. Food and agriculture also provide intriguing potential for major disruption, but the belief here is gradual localization, which is a difficult prospect to exact major institutional change from a large number of players in food and commodity supply.

The technology, information and communications industries represent perhaps the greatest unknowns in industry evolution in the 2020s. And some would argue logically the least opportunity for the environmental industry. Most environmental companies are fully cognizant of the potential for technology to revolutionize their own businesses. Adopting automated services, machine learning, artificial intelligence and other integrated information tools to transform services for which they have traditionally billed at hourly rates is already a competitive battleground today and will be more so in the 2020s. This is not to say that environmental companies cannot participate in the evolution of the technology industries themselves, but they need to have their own technology houses in order before they participate in the commercial market.

Extending the horizon to 2050, EBJ views that cycle as planetary disruption—as if the current evidence of the 2010s is not enough to take climate change seriously. But we believe the 30-year horizon is sufficient to see the sunset of the fossil fuel era in terms of climate change mitigation, but it is also ample time to have planned adaptation and resilience measures to accommodate the 10 billion people on the planet expected by 2020. Equally important to redesigning, strengthening and elevating the ‘built environment’ will be validating the science and economic contribution of the ‘natural environment’—that is all the ecosystems that support life on the planet.

So today’s business challenges may not seem as monumental as our planetary challenges, but they merit more attention in the board rooms of environmental companies. If the environmental industry is to evolve or transform as quickly as these disruptible client categories — and to lead the other recalcitrant and ossified sectors of the economy forward — our grander missions must be used to inspire and involve the new generations that will inherit the mantle and legacy of the last 50 years. If 2020 does indeed represent a 50-year anniversary of the environmental industry then we owe it to our predecessors to honor it with

Ranking of Environmental Markets by Service 2019 2019 2018 Change Rank Rank in Rank Project mgmt./Construction mgmt. 1 2 1 Resiliency planning 2 4 2 Design and project engineering 3 3 0 IT/EMIS software/systems/training 4 1 -3 Industrial waste mgmt/in-plant services 5 8 3 Permitting/compliance 6 7 1 Green building design/construction 7 11 4 Outsourcing EHS functions 8 12 4 Operations & maintenance 9 6 -3 Smart growth/"green" planning 10 16 6 Private remediation/redevelopment/brownfields 11 5 -6 Energy: Performance contracting 12 10 -2 Monitoring & analytical work 13 15 2 Ecological restoration 14 17 3 Investigations/assessments/audits 15 14 -1 Impact Assessment & Permitting 16 13 -3 Solid waste diversion/recycling 17 19 2 Water recycling/reuse 18 9 -9 Waste minimization 19 18 -1 Gov't remediation/ base closure/conversion 20 20 0 Source: EBJ 2018 & 2019 Snapshot Survey. Question was: Please rate the following service market areas in terms of prospects for growth in the next two years.

EBI Report 2020-B U.S. Environmental Industry Overview

1.3.4 Historical Perspective on Growth & Forecasts

Exhibit 1-26 Historical Growth of the U.S. Environmental and C&E Industry, 1992 – 2018

C&E Env Ind Revenue Annual Revenue Annual Year ($Bil.) Growth ($Bil.) Growth 1988 8.68 24.80% 126.28 10.50% 1989 10.56 21.66% 137.30 8.73% 1990 12.50 18.37% 147.69 7.57% 1991 13.50 8.00% 151.77 2.77% 1992 14.30 5.93% 159.47 5.07% 1993 14.56 1.80% 167.21 4.86% 1994 15.29 5.04% 176.87 5.78% 1995 15.50 1.37% 184.19 4.13% 1996 15.21 -1.87% 185.47 0.70% 1997 15.30 0.59% 190.40 2.66% 1998 15.77 3.07% 193.75 1.76% 1999 16.57 5.07% 202.23 4.38% 2000 17.41 5.07% 209.89 4.07% 2001 18.37 5.51% 212.48 1.24% 2002 18.78 2.23% 217.47 2.10% 2003 19.46 3.62% 225.59 3.73% 2004 20.68 6.27% 237.25 5.17% 2005 22.34 8.03% 251.87 6.16% 2006 24.10 7.88% 265.67 5.48% 2007 25.87 7.34% 285.91 7.62% 2008 27.09 4.72% 295.91 3.50% 2009 26.23 -3.17% 290.36 -1.88% 2010 26.83 2.29% 301.54 3.85% 2011 27.80 3.62% 320.26 6.21% 2012 29.03 4.42% 331.85 3.62% 2013 28.63 -1.38% 339.12 2.19% 2014 28.99 1.26% 351.39 3.62% 2015 29.69 2.41% 361.13 2.77% 2016 30.10 1.38% 375.02 3.85% 2017 31.03 3.09% 393.01 4.80% 2018 31.91 2.84% 411.62 4.73%

SOURCE: Environmental Business International, Inc., San Diego, CA © EBI Inc.

The years 2005-2007 were the best in a decade and a half for the environmental consulting and engineering (C&E) sector of the environmental industry—and the news for the whole environmental industry was almost as good. Growth in the environmental C&E segment

slowed marginally in 2006 and 2007, not far behind the decade’s peak of 8.0% growth achieved in 2005. However, after a third consecutive year of relative prosperity, C&E executives were somewhat cautious about prospects for sustained growth in 2007-2009 even though at that time all of the factors identified by EBJ as growth drivers in 2005 remained in play, including economic growth, health of the oil & gas business, increase in property values, and growth in federal markets over the past decade. C&E firms active in the property redevelopment market were enjoying brisk business while looking in the side-view mirror for the end of the boom cycle in the real estate market. Redevelopment activity associated with cities, ports, and waterfronts -- categories so critical to overall economic revitalization -- continued to show excellent growth.

While property redevelopment approached its potential tipping point and ultimately a bubble-burst and crash in 2009, the environmental market associated with industrial activity continued to perform well up to then. In every year from 2006-2016 EBJ has conducted an annual “snapshot” survey of usually 250-340 respondents from all segments of the environmental industry, and the results showed significant variances in which sectors offered the best business in previous years and which sectors respondents expected to offer the best business opportunities in the next 2-3 years, of which selected results are presented below and at the end of this report.

Surveys rate strength in sales across several industrial categories—both actual sales for the trailing year and projected sales over the next two to three years, asking respondents to rate trailing year and project sales for the near future as Very strong, Strong, Good, Slow growth, Flat, Modest decline or Big decline. (Note: See more recent results at the end of this report.)

Exhibit 1-27 Environmental Market Trends 2014-16

USA

• Heading into calmer waters with steady winds • Continued recovery in US economy, with “steady” returns in US equities

EBI Report 2020-B U.S. Environmental Industry Overview

• Intra-year, intra-sector volatility - greater spreads in performance between strong and weak companies (picking winners vs losers) • Move to improved dividends - need to enhance returns, use high % of cash on corporate books, and ageing investor base • Continued low interest rates Non-US

• Improving returns in global equities, notably in attractively priced European equities with global exposure • European economy has “bottomed out” - growth in northern Europe and “flat line” in southern Europe • Growth (with volatility) in emerging markets (BRIC) spreading to next tier economies (Indonesia, Malaysia, Poland, Turkey, Colombia, Mexico) • Slow recovery in resource economies (Australia, Brazil, Canada) • Very strong growth (but high volatility) in Africa

Source: Anthony Brown: Environmental Industry Summit 2014 presentation; Aquilogic and Environmental Business International Inc. (San Diego, Calif.)

Exhibit 1-28 Ranking of Environmental Industry Client Sectors in 2015-16

2015 Rank 2014 Rank 1 Healthcare 3 2 Renewable energy development 4 3 Chemical 5 4 Water utilities 8 5 Power utilities 7 6 Education 13 7 Electronics/computer manufacturing 20 8 Transportation manufacturing (auto & aero) 21 9 Property developers: commercial 14 10 Oil & Gas Midstream (pipelines/terminals) 2 11 Hospitality 12 12 Port authorities 10 13 Transportation authorities 16 14 Food & beverage 11 15 Property developers: residential 17 16 Consumer products 18 17 Solid waste utilities & companies 9 18 Banks & Law Firms 22 19 Oil & Gas Downstream (refineries) 6 20 Local government 23

21 Other manufacturing 15 22 State government 28 23 Primary metals 25 24 Metals fabricating/coating 26 25 Federal government: DOD 33 26 Major retailers 19 27 Oil & Gas Upstream (E&P) 1 28 Federal government: EPA 32 29 Federal government: Other 31 30 Federal government: DOE 30 31 Petroleum retail/gas stations 27 32 Mining 24 33 Pulp & paper 29

Source: Environmental Business Journal 2015 Snapshot Survey: Question was: Rate the following customer areas in terms of prospects for growth in 2015-2016

Exhibit 1-29 Ranking of Environmental Industry Client Sectors in 2014-15

2014 Rank 2013 Rank 1 Oil & Gas Upstream (E&P) 1 2 Oil & Gas Midstream (pipelines/terminals) 3 3 Healthcare 2 4 Renewable energy development 4 5 Chemical 9 6 Oil & Gas Downstream (refineries) 6 7 Power utilities 5 8 Water utilities 8 9 Solid waste utilities & companies 16 10 Port authorities 12 11 Food & beverage 11 12 Hospitality 13 13 Education na 14 Property developers: commercial 19 15 Other manufacturing 21 16 Transportation authorities 17 17 Property developers: residential 18 18 Consumer products 20 19 Major retailers 25 20 Electronics/computer manufacturing 14 21 Transportation manufacturing (auto & aero) 17 22 Banks & Law Firms 22 23 Local government 28 24 Mining 7

EBI Report 2020-B U.S. Environmental Industry Overview

25 Primary metals 10 26 Metals fabricating/coating 24 27 Petroleum retail/gas stations 23 28 State government 27 29 Pulp & paper 31 30 Federal government: DOE 30 31 Federal government: Other 29 32 Federal government: EPA 26 33 Federal government: DOD 32

Source: Environmental Business Journal 2014 Snapshot Survey: Question was: Rate the following customer areas in terms of recent growth and prospects for growth in 2014.

Exhibit 1-30 Client Sectors Rated by 2015 Survey Respondents for Growth in 2015-2016

Very strong Strong Good Slow/Flat Decline Healthcare 13% 33% 28% 23% 5% Renewable energy development 9% 31% 24% 36% 0% Chemical 10% 21% 36% 33% 0% Water utilities 9% 21% 33% 37% 0% Power utilities 7% 25% 39% 27% 2% Education 5% 20% 27% 46% 2% Electronics/computer manufacturing 3% 24% 34% 37% 3% Transportation manufacturing (auto & aero) 0% 26% 18% 54% 3% Property developers: commercial 0% 19% 45% 33% 2% Oil & Gas Midstream (pipelines/terminals) 2% 21% 33% 38% 5% Hospitality 0% 21% 31% 46% 3% Port authorities 5% 17% 29% 45% 5% Transportation authorities 5% 11% 36% 43% 5% Food & beverage 0% 13% 38% 49% 0% Property developers: residential 0% 16% 30% 49% 5% Consumer products 0% 11% 39% 50% 0% Solid waste utilities & companies 0% 12% 40% 45% 2% Banks & Law Firms 0% 16% 32% 47% 5% Oil & Gas Downstream (refineries) 0% 12% 27% 56% 5% Local government 5% 12% 23% 49% 12% Other manufacturing 0% 3% 35% 63% 0% State government 0% 14% 21% 58% 7% Primary metals 0% 8% 20% 65% 8% Metals fabricating/coating 0% 0% 38% 57% 5% Federal government: DOD 2% 12% 21% 48% 17%

Major retailers 0% 0% 36% 59% 5% Oil & Gas Upstream (E&P) 5% 15% 30% 28% 23% Federal government: EPA 0% 12% 20% 54% 15% Federal government: Other 0% 10% 14% 62% 14% Federal government: DOE 0% 5% 21% 56% 18% Petroleum retail/gas stations 3% 5% 8% 65% 20% Mining 0% 8% 25% 38% 30% Pulp & paper 0% 0% 8% 66% 26%

SOURCE: Environmental Business Journal 2015 Snapshot Survey: Question was: Rate the following customer areas in terms of prospects for growth in 2015-2016

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-31 Client Sectors Rated by 2017 Survey Respondents for Growth in 2017-2018

Very Slow Flat Modest Big strong Strong Good Growth Decline Decline Oil & Gas Midstream (pipelines/terminals) 11% 25% 40% 18% 5% 2% 0% Electronics/IT mfg. & service 7% 27% 25% 31% 9% 0% 0% Chemical 2% 28% 35% 24% 11% 0% 0% Oil & Gas Upstream (E&P) 5% 18% 42% 24% 7% 4% 0% Oil & Gas Downstream (refineries) 4% 21% 32% 34% 7% 2% 0% Healthcare 4% 23% 39% 21% 11% 2% 2% Transportation mfg (auto & aero) 4% 18% 33% 27% 18% 0% 0% Federal government: DOD 10% 23% 23% 13% 17% 10% 3% Water utilities 0% 25% 33% 25% 16% 2% 0% Banks & Law Firms 0% 22% 31% 35% 13% 0% 0% Power utilities 2% 16% 46% 21% 12% 4% 0% Port authorities 2% 18% 37% 27% 12% 5% 0% Transportation authorities 5% 13% 33% 33% 13% 2% 2% Consumer products 0% 17% 41% 30% 11% 2% 0% Property developers: commercial 3% 16% 31% 36% 7% 7% 0% Property developers: residential 2% 14% 28% 42% 12% 0% 2% Hospitality 0% 11% 41% 35% 13% 0% 0% Food & beverage 0% 11% 33% 41% 13% 2% 0% Other manufacturing 0% 8% 43% 32% 15% 2% 0% Metals fabricating/coating 0% 7% 37% 39% 15% 2% 0% Mining 4% 7% 32% 35% 16% 7% 0% Primary metals 2% 4% 33% 38% 20% 4% 0% Solid waste utilities & companies 0% 5% 25% 46% 21% 2% 2% Petroleum retail/gas stations 4% 5% 20% 27% 35% 9% 0% Education 0% 9% 27% 27% 27% 11% 0% State government 0% 5% 25% 34% 28% 5% 3% Major retailers 0% 7% 19% 44% 19% 6% 6% Renewable energy development 2% 7% 28% 30% 18% 9% 7% Pulp & paper 0% 4% 15% 37% 35% 9% 0% Local government 0% 5% 25% 31% 27% 8% 3% Federal government: DOE 0% 5% 20% 18% 41% 10% 7% Federal government: Other 0% 0% 7% 17% 37% 32% 7% Federal government: EPA 0% 0% 2% 10% 17% 42% 30%

SOURCE: Environmental Business Journal 2017 Snapshot Survey: Question was: Rate the following customer areas in terms of prospects for growth in 2017-2018

Exhibit 1-32 Client Sectors Rated by 2011 Survey Respondents for Growth in 2011-2013

2010 Strong Good Slow/Flat Decline Rank Shale gas exploration & production 52% 28% 20% 0% 1 Renewable energy development 41% 41% 18% 0% 3 Petroleum extraction & refining 36% 35% 29% 0% 2 Mining 28% 38% 32% 2% 4 Power utilities 26% 42% 30% 2% 7 Primary metals 22% 40% 38% 0% 5 Chemical 24% 41% 35% 0% 6 Electronics/computer manufacturing 24% 31% 44% 1% 8 Solid waste utilities & companies 17% 22% 61% 0% 9 Water utilities 18% 32% 47% 4% 14 Transportation mfg (auto & aero) 12% 33% 55% 0% 17 Major retailers 11% 23% 64% 1% 20 Metals fabricating/coating 9% 35% 56% 0% 18 Banks & Law Firms 11% 31% 54% 5% 13 Consumer products 8% 35% 54% 3% 12 Federal government: DOD 12% 25% 54% 9% 11 Petroleum retail/gas stations 10% 23% 60% 7% 16 Other manufacturing 6% 22% 67% 5% 21 Federal government: DOE 8% 28% 56% 8% 10 Federal government: EPA 9% 18% 63% 9% 15 Property developers: commercial 8% 17% 65% 11% 24 Federal government: Other 10% 14% 59% 17% 18 Property developers: residential 5% 16% 66% 12% 26 Pulp & paper 4% 15% 65% 16% 22 State government 5% 11% 63% 22% 23 Local government 6% 8% 65% 22% 25

SOURCE: Environmental Business International Inc. San Diego, CA; Environmental Business Journal 2011 Snapshot Survey of 324 executives; Question was: Please rate the following customer areas in terms of prospects for sales growth in the next two to three years. Responses are consolidated from the following options: Very Strong, Strong, Slow Growth, Flat, Modest Decline, Big Decline

In 2011 federal agencies tumbled down the top markets list most dramatically. Back in 2006, federal environmental programs were fairly strong, especially those of Department of Energy (DOE) and Department of Defense (DOD), and did not suffer much as expected in light of the war in Iraq and homeland security imperatives. The pace mostly continued in 2007,

EBI Report 2020-B U.S. Environmental Industry Overview

although some firms reported delays in funding or project demand for ongoing long-term assignments and federal markets fell down the list. Survey results for 2008 brought the government back up to the middle of the list, and the forecast for 2010 had the federal government trailing only power utilities in prospects for environmental business largely due to the stimulus package and budget increases in certain departments. 2012 and 2013 surveys saw real estate development come off the bottom of the list, replaced by state and local governments, first, and then jumping over federal government categories with the budgetary fiscal cliff and subsequent sequester. Below are the client growth rankings from the 2009 EBJ Snapshot Survey and more years are included at the end of this report or in EBI survey data sets.

Exhibit 1-33 2008: Best Rated Client Markets for Growth

Power utilities Petroleum extraction & refining Federal government: DOD Chemical Solid waste utilities & companies Mining Water utilities Petroleum retail/gas stations Federal government: EPA Federal government: Other Federal government: DOE

2009 Snapshot Survey, n=241; Question was: Rate the following customer areas in terms of sales growth over the past year in 2008. © EBI Inc.

Exhibit 1-34 Customer Markets Ranked for 2009-2010

Power utilities Federal government: DOD Federal government: DOE Federal government: EPA Federal government: Other Water utilities Solid waste utilities & companies Petroleum extraction & refining Chemical Local government Petroleum retail/gas stations State government Other manufacturing Mining Banks, law firms, real estate Primary metals Electronics/computer manufacturing Textiles Metals fabricating/coating Property developers: commercial Transportation manufacturing (auto & aero) Pulp & paper Property developers: residential

Source: Environmental Business Journal 2009 Snapshot Survey, n=241; Question was: Rate the following customer areas in terms of sales growth over the next two years. © EBI Inc.

1.3.4.1 Energy Market Had Long Legs Before Price Collapse; Return to Growth with Commitment to Energy Security and Domestic Production As concerns of federal markets waning manifested themselves in 2009 and 2010, energy development became the most preferred market, and this continued in 2013-2014 until the oil price collapse. Robert Sanz, of AECOM Environment, offered detail regarding the business opportunities provided by the energy and industrial sectors. “There are a lot of geographies where business is good. Internationally, the growth rate will be higher than domestically for some kinds of environmental services. We are hiring aggressively both here and abroad. As the developing countries continue to emerge, we think there is a great market for infrastructure.” ENSR (acquired by AECOM) had a significant practice serving the energy sector, which has become a clear “sweet spot” for the company and for other environmental

EBI Report 2020-B U.S. Environmental Industry Overview

firms. “A large number of our clients are in the oil and gas sector, and that’s absolutely a strong business.” He pointed to a number of “exciting” projects, such as the tar sands development in Canada, and upstream development in the western United States, that are leading to a broad array of environmental work—pipeline permitting, NEPA studies, Federal Energy Regulatory Commission (FERC) requirements, etc.—associated with transporting supplies to U.S. refineries and markets. In general, prices hovering around $60 per barrel “make our clients cash rich and allow them to undertake projects that they might not otherwise have pursued aggressively,” Sanz noted. “And they are going ahead and taking care of liabilities. They are moving more aggressively to close their contaminated sites and get them off the books. The whole oil and gas remediation front, which we refer to as integrated site closure, is a little less than half of our total business, and it’s going great guns.” It’s not so shabby in the chemical and manufacturing sectors as well, he added. As energy demand grows significantly to address energy security issues or to meet the exploding demand of emerging economies such as China and India, energy development proceeded apace beyond the contours of the oil and gas industry. Coal, for example, has seen renewed interest for power developers as gas prices have fluctuated to the high side, Sanz reported. Meanwhile, renewable energy development “continues to move ahead” as “the sustainability concept gains higher and higher notice, particularly in business, if not government as well.” He added that the build-out of electricity transmission networks is an issue that’s waiting in the wings. “That will be a sore need; there are all sorts of bottlenecks there that will need to be addressed.”

Exhibit 1-35 Service Categories Rated by Growth by Survey Respondents in 2009 Water purification/delivery Wastewater treatment Smart growth/"green" planning Air Quality Natural Resources/Ecological restoration Operation & Maintenance Strategic Env'l Management/Sustainability Energy efficiency/demand response Carbon/Climate Change Consulting (footprints, offsets, compliance) Solid Waste Renewable Energy Development Government remediation and base conversion Monitoring Pollution Prevention Private remediation & redevelopment Ongoing generation of Hazardous Waste Environmental information management Project management Investigations/Assessment/Audits Design Permitting/Compliance Green building design/construction

Source: Environmental Business Journal 2010 Snapshot Survey. © EBI Inc.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-36 Ranking of Growth Prospects by Service/Media Category: 2013-2014

2013 Rank Energy efficiency/demand response 2 Water recycling/reuse 4 Air quality 3 Renewable energy development 1 Green building design/construction 5 Smart growth/"green" planning 6 Environmental information management 8 Natural resources/ecological restoration 7 Project management/Construction mgmt. 13 Wastewater treatment 17 Permitting/compliance 9 Design and project engineering 15 Climate change adaptation na Investigations/assessments/audits 14 Industrial hygiene & safety 23 Water purification/delivery 10 Solid waste 22 Sustainability/corporate responsibility 16 Outsourced EHS functions 12 Operations & maintenance 24 Carbon/climate change consulting (footprints, offsets, compliance) 11 Monitoring & analytical work 18 Private remediation & redevelopment 20 Pollution prevention 19 Ongoing generation of hazardous waste 21 Government remediation/base closure/conversion 25

Source: Environmental Business Journal 2014 Snapshot Survey. Question was: Rate the following media or service market areas in terms of recent growth and prospects for growth in 2014

Exhibit 1-37 Service Sectors Rated by Survey Respondents for Growth in 2010-2012

Very Slow Modest Big strong Strong Good growth Flat decline decline Renewable Energy Development 18.2% 25.3% 37.4% 16.2% 3.0% 0.0% 0.0% Energy efficiency/demand response 14.6% 25.8% 37.1% 18.0% 4.5% 0.0% 0.0% Carbon/Climate Change Consulting (footprints, offsets, compliance) 10.3% 29.9% 26.2% 24.3% 9.3% 0.0% 0.0% Green building design/construction 10.2% 27.3% 30.7% 19.3% 11.4% 1.1% 0.0% Smart growth/"green" planning 11.2% 23.5% 33.7% 22.4% 7.1% 2.0% 0.0% Water purification/delivery 12.3% 16.0% 33.3% 29.6% 8.6% 0.0% 0.0% Strategic Env'l Management/Sustainability 9.2% 20.7% 29.9% 24.1% 13.8% 2.3% 0.0% Wastewater treatment 7.1% 14.1% 34.3% 36.4% 8.1% 0.0% 0.0% Environmental information management 10.1% 11.2% 32.6% 25.8% 18.0% 2.2% 0.0% Natural Resources/Ecological restoration 3.3% 17.4% 34.8% 35.9% 7.6% 1.1% 0.0% Air Quality 3.2% 15.1% 36.6% 34.4% 10.8% 0.0% 0.0% Government remediation and base conversion 2.1% 18.8% 30.2% 31.3% 16.7% 1.0% 0.0% Operation & Maintenance 5.1% 11.4% 27.8% 31.6% 22.8% 1.3% 0.0% Solid Waste 3.8% 15.0% 22.5% 36.3% 20.0% 2.5% 0.0% Monitoring 1.1% 17.6% 16.5% 42.9% 19.8% 2.2% 0.0% Design 1.4% 13.7% 26.0% 35.6% 21.9% 1.4% 0.0% Project management 1.3% 13.2% 28.9% 36.8% 17.1% 2.6% 0.0% Pollution Prevention 1.3% 15.4% 26.9% 32.1% 19.2% 5.1% 0.0% Investigations/Assessment/Audits 3.3% 11.1% 22.2% 34.4% 25.6% 2.2% 1.1% Permitting/Compliance 1.1% 13.7% 27.4% 33.7% 18.9% 4.2% 1.1% Private remediation & redevelopment 1.9% 9.3% 20.6% 43.0% 20.6% 4.7% 0.0% Ongoing generation of Hazardous Waste 1.2% 9.9% 17.3% 37.0% 23.5% 7.4% 3.7%

SOURCE: Environmental Business International Inc. San Diego, CA; EBJ's 2010 Snapshot Survey conducted in January-February 2010. More than 300 respondents participated in the survey and were asked only to rate markets in which they had experience. Respondents were asked to rate customer areas in terms of prospects for sales growth in the next two to three years and sectors are ranked by the product of responses. © EBI Inc.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-38 Ranking of U.S. Regional Markets

2013 2014 2015 2016 2017 Rank Rank Rank Rank Rank US: Gulf Coast/Texas 1 1 1 8 1 US: Southeast 3 2 2 2 2 US: Southern California 4 3 3 1 3 US: Mid‐Atlantic 7 4 4 6 4 All United States 5 9 9 5 5 US: Northern California 2 5 5 3 6 US: Pacific Northwest 8 7 7 4 7 US: Rockies 6 6 6 10 9 US: New England 11 10 10 7 9 US: Southwest/Desert 9 11 11 9 10 US: Midwest 10 8 8 11 11

SOURCE: Environmental Business Journal annual EBJ Snapshot Surveys; "prospects for growth in the next two years"

Exhibit 1-39 Ranking of Growth Prospects by Service/Media Category: 2015-16

Very strong Strong Good Slow/Flat Decline US: Gulf Coast/Texas 17% 31% 31% 17% 3% All United States 5% 26% 48% 21% 0% US: Southern California 5% 19% 41% 35% 0% US: Southeast 3% 25% 44% 25% 3% US: Northern California 5% 19% 32% 41% 3% US: Pacific Northwest 0% 24% 38% 38% 0% US: Mid-Atlantic 3% 19% 33% 42% 3% US: New England 3% 6% 29% 62% 0% US: Rockies 0% 6% 47% 47% 0% US: Midwest 0% 9% 32% 59% 0% US: Southwest/Desert 0% 12% 35% 47% 6% Eastern Canada 0% 0% 32% 65% 3% Western Canada 3% 10% 19% 52% 16%

SOURCE: Environmental Business Journal 2015 Snapshot Survey

Exhibit 1-40 Ranking of Growth Prospects by Global Geographic Region: 2015-16

Very Slow Modest strong Strong Good growth Flat decline All USA 0% 21% 55% 21% 3% 0% India 4% 11% 26% 52% 4% 4% China 4% 12% 35% 31% 15% 4% Rest of Asia 0% 8% 23% 62% 4% 4% Canada 0% 14% 25% 43% 7% 11% Mexico & Central America 0% 7% 31% 38% 21% 3% South America 0% 7% 15% 59% 15% 4% Brazil 0% 7% 22% 48% 7% 15% Western Europe 0% 3% 14% 52% 24% 7% Australia/NZ 0% 8% 20% 44% 12% 16% Middle East 0% 8% 19% 42% 15% 15% Developed World (OECD) 0% 0% 15% 63% 19% 0% Developing World (rest) 0% 0% 22% 44% 26% 4% Japan 0% 0% 14% 36% 43% 4% Africa 0% 0% 26% 37% 19% 15% Emerging World (BRIC) 0% 0% 11% 48% 26% 11% Eastern Europe 0% 4% 7% 33% 26% 30% Russia 0% 0% 0% 18% 21% 25%

SOURCE: Environmental Business Journal 2015 Snapshot Survey

Exhibit 1-41 USA Geographic Regions Rated by Respondents for Growth in 2011-2013

Very Slow Modest Big strong Strong Good growth Flat decline decline Gulf Coast/Texas 6% 16% 41% 29% 6% 0% 1% Southeast 3% 14% 35% 34% 11% 2% 1% All United States 4% 10% 32% 44% 10% 0% 1% Rockies 1% 14% 35% 36% 14% 0% 1% Mid-Atlantic 4% 10% 33% 37% 11% 5% 1% Southern California 5% 9% 30% 28% 21% 5% 2% Northeast 3% 10% 28% 38% 13% 5% 2% Midwest 3% 6% 33% 38% 16% 3% 1% Northern California 3% 10% 27% 31% 24% 4% 1% Pacific Northwest 1% 6% 41% 33% 15% 3% 1% Southwest/Desert 2% 6% 32% 37% 17% 5% 1%

Source: Environmental Business Journal 2011 Snapshot Survey.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-42 Geographic Regions Rated by Survey Respondents for Growth in 2010-2012 Very Slow Modest Big strong Strong Good growth Flat decline decline China 14% 38% 32% 11% 5% 0% 0% India 16% 33% 26% 19% 5% 0% 0% Central & South America 9% 14% 36% 29% 13% 0% 0% Australia/NZ 4% 13% 33% 33% 15% 2% 0% Middle East 4% 15% 30% 35% 11% 6% 0% Canada 0% 15% 41% 30% 12% 1% 0% All Non-USA 3% 6% 44% 40% 7% 0% 0% Rest of Asia 2% 11% 40% 30% 15% 2% 0% United States 5% 7% 28% 48% 11% 1% 1% Western Europe 3% 6% 30% 41% 16% 3% 0% Mexico 5% 3% 36% 29% 24% 3% 0% Eastern Europe 2% 5% 29% 48% 12% 3% 0% Japan 2% 10% 24% 38% 18% 8% 0% Africa 0% 10% 26% 26% 34% 4% 0% Russia 2% 4% 34% 32% 19% 9% 0%

SOURCE: Environmental Business International Inc. San Diego, CA; EBJ's 2010 Snapshot Survey conducted in January-February 2010. More than 300 respondents participated in the survey and were asked only to rate markets in which they had experience. Respondents were asked to rate areas in terms of prospects for sales growth in the next two to three years and sectors are ranked by the product of responses. © EBI Inc.

1.3.5 Historical Framework of the Environmental Industry The environmental industry has its roots in sanitary engineering and waste management, dating back to the 1800s. In 1970, with the birth of the Environmental Protection Agency (EPA) as the acting arm of the National Environmental Protection Act, the environmental industry was given new coherence and impetus. During this formative era, environmental priorities tended to be those that the public could see, smell and touch (like garbage and sewage) which related to the industry’s origins but also included new areas like air pollution. These solutions usually involved large capital projects and central public sector involvement. Landmark legislation in the 80s launched a toxics or hazardous waste era which focused more on a “polluter pays” approach, stimulating more revenue contribution from industry.

From modest beginnings, the environmental industry grew from about $30 billion in 1970 to $400 billion in 2019. It has earned recognition as a valuable and vital part of the economy, responsible for almost 3% of GNP and the employment of over 1.7 million people in the United States.

Exhibit 1-43 Environmental Industry Segments vs. GDP Growth

Source: Environmental Business Journal annual segment-by-segment analysis of the environmental industry conducted from 1988 to 2018. Data prior to 1988 is derived primarily from historical revenue growth figures from environmental companies, spending figures compiled by the US government and interviews with executives.

Exhibit 1-44 U.S Environmental Industry by Media: 1970 – 2020 ($bil)

EBI Report 2020-B U.S. Environmental Industry Overview

SOURCE: Environmental Business Journal annual analysis of the environmental industry. Core Environmental Services include Consulting & Engineering, Remediation/Industrial Services, Hazardous Waste Management and Analytical Services; Infrastructure Segments include WTW, SW, WU & RR

After growing excess of 10% per year in the late 1980s, the industry slowed to 8% growth in 1990, and 3% in 1991  the “wake-up call” year, as EBI characterized it. Growth stayed between 1-6% from 1992-2004, hit 5-9% in 2004-2007, topping 8.5% in 2007, and slipped to negative 1.5% in 2009.

Growth shifted higher than the economy in 2000-2007 mainly because of four factors: 1. Economic Growth, which ramped up in most industries from 2001-2007; 2. Property Values, which shot up in most key markets from 2001-2006; 3. Resource Prices, which rose during 2000-2007, positively affecting environmental expenditures in the Oil & Gas and Mining sectors; and 4. Government Budgets, as spending increased in the Bush years compared with the Clinton years.

Comparing annual growth in the environmental industry to the economy from 1970-2005 as portrayed in the chart (see above) demonstrates notable stages or phases for the environmental industry. Whether these phases represent legitimate trends or cycles depends on definition, but indulge us in the process of further examination. First, the 70s were characterized mostly by capital expenditures and infrastructure projects relating to an initial wave of regulations mostly focused on air, water and waste. Environmental industry growth was well into the double digits and 8-12 percentage points clear of GDP growth until economic slowdown in the early 80s provided the first brake on the environmental industry as industrial capital spending ground to a halt. As the economy picked up and a new wave of environmental regulations came into effect, the mid-to-late 80s saw a second sustained era of prosperity and a coming of age for the environmental service segments, i.e., consulting & engineering, hazardous waste management, remediation contracting and dedicated environmental testing labs. The recession of 1991 again shocked the industry and marked the

© 2019 Environmental Business International, Inc. Page 1-61 EBI Report 2020-B U.S. Environmental Industry Overview beginning of what some have called a backlash against the excesses of regulation. Perhaps more accurately this was when the cost and benefits of environmental programs came increasingly under scrutiny and major initiatives became a thing of the past. The late 90s saw the worst of the resulting malaise in the market. After the turn of the century, the uncertainty accompanying the transition to the Bush administration in 2001 further derailed environmental initiative and enforcement.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-45 Historical Growth of the U.S. Environmental Industry, 1992 – 2018e

Revenue Annual Year ($Bil.) Growth 1992 159.39 5.13% 1993 167.12 4.85% 1994 176.89 5.84% 1995 184.42 4.26% 1996 185.63 0.66% 1997 190.55 2.65% 1998 193.76 1.69% 1999 201.97 4.24% 2000 210.21 4.08% 2001 213.00 1.33% 2002 217.47 2.10% 2003 225.59 3.73% 2004 237.25 5.17% 2005 251.87 6.16% 2006 265.67 5.48% 2007 285.91 7.62% 2008 295.91 3.50% 2009 290.36 -1.88% 2010 301.54 3.85% 2011 320.26 6.21% 2012 331.85 3.62% 2013 339.12 2.19% 2014 351.39 3.62% 2015 361.13 2.77% 2016 375.02 3.85% 2017 393.01 4.80% 2018 411.62 4.73%

SOURCE: Environmental Business International, Inc., San Diego, CA © EBI Inc.

After slower markets in 1996-1998, mostly as a result of government shutdowns and their reverberations throughout the client community, and a slow 2001-2002 from the brief post- internet-bubble recession, from 2003-2007 the environmental industry enjoyed relative prosperity, with the federal government, oil & gas and property development clients contributing significantly to its fortunes, in addition to a significant amount of pent-up demand following the slower years.

The great recession hit the environmental industry hard but in some ways not as hard as other sectors. More stable and large-revenue areas like water, wastewater and solid waste are less

discretionary than other parts of the economy, and some of the more economically sensitive parts of the environmental industry like remediation, renewable energy and some infrastructure area benefited from stimulus funding. One thing environmental executives all now agree on is how much more tightly linked the industry becomes to the overall U.S. economy with each passing year. As the economy cycles, so does the environmental industry, although since EBI started tracking the industry in 1988, it has typically managed to perform better than the economy, and is maybe not yet completely in sync with GDP.

1.3.6 Impact of Recession and Regulatory Uncertainty on a Maturing Industry The environmental industry has displayed the characteristics of a maturing industry since the mid-90s in the form of decelerating growth, heightened competition, growing sophistication among its client base, greater emphasis on marketing, consolidation of market share in larger players, heightened M&A activity and other factors. Beyond facing the challenges of a maturing industry, since as early as 1991 environmental companies have also been subject to periods of regulatory uncertainty. In 1991, government sent an important direct and indirect message that environmental quality would take a back seat to economic growth.

The George H.W. Bush Administration (1989–93) established the Competitiveness Council, which sought, among other things in the opinion of environmental companies, to gut the Clean Air Act Amendments passed in 1990 and announced a “moratorium on new regulations” for the sake of improving the economy. However, by far the most important cause of the collapse of environmental industry growth in 1991 was the recession. A bad economy exposed how truly discretionary most environmental spending was. Environmental industry growth plummeted and, for the first time in over 20 years, was lower than GDP growth. What was once promoted by Wall Street and others as a recession-proof industry was revealed as recession-prone.

Ironically, when the recession abated, regulatory uncertainty persisted during the transition from the Bush to the Clinton Administration. Throughout the Clinton era there was a failure of political leadership in the environmental arena and senior federal positions, leading to

EBI Report 2020-B U.S. Environmental Industry Overview

further postponements and cancellations of environmental projects by the regulated community. As a result while still remaining intact, the environmental industry’s foundation of regulations and enforcement grew progressively weak.

Thus, more than two decades ago, savvy environmental executives learned that business must be based increasingly on delivering economy and value – attributes that serve clients well whatever the economic climate – as government drivers like the economy will always ebb and flow to some extent. Indeed, environmental companies can no longer subsist predominantly on short-term pollution control or waste management 'fix-its' in response to regulatory drivers. Instead they must provide enduring value through long-term, resource- oriented solutions to environmental unsustainability in anticipation of return on investment and long-term competitive advantage. The answer was to start creating a new culture of the environmental industry along these lines; hence, "the foundation for the future" became EBJ recurring theme in subsequent years.

1.3.7 Transition to Sustainability and a Value-Based Environmental Industry Understandably, looking to economics as the emerging driver didn’t mean throwing out the compliance business baby with the regulatory bath water. Even executives who embraced the new paradigm and were courageous enough to say 'sustainable development' in public were cautious not to "overdrive their headlights," to use the words of the late CH2M Hill CEO, Ralph Peterson. But Peterson and others who led their companies into the transition had already established new practice areas, technical offerings and products supportive of the new economic paradigm to complement traditional lines of business.

Exhibit 1-46 U.S. Environmental Industry: Revenues by Function 2016

Compliance Env'l Infrst Resource Total O&M/Suppl Pol Ctrl/Rem y Productivity $bil Services Analytical Services 0.6 1.2 0.14 2.0 Wastewater Treatment Services 56.1 3.0 59.1 Solid Waste Management 53.0 8.1 61.0 Hazardous Waste Management 9.2 0.2 1.4 10.9 Remediation/Industrial Services 10.0 0.7 3.0 13.7 Consulting & Engineering 12.0 9.6 8.4 30.1 Equipment Water Equipment and Chemicals 13.2 15.8 3.2 32.2 Instruments & Information Systems 3.7 2.5 0.8 7.0 Air Pollution Control Equipment 16.8 16.8 Waste Management Equipment 3.3 9.5 2.3 15.1 Resources Water Utilities 56.7 56.7 Resource Recovery 25.6 25.6 Clean Energy Systems & Power 39.8 39.8 TOTAL ALL SEGMENTS: 69.0 205.4 95.7 370.0 18.6% 55.5% 25.9%

Source: Environmental Business Journal © EBI Inc. Compliance, pollution control & remediation are seen as portions of the market with a very finite growth cycle. Environmental infrastructure and operation & maintenance and supply of same has consistent demand but modest growth after an initial high-growth phase. Resource productivity includes recovered materials, reclaimed wastewater, brownfields redevelopment, clean energy and energy & materials efficiency.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-47 U.S. Environmental Industry: Revenues by Function 2014

Compliance Env'l Infrst Resource Total Pol Ctrl/Rem O&M/Supply Productivity $bil Services Analytical Services 0.6 1.2 0.12 1.9 Wastewater Treatment Services 53.1 2.8 55.9 Solid Waste Management 50.3 7.6 57.9 Hazardous Waste Management 9.5 0.1 1.2 10.8 Remediation/Industrial Services 11.2 0.7 2.3 14.2 Consulting & Engineering 11.5 9.5 7.9 28.9 Equipment Water Equipment and Chemicals 12.5 14.6 3.4 30.5 Instruments & Information Systems 3.4 2.2 0.8 6.3 Air Pollution Control Equipment 16.0 16.0 Waste Management Equipment 3.0 7.7 1.5 12.2 Process & Prevention Tech. 2.1 2.1 Resources Water Utilities 54.6 54.6 Resource Recovery 29.1 29.1 Clean Energy Systems & Power 33.3 33.3 TOTAL ALL SEGMENTS: 67.8 194.0 91.9 353.7

19% 55% 26%

Pollution control, waste management and cleanup driven by regulation still represent the majority of non-infrastructure revenues in the environmental industry. However, customers have been increasingly demanding pollution prevention and resource recovery investments not wholly dependent on regulations. For example, water treatment equipment for discharge continues to lose market share to water treatment and purification equipment for reuse. Expenditures on waste management equipment manufactured for containment, collection and transportation of solid waste for efficient disposal are increasingly being replaced by investments in equipment for sorting, processing and baling materials for recovery. Waste management services are focusing more on recovery, and companies are generating profits from both services rendered and sale of recovered material. Demand for compliance-oriented consulting is flat or contracting in many cases, while demand for strategic environmental management and pollution prevention goes unmet.

Exhibit 1-48 U.S. Environmental Industry: Revenues by Function 1997-2016

1997 2001 2004 2006 2008 2009 2010 Compliance/Pol Ctrl/Remed 30.4% 29.3% 24.6% 23.2% 21.9% 20.6% 20.5% Env'l Infrst/O&M/Supply 55.9% 56.3% 52.8% 53.1% 51.1% 51.7% 53.5% Resource Productivity 13.6% 14.4% 22.6% 23.7% 27.0% 27.7% 26.0% 2011 2012 2013 2014 2015 2016 Compliance/Pol Ctrl/Remed 19.6% 19.4% 19.4% 19.2% 18.9% 18.6% Env'l Infrst/O&M/Supply 53.3% 52.9% 54.3% 54.9% 54.2% 55.5% Resource Productivity 27.1% 27.7% 26.3% 26.0% 27.0% 25.9%

Source: Environmental Business Journal © EBI Inc. derived from annual analysis of 14 industry segments

These transitions are in full swing across all environmental industry segments. In concert with the age-old economic mantra of "faster, better, cheaper," they characterize the basis of a new generation of environmental companies. Most companies know that opportunities associated with the regulatory era are slowing. Virtually all know that customers demand much more than they used to. Few disagree that the industry cannot sustain perpetual growth in its current form with still 20% of its revenues based on areas of finite demand. Yes, it's the end of the beginning, but the beginning is not quite over yet. The environmental industry must not merely exploit its current position until the traditional demand is gone but take advantage of client relationships to transition towards more sustainable operations and resource management services on their behalf.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-49 U.S. Environmental Industry: Revenues by Media in 2016

Water/ Haz Remed‐ Solid Segment Air Wwater Waste iation Waste Multi TOTAL Services Analytical Services 0.06 1.0 0.3 0.4 0.2 2.0 Wastewater Treatment Services 59.1 59.1 Solid Waste Management 61.0 61.0 Hazardous Waste Management 10.9 10.9 Remediation/Industrial Services 13.7 13.7 Consulting & Engineering 2.5 10.8 3.6 5.5 1.7 6.0 30.1 Equipment Water Equipment and Chemicals 32.2 32.2 Instruments & Information Systems 1.4 2.5 0.8 1.2 0.14 1.0 7.0 Air Pollution Control Equipment 16.8 16.8 Waste Management Equipment 3.9 1.4 9.8 15.1 Resources Water Utilities 56.7 56.7 Resource Recovery 0.8 24.8 25.6 Clean Energy Systems & Power 39.8 39.8 TOTAL ALL SEGMENTS: 20.7 162.4 20.3 22.1 97.7 46.8 370.0 5.6% 43.9% 5.5% 6.0% 26.4% 12.6%

Source: EBI Inc., San Diego, CA, units in $bil

Exhibit 1-50 U.S. Environmental Industry: Revenues by Media in 2014 Water/ Haz Remed- Solid Segment Air Wwater Waste iation Waste Multi TOTAL Services Analytical Services 0.06 1.0 0.3 0.4 0.2 1.9 Wastewater Treatment Services 55.9 55.9 Solid Waste Management 57.9 57.9 Hazardous Waste Management 10.8 10.8 Remediation/Industrial Services 14.2 14.2 Consulting & Engineering 2.4 10.4 3.5 5.3 1.6 5.7 28.9 Equipment Water Equipment and Chemicals 30.5 30.5 Instruments & Information Systems 1.3 2.3 0.7 1.1 0.13 0.9 6.3 Air Pollution Control Equipment 16.0 16.0 Waste Management Equipment 3.2 1.1 7.9 12.2 Process & Prevention Technology 2.1 2.1 Resources Water Utilities 54.6 54.6 Resource Recovery 0.9 28.2 29.1 Clean Energy Systems & Power 33.3 33.3 TOTAL ALL SEGMENTS: 19.6 154.6 19.4 22.0 96.1 42.0 353.7 5.6% 43.7% 5.5% 6.2% 27.2% 11.9%

Source: EBI Inc., San Diego, CA, units in $bil

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-51 U.S. Environmental Industry: Revenues by Media in 2013 Water/ Haz Remed- Solid Segment Air Wwater Waste iation Waste Multi TOTAL Services Analytical Services 0.06 0.9 0.3 0.4 0.2 1.9 Wastewater Treatment Services 53.2 53.2 Solid Waste Management 56.7 56.7 Hazardous Waste Management 10.7 10.7 Remediation/Industrial Services 13.9 13.9 Consulting & Engineering 2.3 10.2 3.4 5.2 1.6 5.6 28.3 Equipment Water Equipment and Chemicals 29.7 29.7 Instruments & Information Systems 1.2 2.2 0.7 1.0 0.12 0.9 6.1 Air Pollution Control Equipment 15.7 15.7 Waste Management Equipment 3.1 1.1 7.7 11.8 Process & Prevention Technology 2.0 2.0 Resources Water Utilities 52.6 52.6 Resource Recovery 0.9 30.2 31.1 Clean Energy Systems & Power 31.3 31.3 TOTAL ALL SEGMENTS: 19.3 148.8 19.1 21.6 96.5 39.8 345.1 5.6% 43.1% 5.5% 6.3% 28.0% 11.5%

Source: EBI Inc., San Diego, CA, units in $bil

Exhibit 1-52 Historical and Projected Growth in the Environmental Industry in Services, Equipment and Resources, 1970-2020

500$ Billion

450

400

350 Resources 300

250

200 Equipment 150

100 Services 50

0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Source: Environmental Business Journal © EBI Inc

Exhibit 1-53 Historical and Projected Growth in the Environmental Industry in Infrastructure & Non-Infrastructure Segments, 1970-2020

500 $ Billion

450

400

350 Non- 300 Infrastructure Segments 250

200

150

100 Infrastructure Segments 50

0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Source: Environmental Business Journal © EBI Inc

Historical and projected growth for the entire environmental industry is presented in the graphs above, divided into three major categories. Resource segments already exert a stabilizing influence on the environmental industry, with their influence no doubt increasing in the future. Delivery of clean water, recovery of used materials, and alternative energy each carry the promise of sustainable growth, whereas many of the cleanup and control sectors in service and equipment categories face a sobering finite life cycle.

1.3.8 The Great Recession and The Recovery The environmental industry was well entrenched in the process of transitioning from a regulatory-driven to a value-based industry, when in late 2008 the global financial crisis triggered severe economic problems worldwide. From 2000 until 2007 the industry had enjoyed an extended period of relative prosperity, but in the months leading up to the Lehman Brothers bankruptcy, the U.S. economy had been weakening, affecting in particular those environmental companies working in the land development and property markets. By 2008 most environmental business segments were affected, and industry growth slipped to just 3%, down from 8% in 2007. By 2009 the full impact of the economic downturn showed up on the books, and EBI reported an unprecedented decline of 1.5% in revenues for the

EBI Report 2020-B U.S. Environmental Industry Overview environmental industry. Interestingly, it was still ahead of the U.S. economy overall, which sank by 2.6% in 2009. By 2010, with a recovery of sorts underway, the U.S. environmental industry grew 3.1%, up from -1.3% nadir of 2009 and just ahead of the 3.0% growth of U.S. GDP.

EBJ’s aggregate forecast of 4.6% average annual growth for the environmental industry from 2013-2015 implies not much change from the final 2012 growth figure of 4.7%, but notably higher than 2012’s 4.0% forecast. EBJ 2013 survey respondents conveyed a modest growth in optimism over 2012, forecasting their own company growth at one percentage point higher in EBJ’s January 2013 survey than the previous year’s survey, with their own segment’s growth forecast increasing by a 0.7 percentage point. The annual EBJ Snapshot Survey conducted in January-February also indicated almost a one-and-a-half point increase in profit margin in 2012, with a similar expectation of an increase in margin in 2013.

The leading sectors driving revenue growth in 2013-2015 ranked by respondents are shale oil & gas, healthcare, petroleum extraction, renewable energy development, power utilities, petroleum refining, mining, water utilities and the chemical industry. (See full survey results with discussion in EBJ’s 2013 Outlook edition or tables below.) For EBJ’s 2013 Industry Overview edition EBJ conducted a new survey entitled EBJ’s 2013 How Goes the Recovery Survey to see how the various environmental industry client sectors were impacted by the recession, and what executives thought was the status of the recovery by mid-2013. The results are not very surprising, as illustrated by the tables below, with oil & gas, healthcare, utilities and chemicals the least impacted, and state and local government, property development, the federal government and retailers still the most impacted. Some other key observations of the recovery survey include:

26% of respondents said state governments have experienced ‘no recovery ‘yet, and about 1 in 5 said the same for local and federal agencies;

90% said local governments have had ‘no recovery’ or have only barely started;

Property developers were by far the most impacted, but a majority of respondents rated commercial and residential property developers as either ‘moderately’ or ‘mostly recovered’ as of mid-2013;

Only about 10% thought the oil & gas industry was much impacted by the recession, and almost 20% said it wasn’t impacted at all;

Healthcare was rated highest in the “never much impacted by the recession” category at 31%;

Sectors with a majority of responses in the ‘mostly’ or ‘completely recovered’ columns included only power utilities and chemicals, but consumer products, hospitality and water and solid waste utilities all hit 40-50% on this scale.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-54 How Goes the Recovery as of Mid-Year 2013 Recovered Still Only Mostly but Never impacted recently Moderately recovered Completely fundamenta much and no started to recovered but not recovered lly changed impacted recovery recover but a long quite there and 'back to how they do by Client Sector yet modestly way to go yet normal' business recession Healthcare 3% 6% 17% 29% 9% 6% 31% Oil & Gas upstream 0% 0% 23% 29% 16% 10% 23% Oil & Gas midstream 0% 3% 16% 29% 19% 13% 19% Oil & Gas downstream 6% 0% 16% 29% 19% 10% 19% Power utilities 9% 3% 24% 27% 21% 0% 15% Solid waste utilities & cos 6% 3% 30% 39% 9% 3% 9% Chemicals 6% 3% 27% 52% 3% 3% 6% Renewable energy dev. 12% 9% 35% 24% 9% 0% 12% Water utilities & companies 14% 14% 20% 26% 11% 6% 9% Transportation authorities 5% 10% 54% 18% 3% 0% 10% Hospitality 9% 13% 31% 34% 6% 3% 3% Port authorities 6% 6% 57% 20% 6% 0% 6% Mining 15% 12% 33% 21% 9% 0% 9% Consumer products 3% 17% 31% 45% 3% 0% 0% Federal government: DOE 19% 22% 31% 8% 6% 3% 11% Industrial Manufacturing 6% 22% 38% 28% 3% 3% 0% Federal government: EPA 18% 30% 30% 3% 5% 3% 13% Retailers 10% 16% 42% 32% 0% 0% 0% Federal government: DOD 23% 23% 28% 12% 2% 2% 9% Federal government: Other 18% 28% 31% 10% 3% 3% 8% Residential property development 17% 29% 34% 17% 0% 2% 0% Commercial property development 12% 33% 43% 12% 0% 0% 0% State government 26% 24% 36% 12% 0% 0% 2% Local government 23% 38% 29% 10% 0% 0% 0%

Source: EBJ 2013: How Goes the Recovery Survey, August 2013. Question was: How Goes the Recovery?: Please rate where you believe each client sector is on the path to pre-crisis 'recovery' or relatively sustainable levels of growth or stability. (Responses can be a combination of impact on your company's ability to generate revenues and the sector in general.) Sectors are ranked by a product of weighted factors.

EBJ’s 2013 How Goes the Recovery Survey respondents also were given the opportunity to respond to two open-ended questions: 1) items impacting their business independent of economic issues; and 2) any long-term impact of how the recession, credit crisis or government austerity have fundamentally changed how they do business. Selected responses to the latter are presented on page 47 and include understandable themes of revenue diversification, cost control and heightened competition, but also somewhat disturbing but

equally understandable themes of reduced investment and taking fewer risks.

Asking environmental industry executives for non-economic impacts on their business opened the floodgates for negative comments about Congressional inaction and generally negative opinions about the government, budgets, spending and enforcement. Positive notes highlighted regulations aimed at coal-fired power plants, REACH [in chemicals] and related consumer product regulation, habitat protection, regulations on oil & gas development, renewable energy subsidies, fracking, oil & gas pipeline permitting, GHG issues, healthcare, and some specific state programs still driving some business.

1.4 Annual Reports and Trend Analysis, 2006-2019

1.4.1 2019 Environmental Industry in Context Seeing The Forest And The Trees... And The Elephant In The Room Describing an industry as multi-faceted and as disparate as the environmental industry brings to mind the Indian parable of the blind men describing the elephant. The differences between the Solid Waste Management, the Environmental Consulting & Engineering and the Clean Energy Systems & Power segments are no doubt similarly divergent in nature as the tail, tusk and trunk of the elephant, but we can acknowledge that they are all of the same beast. In this annual overview edition of Environmental Business Journal, EBJ again seeks to describe the elephant that is the environmental industry, with some attention to its constituent parts. Previous editions have devoted their full contents to specific appendages or segments, and indeed we do acknowledge that these businesses do operate in measurably different circumstances, but to see macro-trends that impact the broader commons of the entire environmental industry, one must not blindly focus on one part, no matter how healthy or addled it may be, but rise above and view to phenomenon that is the environmental industry in the time and depth it deserves.

To use another perhaps a more apt analogy for business, we at EBJ do spend a considerable amount of time describing trees, and often caution ourselves to avoid not being able to see the forest for the trees. And the trees we do analyze are often increasingly younger and

EBI Report 2020-B U.S. Environmental Industry Overview

smaller trees of more tightly defined competitive gameboards on which companies or new business units compete that may grow into more dominant trees in the environmental industry forest. So we do relish stepping back and contemplating, framing and then describing our view of the whole forest.

ERAS & DECADES The chart below comparing annual growth of the environmental industry and the GDP exhibits some interesting characteristics of different periods of history of the environmental industry that, for the sake of this review, we characterize in eras, punctuated by bubbles.

In the 1980s the environmental industry grew roughly 5 percentage points faster than that of the gross domestic product (GDP) for an extended period of time in the ‘regulatory bubble’ era. It is also worth noting here that in the late eighties, the U.S. economy as measured by the GDP grew by an annual average of 4% for a period of 7 years, and a similar, relatively stable, high-growth period was repeated in the late nineties for 5 years. This contrasts with the ‘new normal’ of another similarly stable period of annual average GDP growth between 2011 and 2018 at 2%, or half the previous rate. The regulatory bubble of the 1980s was inflated by the onslaught of hazardous waste regulations and programs like RCRA, CERCLA, Superfund, EPCRA, SARA and others and gave rise to the remediation and hazardous waste segments much as we know them today.

The 1990s can fairly be described as the ‘anti-regulatory era’ in which policymakers were irked by the fact that it appeared that lawyers were billing more than remediation contractors. And although the chart on page 3 depicts the change of presidential administrations, the control of Congress, and the House of Representatives in particular with its control of the purse, may have at least equal pertinence to environmental industry cycles. The vertical lines on the top of the chart which depict federal government shutdowns were, and unfortunately are, factors in industry growth cycles or at least blips on the chart, but more on the 2019 shutdown and its impact in a subsequent edition of EBJ.

The decade of the 2000s exhibited a noticeable bubble in the chart that hindsight views largely as the ‘property bubble’ funded by the sub-prime mortgage miscalculation, that burst into the global financial crisis, that became the Great Recession, but we at EBJ have our own version of history. In the ‘00s there was a considerable alignment of positive market drivers for the environmental industry that EBJ has documented and tabled frequently in the past. Suffice it to say that at least 6 major factors of federal spending, oil & gas prices, commodity prices, stock market valuations, corporate investments, and property markets were all on strong footing or strong upswings.

These sectoral circumstances drove growth in environmental services and the C&E and project management community, as well as in the equipment supply and technology segments of the environmental industry. The 2000s also saw a breakthrough in the Clean Energy Systems & Power segment which grew from $4 billion in the year 2000, to $21 billion in 2010. Strong markets for industrial commodities also led to growth in resource recovery, or as EBJ quantify as it as sales of secondary materials in the commercial market, which grew from $16 billion to $28 billion in the decade.

Interestingly enough the 2010s exhibited no real discernible bubble on the chart, nor a significant delta between environmental industry and GDP growth, although a fairly consistent growth of the environmental industry over that of the GDP in the range of 1-2% a year could still be argued as significant. Given a somewhat volatile past, this measure of stability is indeed a positive, and exhibits the general consensus that the environmental

EBI Report 2020-B U.S. Environmental Industry Overview

industry is more and more woven in to the fabric of the U.S. economy, if not the global economy. Part of the economy yes, but still with a lot of catching up to do from a century or more of neglect, supporting continued forecasts of environmental industry growth in excess of GDP growth for the time being.

This relative stability has also been a factor in reinvigorating attracting investment capital to the industry, but in contrast to the late eighties and early nineties when a slate of companies went to public markets and raised significant amounts of capital, in the more recent era more money has been raised from private equity sources, many of them plucking off major acquisitions as companies have prepared to issue initial public offerings. The table below exhibits slightly different features, but also pertaining to the era's discussed above. Here notice first the 4-digit percentage growth for certain segments in the 1980s. And while people yearn for double-digit growth today, this does recall the emerging nature are of our industry in the not too distant past.

The 1990s did see 4-digit growth in the Hazardous Waste Management segment, and it is notable that during that ‘regulatory era’ the four highest growth segments were what we define as the ‘core environmental services’ graphed on the chart on decades. Not escaping notice will be the fact that the Clean Energy Systems & Power segment declined during the 80s which can be fairly blamed on federal government policy, and symbolically characterized by President Reagan dismantling President Carter's solar energy system on the roof of the White House, if not metaphorically tossing Carter’s conservation-themed cardigan into the Lincoln Room fireplace. The evisceration of federal tax credits and renewable energy research & development funding programs likely were more directly responsible for the collapse of growth in the 80s, as well the loss of now likely never to be recovered U.S. leadership in wind and solar technology worldwide.

The 1990s can be characterized as the ‘maturity phase’ and EBJ overview editions such as this one from that era used industry maturation as a common theme—and couldn't be blamed for evoking some awkward teenager analogies as the industry developed a more stable foundation beyond its formative dependence on regulations. ‘The Wake-Up Call’ and ‘The

End of the Beginning’ years recognized this trend and the industry transformation at the time. However, during the 1990s, the infrastructure segments added over $10 billion in revenue base each, or thereabouts. Leading the segment growth in the 1990s percentages were Instruments & Information Systems followed by Air Pollution Control Equipment, each seeing steady growth, the former driven largely by the emerging nature of information technology during the decade, and the latter principally due to the Clean Air Act reauthorization in 1990 and its gradual implementation throughout the decade.

The decade of the 2000s as mentioned saw the significant emergence of clean energy and in particular the wind energy economy which drove the segment to grow 380% over the 10 years. Infrastructure segments gained closer to $15 billion dollars each in annual revenue during this decade, as both rates and volumes increased in water and solid waste. Resource Recovery also really dove into China and Asia in the 2000s, and although exports to the region had raised noticeably before, the volumes of global trade in secondary materials increased measurably during the 2000s.

The Consulting & Engineering segment made notable progress in the decade of the 2000s as the maturation phase of the previous decade many analysts would assert had forced the development of business management structure to a larger majority of players in C&E. Growth in the segment was 15 percentage points higher in the 2000s compared to the 1990s, and off a significantly larger base value. In absolute dollars, the gain in the 90s of about $5 billion dollars compared to a gain of almost $10 billion dollars in the 2000s is indicative of the confluence of positive market drivers noted above, but also the business model optimizations that became more the norm in C&E.

If anything the current era or the current decade of the 2010s will be looked at as a measure of stability in the industry. It is remarkable that our current model portrayed in decades on page 2 shows overall environmental industry growth of 42% in the 1990s, 44% in the 2000s, and 39% in the 2010s. While clean energy remains the fastest growing segment in percentage and now in absolute dollar value, environmental infrastructure still boasts significant growth

EBI Report 2020-B U.S. Environmental Industry Overview

in annual revenue generation, although the majority of this revenue-generating still lies under municipal government control, particularly in wastewater.

Beyond 2020 the environmental industry sees a horizon of growth, and not too many clouds to cast a pall on business forecasts. The value of land and property continues to go up, the value of resources goes up, and in many cases are increasingly scarce, driving the engine of a circular economy that only makes the value of services to use resources more efficiently, or reuse them, more valuable. Even in remediation, companies see a revitalized future with the emerging awareness of PFAS and new findings, regulations, programs and potential enforcement and funding mechanisms in government to address these and other emerging contaminants.

And climate change, which will be remembered for its history of political contention up to the current era, will be a major—if not the major—factor in impacting how the environmental industry, the project management community, the technology development and resource management communities impact the economy in the next two decades or more. The recent bankruptcy of Pacific Gas & Electric only underscores the economic consequences of any shred of neglect of climate resilience, and of any absence of perspective on potential hazards and liabilities with the increased exposure to severe weather events and liabilities associated with managed assets. Which of these assets are the most vulnerable will be the subject or considerable study in the short term, and likely significant revenues for the experts and the companies that hire and train them. Utility companies and port authorities that failed to maintain the levees around New Orleans, Houston, New York and others mostly escaped financial ruin, but many observers assert that the PG&E case is more than likely the first of many. The legal dust on PG&E has not settled by any means, and influential precedents may be set, but pundits comparing climate change resilience neglect to tobacco company liabilities may seem a stretch, but aren’t wildly out of place. From a business and consultants standpoint, resilience may be regarded by some observers as analogous to sustainability as both are now essential elements to add on to all corporate or government planning, design, construction, operation & maintenance of built or natural assets. However, we at EBJ believe that the stakes are much higher in resilience.

Sustainability is a noble corporate pursuit and a legitimate part of long-term corporate governance to give confidence to consumers, shareholders or other stakeholders, but lack of resilience and lack of and adaptation planning for extreme weather and the changing climate will have much more grave financial consequences, and likely many more completely unpredictable ones, as evidenced by PG&E.

Meanwhile on the electric generation side, the clean energy economy also has a lot of catching up to do to continue its quest from being a ‘drop in the bucket’ as it was until 2000, to a ‘chip in the armor’ of the global energy industry, to now aspiring to a once mostly scoffed-at notion of revolutionizing the electric power industry, and possibly the broader global energy economy. The accompanying charts show the still relative insignificance of renewable energy generation globally, but also the still alarming growth of CO2 emissions in much of the world. Coal consumption may have leveled somewhat in China, but still grows in many economies and coal remains the dominant source of electricity generation worldwide. The growth in installed capacity of solar and wind recently is indeed impressive, but will take years to move up the power generation chart.

Scenario planning is still all over the map for the future of electricity generation in the United States and globally, in addition to the evolution of the electricity grid and the role of renewables, distributed generation, micro-grids, storage, battery technology and integrated systems. Also in flux is the future of ground transportation, and the presumed transition from gas-powered vehicles to electric vehicles, as well as the future of the transportation grid and the role of information technology, autonomous vehicles, city planning, private property and other factors that will impact the speed and socio-political issues around these transitions. But it is abundantly clear that a substantial amount of questions will be answered on these, and perhaps other unforeseen but equally monumental, topics in the next decade. It is advisable for the environmental industry to be an active participant in these disruptions and not a mere bystander.

In conclusion, we return to seeing the forest, and to the blind men and the elephant in the room. In the parable, not only does each blind man have a different perspective and

EBI Report 2020-B U.S. Environmental Industry Overview

description of the elephant based on the particular body part he lays his hands on, but each also finds it easy to dismiss each other’s view. Not too dissimilar from the stubborn wave of partisanship washing over many of the world’s leading democracies today, but also an apt analogy for the recent history of climate science. All the more reason for keeping an eye on the forest, or what is left of it.

1.4.2 2018 Report and Trend Analysis

1.4.2.1 The Sword and the Boomerang

Post-Trump election editions of Environmental Business Journal and conversations with environmental industry executives have raised the question of the Trump Administration being a double-edged sword: One edge is good for the environmental industry and the other is bad.

“Good” as in policies for economic growth have led to corporate expansions, new hiring, new investments in facilities, and increased industrial production. Good as already promising development and construction markets are further stimulated by rising property values and positive trends in commercial property development and housing starts. Good, insofar as the new tax plan hammered out by Congress has boosted consumer confidence and investments across the board. And good for the stock market, which soared to record highs before a hold- your-breath week of corrections and ripple effects in February 2018.

With business conditions deemed good in virtually all environmental industry segments covered by EBJ and presented in statistical summary in this annual overview edition, it’s hard to see the bad edge of the sword – but that’s where the boomerang effect comes in. If it doesn’t hit you on the way out, you better duck when its on the way back. And ultimately “bad” on environmental policy trickles down to bad for the environment and bad for the environmental industry, no matter how long the economy is primed to grow.

While the Administration has gone all-in on economic policy, it has folded on environmental policy, which many executives fear will have a latent effect on environmental industry

© 2019 Environmental Business International, Inc. Page 1-83 EBI Report 2020-B U.S. Environmental Industry Overview growth. The federal Environmental Protection Agency hasn’t been dismantled as threatened by certain members of the Administration’s team and their think tanks. EPA has sustained only modest budget cuts so far, and further reductions are expected to be in the 5-10% range at most in the next two fiscal years. However, new policies or programs are off the table, and any momentum or morale in the environmental enforcement apparatus for existing statutes has eroded at the federal level, although many states have embraced and expanded their role in compliance and enforcement, and in some cases introducing new policy or programs of their own.

Exhibit 1-55 Environmental Industry Segments vs. GDP Growth: 2000 - 2018

Source: Environmental Business Journal annual segment-by-segment analysis of the environmental industry based on market analysis and revenue information from more than 1,200 companies. Environmental Contracting includes Remediation/Industrial Services (Site Remediation Construction; Industrial Services and Abatement for asbestos, radon, lead and mold) and Hazardous Waste Management (Industrial/Commercial Haz Waste Management, Solvent Recovery & Parts Cleaning, Medical Waste Management, Utility/Commercial Nuclear Waste Management and Federal Waste Management for DOE & DOD)

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-56 U.S. Environmental Industry and Forecast: 2016-2020

2013-14 2014-15 2015-16 2014 2015 2016 SEGMENT Growth Growth Growth Environmental Services Analytical Services 1.89 0.4% 1.93 2.1% 1.97 1.9% Wastewater Treatment Works 55.86 4.1% 57.59 3.1% 59.09 2.6% Solid Waste Management 57.94 2.2% 58.98 1.8% 61.05 3.5% Hazardous Waste Management 10.80 1.0% 10.91 1.0% 10.86 -0.5% Remediation/Industrial Services 13.59 -2.0% 13.51 -0.6% 13.68 1.2% Consulting & Engineering 28.99 1.3% 29.69 2.4% 30.10 1.4% Environmental Equipment Water Equipment and Chemicals 30.69 3.4% 31.33 2.1% 32.23 2.9% Instruments & Information Systems 6.36 5.1% 6.71 5.4% 7.03 4.8% Air Pollution Control Equipment 15.96 1.6% 16.29 2.1% 16.81 3.2% Waste Management Equipment 14.23 3.0% 14.66 3.0% 15.12 3.1% Resource Management Water Utilities 51.98 3.6% 54.35 4.6% 56.74 4.4% Resource Recovery 29.11 -5.6% 26.10 -10.3% 25.55 -2.1% Clean Energy Systems & Power 32.11 24.0% 34.94 8.8% 39.78 13.9% TOTALS: 349.5 3.5% 357.0 2.1% 370.0 3.6%

SOURCE: Environmental Business International, Inc., San Diego, CA, units in $bil. © EBI Inc.

Exhibit 1-57 U.S. Environmental Industry: Revenues by Function: 1997 - 2016

1997 2001 2004 2006 2008 2009 2010 FUNCTION Compliance/Pol Ctrl/Remed 30.4% 29.3% 24.6% 23.2% 21.9% 20.6% 20.5% Env'l Infrst/O&M/Supply 55.9% 56.3% 52.8% 53.1% 51.1% 51.7% 53.5% Resource Productivity 13.6% 14.4% 22.6% 23.7% 27.0% 27.7% 26.0%

2011 2012 2013 2014 2015 2016 FUNCTION Compliance/Pol Ctrl/Remed 19.6% 19.4% 19.4% 19.2% 18.9% 18.6% Env'l Infrst/O&M/Supply 53.3% 52.9% 54.3% 54.9% 54.2% 55.5% Resource Productivity 27.1% 27.7% 26.3% 26.0% 27.0% 25.9%

SOURCE: Environmental Business International, Inc., San Diego, CA, units in $bil. © EBI Inc.

Exhibit 1-58 Environmental Industry Segments vs. GDP Growth

And finally, and perhaps most concerning for the NGOs and environmental groups that have historically been the de facto voice for the environmental industry in Washington and other policy circles, almost everything related to climate change, any program using the phrase climate change, or any proposal or initiative remotely connected to climate change has been swept off the table. On the way out, this lack of investment in environmental and climate policy may look promising to those in industry and commercial development who savor in the aroma of decreased regulations, fewer or weaker permitting requirements and lower costs, but the environmental industry is not misguided in its concern that current short-term thinking could have considerable long-term impact on their business, as well as on physical environmental indicators like emissions.

Nobody wants regulation for regulation’s sake, and even most progressive policy advocates understand the movement to lighten the hand of government. Historically, investment made today builds on the solid foundation of the environmental industry since water and waste management policies were laid down well before the formation of the federal EPA in 1970.

At risk during this current period of environmental neglect are policies aimed at motivating and sustaining incentives for continuous improvement in air quality, water quality, water

EBI Report 2020-B U.S. Environmental Industry Overview reuse, landfill diversion, recycling, risk identification in emerging contaminants, coal ash residuals and sediments, clean energy generation and the clean energy infrastructure, and perhaps most important of all the emissions of carbon and other greenhouse gases and their accumulation in the atmosphere and planning for and adapting to their long-term impacts. Today’s investments in these policies are not always tomorrow’s contracts, but sustaining their momentum is surely better than turning industry and development loose and picking up the pieces later.

The environmental industry has keen interest in growing its foundation of environmental policy in an economically sensible manner, so lack of progress on any or all of these issues is a legitimate concern lest the boomerang effect becomes a harsh reality of slowing or declining markets. Not only could it slow environmental industry growth, but what effect will it have on the evolution a more resource productive or ‘circular economy’, and any national leadership still up for grabs in that regard? Using sustainable resource policy to make U.S. industry more efficient has hasn’t always been a by-product of environmental policy but it has become an increasingly important and influential factor. In addition, years of intellectual effort to de-couple environmental policy and programs from negative economic consequence is also threatened, and momentum in economic research has waned as political polarity has cast the audience further into the realms of preaching to the choir or immediate close-minded dismissal.

THE NEXT RECESSION? The timing of this misalignment in policy priorities is also a concern in that economic cycles portend the onset of recession in the relatively short term. Most economists are loath to pick a quarter when the next recession will start; some published forecasts throughout 2017 set the date in 2019, if not the end of 2018. But as the graph above that compares the growth of the environmental industry to the growth of the gross domestic product shows, the 10-year cycles of the U.S. GDP point to a pending downturn. Years with clear valleys in the GDP chart include 1982, 1991, 2001 and 2009. Most recessions have had a trigger-point like the dotcom bubble of 2001 or the global financial crisis of 2008-2009, so given that the recovery from the financial crisis has been more tepid than dramatic with no peaks along the way,

© 2019 Environmental Business International, Inc. Page 1-87 EBI Report 2020-B U.S. Environmental Industry Overview many economists feel that the next recession may not necessarily be kicked off by a precipitating event, although a crash or mini-crash of the stock market or property markets could be a trigger.

Also, worth noting amongst the peaks and valleys on the chart are two valleys for the environmental industry in relation to the GDP, as well as notable bubbles where the industry grew substantially faster than the economy. First, let’s look at the valley from 1996 to 1998, when environmental industry growth was two percentage points slower than the GDP. This was when government shutdowns and partisan face-offs between the Clinton Administration and the Contract With America led to under-investment in, if not a complete grinding to a halt of environmental programs. But this era also coincided with the onset of environmental industry maturation factors like waste minimization, pollution prevention, rapid customer sophistication and pricing pressures in an industry finding its feet in the economy as distinct from its label as a regulatory-driven industry.

As the environmental industry became more integrated into the economy and less reliant on prescriptive regulatory programs and direct government funding in the 1990s, it again embarked on a sustained era when growth exceeded that of the GDP. The year in which growth was slower than the economy in core environmental services like C&E and remediation was 2013, a year which coincided with government shutdown and budget sequestration, both of which played a significant role in slowing these segments, especially for the larger players more dependent on federal markets.

The chart on page 1 provides more detailed recent perspective on key segments in the environmental industry. Here the separation between the C&E segment and Environmental Contracting segments is more apparent, and is due mostly to the confluence of positive drivers for the C&E segment in the 2000s. More recently it is evidence of consulting & engineering firms’ more diversified service areas compared to the relative dependence of environmental contractors on hazardous waste and remediation. The chart also shows overall environmental industry growth higher than the GDP in 2016-2018, as environmental infrastructure segments such as solid waste management and water and wastewater utilities

EBI Report 2020-B U.S. Environmental Industry Overview

are benefiting from both volume and rate increases, in addition to the growing contribution of the Clean Energy Systems & Power segment.

Factors that impact the recent growth and forecast are illustrated on page 4 and on page 49. EBJ forecasts overall industry growth to average 4.8% in 2018 and 2019, or about 3.3% when removing the Clean Energy segment, with Consulting & Engineering at about 3% and Environmental Contracting at about 1% average annual growth.

While all these potential impacts have an element of the unknown, the most volatile are most likely to be the stock market and oil & gas prices if history provides any lesson, followed by housing and construction markets. Overall the consensus economic growth forecast for the US GDP is around 2.5% for 2018 and 2019, a noticeable notch up from 2011 to 2017, when annual growth rates hovered closer to 2%.

Other charts in this overview edition worth noting as they pertain to significant trends include the environmental industry by function over time on page 2 which tracks the decline of the share compliance pollution control and remediation from more than 30% of the industry in 1997 to under 19% today. The share of market going to the function of resource productivity, which includes resource recycling and clean energy, as well as some specialty services, is also evident on the charts below, which illustrates the growth of multimedia in the media breakdown, with information systems and software also a contributor. The matrix of the function table and the media table are included at the end of this review along with other industry history and breakdown tables.

Exhibit 1-59 U.S Environmental Industry by Media: 1970 – 2020 ($bil)

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-60 U.S Environmental Industry by Segment: 1970 – 2020 ($bil)

Exhibit 1-61 Environmental Industry: Key Growth Factors: 2004-2019

2004‐2008 2009‐2010 2011‐2013 2014‐2016 2017 2018‐2019

Economic Growth (GDP) + ‐‐ + +n + + Property Values ++ ‐ ‐ + + + Federal Government Spending + + ‐ n ‐ n‐ Oil & Gas, Commodity Prices ++ ‐‐ + ‐‐ + n+ Construction Activity + ‐‐ + ++ + + State & Local/Infrastructure Spending + ‐ ‐ n n n+ Environmental Policy & Regulations ‐ n n+ n+ ‐‐ ‐‐ Average Env'l Industry Growth 5.9% ‐0.4% 3.8% 3.6% 4.8% 4.8% Average C&E Growth 6.8% ‐0.4% 2.2% 1.7% 3.1% 3.0% Average Env'l Contracting Growth 3.4% ‐0.1% 2.8% 0.0% 1.6% 1.0% Average US GDP Growth 2.2% ‐0.3% 1.9% 2.1% 2.3% 2.6% Average Oil Price Growth 27.9% ‐3.6% 12.5% ‐24.3% 24.6% 8.0% Construction Activity 6.8% ‐13.2% 4.1% 9.4% 3.6% 4.6%

SOURCE EBJ, Environmental Industry Summit 2018 presentation by Grant Ferrier

Exhibit 1-62 Environmental Industry: Key Growth Factors: 2004-2022

ADD

THE SWORD AND THE SHIELD: TRADE WARS In 2017, the environmental industry took center stage in global trade wars, specifically in trade and import-export issues between the two major powers China and the USA in resource recovery and the solar PV manufacturing.

In recycling, China announced and, over a relatively short period, instituted its National Sword policy, which banned 24 types of solid waste or recyclables from being imported into China, principally paper, plastic, fiber and textile scrap, due mostly to high levels of contamination in these shipments. As data in the solid waste and resource recovery sections of this review show, specifically on page 11 and page 19, U.S. exports to China in both scrap plastics and scrap paper had already declined dramatically towards the end of 2017, even before National Sword formally came into effect on January 1, 2018.

One can hardly blame the Chinese and the Chinese companies that manually sort and clean, and presumably have had to dispose of, mountains of contaminated imported recyclables over the years for this dramatic measure to elevate the quality of shipments they receive from around the world. The ban is designed to keep polluted materials out of China, but also to stimulate its own domestic recycling infrastructure, as the growing Chinese middle-class is generating consistently growing volumes of recyclable municipal solid waste at home and in the local economy.

China’s policy has also only started to alter conditions in the historically volatile balance of supply and demand in recycling markets in the United States. Not only is it now necessary to improve the quality of collected materials for export, creating higher costs for U.S. waste recovery businesses, but the increase in domestic volume due to lower exports will create downward pressure on pricing. This pressure will have a knock-on effect throughout the

EBI Report 2020-B U.S. Environmental Industry Overview volatile supply-and-demand chain that drives the economics of post-consumer consumer recycling.

As the sidebar on page six indicates, the major solid waste companies and many major municipalities that still own and manage their own solid waste service assets have become better at managing the volatility of commodity prices for the recyclable programs they conduct or finance. So, China’s National Sword is by no means the beginning of the end for the U.S. recycling industry, but perhaps a fair stimulus to elevate the investment needed to elevate the quality and value of the ‘product’ that the scrap industry and it’s multi-faceted supply chain produces.

As the review of the solid waste, recycling and scrap industries on pages 12-25 indicates, business conditions may have improved in solid waste, but companies and cities have more room improvement and a sizeable challenge to achieve further landfill diversion. EPA data indicates plastics and food waste now eclipse paper in landfill tonnage (p.10) putting these in the cross hairs for future diversion programs.

In solar energy it is not the sword but the shield that is being erected as the Trump Administration announced tariffs on imported photovoltaic cells and modules in January 2018. As data on page 7 shows, China is regarded as the main culprit in the decline of the U.S. solar manufacturing industry, due to state sponsorship of its solar industry and price supports leading to the “dumping” accusation by Trump and the U.S. Trade Representative.

Compiled data by EBJ indicate that U.S. market share of the global photovoltaic (PV) cell and module manufacturing has been in the single digits since 2005, after falling from 30% in 1999 to 10% in 2005. U.S. PV manufacturer share in 2017 was less than 1%. The U.S. trade deficit in PVs between 2011 and 2014 in PV systems averaged over $6 billion a year and in 2016 jumped to close to $9 billion, with 2017 estimated at $9-10 billion (p.50).

Recent growth in U.S. solar PV installations has put total capacity at about 54,000 megawatts, up from a total cumulative capacity of about 7,500 megawatts at the end of 2012.

From 2012-2017, U.S. share of global PV capacity on the ground or on rooftops went from 7% to 14%, with the share of power generated substantially higher due to the lower latitudes and higher insolation than in Germany and Japan which have a similar share of the global installed capacity. China has led the installation race as well as the manufacturing race the last few years going from 2% of installed capacity in 2013 to 26% at the end of 2016. The top four account for 67% of global MW installed.

Regardless of the outcome of the tariff debate and to what extent it is instituted and enforced, the increasingly influential solar installers have made their case of the jobs that are at stake if Trump’s America First manufacturing fixation has a negative impact on the installation of solar power at the utility and distributed levels. Recent analysis by DOE’s National Renewable Energy Laboratory, published in its U.S. Solar Photovoltaic System Cost Benchmark indicates that while the ‘hard costs’ of cells, modules, inverters, and structural and connectivity elements have declined, ‘soft costs’ are a significant and growing contributor to the cost of installation and a clear majority on residential systems, averaging of $3.50 per watt installed for residential to $2 per watt installed for utility-scale PV systems.

NREL defines soft costs as “permitting, inspection, interconnection, land acquisition, sales tax, engineering procurement and construction developer overhead and net profit.” Soft costs incorporate the solar integrator model made popular by leaders Solar City (now merged into Tesla), Sunrun and Vivint that together had about half the market for the residential installations that are about 10-15% of the market in terms of MW installed.

The sword and the boomerang is hardly the first potentially memorable industry overview theme used by EBJ. Who could forget The Wake-Up Call of 1991 or The End of the Beginning in 1994, The Age of Uncertainty, The Foundation for the Future and countless others. Last year’s Era of Infrastructure has neither been abandoned nor forgotten and EBJ still believes the theme pertains for 2018 and perhaps for the 2020s but under the heading Infrastructure Disruption.

EBI Report 2020-B U.S. Environmental Industry Overview

A late 2017 poll by EBJ ranked transportation as the part of infrastructure most likely to be revolutionized in the near term, but not much farther behind were water/wastewater and electric power. Environmental industry combatants would be wise to develop technology and service value propositions in each of these three areas with little regard for the sword and boomerang, and the administration and policies coming from it.

Indeed, a contemporary environmental industry review evoking images of medieval knights wielding swords and aboriginal warriors flinging boomerangs does not quite jibe with today’s era of technology disruption. The application of specialty services, project management skills and technology to business challenges with an environmental component will continue to surface new niches for innovators and creative client-driven solution providers in the environmental industry. Just be prepared to duck.

Exhibit 1-63 U.S. Environmental Industry and Forecast: 2016-2020 Revenues in $Billion

2014 2015 2016 2017 2018e

GDP: USA 2.4% 2.4% 1.5% 2.3% 2.6% GDP: Global 3.4% 3.1% 3.2% 3.7% 3.9% Oil Price ‐9% ‐47% ‐17% 25% 14% Natural Gas Price 18% ‐40% ‐4% 19% 7% Stock Market (S&P 500/DJIA) 9% ‐1% 11% 22% 5% U.S. Construction (put in place) 11.0% 10.7% 6.5% 3.6% 5% Housing Price Index 13.2% 4.3% 5.6% 5.7% 5% Housing Starts 8.5% 10.8% 5.6% 2.5% 3% Water/Wastewater Rates 3.9% 3.3% 3.9% 3.7% 3% EPA Budget 3.8% ‐1.2% 0.0% ‐0.5% ‐5% Environmental Industry 4.5% 2.9% 3.6% 4.8% 4.9% Environmental C&E 1.3% 2.4% 1.4% 3.1% 2.8% Environmental Contracting ‐0.7% 0.1% 0.5% 1.6% 1.0% Environmental Infrastructure 3.3% 3.1% 3.5% 4.1% 4.1%

SOURCE: Environmental Business Journal, Environmental Business International, Inc., San Diego, CA, units in $bil. © EBI Inc. Forecast is annual average growth for the four-year period derived from company surveys, analyst interviews, economic data, client sector forecast and other inputs.

Exhibit 1-64 Environmental Industry as a Percentage of GDP: 1980 - 2018

SOURCE: Environmental Business Journal, EBI Inc. All 13 segments of the environmental industry

Exhibit 1-65 U.S. Environmental Industry 2016: Companies, Employment & Exports

Revenues Companies Exports 2016 avg Jobs 2016 $bil Entities 2015 $mil $/FTE Analytical Services 2.0 980 126 16,200 121,492 Wastewater Treatment Works 59.1 26,870 282 195,900 301,633 Solid Waste Management 61.0 9,550 206 295,200 206,797 Hazardous Waste Management 10.9 540 162 48,500 223,932 Remediation/Industrial Svcs. 13.7 1,980 821 99,800 137,081 Consulting & Engineering 30.1 3,270 5,645 232,300 129,574 Water Equipment & Chemicals 32.2 2,090 12,469 175,900 183,229 Instruments & Info. Systems 7.0 1,080 3,360 44,400 158,266 Air Pollution Control Equipment 16.8 1,310 2,476 97,800 171,858 Waste Management Equipment 15.1 680 4,836 93,900 161,022 Water Utilities 56.7 62,220 118 208,800 271,743 Resource Recovery 25.6 3,950 17,118 81,900 312,026 Clean Energy Systems & Power 39.8 2,820 4,100 135,100 294,467 Totals: 370.0 117,340 51,720 1,725,700 214,410

Source: EBJ, Environmental Business International, Inc., San Diego, Italics indicate public sector entities, Copyright EBI Inc.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-66 U.S. Environmental Industry: Revenues by Function in 2016 ($Billions & Share)

Env'l Infrst Resource Total Compliance Pol O&M/Supply Productivity $bil Ctrl/Rem SEGMENT Environmental Services Analytical Services 0.6 1.2 0.14 2.0 Wastewater Treatment Works 56.1 3.0 59.1 Solid Waste Management 53.0 8.1 61.0 Hazardous Waste Management 9.2 0.2 1.4 10.9 Remediation/Industrial Services 10.0 0.7 3.0 13.7 Consulting & Engineering 12.0 9.6 8.4 30.1 Environmental Equipment 0.0 Water Equipment and Chemicals 13.2 15.8 3.2 32.2 Instruments & Information Systems 3.7 2.5 0.8 7.0 Air Pollution Control Equipment 16.8 16.8 Waste Management Equipment 3.3 9.5 2.3 15.1 Resource Management 0.0 Water Utilities 56.7 56.7 Resource Recovery 25.6 25.6 Clean Energy Systems & Power 39.8 39.8 TOTALS: 69.0 205.4 95.7 370.0

Source: EBJ, Environmental Business International, Inc., San Diego, Italics indicate public sector entities, Copyright EBI Inc.

1.4.3 2017 Report and Trend Analysis: Trump Era Forecast

1.4.3.1 Environmental Industry Counts On Growth But Anticipates a Change In Direction in 2017 The election of Donald Trump in November 2016 caused a mixed reaction from the environmental industry. The double-edged sword of ‘good for business, bad for the environment’ is a bit simplistic, but fitting for a snapshot summary. Thirty years ago such a result would have caused a much more dire reaction as then most of environmental industry executives were environmentalists first and businessmen as an afterthought. Today most environmental industry executives are businessmen first and foremost, not necessarily out to right the wrongs of generations past, but integrating their views of social and economic

progress into the fabric of business and resource management in a way that provides value to their clients, meaningful work for their employees, profits for their company and personal satisfaction in making an enduring contribution to the world.

Whether these same sentiments motivate the ethereal Mr. Trump is anybody’s guess, but his appeal to make meaningful lives for more of the disaffected majority of voters in key parts of the country that got him elected is perhaps a step in the right direction. Making America great again with the return of 3-4% growth in U.S. GDP is also not a deplorable aspiration, but not necessarily a noble one, as a number of progressive 21st century economists that decouple GDP growth and quality of life would argue. Nevertheless, freeing up American industry to invest, stimulating private and public investment in infrastructure, turning up the spigots of America’s energy production and, closer to Trump’s heart, building skyscrapers and housing and airports and golf courses and casinos and walls all bode well for the backlog of the environmental industry’s main service segments.

So, what’s there not to like for the environmental industry about the election of Donald Trump? Well there is climate change denial and threatened isolation from global cooperation on climate policy. Then there is the dismantling of the EPA or at least its Clean Power Plan. And then there is the regression on healthcare, global trade, immigration, women’s issues and religious tolerance, but we are back to the double-edged sword again. With so much bluster it seems apparent that the environmental industry needs to find a voice to be heard amongst the crowd, something the industry has failed to do for 30 years so expectations of having any influence in new policy are understandably low. Money for infrastructure seems the most likely positive outcome, and no doubt any design and construction would entail a certain amount of ‘unbranded’ resiliency planning, so our world will keep turning, whether we keep pedaling or not.

EBJ growth forecast scenarios, admittedly mostly built from surveys conducted prior to the election, point to annual growth of 3.3-3.5% in 2017 and 2018. With the double-edged sword being wielded again with its self-cancelling factors leads us to make no major adjustment to EBJ forecast, but the addition of more uncertainty in both the positive and negative

EBI Report 2020-B U.S. Environmental Industry Overview

directions.

Positive factors again are the enhanced prospects in infrastructure design and construction, increase in domestic energy production and increased investment in manufacturing and general economic growth as targeted by the new administration. Negative scenarios are fueled by an increased likelihood of federal funding cutbacks and budget and staff reductions in federal programs that drive work for environmental firms from remediation to climate science, the dismantling of existing and planned regulatory programs like Clean Power Plan and Waters of the U.S., the likelihood of a significant stock market readjustment or a period of economic stagnation or recession induced by isolationist or misguided economic policy, and the increased unpredictability of global economic growth and cooperation the United States could experience in the hands of an untested political leader. While wrestling China and Russia into submission with a perhaps more diplomatically coiffed President Trump making America great again may paint a hopeful picture, in reality the bout will be more than a one-round match.

Commodity prices and property values are other macro-factors worth considering in scenario planning for environmental industry growth, but most observers feel these will be largely outside of the new administration’s influence, with the exception of some global or regional conflict of a scale we’d like to not consider, or a domestic financial situation mirroring the crisis of 2009 where factors underpinning the market erode or evaporate. Perhaps not the best way to end a forecast discussion, but we did start with the positive.

1.4.3.2 The Trump Effect is a Double-Edge Sword for The Environmental Industry

Like it or not we are at beginning of the Trump Era. Just how will the Trump Era be seen in the context of environmental industry history is the question--a question of some significance to today's strategy making decisions in the environmental industry.

A sampling of opinions from industry leaders and from attendees at EBJ’s Environmental Industry Summit XV give us at EBJ some latitude to make some early pronouncements. The consensus opinion on the Trump Effect is that it is a double edged sword. One edge is an all-

out effort to advance the gross domestic product, make a dent in Rust Belt unemployment, re-shore manufacturing, boost domestic energy production and lay the foundation for a Trump Era ushering in a revolution in infrastructure investment, development and deal- making on a scale to not only make America great again, but also chisel a fifth head on to the face of Mount Rushmore. This edge is mostly good for the environmental industry.

The second edge of the blade is a seemingly ardent lust to cut government and its influence on everyday life and business. This view was crystallized all too clearly in the last of the top three of the administration’s central purposes laid out by Trump’s lead political architect Stephen Bannon in a February 2017 speech. The first two were not a surprise: “national security and sovereignty” and “economic nationalism” but the third leg of the stool of the “deconstruction of the administrative state” was somewhat more alarming.

“If you look at Cabinet appointees, they were selected for a reason and that is the deconstruction,” Bannon told the Conservative Political Action Conference. “The way the progressive left runs, is if they can’t get it passed, they’re just gonna put in some sort of regulation in an agency.... That’s all gonna be deconstructed.” Bannon explained Scott Pruitt as the head of the EPA as an example of appointing officials who question or even disdain what their agencies do.

The goal to dismantle the administrative state or the “fourth branch of government” has been dulled somewhat by the subsequent departure of Steve Bannon from Trump’s innermost circle. But the movement has not gone with him, and it's already had some knock-on or trickle-down effect on federal departments and agencies and their morale, and on state and local authorities and their ability to carry out their duties.

In late March, Trump signed an executive order to review the Clean Power Plan (still technically tied up in court challenges that elevated to the Supreme Court), withdraw a moratorium on coal mining on US lands, as well as urging federal agencies to “appropriately suspend, revise, or rescind [regulations] that unduly burden the development of domestic energy resources.”

EBI Report 2020-B U.S. Environmental Industry Overview

This edge of the sword certainly targets Obama-era new environmental regulations like the Clean Power Plan and the Waters of the United States, but also aims to weaken what is fair to call “permanent feature” standards of environmental protection since the 1970s like NEPA, CAA and CWA, and characterizes environmental issues in general as exaggerated causes of too prominent liberal thinking that gets in the way of doing business.

The demon to this perspective is none other than the Environmental Protection Agency whose fate will be a decent bellwether of the Trump Effect on the more traditional environmental protection and natural resource management segments of the environmental industry. But here early bluster is being countered by evolving pragmatism. While EPA administrator Scott Pruitt was a polarizing choice politically and decidedly unpopular amongst senior staff and career environmental protection professionals, the initial 50% cuts bandied about by administration spokesman and the conservative think tanks like the Competitive Enterprise Institute and others look more in the 2-5% range in May’s compromise budget that averted federal government shutdown for at least four months.

As EBJ’s lead political analyst Andy Paterson had suggested at EBJ’s March 2017 Summit and in subsequent blogs and postings, the Senate and it's customary authority over budgets and federal government spending is acting in the role of ‘adult supervision’ for the pre- adolescent president and his team in the ‘Senate Regency’ scenario laid out on page 21. It appears most likely that Congress is taking on this supervisory role and even embracing its relative position of power as the final gateway or stopping point for a number of Trump Administration initiatives, executive orders and trial balloons.

IT WAS THE ECONOMY STUPID

In the final analysis of all the factors, the Trump Administration likely will keep its eye on the ball of the gross domestic product and it’s quarterly growth, believing the prevailing wisdom that reelection prospects in 2020 will be a function of GDP growth in the next four years. Policies that risk the upward trajectory of these numbers or serve as a distraction from

© 2019 Environmental Business International, Inc. Page 1-101 EBI Report 2020-B U.S. Environmental Industry Overview keeping eyes on the GDP ball are unlikely to have too many political bargaining chips wagered on them.

As far as the environmental industry is concerned the leading edge of Trump’s double-edged sword will be the factors that affect economic growth, and therefore the pace of construction and development, so while there may be less work per project on a typical development project, there will be more projects to work.

Compromises around budget rollovers and avoiding politically embarrassing government shutdowns are expected to continue to sustain a measure of status quo in the environmental programs overtly targeted during the campaign season.

This ‘let sleeping dogs lie’ factor likely does not likely apply to the CPP or WOTUS, nor has it or will it to U.S. position on global climate change policy. Global climate policy guru and EBJ Summit panelist David Victor from University of California San Diego however, stated that the USA “taking four years off” in the big picture will not put much of a dent in the 20- or 50-year cycle that global climate policy is on towards rationalizing greenhouse gas emissions mitigation and climate adaptation goals on a global level with economic growth and quality of life.

REVOLUTION IN THE DOMESTIC MARKET

On the domestic front recent quarterly financial reports indicate better earnings than we have seen since 2011, but even the more conservative economic analysts conclude it is more as a factor of economic fundamentals then any change in policy or the administration.

Another piece of the domestic agenda with a significant bearing on the environmental industry is the transition from the concept of ‘energy independence’ to the potential for ‘global energy dominance’. This is in part instigated by what some are observing as a second shale revolution where the collapse of crude oil prices over the previous few years has served to hone efficiencies in horizontal drilling, extracting light crude from shale deposits and

EBI Report 2020-B U.S. Environmental Industry Overview

getting it to market at a profit with the price even at $50/barrel or lower. American policymakers now seek to wield greater influence over global energy markets and its previously mostly immovable master OPEC, and is presumed to be a key reason why former Exxon chief Rex Tillerson is now Secretary of State.

Another revolution only in its formative stage is in the transportation system with the onset of self-driving vehicles, shared vehicles, grid-controlled traffic and other disruptive forces set to revolutionize personal transportation in urban settings. This revolution has attracted massive investment from Google, Microsoft, Apple, Amazon, Uber, Tesla, BMW, Ford and others. Much less investment has been made in the infrastructure to support the new system, however, or the urban planning, infrastructure and community outreach required for what many inevitably will call the onset of ‘socialized transportation’. This is a clear long-term opportunity for the project management community.

Another element for the somewhat more near-term planning horizon is the socio-political drivers portrayed on Pew Research’s annual list of top priorities for Americans. The 2017 list shows not only the overall rankings but the split between red and blue America, providing some insight into the political seasons ahead. First, environment does not even rank in the top 10, coming in at 11 of 21 issues (although tied for second for Democrats or those that lean Democrat). Second, while economy is second and jobs is fourth, other Trump Administration priorities immigration, trade policy, tax reform and the military are all well into the bottom 10 of priorities for citizens: Again areas where significant political capital would need to be expended to get anything done on a legislative scale because of thin public support, and where impatient leaders will not be rewarded with higher approval rating for being on the wrong side of an issue.

And while infrastructure is not a specific item on the Pew list, transportation is, and it ranks 19th of 21, indicating that while support to advance America’s infrastructure seems to be taken for granted by both sides, the challenge of financing it from a public perspective remains daunting. Last, while the priorities for many issues are similar across party lines, it is not surprising that climate change shows the widest partisan divide. Only 15% of

Republicans consider action on climate change a priority, and it is certainly more than a social concern when many seem to regard clinging to ‘climate change is a hoax’ as some sort of badge of honor in conservatives circles.

GROWTH FORECAST AT 3-4%

So to craft an environmental industry forecast involves weighing numerous elements both subjective and quantitative, and even the quantitative have an element of subjectivity about them. The tables on page 1 and page 5 summarize the key factors past, present and future, and result in a forecast of growth in the environmental industry, in the consulting & engineering segment, and in the environmental infrastructure segments of 3-4% in 2017 and 2018, still measurably ahead of the consensus GDP forecasts in the low 2-2.4% range. The outlook for growth in the environmental contracting segments of remediation, industrial services and hazardous waste management is somewhat lower in the 1-2% range.

EBJ’s 2017 Market Snapshot & Industry Trend Survey gives some insight on where the growth will likely occur based on the consensus of more than a hundred environmental industry executives polled in February and March 2017. Survey respondents first tackled a series of questions relating to the expected impact of the Trump Administration and Congress on federal departments, agencies and programs and then on general economic and policy issues and last on environmental markets. The results presented here on the Trump Effect on page 3 and 4 unsurprisingly mirror the stated objectives of the post-election and post- inauguration declarations, with the firm affirmation that in terms of markets, infrastructure is the place to be.

Climate change policy will get little love, but somewhat unexpected is that the momentum around renewable energy markets is expected to decrease with roughly one in ten respondents even expecting a ‘major decrease’. This in spite of the quotes and tweets from Trump that he just loves solar power and renewable energy.

EBI Report 2020-B U.S. Environmental Industry Overview

Energy prices continue to be a economic issue of significant impact to the environmental industry, and it appears that the Trump Administration and the U.S. oil & gas industry at the upstream, midstream and downstream levels are committed to expanded production and advancing their collective influence on global supply and prices. It also appears that while the industry itself would prefer higher prices, the administration likely will tolerate crude oil price hovering around $50 a barrel for the sake of re-shoring manufacturing, increasing employment in the Rust Belt states that gave Trump the election and moderate gasoline prices for consumers. Other commodities remain a factor and the depressed prices in mined commodities have rebounded somewhat recently, and those sectors are expected to remain on a modest upward trajectory with more investment in industry and construction.

Direct government spending clearly is compromised at the federal level (outside of Defense, Homeland Security and Border Patrol where dismantling the administrative state seems to not apply) as one of the major objectives of the administration is to cut overall spending. How this reconciles with the yet-to-be proposed details about a major infrastructure investment plan supported by, and to some extent instigated by federal funds remains to be seen. One element of tax reform that will likely have an impact on stimulating Private Public Partnerships (P3) for infrastructure investment are tax credits, but tax credits alone will hardly move the needle on private investment in infrastructure, and tax reform will generally focus more on lowering the corporate tax rate, the rate on the highest earners and simplifying the tax code for all Americans.

The ability of state and local governments to expand their investment in infrastructure is a function of their particular tax base and local economic conditions, but the approach of the federal government will play a role in how shovels hit the ground and who pays for those shovels, the boots that drive them and the plans that direct them.

State transportation authorities and various port authorities or their equivalents are expected by EBJ survey respondents to drive growth considerably more than state and local governments themselves. Transportation and port authorities as client markets rated by respondents for their growth prospects in 2017-2018 and exhibited on page 8 are still only at

© 2019 Environmental Business International, Inc. Page 1-105 EBI Report 2020-B U.S. Environmental Industry Overview the bottom of the top third of clients ranked, behind water utilities and power utilities as other infrastructure-related segments, and well behind the oil & gas industry that ranks across the top along with the IT sector, chemicals and healthcare as top markets.

The chart at the right also illustrates the change in ranking that each of the 33 markets have registered over the past five years. A notable change, besides the decline and rise the oil & gas business and the relatively recent rise of manufacturing sectors, is the fall of renewable energy and education out of the top 10 and down to the bottom 10. Subsidies are expected to be targeted in renewable energy and more private influence in education is expected to compromise those markets for capital spending in new construction, but also in energy investment and traditional environmental categories and like remediation and asbestos abatement.

REGIONAL MARKETS

Regional market rankings for growth in the next two years also have undergone a similar change in that the Gulf Coast took the same roller coaster ride, again demonstrating the influence of the domestic oil & gas markets on the environmental industry. Coastal markets have generally been driven by real estate development at the commercial and residential levels, but the strong position of California markets is also a factor of technology sectors and already approved transportation infrastructure projects funded by both state and city governments like high-speed rail and numerous transportation projects in LA.

The year 2016 also saw the debut of regional Environmental Industry Summits hosted by EBJ in Seattle in July and Boston in December, where regional markets and their notable differences where confirmed as key factors to competing and growing in each market. Investment in commercial property in Boston, Cambridge and surrounding areas was a big driver in that region, as well as traditional strength in the biotech and healthcare segments. In the Pacific Northwest the influence is spread among the transportation authorities of Washington and Oregon as movers of the market, the still relatively healthy real estate development environment, the hub of tech companies, and the impact of the presence of

EBI Report 2020-B U.S. Environmental Industry Overview

major corporations like Microsoft, Boeing, Starbucks, Amazon, Costco and others and the impact of them and their employees on local markets, development and investment.

Globally China and India remain intriguing opportunities with growth prospects expected to remain strong, but still only a small minority of environmental service and equipment companies are making investments of any significance there, and only a minority of those are indicating any early returns of sustainable long-term business models under their control. The ascension of Europe up the charts is also promising, with Germany and the Nordics leapfrogging Latin America and the United Kingdom where Brexit issues drive uncertainty in future growth.

Forecasting markets by media show that in the opinion of environmental executives surveyed by a EBJ, climate adaptation and greenhouse gas mitigation markets now fall to the bottom of the pile, but notably falling further is air quality which tumbled from the number one ranked media category in 2016 due to the expectations of EPA’s now seemingly doomed Clean Power Plan. Water and wastewater have moved up to the number one and three positions respectively, but the ranking of other media categories appear more a random grasping at straws in traditional environmental markets, although the growth in manufacturing certainly validates relatively more growth in traditional EHS work in those sectors and development of real estate, infrastructure and oil & gas projects certainly drive more project work in the natural resource market, despite the anti-regulatory rhetoric.

The trajectory of energy markets has entered a new era of speculation with the onset of the Trump Era. The decarbonization of the economy has been wiped out of the short-term equation much as climate change has been wiped off U.S. Department of Energy websites. While candidate Trump did shake some grandstands with his promise of the return of coal jobs, the 2017 EBJ survey only validates the most likely scenario that growth will not return, but that the decline of coal will only gradually be slowed by the eventual abandonment of the Clean Power Plan as drafted by the Obama Administration. The adjoining RE question on the EBJ survey however, indicates that environmental industry executives expect only upward trajectory in their assessment of renewable energy’s future as a percentage of U.S. electricity

generation, with those numbers steadily increasing with each year’s successive polling, leading to one third by 2100. The Trump Effect may slow momentum in renewable energy but not growth, kind of like what is expected for the entire environmental industry.

1.4.3.3 The Trump Administration: Trump: Four Merging Scenarios to 2020

View from EBJ’s Man in Washington Andy Paterson, Markets & Policy Editor.

With first 100 days into the Trump Administration behind us, four scenarios are emerging. None is clearly dominant, and they each surge more or less into play, depending on the week and the domestic and international agenda drivers.

A) “Hard Right Rudder” is exemplified by the attempt to repeal the Affordable Care Act, big reductions in corporate tax rates, and rollback of regulations. The “repeal two-for-one regulation” emanates from this political philosophy.

B) “Art of the Deal” may be at work in negotiation on an eventual Infrastructure bill, important to members of Congress from both parties and to Governors of all stripes. Many tradeoffs will need to be made as priorities are fought over.

C) “Senate Regency” is evidenced by the moderated Omnibus Budget agreement to avoid government shutdown in early May. Cooler heads among Senate Leadership working with Speaker Ryan were able to prevent a shutdown and accommodate enough votes to get a 1,600 budget deal digested. Anger on both the Far Left (too many cuts) and the Hard Right (not enough cuts) offers a positive barometer.

D) “Misfire and Confusion” is shown by Republican infighting over terms related to the ACA. Lack of an Infrastructure bill in the first few months

Strong interlinkage of big issues is shifting what Congress can do. Republicans needed to rollback Health Care to remove the subsidies for insurance premiums and gain $800 billion

EBI Report 2020-B U.S. Environmental Industry Overview in budget scoring (over ten years) to then apply to tax reform in the budget scoring derby – and then they need tax reform to provide financing incentives for a mega-Infrastructure bill. Trump has advocated a border tax on imports pegged at another $800 billion on the ledger. Both would enable more corporate rate reduction for small business, but retailers and industry are cool on the border tax which could disrupt trade. Republicans are not united. Trump proposed a $54 billion plus up in Defense spending, but without entitlement reform, the dollars come out of already whittled discretionary spending at agencies like DOE, DOT, Ag, and NIH. He got $15 billion in for DOD in the FY17 Omnibus Budget deal in early May, after giving in to demands by Democrats to fend off deeper budget cuts.

Scenario A) “Hard-Right Rudder”

Under this scenario, Republicans cut corporate and business taxes based on spending reductions at government agencies. Tea Party members would slash agency budgets.

A hallmark of this lurch toward the Right lies in extensive rollbacks by EPA on regulations, starting with the Clean Power Plan and Waters of the US (WOTUS). On April 28, the DC District Court officially postponed its much awaited ruling on CPP from the high profile “En Banc” hearing in late September 2016. EPA would need to re-enter an extended rule-making process over several months to formally withdraw the rule. When CPP was issued originally, EPA received over four million comments, which needed to be addressed before promulgation of the final rule.

At a high level, the seating of Justice Gorsuch in April, a clear Conservative akin to Scalia who he replaced, would seem to buttress rollbacks in regulation – the 5-4 majority, led by Chief Justice Roberts that suspended CPP in Feb 2016 with Justice Scalia, is now restored. The stay has not been lifted.

WOTUS was never popular in Farm states with either party, so the Administration likely will face less static on repealing that law, though the Clean Water Act and TSCA reform remain in effect.

A major area of contention with pro-business groups here is the trashing of multi-lateral trade deals by Trump. Crossover industrial union “hardhat households” are with Trump on his point: America is short-changed on trade deals, leading to outsourcing of a lot of factory jobs since NAFTA in 1993. That trend accounts for much of the vote switching in the Rustbelt (WI, MI, OH, IN, PA, WV); those hardhat households not only lost their jobs (temporary), the factory closed down (permanent loss for an entire community).

Possible Results: Less government spending. Widespread rollbacks of environmental regulations. Could put the House at risk for the GOP in 2018 if a recession occurs. Some progress on national debt, but fewer jobs unfold in Rustbelt states. However, entitlement reform remains elusive as votes from some Democrats are needed. Would the rollback in regulations allow more commercial and manufacturing projects to proceed to financing and investment with historically low interest rates? Too soon to tell; investment would ride on larger perceptions about the health of the economy.

Scenario B) “Art of the Deal… ”

In the forced agreement on the Omnibus May 1, Team Trump had to reassert some of the items they garnered “in negotiation”, like $15 billion more for DOD, but the Hard Right groups saw the deal as capitulation to avoid a government shutdown.

“Art of the Deal” inherits the rhetoric from trashing multi-lateral trade initiatives (Hard Right Rudder), and recrafts bilateral deals, e.g., with Canada and Mexico. So, Art of the Deal is about delivering results beyond tearing down policy. Trump’s support among Independent voters and crossovers is not ideological – he only earns their support with factories being rebuilt, and with training upgrades. Tearing down trade deals does not put food on the table.

Possible Results: Trump positioned as a deal-making negotiator. Uncertainty over whether any House Democrats are susceptible to negotiation.

EBI Report 2020-B U.S. Environmental Industry Overview

Infrastructure bill could stimulate some economic growth if coupled with tax reform, possibly energy investment and reduced regulations. Some Rustbelt recovery. A strengthened NATO with better budget and troop support for EU allies (?)

Scenario C) “Senate Regency”

The Senate has already demonstrated its primary position in shepherding a young government by managing the approval of Trump’s Cabinet, many of them contentious. Labor nominee Puzder was a casualty, but was quickly replaced. So far, the Senate is working well the National Security team: DOD Secretary General Mattis, Secretary of State Tillerson from industry, and CIA Director Mike Pompeo from the House. In addition, pacing in the Senate will determine how quickly Trump can get subordinate positions filled in agencies.

When Team Trump descended on Capitol Hill to twist arms on the ACA repeal, they got stiff-armed by Committee chairs and caucus members who reminded them that Article One of the Constitution is the Congress, not the President. The Senate was established to provide a longer horizon decision-making body and many Republican members have not been shy at all about challenging initiatives by Trump on national security (Russian relations), foreign policy (trade) and on intelligence reviews.

Possible Results: Government spending is determined by Senate Appropriators and compromises with House. Tax Reform is critical to any kind of spending deal. Under this scenario, Team Trump would be involved in negotiating tax measures, but Congress is in the driver’s seat. Speaker Ryan is steeped in tax law, but the close majority in the Senate is likely the ultimate gatekeeping function with Trump’s signature expected to enact potentially the biggest reform since the landmark 1986 deal.

D) Mis-Fire and Confusion

Trump’s tweets and misstatements by Press Secretary Spicer display confusion on policy poorly thought out. The attempted Muslim bans on immigration and air travel were knee jerk

© 2019 Environmental Business International, Inc. Page 1-111 EBI Report 2020-B U.S. Environmental Industry Overview sops to campaign constituencies, and were interdicted by lower courts. Trump has not yet articulated a coherent foreign policy relative to conflict in the Middle East, Europe, and Asia. Weekend dining with PM Abe (Japan) and then President Xi Jinping (China) are useful for communication, but do not amount to a comprehensive foreign policy with clear goals. A brief business lunch with Chancellor Merkel was clearly frosty. A walk back in favor of NATO after meeting with Scretary General Stoltenberg was welcomed, but follow through with allies at the NATO summit May 25 and at G7 are needed to show substance.

If a much needed Infrastructure bill is derailed over “how to pay for it”, then Trump loses a major plank of his campaign and lots of working class jobs go wanting. The Trump coalition needs welders, drillers, truck drivers and miners to be re-employed.

Possible Results: Warring factions among Republicans, results in more lost House seats at midterms in 2018. Losses in the House further jeopardize what Republicans can get done in 2019-20, despite holding the Senate. A fail on an Infrastructure bill could be lethal to keeping the House in 2018.

1.4.4 2016 Industry Overview Report and Trend Analysis Infrastructure the Next New Era? Environmental industry eras have come and gone with changes in political seasons, resource prices, economic cycles, industries on the upswing and government funding trends, but no era is dramatically apparent in 2015. Relatively recent phases of debt-fueled property development, recovery-minded government stimulus, and $100-per-barrell domestic oil & gas development all had almost inevitable horizons as they drove growth in spurts over the past decade, but a nascent, and perhaps longer lasting, era of infrastructure investment may be ready to take center stage.

While the need to re-invest in critical infrastructure has long been advocated by the American Society of Civil Engineers and others, political consensus and funding momentum has yet to create a sustained double-digit growth market for services. ASCE offered America’s cumulative infrastructure a D+ in its last Report Card to shame leaders, but at

EBI Report 2020-B U.S. Environmental Industry Overview least acknowledged an improvement from its prior grading period. The estimate of investment still needed by 2020 is $3.6 trillion, something well out of scope for Congress’ 2015 transportation bill, but not too exaggerated a target.

Leadership, funding and resiliency are effectively the three things ASCE concludes that are needed to usher in an infrastructure era, but it may be asking too much to expect all three. Resiliency is built into almost everything now in the wake of Katrina and Sandy, and has almost become a code word for climate change adaptation in some circles, offering a hint of perhaps another era ahead for the environmental industry. Other legitimate drivers include investment in energy security, a growing and diverse domestic economy, the benefits of relatively inexpensive energy, environmental & energy policy and the elevation of water security as more than a regional issue. With an election looming in 2016, one has to mention the potential impact of the now seemingly conflicting visions of ‘making America great again’ and maintaining a fairly consistent effort to advance environmental policy domestically and globally. National leadership will indeed have an effect on environmental industry growth in 2017-2020, but there is time for this to play out. Meanwhile the last year of the Obama Administration promises not to be a typical lame duck year, but an ongoing effort to pursue national goals like EPA’s Clean Power Plan and global goals like those to be presented in Paris at COP21.

Industry Grows 4% in 2014 The U.S. environmental industry grew 3.9% in 2014, according to research and data compiled by Environmental Business International Inc., publisher of EBJ. The environmental industry’s total of $353.7 billion in revenues represented 2.82% of the U.S. gross domestic product (GDP) in 2014, and EBI estimates environmental industry employment at 1.74 million in 2014, up a marginal 9,000 from 2013.

In 2015, the U.S. environmental industry is on track to grow 5%. 2014’s growth rate of 3.9% is up more than 2 points from 2013’s 1.8%, but eliminating the volatile resource recovery and clean energy segments shows growth in the remaining 12 segments of 2.8%, or the lowest since the same 2.8% in 2010.

In environmental services, the 2.4% growth in 2014 was the lowest rate since a 1% contraction in 2009, mostly a function of continued decline in federal spending and a cut-off in domestic oil exploration. The 2.4% growth in environmental services matched the GDP in 2014, as property development, construction and domestic industrial activity made up for the declining federal and oil & gas categories. 2015 looks to be close to 3% growth in environmental services, ahead of the U.S. GDP which should end up 2.4-2.6% in 2015. Environmental Services: Key Growth Factors

2004-2008 2009-2010 2011-2013 2014-2015 2016 Economic Growth (GDP) + -- + +n +n Property Values ++ - - + +

Federal Government Spending + + - n n Oil & Gas, Commodity Prices ++ -- + -- n Construction Activity + -- + + + State & Local/Infrastructure Spending + - - n +

Key factors that impact market cycles in environmental services, or the consulting & engineering (C&E) segment in particular, are summarized on the table above, with the notable absence of regulation. Positive forces that conspired to lead to 6.8% average annual growth in C&E from 2004-2008 are unlikely to be repeated, but it appears for 2016 and beyond that the recent negative factors have been held in check. Property values and development are on the upswing, admittedly more on the coasts than in the heartland. Federal revenues may even grow in 2015 after 2014’s loss of $330 million in C&E revenues from the federal government, itself an improvement from a $860 million decline in 2013.

Overall the $28.9 billion environmental consulting & engineering industry grew 1.9% in 2014, with government revenues down 2% and the private sector up 6%. The private sector now accounts for 49.7% of U.S. C&E firm revenues, up from a low of 40.8% in 2004, according to EBI’s annual analysis. The private share grew steadily through the last 10 years with a slight hitch as recovery spending sustained government markets in 2009. Segment leaders AECOM, CH2M and Tetra Tech understandably focused on fiscal management in their fall 2015 financial reporting as revenue growth has been hard to come by.

EBI Report 2020-B U.S. Environmental Industry Overview

Michael Burke, AECOM’s chairman and chief executive officer said, in announcing fiscal 2015 results: “We completed the largest combination in our industry’s history [AECOM acquired URS in summer 2014]…. Despite the attention to integration and uneven global economic trends, our results and outlook reflect the benefits of our diversification.”

Tetra Tech’s Chairman and CEO Dan Batrack said in announcing fiscal 2015 results: “We had a solid fourth quarter, generating a 13% EBITDA margin…. Our successful business model has enabled us to pay a dividend, repurchase shares and invest in the Company’s growth, both organically and through acquisitions,” noting the recent acquisition of Coffey, an Australia-based C&E firm with 3,300 staff worldwide.

CH2M’s Chief Financial Officer Gary McArthur said, upon releasing CH2M’s Q3 2015 results, “Our performance this quarter marks a turning point for CH2M, reflecting the fact that we’ve positioned the company well to continue to perform at a higher level, with a stronger balance sheet and greater flexibility to invest in our future,” after Chairman and CEO Jacqueline Hinman emphasized CH2M’s improved balance sheet due to improved operations and a $100-million investment from Apollo Global Management.

What these three leaders also had in common was a 4% decline in revenue: AECOM’s Design & Consulting Services (DCS) segment reported 2015 FY revenue of $8.0 billion, a 46% gain compared to pre-URS figures but an ‘organic revenue’ decrease of 4%; Tetra Tech reported fiscal 2015 revenue and net revenue of $2.3 billion and $1.72 billion, respectively, with a net revenue decrease of 4%, although due in ‘large part’ to the wind-down of its Remediation and Construction Management division; CH2M reported Q3 2015 revenue of $1.37 billion, a decrease of 4%, and year-to-date revenue of $3.95 billion, also a decrease of 4% compared with the same period in 2014.

The share of the top 5 environmental C&E firms (including Golder and Arcadis) has dipped to 33% in 2014 from 36% in 2012, after a steady climb to that 36% share point from 19% in 2000. Many pundits foresaw a polarization of the C&E industry into mega-firms and smaller,

© 2019 Environmental Business International, Inc. Page 1-115 EBI Report 2020-B U.S. Environmental Industry Overview regional independents or specialists, but few anticipated the share of the megas would diminish. No doubt the larger firms will continue to acquire, and evidence shows they have recovered from their federal swoon and are prepared to continue in growth and M&A, but the road to dominance has not been so smooth.

New Future in Solid Waste In other segments, solid waste management continues to be the environmental industry’s largest segment at $58 billion in revenues in 2014, but growth has been modest recently. The fundamental issue of having less waste to cart around is prevalent, but the volume of material handled for recycling has leveled off since 2008 as well. From a business standpoint, leaders acknowledge volume declines, but revenues are also impacted by service prices, recycled commodity prices and fuel surcharges, of which the latter two have been on a downward cycle. $13-billion leader Waste Management reported “core price increases”, or effectively what they charge their mostly municipal and commercial customers, were up 4.0% in 2014 and 3.8% in 2013, while overall revenue increased by only 0.1% in 2014. Price increases continued at similar 4% pace in 2015 as reported in October 2015, but modest revenue declines were largely the result of declining volumes, recyclable prices and fuel surcharges.

Observers have perhaps not unfairly characterized the solid waste business as less an environmental business and more a logistics business or ‘Fedex in reverse’, and Waste Management’s CEO David Steiner’s recent statement when releasing quarterly financials indicated the company’s focus on operations. “Our third quarter results reflect the impact of our continued commitment to core price, disciplined growth, and cost controls, all of which are driving improvement in our key operating metrics.... We saw positive volume growth in our very profitable industrial line of business.... Internal revenue growth from volumes has improved each quarter since the first quarter of 2015.” Number two firm, $8.8-billion Republic Services has a similar focus and reported 4% growth in 2014 with only 1% due to acquisitions, and so far in 2015 has reported 4% growth with 1% losses each in recycled commodities and fuel recovery, so volumes and prices are up. Waste Management and Republic represented 37% of the industry in 2014, with municipalities collectively generating $16.4 billion or a 28% share.

EBI Report 2020-B U.S. Environmental Industry Overview

In the big picture, environmental issues will impact the solid waste business, but perhaps to a lesser degree than costs & prices and supply & demand. Over the last few decades, the generation, recycling, composting, and disposal of municipal solid waste (MSW) have changed substantially, and escalating state-by-state diversion rate targets will continue to pace this change. U.S. volumes of waste being discarded flattened in the 90s and are now declining. Solid waste generation per person per day peaked back in 2000, and EPA’s most recent figure of 4.38 pounds per person per day is the lowest since the 1980’s. The recycling rate has increased from less than 10% of MSW generated in 1980 to over 34% in 2012, EPA most recent complete figures. Disposal to landfill has decreased from 89% in 1980 to 54%. In EPA’s latest recovery rates, lead-acid battery recovery is 96%, steel cans 71%, newspapers 70%, aluminum cans 55%, glass 34%, PET plastic 31%, consumer electronics 29% and HDPE plastic 28%.

The tonnage of recovered materials grew steadily from 14 million tons in 1980 to 84 million tons in 2008, but has stayed between 84 and 87 million tons since. Sales of secondary materials in the U.S. in 2014, or what EBJ defines as the resource recovery segment, dipped below the $30 billion mark it first reached in 2007, with an understandable dip during the recession. With prices down in 2015, the resource recovery segment will fall further. Perhaps more telling for the future is EPA’s history of tonnage of waste discarded (mostly either landfilled or incinerated) that shows the halving of paper and yard waste, but the continued march of plastics, food waste and textiles into the wastesteam. While currently not too high value, these wastes are the frontier of activity in innovation, technology and likely regulation in the future.

In hazardous waste, EBI estimates that $10.8 billion segment saw 1-2% growth in 2014 as commercial/industrial waste service revenues increased 5% and medical waste 4%, offsetting declines in federal facilities and relatively flat conditions in nuclear waste and solvent recovery. Segment leader, $3.4-billion Clean Harbors posted a 3% decline in revenues in 2014, with a drop-off in its oil & gas business the largest contributor, although Technical Services, its traditional hazardous waste business, grew 5% to $1.2 billion. Other segments in

environmental contracting were fortunate not to lose ground as government markets continued to slow work for remediation contractors, although developers and industrial clients showed some rebound. Industrial service contractors likewise suffered in the upstream oil & gas market, but fared better in downstream and particularly in midstream where pipeline work continued with increased domestic production.

Exhibit 1-67 Selected Materials Discarded* in the Municipal Waste Stream (1960-2012)

Paper and Paperboard Total Metals Plastics Textiles Food Waste Yard Trim m ings

60000

50000

40000

30000

20000

10000

0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Source: (In thousands of tons and percent of total discards); Adapted by EBJ from Municipal Solid Waste Generation, Recycling, and Disposal in the United States, U.S. Environmental Protection Agency, Office of Resource Conservation and Recovery, February 2014. Figures for years without data reported are filled in with average change in the periods between reported data.

Other measures of industry trends worth examining are FMI’s construction activity summary presented above, and ENR’s annual list of the top 200 environmental firms. The ENR list includes contractors, consultants and operations firms in waste and water. EBJ’s comparison of companies that appear in ENR with complete data in successive years reveals some interesting results for the past three years. Overall growth of 2.2% saw little variation by size of company, although the smallest firms declined in 2014. Federal markets have recovered somewhat, but not much if large waste management contractors Bechtel and Fluor are eliminated. Perhaps most notable is the 6.8% gain in firms with more than half their revenues from state & local government clients, after a 5.5% gain in this category in 2013, which followed a few appalling years during the recession. Water/wastewater firms are a close

EBI Report 2020-B U.S. Environmental Industry Overview comparable to state & local markets, and the 7% gain in 2013 and 10% gain in 2014 serves as a real measure of the momentum building in infrastructure.

Exhibit 1-68 2012-2014 ENR Top 200 Environmental Firms: Performance by Groups

2012 Growth 2013 Growth 2014 Growth All Firms ‐4.1% 3.4% 2.2% Large Firms ($500 mil+) ‐3.8% 3.4% 2.6% Medium Firms ($100‐500 mil) ‐4.4% 2.6% 1.5% Small (Under $100 mil) ‐4.0% 4.7% 0.9% Smallest (Under $40 mil) 1.6% ‐7.7% ‐2.5% By Client Focus 50%+ Federal ‐7.2% ‐3.7% 8.8% 50%+ Federal ‐Fluor/Bechtel ‐4.1% ‐21.6% ‐5.0% 50%+ State/Local ‐13.6% 5.5% 6.8% 80%+ Government ‐11.4% 0.9% 4.8% 50‐80% Government ‐8.1% ‐0.5% ‐0.2% 20‐50% Government 0.3% 2.4% 1.5% Under 20% Government 15.0% 18.9% 4.4% By Majority of Work Construction ‐13.0% 4.0% 4.7% Consulting 4.3% ‐2.8% 3.4% Design 4.0% ‐4.7% ‐4.1% Water/Wastewater (>95%) ‐7.5% 10.0% 7.4%

Source: EBJ, adapted from aggregating figures for the same companies reported to ENR magazine (McGraw Hill) for its Top 200 Environmental Firms editions in successive years from 2011-2015

If it is an era of a renewed emphasis on infrastructure that we anticipate as a next big driver in the environmental industry, just who is the client? EBI’s annual survey questions that rates client sectors provides more than a hint. Despite construction activity rankings that put them nearer the middle of the pack, environmental firms rate education and healthcare in the top six of 33 client categories, and both power and water utilities in the top five. Manufacturing places three sectors in the top eight rated client sectors in 2015-2016. If we include both utilities and oil & gas midstream (which is largely pipelines), then infrastructure segments place five in the top 13. Government categories all fall near the bottom of the list, with a notable exception of local government moving up eight positions on the EBI survey in two years.

If it is to be infrastructure that defines a new era, than indeed a larger commitment is required. Previous environmental industry eras were defined by commitments to environmental regulation (1970-90), shrinking the government (1994-98), rescuing the economy (2008-2010) and the shale-era oil & gas boom (2010-2013), each of which had a pretty clear political commitment behind it. Perhaps the one thing that both making America great and maintaining the commitment to environmental quality have in common is reinvesting in infrastructure. Whether a new commitment is made or not, or which party commands Washington, state capitols or city halls, it is likely that a larger focus on infrastructure, and resilient infrastructure, is here to stay.

Highlights From EBJ’s First Washington D.C. Strategy Summit Environmental Business International, publisher of EBJ, hosted its first Washington DC Summit in the collegial spirit of its annual March meeting in San Diego. Over-arching themes were: a) The Obama Administration will pursue environmental goals despite opposition in Congress. Congress will oppose regulations, except as they promote energy modernization and development. b) EPA’s Clean Power Plan continues pressure on old coal units to close, but cheap gas and other regulations on mercury, ozone, and particulates will augment that pressure independent of CPP. EPA is not responsible for keeping lights on in states; Governors and PUCs are. CPP implies massive build required for natural gas: pipelines, storage, generation facilities— and transmission. Threat of stranded assets could accelerate industry consolidation. c) Regional differences remain severe (fuel mixes, level of urbanization, growth or decline, weather; Drought in the West to 2080 will aggravate water shortages, and temperatures will amplify impacts.

Key Observations CCS and Nuclear are not dead: Greatest global challenge is electricity and transport for 4 billion more people – while reducing carbon emissions, said Barry Worthington of U.S. Energy Assn. The challenge cannot be met without nuclear or CCS. “Without CCS the

EBI Report 2020-B U.S. Environmental Industry Overview

challenge of reducing carbon emissions will be more expensive,” said DOE’s Jonathan Pershing. “After 2025 we will need to look at CCS on natural gas as well to meet the 450ppm goals.”

Climate stress impacts water supply and water quality. Water stress will impact the food chain and urban supply more extensively. NASA work forecasts perhaps three more decades of drought in West, says Jason Smerdon of Columbia University.

Grid upgrades entail billions of new investment: We are living on borrowed time with an aging grid, and the need to upgrade for intermittent wind and more decentralized storage. Utilities invested over $100 billion in 2014 on generation, transmission and distribution. The drivers are environmental regulations, fuel switching to gas, state RES, and demand where there is growth or upgrades to aging assets.

EPA CPP DOA? EPA Clean Power Plan will be challenged on all fronts, while states pursue energy plans in parallel. Southern states and coal-powered counties are suing EPA, sais Fred Eames of EBI’s co-host Hunton & Williams. Emissions targets vary widely by state to reach EPA goal of 32% lower emissions by 2030, creating grounds for suits, combined with usurpation of state jurisdiction on resource laws.

DOD is continuing renewable resource programs despite landscape of Budget Control Act and Sequestration. There could be a BRAC round in 2017 to help meet BCA pressures. Oceans’ health critical: We reached ‘Peak Fish’ in the late 1990s; we are taking out more than regenerating stocks. More carbon capture is done by green algae at sea than by any other mechanism.

Gathering Storm: Utilities face more buffeting from decentralization, consumers doing rooftop solar, and companies doing on-site production to loosen the tether to electric utilities. EVs are a big wild card.

Nuclear: Worldwide USA operates 100 of 390 GWs, but with aging reactors in North America and Europe, the decommissioning market will top $100 billion from 2015 to 2040. Climate adaptation work is already underway, funded mostly by AID, development banks, Corps of Engineers and cities.

EPA “Waters of US” regulations are unfolding since August 2015 with controversies over “significant tributaries to watersheds” and expansion from “navigable waters” in original Clean Water Act. Ag states and communities have launched “Ditch the Rule” campaign.

1.5 Segment Review

1.5.1 Environmental Service Segments COPY EI BY DECADE TABLE AGAIN The U.S. Environmental Industry by Decade 1970‐2020 Revenue & Growth ($ Billions) ENVIRONMENTAL 70-80 80-90 INDUSTRY SEGMENT 1970 1980 Growth 1990 Growth 2000 SERVICES Analytical Services 0.1 0.1 0.3 300% 2.1 523% 1.8 Wastewater Treatment Works 5.8 5.8 10.3 78% 18.4 78% 28.7 Solid Waste Management 8.3 8.3 14.6 76% 26.1 79% 39.4 Hazardous Waste Management 0.1 0.1 0.6 339% 7.1 1082% 8.8 Remediation/Industrial Services 0.3 0.3 1.6 401% 9.9 534% 9.9 Consulting & Engineering 0.1 0.1 1.3 1492% 12.5 856% 17.4 EQUIPMENT 0.0 Water Equipment and Chemicals 1.7 1.7 6.9 306% 13.4 93% 19.8 Instruments & Information Systems 0.1 0.1 0.4 265% 2.0 404% 3.8 Air Pollution Control Equipment 0.4 0.4 4.5 1122% 11.1 144% 19.0 Waste Management Equipment 2.0 2.0 4.7 134% 9.1 95% 11.1 RESOURCES 0.0 Water Utilities 7.4 7.4 12.0 61% 19.8 66% 29.9 Resource Recovery 2.3 2.3 6.1 161% 13.1 114% 16.0 Clean Energy Systems & Power 0.7 0.7 4.1 467% 3.0 -28% 4.4 TOTALS: 29 29.4 67 129% 148 119% 210

EBI Report 2020-B U.S. Environmental Industry Overview

ENVIRONMENTAL INDUSTRY SEGMENT 90-00 00-10 10-20 SERVICES Growth 2010 Growth 2020 Growth Analytical Services Wastewater Treatment Works -14% 1.9 7% 2.1 14% Solid Waste Management 56% 45.5 58% 67.7 49% Hazardous Waste Management 51% 53.4 35% 68.3 28% Remediation/Industrial Services 23% 10.0 14% 11.1 11% Consulting & Engineering 1% 12.4 25% 14.6 17% EQUIPMENT 39% 26.8 54% 34.8 30% Water Equipment and Chemicals Instruments & Information Systems 48% 26.9 36% 34.7 29% Air Pollution Control Equipment 88% 5.4 44% 8.3 55% Waste Management Equipment 72% 14.9 -22% 17.1 15% RESOURCES 22% 12.7 14% 16.3 29% Water Utilities Resource Recovery 51% 43.5 45% 67.1 54% Clean Energy Systems & Power 22% 28.5 79% 22.1 -23% TOTALS: 49% 21.4 381% 59.5 179%

In general, the environmental services market has slowed down a bit in the past decade. Solid waste companies were somewhat sustained by a modest uptick in the economy, the consistent volume of municipal solid waste and recovering prices. Remediation companies saw Superfund and RCRA-related revenues decline, while privately-initiated and large government site cleanups picked up. Wastewater treatment works continued growth higher than that of the economy with increased demand and notable rises in price. Unfortunately, the other service segments enjoyed less such sustaining factors from their respective customer bases. As a result, demand for analytical services waned, and these firms experienced very competitive markets, which in turn, spurred consolidation. The fortunes of hazardous waste management companies declined precipitously in 1993-2008 as overcapacity on the disposal side lead to pricing pressures and coincided with a demonstrable drop in volumes due to waste minimization efforts.

In general, the transition that has occurred over the past decade in environmental services has been from a “sellers market” to a “buyers market”. Diminished growth in demand for environmental services heightened competition in each segment, leading to pricing pressures and declining profitability. Understandably, firms turned their attention inward and became more focused on management issues, particularly cost control. The common perception of environmental firms is that they are run by scientists or engineers and are not very sophisticated from a business standpoint. This is not entirely misplaced. No doubt many environmental firms have been lax in professional management practices, but simple attention to cost control in a more competitive marketplace has not solved all their problems. A common characteristic of a maturing industry is an increase in expenditures on sales and marketing. While this has occurred in parts of the environmental services sector, more often than not, business development and marketing are the first to suffer as cost controls are implemented. Layoffs in the sales and marketing department, justified or unjustified, still pervade the industry. Because of this short-sighted reflexive action, in the future many firms will find themselves struggling just to maintain their market position.

Essential to maintaining growth and strategic direction, particularly for service firms, is protection of market share in the face of pending technological advances. Many traditional environmental service sectors face the threat of losing some of their service revenues due to new technology and equipment purchases. Whether common fixed-lab instrumentation loses out to field instruments, or hazardous waste disposal companies lose business to innovative process treatment technologies, all environmental service operations need to view new technology as an ally and as a potential new market area for continued growth, rather than a threat to their business.

1.5.2 Environmental Testing and Analytical Services Analytical Services companies provide environmental sample analysis and other laboratory services such as sampling, monitoring and lab analysis for environmental samples (soil, water, air and biological tissue). Analytical services can be considered a forerunner for the rest of the environmental industry, since many projects, as well as service and equipment purchases, generally follow some form of analytical testing.

EBI Report 2020-B U.S. Environmental Industry Overview

The analytical services industry responds primarily to federal, state and local regulations and programs. These may include the Clean Air Act and its amendments, Clean Water Act, Resource Conservation and Recovery Act (RCRA), Toxic Substances Control Act, Toxic Release Inventory reporting requirements and Superfund. Their services are marketed to federal, state and local governments, hazardous waste remediation contractors, environmental consultants and environmentally regulated industrial companies.

The analytical services segment peaked at $2.2 billion in revenues in 1991 but declined to $1.7 billion in 1998. It has since exhibited a somewhat upward, but mostly flat, trend to $1.9 billion in 2012 and about $2 billion in 2020. More than half of revenues results directly from other environmental firms (mostly consulting firms). Revenue growth in this segment should be level for the next few years but eventually decline as testing will increasingly be a function performed by onsite technology replacing off-site laboratory testing services which is the vast majority of the market today.

During the years 1992-1999, the environmental testing and analytical services segment of the environmental industry suffered through a very difficult period of declining revenues and excess capacity. Growth in revenues generated from commercial environmental testing and analytical services fell from levels of over 20% per year in the late 1980s to negative growth in the 1990s. In the 2000s growth mostly leveled off at zero to 2% range per year until a fall- off of near 8% in 2009. Some recovery has been seen since but annual growth has been only modest or flat to 2016.

In many regards, the analytical services segment has served as a leading indicator for environmental service segments, such as C&E and remediation services encountering the challenges of industry maturation in advance of other environmental segments.

Exhibit 1-69 Historical and Projected Growth in Environmental Testing & Analytical Services

Source: Environmental Business Journal © EBI Inc.

In the environmental lab business, all of the fundamentals continue to suggest a longer-term return to greater stability and profitability. However, as we all know today, the environmental business is increasingly an economically-driven business – one where discretionary spending plays a key role in the overall level of business activity. Given that the major shake-out and turmoil which the industry experienced in the mid 1990s occurred right smack in the middle of one of the largest and most sustained periods of economic expansion in our history, one naturally has to worry a little bit about the lab industry’s general prospects in times of a softer economy where there may be less discretionary spending.

Exhibit 1-70 Historical Growth in the US Analytical Services Market, 1988 - 2018

Revenue Annual Year ($Mil.) Growth 1988 1.64 25.0% 1989 1.95 18.9% 1990 2.05 5.1% 1991 2.16 5.4%

EBI Report 2020-B U.S. Environmental Industry Overview

1992 2.04 -5.6% 1993 1.96 -3.9% 1994 1.87 -4.6% 1995 1.82 -2.7% 1996 1.77 -2.7% 1997 1.74 -1.7% 1998 1.72 -1.1% 1999 1.73 0.6% 2000 1.76 1.7% 2001 1.78 1.1% 2002 1.77 -0.6% 2003 1.77 -0.2% 2004 1.80 2.0% 2005 1.82 0.9% 2006 1.84 1.2% 2007 1.89 2.8% 2008 1.95 3.0% 2009 1.79 -8.4% 2010 1.88 5.5% 2011 1.94 2.8% 2012 1.94 0.4% 2013 1.88 -3.1% 2014 1.89 0.4% 2015 1.93 2.1% 2016 1.97 1.9% 2017 2.01 2.3% 2018 2.06 2.2%

Source: Environmental Business International Inc. (San Diego, CA)

Exhibit 1-71 Distribution of Companies and Revenues in Environmental Testing & Analytical Services, 1993

Number Total Average Size Companies Revenues Revenues Large (>$12 Million) 27 675 25.0 Mid-Size ($3-12 Million) 60 360 6.0 Small (<$3 Million) 1,050 925 0.49 Total 1,137 $1,960

Source: EBI and TSG databases of environmental labs © EBI Inc.

Exhibit 1-72 Distribution of Companies and Revenues in Environmental Testing & Analytical Services, 2003

Number Total Average Size Companies Revenues Revenues Large (>$10 Million) 21 715.1 34.1 Mid-Size ($3-$10 Million) 76 428.7 5.6 Small (<$3 Million) 1053 625.6 0.6 Total 1,150 $1,770

Source: EBI and TSG databases of environmental labs © EBI Inc.

Exhibit 1-73 Distribution of Companies and Revenues in Environmental Testing & Analytical Services, 2016

Number Total Average Size Companies Revenues Revenues Large (>$10 Million) 17 1,102 64.8 Mid‐Size ($3‐$10 Million) 66 290.4 4.4 Small (<$3 Million) 660 575 0.9 Total 743 1,968 2.6

Source: EBI and TSG databases of environmental labs © EBI Inc.

All the mergers and acquisitions in the world won't immediately solve the overcapacity problem. It is doubtful that many acquired assets in the form of analytical equipment and trained personnel were retired. Moreover, there is actually a larger number of small, independent operators in the market today.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-74 Leading Companies in Environmental Testing & Analytical Services, 2001

Revenues Company (HQ Location) ($Millions) STL, Inc. (Ft. Washington, PA) 229 Sequoia Network (Morgan Hill, CA) 57 TestAmerica, Inc. (Asheville, NC) 39 Pace Analytical Svcs. (Minneapolis, MN) 39 Microbac Laboratories (Pittsburgh, PA) 37 Accutest Laboratories (Dayton, NJ) 33 Columbia Analytical (Kelso, WA) 30 Lancaster Labs (Lancaster, PA) 27 EMSL Analytical, Inc. (Westmont, NJ) 25 General Engineering (Charleston, SC) 21 SPL Inc. (Houston, TX) 17 GlenRose Capital (Georgetown, TX) 16 Environmental Science Corp. (Mt. Juliet, TN) 15 CT&E Environmental (Ludington, MI) 15 EnChem (Green Bay, WI) 14 QC, Inc. (Southampton, PA) 12 MWH Labs (Pasadena, CA) 12 Datachem (Salt Lake City, UT) 11

Source: Environmental Business International Inc. (San Diego, CA) © EBI Inc.

It is worth noting that over half of revenues generated by environmental testing firms come indirectly from the end-user through other environmental companies, mostly C&E firms and remediation contractors, which tend to exaggerate the competitive pressures in this business. All companies must also add value to their services by doing more than just turning around samples and taking over a client's problem from beginning to end by sampling, testing and completing the paperwork. Businesses seldom fail that offer good customer service provided they can price accordingly. Long-term prospects for this market revolve around the transition from fixed-facility lab testing to onsite testing and monitoring. Momentum is building, and technology will play a role. Equally important will be how analytical service firms participate in this transition. Analytical and information technology is making environmental analysis faster and cheaper. Leading firms will use both to their advantage. Losers will find their services supplanted by onsite monitoring technology.

Exhibit 1-75 Leading Companies in Environmental Testing & Analytical Services, 2008

Annual Revenue ($million Company Headquarters U.S.) TestAmerica Ft. Washington, PA $277.00 Pace Analytical Services Minneapolis, MN $77.00 Accutest Laboratories Dayton, NJ $63.50 EMSL Analytical Westmont, NJ $54.20 Columbia Analytical Services Kelso, WA $41.90 Microbac Laboratories Pittsburgh, PA $40.1 ALS Lab Group* Houston, TX $35.50 Lancaster Laboratories Lancaster, PA $32.0 Environmental Science Corp. Mt. Juliet, TN $29.00 GEL Laboratories Inc. Charleston, SC $27.5 3Stone Advisors/Gulf Coast Columbus, OH $23.60 SGS Environmental* Wilmington, NC $21.90 SPL Inc. Houston, TX $21.00 Energy Laboratories Billings, MT $20.0 MWH Labs Monrovia, CA $19.70 QC Labs Southampton, PA $18.80 Calscience Analytical Garden Grove, CA $18.0 Alpha Analytical Westborough, MA $17.70 Bureau Veritas/U.S. Labs San Diego, CA $17.70 Spectrum Analytical Agawam, MA $17.20

Source: Steve Maxwell as appeared in Environmental Laboratory May 2009 If the environmental testing business looks to its recent past for positive indications of revenue growth, increased profitability and successful investments, one could understand a lack of enthusiasm. Strategic planning in the changing environmental industry, however, is about where a firm will be in two years, not just where it fits in the current market. Looking to the future of a more promising mature market only heightens the importance of good management, good technology, good marketing and above all good customer service.

Exhibit 1-3 Top U.S. Environmental Lab Companies 2016

Company (HQ) 2016 Env’l Revenue TestAmerica 223.0 Pace Analytical Services* 157.2 Eurofins U.S. Holdings* 133.0 ALS Lab Group* 110.0 SGS Environmental* 100.0 EMSL Analytical 92.4

EBI Report 2020-B U.S. Environmental Industry Overview

Montrose Environmental 60.0 Alpha Analytical 41.2 Microbac Laboratories* 40.0 Environmental Science Corp. 38.5 GEL Laboratories LLC 27.0 Energy Laboratories 17.0 Phoenix Environ. Labs 16.4 Bureau Veritas/U.S. Labs* 15.0 Contest Analytical 11.0 PDC Laboratories 10.5 Waypoint Analytical 10.2

Source: Environmental Business International Inc. (San Diego, CA) © EBI Inc, adapted from TechKNOWLEDGEy Strategic Group's “Maxwell/ELWR” report first published in Environmental Lab Washington Reporter

1.5.2.1 Environmental Laboratories Can’t Snap Out of the Funk In 2014-2015 It would have been nice to report to EBJ readers in 2014 that the environmental laboratory industry has exited the doldrums and is growing along with the rest of the industry and the rest of economy, however slowly. It would have been nice to report that consulting and engineering firms and other users of environmental testing services—an essential part of the value chain in which environmental problems are solved—were recognizing the value of these services and paying for it. It would be nice if a rising tide truly lifted all boats. Well, maybe next year. Or maybe not. The environmental laboratory industry in North America can’t seem to shake the doldrums. The volumes of samples being tested grows, but the pricing competition that seems to have become endemic to the industry means that, despite the fortunes of some of the leaders, the industry just simply can’t grow.

When other industries fall upon hard economic times, many players look for opportunities to diversify into new client or service areas. Environmental consulting and engineering firms have weighed such options many times over the years, and past issues of EBJ are replete with the stories of firms that branched out into new service areas or client sectors, often with the help of an acquisition (there have also been many stories of firms that have “stuck to their knitting” and trimmed operations that were not part of their “core competency”). It’s fair to ask whether environmental lab companies shouldn’t consider doing the same. Some firms have ventured into pharmaceutical and food and beverage testing, or the “life sciences”

sector, with mixed results. But why not stay within the environmental field and expand into, say, field testing or environmental monitoring? There would seem to be some logical affinities, but that hasn’t been an option, for some important reasons.

The top 25 environmental laboratories generated an estimated total of $983 million in revenue for their most recent calendar or fiscal years, according to TechKNOWLEDGEy Strategic Group’s (Boulder, CO) latest Environmental Laboratory Washington Report (ELWR), released this past spring. That’s slightly less than the top 25 generated one year earlier, according to Steven Maxwell, president of TechKNOWLEDGEy and a long-time analyst of and provider of financial advisory services to the environmental lab industry. “It’s the same old story,” Maxwell tells EBJ. “2013 was yet another flat and unremarkable year for the overall industry.” There’s still overcapacity in the industry, and there’s still good demand for the service, “so volumes can grow at a perceptible rate—but the revenue doesn’t.” Unlike other industries, that overcapacity just doesn’t seem to be shaking out at a pace that could put the industry’s supply and demand back into better balance.

1.5.2.2 The Environmental Lab Industry Landscape In 2018 In surveying the environmental lab industry landscape, 2017 was yet another flat and relatively uneventful year. Although I certainly get tired of saying essentially this same thing year after year after year, this is an industry which has not seen much growth or change – either positive or negative – for quite a long time now. Historical data from Environmental Business International show that total revenues in the environmental lab industry have grown just 2.5 percent over the last 10 years, with future growth dismally projected to be less than 1 percent annually.

Furthermore, to the extent that we did see any changing trends this year, they seemed to be more negative than positive. As the Trump Administration’s EPA has become more hostile towards preexisting legislation and enforcement, and as it has been increasingly bogged down in scandal, there seems to be an impact on the focus or level of enforcement. Hence, environmental management programs are slowing, and industrial clean-up spending seems to

EBI Report 2020-B U.S. Environmental Industry Overview

be stalling. In addition, similar slowdowns have been observed in other, larger Federal markets involving DOE and DOD contract work.

This is not just a hypothetical development or an expression of broad policy; there are individual incidents – such as the EPA’s public declaration that wastewater sampling was not required following hurricane Harvey – which represent specific cutbacks in traditionally- expected levels of environmental testing. Labs which were more dependent upon Federal work definitely had a bit rougher 2017 than those which were more industrially or municipally focused. My ranking of the largest 25 companies in the industry didn’t show many significant changes this year either. There haven’t been any significant new entrants into the industry, nor have there been any major mergers or acquisitions in the industry over the past 12 months. Just over a year ago now, Pace Analytical announced its purchase of Environmental Science Corporation, pushing its environmental revenue to over $200 million. This put Pace within striking distance of long-time industry leader TestAmerica, which this year posted revenues of $220 million. Those two companies are now considerably larger than the next rung of players in the $100 million range – ALS, Eurofins and EMSL. EMSL was also a notable gainer in the Top 25 list, up almost 15% over 2016. Those companies in the mid-range have remained fairly consistent, with players such as Alpha Analytical, Phoenix Environmental and Contest Analytical continuing to show incremental growth. There have been a few new companies appearing at the smaller end of our list over the past few years, including Waypoint, McCoy & McCoy and Suburban Testing (of Pennsylvania), but otherwise the rankings there have not seen significant changes over the last few years.

Several of the larger international companies have declined to participate in the survey the last few years, and so it is difficult to judge exactly how well some of them have been performing. ALS reported significant growth over last year, although several of its domestic operations have reportedly struggled over the past couple of years. Eurofins and SGS – both major international testing, inspection and certification (TIC) companies – have not provided figures the last couple years, so it is also difficult to judge how well their stateside

environmental testing businesses are doing. However, based upon industry contacts and knowledge and – in the case of SGS – the shuttering of some facilities, we have estimated that the environmental revenue levels for both of those companies were down in 2017.

Fundamentally, the overall U.S. environmental services industry is also reflective of an uncertainty or a lull in regulatory attention and focus. EBI data shows that the engineering, consulting and remediation industries have also experienced little if any growth over the past two years.

Analysts believe that the fundamental health of this industry will eventually stabilize and improve. Although we may be experiencing something of a short-term blip at the moment, longer-term demand for the services and data provided by environmental labs has continued to grow since the inception of the industry in the late 1960s and 1970s. The countervailing factor is that at the same time a wide range of technological advances, analytical automation and advances in information management have allowed operating costs to consistently decline. And that factor of declining costs in a highly competitive marketplace has meant that prices have stagnated and declined as well. Hence, when viewed from a total revenue perspective, this industry has been flat for a long time. However, when viewed from the perspective of total sample throughput, or unit analytical testing demand, the industry has indeed shown some growth. In the future, as regulatory requirements become tougher and as greater and greater technological and IT sophistication is required to operate in this business, the weaker capacity will continue to be forced to exit the industry. As that weaker capacity gradually exits the market, and as the demand for testing services continues to gradually but inexorably grow, supply and demand factors will come into better balance, and prices will gradually stabilize. As that stabilization process occurs – and it eventually does in any free market – remaining players in the industry should be able to achieve more consistent and predictable profitability. But the short-term prognosis suggests a continuingly competitive and price-sensitive marketplace. Particularly in that kind of business environment, I believe that better market research – and better understanding of the variables and strategies that lead to success or failure – are an invaluable business resource and benchmarking tool for the whole range of

EBI Report 2020-B U.S. Environmental Industry Overview

industry players, big and small. Hence, I encourage all participants in the industry to be more responsive to surveys like this one, and hopefully to more substantive ones in the future.

Exhibit 1-3 Top U.S. Environmental Lab Companies 2017

1.5.3 Solid Waste Management Solid waste management is the largest of the environmental industry business segments tracked by EBJ and also the most mature from a business perspective. It will always be necessary to have trash removed from our homes and businesses and disposed of safely. In fact, for that reason, some have even compared this business to utilities because of the consistent demand for collection and disposal services. Most analysts now agree that the management of solid waste in the United States generates about $40 billion per year. EBI estimates that the industry brought in about $54 billion in 2007 and again about $54 billion in 2009, including revenues from processing recyclables. Solid waste companies are engaged primarily in collection, transportation, disposal, recycling and operation of transfer stations, waste-to-energy facilities and landfills. This is the largest and most mature of EBI’s environmental industry segments. Solid waste services are marketed to municipalities as well as to all waste-generating industries, commercial businesses and the general public. The price of raw resources and the price of disposal are expected to increase in the near term, driving economic incentives for source reduction, conservation, materials recovery and recycling. As a result, onsite management services and resource recovery of non-hazardous or special waste (provided by solid waste companies as well as consultants), while not a large component of current revenues, will become increasingly important throughout. High disposal prices in many parts of the country, increasing emphasis on recycling, waste stream source reduction and shrinking municipal budgets have affected this segment significantly. These trends are necessitating tighter management control and new strategies for diversification into non-disposal operations.

Exhibit 1-76 2017 Universe of Solid Waste Companies

Number of Category Companies SWM Revenues % of Market % of Market Giants (>$5 Billion) 2 23,630 37% 6.5% Very Large (>$1 Billion) 3 6,959 11% 7.4% Large ($100–999 Million) 22 6,202 10% 4.2% Mid‐Size ($20–100 Million) 50 2,189 3% 3.4% Small ($5‐$20 Million) 330 2,850 4% 1.0% Really Small 6,160 4,499 7% 3.5% Municipalities 17,097 27% ‐0.3% Total SWM Revenues ($mil) 6,567 63,427 100% 3.9%

Source: EBJ model of the solid waste industry derived from Waste360 top 100, surveys, interviews and U.S. Census data on municipal income.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-77 2016 Top Solid Waste Companies

Company 2016 Revenue ($Mil) Waste Management 13,600 Republic Services 9,380 Waste Connections 3,376 Covanta Energy 1,699 Advanced Disposal Services 1,405 Recology 945 Waste Industries USA 615 Waste Pro 594 Casella Waste Systems 565 Rumpke Waste & Recycling 558 WCA Waste Corporation 309 Action Enviromental Group 271 Tunnel Hill Partners 270 TOMRA North America 265 Solid Waste Services d/b/a J.P. Mascaro & Sons 212 Clean Earth 189 EnviroSolutions Inc. 158 Lakeshore Recycling Systems 151 Accent Wire 146 ReCommunity 144 Harvest Power 133 Kimble Company 113 Sprint Waste Services 110 Appliance Recycling Centers of America 104

Source: EBJ adapted from The Waste 100

Exhibit 1-78 2015 Top 40 Solid Waste Companies

Company 2015 Revenue Waste Management $13,996,000,000 Republic Services $8,788,000,000 Clean Harbors $3,401,636,000 Stericycle $2,555,601,000 Waste Connections $2,079,000,000 Progressive Waste Solutions $2,009,000,000 Covanta Energy $1,682,000,000 Advanced Disposal $1,403,000,000 Recology $780,000,000 Waste Industries USA $552,000,000 Rumpke Waste & Recycling $527,000,000

Casella Waste Systems $525,900,000 Waste Pro $509,000,000 US Ecology $447,411,000 GFL Environmental $425,186,000 Heritage - Crystal Clean $339,052,000 CSX Transportation $309,000,000 Strategic Materials $256,000,000 Action Environmental Group $250,263,000 WCA $240,000,000 Solid Waste Services:J.P. Mascaro & Sons $200,000,000 EnviroSolutions (ESI) $190,000,000 Clean Earth $164,500,000 SCS Engineers $155,400,000 Tetra Tech $151,000,000 Sprint Waste Services $147,000,000 Appliance Recycling Centers of America $130,900,000 Kimble Company $129,000,000 Harvest Power $124,200,000 Industrial Services of America $117,404,000 Lakeshore Recycling Systems $112,400,000 Coulter Companies 95,000,000 Avangard Innovative $92,000,000 Consolidated Waste Service $90,200,000 KRD Trucking $90,000,000 Rock River Environmental Services $87,000,000 Modern Disposal Services $85,000,000 Rizzo Environmental Services $85,000,000 AR Recycling $81,500,000 Tunnel Hill Partners $72,000,000

Source: EBJ derived from The WasteAge 100 that ranks the largest waste and recycling firms in North America

Exhibit 1-79 Size of the Solid Waste Market by Industry Segment, 2009

(in Billions of $) Public Private / 2009 Companies Small Municipal Total Collection Residential Collection 11.09 3.29 3.10 17.48 Commercial/Industrial Collection 7.59 2.23 2.10 11.91 Total $18.67 $5.52 $5.20 $29.39 Processing

Transfer 2.39 0.79 1.62 4.80 MRF/Recycling Operations 0.75 0.46 0.32 1.54 Composting 0.05 0.05 0.05 0.15

EBI Report 2020-B U.S. Environmental Industry Overview

Total $3.19 $1.31 $1.99 $6.49 Disposal

Incineration/Waste-to-Energy 1.11 0.63 0.96 2.70 Landfill Operations 9.32 1.58 4.24 15.14 Total $10.43 $2.20 $5.21 $17.84 Total Market $32.29 $9.03 $12.40 $53.72

Source: Waste Business Journal (www.wastebusinessjournal.com)

Solid waste management remains the largest revenue producer in the environmental industry at $7.94 billion in 2014. Three years of modest growth and declining profits between 1991- 1993 are almost universally looked upon as a correction to the steady growth and profits of the late 1980s. Like the hazardous waste management segment, the solid waste business suffered from declining industrial and commercial volumes in the recession of 1991 and 1992. Business has recovered somewhat to post a 2-5% revenue gains and in 1994-2001, as opposed to revenue drop-offs in hazardous waste.

Exhibit 1-80 Distribution of Solid Waste Management Revenues, 2009

Size Companies Tot Revenues % of Market Very Large (>$1 Billion) 8 $28.1 52% Large ($100–999 Million) 26 $7.9 15% Mid-Size ($20–100 Million) 88 $3.5 7% Small ($0.25-$20 Million) 7,405 $1.8 3% Municipalities $12.4 23% Total 7,527 $53.7 100%

Environmental Business International Inc. (San Diego, Calif.) © EBI Inc.

Hopefully for society, EPA's waste management hierarchy of reduce/reuse/recycle will eventually result in lowering volumes of municipal solid waste (MSW). However, EPA estimates in the best case that the annual rate of MSW volume growth can only be expected to decline by 2%. In 1996 for the first time, EPA reported no gain in the per capita waste generation figure of 4.4 lbs. per day and the expectation that this will remain steady if not continue to grow. Economic growth in the late 90s lead to continued growth in per capita waste generation.

Exhibit 1-81 Historical and Projected Growth in Solid Waste Management

Source: Environmental Business International Inc. (San Diego, Calif.) © EBI Inc.

Over two-thirds of solid waste revenues are generated by private sector companies. The 2007 $32 billion in revenues for public sector solid waste services represented the considerable potential remaining in privatization, although the lowest hanging fruit has been harvested.

Exhibit 1-82 Distribution of Solid Waste Management Revenues, 2006

Size Companies Tot Revenues % of Market Very Large (>$1 Billion) 5 $25.6 48% Large ($100–999 Million) 25 $8.8 17% Mid-Size ($20–100 Million) 75 $3.2 6% Small ($0.25-$20 Million) 75 $1.1 2% Really Small 9,216 $1.0 2% Municipalities $13.2 25% Total 9,396 $52.8 100%

Source: Environmental Business International Inc. (San Diego, Calif.) © EBI Inc.

EBI Report 2020-B U.S. Environmental Industry Overview

Consolidation in the private sector also continues as larger firms acquire small ones, but not at the pace they once did. More stringent landfill requirements (notably RCRA Subtitle D) have forced many small landfill to close and many small operations to close or sell. Increasingly, the name of the game is collection, transfer and processing (increasingly involving recycling). Firms are focusing on maximizing the efficiency of their collection routes, an increasing challenge in a market demanding more integrated waste and resource recovery services.

Exhibit 1-83 Leading Companies in Solid Waste Management, 2001

Revenues Company (HQ Location) ($Millions) Waste Management Inc. (Houston) 11,322 Allied Waste industries Inc. (Scottsdale, AZ) 5,565 Republic Services Inc. (Fort Lauderdale, FL) 2,257 Onyx NA (includes Superior Services Inc., Milwaukee) 480 Casella Waste Systems Inc. (Rutland, VT) 479 Waste Connections Inc. (Folsom, CA) 377 Norcal Waste Systems Inc. (San Francisco) 320 Rumpke Consolidated Companiess Inc. (Cincinnati) 293 Waste Holdings Inc. (Waste Industries, Raleigh, NC) 260 IESI Corp. (Haltom City, TX) 188 Deffenbaugh Industries Inc. (Shawnee, Kan) 174 Edco Disposal Corp. (Fontana, CA) 110 J.P. Mascaro & Sons Inc. (Harleysville, PA) 100

Source: Chartwell, Environmental Business International Inc. (San Diego, Calif.)

Two key issues have surfaced which will affect the solid waste business. The first is recent court decisions in favor of more unrestricted interstate waste transfer, which should help the larger players. The other is variable pricing dependent on volume or weight, which should drive reduction and understandably has solid waste companies concerned.

Exhibit 1-84 Leading Companies in Solid Waste Management, 2007

Company Rev Waste Management 13,360 Allied Waste Industries Inc. 6,030 Republic Services Inc. 3,070 Veolia Environmental Services North America Corp. 1,840

Covanta Holding Corp. 1,270 Safety-Kleen Systems Inc. 1,000 Clean Harbors Inc. 830 Waste Connections Inc. 824 Stericycle Inc. 790 BFI Canada (parent of IESI) 681 Newpark Resources Inc. 668 Casella Waste Systems Inc. 526 Norcal Waste Systems 492 Waste Services Inc. 396

Source: Waste Business Journal (San Diego, Calif.)

Declining numbers of landfills have led to an increasing share of business for transfer stations, but growth has been highest in materials recovery facilities (MRFs) and to some extent in composting operations. Waste firms are playing a bigger role in the resource recovery segment. Recycling is no longer just a service that they are obliged to offer in order to secure municipal contracts but a profit center in its own right.

Solid waste volumes continue to be linked to the economy, with roughly 50% coming from the commercial/industrial sector. Advantage continues to tilt towards the bigger firms as capital intensity, economies of scale and national presence have all become distinct benefits in the still-evolving solid waste business. Recycling remains an obvious strategic issue in the waste business and now accounts for 20-30% of MSW collected. Recycling represents roughly as much as 10% of revenues for big firms. Most firms have taken a conservative approach of bidding the business as a service and not gambling on the commodity pricing upside.

Growth is forecast to be roughly 2.5% for the next few years. Some argue that industry fundamentals will be less favorable than over the past few years, citing slower economic growth, falling prices for recyclables, and increasing costs of labor and fuel, but landfill space continued to be at more of a premium in 2008-2010.

Exhibit 1-85 Top Solid Waste Companies 2008-2010 Revenues

2008 2009 2010 revs $mil

EBI Report 2020-B U.S. Environmental Industry Overview

Revenue Revenue Waste Management 13,390 11,790 12,500 Republic Services 9,670 8,200 8,100 Veolia Environmental Services North America Corp. 2,190 1,800 1,900 Clean Harbors 1,030 1,070 1,700 Covanta Energy Corporation 1,660 1,550 1,600 Stericycle Inc. 1,080 1,180 1,440 Progressive Waste Solutions Ltd. (formerly IESI-BFC Ltd.) 1,050 1,010 1,430 Waste Connections 1,050 1,190 1,320 Recology Inc. 535 515 539 Casella Waste Systems Inc. 580 554 522 Rumpke Consolidated Companies Inc. 407 396 450 Waste Industries USA Inc. 365 366 397 Industrial Services of America 100 181 343 Advanced Disposal Services Inc. 246 261 322 EQ - The Environmental Quality Company 240 240 300

Source: Waste Business Journal (San Diego, Calif.)

Exhibit 1-86 Number of Solid Waste Facilities by Region, 2013

Landfills Waste-to-Energy Composting Recycling Total Pacific 270 6 297 766 1,339 Mountains and Plains 199 1 277 343 820 Midwest 346 14 1,359 1,007 2,726 South Central 250 1 122 351 724 Southeast 267 12 159 750 1,188 Northeast 208 47 1,280 696 2,231 1,540 81 3,494 3,913 9,028

Source: Environmental Research & Education Foundation (EREF)

Exhibit 1-87 Materials Recovery Facilities

Estimated Throughput Region Number (tpd) Northeast 147 23,770 South 161 19,700 Midwest 144 21,321 West 126 21,566 U.S. Total 578 86,354

Source: Governmental Advisory Associates, Inc.

Exhibit 1-88 Number of Landfills in the United States, 1988 - 2010

Year Landfills 1988 7,920 1990 6,330 1995 3,200 2000 1,970 2005 1,760 2010 1,910

Source: EPA, Municipal Solid Waste in the United States: 2010 Data Tables and Figures.

1.5.4 Environmental Contracting: HWM & R/IS

Flat is the new up is a phrase uttered by more than a few remediation companies these days as contractors and consultants grow accustomed to low-growth or no-growth environments. A similar sentiment could be expressed by the commercial hazardous waste management business as well, although they have likely become more accustomed to rationalizing that not losing revenues is not such a bad result in bleaker periods. All told the environmental contracting business totaled $24.5 billion in the United States in 2015, according to research by Environmental Business International, publisher of EBJ, with a fractional 0.1% gain in aggregated revenues of eight sub-segments (see table on page 3). Environmental contracting as defined here includes the totals of two of EBI’s 14 segments in the $371-billion U.S. environmental industry: $10.9-billion in Hazardous Waste Management and $13.6-billion in Remediation/Industrial Services (see more detailed definition of segments and sub-segments in the chart boxes). Environmental contracting is not to be confused with the $30-billion Environmental Consulting & Engineering (C&E) industry, although there are companies with operations in either two, but almost never three, of these environmental services segments. Consulting firms are often also contractors (think turnkey or design-build), and waste management and disposal facility companies are also often industrial or environmental service contractors, but C&E firms do not own Treatment, Storage and Disposal (TSD) facilities, nor do haz waste firms often have consulting engineers for hire.

Environmental contracting includes construction, clean-up or the physical handling or treatment of waste, by-products from contaminated sites or operating facilities, as well as the on-site or off-site management of hazardous or special waste streams. In other words it is the proverbial ‘dirty work’ done by the segments we’re reviewing in this issue of EBJ— hazardous waste management, remediation construction, abatement and industrial services. After the audits, assessments and investigations are complete, the permits acquired, the designs prepared, and the engineering plans in hand, these contractors move the “yellow

EBI Report 2020-B U.S. Environmental Industry Overview

iron” and other equipment into the field and help prepare sites, support the commissioning of new facilities, and take the waste products away for proper disposal. These are also the companies that support the ability of existing industrial, oil field and refinery assets to keep humming through maintenance and environmental cleaning, in addition to spills and emergency response. They clean tanks and other industrial process equipment, they treat process water and wastewater, and they haul away the by-products of production—often for disposal but increasingly for re-processing and re-purposing. In a broader view of environmental contracting, EBI also includes hazardous waste management services that collect, treat, dispose and recycle hazardous wastes.

Exhibit 1-89 U.S. Environmental Contracting Markets in 2016-2018 ($bil)

Service 2016 2017 2018 Industrial/Commercial Haz 3.13 3.21 3.29 Waste Management Solvent Recovery & Parts 0.54 0.57 0.58 Cleaning Medical Waste Management 2.63 2.61 2.62 Utility/Commercial Nuclear 1.16 1.18 1.20 Waste Management Federal Waste Management 3.41 3.33 3.26 (DOE & DOD) Hazardous Waste 10.86 10.90 10.96 Management Segment Site Remediation 4.96 5.02 5.10 Construction Industrial Services 6.56 6.79 6.85 Abatement 1.88 1.89 1.90 Remediation/Industrial 13.41 13.70 13.86 Services Segment Environmental Contracting 24.27 24.60 24.82 Revenues

Commercial nuclear is mostly low-level radioactive waste; Federal waste management is mostly long-term management contracts for operating facilities rather than off-site disposal. Forecasts derived from economic and industrial production data and EBJ surveys and interviews.

1.5.5 Hazardous Waste Management

Hazardous waste is defined by the U.S. Environmental Protection Agency as any material displaying the characteristics of toxicity, corrosivity, flammability, or reactivity, a definition that covers several hundred individual chemical compounds. Companies in this segment of the environmental industry are responsible for hazardous waste handling, treatment, storage, recycling and disposal. This $10-billion segment also encompasses medical waste

management and nuclear waste management. The hazardous waste management segment includes collection and disposal services and management of treatment, storage and disposal (TSD) facilities ($3 billion), and handling, treatment, disposal and storage of medical ($2.5 billion), nuclear waste ($1.1 billion) and federal waste (U.S. Department of Energy and U.S. Department of Defense $3.6 billion). The TSD sector has been showing some growth recently with some rebirth in domestic manufacturing and medical waste has grown steadily.

Exhibit 1-90 Hazardous Waste Management Market, 2012 – 2017 by 5 Sub-Segments

2012 2013 2014 2015 2016 2017 Industrial/Commercial Haz Waste Management 2.95 3.09 3.19 3.15 3.13 3.21 Solvent Recovery & Parts Cleaning 0.56 0.55 0.54 0.51 0.54 0.57 Medical Waste Management 2.40 2.49 2.58 2.65 2.63 2.61 Utility/Commercial Nuclear Waste Management 1.07 1.10 1.12 1.14 1.16 1.18 Federal Waste Management (DOE & DOD) 3.58 3.47 3.37 3.47 3.41 3.33 Hazardous Waste Management 10.57 10.69 10.80 10.91 10.86 10.90

SOURCE: Environmental Business International Inc. (San Diego, CA) © EBI Inc.

Hazardous Waste Industry Continues To Evolve For years, EBJ has been delivering annual updates of the hazardous waste management industry in North America, and in recent years, it has become increasingly more difficult to delineate exactly what that industry is. One can define the market as the sum of all gate receipts at traditional hazardous waste treatment, storage, and disposal (TSD) facilities regulated under Subtitle C of the Resource Conservation and Recovery Act (RCRA), and you’d come up with a number close to $2.5 billion to $3 billion, the range in which EBJ has been quantifying the relatively flat industrial haz waste market since 2000. EBI quantifies the total U.S. hazardous waste management market at $10.7 billion in 2013 with its five sub- segments portrayed in the chart. Medical waste is the only subsegment to have grown faster than the GDP over the past 10 years.

The commercial & industrial hazardous waste transportation and disposal business is a market that, as far as anybody can tell, is not growing. But that may not matter much. It matters more what the actual providers of these services are doing to redefine themselves, to tweak or even overhaul their value propositions, to diversify their offerings in response to

EBI Report 2020-B U.S. Environmental Industry Overview client demands, and to strengthen their competitive positions in whatever market they designate that they are competing in. The hazardous waste management industry is an industry undergoing evolution and transition in both the service providers and customers, and in what wastes are collected and what they do with them. A number of services now routinely offered by what EBJ would call hazardous waste companies are classified in either the industrial services (industrial cleaning) or resource recovery (waste oil re-refining) segments of the environmental industry.

The industry continued its evolution in 2013-14, with a couple of interesting twists. The biggest player in the traditional TSD, “pick it up and put it down” industry—Clean Harbors, Inc. (Norwell, MA)—had been a serial acquirer of many businesses, and some of them quite large, to diversify itself well beyond the borders of its traditional service offering and client base. Over the past year, the company has been focusing more on integrating those parts, most notably Safety-Kleen, Inc., which Clean Harbors acquired at the very end of 2012 for about $1.25 billion. (In September 2013, Clean Harbors expanded its business in used oil re- refining through the $60 million acquisition of California-based Evergreen Oil out of bankruptcy, but the Safety-Kleen integration has been its big project over the last year and a half.) The acquisition activity of 2014 was led by other entities, with two major deals of note—one combining two major players in the traditional hazardous waste industry, $200- million US Ecology, Inc. (Boise, ID) and $370-million EQ – The Environmental Quality Company (Wayne, MI), and the other marking a surprising entry into the market by a company with tangential but perhaps complementary business interests. Indeed, the latter deal—of PSC Environmental Services, LLC (Houston, TX) by $2.1-billion medical waste services giant Stericycle, Inc. (Lake Forest, IL)—took some industry analysts by surprise. Whatever one makes of the strategic motivations behind each of the deals of the recent past, it’s safe to say that companies are up to something more than simply being able to better pitch their hazardous waste management expertise. The industry that built itself up around the regulatory requirements of RCRA and the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)—an industry that once had such clear boundaries, with high barriers to entry—has changed, as these laws melt into the economic fabric.

2014 Revival The environmental industry, from the consultants and engineers at the front end of projects to the contractors at the construction, operations, and maintenance back end, have benefited from what’s been taking place in oil and gas fields in Pennsylvania, Texas, Colorado, North Dakota, and elsewhere. The opportunity only begins in the field, however, and continues to pipelines, terminals and refineries. Other U.S. industries are benefiting from the availability of abundant oil and cheap gas, including refining, chemicals, petrochemicals, steel production, and other manufacturing sectors. The “on-shoring” of U.S. manufacturing, after having migrated overseas to take advantage of cheap labor, had been anticipated by environmental industry executives for a couple of years now, and there is reason to believe that it’s finally happening. With the substantially increased supplies of crude oil, which by U.S. law may not be shipped out of the country in its raw state, refineries are gearing up to make product—which can then be exported, or sold domestically. Particularly on the Gulf Coast, the refining revival is in full swing and prognosticators see it as the driving force behind the population boom in the Houston area stretching out for 30 years. The chemical/petrochemical industry is enjoying a boost as well. Low-cost natural gas not only serves as an inexpensive source of energy, but as a readily available feedstock for many intermediaries that are used in the production of plastics, fertilizers, anti-freeze, fabric, and other products. The American Chemistry Council is currently tracking up to 200 investment projects in the chemical industry valued at approximately $125 billion. This investment in new construction and expansion, and the construction of pipelines to get oil and gas to refining and production facilities, also means a comeback for the U.S. steel industry. Both the $25-billion environmental contracting segments and the $28-billion environmental consulting & engineering industry stand to benefit from the trends of a growing U.S. oil & gas industry and expansion of industrial production, and forecasters who once anticipated a contraction in domestic services revenues in these categories now see a long tail of growth in virtually every sub-segment of contracting and C&E.

The industrial services and waste management segment of the environmental contracting

EBI Report 2020-B U.S. Environmental Industry Overview community is certainly enjoying all of the resource development and industrial activity. The companies in this sector may not be growing at double-digit rates this year and only 2-3% overall in 2014, but there have been worse periods for plant commissioning and turnaround. “The increase in shale gas production and the opportunity it has brought to our customer base has allowed them to operate cheaper, have more available feedstocks, and expand their businesses,” says Gary Noto, CEO of Houston-based HydroChem one of the top four in industrial cleaning, along with Veolia North America Industrial, Clean Harbors, and PSC. “There are a lot of upgrades that customers are doing at various sites, and with that comes work for our company and others—not just in industrial cleaning but in mechanical and other services.”

Moreover, industrial cleaning contractors are finding that they can apply their expertise and capabilities to the linear construction that is taking place to bring the oil and gas from the field to the plant. “They can’t build enough storage right now,” says Thomas Brinsko, president and COO of the BIC Alliance (Houston, TX), a provider of information, recruiting, and investment banking services to the energy industry. The big issue in industrial cleaning today is safety. Hydroblasting is a high-pressure, dangerous job, and clients are demanding more hands-free, automated approaches to ensure top safety ratings. The leaders in the business have strong technology development arms and are answering the call. The hazardous and industrial waste companies—again, Clean Harbors and Veolia are leaders (PSC sold its environmental services unit to medical waste leader Stericycle this year)—are obviously in the chain of service industries that have benefited from the resurgent economy. The key dynamic in the hazardous waste industry is the blurring of its boundaries as a distinct industrial sector.

Clean Harbors, Veolia, and others today do more than handle waste that’s regulated under the Resource Conservation and Recovery Act (RCRA). Yes, they still have their fleets of RCRA Subtitle C-permitted treatment, storage, and disposal (TDS) facilities—those assets aren’t going away, nor are they gathering dust—but these companies are very present in the field and at the plant, and recycling the wastes they handle is a growing part of their value proposition. In the 2010s, “the hazardous waste industry has evolved into a business of

helping clients manage non-revenue-generating by-products cost-effectively,” notes Joan Berkowitz, industry analyst and managing partner at Farkas Berkowitz & Co. (Washington, DC). “Incineration, landfill, solvent recovery, fuels blending, cement kiln burning, and aqueous treatment are some, but by no means all, of the tools.”

History of Haz Waste In spite of a mostly growing economy, revenues in U.S. industrial hazardous waste management fell in 1995-2004. Unlike other service segments, in which price declines were counteracted by growing volumes of work, volumes of industrial hazardous waste sent to commercial disposal facilities continued to fall, as did prices. Overcapacity in the incineration market has claimed more than a few victims, and supply and demand balance has still not normalized.

Firms lined up to exit the business. Haz waste leader Chemical Waste Management, having written down a good chunk of its incineration assets first, folded its stock into parent WMI and operations subsumed into the waste services group in the mid-90s. Westinghouse sold its Aptus subsidiary to incineration leader Rollins for $135 million in 1994. Cement company Southdown sold all of its assets for commercial incineration of hazardous waste. Ecova, successor to Amoco subsidiary Waste-Tech Services, sold its incineration business to 2012 haz waste leader Clean Harbors. Union Pacific sold the hazardous waste assets of its subsidiary USPCI to Laidlaw in 1994, taking a $500-million bath that also left a nasty ring around its balance sheet. Safety-Kleen ultimately bought Laidlaw and Rollins before running into financial difficulties itself and selling its industrial haz waste operations to Clean Harbors in 2002, before merging the rest of its business into Clean Harbors in 2012 after some ownership changes during the decade in between.

But the news is not all bad. Acquiring firms got assets at a fraction of what they would have cost a few years ago and have broadened capacity, service and customer range. Many smaller regional service companies, including firms like Heritage and Perma-Fix, have found niches in a market that eventually improved as the supply vs. demand situation normalized. The haz waste business has surely lost its old sizzle of the 80s and early 90s, but the survivors look

EBI Report 2020-B U.S. Environmental Industry Overview

set to build some profitability in a slightly more stable market. Capacity is still an issue in this over-built business, where more than one state-of-the-art facility has yet to receive waste. A common tactic is to "mothball" facilities as opposed to shutting them down and incurring calamitous closure costs, mostly RCRA-related. These capacity concerns combined with still declining volumes due to regulatory definition and industrial waste minimization conspire to keep the hazardous waste management segment a challenging segment.

Exhibit 1-91 The U.S. Hazardous Waste Management Market 1987-2016

Source: Environmental Business International Inc. (San Diego, Calif.) © EBI Inc.

Exhibit 1-92 Distribution of Companies in Hazardous Waste Management, 1995

Number Total Rev Average Size Companies ($Mil) Revenues Large (>$100 Million) 9 2,729 303 Mid-Size ($50-100 Million) 8 512 64 Small (<$50 Million) 320 859 2.7 Total 340 $4,100 $12

Source: Environmental Business International Inc. (San Diego, Calif.) © EBI Inc.

Exhibit 1-93 Leading Companies in Hazardous Waste Management, 1995

Company (HQ Location) Revenues ($Millions) Laidlaw Environmental Services (Columbia, SC) 643 Chemical Waste Management (Oak Brook, IL) 614 Safety-Kleen Corp. (Elgin, IL) 481 Philip Environmental (Ontario) 234 Rollins Environmental Services (Wilmington, DE) 217 Clean Harbors Environmental Services (Braintree, MA) 165 EnviroSource Inc. (Stamford, Mass.) 159 ENSCO (Chicago, IL) 110 Horsehead Resources Dev. Co. (Palmerton, PA) 106

Source: Environmental Business International Inc. (San Diego, Calif.) © EBI Inc.

Other components of the hazardous waste management market include medical waste management and nuclear waste management. As the only medical waste service provider that can claim a national platform, Stericycle Inc. (Lake Forest, Ill.) continues an aggressive, decade-long acquisition campaign to acquire companies that can enhance profitability by providing operating synergies. Stericycle controls a dominant share of the better than U.S. market for medical waste services and is several times larger than its nearest competitor. The outlook for Stericycle remains positive, not only because of the company’s market dominance but because of several factors that point to growth in the mid- to high-single-digit range for the medical waste management sector in general. EPA’s emission standards for hospital, medical, and infectious waste incinerators took effect in 2002, and the agency’s prediction that anywhere from 50% to 80% of more than 2,370 incinerators were to cease operation. According to Mark Miller, Stericycle’s president and chief executive officer, perhaps a little more than 300 such facilities are still operating.

EBI Report 2020-B U.S. Environmental Industry Overview

Nuclear waste management includes mostly spent fuel and materials from nuclear power plants, and ongoing and remedial waste from federal facilities, mostly DOE weapons factories. Of course, much of the waste at DOE sites won't be transported or handled as waste but is more likely to be contained onsite or rendered as inert as possible as part of a remediation project. Much of the nation's waste from power plants and weapons sites remains in limbo awaiting the completion of the Yucca Mountain repository in Nevada.

Exhibit 1-94 Leading Companies in Hazardous Waste Management, 2001

Company (HQ Location) Revenues ($Millions) Clean Harbors Inc. (Braintree, Mass.) 750 Onyx (Vivendi) 350 Philip Services (Pittsburgh) 270 Heritage 200 Teris LLC (Rhodia, Ensco) 130 EQ The Environmental Quality Company (Wayne, Mich.) 120 Waste Management (Houston) 100 US Liquids 80 Permafix 75 American Ecology 55 Sum of largest firms 2130 Others 570 Total ($mil) 2700

Source: Environmental Business International Inc. (San Diego, Calif.) © EBI Inc.

Revenues for onsite/off-site hazardous waste management services will continue to decline slowly throughout the decade. This will be due to the increased pace of waste minimization efforts by waste-generators coupled with pollution prevention and continued internalization of recycling. At some point pollution levels will descend to new minimums, and in some industries may actually approach zero discharge.

In concert with declining waste volumes, off-site disposal capacity has grown considerably, leading to what is decidedly a buyers’ market. Price cutting and cost control are the inevitable responses that all firms have taken, but the widespread implementation of these strategies makes it difficult to turn them into a sustainable competitive advantage. The

© 2019 Environmental Business International, Inc. Page 1-153 EBI Report 2020-B U.S. Environmental Industry Overview competitive trend is to enhance service offerings by adding more value for the customer, particularly by treating and recycling more waste on site.

Exhibit 1-95 Leading Companies in Hazardous Waste Management, 2005

est. 2005 HW Companies revs Clean Harbors Inc. (Braintree, Mass.) 490 Onyx (Veolia) 310 Philip Services (Pittsburgh) 230 Heritage 200 Waste Management (Houston) 160 Teris LLC (SITA:Suez acqd by CH in 8/2006) 120 EQ The Environmental Quality Company (Wayne, Mich.) 110 Safety-Kleen 90 Burlington Northern 60 Chemical Solvents Inc. 50 Permafix 50 Shamrock Environmental Corp. 30 Sum of top firms 2,220 Other firms 740 Total 2,760

Source: Environmental Business International Inc. (San Diego, Calif.) © EBI Inc.

Exhibit 1-96 Leading Companies in Hazardous Waste Management, 2010

Est. 2010 HW revs Clean Harbors Inc. (Braintree, Mass.) 721 Veolia ES (formerly Onyx) 522 Waste Management 382 EQ - The Environmental Quality Company 300 Heritage Environmental Services 221 NRC Environmental Services Inc. 200 EnergySolutions 129 Heritage - Crystal Clean Inc. 112 American Ecology 105 Permafix 98

Source: Environmental Business International Inc. (San Diego, Calif.) © EBI Inc.

EBI Report 2020-B U.S. Environmental Industry Overview

1.5.6 Remediation and Industrial Services Remediation and industrial service companies are those that conduct physical cleanup projects. Remediation and industrial service revenues are divided into three categories: abatement services (in buildings including asbestos, lead paint, radon, etc.), industrial services (for operating facilities such as refineries) and site remediation construction (on contaminated property).

Exhibit 1-97 U.S. Environmental Contracting Markets in 2000-2017 ($bil)

SOURCE: Environmental Business International, Inc., San Diego, CA, units in $bil.

1.5.7 Environmental Contracting Overview 2016 Environmental Contractors Facing The Reality Of Flat Markets Flat is the new up is a phrase uttered by more than a few remediation companies these days as contractors and consultants grow accustomed to low-growth or no-growth environments. A similar sentiment could be expressed by the commercial hazardous waste management business as well, although they have likely become more accustomed to rationalizing that not

All told the environmental contracting business totaled $24.5 billion in the United States in 2015, according to research by Environmental Business International, publisher of EBJ, with a fractional 0.1% gain in aggregated revenues of eight sub-segments (see table on page 3). Environmental contracting as defined here includes the totals of two of EBI’s 14 segments in the $371-billion U.S. environmental industry: $10.9-billion in Hazardous Waste Management and $13.6-billion in Remediation/Industrial Services.

POSITIVES & NEGATIVES While property development and construction has picked up in the last two years, and lower energy prices has led to somewhat of a rebirth of American manufacturing, negative pressures of government budgets and the slowdown of oil & gas exploration & production with the dip in prices have counteracted the positives. Many larger publicly-traded firms in hazardous waste management or contracting evoke the term “headwinds” for the forces they are encountering across the industry when characterizing their business environment in 2015 and 2016.

Exhibit 1-98 Transactions in Environmental Services 2008-2015

120 101 100 92 76 80 64 64 63 59 59 60 55 47 45 46 40 35 40 32 24 20

0 2008 2009 2010 2011 2012 2013 2014 2015

Environmental Engineering & Consulting Special Waste

EBI Report 2020-B U.S. Environmental Industry Overview

Source: January 2016 Brown Gibbons Lang & Company Environmental Services Insider. Data compiled from S&P Capital IQ, mergermarket, PitchBook, and BGL Research. Based on announced deals, where the primary location of the target is in the United States. COAL TO GAS CONVERSION AND OIL PRICES Due in part to climate and clean air policy, but likely more to prices, natural gas is replacing chunks of the coal-based electricity generation fleet. This has created a nice market for conversion and demolition contractors, in addition to new rules regarding Coal Combustion Residuals driving work in coal ash ponds and silos.

Exhibit 1-99 The U.S. Hazardous Waste Management Market 1987-2016

Source: Environmental Business International Inc. (San Diego, Calif.) © EBI Inc.

Exhibit 1-100 Remediation/Industrial Services Revenues ($mil) 2011‐2020

Remediation/Industrial Services Segment 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Site Remediation Construction 4,842 5,019 4,826 4,761 4,847 4,955 5,025 5,119 5,186 5,257 Industrial Services 5,842 6,146 6,760 6,591 6,460 6,563 6,786 6,854 6,991 7,134 Abatement Services 1,830 1,860 1,890 1,890 1,890 1,880 1,890 1,900 1,890 1,880 R/IS Segment Total 12,514 13,024 13,477 13,242 13,196 13,398 13,701 13,873 14,068 14,272

SOURCE: Environmental Business International, Inc. (San Diego, CA) May not be reproduced without written permission. Industrial Services includes industrial cleaning, refinery turnaround, safety services, spill response, oil field services, AST cleaning & maintenance, hydroblasting, chemical cleaning, high- pressure cleaning, vacuum services, and tank cleaning. Abatement Services include asbestos, radon, lead paint, mold and other contaminant cleanups in buidlings and existing structures.

In spite of compromised federal spending and cooling property markets that underlay over 75% of the U.S. remediation market, market growth has not tumbled for the nation’s remediation companies. However, it is clear that the historical regulatory foundation is permanently cracked. Like some elected officials, the environmental cleanup market was supposed to have a term limit. Unlike those elected officials, nobody quite knows what the limit of that term is, but it was widely thought that the number of hazardous waste sites in the United States was finite, and that we would gradually draw down that portfolio and have successfully addressed the dirty side of our industrial legacy by some time this decade. After all we are not supposed to be making asbestos or Superfund sites anymore. But while closure has been obtained at thousands of sites nationwide (including more than 350 Superfund sites that have been removed from the National Priorities List), the database of contaminated sites seems not to be diminished much no matter how hard remediation contractors work.

Like the practice of philosophy or even healthcare, the cleanup business is supposed to be working itself out of a job. For those in the remediation business, however, the work has kept coming as waves of sites have come into play over the past decade as regulatory, economic and development priorities change—and new categories like manufactured gas plants or shale gas sites emerge—and the business is not in free fall or even decline. EBJ estimates the U.S. remediation business grew 2-3% in 2010 to $7.7 billion in total revenues, of which 62% is generated by remediation construction, with the remainder in consulting, design and analytical work.

EBI Report 2020-B U.S. Environmental Industry Overview

Remediation contractors reported better than average performance in the environmental industry in 2009 and 2010. All remediation companies, including consultants and engineers, reported aggregate revenue gain of 0.9% in 2009 and 2.9% in 2010. Of the 74 companies reporting remediation revenues in EBJ’s 2011 surveys, 31% reported declines in 2009 and 18% declined in 2010. For just remediation contractors, or those doing site construction predominantly, revenue gain was 9% in 2010.

Exhibit 1-101 Growth in US Remediation/Industrial Services, 1988 – 2020

16,000$ Billion

14,000 Building Abatement 12,000 (asbestos, radon, lead, mold) 10,000 Industrial Services 8,000

6,000 Site Remediation 4,000 Construction

2,000

0 1988 1993 1998 2003 2008 2013 2018 Years

Source: Environmental Business International Inc. (San Diego, Calif.) © EBI Inc.

1.5.8 Industrial Services The commercial environmental industrial services business is focused primarily on the petroleum industry and inevitably rides cycles in that sector. It had difficult years during the recession of the early 90s. Not since the oil slump in the early 80s did industrial plants have it tougher. Industrial services firms that emerged as a strong, fast-growing auxiliary to refineries in the late 80s experienced sharp drops in demand and profitability during the early 90s, although the fundamentals of their business remain strong along with the demand for oil.

Exhibit 1‐102 Industrial Services Market, 2007‐2016 ($billion)

Service Type 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 industrial cleaning & refinery turnaround 2.65 2.86 2.75 2.81 2.89 2.99 3.08 3.18 3.23 3.29 safety services 0.16 0.17 0.17 0.18 0.19 0.19 0.20 0.21 0.21 0.22 spill response 0.52 0.50 0.49 0.88 0.70 0.60 0.96 0.76 0.77 0.79 oil field services 0.83 0.93 0.88 0.95 1.16 1.37 1.56 1.49 1.33 1.32 AST clean/maint 0.39 0.42 0.40 0.41 0.42 0.44 0.45 0.47 0.47 0.48 others 0.52 0.50 0.48 0.46 0.48 0.56 0.52 0.48 0.45 0.46 Industrial Services Total 5.08 5.38 5.17 5.68 5.84 6.15 6.76 6.59 6.46 6.56 Growth 8.0% 6.0% -4.0% 10% 2.8% 5.2% 10% -2.5% -2.0% 1.6%

SOURCE: Environmental Business International, Inc. (San Diego, CA); Others include hydroblasting, chemical cleaning, high-pressure cleaning, vacuum services, and tank cleaning

Exhibit 1‐103 Industrial Services Market, 2017e‐2020e ($billion)

Service Type 2017e 2018e 2019e 2020e industrial cleaning & refinery turnaround 3.32 3.36 3.40 3.44 safety services 0.22 0.23 0.24 0.24 spill response 0.95 0.90 0.92 0.95 oil field services 1.32 1.33 1.34 1.36 AST clean/maint 0.49 0.49 0.50 0.50 others 0.48 0.54 0.59 0.63 Industrial Services Total 6.79 6.85 6.99 7.13 Growth 3.4% 1.0% 2.0% 2.1%

SOURCE: Environmental Business International, Inc. (San Diego, CA); Others include hydroblasting, chemical cleaning, high-pressure cleaning, vacuum services, and tank cleaning

Industrial services firms and analysts believe that, in the long term, there is money to be made in cleaning services, particularly with anticipated enactment of new AST regulations on federal and state levels that parallel existing Underground Storage Tank (UST) programs. Prior to major AST fuel spills in Fairfax, Va. in 1988 and Sioux Falls, S.D. in 1990, the AST market was loosely regulated and driven primarily by the Oil Pollution Act of 1990 and the Clean Air and Clean Water Acts.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1‐104 Top Industrial Services Firms, 2016

Industrial Services Company Revenues ($Millions) Clean Harbors 582 Veolia NA Industrial Services 550 HydroChem (Centerbridge) 420 Williams Industrial Services Group, LLC 330 Team Industrial Services, Sugar Land, Texas 320 Quanta Services Inc., Houston, Texas 260 Stericycle (PSC Industrial Services) 250 United States Environmental Services (K2 Industrial Services) Halifax 240 Mastec Inc., Coral Gables, Fla. 240 The Brock Group, Houston, Texas 230 Brand Energy & Infrastructure Services Inc., Kennesaw, Ga. 200 National Response Corp (NRC, JF Lehman) 180 Safway Group, Waukesha, Wis. 170

SOURCE: Environmental Business International, Inc. (San Diego, CA)

WELCOME BACK, MANUFACTURERS Executives of environmental services firms and other experts have been telling EBJ for months that the low price of natural gas was likely to lead the “on-shoring” of chemical production and manufacturing capacity. By and large, however, they indicated that they were only seeing some signs rather than a full-blown movement. That movement may now be blossoming. “In terms of the on-shoring of manufacturing in the U.S.—yes, I think it is for real,” says Thomas Brinsko, president and COO of the BIC Alliance (Houston, TX), a provider of information, recruiting, and investment banking services to the energy industry. Certain that the industrial resurgence is very much alive along the Gulf Coast, Brinsko declares confidently that “I think this activity is nationwide.”

Although it’s been quite some time since the remediation segment was one of the leading growth segments of the environmental industry, contaminated sites do keep turning up, and not all of them are small, over-looked parcels. What’s more, the large, complex sites already known to exist continue to present challenges, and even the not-so-large and complex sites

still require re-visiting from time to time to improve upon the original remedy—sometimes because that remedy was the wrong one, sometimes because it was badly implemented, and sometimes because new, “green” technologies and approaches can help us to achieve modern, sustainable or politically desirable goals. In both ways, the cleanup market keeps plugging along.

It is ironic that the one movement expected to inject sustainable life and purpose into the cleanup market has struggled as much or more than any portion of the remediation business in the past couple years. The term “brownfields” was coined in the 1990s, conveying the idea that we weren’t just cleaning up past contamination but recycling properties back into productive economic use in the places that needed economic revitalization most—cities— while paying the additional environmental dividend of protecting green spaces from new development. Brownfields redevelopment meant more than just alleviating the guilt of our polluted past; it was an engine for economic development and urban renewal.

Alas, the brownfields market is still at its core a real estate market, albeit one that claims reuse, recycling and sustainability as major components of its value proposition. The crash in the real estate bubble, of course, was itself a central figure in the recent recession, and real estate and land development still haven’t recovered, although some indicators are starting to point in the right direction.

In EBJ’s 2011 Snapshot Survey, conducted in January and February, EBJ asked executives across the environmental industry to rate client sectors according to business growth in 2010 and the outlook for 2011-2013. Commercial and residential property development ranked in the bottom three client sectors in 2010 with local government; and in the bottom five of 26 ranked markets for 2011-2013. Polling remediation companies specifically in March-April 2011 in EBJ’s annual Survey of Remediation Companies, Markets, and Technologies, real estate developers ranked 11th of 17 client markets for 2011-2012 growth prospects, up from last in a similar ranking from 12 months ago.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1‐105 Distribution of Site Remediation Companies, 2016

Number of Gross Rem. Average Size Category Companies Revenues Revs Share Large (GrRemRevs >$100 mil) 24 7,468 311.2 64% Medium ($20-100 mil) 77 3,178 41.3 27% Small (<$20 mil) 288 1,052 3.7 9% Total 389 11,698 30.07 100% Gross/Net 83.0% Net Revenues Total (inlcudes Abatement) 9,730

Source: Environmental Business International Inc., San Diego, CA © EBI Inc

Exhibit 1-106 Historical and Projected Growth in Remediation & Industrial Services

16 $ Billion

0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 Years

Source: Environmental Business International Inc. (San Diego, Calif.) © EBI Inc.

Robert Colangelo, executive director of the National Brownfield Association (NBA; Barrington, IL) affirms the stagnant market perspective when he points out that the traditional industrial, commercial, residential, and mixed-use segments of the brownfields redevelopment market are “very flat” into 2011. The real estate market remains in a state of decline, with perhaps a million more foreclosures to come this year, and this condition has a domino effect on the brownfields market. There are bright spots in brownfields redevelopment. These include the progressive and visionary projects that dogged, innovative developers are pursuing—the siting of solar photovoltaic (PV) power plants on closed landfills, or the conversion of urban in-fills into urban gardens, or the establishment of small medical centers on former gas stations (“minute clinics,” or “doc in a box”). And transit,

transit, transit: the redevelopment of blighted properties along transportation corridors is a huge opportunity, or will be when more lending gets off the sidelines and into the game.

Other pluses for brownfields redevelopment: more experienced developers, improved cleanup technologies, mature and adequate liability protection, specialty service providers with more appetite for risk, supportive government policy, development incentives, and the brownfields redevelopment industry’s solid track record. In addition, the depressed real estate market has an upside—properties are available for very low prices.

Representatives of environmental consulting, engineering, and cleanup contracting firms exhibiting at the Brownfields 2011 conference in Philadelphia in April tended to be more upbeat than not. Yes, the market is challenging, but the deals are out there; you have just have to be patient, they say. Executives spoke to EBJ on the general condition of the remediation market in 2011, after what all agree were difficult years in 2009 and 2010 when enforcement and consent decrees kept the market moving to some degree, but discretionary spending on the management of corporate site portfolios in many client sectors was on hold. Clients are now asking for budgets and cleanup cost estimates, said a representative of one national engineering firm. An executive of one East Coast cleanup contracting firm agreed that clients are now sending out for bids again, but they’re not necessarily awarding the work. The bids coming back are still perceived to be over budget, even if those bids are lower than in the past. “Clients need more confidence to spend,” said the executive.

Robert Toups, president and CEO of ATC Associates, Inc. (Lafayette, LA), characterizes his firm’s remediation business as flat over the past couple of years with the commercial properties segment taking the hardest hit. Says Toups, “due to the economic climate, it is very difficult to forecast what direction the market will take.” However, “we are currently seeing projects that were delayed for the past two years now in line for start-up this year. There are signs of some recovery out there.” ATC recently won a five-year nationwide contract for remediation work for a major oil client—an assignment that will engage 30 of the firm’s 67 locations. This contract was timely as over the past year ATC had seen a slowdown in activity at the oil and gas industry’s non-regulated sites. Some state cleanup

EBI Report 2020-B U.S. Environmental Industry Overview programs have helped contribute what appears to be an upturn in the cleanup business, Toups reports. “The outlook is very fuzzy though, with states operating within huge budget deficits.” Meanwhile, he adds “we see continued federal market stability,” especially from the Department of Defense (DOD).

Robert Stover, vice president of business development at Environmental Restoration, Inc. (St. Louis, MO), tells EBJ that the mining industry has been growth segment, offering a nice volume of work in the cleanup of tailings piles and the closure of lagoons. In addition, the firm’s brownfields work didn’t fall off because Walmart and other “big box” retail clients “are not afraid of it” and were active. He also claims his firm is the Army Corps of Engineers’ largest Environmental Remediation Services (ERS) contractor. The federal market has been quite healthy, he reports.

Exhibit 1-107 Leading Companies in Remediation, 2003

Remed Gross Revs Company (HQ Location) 2003 ($mil) Bechtel Group Inc. (San Francisco, CA) 780 Shaw Environmental & Infrastructure (Baton Rouge, LA) 590 Parsons (Pasadena, CA) 570 Fluor Daniel, Inc. (Irvine, CA) 540 CH2M Hill (Greenwood Village, CO) 500 Jacobs Engineering Group (Pasadena, CA) 340 Washington Group (Boise, ID) 310 Tetra Tech Inc. (Pasadena, CA) 290 URS Corp (San Francisco, CA) 270 Earth Tech (Long Beach, CA) 210 Weston Solutions, Inc. (West Chester, PA) 200 Environmental Resources Management (ERM; Exton, PA) 200 Sevenson Environmental Services (Niagara Falls, NY) 160 LVI Services Inc. (New York, NY) 150 MWH (Broomfield, CO) 140 Mactec Inc. (Golden, CO) 130 Kaiser-Hill LLC (Fairfax, VA) 130 Clean Earth (Mount Laurel, NJ) 120 Conestoga-Rovers & Associates (CRA; Niagara Falls, NY) 120 Battelle Columbus Division (Columbus, OH) 110 Golder Associates Corp. (Atlanta, GA) 110 ARCADIS Geraghty & Miller, Inc. (Arnhem, The Netherlands) 100

Source: Environmental Business International Inc. (San Diego, Calif.)

Whether it will stay that way is something cleanup contractors in the federal sector evince some concern about, budget-cutters in Congress have taken direct aim at the U.S. Environmental Protection Agency’s (EPA) budget, but thus far, the cleanup budgets for DOD and Department of Energy (DOE) have held up. They may do so for the 2012 federal fiscal year as well.

DOE and DOD do keep awarding significant contracts. In January 2011, for example, DOE’s Office of Environmental Management (EM) issued multiple-award indefinite- delivery/indefinite-quantity (ID/IQ) contracts to 11 companies to perform environmental cleanup work at various DOE sites. The companies receiving the contracts were the following: AECOM Technical Services; Bechtel; CDM; CH2M HILL Constructors; EnergySolutions Federal Services; Fluor Federal Services; Jacobs Engineering Group; MACTEC Engineering and Consulting; Science Applications International Corp. (SAIC); Shaw Environmental & Infrastructure; and Washington Group. The contracts have an estimated total value of $907 million over five years.

The names on this list reflect a fact that has been true for some years: the DOE cleanup club is a rather exclusive one, and hard to break into. That’s not likely to change. For DOD, there’s less exclusivity, as small firms can continue to find opportunities, especially if they can take advantage of set-asides or mentor-protégé relationships with the larger, more established firms. DOD’s Military Munitions Response Program (MMRP) continues to provide opportunity, and the various branches—the Army Corps of Engineers, the Navy, etc.—continue to let task orders. Despite the budget uncertainties, the outlook for the federal market appears to be fairly stable.

As the remediation market matures, advances in cleanup technology gain acceptance as well. “The industry has caught up with new technology, which has been proven over the past few years,” says Deborah Jackson, recently appointed CFO at TerraTherm, Inc. (Fitchburg, MA), which deploys in situ thermal desorption (ISTD) technology and has enjoyed upwards of

EBI Report 2020-B U.S. Environmental Industry Overview

50% annual growth through the recession. “Consistent with most innovative technologies, early adopters embraced it while others remained to be convinced,” says Jackson. “As few as two to three years later—as well as today—we’re in a position where both the government and commercial clients have adopted the technology due to its benefits.” She adds “we now have a long track record of successfully completed projects with zero safety issues or legal disputes.”

Exhibit 1-108 Leading Companies in Remediation, 2006

Remed Gross Company Revs 2006 ($mil) The Shaw Group Inc. 1,110 Bechtel Group Inc. 850 CH2M Hill 720 Jacobs Engineering Group 640 Washington Group 620 Parsons 510 Fluor Corp. 360 URS Corp 360 LVI Services Inc. 320 ARCADIS 320 Battelle Columbus Division 300 Earth Tech 280 Sevenson Environmental Services (Shamrock) 240 Tetra Tech Inc. 230 Environmental Resources Management (ERM) 230 Weston Solutions, Inc. 200 AECOM 180 SAIC 170 Environmental Quality Management 160 Mactec Inc. (including acq'd cos) 150 Entact 130 Golder Associates Corp. 120

Source: Environmental Business International Inc. (San Diego, Calif.) © EBI Inc.

Innovative technology has a role to play in the movement to make remediation more “green” or sustainable as well, but it is not the deciding factor. Serving on a green remediation panel at Brownfields 2011, Douglas Sutton, an engineer at Tetra Tech, Inc. (Pasadena, CA) claimed that green remediation is an optimization market, not a technology-specific market. Sutton, who works with EPA on remedy evaluation and optimization, offered several examples of approaches that can reduce a cleanup solutions environmental footprint: using extracted groundwater instead of potable water for blending and extracting chemicals; decreasing the size of blowers in soil vapor extraction (SVE) systems once extraction points have been eliminated; and segregating clean soil from contaminated soil to reduce soil requiring treatment or disposal. EPA’s best practices effort has also provided more detailed baselines for sustainable remediation, particularly in energy use.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-109 Leading Companies in Remediation, 2008

Remed Gross Company Revs 2008 ($mil) URS Corp 752 The Shaw Group Inc. 685 Parsons 669 CH2M Hill 592 Jacobs Engineering Group 485 Bechtel Group Inc. 444 ARCADIS 371 AECOM 345 Golder Associates Corp. 333 Sevenson Environmental Services (Shamrock) 261 Battelle Columbus Division 237 Environmental Resources Management (ERM) 231 CDM 216 Tetra Tech Inc. 207

Source: Environmental Business International Inc. (San Diego, Calif.) © EBI Inc.

Ultimately, green remediation and remedy optimization fundamentals include comprehensive data integration, a good handle on tools and technology, and a readiness to be constructive. “Ask questions over and over again about the site conceptual model,” Sutton advised.

Other EBJ sources indicated that they are taking steps to reduce the environmental footprint of their cleanup actions, including the use of solar power to drive equipment, the tendency to adopt on-site solutions to reduce the truck trips associated with “dig and haul,” and recycling construction debris and other materials. By varying degrees they do see a trend towards sustainable remediation; some firms see more demand from the larger clients, while others see it across the board in the federal and private sectors. If you don’t show your ability to provide sustainable solutions in your bid documents, you’re not in the game, they say.

Ultimately, although sustainable remediation and progressive and visionary brownfields redevelopment lend a good measure of excitement, and some novelty, to the remediation marketplace, the majority of the cleanup market remains a challenging and very competitive one. Bid win rates fell noticeably in 2009 from previous years and only inched back up in 2010. Clients are more sophisticated and continue to try to transfer more risk to the cleanup

vendors, who have to devote more resources to job screening and business development— and to occasionally make the difficult decision to walk away from a job. Those firms with strong existing client relationships—as well as reputations for having good relationships with regulators—continue to have the inside track in key industrial and government client segments.

The remediation business expects growth of only 3% on average in 2011, according to the EBJ survey, and the outlook beyond is only slightly more positive. EBJ forecasts remediation market growth at 3.5% in 2012 and 2013. Today’s less than stagnant private markets should recover enough to balance a modest decline in the still relatively stable federal markets, and specialized niches in technology and redevelopment should continue to grow. As aggregated comments from survey respondents demonstrate, the economy, funding and budgets for projects are much larger concerns for the industry than regulations or specific programs in 2011. The confidence in the volume of work to be done in remediation does not wane, but the art of demonstrating its value outside the regulatory system has become more challenging in the moving target of remediation and redevelopment.

Exhibit 1-110 Leading Companies in Remediation, 2013

Total Gross Remed Rev 1999 Gross Revs Company (HQ Location) ($Mil.) 2013 Bechtel Group Inc. (San Francisco CA) 35,813 921 CB&I (acqud Shaw Gp) 8,688 899 Fluor Corp. (Irvine CA) 26,320 664 URS Corp. (New York NY) 11,110 545 CH2M Hill (Greenwood Vill CO) 6,647 484 Golder Associates Corp. 1,397 481 AECOM 8,154 447 ARCADIS 1,401 392 ERM 941 329 Battelle Columbus Division 4,482 311 Northstar Group (LVI & NCM) 234 234 Jacobs Engineering Group 10,900 234 Clean Harbors Environmental Services Inc. 3,481 210 Sevenson Environmental Services (Shamrock) 228 209 Cardno Ltd. (Entrix, TBE, ERI, TEC, ATC) 599 196 Tetra Tech Inc. 2,602 169 Parsons 3,443 156 Clean Earth 155 154

EBI Report 2020-B U.S. Environmental Industry Overview

RECON (Remedial Construction Svcs) 151 151 CDM 1,233 150 Stantec Inc., Edmonton, Alberta, Canada† 2,181 144 Entact 141 141 Weston Solutions, Inc. 351 128 Energy Solutions (Duratek) 1,804 126 AMEC 6,064 124 Envirocon 115 115 SAIC (Leidos in 9/2013) 6,015 108 Conti Cos., The 278 103 ECC, Burlingame, Calif. 592 101 O'Brien & Gere Companies 217 100

Source: Environmental Business International Inc. (San Diego, Calif.) © EBI Inc.

Exhibit 1-111 Top Remediation Companies, 2016

Gross Revs Remed. 2016 Gross Revs Company in $mil 2016 in $mil Fluor Corp. 18,811 1,367 AECOM 17,410 618 CB&I 8,463 592 Bechtel Group 32,898 576 Jacobs Engineering Group 10,960 540 Battelle Columbus Division 4,787 383 CH2M (Jacobs in 2017) 5,768 363 Arcadis 3,742 313 ERM 888 311 Stantec Inc. 3,040 249 Leidos (fmr SAIC) 7,344 220 Tetra Tech 2,700 213 NorthStar Group 600 200 Clean Harbors 2,755 194 ECC 203 162 Golder Associates 957 157 Sevenson Env'l Services 170 157

Source: Environmental Business International Inc. (San Diego, Calif.) © EBI Inc.

1.5.9 Environmental Consulting & Engineering Environmental consulting and engineering (C&E) encompasses a variety of services for reduction or clean-up of environmental hazards performed for clients on a contract basis.

These services may include permitting and compliance assistance, site cleanup design, project management, operations and maintenance of environmental cleanup facilities, facility audits, investigations and analyses, pre-planning, design and construction management, research and development and consultation on other engineering-related problems.

The cleanup agendas at DOD and DOE are partially responsible for driving growth in this segment, as are the vast array of continuously revised regulations that govern the activities of all industry. Environmental C&E firms serve not only government and pollution generators, but the other environmental industry segments as well.

Exhibit 1-112 Historical and Projected Revenue (in $billion) & Growth in Environmental Consulting & Engineering

35 10%

30 8%

25 6%

20 4%

15 2%

10 0%

5 -2%

0 -4% 94 96 98 00 02 04 06 08 10 12 14 16 18 20e

Source: Environmental Business Journal. © EBI Inc.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-113 Environmental Consulting & Engineering: Annual Growth Rate, 1975-2022

35%

30%

25%

20%

15%

10%

0% 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 -5%

Source: Environmental Business Journal.

In recent years the C&E market has focused less on the traditional environmental markets— notably hazardous waste management, cleanup and industrial pollution control. These markets, along with water & wastewater treatment, still represent the large share of the U.S. C&E industry. However, the industry is clearly moving away from these traditionally regulatory-driven areas, and moving toward more private-sector oriented markets. Regulations don’t drive the environmental industry, the economy does—with environmental regulations now more neatly woven into the fabric of economic growth and development. The status quo of the environmental industry in the past few years has been more ‘business as usual’ rather than ‘what will those regulators throw at us next.’

Regulations do remain an essential part of the economy. The environmental regulations arose out of the popular will and reflected the battle between apparently competing priorities of ‘environment vs. economy.’ But, as time goes on, the two aspects are seen as complementing rather than contradicting one another. Compliance with the environmental regulations on the books is an essential part of what’s required now to build neighborhoods and the commercial networks serving them; clean up and resell industrial properties; construct and operate industrial facilities; extend highways, rail lines and airports; restore and expand ports and waterways; and build out power corridors and communication networks.

The big engines of the environmental industry throughout its 30-year history—the Clean Water Act (CWA), the Clean Air Act (CAA), the Resource Conservation and Recovery Act (RCRA) and the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)—are certainly part of this fabric, but they need to move over and give room to the other regulatory blocks in the industry’s foundation. Today, no highway or wireless telecommunications network can be built, no port expanded, no power plant sited and constructed until the proper environmental impacts can be assessed, as defined under laws like the Endangered Species Act (ESA) and the National Environmental Policy Act (NEPA). The regulations associated with all these laws are, in fact, now more pertinent growth drivers for the industry as we move further from the past of an environmental industry consumed with making up for the past to an industry of building a better future for tomorrow.

Exhibit 1-114 U.S. C&E Market by Media Type, 2010-2020e

Media 2010 2011 2012 2013 2014 2015 2016 2017e Hazardous Waste 3560 3640 3730 3390 3250 3270 3280 3350 Remediation 5200 5330 5480 5190 5090 5040 5090 5110 Solid Waste 1490 1530 1580 1610 1640 1690 1720 1750 Wastewater 4900 5100 5350 5300 5400 5560 5660 5940 Water 4530 4720 4950 4900 5030 5230 5350 5640 Energy 610 650 700 730 750 780 800 840 Air Quality 2010 2100 2230 2310 2360 2440 2490 2500 Natural Resources 2180 2270 2390 2460 2520 2610 2670 2770 Renewable Energy 580 620 670 700 720 750 770 800 Multi-Media 1770 1840 1950 2040 2230 2320 2270 2330 Total 26830 27800 29030 28630 28990 29690 30100 31030

SOURCE: Environmental Business International Inc. San Diego, CA

Exhibit 1-115 Revenue Performance of U.S. Environmental C&E Firms in 2015-2017

Source: Environmental Business Journal, *Gross revenues of all companies; Net total would be the total market

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-116 Distribution of U.S. Environmental Consulting & Engineering Firms in 2017

Source: Environmental Business Journal's annual model of the U.S. environmental consulting & engineering industry. Revenues listed are gross revenues for environmental consulting & engineering only (note total gross revenues exceed market size expressed in net revenues).

Growth Factors in the 2010s: Where is Policy? GDP & Real Estate: Development, transactions, speculation, infill, brownfields. Also M&A, stock market, capex investment by industry Federal+S&L Markets: DOE/DOD/EPA budgets; cleanup & closure; energy programs: Cuts & sequestration; GDP growth leads to state & local growth Oil & Gas: Fracking leads North America renaissance; Growth in Upstream, Midstream and Downstream… Exports? Oversupply contributes to price collapse Commodity Prices: Mining & Resources; Energy, Water, Food = Next: Up & Down Environmental disasters to climate change: Katrina to BP to Sandy… Response to risk; Adaptation & Resiliency Water & Wastewater: 36% of C&E revenues; stable growth Policy: Air/GHG rules; EPA Clean Energy Plan; Renewable energy incentives; funds for water and infrastructure

Exhibit 1-117 Environmental Services: Key Growth Factors 2019

Source: EBJ, Environmental Industry Summit 2019 presentation by Grant Ferrier

Exhibit 1-118 Environmental C&E Industry vs. GDP Growth: 1991-2020

10% USA GDP Growth C&E Growth 8%

0% 91 93 95 97 99 1 3 5 7 9 11 13 15 17 19 -2%

-4%

SOURCE: Environmental Business Journal annual analysis of the environmental consulting & engineering industry based on market analysis and revenue information from more than 700 C&E companies

Exhibit 1-119 Top 5 & 10 U.S. Environmental C&E Firms (Gross Environmental C&E Revenues in $mil)

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-120 Top 20 Companies in Environmental Consulting & Engineering, 2001-2005

Total Env’l C&E Revs Gross Rev Rank Company 2001 2002 2003 2004 2005 2005 1 CH2M Hill Inc. 1,418 1,660 1,620 1,755 1,880 3,806 2 URS Corporation 705 751 769 884 1,024 3,917 3 Tetra Tech Inc. 534 905 709 870 930 1,358 4 MWH Global 598 747 745 704 745 977 5 Battelle Memorial Institute 450 472 709 680 850 3,035 6 AECOM Technology Corp 371 449 514 606 778 2,593 7 Earth Tech 575 1115 600 590 556 1,350 8 Bechtel Group Inc. 640 625 520 546 410 16,630 9 Camp Dresser & McKee Inc. 435 457 466 450 448 687 10 ERM 303 310 313 376 487 487 11 Black & Veatch Corp. 390 376 353 359 364 1,583 12 SAIC 180 315 317 310 380 7,658 13 Parsons 434 548 228 309 291 2,663 14 Golder Associates Corp. 158 190 190 300 363 511 15 Jacobs Engineering Group 246 209 226 276 348 6,165 16 Malcolm Pirnie, Inc. 216 225 251 269 284 284 17 ARCADIS G&M Inc. 170 178 228 259 450 562 18 AMEC Earth & Environmental 150 160 161 215 175 501 19 Berger Group 72 89 151 202 242 771 20 Weston Solutions Inc. 170 240 210 202 240 498

Source: Environmental Business International Inc. (San Diego, Calif.) © EBI Inc.

The recession certainly hit C&E firms, as EBJ has reported many times over the past several months, and 2009 growth was less than the economy for the first time since the late 90s. In EBJ’s final analysis completed for this C&E market review, we have downward adjusted our earlier C&E market estimate to a 3.9% decline in 2009. EBJ reported the total U.S. environmental industry contracted by 1.4% from $309.1 billion in 2008 to $304.6 billion in 2009. In the C&E segment, EBJ reports a 3.9% decline in 2009 to $25.66 billion. Of 488 environmental C&E companies for which revenues were compiled by EBJ, 52% declined, 43% grew and 5% stayed the same in 2009, with a composite decline of 4.6%. All together, EBJ estimates there are more than 3,700 U.S. firms offering environmental consulting services, although many are very small. Market data compiled by the Environmental Financial Consulting Group (EFCG; New York) showed a more modest median decline of 2% in environmental C&E firms in 2009.

Anecdotally, many C&E firms report that they are doing much better in 2010. EBJ’s 2010

Snapshot Survey concluded in February 2010 received 118 responses from C&E firms with an average forecast of 2010 growth at 1.9%. A “mini-survey” of 67 C&E firms conducted by EFCG in July 2010 projected a median outlook of 2.5% growth for 2010. That figure was down from the 4% median growth projected by the 100 firms attending EFCG’s CFO Conference in April. EBJ forecasts 2% growth in 2010, and 4-5% in 2011 and 2012.

2009 was a year during which just holding flat in revenue generation could move your firm up the industry lists. For example, GEI Consultants (Woburn, MA) recorded revenue of about $70 million in 2008 and a percentage point less in 2009. Still, the company moved up the ranks on Engineering News-Record’s (ENR) list of the Top 500 Design Firms and Top 200 Environmental Firms, gaining 17 notches to Number 156 on the former and 11 notches to number 172 on the latter. On EBJ’s top C&E list. GEI moved up from 140 in 2008 to 110 in the 2009 rankings. One of the results of market contraction has been increased competition for the available work, and that is what industry players and watchers are seeing—not only more bidders on projects, but bigger companies bidding on smaller projects that they would once have overlooked. And all companies but the most disciplined and successful are seeing reduced opportunity to be selective. “Where there were once eight bidders, now there are 15 or more,” says Marc Cicalese, vice president and federal program director at Sovereign Consulting Inc. (Robbinsville, NJ). Cicalese is speaking primarily about the federal sector, but the comment could apply market-wide. “I think the need across the industry is a little tighter, so you see more companies bidding jobs, rather than not bidding jobs,” says John Mogge, senior vice president for the Environmental Business Group at CH2M HILL.

Interestingly, although 2010 revenues are apparently coming in slightly short of projections, there’s less margin erosion than might be expected under those circumstances. The EFCG mini-survey projected a median operating margin (EBIBT/net revenues) of 10.2%, somewhat less than the CFO conference survey’s 10.8% but still quite healthy. Professional services, which can’t throw work product into inventory when sales come in lower than projections, should be showing some margin trimming—that is, unless they prepared for the revenue shortfall. For C&E firms, that means cutting staff, and “pre-cutting” is what many firms appear to have done. Whether any of them went too far and overworked their staff remains to

EBI Report 2020-B U.S. Environmental Industry Overview

be seen, but the consensus is that voluntary turnover is down too, so operating on the edge will likely continue. There were layoffs, to be sure, but as environmental industry recruiter Robert Graziano of Graziano & Partners reports, many firms took alternative approaches to managing their staffing issues after engaging in a first round of layoffs and then suffering from lingering problems in revenue generation. For example, they furloughed people, or effectively put them on part-time status to match actual billable hours, or mandated unpaid vacations. It was tough enough to find good people when the economy was healthy; these firms recognized that hiring back the professionals they would need when the economy rebounds could be difficult and costly.

As for hot—or at least warm—markets, we report in this issue on the relative strength of the market for remediation and other environmental services at the Department of Defense (DOD), the Environmental Protection Agency (EPA), the Department of Energy (DOE), the Department of Interior (DOI) and other federal agencies. We say “relative” because it may be a case of the federal markets doing little more than holding steady while the commercial and state/local markets moved back a step—or two.

Federal spending on environmental projects and initiatives has received a boost from the Obama administration. EPA’s budget was increased dramatically for FY 2010, and economic stimulus funding under the American Recovery and Reinvestment Act (ARRA), long awaited by the environmental industry, has shown up noticeably in Superfund cleanups and accelerated DOE environmental management programs. Furthermore, Obama’s Executive Order 13514, signed in October 2009, has established for all federal agencies and departments a series of sustainability goals, including greenhouse gas (GHG) emissions reductions, energy efficiency retrofits for buildings, improvements in water use efficiency, reductions in waste generation, increases in waste recycling, and other targets for environmental performance improvement.

And so there has been a notable shift in revenue derived from the federal, commercial, and state/local markets for environmental C&E firms. On ENR’s latest list of the Top 200 Environmental Firms, revenue the private sector exhibited a decrease from 43% of the total

© 2019 Environmental Business International, Inc. Page 1-179 EBI Report 2020-B U.S. Environmental Industry Overview in 2008 to 37% in 2009. By comparison, the federal share increased from 25 to 29% over the same period. EBJ’s model of the C&E market showed the federal share increased from 31% in 2008 to 33% in 2009 with the private sector down to 41% in 2009 from a peak of 48% in 2000. In terms of geography, the “hot” markets are in Asia, not Europe or the United States. In EBJ’s Snapshot Survey, respondents ranked the environmental markets in India, China, and Australia/New Zealand as “very strong,” “strong,” or “good” at a much greater frequency than they did the markets in the United States, Mexico, and Western and Eastern Europe.

Although 2010 is showing incremental improvement over 2009, several firms report an increase in backlog and sales for the second half of the year, and—with the exception of the property development business—are hopeful about 2011 and beyond. We feel they should be. Environmental consulting & engineering is an industry with strong fundamentals. More importantly, in a world of increasing pressure on resources, it is an industry that is necessary—and one that should be attracting more young people to enter the profession. In addition, management teams are savvier than ever before in marshalling their own resources. Perhaps when the recovery returns, the industry should engage in a more vigorous self- promotion campaign than it has in the past. The world would be the better for it.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-121 Leading Companies in Environmental Consulting & Engineering, 2015

Gross Env'l Company Revenues Cont/HW Env'l C&E 1 AECOM 17,990 1,497 2,779 2 CH2M 5,992 1,618 2,217 3 Tetra Tech Inc. 2,280 609 1,580 4 ARCADIS NV 3,823 90 1,248 5 ERM 946 - 946 6 Battelle Memorial Institute 5,031 - 906 7 Stantec Consulting Inc. 2,260 - 701 8 MWH Global 1,320 614 653 9 Jacobs Engineering Group 12,114 300 611 10 Golder Associates Corp. 954 51 563 11 GHD 1,266 20 486 12 CDM Smith 1,275 523 485 13 Ramboll ENVIRON 1,617 - 469 14 Parsons 3,566 177 430 15 Black & Veatch Corp. 2,963 403 397 16 ICF 1,132 - 385 17 HDR Inc. 2,123 573 382 18 Brown and Caldwell 341 - 341 19 AMEC Foster Wheeler 8,090 735 317 20 The Louis Berger Group Inc 981 60 314 21 TRC Companies Inc. 572 - 309 22 Bechtel Group Inc. 31,135 2,819 294 23 Fluor Corp. 19,130 1,239 291 24 WSP Parsons Brinkerhoff 5,777 116 288 25 Leidos (fmr SAIC) 4,672 - 280 26 Cardno Ltd. 880 30 250 27 GeoSyntec Consultants, Inc. 274 - 241 28 Carollo Engineers 212 - 212 29 Weston Solutions Inc. 267 45 192

Note: Figures in EBJ's list of top ranked C&E firms are revenues generated for calendar year 2015 in gross environmental consulting & engineering (C&E) not including construction and remediation construction, but including construction management. Environmental construction, remediation construction and federal waste management or contracting services are counted in the middle column labeled Cont/HW. This list is a result of independent research and EBI surveys. In some cases, revenues are approximations derived from executives, analysts and reputable business information sources and published materials. Although EBI has made every reasonable effort to be accurate, figures are not the result of internal or external audits and are not guaranteed to be accurate. Errors and omissions are unintentional. EBJ’s database of C&E firms includes revenues on more than 500 firms down to <$1 million in C&E revenues.

Exhibit 1-122 Leading Companies in Environmental Consulting & Engineering, 2016

Env'l Gross Cont/HW Company Revenues Env'l C&E 2016 1 AECOM 17,410 2,942 1,202 2 CH2M 5,768 2,134 1,961 3 Tetra Tech Inc. 2,700 1,772 847 4 Stantec Consulting Inc. 3,040 1,246 - 5 ARCADIS NV 3,742 963 10 6 Battelle Memorial Institute 4,787 957 - 7 ERM 888 888 - 8 Golder Associates Corp. 957 785 - 9 Jacobs Engineering Group 10,960 770 380 10 CDM Smith 1,189 484 419 11 Ramboll ENVIRON 1,567 455 - 12 Black & Veatch Corp. 3,192 427 339 13 HDR Inc. 2,226 405 597 14 ICF 1,174 399 - 15 Leidos (fmr SAIC) 7,344 367 - 16 Brown and Caldwell 362 362 - 17 Parsons 3,470 347 278 18 Fluor Corp. 18,811 329 1,364 19 Bechtel Group Inc. 32,898 303 2,328 20 GHD 1,231 297 134 21 AMEC Foster Wheeler 7,031 290 764 22 TRC Companies Inc. 707 290 - 23 The Louis Berger Group Inc 861 258 - 24 Carollo Engineers 248 248 - 25 GeoSyntec Consultants, Inc. 277 244 - 26 Hazen and Sawyer 218 218 - 27 WSP Parsons Brinkerhoff 6,002 214 322 28 Woodard & Curran 206 194 - 29 NV5 224 190 -

Note: Figures in EBJ's list of top ranked C&E firms are revenues generated for calendar year 2016 in gross environmental consulting & engineering (C&E) not including construction and remediation construction, but including construction management. Environmental construction, remediation construction and federal waste management or contracting services are counted in the middle column labeled Cont/HW. This list is a result of independent research and EBI surveys. In some cases, revenues are approximations derived from executives, analysts and reputable business information sources and published materials. Although EBI has made every reasonable effort to be accurate, figures are not the result of internal or external audits and are not guaranteed to be accurate. Errors and omissions are unintentional. EBJ’s database of C&E firms includes revenues on more than 500 firms down to <$1 million in C&E revenues.

EBI Report 2020-B U.S. Environmental Industry Overview

1.5.10 Environmental Equipment Segments When economic recovery and/or fairly consistent economic growth are present it boosts capital spending, and revenues for equipment manufacturers are usually on the upswing. This is true since it has been a safe bet over the years that a fairly steady and even growing percentage of industry's capital spending was allocated for environmental concerns. However, today’s equipment vendors face the inevitable fact that environmental regulatory drivers are not as strong as they once were, and that the percentage of spending going to end-of-pipe technology is diminishing—and at a higher rate than overall spending could ever grow.

Environmental equipment remains a large market, but now more than ever manufacturers must push the envelope on cost-effectiveness, innovation and service, or ‘equipment as service’. The more sophisticated the equipment, generally the higher the growth. On the way out are primitive, labor-intensive systems. On the way up are onsite, source-specific systems for recovery, recycling or treatment. Nowhere is this more apparent than in water & wastewater, where recycling, point-source treatment, desalination and complete reuse water systems are in high demand. Likewise in monitoring, testing and information: automation and continuous generation and access to data is demanded by most clients. Last automation and AI is increasingly seen by service provider and the environmental industry client base as a more efficient way to replace internal and service-vendor labor, so equipment leader must be leaders in this trend.

Individual equipment segments are addressed below. But first a discussion of the water industry.

1.5.1 Water Industry Overview

Water Industry Presents Multiple Challenges And Some Potential For Disruption The water industry and water services segments within the environmental industry have long had a reputation of as sleepy, stagnant, stubbornly unchanging business category compared

to more dynamic, rapidly evolving or growing segments of the industry. So let’s check on the validity of this stereotype. First, as a business segment with a majority of its customer base in the municipal sector, it is regarded as slow moving, slow growth, and not very dynamic or innovative in the short term. Check: The vast majority of the market is municipal clients that are generally capital constrained and working under controlled rate structures that allow them a limited budget to do not much more than maintain their facilities and assure the public health through clean water delivery and relatively safe and sanitary water and wastewater management. Second, the water industry is broadly regarded as resistant to innovation as the conservative approach of ‘doing things the way they have always been done’ prevails. The aversion to taking risks that may endanger or upset the service population or cause unwanted attention or headlines for the public water utilities and the elected officials charged with overseeing them is also commonplace. In addition, for technology developers and equipment providers, the consulting engineers or operations contractors tasked with system operation & maintenance (O&M), upgrades or redesign tend to not want to experiment with innovations or twists or tweaks to the systems that endanger their tight budgets — not to mention threaten the public safety or the re-electability of their employers the public officials or public agencies. Check: The mission of providing safe drinking water and not endangering the public from substandard water quality, exposure to wastewater or water pollution incidents is still the main objective of public water departments across the country — and not to make a profit for owners or shareholders. Although lacking the profit motive, over the past three decades system optimization, more sophisticated financial management, and a general but gradual embrace of new technology in treatment systems, automation and the use of information technology has made a dent in the water industry’s reputation. Private water utilities tend to be more ambitious in investing in new technology, but are generally regarded as conservative in nature. So the ‘just get the job of delivering potable water done’ still remains the prevailing mentality, maintaining a sort of archaic status quo of much of the existing water delivery and wastewater treatment system. Third, the wastewater and water market is very fragmented, populated with thousands of tiny districts, small private water companies and a diverse network of treatment plants and transmission and distribution assets that involve numerous client interests and numerous

EBI Report 2020-B U.S. Environmental Industry Overview

public interests in each client or project situation. Check. This is also true as water is, and water will likely remain for the foreseeable future, fundamentally a local issue under local control and the citizens and businesses and industry it serves will likely always have a voice in its maintenance, whether through elected representatives or through direct action or advocacy at public hearings. As the tables on the following pages illustrate, there are literally hundreds of thousands of entities that represent customers for equipment or clients for services. An EPA officer acknowledged that the list of all NPDES permits is ‘voluminous,’ in fact around 350,000 entries. EPA’s Enforcement and Compliance History Online or ECHO website shows 6,800 ‘major’ National Pollution Discharge Elimination System permits under the Clean Water Act, 41,000 non-major ‘individual’ permits and more than 300,000 ‘general’ NPDES permits. Admittedly there are plenty of big clients with billion-dollar budgets and billion-dollar projects in their portfolio, but that is to be expected in a $172.6-billion industry. Fourth, the water market has an almost infinite supply and variety of discharge points and wastewater flows varying in scale, contaminant profile and local hydrogeologic and geographic characteristics. This means that water solutions resist standard solutions or standardization in technology, design, regulation and enforcement, and almost always require some form of customization or engineering or combination of treatment approaches. Now this lack of standardization may be good for the engineering consulting profession, and the designers and contractors that oversee and build treatment facilities and distribution networks. But it is not so good for the equipment providers and technology developers that look to build scale in their manufactured equipment, nor for products looking to mass produce or quickly penetrate new markets. Water markets compared to many other contemporary business segments or opportunities for scientists and technology developers also seem to resist the prospect of technology or engineering breakthroughs that can rapidly revolutionize an industry. Many characterize much of the water industry as largely still a civil engineering exercise where the challenge is in moving water around efficiently and assuring that it does not leak, evaporate or get lost in some way, and then minimizing energy use and costs in treatment and delivery. This is also true to an extent and merits a check, but this factor along with all of the factors

listed above do reveal that we have started this review from a municipality-centric viewpoint. It is not completely out of place to regard the water market as a monolithic, central system or as an immovable or irreformable and stagnant mish-mash of infrastructure of various quality and states of decline, but that view is blind to the downstream activities of the user community. The truth is that as the water and wastewater infrastructure has evolved in the United States—or some would say as it has slowly deteriorated in the United States — the end user has inevitably taken on more of the mantle of responsibility for their own water quality and security of supply. This is manifested perhaps most in the growth of the bottled water industry from $2 billion in 1990, $6 billion in 2000, $12 billion in 2010 to $18.5 billion in 2017, revenue figures much smaller than the water industry as EBJ defines it, but representative of a mobilization of capital that likely exceeded that put into the water infrastructure over the same period. On a larger, water-system scale, end users and their suppliers have also increasingly taken on the mantle of technology innovation across the water industry. This applies to industrial markets most acutely where food & beverage manufacturers, microelectronics manufacturers, and others that have specialty water quality needs and where additional layers of treatment on the public supply are required. To some extent it also applies to the larger and more heavily consuming industries that more frequently draw surface water or groundwater from outside the public infrastructure like power utilities, the oil & gas industry, hydraulic fracturing contractors, the mining industry, agriculture, and others, each of which have different purposes from their water supply, and are generally less concerned about quality, but have their own usage, quality, rights, disposal & discharge, regulatory and price issues requiring strategy and management. On the residential and commercial side, rising awareness of water quality has increased demand and development of point-of-entry and point-of-use water treatment systems. A recurring debate still persists over whether the approach to a national water strategy or regional water systems should emphasize centralized control and management and a broad access to high quality drinking water, or whether this centralized approach should devolve into more of a distributed system. In a more distributed systems, point-of-entry treatment modules would exist where drinking

EBI Report 2020-B U.S. Environmental Industry Overview

water quality is required at apartment buildings or hotels or hospitals or other institutions, or that point-of-use water treatment units would be more prevalent or even universal at more clearly designated drinking water locations, whether in someone’s home or in public spaces. This multi-level water treatment industry layers another dimension of fragmentation and lack of standardization, adding to industry challenges. In addition, most scenarios for more institutionalized or system-wide water reuse networks involve a two-pipe system of potable and non-potable water that add both considerable cost and safety concerns. A POSITIVE FOR EVERY NEGATIVE? One would think with this long list of unappealing attributes that the water industry would not be a core focus of many companies. However, for every negative point there is more often than not a positive point to balance it out. For the matter of the water industry being slow growing compared to other environmental market niches, while never approaching double-digit growth rates, it is and has been one of the most consistently growing segments over the 30 year history of the environmental industry, as the chart on page 1 shows. Additionally, water is one of the largest segments, or cluster of segments, in terms of both absolute size in revenue generation for service providers and equipment manufacturers, and in the absolute number of customers or clients. The relative lack of innovation that has been in evidence in the water industry over the last 100 years or more has indeed contributed to both slow growth and to no sweeping changes in marketshare. One could argue, however, that it does make the water industry more ripe for ‘disruption’ to use a contemporary term. So slow, steady and predictable are characteristics we can ascribe to the water industry, but like the tortoise in the fabled tale of the tortoise and the hare, slow and steady often wins the race. DISTINCT ERAS PUNCTUATE INDUSTRY EVOLUTION In EBJ’s 30 years of analyzing the water industry we have observed a few distinct eras where certain issues characterized the prevailing trend in the business. The 1970s and 1980s were the dawn of the regulatory era when decades of primarily municipal history of construction of water delivery and wastewater treatment infrastructure were subjected to the Clean Water Act and the Safe Drinking Water Act standards that impacted O&M procedures as well as capital expenditures on upgrades, retrofits and new facilities.

In the early 1990s when growth stagnated from often double-digit annual rates in core environmental industry segments that had come of age in the 1980s like C&E, hazardous waste and remediation, interest in water and wastewater resurfaced to some extent by the stability of its revenue flows. One of the prevailing themes debated in theory at the time was privatization, and competition focused on short-term opportunities in contract operations and O&M services for municipal and industrial water and wastewater management. Long-term commitments to consistent revenue streams by stable customers contrasted favorably to ‘event-based’ projects with a finite life cycle that characterized the maturing cleanup business in the early 90s. Additionally, when considering privatization, the example of France where much of the water infrastructure was owned and managed by private companies like Vivendi and Suez, and the United Kingdom where the water industry had been broadly privatized during Thatcher governments was fresher in the minds of environmental industry analysts. Government and business policymakers also observed a competitive advantage these firms had in what then seemed appealing global markets, and arguments that more private control and ownership of the U.S. water infrastructure gained credence. The globalization of the water services industry expanded most rapidly in that era as French, British and Spanish utilities had ambitious growth and acquisition plans in developing markets of Asia, Africa and Latin America. Private U.S. water utilities were still in the minority and of a considerably smaller scale than their European counterparts, so never went much beyond their borders in that era, and few even consider it today. Long-term concession contracts by globalizing utilities also became less appealing over time as monetizing the user communities into consistent rate-payers, and dealing with entrenched interests in developing and transition economies has been more fraught with risk than companies expected. U.S. water equipment and chemical manufacturers and U.S. consulting engineers with major water practices both have seen fairly consistent growth in demand for their business offerings in global markets, and have proven to be competitive, if not in an outright leadership position, in these segments. The 1990s also saw the beginning of consolidation plays characterizing the water equipment and chemicals segment of the environmental industry with companies like US Filter and later

EBI Report 2020-B U.S. Environmental Industry Overview

GE leading the charge in the U.S. with multiple 100-million-dollar acquisitions to build water equipment platforms well over a billion in annual sales. In Europe utilities like Severn Trent in the UK and the French leaders acquired or built equipment and technology firms. Consolidation in the Water Equipment & Chemicals segments of the environmental industry continues today with some fits and starts over the last couple decades. Current leaders Pentair, Danaher, Xylem (formerly ITT) and Ecolab all are representative of a more recent wave of publicly traded consolidators in equipment or ‘water industrials’ to use the term favored by water investment analysts. (see page 27). SUEZ, predominantly an electric and water utility, was the eventual buyer of GE’s water business. And while the US Filter business did pass through Vivendi (subsequently renamed Veolia) before being acquired by Siemens, it was sold to private equity before going public as Evoqua in October 2017 (see box below and Q&A on page 39). It is somewhat noteworthy that GE and Siemens as major global multinational corporations with a technology bent exited the industry, but each rationalized water as not being a large enough part of their business to qualify as a core competence. More notable to analysts recently is that SUEZ made a $3.4 billion bet on GE’s water business with the fairly recent example of Veolia’s generally regarded as failed acquisition of US Filter staring them in the face. Private equity has showed interest in the water industry the past decade or more, but perhaps not with the same fervor as other investment-platform sectors like tech or biotech. Some analysts observe that valuations are perhaps too high for the larger companies and that strategic acquirors are more likely to pay higher premiums. Nevertheless a next wave of consolidators seem more likely to be funded by private equity than public or family-owned business. EBJ’s annual list of top Water Equipment & Chemicals companies shows no real major change besides SUEZ replacing GE, but annual growth figures of the top firms WE&C revenues illustrate some important features of the segment. Aggregated revenues of the top 21 WE&C firms in EBJ’s database with significant U.S. operations grew 6% in 2013, 3% in 2014, -5% in 2015, -2% in 2016 and 7% in 2017. Despite not being a central focus of this review thus far, the largest factor here is the decline in capital spending by the oil & gas industry and others with top firms Ecolab, Pentair and Xylem all posting significant declines

© 2019 Environmental Business International, Inc. Page 1-189 EBI Report 2020-B U.S. Environmental Industry Overview well above the average decline in 2015, with subsequent turnarounds well above the average growth in 2017. Companies more focused on municipal supply or infrastructure equipment like pipes, pumps and valves predictably posted more consistent results. BEATING THE FINANCE GAP The over-arching challenge faced by the water industry both U.S. and global is the aforementioned gap between investment required to even maintain if not upgrade current water infrastructure, and the meager allocation of capital or financial instruments to support more private investment. The disturbingly vague hope is that private investment in the form of asset acquisition, project finance or the long promoted P3 or private-public partnerships will fill the gap, but evidence of this trend is unsettlingly sparse. Hope that the Trump Administration would provide some leadership on infrastructure funding, financing or at least policy has not materialized, leaving the water industry to create more public debt instruments or attempting to monetize future income from tightly controlled rate-paying user communities to support investment projects with bonds or local ballot or legislative initiatives. While the relative lack of investment and capital has been in evidence for some time, one of the prevailing trends of the first decade of the 21st century was a gradual but broader realization that the domestic water infrastructure in the United States was aging and badly in need of repair. Coupled with that is the affirmation that the price paid by the residential, commercial, industrial and agricultural customers was not reflective of the true value of treated, potable water, nor the true cost of transporting and treating it from source to tap. This funding, financing and pricing gap persists and even escalates today as a theme, and has driven gradually building support for more price increases for water users, as well as the still largely inadequate and marginal increases in federal support for local and municipal water investments. A flood of government reports continue to come out detailing the water infrastructure funding crisis or gap. The sixth edition of EPA’s mandated Drinking Water Infrastructure Needs Survey and Assessment concludes that “the nation’s drinking water utilities need $472.6 billion in infrastructure investments over the next 20 years for thousands of miles of pipe as well as thousands of treatment plants, storage tanks, and other key assets to ensure the public health, security, and economic well-being of our cities, towns, and communities.”

EBI Report 2020-B U.S. Environmental Industry Overview

The U.S. Government Accountability Office latest compilation added wastewater on and stated “EPA’s most recent surveys estimated approximately $655 billion of drinking water and wastewater infrastructure needs nationwide over the next 20 years.” GAO also reviewed data from seven other agencies with direct ties to, or significant influence on, the water industry: the departments of Agriculture (USDA) and Housing and Urban Development (HUD) and the Economic Development Administration, Indian Health Service, Bureau of Reclamation, U.S. Army Corps of Engineers, and Federal Emergency Management Agency (FEMA). The latest summary from the Congressional Budget Office (see charts on page 7) shows that public spending on transportation exceeds water infrastructure by about two to one, but also an alarming recent decrease in the proportion of public spending for capital projects. The history of comparable data back to 1956 shows an understandable rise of O&M spending over time, as well as understandable dips in capital spending in recession and post-recession times, but the recent history and separation from 2002 onwards is neither understandable nor sustainable. Non-governmental organization American Society of Civil Engineers issued its 2017 Infrastructure Report Card and, like the previous edition it issued four years earlier, gave the USA a D+ overall, with Drinking Water a D and Wastewater a D+ as two of the 16 categories, with Inland Waterways and Levees also Ds and Ports marginally better at C+. ASCE says the theme of its 2017 Report Card is investment calling financing “the $2 trillion question... In infrastructure, you get what you pay for and for decades we haven’t been paying nearly enough. It shows in the grades.” Sounding a familiar drumbeat, but hopefully short of beating a dead horse, ASCE sums up the tone of the various voices aimed at Congress and other policymakers: “Now is the time to renew, modernize, and invest in our infrastructure to maintain our international competitiveness. The longer we wait, the more it will cost.” The 2010s have also brought a heightened focus on water scarcity and sustainability of water supplies, particularly in arid climates and regions more susceptible to climate change. In addition the growing frequency and severity of weather incidents with measurable impacts on water and wastewater facilities has magnified the importance of the resilience of these assets, and the heightened need for the planning and adaptation scenarios.

Plotting future scenarios in rainfall and water supply trajectories subjected to changing climate patterns are also more realistic and actionable with improved climate data, models and software that have come out over the decade, many of them now publicly available. Water scarcity has also led to many advances in the efficiency of water management systems. Supervisory control and data acquisition (SCADA) systems are by no means entirely new, but progressive innovations in application and in particular the use of data, sensors, mobile apps, data management systems, automation, and other innovations to minimize human error, losses in the system and maximize efficiency and volume and quality of water available to the utilities delivering water. On the regulatory front one new frontier opened up related to ECs (emerging contaminants) and CECs (contaminants of emerging concern) – a frontier new enough not to have a universally settled term or acronym to describe it. But ECs are here to stay with some saying a whole new era of the cleanup business will be driven by new requirements likely to come out in the next five years (see page 29). Last, alternative supply sources to augment traditional methods have seen fairly consistent support and investment, and to a lesser extent business growth, in the form of desalination and more importantly water reuse and the infrastructure required to expand water reuse options on a centralized system basis, as well as in closed loop systems within an industrial facility or in a defined user community. If the theme of direct potable reuse (DPR) is to characterize the 2020s, then we wouldn’t be too surprised but, as DPR would likely be somewhat geographically confined, it would represent only a marginal evolution to the U.S. water industry. A renewed focus on quality in light of ECs would also merely be a wave rippling across the industry, creating significant activity, but little in the way of lasting systemic change. While it is not obvious to say that the 2018’s $180-billion U.S. water industry is starved for innovation or ripe for disruption, in hindsight from 2030 we submit that this will likely be the case. The question for innovators and disruptors – and those generating the steady and consistent revenues operating and upgrading the status quo – will be how. How did the mobile phone render landlines obsolete? How did cable then satellite TV then internet streaming render antennae and airwave TV obsolete? How has distributed energy, efficiency, renewable energy and storage technology started to revolutionize the electricity

EBI Report 2020-B U.S. Environmental Industry Overview

industry and threatened the electric utility business model? The answers to these communications and energy infrastructure questions all could pertain to the water industry. How did Uber monetize unused car seats and mobilize latent labor? How did airbnb monetize unused living space? How will WaterX monetize unused water going down the drain, or out to sea or from the sky or from some other source not yet fully conceived? The answers to these businees disruption questions will also likely shed light on future scnearios for the water industry. In the end significant change will require investment, but like all investments the investment requires a return—and almost assuredly a return that doesn’t involve just selling more water. Lacking a track record of disruptive change or even rapid evolution, the water industry will need some more structural change to open a path for the type of returns needed to mobilize private capital. Or the municipal water industry and its advocates can continue to beat the drum of government support in the interests of the public good. “You can lead a dead horse to water, but you can’t make it drink,” a wise man once said. In the water industry the ‘dead horse’ of demanding increases in federal and state funding has been beaten for years, but again generally only fosters localized, marginal improvements to the water infrastructure. Maybe that is the water industry’s fate to continue to rely on old- school municipal financing and incremental rate increases, but it will be interesting to see what alternatives, technology and companies may emerge.

1.5.2 Water & Wastewater Treatment Equipment and Chemicals The water treatment equipment and chemicals segment includes products and services such as pumps, pipes and chemicals for wastewater treatment and disposal, repair of water systems and sludge and storm water management. Aging infrastructure, availability of new funding and eventual upgrading of the Clean Water Act (CWA) and Safe Drinking Water Act are all expected to fuel new development in this industry. Products and services for water infrastructure and treatment are marketed primarily to municipal governments and industry.

In 2007 the U.S. media turned its attention to the nation’s crumbling infrastructure in an unfortunately all-too-common way this summer—in the aftermath of disaster. On August 1, the I-35 bridge in Minneapolis suddenly collapsed during the evening rush hour, killing 13

people and injuring about 100 more. In a matter of seconds, the 390-foot span, which had undergone a partial inspection just three months earlier, plunged some 60 feet into the Mississippi River. The city was in shock, and America had something new to worry about.

The media wasted no time drawing the American Society of Civil Engineers (www.asce.org2 ) into the spotlight, out from the shadows where myriad industry associations operate. ASCE’s annual Report Card for America’s Infrastructure was suddenly front-page news, and the public collectively dropped its jaws when confronted with the dismal grades—highways, D; bridges, C; aviation, D+; dams, D; energy D, hazardous waste, D; navigable waterways, D-; drinking water, D-; wastewater, D-. There was nothing new about these grades; ASCE has been raising the alarm for years. Now, however, people were paying attention, because people had died.

Exhibit 1-123 Growth in Water & Wastewater Treatment Equipment and Chemicals

40 $ Billion

0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

EBJ market analysis indicates that the $85 billion in revenues generated by U.S. water utilities and wastewater treatment works increased by better than 5% in 2009—and further data indicates that numerous overseas markets are growing even faster. Water and wastewater accounted for 40% of the $305-billion U.S. environmental industry in 2009, and the water industry’s growth of 2.1% in 2009 was three and a half percentage points higher

EBI Report 2020-B U.S. Environmental Industry Overview

than the environmental industry’s -1.4%. In EBJ’s 2010 Snapshot Survey, the largely environmental service provider respondents reported “water purification” and “wastewater treatment” as the top two of 22 service and media categories in terms of growth in 2009; in the forecast out to 2012 the two water/wastewater categories placed in the top eight behind only emerging service categories related to renewable energy, energy efficiency, climate change, smart growth and green building. In terms of international growth, water and renewable energy development topped the list.

To be sure, developing nations know well the value of water, as the lack thereof presents immediate and obvious threats to health and livelihood—their citizens are just not accustomed to paying for it. Access to clean supplies and adequate sanitation is clearly understood to be critical to economic growth and improved standards of living. The people and governments of these countries certainly want the funding for water infrastructure projects; the issue is getting it. And the issue for those providing the financing is getting it back, something that has not always happened in water infrastructure development in the developing world in the past.

In the developed nations, where reliable water and wastewater infrastructure is affordable, there’s something of a myopia regarding water’s value, arising from people being habituated to turning on the faucet and getting clean water instantaneously, thus taking the resource for granted. In the abstract, people understand that there’s no replacing water for the vital service it provides—in contrast with oil, which does have substitutes—and in select regions of the developed world, scarcity of the resource makes this understanding more than a mere

abstraction. Water and wastewater equipment and chemicals (including delivery) was a $28.5 -billion market in 2008, however dropped to $27 billion in 2010.

Exhibit 1-124 Water & Wastewater Treatment Equipment and Chemicals Industry, 2002-2010

Water Business Segments 2002 2003 2004 2005 2006 2007 2008 2009 2010 Water Treatment Equipment 7,390 7,930 8,510 9,110 9,790 10,440 11,090 10,420 10,890 Delivery & Infrastructure Equipment* 10,350 10,760 11,190 11,660 12,170 12,600 13,030 11,990 11,750 Chemicals (Bulk & Specialty) 3,660 3,750 3,880 4,020 4,150 4,250 4,340 4,210 4,290 Water Equipment & Chemicals 21,400 22,440 23,580 24,790 26,110 27,290 28,460 26,620 26,930

Exhibit 1-125 Water & Wastewater Treatment Equipment and Chemicals Industry, 2011-2018

2011 2012 2013 2014 2015 2016 2017 2018 Water Business Segments ($mil) ($mil) ($mil) ($mil) ($mil) ($mil) ($mil) ($mil)

Water Treatment Equipment 11,130 11,440 11,990 12,390 12,340 12,440 13,000 13,490

Delivery & Infrastructure Equipment* 12,150 12,550 12,960 13,370 13,440 13,370 13,900 14,360

Chemicals (Bulk & Specialty) 4,450 4,670 4,810 4,920 4,870 4,810 4,870 4,920

Water Equipment & Chemicals 27,730 28,660 29,760 30,680 30,650 30,620 31,770 32,770

The revenues of treatment equipment manufacturers have grown fairly steadily, even during periods of reduced capital spending. Sales of delivery equipment like pipes, pumps and valves depend more on major upgrades or new capital projects. These have been delayed over the past few years but are likely to pick up throughout the rest of the decade. Bright spots for equipment providers have been industrial pre-treatment, in-process and reuse systems, although municipal markets have come back. Sales of water recovery systems have a compelling combination of economic drivers and less dependency on regulations. The price of water is still escalating, as is the price of discharge. With customers already paying at both ends, it's now easier than ever to demonstrate the cost savings of recycling water. Water recovery is helping to drive another trend in the equipment business. Larger companies are consolidating in order to offer all the technologies for integrated solutions to wastewater and water use problems rather than remain simply sellers of non-value-added equipment. Competitiveness will hinge on the ability to stay close to capital spending cycles domestically and to position for integrated projects internationally.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-126 Leading Companies in Water & Wastewater Treatment Equipment, 2006

WEC Rev Company ($mil) GE Water & Process Technologies 2,200 ITT Industries 1,920 Siemens Water Technologies 1,900 Nalco Company 1,590 Pentair 1,570 Watts Water Technologies 1,230 Culligan International 780 Pall Corp. (Fluid Processing Div) 360 Danaher (Trojan, Chemtreat) 300 Clarcor 300 Roper Industries 270 Calgon Carbon Corp. 250 Dow Chemical (Liquid Separations) 230 3M Corp. (Cuno) 220 Severn Trent Services 210 Crane Company 210 Koch Membrane Systems 180 Marmon Group (Graver, Ecowater, Ecodyne, Alamo) 180 Proctor & Gamble (PUR) 170 Ashland (Specialty Chemicals) 160 Flowserve Pump Division 130 Rainsoft (Waud Capital) 130 Axel Johnson (Parkson, Kinetico) 120 Tyco International 100 Hercules 100 Other Treatment/Chemical/Pump Companies 4,340 Pipes, Fixtures, etc. 6,960 Total Water Equipment & Chemicals ($mil) 26,110

1.5.2.1 Market Overview Water changes hands from resource owners and providers, to treaters, to end-users to wastewater treaters and back to providers again. This makes the “buy-side” and a “sell-side” of this industry at once circular and complex. The end-users in the water market are the ultimate buyers of water treatment equipment, chemicals, and services. So, while water flows through their hands, crops, cooling towers and industrial processes, money generally flows from their bank accounts.

The various end-user groups, or categories, are each unique in their water uses and treatment needs. Exploring these individual markets from an applications/needs as well as size/growth perspective provides the necessary intelligence for developing marketing strategies.

The water end-user markets are defined here as all individuals or companies that draw water from either water utilities or natural sources for “out of stream use” and eventually discharge back to natural sources or wastewater treatment works. The four major end-user categories are:

• Agriculture: (livestock, irrigation) • Thermoelectric Utilities • Domestic/Commercial • Industrial Manufactures: (chemical, petroleum, paper, food)

In addition to these end-user markets, there are two more areas where water and wastewater treatment opportunities exist: landfill leachate treatment and groundwater remediation.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-127 EBJ’s Top U.S. Water Equipment & Chemicals Companies: 2015 Revenues

(listed by global WE&C revenues in 2015)

>$4 Billion EcoLab (Nalco) 6,740 Pentair 4,663 $2-4 Billion Xylem (formerly ITT) 3,653 GE Water & Process Technologies (Glegg, BetzDearborn, Osmonics, Ionics, Zenon) 2,900 Danaher (Pall, Trojan, Hach, ChemTreat, Am.Sigma, Veeder-Root) 2,036 $1-2 Billion Solenis (formerly Water Technologies segment of Ashland) 1,600 Watts Water Technologies Inc. 1,468 Evoqua (AEA Investors, fmr: Siemens, USFilter) 1,200 Mueller Water 1,165 Pall Corp. (acq'd by Danaher in May 2015) 1,041 $500-1,000 Million Dow Water and Process Solutions: Dow Chemical (Liquid Separations) 979 Culligan International (Centerbridge) 800 Rexnord 785 Calgon Carbon Corp. 535 $200-500 Million Roper Technologies, Inc 484 Koch Membrane Systems Inc. 450 The Marmon Group (Graver, Ecowater, Ecodyne, KX) 422 Gorman-Rupp 406 Axel Johnson (Parkson, Kinetico) 350 3M Purification Inc. (Cuno) 309 Cabot Corporation 296 Flowserve 167

Source: EBJ database of Water Equipment & Chemicals companies, based on surveys, interviews and compiled research on public and private companies.

1.5.3 Environmental Instrumentation & Information Systems Instrument & Information Systems segment of the U.S. environmental industry is $6 billion with recent annual growth in the 4-5% range. The global market is estimated at $14-15 billion and 6% growth. EBJ interviews information, EHS software vendors, IT firms, environmental consultants, energy management and accounting firms all were interviewed

and profiled to shed light on this dynamic market of providing EMIS or EHS information management solutions to corporations and government. In instruments, leaders in bench-top instruments and emerging on-site diagnostic tools are profiled. Includes revenue breakdowns by equipment and client type, and growth forecasts. Markets are divided into the following subsegments:

• In-Lab Analytical Instruments

• In-Line Process Control Instruments

• Portable/Field Analytical Instruments

• Environmental Software & Service/Data

• Dedicated Environmental Information Management Hardware

Instrument Manufacturing includes equipment for analytical testing in laboratories, in-situ and continuous monitoring instruments for use with machinery and portable instruments and test kits. New and revised regulations are constantly renewing the demand for up-to-date monitoring and analysis equipment. The majority of revenues are generated from sales of fixed-facility equipment for gas chromatography and mass spectroscopy (GC/MS), but higher growth is in mobile equipment. Instruments is one of the most global of the environmental industry segments. Revenues of U.S. companies are roughly half domestic, and half international and our list of top manufacturers includes some overseas-based companies.

Exhibit 1-128 U.S. Environmental Instruments & Information Market by Product, 1998-2020

1998 1999 2000 2001 2002 2003 2004 2005 In‐Lab Analytical Instruments 1.28 1.30 1.32 1.34 1.35 1.38 1.40 1.45 Portable/Field Analytical Instruments 0.50 0.53 0.56 0.59 0.62 0.66 0.69 0.75 In‐Line Process Control Instruments 0.58 0.61 0.64 0.68 0.72 0.76 0.81 0.88 Environmental software & service 0.55 0.58 0.60 0.65 0.70 0.75 0.81 0.89 Dedicated environmental hardware 0.58 0.61 0.63 0.66 0.68 0.69 0.70 0.70 Total 3.49 3.63 3.75 3.91 4.07 4.24 4.41 4.67

EBI Report 2020-B U.S. Environmental Industry Overview

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 In‐Lab Analytical Instruments 1.50 1.55 1.58 1.51 1.55 1.58 1.62 1.65 1.69 1.73 Portable/Field Analytical Instruments 0.81 0.87 0.90 0.88 0.92 0.96 1.00 1.04 1.09 1.14 In‐Line Process Control Instruments 0.95 1.02 1.06 1.03 1.08 1.12 1.17 1.22 1.27 1.33 Environmental software & service 0.96 1.05 1.11 1.13 1.19 1.26 1.34 1.45 1.60 1.78 Dedicated environmental hardware 0.71 0.70 0.68 0.64 0.65 0.65 0.67 0.68 0.70 0.72 Total 4.93 5.20 5.34 5.20 5.38 5.58 5.79 6.05 6.36 6.71

2016 2017 2018 2019 2020 In‐Lab Analytical Instruments 1.77 1.81 1.86 1.90 1.94 Portable/Field Analytical Instruments 1.19 1.25 1.31 1.37 1.43 In‐Line Process Control Instruments 1.39 1.45 1.52 1.59 1.65 Environmental software & service 1.93 2.07 2.20 2.32 2.43 Dedicated environmental hardware 0.74 0.77 0.80 0.83 0.86 Total 7.03 7.36 7.68 8.01 8.32

Exhibit 1-129 Environmental Software & Information Service Companies, 2006

Number of Companies EI Sales (bil) Top 10 ($10 mil+) 8 165 Top 11-50 ($5-10 mil) 30 225 Top 51-200 ($1-5mil) 150 270 Rest (<$2mil) 350 158 Total 538 818

Exhibit 1-130 Environmental Software & Information Service Companies in 2014

Number Average Total $mil Share of Cos. Size $30 mil+ 5 46.0 230 14% $10-30 mil 35 14.0 490 31% $5-10 mil 60 6.8 408 26% $1-5 mil 210 1.55 326 20% Rest (<$1mil) 350 0.4 140 9% Total 660 1,594

Source: EBI Inc. EBI Report 616

Historical growth has been mostly fueled by the need for detection of toxics under the many hazardous waste regulations. This has understandably driven competitiveness higher in the United States where these laws are much more stringent, particularly on the remedial side. The Clean Air Act amendments have driven a good opportunity for environmental

© 2019 Environmental Business International, Inc. Page 1-201 EBI Report 2020-B U.S. Environmental Industry Overview instrumentation, driving sales of monitoring equipment, particularly continuous emissions monitoring (CEM). Laboratories internal to government or industry, analytical service companies and all regulated industrial companies constitute the market for environmental instrumentation. Environmental instrument manufacturing suffered like the rest of the equipment segments through the era of decreased capital expenditures but has been buffered to some extent by its global presence.

Exhibit 1-131 Top Environmental Software & Information Service Companies in 2010

2010 Env’l Info. Sales in Company Millions IHS/ESS 50 3E Company 35 Pavilion Technologies 35 SAP 30 Enablon 30 Atrion International (HIS acq'd) 25 CGI 25 Enviance 25 EarthSoft 12 Intelex 12 ADEC Solutions (Enverity) 12 Locus Technology 10 Medgate 10 ProcessMAP Corp 10 ENXSuite 10

Source: EBI Inc. EBI Report 616

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-132 Top Environmental Software & Information Service Companies in 2014

2014 Env’l Info. Sales in Company Millions Microsoft 40 SAP 40 IBM 30 Oracle 30 IHS Inc. 90 Verisk Analytics (3E) 25 Enablon 25 EarthSoft 25 Intelex 25 Enviance 25 CGI 20 FirstCarbon Solutions 20 CR360 20 PE International (thinkstep) 20 ProcessMAP 10

Source: Environmental Business International, Inc., San Diego, CA, units in $mil. Based on EBI surveys of over 50 environmental information and environmental C&E firms, interviews and secondary research. This list is a result of independent research and EBI surveys. In some cases, revenues are approximations derived from executives, analysts and reputable business information sources and published materials. Although EBI has made every reasonable effort to be accurate, figures are not the result of internal or external audits and are not guaranteed to be accurate. Errors and omissions are unintentional.

Business in environmental instrument manufacturing has been tempered by conflicting factors over the past few years. On one hand, international sales have boosted U.S. firms as the clear, global leaders in analytical technology. On the other, overcapacity in environmental testing labs has slowed domestic sales. Nevertheless, this subsegment has posted consistent revenue gains.

Exhibit 1-133 Top 30 Analytical and Life Science Instrument Companies, 2005

>$1 Billion Applied Biosystems Group Thermo Electron* Agilent Technologies >$100 Million-$1 Billion Waters PerkinElmer Shimadzu GE Healthcare Bruker Group Beckman Coulter Varian Invitrogen Becton Dickison Sigma Aldrich Hitachi High Technologies JEOL Mettler Toledo Bio-Rad Olympus Carl Zeiss Qiagen Nikon Affymetrix Merck Danaher Fisher Scientific* Eppendorf Dionex Roche Tecan Horiba

Note: Global sales including all analytical and life science applications, not just environmental

Source: Strategic Directions International

Analytical laboratory equipment has traditionally dominated sales in environmental instrumentation, but its share fell to around 60% in the mid-90s. Mobile or field analytical equipment represents a growing share, and test kits a small but emerging niche. Monitors and continuous emission monitors for air contribute most of the rest.

U.S. environmental instrument manufacturers generated about 55% to 60% of their revenues outside the United States. International demand has been good for traditional lab instruments

EBI Report 2020-B U.S. Environmental Industry Overview but particularly for ambient monitors and other devices, terrestrial or otherwise, to measure the extent of pollution problems in the developing world. A billion-dollar Amazon River monitoring project, won by Raytheon in Brazil, is testimony to the desire to track environmental problems, but perhaps more importantly to gauge future resource issues. Satellite monitoring and sophisticated site characterization tools developed mostly from defense and surveillance R&D projects do have a future in the environmental industry, but it is unlikely that many more billion-dollar projects will be funded by World Bank. In the developing nations—and even in various parts of Europe—there is greater concern about water quality “because so much sewage is discharged directly into waterways. In all the developing countries, this is a huge problem.” Instrumentation that is in great demand for water-quality monitoring outside the United States includes Spectrophotometers, water test kits and electrochemistry test equipment. The non-U.S. markets are also presenting solid opportunities for providers of field monitoring and sampling equipment.

Exhibit 1-134 Leading Companies in Environmental Instrumentation, 2000

Revenues Company (HQ Location) ($Millions) Thermo Instrument Systems 300 Agilent Technologies (Formerly Hewlett-Packard) 260 PerkinElmer Corp. 180 Varian Inc. 141 Hach Co. 120 $100 Million - $30 Million Rosemount Analytical Bristol Babcock KVB/Analect (Hamon Research-Cottrell) Foxoboro Company Graseby Anderson Andros CEM Corp.

In some cases, air emissions monitors have been supplanted or avoided by "predictive emissions monitoring," which is essentially a software and information system. Linking information systems to monitors and analytical instruments will serve not only to track

environmental performance but also to track processes and material and energy efficiency. The new wave of environmental information is struggling to get off the ground, but the technology is here.

The sales of environmental software and related services is about $1 billion in the United States. The majority of environmental information projects still involve crafting software onto existing hardware systems rather than purchasing entirely new dedicated hardware. In these new systems, however, hardware represents upwards of 70% of the costs, depending on the extent of system integration involved. As a discrete market, environmental information systems have the potential to grow well over 10% a year, but the disconnect between start-up costs and measurable value delivery for the customer must be bridged better if companies are to thrive. The universe of providers and packages is approximately 500 to 600 companies are providing up to 4,000 packages of many different stripes, from application-specific packages for reporting air emissions or tracking material safety data sheets (MSDSs) to enterprise EHS packages for comprehensive environmental tracking and reporting.

Exhibit 1-135 Historical and Projected Growth in Environmental Instruments & Information

$ Billion 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Few new regulatory drivers, a relative lack of environmental enforcement, and client needs for productivity more than dramatic new detection-sensitivity levels have helped turn the

EBI Report 2020-B U.S. Environmental Industry Overview

North American, European, and Japanese markets for environmental instrumentation into flat, “replacement” markets, according to industry watchers. Pockets of opportunity persist, such as activity in emissions-source testing, water-quality analysis, and—in Japan and Europe—dioxin testing, but for the most part, instrument makers are focused on serving existing client needs for equipment with improved up time, ease of use, and throughput—all at a lower cost. Like many other segments in the environmental industry, instruments have ‘matured’ with flattened growth, increased customer sophistication, heightened competition, pricing pressure and inevitable merger & acquisition activity.

A push for improved infrastructure in developing nations, primarily in water infrastructure, has stimulated double-digit growth in the market for environmental instruments, and in particular, for analytical laboratory instruments in those countries. The problem is, the baseline market in those nations is very small compared to the established markets in North America, Europe, and Japan.

1.5.4 Air Pollution Control Equipment The air pollution control (APC) equipment segment of the environmental industry is comprised of companies selling equipment, supplies, materials and maintenance for air pollution control systems.

Air Pollution Control Equipment includes equipment for use in reducing air emissions from stationary sources and vehicles. Federal Clean Air Act and state and local regulations are all responsible for fueling demand in this market. These products are purchased by all air pollution generating industries and utilities. As the Clean Air Act (CAA) amendments of 1990 and subsequent programs have been slowly promulgated by the EPA, it had 20+ years of a driving effect on both the emission study/control markets and the permitting/compliance markets.

The roughly $4-billion market for equipment and systems for stationary sources include flue gas desulfurization (FGD) systems, electrostatic precipitators (ESP), fabric filter systems, absorbers, oxidation systems, catalytic systems, NOx control, and others. Most of this

equipment is associated with fixed-facility combustion. In fact, air quality markets have evolved mainly along the lines of combustion or energy with control efforts focused on utilities, waste incineration plants and then moving on to metals production and pulp & paper mills. Other equipment includes air filters used for small stacks, volatile organic compound (VOC) controls, odor controls and air handling equipment used on landfills and remediation projects.

The equipment and systems market breakdown shows that traditional combustion controls FGD, ESP, and fabric filters & baghouse supplies once accounted for a total of 64% of total market revenues, but now this figure is closer to half. Oxidation systems, NOx control, and carbon adsorption account for a much smaller proportion of the current market, these segments have been high-growth areas. According to the breakdown by industry buyer, electric utilities' share declined considerably in the mid-90 but has picked up again in recent years. The revenues from electric utilities declined from 45% in 1992 to 26% in 1997, but 45% again in 2004 and 40-50% throughout the 2000s. The sunsetting of coal has and will increasingly decrease power’s APC share, but closing multiple plants will be a long-term process extending throughout the 2010s.

Exhibit 1-136 Mobile Source vs. Stationary Source, 2000-2014

2002 2003 2004 2005 2006 2007 2008 2009 2010 E7. Air Pollution Control 18.91 18.5 19.0 18.8 18.5 18.3 18.0 15.8 14.9 Mobile APC 15.19 14.80 15.21 14.91 14.46 14.03 13.60 11.70 11.00 Stationary source APC 3.71 3.67 3.77 3.85 4.08 4.28 4.37 4.15 3.94

2011 2012 2013 2014 2015 2016 2017 2018 E7. Air Pollution Control 15.07 15.52 15.71 15.96 16.29 16.81 17.41 17.31 Mobile APC 11.22 11.44 11.39 11.44 11.50 11.73 12.02 12.14 Stationary source APC 3.85 4.08 4.33 4.52 4.79 5.08 5.38 5.17

In mobile controls, a series of regulatory initiatives in 2001 and 2002, led by new diesel emission standards issued as one of the Clinton Administration’s final actions, has apparently jump-started unprecedented levels of technology development among makers of mobile-

EBI Report 2020-B U.S. Environmental Industry Overview

source emissions controls. Manufacturers are preparing for robust markets for particulate

filters, oxidation catalysts, selective catalytic reduction (SCR) systems, and lean NOX traps

(LNTs), or NOX absorbers as new standards for engine emissions of diesel particulate matter, oxides of nitrogen, hydrocarbons, phase in over the next two to ten years. Both light-duty vehicles, such pickup trucks, minivans, and sport utility vehicles (SUVs), and on-road heavy- duty diesel vehicles, including buses and large trucks, face compliance with new regulations as early as 2004. EPA’s 1999 Tier II rules will require the SUVs and other light-duty vehicles, for the first time ever, to meet the same emission standards as passenger cars beginning with the 2004 model year. The Tier II rules are modeled after the California Air Resource Board’s (CARB’s) second round of Low-Emission Vehicle standards (LEV II). The Tier II and LEV II standards will tighten in successive years so that, by 2010, a GM Suburban will be as clean as a Toyota Tercel, emission-control companies say.

Although a host of new air quality programs of almost unprecedented breadth and scale are on tap for 2011 and 2012, the threat of these programs has cast the major emitters into a waiting game, much to the chagrin of APC companies across the board. U.S. Environmental Protection Agency (EPA) has issued, or is poised to issue over the next several months, a slew of new regulations under the Clean Air Act (CAA): National Ambient Air Quality Standards (NAAQSs) for criteria air pollutants such as sulfur dioxide (SO2), nitrogen oxides (NOX), ozone, and fine particulate matter (PM 2.5); National Emission Standards for Hazardous Air Pollutants (NESHAPs) establishing maximum achievable control technology (MACT) requirements for utility boilers, industrial boilers, cement kilns, and other industrial sectors; New Source Performance Standards (NSPSs) for the electric utility and oil and gas industries; best available control technology (BACT) standards for greenhouse gas (GHG) emissions control for power plants and refineries; and more.

For the regulated community, this onslaught of regulation is confusing and disturbing on a variety of levels. First, there’s always the question of how tight the standards will be, and what will be acceptable methods of achieving those standards. MACT and BACT provide some historical guidance, but in the case of some of the new rules, the agency appears to have departed from its customary practice of looking at the overall pollution control

performance of the top 12% of facilities across all categories of pollutants, and has instead assessed performance on a pollutant-by-pollutant basis.

When it comes to controlling hazardous air pollutants (HAPs), such as mercury, dioxins, furans, hydrogen chloride, cadmium, and many others, any given facility in several of the industrial categories targeted for regulation may be a top performer in controlling any one of these pollutants, but no single facility has demonstrated consistent top performance in controlling all or even most. The terms “Frankenboiler” and “FrankenMACT” have been coined to stand for this ideal—and fictional, according to the regulated community—facility that can cost-effectively control a broad sweep of HAPs, and for the rule that requires such performance.

Exhibit 1-137 APC Segment Revenues 1970-2020: Air Pollution Control Equipment

$ Billion 25.0

20.0

15.0

10.0

5.0

0.0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

The APC equipment business has evolved among industries depending mostly on their energy intensity – in other words those that use the most energy (particularly in the form of combustion) get regulated first. Utilities represent about half of the market, but air consulting revenues have already shifted more to pulp & paper, refineries, etc., in effect prefacing more equipment revenues in these industries. Baghouses/filters represents a large contributor to revenues of stationary sources, with electrostatic precipitation and flue gas desulfurization (FGD) making up big pieces, but NOX and VOC control are fast catching up.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-138 Distribution of Companies in Air Pollution Control Equipment, 2004

Number of Total APC Average Revenue Company Size Companies Revenue ($mil) ($mil) >$100 Million 6 946 157.6 $50 Million–$100 Million 11 708 64.3 $20 Million–$50 Million 28 828 29.6 $10 Million–$20 Million 42 500 11.9 <$10 Million 354 799 2.3 Total 441 3,780 8.6

The implementation of CAA titles and New Source Review (NSR) will be instrumental to segment growth and changing opportunity. The good news for all air quality companies is that the broadened regulatory scope is adding not only more pollutants to be measured and controlled but also many more sources to the list of the regulated. The bad news for existing APC manufacturers is that far fewer solutions will involve the purchase of pollution control equipment but instead will rely on materials substitution, fuel changes, process adjustment, consulting and pollution prevention technology instead.

With numerous fingers pointed at coal-fired electric power plants identifying them as the

leading U.S. sources of nitrogen oxides (NOX), sulfur dioxide (SO2), and mercury pollution— to say nothing of emitting substantial volumes of carbon dioxide—the impetus to regulate these facilities more stringently has been overwhelming. The regulatory initiatives are coming from multiple directions, and despite the regulated community’s customary efforts to resist, some initiatives are now certain to stick. In addition, at least until the recent economic downturn, new power generation projects were moving forward at rapid pace. No surprise, then, that many providers of air-quality equipment and services have identified the electric power industry as their primary target market, by a considerable margin. Electric utilities have invested substantially in air-quality strategies and emissions control equipment in recent

years, with the promise of more to come. The NOX-control equipment market in particular is poised for growth over the next two years as states in the Midwest and Southeast scramble to revise their State Implementation Plans (SIPs) with new, tighter NOx emission standards.

Exhibit 1-139 Leading Companies in Air Pollution Control Equipment, 2004 - 2006

Company Location >$100 million Babcock & Wilcox Co. (McDermott) Barberton, OH GE Energy (BHA Group) Kansas City, MO Donaldson Company, Inc. Minneapolis, MN Alstom Power Knoxville, TN Wheelabrator APC (Aquilex) Pittsburgh, PA $50-100 million Clarcor Rockford, IL Monsanto Enviro-Chem, Inc. Chesterfield, MO Ducon Technologies Inc. Farmingdale, NY Ceco Filters Inc Conshohocken, PA MFRI (Midwesco Filter) Niles, IL Hamon Research-Cottrell Somerville, NJ Marsulex Environmental Tech LLC Lebanon, PA Koch Industries (John Zink, Todd) Louisville, KY Babcock Power Inc. (BP Env’l; Riley) Worcester, MA Mitsubishi Power Systems Inc. Newport Beach, CA $10-50 million Met-Pro Corp. Harleysville, PA Belco Technologies Corp. Parsippany, NJ Peerless Manufacturing Co. Dallas, TX Fuel Tech Stamford, CT FLS (formerly FLS miljo) Houston, TX Environmental Elements Corp. Baltimore, MD Durr Industries Wikom, MI Thermatrix Inc. (Linde AG) Knoxville, TN Combustion Controls S&ES Toledo, OH Wahlco Environmental Systems Santa Ana, CA Epcon Industrial Systems Inc Conroe, TX Crown Andersen Inc. Peachtree City, GA Mobotec USA Orinda, CA Powerspan Corporation New Durham, NH Anguil Environmental Systems Milwaukee, WI ADA Environmental Solutions Littleton, CO Coen Company Inc. Burlingame, CA

EBI Report 2020-B U.S. Environmental Industry Overview

1.5.5 Waste Management Equipment Waste management equipment is a catch-all segment for environmental products not specifically associated with water and air pollution control. This includes equipment for handling, storing, or transporting solid, liquid, or hazardous wastes. Manufactured equipment includes vehicles, compactors, shredders, drums, containers, landfill liners, incinerators, recycling equipment, remediation equipment and protective clothing. This equipment tends to be bought directly by generators bypassing the service components of the environmental industry to some extent and tends to follow economic and waste generation cycles, as well as wastes affected by regulatory scrutiny. Whereas our waste infrastructure will always be massive, it is hard to foresee high growth in tanks, liners, vehicles, etc., although upgrades in garbage trucks have had noticeable positive business implications for component manufacturers.

Exhibit 1-140 Historical and Projected Growth in Waste Management Equipment

$ Billion 16

0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Waste Management Equipment has benefited from cycles of positive returns in the resource recovery business. Manufacturers of sorters, conveyers and balers have never been as busy as they were when recyclable commodity prices shot up. Demand for specialty vehicles was also high as municipalities and private collectors seek the most efficient way to harvest their commodities. Another growth area has been specialty containers for commercial and residential collection of recyclables.

This business is not just about recycling, however. Waste transportation vehicles (mostly garbage trucks), the largest component of this segment, improved growth following a couple of slow years. Business for landfill liners has been fairly steady, as few new landfill cells can get away without minimal if not state-of-the-art controls.

Hazardous waste equipment from drums to chemical storage buildings to protective gear has seen better days. Likewise, the market for incineration equipment is on the decline as waste minimization and overcapacity in both the commercial market and captive incinerators have slowed the few anticipated purchases. Remediation and spill response equipment also have experienced little growth, as cleanup markets have been uncertain.

Exhibit 1-141 U.S. Waste Management Equipment Industry: 2001-2020 ($mil)

2001 2002 2003 2004 2005 2006 2007 Drums/Haz Waste Tanks/Containers; HW 1100 1010 950 970 1040 1070 1100 Landfill Liners SW/HW 540 500 470 490 510 540 570 Chemical Storage Buildings HW 180 170 160 160 160 160 160 Balers RR 360 320 310 330 360 390 420 Compactors SW/RR 390 370 380 400 440 470 500 Shredders SW/RR 330 310 320 340 370 390 410 Incinerators SW/HW 540 530 520 510 520 510 500 Waste Collection Vehicles & Components SW/HW 2410 2310 2260 2350 2470 2570 2670 Remediation Equipment & Supplies REM 610 600 640 690 740 780 820 Protective Gear/Clothing HW 750 740 750 770 790 810 830 Conveyers/Sorters SW/RR 310 310 320 330 340 360 380 Commercial/Residential Waste Containers Dumpsters SW/RR 1170 1180 1200 1250 1350 1440 1540 Recycling Separators/Screens RR 220 220 220 220 230 240 250 Process & Prevention Technology 1260 1300 1380 1420 1520 1680 1800 Other 710 720 730 740 770 810 850 Total WME 10880 10590 10610 10970 11610 12220 12800 WME growth ‐2.2% ‐2.7% 0.2% 3.4% 5.8% 5.3% 4.7%

EBI Report 2020-B U.S. Environmental Industry Overview

2008 2009 2010 2011 2012 2013 2014 Drums/Haz Waste Tanks/Containers; HW 1130 1,020 1,040 1,030 1,060 1,090 1,110 Landfill Liners SW/HW 590 540 550 570 580 600 620 Chemical Storage Buildings HW 160 140 140 140 140 140 140 Balers RR 440 400 410 430 440 450 460 Compactors SW/RR 530 480 490 520 530 550 570 Shredders SW/RR 430 400 420 440 450 460 470 Incinerators SW/HW 490 430 420 420 420 430 440 Waste Collection Vehicles & Components SW/HW 2760 2,400 2,470 2,570 2,650 2,740 2,830 Remediation Equipment & Supplies REM 850 830 860 900 940 990 1,020 Protective Gear/Clothing HW 850 810 830 860 890 920 940 Conveyers/Sorters SW/RR 400 370 380 400 410 430 450 Commercial/Residential Waste Containers Dumpsters SW/RR 1630 1,560 1,590 1,650 1,680 1,760 1,830 Recycling Separators/Screens RR 260 250 260 270 280 290 300 Process & Prevention Technology 1910 1800 1880 1900 1971 2000 2050 Other 880 890 910 930 950 970 1,000 Total WME 13310 12,320 12,650 13,030 13,390 13,820 14,230 WME growth 4.0% ‐7.4% 2.7% 3.0% 2.8% 3.2% 3.0%

2015 2016 2017 2018 2019 2020 Drums/Haz Waste Tanks/Containers; HW 1,140 1,170 1,210 1,250 1,300 1,360 Landfill Liners SW/HW 640 660 690 720 760 800 Chemical Storage Buildings HW 140 140 140 140 140 140 Balers RR 470 480 490 490 490 490 Compactors SW/RR 590 610 640 670 700 740 Shredders SW/RR 480 490 500 510 520 520 Incinerators SW/HW 450 460 470 490 510 530 Waste Collection Vehicles & Components SW/HW 2,930 3,040 3,160 3,290 3,430 3,580 Remediation Equipment & Supplies REM 1,050 1,090 1,140 1,190 1,250 1,320 Protective Gear/Clothing HW 960 990 1,020 1,060 1,100 1,150 Conveyers/Sorters SW/RR 470 490 500 510 520 530 Commercial/Residential Waste Containers Dumpsters SW/RR 1,900 1,960 2,010 2,060 2,100 2,130 Recycling Separators/Screens RR 310 320 330 330 330 330 Process & Prevention Technology 2095 2145 2201 2263 2331 2405 Other 1,030 1,070 1,110 1,160 1,220 1,290 Total WME 14,660 15,120 15,610 16,130 16,700 17,320 WME growth 3.0% 3.1% 3.2% 3.3% 3.5% 3.7%

Long-term prospects for manufacturers of waste management equipment in the domestic market are unpromising outside of capitalizing a larger recycling infrastructure. Outside the United States, Japan and Western Europe, entire solid waste infrastructures need to be created, but many of these will line up for funding behind water projects. As in other

segments, foreign buyers look for solutions and not isolated pieces of equipment. Waste management equipment manufacturers would be well advised to pay attention to how and to whom the projects shake out.

Waste Management Equipment: 2010-2015 Update Like just about any other industrial sector you can name, the market for waste equipment was in a sad state in 2009. The big blow came from states, counties, and municipalities— traditionally about half the client base for waste equipment—which were suffering from anemic budgets and put a hold on any equipment purchases. There has been some comeback, but not across the board. In 2009, “every segment of the market was off,” says Janice Bradley, executive director of the Waste Equipment Technology Association (WASTEC; Washington, DC). Among the government clients, “you saw 18 months of the band-aid approach—making do with what they had. It was a total breakdown, as it was in many industries.” The commercial real estate market—particularly the development of strip malls and the franchising of restaurants—“came to a halt or went backwards,” Bradley adds. “Dumpsters or containers that were just sitting there were returned to the owner. And with the slowdown in construction, roll-offs took an 80% hit, and that hasn’t rebounded yet.” Meanwhile, companies went out of business—clients and manufacturers—and if they had any inventory, that meant a surplus in the marketplace, according to Bradley.

Into mid-2010, there was a six-month upward trend in the market, “which is good news,” Bradley says. The market for balers, compactors, and residential containers, such as two- wheel carts and bins, has not come back to 2007 levels, but sales of Class 8 vehicles are showing signs of life. “It’s no spike,” Bradley affirms. “It’s steady now, and we’ll take that.” The price of steel has leveled off, although “it’s still pretty high,” Bradley reports. Rolled steel plates, at $706 per ton in March 2010, were priced at more than $960 per ton as of early August 2011. A key trend has been the conversion of waste hauler vehicle fleets to alternative fuels, such as liquefied natural gas (LNG) or compressed natural gas (CNG). Waste companies are converting their fleets by the hundreds annually, companies like Cummins Westport (Vancouver, B.C.) are supplying LNG and CNG vehicle engines, and WASTEC member Clean Energy Fuels Corp. (Seal Beach, CA), a developer of CNG and

EBI Report 2020-B U.S. Environmental Industry Overview

LNG fueling facilities, “is doing very well,” according to Bradley. In its statistical reports for core members, WASTEC is now tracking the alternative vehicle category, she adds.

1.5.6 Environmental Resource Segments With perpetual revenue growth for environmental service and equipment seriously out of the question, it is surprising that few companies have sought entry into resource segments, such as water delivery, resource recovery (recycling), and clean energy sources, e.g. solar, wind, and geothermal. No doubt there seems little synergy between resource recovery, renewable energy and equipment and service segments, but the management of water resources provides a match for both. More importantly water management promises to dwarf all other segments, even solid waste, in terms of revenue size.

1.5.7 Water Utilities Water Utilities provide delivery of water to end users in the private sector. As with water infrastructure and treatment equipment, population growth, upgrading of infrastructure and an updated Clean Water Act are expected to sustain stable growth in water utilities. RCRA requirements and potentially embarrassing reports under the Toxic Release Inventory also drive demand. Customers include municipalities, all industry and private homes. Unlike environmental industry segments in non-resource categories, water utilities are not a segment that faces a finite life cycle. In other words, consistent growth prospects look likely well into the next century, as opposed to cleanup service and control technology markets, which will diminish eventually.

All water utilities generated $45-60 billion in revenues in 2010-2020. The price of water continues to be a determining factor in growth, rising 3-6% a year. Discharge fees will also be a growing concern in the future. Paying at both ends for water, and with delivery and disposal rates both rising, more facilities will treat and reuse water on site. Around 85% of U.S. water delivery is in public-sector hands. Only about 5% of municipal waste water treatment systems are privately owned in the United States, although a number of POTWs are privately managed or operated.

Exhibit 1-142 Historical and Projected Growth in Water Utilities Revenues

$ Billion 70

0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

For evidence of the importance of water privatization and its effect on the environmental industry, look no further than across the Atlantic. France has succeeded in transferring water delivery and treatment from a public enterprise to a predominantly private sector ones, Vivendi (now Veolia) and Suez. Britain privatized more rapidly in 1989 and lists 10 water utilities averaging over £500 million in revenues, with North West, Severn Trent and Thames all over £1 billion. Business conditions for privatization of water utilities in this country, are not as ripe as they were for the transitions in France and the United Kingdom, but the potential remains for companies to access at least some of this continuous pool of capital. If U.S. water companies don't position for such a transition, their competitors from across the Atlantic will be only too pleased to fortify their presence in the United States.

These European companies all have something else in common. They have all taken part in the foreign invasion of the 90s. All are actively pursuing environmental business in the United States – and not just limiting it to water. Water management contracts have and will continue to be won, but these firms have bought companies in virtually every segment of the environmental industry. Vivendi also had considerable success in its solid waste business in Europe, capitalizing on its strong relationship with municipal water clients to out-compete Waste Management and the then-BFI for solid waste contracts on more than one occasion.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-143 U.S. Community Water System Summary: 2015

System Service Population Systems % Systems Service % Population Population (mil) Very Small <=500 28,595 55% 4.7 1.6% Small: 501–3,300 13,727 27% 19.7 6.6% Medium: 3,301–10,000 4,936 10% 28.8 9.6% Large: 10,001–100,000 3,851 7% 109.8 37% Very Large >100,000 426 0.8% 137.3 46% Total 51,535 100% 300.2 100%

Source: U.S. Environmental Protection Agency, adapted from AWWA State of the Water Industry report

In the United States, there are over 50,000 community water delivery systems in the United States serving 300+ million people. The rest of the population is served by immeasurable or individual systems such as wells, springs and surface waters. Total water usage from all sources is much higher than that processed through the utilities, of course. Of total water withdrawals of roughly 410 billion gallons per day (GPD), 45% is by thermoelectric power plants, 34% by agriculture, 12% residential and 9% commercial and industrial. The first two rely almost exclusively on surface waters. Industrial users purchase only 19% from utilities; domestic and commercial users, 87%.

Among water utilities, there is considerable variety in size and ownership. Six percent of the nation's 58,000 systems serve almost 80% of the population hooked up to water utilities. Of these, 311 large systems collectively serve 43% of the population. With so many small systems--36,000 serve 500 or less people--the huge fragmentation of this business is apparent. Also apparent is the dominant role played by the public sector. The private sector is responsible for only 16% of the $30 billion in water utility revenue generation.

This segment looks much like solid waste did 30 years or so ago, when the majority was in public-sector hands. Although solid waste started from a larger base of private operations, and the systems were less fragmented, the potential for privatization is great. Those who doubt it should look to France and the United Kingdom where privatization swept in, although in the UK more because of government policy than private initiative.

Exhibit 1-144 Historical and Projected Growth in Water Treatment Works

80$ Billion

0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Exhibit 1-145 U.S. Wastewater System Summary: 2008

Existing flow range (MGD) Number of Total existing Present Facilities flow (MGD) design capacity (MGD) < 0.1 5,703 257 490 0.1 to 1.0 5,863 2,150 3,685 1.0 to 10.0 2,690 8,538 13,082 10 to 100 480 12,847 17,267 100 and greater 38 8,553 10,344 Total 14,780 32,345 44,868

Source: U.S. Environmental Protection Agency, adapted from AWWA State of the Water Industry report, MGD is million gallons per day

On average, water use charges increased 22% between 1990 and 1994 and 10.5% between 1992 and 1994, while the consumer price index (CPI) rose 6.1%, and the general trend continues to 2020. Rises in water prices are expected to continue to outpace that of inflation. In short, user fees are a major driver of segment growth that is projected at 3-4%, but two other key factors will affect this business going forward. Besides the evolutionary macrotrend of privatization, the whole water reuse and water recycling movement will have an interesting impact on water utilities. Rising fees for water users and rising fees for water dischargers (which have been escalating at a much higher rate than user fees) are strong economic drivers for water reuse systems. Once a resource is paid for, it increasingly makes

EBI Report 2020-B U.S. Environmental Industry Overview

sense for the purchaser to capture the resource on site. This trend is ushering in an era of water resource management at the facility rather than the community level. Industrial water recycling systems are more than in vogue, they make economic sense. Even the notion of homes in arid regions using simple treatment systems for channeling wastewater for garden irrigation is not that far-fetched. Taken to its extreme, these examples augur an eventual decline in growth in demand for water from water utilities, and that in the next century water consumption may not always increase with economic growth.

1.5.8 Resource Recovery Resource Recovery involves post-industrial and post-consumer recovery and recycling, and recovery and recycling of non-hazardous chemicals or other materials from industrial wastes. The shift toward a circular economy (in which resources are reused and recycled and waste and pollution are minimized), along with state recycled content laws, general public pressure for recycling and increasing laws regarding manufacturer responsibility for packaging and waste from their used products, are creating many opportunities for resource recovery. Municipalities, waste generators and solid waste companies all purchase resource recovery services. The numbers in this section do not include cost or revenues from companies recycling within their own plants, i.e. industrial ecology efforts that are entirely captive. Rather, they represent only the resource recovery dollars that are externalized into separate and distinct businesses.

Exhibit 1-146 Sales of Recovered Materials in/from U.S., 2002-2016 ($bil)

2002 2003 2004 2005 2006 2007 2008 2009 2010 Ferrous Scrap 5.6 6.9 8.9 9.6 9.8 12.8 11.9 11.0 12.6 Non‐Ferrous, Other 1.7 1.8 1.8 2.0 2.4 2.9 2.7 2.5 2.7 Aluminum Scrap 2.6 2.3 2.2 2.8 4.1 4.7 4.9 3.3 4.1 Aluminum Cans 0.7 0.7 0.7 0.6 0.9 1.1 1.0 0.8 0.8 Plastic 0.6 0.7 0.8 0.9 1.1 1.3 1.4 1.4 1.5 Glass 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.3 Paper 3.6 4.1 4.8 5.0 5.8 8.4 6.1 5.0 6.6 Materials Total 14.91 16.54 19.31 21.09 24.25 31.35 28.22 24.23 28.52 Annual Growth 9% 11% 17% 9% 15% 29% ‐10% ‐14% 18%

2011 2012 2013 2014 2015 2016 2017 2018 2019 Ferrous Scrap 15.5 14.3 14.7 14.5 12.3 11.8 12.4 12.7 Non‐Ferrous, Other 2.8 2.9 2.8 2.3 2.1 2.1 2.1 2.0 Aluminum Scrap 4.8 4.2 4.1 3.9 3.6 3.2 3.5 3.2 Aluminum Cans 0.8 0.8 0.9 0.8 0.7 0.6 0.5 0.4 Plastic 1.7 1.6 1.6 1.7 1.6 1.5 1.4 0.8 Glass 0.3 0.2 0.2 0.3 0.3 0.3 0.4 0.4 Paper/OCC 6.6 6.3 6.5 5.6 5.4 6.0 5.7 3.4 Materials Total 32.46 30.36 30.82 29.11 26.10 25.55 26.11 23.01 Annual Growth 14% -6% 2% -6% -10% -2% 2% -12%

SOURCE: EBI Inc., San Diego, ebiusa.com, derived from a variety of sources, units in $bil, post-consumer and post-industrial © EBI Inc.

2011 was a mixed year for recycling, and at a time when economic recovery is limping along post-recession, it may be helpful to see the glass as half full. There have been some high points; there have been some disappointments. There certainly has been action—in investments, mergers and acquisitions (M&A), technology development, and regulation.

One disappointment: No matter how you measure it—and it turns out that accurate assessments are difficult to compile—residential recycling rates have stagnated. Unsurprisingly, overall municipal solid waste (MSW) generation appears to have tailed off during the recession, but recycling hasn’t been making the gains that proponents would like for some time. Whether it’s because states and municipalities are no longer enthusiastic about incentivizing recycling, or can’t because fiscal constraints force attention elsewhere, it’s hard to tell. Another disappointment: Although for recyclers of secondary materials— aluminum, metals, glass, plastics, and paper—2010 was, overall, the best year they’ve seen in a long time, that good fortune was not shared across the board. The generation of

EBI Report 2020-B U.S. Environmental Industry Overview construction and demolition (C&D) waste remains a casualty of the slumping economy and the lack of construction activity, for example, and the decline of newspapers is having a negative ripple effect on newsprint recycling capacity.

On the positive side is the aforementioned banner year for secondary materials recycling, across several categories. One result of the robust market for recovered materials is the resumption of a reinvestment cycle, and some M&A activity by major players to fill in holes in their networks. Another positive is the steps that the top waste management firms are taking to invest in the technology and infrastructure needed to recover more materials from waste streams and put them to beneficial use, whether energy, compost, or other products. Notable is the substantial investment activity of Waste Management, Inc. (Houston, TX), which is joining major multinational industrial companies like Chevron, Chrysler, Total, Toshiba, and Shell Oil in realizing that strategic investment in clean technology is a critical part of their future.

In the middle ground is organics recycling. Twenty-three states had bans on the disposal of yard trimmings in landfills as of 2008, but the number dropped to 21 this year as Georgia and Florida repealed their bans. Meanwhile, the diversion of commercial and residential food waste away from landfills is making little progress nationwide due to structural issues associated with making it easy, particularly for households, to separate food waste.

One important trend to watch is the so-called “Walmart effect.” The big-box retailer continues to impose standards on its supply chain that are leading to more responsible management of electronic waste, or “e-waste,” and organic wastes where regulatory programs may be lagging in their ability to compel such behavior. Look for sustainability- focused companies like Walmart to stay out ahead of regulation as a driver for recycling markets. As noted, the market for recovered materials had its best year in 2010, as reported by Jerry Powell, executive editor of Resource Recycling magazine (Portland, OR). “Revenues rose in the mid-teens in percent to reach a new sales record,” he says. “Overall, the recycling markets remain robust and high priced. The indicators suggest they will stay there, and with one exception, the pricing volatility has moderated.” That exception is

plastics. “They ride the volatility scale with their main raw material, oil and gas,” says Powell. “The price chart for plastics follows those ups and downs.”

The high prices and solid sales for secondary materials overall are bringing a good return on investment and has led to the beginning of a reinvestment cycle, he continues. This in turn is leading to growing consolidation. Especially in ferrous scrap, many companies are family- held partnerships “with some desire to exit,” and big players like $7.5-billion Sims Metal Management (New York, NY) and $2.3-billion Schnitzer Steel Industries, Inc. (Portland, OR) “are picking up options to fill geographic holes, in order to establish a national practice,” Powell observes. That’s the up side of M&A activity in the secondary materials market; there’s a downside, in the end-use processing segment, according to Powell. Paper mills and steel mills are going in “fire sales.” RockTenn Co. (Norcross, GA), for example, acquired bankrupt paper recycler Smurfit-Stone Container Corp. (Creve Coeur, MO), in May 2011 and has begun to shut down various operations.

Exhibit 1-147 Historical and Projected Growth in Resource Recovery

$ Billion 35

0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

The volatility associated with recycling prompts some disaffection with the business, but it hasn’t driven companies out—not that it could. “If the customer says its part of the contract, our members respond to the requirement,” says NSWMA’s Miller. Yet “recycling is a different business from collecting garbage; a different entrepreneurial attitude is required,” he observes. “Solid waste is predictable—you pick it up and take it to a transfer facility.

EBI Report 2020-B U.S. Environmental Industry Overview

Recycling throws in a wild card, because you never know what your revenues will be from the sale of the recovered materials. You definitely can make money, but you are also going to lose money every couple of years.”

Interestingly, the economic slump has benefited recycling operations in at least a couple of ways. The burst of recycling activity throughout the 1990s prompted investments in mills for processing recycled materials, and “when the recession hit and steel and newsprint consumption fell, the mills that were shut down were the older, antiquated mills using virgin materials,” Powell says. “Newspaper recycling mills didn’t get hit quite as bad, and that trend is continuing.”

Rising energy prices also provided a spur for the use of recycled materials for their energy value. For example, “we’re seeing more companies, like timber processor Weyerhauser, becoming more self reliant,” Powell explains. “A significant portion of the tree can’t be used to make paper, so it goes to energy generation.” In the aluminum sector, “energy prices forced one-third of the aluminum capacity to shut down,” Powell continues. “Yet people continue to buy cars, so when the virgin smelters were down because energy prices were too high, the demand for recycled aluminum went up.”

Exhibit 1-148 Leading Companies in Resource Recovery, 2002

2002 Company Recycling (HQ Location) Revenue ($Mil) OmniSource Corp. (Fort Wayne, Ind.) 809 Metal Management (Chicago) 757 Imco Recycling (Irving, Texas) 687 Waste Management (Oak Brook, Ill.) 635 Smurfit-Stone Container Corp. (St. Louis) 563 Wabash Alloys L.L.C. (Wabash, IN) 485 Philip Services Corp. (Hamilton, Ont.) 484 W. Marsh & Co. (W. New York, NJ) 471 Commercial Metals (Dallas) 394 Ferrous Processing & Trading Co. (Detroit) 325

1.5.9 Clean Energy Systems & Power Clean energy sources include solar, wind, geothermal, small scale hydroelectric and other forms of alternative energy with environmental benefits that make them substantially more desirable than fossil fuels and promise them a prominent place in tomorrow’s sustainable economy. The public’s desire for cleaner, renewable sources of energy drives the need for research and development in new and improved environmental energy sources. Utilities, industry and builders all purchase these services.

Exhibit 1-149 Historical and Projected Growth in Clean Energy Systems & Power

$ Billion 70

0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Like pollution prevention services, there is a higher internalization ratio for these kinds of services compared to other environmental services. For example, in a growing number of cases, energy efficiency services are provided by power generating utilities themselves, which may, upon occasion, hire C&E firms to help with their efficiency outreach projects. It is anticipated that energy (oil) prices will continue to rise, which, coupled with the concerns about global warming will heighten demand for energy conservation technologies and solutions. Alternative and renewable energy companies have reason to be optimistic as well. Market acceptance has grown. Technology, product performance and reliability are up, especially in wind and solar. Utilities are more favorable towards alternative approaches, particularly in the current regulatory climate. And government incentives appear to be on their way back. Optimism, yes, but with more than a smidgen of caution. The alternative

EBI Report 2020-B U.S. Environmental Industry Overview energy business has a long history of hopes smashed on the rocks, and seasoned survivors wisely take nothing for granted.

The ability for renewable energy sources to deliver a return on investment and ultimately make sustainable markets depends on a variety of factors. EBI has endeavored to rate market drivers and their effect on seven renewable categories. The analysis results in a fairly positive picture that validates the optimistic future of solid double-digit growth rates forecast for the renewable energy segment.

Exhibit 1-150 Low-Carbon Power: Renewable & Conventional Power Sales; Specialty Equipment & Services: 2014-2020e ($bil)

USA 2014 2015 2016 2017 2018 2019 2020 1a. Low‐Carbon Power: Renewable Power Sales; Specialty Equipment & Services Wind Turbines 6.61 8.85 8.33 6.25 6.41 6.85 7.35 Windpower Electricity Sales 12.70 13.79 15.79 17.71 19.82 22.18 23.65 Wind Consulting & Engineering 0.22 0.20 0.16 0.16 0.18 0.19 0.19 Wind Construction 1.19 1.54 1.50 1.08 1.10 1.17 1.27 Wind Operation & Maintenance 0.74 0.78 0.87 0.90 0.94 1.00 1.07 Wave & Tidal Systems 0.56 1.00 1.00 1.00 1.00 1.00 1.00 Wave & Tidal Electricity Sales 0.17 0.30 0.30 0.30 0.30 0.30 0.30 Photovoltaic Systems Manufacturing 0.98 0.88 0.77 0.64 0.57 0.58 0.58 Concentrated Solar Power Systems 0.51 0.06 0.01 0.01 0.01 0.01 0.00 Solar Thermal Systems 1.28 1.34 1.38 1.42 1.46 1.50 1.54 PV Electricity Value 3.74 5.31 8.37 11.06 14.09 17.42 21.03 CSP Electricity Value 0.74 0.79 0.83 0.86 0.89 0.93 0.96 ST Power Value 1.91 2.00 2.06 2.12 2.18 2.24 2.30 Solar Planning, Design & Installation 4.16 4.67 8.66 6.28 7.43 7.06 7.43 Biomass Electricity 4.14 4.11 4.00 4.16 4.39 4.61 4.84 Specialty Services: Biomass: Wood & Waste 0.11 0.11 0.12 0.12 0.13 0.14 0.14 Specialty Services: Landfill Gas 0.15 0.15 0.16 0.17 0.18 0.19 0.20 Geothermal Electricity Sales 1.34 1.41 1.45 1.52 1.59 1.66 1.73 Geothermal Equipment Sales 0.07 0.07 0.05 0.10 0.10 0.11 0.05 Geothermal Services 0.04 0.07 0.06 0.09 0.09 0.06 0.03

Outside of power, renewables made contributions in solar thermal systems, passive solar buildings and other areas but these sources were less significant economically. Not to be forgotten is the sleeping giant on the demand side. Higher efficiency systems, equipment and products for use by industry and consumers offer untold potential to save energy and money—which become incrementally more cost effective as energy prices go up.

The figures do not include revenues generated by utilities from renewable energy or energy efficiency programs. Most of the revenues in photovoltaics are sales of system modules and parts rather than electricity sales. The majority of these sales were overseas. Solar thermal electric capacity is represented by the former Luz International (Los Angeles) facility, which, while operational, is not hooked up to grids or generating revenue from power sales but is being run as an R&D project. Solar water heating revenues are mostly sales of collectors for residential and some industrial use.

Geothermal, wind and biomass revenues are all power sales of independent power producers (IPPs) or non-utility generators (NUGs). Although geothermal and wind companies have significant opportunity in expanding operations overseas, virtually all of their revenues were domestic. Wind and geothermal firms are typically project developers rather than sellers of equipment or systems. Biomass is defined as landfill gas and agricultural waste. Wood, wood waste and municipal solid waste are not included in the total. If included, these would increase biomass capacity tenfold to 8,000 MW. Power contributions from NUG hydroelectric are sometimes counted in the renewable equation and amount to close to 2,500 MW. Demand side management (DSM) or efficiency investments include innumerable methods whereby utilities assist customers in modifying electricity demand, thereby conserving energy.

Domestically, the "renewable" energy sources of wind, solar, geothermal, biomass, landfill gas and municipal solid waste represented just 2% of the U.S. electricity generation mix in 1994. Coal (55%), nuclear (20%), natural gas (11%), hydro (9%) and oil (3%) contribute the rest. Proponents have envisioned a future in which renewables contribute as much as 10% by 2010, but the open competition of utility deregulation will make it a hard target to reach. What exactly deregulation and future state and federal energy--and environmental--policy will mean to environmental energy sources remains to be seen.

Cancellation of subsidies and set-asides for renewables and continuing neglect of the environmental externalities of traditional power generating sources will surely spell even

EBI Report 2020-B U.S. Environmental Industry Overview

tougher times for alternative energy than the '80s. Clearly, coal combustion has made tremendous environmental strides in the past 25 years, but most analyses still fail to account for environmental degradation. Even the coal industry's most recently funded study, though admirable and objective in many ways, is still afraid to put environmental issues on a level playing field. It carefully explains the execution of a few magnificent birds of prey at the hands of razor-like wind machine blades, which lure them in by providing a protective habitat for rodents below, but it conveniently fails to mention the billions of fish, millions of people, acres of land and countless ecosystems disrupted by the coal industry. With the progress the coal industry has made -- thanks in no small part to the environmental industry - - maybe coal is truly a more economically and environmentally sustainable power source. But the world does not yet have that information. In its absence, renewables should continue to receive subsidies to bridge the way for alternative energy firms into a more sustainable future.

Exhibit 1-151 Leading Companies in Wind Energy in 2009

Est. 2009 Global Wind Company Revenues ($mil) Vestas 7,680 GE Energy 7,580 Sinovel 4,920 Enercon 5,200 Goldwind 3,850 Gamesa 4,040 Dongfang 3,480 Suzlon 3,530 Siemens 3,610 REpower 2,010

Exhibit 1-152 Leading Companies in Wind Energy in 2015-2016: MW Capacity Added

2015 2016 Vestas (Denmark) 7300 8700 GE Energy (USA) 5900 6530 Goldwind (China) 7800 6457 Gamesa (Spain) merged with Siemens in April 2017 3100 3700 Enercon (Germany) 3000 3500 Nordex (Germany) 2300 2700 Siemens (Germany) 3100 2252 Guodian United (China) 2800 2200 Envision (China) 2700 1990 Ming Yang (China) 2700 1960

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-153 Leading Companies in Solar Energy in 2009

Est. 2009 Global Solar Company Revenues ($mil) Suntech 2900 JA Solar 2710 First Solar 2560 Yingli Solar 1900 Trina Solar 1960 Motech Solar 1710 Q-Cells 1810 Gintech 1530 Sharp 1430 Canadian Solar 1090

Exhibit 1-154 Solar PV Leaders: PV Module Shipments in MW 2011-2013

COMPANY 2011 2012 2013 Yingli 1700 2300 3200 Trina Solar 1900 1600 2550 Canadian Solar 1650 1550 1900 Sharp na 10501900 JinkoSolar 1100 900 1650 First Solar na 1800 1600 ReneSola na na1600 Kyocera na na1250 JA Solar 2100 na 1200 Hanwha Solar 1300 750 1200 One Sunpower 1000 8501100 Suntech 2400 1500 1000 Solar Frontier na na 950 REC Group na 750 850 Hanwha Q-Cells na na 800

1.6 Climate Change Industry Definition and Context

This section presents Environmental Business International Inc.’s (EBI) definition of the climate change industry and its nine business segments, in addition to a synopsis of the industry’s size, growth trajectory and market drivers. We also take the opportunity to compare the climate change industry to the environmental industry that preceded it. Environmental Business International initiated research into the climate change industry in 2007, more than 20 years after providing a widely adopted definition of the environmental industry. We believe that the evolution of the environmental industry, which EBI has tracked in detail since 1987, provides valuable precedents for and insights into the climate change industry and the challenges and opportunities it faces.

The environmental industry traces its roots to the National Environmental Policy Act (NEPA) of 1970 and the birth of the Environmental Protection Agency, which heralded an era of policy and regulation governing pollution cleanup and control. Similarly, the climate change industry is developing in response to a wave of global, national and regional climate change policy focused on carbon control. In the United States of course the climate change industry still lacks a central governing climate change policy and has no NEPA equivalent. However, we believe more regulation is inevitable, and the climate change industry will be driven by government programs, compliance regimes, and market mechanisms much like the environmental industry that preceded it. As government initiatives and market mechanisms are put in place, EBI believes the business segments that comprise the climate change industry will coalesce into a more closely connected group of sectors with enough common issues to represent an industry.

Figure 1-1 Nine Segments of the Climate Change Industry

1. Low-Carbon Power Renewable & Conventional Power Sales; Specialty Equipment & Services 2. Carbon Capture & Storage (CCS) Systems, Equipment and Operations 3. Energy Efficiency&Demand Response Systems, Equipment & Appliances; Audits & Studies 4. Energy Storage Equipment & Systems 5. Green Buildings Design & Development; Building Materials & Supply

EBI Report 2020-B U.S. Environmental Industry Overview

6. Transportation Vehicles, Fuels & Systems 7. Carbon Markets Credit & Offset Trading; and Project Development, Verification and Registration 8. Adaptation Risk Assessment, Planning, Engineering & Construction 9. Services Consulting & Engineering; Research

SOURCE: Climate Change Business Journal; Environmental Business International, Inc.

Why the Climate Change Industry? What prompted EBI to define and quantify the climate change industry (CCI)? First, it was clear to us that multiple emerging opportunities in the business of mitigating and managing climate change were in need of definition and quantification, and segments which initially appeared disparate and unrelated in fact fell under the same climate change umbrella. Like the environmental industry before it, the components of the climate change industry lack uniform recognition by government or international industry coding systems. Thus EBI set itself the task of creating an identity for the climate change industry—just as we originally gave shape to the environmental industry in 1988 by creating a definitional framework that has since been widely adopted by the private sector and government agencies worldwide.

EBI’s interest in the climate change industry arose naturally from the overlap between the cleanup-oriented environmental industry (which over the years has become increasingly concerned with pollution prevention, energy management and waste reduction) and the proactive climate change industry. The industries share common ground—notably two of the largest segments: consulting & engineering and low carbon power (renewable energy). Consulting & engineering is populated by companies central to both the environmental and the climate change industries because they operate as service providers in virtually every segment of both. EBI has researched renewable energy since the 1980s, although it was tangential to the traditional environmental industry which was typically guided by EPA programs targeting legacy issues like pollution control, waste management, remediation, and water & wastewater. In the climate change industry, by contrast, low carbon power is a central player, representing 40% of the U.S. climate change industry pie. But there the similarities end. The majority of business segments in EBI’s definition of the climate change industry represent a new universe of markets that are still in their infancy but until now have

lacked a coherent framework for analysis. By providing such a framework we aim to create a strategic context for those seeking to participate in business opportunities associated with climate change—opportunities that increasingly share common market drivers and competitive economic issues.

Second, EBI believes that the need for a comprehensive definition of the climate change industry is going to become increasingly obvious as carbon market systems are established worldwide. As this happens, our cluster of 9 climate change segments will become even more responsive to the CO2 and greenhouse gas imperatives that we believe will become more important relative to other drivers like energy security, environmental protection, and sustainable development.

Third, climate change is now permanently on the political and policy agenda of world governments. Regulatory engines may fire in fits and starts, but they’ll only move in one direction, i.e., towards bringing EBI’s 9 segments together into a more closely comparable framework. For example, carbon capture and storage (CCS) developers may not consider themselves directly competitive with tidal power companies or green building supply companies, but increasingly policymakers, investors and companies will regard them as more closely related. Climate change policy in 2010 (much like environmental policy in 1970 when the U.S. EPA was founded) will emphasize long-term climate issues in some eras and short-term economic issues in others but will not be eliminated or fundamentally derailed regardless of political leadership or the trajectory of global negotiations or agreements.

Why did we choose the “climate change industry” rather than “clean energy” or “cleantech” industry or another term already in use? Mostly because our definition is far broader than terms already being used by market researchers. “Cleantech” was coined for the benefit of the investment community to resonate with IT or biotech roots. While EBI’s first impulse when planning its dedicated research unit and publication in 2001-2002 was to call it Clean Energy Business Journal, because of the low price of oil and recession at that time, we chose not to launch under this rubric and chose Climate Change Business Journal instead. EBI’s broader definition includes all markets related to carbon or greenhouse gas emissions,

EBI Report 2020-B U.S. Environmental Industry Overview including carbon capture & storage, energy storage, adaptation, design and construction, and even conventional low carbon power sources like nuclear, hydroelectric generation and cogeneration whose growth prospects have brightened in the climate aware era. We believe this broader sweep captures more accurately the long-term market fundamentals and opportunities arising from climate change policy and regulation.

1.7 Trends in the Climate Change Adaptation Industry

Figure 1-2 USA Climate Change Adaptation Industry (2014-2021e)

2014 2015 2016 2017 2018 2019 2020 2021 Climate Change Adaptation Services Climate Risk Assessment & Analysis 180 212 248 287 327 370 413 457 Climate Adaptation Planning 137 172 213 262 319 387 464 552 Adaptation Design, Engineering & Construction 226 253 284 321 365 416 476 547 Disaster Services Disaster Risk Reduction 74 88 103 119 135 153 171 189 Disaster Preparedness and Response Planning 86 108 134 165 201 243 292 348 Disaster Response Contracting Climate Adaptation Equipment & Systems Analytical & Information Systems 104 122 139 154 166 178 189 198 Construction Materials & Supplies 150 168 190 214 243 277 317 365 Total 959 1123 1310 1521 1758 2024 2322 2656 Growth 18% 17% 17% 16% 16% 15% 15% 14%

Source: CCBJ climate change adaptation industry model

Figure 1-3 Climate Change Adaptation Services by Client (2014-2018e)

2014 2015 2016 2017 2018 Federal Government 246 273 295 319 344 Local government 256 302 356 420 496 Port authorities 81 107 131 159 194 Water utilities 50 63 79 99 125 Insurance 18 22 27 33 41 Others 54 67 95 123 148 Climate Change Adaptation & Disaster Services 704 833 982 1,153 1,348

Source: CCBJ climate change adaptation industry model

1.7.1 Strategy for Consultants 1.7.1.1 TRC, ENVIRON, ICF, and dcarbon8 define their climate change practices. You’ve inventoried your greenhouse gas (GHG) emissions and developed a general sense of your carbon footprint: Now what do you do with the information? Increasingly, those parties that have had their carbon footprints analyzed—electric utilities, energy-intensive industrial companies, consumer retailers, municipalities, and a host of others—have asked that question before the analysis even began. Regulation associated with mitigating climate change is coming down the mountain fast, and in some jurisdictions, such as the European Union and California, regulation is already here. The risks—and direct costs—associated with living in a carbon-constrained world are no longer theoretical.

Figure 4 Climate Change Consulting Competitor Types and Examples

Environmental C&Es ICF, ENVIRON, ERM, CH2M Hill, URS, SAIC Management Consultants: McKinsey, Booz, Accenture Big 4 Accounting Firms: Ernst & Young, Deloitte, KPMG, PwC Insurance Financial Carbon Brokers: Cantor CO2e, EcoSecurities, NatSource Specialist/Boutique: Stratus, Eastern Research, KEMA

Figure 5 Other Climate Change Consulting Sector Competitors

ESCOs: Johnson Controls, Siemens, Honeywell, Ameresco Demand Response: Comverge, EnerNOC Green Building design: URS, AECOM, Fluor, Kimley-Horn, Tetra Tech, Gensler CCS consultants: E&E, Potomac Hudson, MJ Bradley, Monitor Sciences

EBI’s Report 4000, a sister report to EBI Report 2020, is a compendium of all nine segments of EBI’s climate change industry, in addition to five renewable energy subsegments. Individual report sections are numbered accordingly and may also be purchased individually.

EBI Report 2020-B U.S. Environmental Industry Overview

1.8 Healthy Products, Healthy Planet (HP2) Market

In a research project 20 years in the making, Environmental Business Journal (EBJ) and Nutrition Business Journal (NBJ) have defined and quantified a new market to represent all products and services sold to promote personal health or to benefit the environment. Entitled the Healthy Products, Healthy Planet (HP2) market, this $620 billion in 2007 U.S. expenditures represents 4.7% of the U.S. economy and grew 10.2% in 2007—or more than twice the GDP growth of 4-5%. The value proposition may be health, it may be sustainability, it may be minimizing the footprint of each citizen, but collectively the $620 billion represents the early stages of an inexorable trend towards healthier lifestyles and a more sustainable economy.

The HP2 market includes consumer products like organic food and fitness equipment, consumer services like complementary & alternative medicine and ecotourism, industrial equipment like air pollution control, water filtration and wind power systems, industrial services like environmental consulting and waste management, sales of recycled materials and emerging categories like green building, sustainable timber and hybrid cars. Starting from virtually nothing about 30 years ago, HP2 products and services have been driven by a segment of the population seeking companies and solutions that reflect their concern for both personal and environmental health. Consumer demand for healthier lifestyles and a healthier planet have also impacted government policy and product development—creating opportunity for two or three generations of entrepreneurs. Growth in the HP2 market is expected to continue at more than twice the rate of the economy. Many HP2 categories represent just a tiny fraction of their conventional counterparts, indicating a vast potential for growth. Organic food is less than 2% of U.S. food sales, green buildings are less than 2% of new construction, and sustainable timber, hybrid cars and ecotourism are all well under 1% of conventional. All of these categories have a realistic potential of 5-10% penetration by 2020.

Defining the Healthy Products, Healthy Planet market is more than just an intellectual exercise. These categories do not at operate as a cohesive unit. Consumer products and

industrial services may be at opposite ends of the economy, HP2 segments converge on the simple objective of a creating a better world. The HP2 market also serves as a valuable indicator of the increasingly important role being played by socially progressive businesses. HP2 firms are offering solutions to some of the biggest challenges of our time such as sustainable energy generation, resource use and escalating health care costs. At less than 5% of the economy, the HP2 market has a lot of catching up to do.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-155 The U.S. Healthy Products, Healthy Planet Market 2006-2009

The U.S. Healthy Products, Healthy Planet (HP2) Market 2006 2007 2008 2009 Consumer Products 171.77 186.44 196.08 201.97 Healthy Foods Natural & Organic Foods 23.60 26.59 29.78 33.11 Functional Foods 31.40 34.07 36.30 38.27 Lesser Evil Foods 62.43 64.54 66.80 67.13 Dietary Supplements 22.46 23.56 24.75 25.95 Natural & Organic Household Products Natural & Organic Personal Care Products 6.29 7.04 7.67 7.98 Natural & Organic Cleaners 0.39 0.45 0.53 0.56 Natural & Organic Pet Foods & Supplements 0.58 0.67 0.78 0.83 Organic Clothing & Other Fiber Products 0.21 0.27 0.33 0.35 Organic Flowers 0.018 0.021 0.023 0.02 Household Durable Goods Drinking water systems (point-of-use) 1.71 1.85 2.00 2.12 Air Quality filters & Home Air Purifiers 0.71 0.76 0.80 0.79 Energy Efficient Lightbulbs 0.53 0.90 1.05 1.12 Super-Efficient Appliances 2.70 2.81 2.92 2.87 Home Solar Energy Collectors/Systems 0.27 0.32 0.37 0.40 Compost & Organic Gardening Supplies/Rainwater collectors 2.68 2.77 2.87 2.81 Exercise & Fitness Equipment 3.54 3.55 3.65 3.50 Hybrid Cars 7.71 10.98 9.97 9.03 Other Electric/Alternative Fuel Vehicles 0.93 0.85 1.56 1.06 Eco-House Building Kits 0.27 0.29 0.32 0.30 Home Energy Efficiency Products (weatherstripping, thermal curtains, audit devices) 1.08 1.19 1.29 1.43 Specialty Kitchen Equipment: Juicers, Sprout Growers 0.05 0.05 0.06 0.06 Sustainable Timber Products & Supply 0.59 0.79 1.07 1.05 Consumer Educational Materials: Books, Tapes, CDs, Classes, Software 1.01 1.09 1.18 1.25 Consumer Services 78.47 82.59 87.50 90.85 Complementary & Alternative Medicine: Chiropractic, Traditional Chinese Medicine, Acupuncture, Homeopathy, Massage Therapy, Naturopathy, Ayurveda 39.52 42.29 45.25 48.32 Gyms, Health Clubs, Fitness Centers 16.46 17.03 17.63 17.45 Yoga Centers/Instructors 4.10 4.51 4.92 5.07 Day Spas 5.29 5.40 5.30 5.09 Home Energy Efficiency Audits/Testing/Consulting 0.88 0.98 1.06 1.10 Eco-Tourism 1.03 1.23 1.48 1.78 Industrial Products 141.19 162.87 192.20 193.22 Water Treatment Equipment and Chemicals 26.11 27.29 28.52 26.62 Air Pollution Control Equipment: Vehicular & Stationary Sources 18.54 18.31 17.97 15.85 Waste Management & Recycling Equipment (Vehicles, compactors, containers, shredders, etc.) 10.54 11.00 11.40 10.96 Environmental Instruments & Information Systems (lab eqpt., monitors, etc.) 4.93 5.20 5.34 5.21 Clean Energy Systems (Solar, wind, biomass, fuel cells, 4.68 9.77 16.27 18.42

geothermal, small scale hydro) Clean Energy Power Sales (Solar, wind, biomass, landfill gas, fuel cells, geothermal, small scale hydro) 7.90 8.69 10.41 12.03 Biofuels 13.31 16.31 25.68 20.32 Green Building Materials (for Resource efficiency, Indoor air quality, Energy efficiency, Water conservation) 18.24 24.59 29.53 30.19 Industrial Services 207.80 223.80 238.39 241.95 Environmental Consulting & Engineering 23.98 25.61 26.69 25.66 Site Remediation/Industrial Decontamination & Cleanup Services 11.55 12.18 12.51 11.93 Environmental Analytical Services: Lab Testing Services & Vehicle Smog Tests 4.69 4.83 4.97 4.97 Wastewater Treatment: Municipal & Private Infrastructure Operation & Maintenance 37.35 39.25 40.98 44.05 Water Utilities: Municipal & Private Infrastructure Operation & Maintenance 36.61 37.89 39.22 40.59 Solid Waste Management & Recycling: Residential, Commercial & Industrial: Collection, Transportation & Disposal 49.79 51.80 53.45 51.07 Hazardous Waste Management & Disposal: Industrial, Medical & Nuclear 8.99 9.08 9.18 8.64 Green Buildings: Design & Construction (by value put in place) 14.93 20.12 24.16 24.70 Recycled Materials & Products 28.46 36.00 33.76 29.88 Sales of Secondary/Recovered Materials (post-industrial & post-consumer) 24.13 31.23 28.50 24.51 Finished Consumer Goods Made Predominantly from Recycled Materials 4.33 4.77 5.27 5.37 (paper, tissue, plastic lumber, fiber-fill goods)

SOURCE: EBI's 2008 HP2 Market Report, Environmental Business International Inc., San Diego, Calif. Research is a product of more than 20 years of continuous research by EBI. EBI is the founding publisher of Environmental Business Journal (1988, now owned and produced by ZweigWhite), Nutrition Business Journal (1996, now owned and produced by Penton Media), and Climate Change Business Journal (an EBI publication since 2007). Units are sales or revenues generated in $bil. © EBI Inc.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-156 The U.S. Healthy Products, Healthy Planet Market ($bil)

2002 2003 2004 2005 2006 2007 2008 2009 Consumer Products 146.4 156.5 161.9 176.9 196.4 213.3 225.5 228.2 Consumer Services 60.3 64.3 69.3 74.5 78.5 82.6 87.5 90.8 Industrial Products 92.2 100.0 109.0 122.7 141.2 162.9 192.2 193.2 Industrial Services 160.3 168.6 178.7 193.2 207.8 223.8 238.4 241.9 Recycled Materials & Products 17.9 19.9 23.1 24.9 28.5 36.0 33.8 29.9 Total U.S. HP2 Market 477.1 509.5 542.0 592.2 652.4 718.6 777.3 784.1

2002 2003 2004 2005 2006 2007 2008 2009 Total U.S. HP2 Market 477 509 542 592 652 719 777 784 HP2 Market as % of GDP 4.6% 4.6% 4.6% 4.8% 5.0% 5.2% 5.5% 5.7%

SOURCE: EBI's HP2 Market Data Set, Environmental Business International Inc., San Diego, Calif. Research is a product of more than 20 years of continuous research by EBI. EBI is the founding publisher of Environmental Business Journal (1988, now owned and produced by ZweigWhite), Nutrition Business Journal (1996, now owned and produced by Penton Media), and Climate Change Business Journal (an EBI publication since 2007). Units are sales or revenues generated in $bil. © EBI Inc.

1.9 Exports and International Business

By 2015 USA environmental industry export revenues were 15% of the U.S. environmental industry total--a noticeable gain from 6.7% in 1994. Countries such as Canada, Mexico and Japan are the largest export markets for the U.S. companies, but China promises to be a strong market as the country's industrialization continues. EBI has conducted a number of detailed studies on global environmental markets and the most recent estimates are reproduced in the following exhibit.

Exhibit 1-157 Global Environmental Market by Region, 2011 - 2016

2011 2012 2013 2014 2015 2016 USA 301.2 317.6 324.0 338.3 351.7 363.7 Western Europe 285.9 288.3 293.7 301.5 310.1 317.8 Japan 101.6 103.1 106.2 107.6 110.0 112.2 Rest of Asia 103.4 111.3 120.9 130.0 139.4 149.3 Mexico 13.1 13.9 14.3 14.8 15.5 16.2 Rest of Latin America 40.0 41.9 44.2 45.7 46.2 46.6 Canada 27.8 29.5 31.8 33.2 32.8 33.8 Australia/NZ 30.8 32.3 33.5 33.1 32.6 33.6 Central & Eastern Europe 26.8 27.5 27.8 28.4 28.6 29.0 Middle East 26.1 28.9 31.1 33.6 36.3 39.4 Africa 11.2 11.6 12.0 12.7 13.6 14.7 Total 968 1,006 1,039 1,079 1,117 1,156 Growth 4.5% 3.9% 3.4% 3.8% 3.5% 3.5%

Exhibit 1-158 Global Environmental Market by Segment, 2011 – 2020

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Equipment Water Equipment & Chemicals 81.2 84.3 87.5 91.0 94.8 98.6 102.4 106.4 110.6 114.9 Air Pollution Control 57.8 60.1 62.5 65.0 68.4 71.8 75.5 79.5 83.6 87.9 Instruments & Info Systems 10.7 11.2 11.7 12.2 12.8 13.4 14.2 15.0 16.0 16.9 Waste Mgmt Equipment 39.3 40.6 42.0 43.4 44.9 46.4 48.2 50.1 52.1 54.2 Process & Prevention Tech 4.3 4.4 4.5 4.6 4.8 5.0 5.2 5.5 5.8 6.0 Services Solid Waste Management 150.0 152.1 154.7 157.3 160.1 162.7 165.4 168.3 171.1 174.0 Haz Waste Management 26.1 26.6 27.3 28.0 28.6 29.2 30.1 31.0 31.9 32.9 Consulting & Engineering 60.0 62.4 64.5 66.8 69.5 72.0 74.6 77.2 80.0 82.9 Remediation/Ind'l Services 39.0 39.7 40.6 41.5 42.8 44.5 47.1 50.0 53.0 56.1 Analytical Services 6.6 6.7 6.9 7.0 7.2 7.4 7.6 7.9 8.1 8.3 Water Treatment Works 134.7 137.7 140.6 143.5 146.7 149.9 153.4 156.9 160.5 164.2 Resources Water Utilities 158.0 162.1 166.2 170.3 174.7 179.1 183.8 188.5 193.4 198.5 Resource Recovery 55.2 52.3 49.5 48.5 45.7 45.6 46.2 46.0 46.7 41.7 Clean Energy Systems & Power 145.2 165.5 181.1 199.9 215.9 231.0 246.0 262.0 279.1 297.2 Total 968 1006 1039 1079 1117 1156 1200 1244 1292 1336

SOURCE: Environmental Business International, Inc., San Diego, Calif. units in $bil © EBI Inc. Exhibit 1-159 U.S. Environmental Trade Balance, 2016

Equipment US ind US mkt surplus exports imports %export Water Equipment & Chemicals 30.6 25.1 5.5 12.28 6.8 40% Air Pollution Control 16.8 18.2 -1.4 2.61 4.0 16% Instruments & Info. Systems 7.0 4.2 2.8 3.54 0.7 50% Waste Mgmt Equipment 15.1 12.0 3.2 5.87 2.7 39% Process & Prevention Tech. Services Solid Waste Management 61.0 61.8 -0.7 0.19 0.9 0.3% Hazardous Waste Mgmt 10.9 10.8 0.1 0.15 0.1 1% Consulting & Engineering 30.1 26.5 3.6 5.69 2.1 18.9% Remediation/Industrial Svcs. 13.7 13.3 0.4 0.85 0.5 6% Analytical Services 2.0 2.0 0.0 0.12 0.1 6% Water Treatment Works 59.1 60.0 -0.9 0.26 1.2 0.4% Resources Water Utilities 56.7 58.2 -1.5 0.13 1.6 0.2% Resource Recovery 25.6 8.8 16.7 17.25 0.5 67% Clean Energy Systems & Power 39.8 57.4 -17.6 4.10 21.7 10%

Total 368.4 358.2 10.2 53.0 42.9 14.4%

Source: EBI Inc., San Diego CA, units in $bil. US ind is revenues generated by US cos worldwide. US mkt is revenues from US customers. Exports do not include ownership of overseas companies but do include repatriated profits. Industry-exports+imports=Market © EBI Inc.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-160 Global Environmental Market by Region, $1,156 Billion in 2016

Source: Environmental Business International Inc. (San Diego, Calif.)

Exhibit 1-161 U.S. Environmental Industry Export Performance, 2010-2015

2011 2012 2013 2014 2015 Global Market ($bil) 968 1006 1039 1079 1117 US Market ($bil) 301.2 317.6 324.0 338.3 351.7 Non‐US Market ($bil) 667 688 715 741 765 % Exports 15.5% 14.6% 15.0% 14.5% 14.3% US Exports ($bil) 49.6 48.9 51.0 51.4 51.9 Growth in US Env'l 12% ‐1% 4% 1% 1% Exports US Share of Non‐US 7.4% 7.1% 7.1% 6.9% 6.8% Market Trade Surplus 18.3 16.7 16.3 15.4 11.6

Exhibit 1-162 Companies and Exporters in the U.S. Environmental Industry

Companies or Potential Actual Environmental Industry Segment Entities Exporters Exporters Services Analytical Services 1,140 100 20 Wastewater Treatment Works (*mostly public sector) 26,000 50 5 Solid Waste Management (*incl. just private cos.) 11,100 50 5 Hazardous Waste Management 850 30 10 Remediation & Industrial Services 2,400 400 100 Environmental Consulting & Engineering 3,580 1,200 400 Equipment Water & Wastewater Equipment & Chemicals 2,100 1,200 350 Instrumentation & Information Systems 800 600 250 Air Pollution Control Equipment 2,050 600 200 Waste Management Equipment 1,300 1,000 350 Process & Prevention Technology Equipment 300 50 10 Resources Water Utilities (*mostly public sector) 61,600 50 10 Resource Recovery 4,600 900 500 Alternative & Renewable Energy 1,200 500 200 Total 119,020 6,730 2,410 Private Companies* 31,420

EBI Report 2020-B U.S. Environmental Industry Overview

1.10 Employment

The U.S. environmental industry employs about 1.7 million Americans, or over 1% of the workforce in the United States.

Exhibit 1-163 The U.S. Environmental Industry 2016

Revenues Exports 2015 Employment 2016 avg $bil Companies $mil 2016 $/FTE Analytical Services 2.0 980 126 16,200 121,492 Wastewater Treatment Works* 59.1 26,870 282 195,900 301,633 Solid Waste Management 61.0 9,550 206 295,200 206,797 Hazardous Waste Management 10.9 540 162 48,500 223,932 Remediation/Industrial Svcs. 13.7 1,980 821 99,800 137,081 Consulting & Engineering 30.1 3,270 5,645 232,300 129,574 Water Equipment & Chemicals 32.2 2,090 12,469 175,900 183,229 Instruments & Info. Systems 7.0 1,080 3,360 44,400 158,266 Air Pollution Control Equipment 16.8 1,310 2,476 97,800 171,858 Waste Management Equipment 15.1 680 4,836 93,900 161,022 Water Utilities* 56.7 62,220 118 208,800 271,743 Resource Recovery 25.6 3,950 17,118 81,900 312,026 Clean Energy Systems & Power 39.8 2,820 4,100 135,100 294,467 Totals: 370.0 117,340 51,720 1,725,700 214,410

Source: EBJ, Environmental Business International, Inc., San Diego, * indicates mostly public sector entities

Exhibit 1-164 Employment in the U.S. Environmental Industry 2013-2018

Environmental Industry Segment Services 2013 2014 2015 2016 Services Analytical Services 16,200 16,000 16,100 16,200 Wastewater Treatment Works 189,100 192,800 194,800 195,900 Solid Waste Management 291,000 291,400 290,800 295,200 Hazardous Waste Management 49,700 49,500 49,400 48,500 Remediation/Industrial Services 111,400 105,600 101,700 99,800 Consulting & Engineering 237,400 234,500 234,500 232,300 Equipment Water Equipment and Chemicals 169,900 172,800 173,700 175,900 Instruments & Information Systems 39,900 41,300 43,000 44,400 Air Pollution Control Equipment 99,100 97,900 97,300 97,800 Waste Management Equipment 90,000 91,200 92,500 93,900 Resources Water Utilities 191,300 195,900 202,400 208,800 Resource Recovery 100,700 94,500 84,200 81,900 Clean Energy Systems & Power 93,300 113,300 121,100 135,100 Total 1,679,000 1,696,700 1,701,500 1,725,700 Added Jobs 2,600 17,700 4,800 24,200

Source: EBJ, Environmental Business Journal, includes public sector entities, Copyright EBI Inc.

1.11 2019 Snapshot Survey

The following charts are from EBJ's 2019 Snapshot Survey.

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-165 Ranking of Environmental Markets by Client

2019 RANK 2018 RANK 2019 CHANGE IN RANK Oil & Gas Midstream (pipelines/terminals) 1 2 1 Chemical 2 10 8 Healthcare 3 1 ‐2 Water utilities 4 4 0 Power utilities 5 3 ‐2 Transportation authorities 6 15 9 Port authorities 7 11 4 Oil & Gas Downstream (refineries) 8 13 5 Oil & Gas Upstream (E&P) 9 8 ‐1 Property developers: residential 10 12 2 Renewable energy development 11 5 ‐6 Property developers: commercial 12 17 5 State government 13 24 11 Local government 14 25 11 Electronics/IT mfg. & service 15 6 ‐9 Other manufacturing 16 23 7 Hospitality 17 7 ‐10 Transportation mfg (auto & aero) 18 16 ‐2 Mining 19 26 7 Education 20 27 7 Consumer products 21 18 ‐3 Solid waste utilities & companies 22 22 0 Food & beverage 23 19 ‐4 Petroleum retail/gas stations 24 28 4 Primary metals 25 20 ‐5 Metals fabricating/coating 26 21 ‐5 Banks & Law Firms 27 9 ‐18 Federal government: DOD 28 14 ‐14 Major retailers 29 30 1 Pulp & paper 30 31 1 Federal government: DOE 31 29 ‐2 Federal government: Other 32 32 0 Federal government: EPA 33 33 0

Source: Environmental Business Journal annual EBJ Snapshot Surveys (2018 & 2019); "prospects for growth in the next two years".

Exhibit 1-166 Ranking of Environmental Markets by Media

2019 2019 2018 Change Rank Rank in Rank Water 1 1 0 Wastewater 2 3 1 Sustainability/corporate responsibility 3 8 5 Environmental information 4 4 0 Renewable energy 5 5 0 Energy mgmt/efficiency 6 2 ‐4 Hazardous waste mgmt. 7 9 2 Climate adaptation/resilience 8 13 5 Solid waste mgmt 9 10 1 EHS/Industrial hygiene & safety 10 6 ‐4 Remediation 11 7 ‐4 Climate/carbon: mitigation 12 14 2 Natural resources 13 12 ‐1 Air quality 14 11 ‐3

Source: Environmental Business Journal annual EBJ Snapshot Surveys (2018 & 2019); "prospects for growth in the next two years".

EBI Report 2020-B U.S. Environmental Industry Overview

Exhibit 1-167 Ranking of Environmental Markets by Service

2019 2018 2019 Change Rank Rank in Rank Project mgmt./Construction mgmt. 1 2 1 Resiliency planning 2 4 2 Design and project engineering 3 3 0 IT/EMIS software/systems/training 4 1 ‐3 Industrial waste mgmt/in‐plant services 5 8 3 Permitting/compliance 6 7 1 Green building design/construction 7 11 4 Outsourcing EHS functions 8 12 4 Operations & maintenance 9 6 ‐3 Smart growth/"green" planning 10 16 6 Private remediation/redevelopment/brownfields 11 5 ‐6 Energy: Performance contracting 12 10 ‐2 Monitoring & analytical work 13 15 2 Ecological restoration 14 17 3 Investigations/assessments/audits 15 14 ‐1 Impact Assessment & Permitting 16 13 ‐3 Solid waste diversion/recycling 17 19 2 Water recycling/reuse 18 9 ‐9 Waste minimization 19 18 ‐1 Gov't remediation/ base closure/conversion 20 20 0

Source: Environmental Business Journal annual EBJ Snapshot Surveys (2018 & 2019); "prospects for growth in the next two years".

Exhibit 1-168 Ranking of Environmental Markets by Geography

2019 2018 RANK RANK 2019 Change in Rank US: Gulf Coast/Texas 1 1 0 US: Southern California 2 3 1 US: Northern California 3 5 2 US: Southeast 4 2 ‐2 US: Pacific Northwest 5 4 ‐1 US: Rockies 6 7 1 All United States 7 6 ‐1 US: Mid‐Atlantic 8 8 0 US: Southwest/Desert 9 9 0 US: New England 10 11 1 Western Canada 11 10 ‐1 US: Midwest 12 12 0 Eastern Canada 13 13 0 Mexico 14 14 0

2019 2018 Rank Rank 2019 Change in Rank India 1 2 1 Australia/NZ 2 6 4 Southeast Asia 3 3 0 Japan 4 8 4 France 5 9 4 Nordic Europe 6 5 ‐1 Brazil 7 13 6 Africa 8 7 ‐1 South America 9 11 2 Germany 10 4 ‐6 Eastern Europe 11 10 ‐1 China 12 1 ‐11 Southern Europe 13 16 3 Middle East 14 12 ‐2 Central America 15 15 0 UK 16 14 ‐2 Russia 17 17 0

Source: Environmental Business Journal annual EBJ Snapshot Surveys (2018 & 2019); "prospects for growth in the next two years".

EBI Report 2020-B U.S. Environmental Industry Overview

1.12 Conclusion

While historically environmental companies have been providers of isolated technical services or equipment, a solutions orientation now requires a different business strategy. To package solutions, equipment firms are teaming with service firms to become resource managers. This integration is also happening on a much larger segment scale, with water providing a good example. While WTWs, water utilities and water equipment are separate segments in EBI’s industry classification and segmentation, they will increasingly become integrated into an overall water management function. We have already integrated instruments and information systems into one segment reflective of an information management function. Solid waste and resource recovery are also already integrating into a waste resource management function. The remediation business and property developers have the potential to integrate into a land management function. And the environmental consulting business has the potential to integrate itself into the overall resource management function for industry and government. In effect, future opportunities for environmental companies lie in effective resource management and not environmental management.

In the 21th century, society faces the tremendous challenge of reconciling environmental and economic concerns. In the developed world, environmental conditions have improved noticeably over the past 20 years, but these changes have come mostly as a result of negative pressure from the public and government regulatory bodies, not as a result of positive economic incentives. As environmental policy makers approach their task today, they are indirectly laying the foundation for environmental markets of the future, and these economic issues are increasingly influential in their decision making. The underlying quest is to internalize the economic externalities of pollution, environmental degradation and wasted resources into an economic system that values the environment rather than freely permitting its exploitation.

What does this mean for the future of the environmental industry? The most basic premise is that companies must sell products and services that integrate with the business concerns of their clients. There will always be a market for tacked on pollution control equipment and particularly for waste management services, but these will decline in importance. Resource

delivery, highlighted by the size of the water and wastewater segments and energy markets, cannot be overemphasized. In a broad context, environmental providers must become resource managers as well as environmental managers if they are to fully integrate themselves with their industrial and government clients. And these resources are not limited to water and energy but include materials, property, people and information.

To reiterate, the environmental industry must become more than a technical provider of short-term “fix-it” solutions; the goods and services it sells must provide enduring value and lend a competitive advantage to the customer. Future competitiveness of all industries and nations will increasingly depend on the efficient allocation, management and reuse of resources. The environmental industry of the 21st century must embrace this challenge and apply its considerable technical, analytical and management skills to this end.

Outside the developed nations of North America, Western Europe and Japan, a different but complementary approach must be taken to environmental business development. As developing and emerging nations attempt to catch up to the developed world in terms of standard of living and environmental quality, inestimable investments will need to be made in water, energy and waste infrastructures and resource management systems. Economics play perhaps an even more vital role here, as environmental quality is perceived even more as a luxury when basic needs of food and shelter go unmet.

Translating the value of clean water, clean air and unspoiled land into economic terms remains a daunting if not impossible task, but these measures must be taken if society is to start to move towards greater sustainability. If it was the challenge of the past 20 years to reverse the pace of environmental degradation, the challenge of the next 20 years is to consolidate the transition into sustainable economy. Driving this endeavor will not be environmental policy as we have seen over the past 25 years but economic policy of which we are now just seeing the beginnings.

Another thing the recent past has taught us is that the world will not be governed by centrally planned economies; it will be ruled by the free market. While the free market currently does

EBI Report 2020-B U.S. Environmental Industry Overview

little to account for environmental degradation and unsustainable resource consumption, future economic policy – stimulated by environmental and international trade concerns – will center around these issues. Environmental economic policy will manifest itself in discharge fees, environmental taxes, resource sustainability ratings and other economic instruments designed to internalize the environmental externalities currently born by the decreasing value of our resource base due to pollution, unsustainable resource extraction, natural resource degradation, contamination and accumulated waste materials.

Whereas these issues represent the framework for a more sustainable economy, they remain distinctly over the horizon in terms of short-term business tactics. However, companies rarely remain on top or gain a leadership position in a particular market relying solely on tactics. The essence of business strategy is long-term vision, and EBI has devoted itself to creating this vision for the environmental industry. The success of a good business strategy depends directly on good information to support and realize the vision. But a golden vision of the horizon is no use if you can't see the ground beneath your feet. EBI Report 2020: The U.S. Environmental Industry is our effort to make both today's ground and tomorrow's horizon as clear as possible for business planners in the environmental industry. We hope our readers have found this report to be beneficial and instructive, and that it provides them with a valuable source of information when planning business endeavors that prove not only profitable for themselves and their companies but create enduring value for society at large.