The Times West Virginian

Business

April 14, 2013

Agencies team up to fund improvements to pipeline safety

FAIRMONT — With financial assistance from INNOVA Commercialization Group and the West Virginia Jobs Investment Trust, Berkeley Springs Instruments LLC is working to improve pipeline safety through its innovative technology.

INNOVA, an initiative of the West Virginia High Technology Consortium Foundation in Fairmont, and WVJIT recently announced that they are making a $1 million investment in BSI, which will help it commercialize its Eagle Array Sensor.

INNOVA and WVJIT will each contribute $500,000 toward the $1 million loan, which will be awarded in increments of $250,000 based on the progress of BSI. The first stage of funding — $250,000 from both entities — was awarded April 4.

INNOVA’s investment was primarily provided through the Appalachian Regional Commission and the Claude Worthington Benedum Foundation, and those funds were matched through the West Virginia Capital Access Program. WVJIT is also using West Virginia Capital Access Program funds as well as its own investment capital for its portion of the loan.

Dr. Gene Silverman, president of BSI, started the company in July 2007 to conduct research related to the use of ultrasound to measure the integrity of pipelines. The business began with a small storage facility and lab in Paw Paw and, after outgrowing that space, moved to Berkeley Springs around 2009.

After operating in Berkeley Springs for about three years and also becoming too big for that office, BSI moved to a larger facility in Cumberland, Md., in order to meet its needs related to research expansion and to begin moving into prototypes, he said.

Last year, Silverman realized that BSI was soon going to be in a growth mode, and he spoke to INNOVA about a potential relationship. As a result, BSI decided to continue its research in Berkeley Springs.

The loan will go toward the commercialization of the Eagle Array Sensor, which BSI has been working on for 5 1/2 years.

“It’s really sort of a futuristic ... type of technology where it takes today’s data and projects it in the future,” Silverman said.

He explained that this technology is designed to monitor the integrity of pipelines, which would be used for natural gas, oil, water and a range of chemicals.

These sensors, which are solar-powered and wireless, are accessible through the Internet 24/7 from anywhere in the world, which allows the user to look at the thickness of the pipe wall. The technology could be used to forecast the future lifetime of the pipe and recommend its retirement date.

“Another very important component from a marketing point of view is that it provides a level of assurance,” Silverman said. “The pipe owner and operator has more confidence in the integrity of the pipeline, and the public also feels that they are protected.”

For about 30 years, Silverman has been working in the area of monitoring or measuring the mechanical integrity of structures like tanks and pipes. There will be great opportunities for the application of the Eagle Array Sensor in West Virginia, Ohio and Pennsylvania with the fracking industry, he said.

BSI recently moved into a new building in Berkeley Springs, where all the research and development related to this technology will be done. The goal is for the Eagle Array Sensor to be ready for commercialization sometime next year, Silverman said.

The new facility has two employees, and two more will probably be added there, he said. The Cumberland, Md., location has about eight employees. BSI hopes to increase its total number of workers to 20 by the end of the year.

Silverman said he is honored by the significant investment that INNOVA and WVJIT have made in BSI. While the financing is crucial, he is also excited that BSI is part of a network of other companies and technologies and is closer to resources. This will open up a whole new set of opportunities.

BSI wants to draw a closer relationship with the nearby colleges and universities in West Virginia and Maryland, Silverman said.

“I think that’s going to be clearly an economic benefit for everybody, but I think it’s going to offer some new opportunities for students,” he said.

INNOVA, established in 2002, is headquartered at the Alan B. Mollohan Innovation Center in Fairmont’s I-79 Technology Park. It offers entrepreneurial education and skill enhancement programs, strategic planning and business development, and a network of business expertise and access to capital that goes across the state and nation.

INNOVA’s Technical Assistance and Early Stage Investment program works “to accelerate and enhance technology commercialization through an innovative process moving new and existing technologies into the marketplace and creating high-paying, skilled employment opportunities,” said Guy Peduto, director of INNOVA.

WVJIT, created by legislation that was passed in 1992, is based in Charleston but also has an office in Fairmont in the same building where INNOVA is located.

“Technically we are the state’s venture capital fund,” said Andy Zulauf, executive director of WVJIT. “We were created to support small business and entrepreneurship.”

WVJIT invests in small businesses that have an opportunity to grow. It looks to invest in companies that can provide a financial return to the state as well as create jobs.

“INNOVA has had a long and collaborative relationship with WVJIT,” Peduto said. “We discuss companies and investing opportunities on a daily basis.”

He said INNOVA began the strategic planning with BSI, and then a few months later asked WVJIT to get involved as a co-investor.

“Our collaboration allowed a larger base investment, which could be matched dollar for dollar through the West Virginia Capital Access Program utilizing funds provided through the U.S. Department of Treasury,” Peduto said. “The larger investment pool will allow BSI to move forward aggressively in their sales effort, launch their (research and development) initiative and look to adapting their technology to additional markets.”

Zulauf explained that while WVJIT and INNOVA made a loan to BSI, it’s in the form of a convertible loan where based on mutual agreement it can be converted into equity into the company. This is a way that they can finance the transaction.

Peduto said BSI fit their investment criteria, which focuses on the technology, the management, and the market opportunity and competition.

“In our research we found that the technology that Dr. Silverman had developed not only addressed a growing demand and significant concern in the pipeline industry, but also was unique and innovative in its technology and product design,” Zulauf said.

When examining an investment opportunity, they place added weight on the management’s ability, experience and expertise, he said.

“The fact that this is Dr. Silverman’s second startup enterprise after a successful first company gave us more reason to believe that the company would be successful,” Zulauf said.

Peduto pointed out that the United States has more than 2.5 million miles of pipeline. In 2005, the Southwest Research Institute estimated that about 15 percent of all reportable incidents with gas transmission pipelines were caused by internal corrosion, and resulted in $3 million in annual property damages as well as several fatalities.

“In addition, environmental and safety organizations both have been urging Congress to require more statutory compliance for state damage prevention programs in the reauthorization of federal pipeline safety laws, and Congress has tied states’ pipeline safety program federal grant money to state-level implementation of federal regulations,” Peduto said.

Zulauf said the pipeline infrastructure is aging and requires an enhanced sensory instrument like the Eagle Array Sensor to help avoid disasters. Companies can access this technology remotely, which will allow them to protect the environment and their own investment.

BSI will provide an opportunity for employment in the technology economy, including high-end jobs in engineering, manufacturing and design, he said.

“This puts West Virginia in a very positive light,” Zulauf said.

Email Jessica Borders at jborders@timeswv.com or follow her on Twitter @JBordersTWV.

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