Milestone CEO shares growth outlook

In early October, SK Capital Partners, a New York-based private investment firm, took a controlling stake in Milestone Environmental Services LLC, an environmental services and carbon management company, from Amberjack Capital Partners. The move was done in partnership with Milestone President and CEO Gabriel Rio, who continues to serve in that role and retains significant ownership in the company following the transaction.

Rio founded Milestone in Houston in 2014 to provide environmental services to the energy industry. The company has grown to operate 10 facilities in Texas and New Mexico. “The active sites we have today all manage waste for the oil and gas industry,” Rio says. “Out of the 10 facilities we operate, eight of them are slurry injection sites, and two of them are landfills to handle the solid waste that we can't inject.”

Those sites include one location in the Delaware Basin in New Mexico, seven locations in the Permian Basin in Texas, one in Fashing, Texas, in the Eagle Ford Shale geological area and one in Center, Texas, in the Haynesville Shale geological area.

“Our network currently covers about two-thirds of the oil and gas activity in the United States,” Rio says.

Photo courtesy of Milestone Environmental Services

Milestone Environmental Services is adding its third landfill to its slurry injection site in Stanton, Texas, in the western part of the state. The company recently announced that in late August the Railroad Commission of Texas (RRC) approved the permit for the facility, which will be nearly 12.4 million cubic yards. The 78-acre Stanton Landfill will accept drill cuttings, contaminated soil, cement, gels and other nonhazardous energy waste solids.

Rio says the landfill should come online in the first quarter of 2024.

Additionally, in the fall of 2021, the company introduced Milestone Carbon, a subsidiary that provides carbon capture and sequestration services to a broad range of industrial CO₂ emitters.

Rio says the transaction with SK Capital Partners was prompted in part because Milestone is at an “inflection point.”

“We have, over the last nine years, developed to be what is truly the leading player in oil and gas waste management in the U.S.," he adds. "We also have been working for some time to expand our service offering into carbon sequestration and have been evaluating the use of our same processes for the handling of other types of industrial waste. As we think about really expanding Milestone’s service offering and growing into other segments of the environmental services sector, it was just time for us to get some fresh capital in the door to help us with all the expansion.”

Milestone had been with Amberjack Capital since 2014. “It was time for them to be able to return capital to shareholders," Rio says. "It was a natural transition point where the business was starting to accelerate and grow faster, so it made sense for us as a company to get new capital in the door to help us do that. And it made sense for our investors as well to be able to return capital to their shareholders and recognize the win. And, so, it ends up being a great deal on all sides.”

He says that Class II injection wells, such as the ones the company uses for oil and gas waste, also can be used to sequester carbon from oil and gas operations. However, to serve a broader range of industrial clients, Milestone will have to permit Class VI injection wells. These wells generally are permitted by the Environmental Protection Agency and not by state agencies. “But some states, including Texas and Louisiana, are working to get primacy to be able to permit them at the state level though the process is still ongoing," Rio says.

In either case, he says, the permitting process is long—about two years for Class II wells and perhaps longer for Class VI—but Milestone’s experience in the oil and gas sector offers advantages. “We already have a good understanding of complex geology," Rio adds. "We already understand how to work with regulatory agencies and long-cycle permitting processes. So, the Class VI applications, while they are different and they do require some different elements than we've had to do before, it's all very much down the fairway for us to be able to develop these assets.”

Injecting CO₂ is different than injecting energy waste or wastewater. “First, CO₂ starts as a gas, and then you have to compress it," Rio says. "And when you compress it, it turns into a supercritical fluid, which is a lot like a liquid but has different properties than water. But, at the end of the day, the infrastructure at its core looks like pipes and compressors and pumps and wells, and we know all that very well.”

Milestone will offer its carbon sequestration services to different industrial emitters of CO₂, such as natural gas processing facilities, power plants and cement manufacturers. “A lot of power companies are looking for ways to build new assets that can provide low-carbon electricity,” Rio says. “And one way to do that is to use natural gas as a feedstock to create electricity, but then capture the CO₂ and sequester that permanently.”

He adds that Milestone is looking to service customers that are within a 50-to-100-mile radius of its carbon sequestration wells. “We're not talking about interstate pipelines to bring CO₂,” Rio says. “We're really trying to find ways to do this in a more streamlined way, where we can actually get CO₂ going into the ground faster.”

He says a differentiator for the company’s Midland Basin CO₂ hub is that he believes it will be able to start sequestering CO₂ as soon as 2025, assuming the emitters are ready to send it there. To do so, the company’s customers would need to incorporate carbon capture into the design of their facilities, which is something natural gas producers are doing already. With natural gas producers, Rio says, “It’s just a matter of putting that captured CO₂ into a pipe instead of venting it into the atmosphere, compressing it and sending it to us. … For others, it's a matter of uptake or retrofit to their facilities to better refine and clean up the CO₂ before we can take it. So, there's a spectrum there of what they need to do to get ready.”

In terms of its oil and gas waste disposal services, Rio estimates that 60 percent of the waste in these basins is managed off-site, meaning Milestone has more room to grow. He notes that the company has five additional facilities already permitted. “We're always working on more to make sure that we have good options to be able to grow in the right places.

“The oil and gas industry has become pretty capital-disciplined, and we expect that the volatility within oil and gas is slowing down. Lower volatility helps us plan for the longer term," Rio adds, “We're going to continue to add some capacity over time, and … as operators start choosing, whether from the adoption of best practices or from regulatory pressure … to start to utilize professional waste management more. That said I think more of our growth, and the faster growth, is going to come from carbon sequestration and from expanding into other types of industrial waste management.”