Obatined from ABQ Court Clerk. Scanned, sorry if software is not up to the job.
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
IN RE:
Solv-Ex Corporation, 85-0283729
Debtor.
Solv-Ex Corporation,
Plaintiff,
vs.
The United States Securities
& Exchange Commission,
Defendant.
City of Albuquerque
) ss:
State of New Mexico )
Declaration of John S. Rendall
I, John S. Rendall, declare under penalty of perjury, as follows:
Case No. 11-97-14361 MA
Adversary No. 97-1159 M
1. I founded Solv-Ex in 1980 and at all relevant times have been employed as the Chairman and Chief Executive Officer of Solv-Ex Corporation ("Solv-Ex" or the "Company"), Albuquerque, New Mexico. Solv-Ex became a public company in 1981 and, to date, has raised all of its funding through joint ventures, government grants and sales of equity (Common Stock) and convertible debentures through public offerings and private placements.
2. My knowledge of and involvement in extraction of oil from Athabasca oil sands extends back to 1978, at which time I formed a joint venture known as "RTR" with a subsidiary of one of the largest diversified mining companies in the world. I was Plant Manager for the venture, which constructed and operated a small pilot plant north of Fort McMurray, Alberta, on an oil sands lease operated by the company now known as Suncor Energy Inc., Suncor operates one of the two largest oil sands mining operations in the world (more than 90,000 barrels per day), both of which use the Clark Hot Water Process ("CHWP") to recover bitumen (very heavy oil) from the Athabasca oil sands. I sold my stake in RTR in 1979 and moved to the United States following the sudden death of the Chief Executive Officer at the parent mining company and subsequent management change.
3. In the course of the pilot work with RTR, I became acutely aware of an environmental problem created by using CHWP, which was the creation of vast tailings (waste)
EXHIBIT I
retention ponds near the Athabasca River. Because of certain reagents used in CHWP, the tailings are considered highly toxic. During the more than 30 years of oil sands operations in Athabasca, Suncor and Syncrude Canada Ltd. (the largest operation which produces more than 200,000 barrels per day) have accumulated more than 4 billion tons of these toxic wastes (as well as toxic water), which must ultimately be reclaimed under Alberta environmental regulations.
4. The objectives of RTR, followed by the work which was undertaken by Solv-Ex, was to develop an extraction process which (i) generated environmentally benign waste and (ii) recirculated process water, which could ultimately be returned to the Athabasca River with only minor treatment. Although commercial operations have not been performed to date using SolvEx technology, The Company believes it was successful in in accomplishing its objectives, first through a 1986-87 venture with Shell Canada Ltd. involving significant pilot plant operations and more recently through a major pilot plant program extending from 1994 into 1996. The Shell venture terminated in 1987 because of low oil prices and involved somewhat higher cost technology than the later simplified and improved technology used by Solv-Ex in the oil extraction plant which was constructed in Athabasca during 1996 and 1997. The oil extraction plant was designed to achieve commercial operations but was unable to reach continuous operations because Solv-Ex ran out of funds to complete necessary plant modifications after start-up and was forced to file for protection under Canadian and U.S. bankruptcy laws.
5. During 1991, I entered into discussions with Syncrude regarding a possible venture to commercially develop the Solv-Ex technology for oil extraction with co-production of minerals from the waste fine clays generated in oil production. I was advised that Syncrude would not develop the technology, which would have then been available for use by Solv-Ex on Lease 5. At about this same time, I was publicly accused (in the Edmonton Journal) by the President of Syncrude of stirring up public interest in the toxic tailings of Syncrude, presumably as a lever to sell technology for cleaning up the tailings. See attached article in the Edmondton Journal dated May 23, 1991 attached hereto as Exhibit A. This was not correct because, among other things, Solv-Ex had not yet developed the technology to clean up the tailings.
6. The Solv-Ex technology to "clean" the tailings was not developed until 1992-93 following a major tailings treatment pilot program undertaken at the Solv-Ex plant in Albuquerque. Notwithstanding this program, which successfully processed significant quantities of Suncor and Syncrude tailings and demonstrated at pilot plant scale the ability to commercially extract and market minerals from the tailings, detoxify the water and produce a final waste which was environmentally suitable for mine reclamation, neither Suncor nor Syncrude would enter into an agreement for construction and operation of a plant for commercial tailings processing. The pilot plant work and plans for such commercial production of minerals from tailings were reviewed by independent consultants and found to be commercially feasible. Suncor later did enter into an agreement but ultimately would not make a plant site available until SolvEx had announced plans to co-produce minerals with oil on Lease 5. In the course of these discussions, Syncrude falsely accused in writing Solv-Ex of using Syncrude's name to promote the Company and its technology and refused to have further discussions with Solv-Ex on any reasonable terms. See correspondence in June and July, 1993, attached hereto as Exhibit B. I was advised that the letters to Solv-Ex from Syncrude were widely disseminated by Syncrude, including to a number of high-level persons in Alberta Government.
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7. Solv-Ex successfully demonstrated its oil extraction technology at the Alberta plant and, if the Company had been able to complete minor plant modifications and achieve production operations on a continuous basis, it would have had a significant impact on the oil sands industry in Alberta. Similarly, successful completion of the plan for commercial production of TI02S as described in the Disclosure Statement filed with the United States Bankruptcy Court could have an equally significant impact. These impacts include the following:
(a) Pressure from Alberta Government, particularly the Alberta Ministry of Energy
(and Alberta Environmental Protection and the Energy and Utilities Board
thereunder) to require use of the Solv-Ex oil extraction technology (or an
equivalent dry-land reclamation technology if any exists) as "best available
technology" for development of new leases or expansion of existing operations.
This could have resulted in environmental obsolescence for billions of dollars of
capital investment in existing operations, as well as significant licensing royalties
to Solv-Ex.
(b) Increased pressure to clean up the tailings ponds using Solv-Ex mineral extraction
technology or otherwise at considerably higher cost. Alberta regulations mandate
reclamation of the tailings ponds, irrespective of cost, but have been applied in
a manner that seems to anticipate development of new technology which can be
cost effective.
(c) The ability of Solv-Ex to joint venture development of other Athabasca oil sands
leases, thereby breaking the stranglehold which Suncor and Syncrude have held
in the area, as well moving Solv-Ex into a strong position regarding development
of other leases.
8. Solv-Ex has not been accepted into the oil "fraternity" and it is unlikely that any
true competitor will have anything but negative remarks to offer about Solv-Ex or its
technologies, irrespective of whether any such competitor is given access to the technology under
an appropriate confidentiality agreement. Koch Exploration has agreed to evaluate the Solv-Ex
oil extraction technology during the next six months and holds an option to obtain a non-
exclusive license to use the technology on the two leases being acquired from Solv-Ex.
9. It is my opinion and belief that the negative publicity which has been directed against Solv-Ex could not have taken place without knowing and intentional assistance and input from competitors. As an example, I cite the draft report prepared by Weir-Jones Engineering Consultants Ltd. which was "leaked" to the market through CNBC/Dan Dorfman on March 25, 1996. The final report, which is attached hereto as Exhibit C, includes Appendix A2 in which some of the sources used by Weir-Jones are acknowledged. In all cases (6) where the acknowledged source is a competitor of Solv-Ex, the identity of the individual has been designated as "Confidential" and the comments offered are negative for the most part. I also refer to the complaint filed against Solv-Ex in the class action filed against Solv-Ex in United States District Court for the Southern District of New York, which is attached hereto as Exhibit D and which could not have been prepared in its present form without assistance from competitors.
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10. Solv-Ex was repeatedly attacked in the media during 1996, which had little interest in investigating the Solv-Ex technologies and would neither reveal sources for their information nor take any action to thoroughly investigate or substantiate their denigration of Solv-Ex and its technologies. In my opinion, it is unlikely that such media conduct could have been solely the responsibility of short-seller and, in all likelihood, included input from undisclosed competitors.
11. Solv-Ex has previously furnished the Commission staff with documented evidence obtained from short-sellers indicating the commission of criminal offenses by the short-sellers under the Securities Exchange Act of 1934. To date, the Commission has failed or refused to take any action against such short-sellers. Although Solv-Ex does not have access to communications between the Commission staff and the short-sellers, it has been documented that such communications occurred. It is my belief and opinion that the Commission staff has been used (perhaps unwittingly) by the short-sellers and Solv-Ex's competitors to further their own profit motives and that competitors of Solv-Ex have acted in concert with the short-sellers to lend credibility to the negative publicity generated against Solv-Ex.
I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct to the best of my knowledge.
Executed this 18th day of May, 1998, in Albuquerque, New Mexico.
_ John S. Rendall
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