BION ENVIRONMENTAL TECHNOLOGIES, INC.
                         Box 566/1774 Summitview Way
                          Crestone, Colorado  81131
                                (212) 758-6622



                              September 14, 2009


Ms. Simpson
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, NE
Washington, D.C.  20549

     Re:   Bion Environmental Technologies, Inc.
           SAB 99 Response to SEC Comment Letter dated June 30, 2009
           File No. 0-19333

Dear Ms. Simpson,

     Per our last discussion, attached find our supplemented SAB 99
Materiality Memo.  This has been filed electronically.

     If you have any further questions/comments/requests related to this
matter, please contact me.

     Thanks for your efforts.

                                   BION ENVIRONMENTAL TECHNOLOGIES, INC.


                                   /s/ Mark A. Smith
                                   Mark A. Smith




                                  ATTACHMENT


Date:      September 14, 2009

To:        Jon Northrop and Jere Northrop, Board members

Cc:        Michael Filkoski, GHP Horwath P.C.

From:      Mark A. Smith, Chief Executive Officer and Chief Financial Officer

Subject:   Materiality Assessment of Prior Period Error (Updated)

Overview

Pursuant to our discussions, I have documented our analysis of the facts and
circumstances related to the accounting of the conversion of the 2006 Series
A Notes ("Notes") into restricted common shares of the Company in May 2008
and the materiality of the required adjustment.  It documents management's
conclusion that the necessary adjustment is immaterial when applying the
guidance of Staff Accounting Bulletin No. 99.  I have informed the
independent auditors that the Board shares this conclusion and the
independent auditors also agree.

In connection with a review of the Company's June 30, 2008 financial
statements by the Corporate Finance Staff of the Securities and Exchange
Commission (the "Staff"), we have had several discussions via written and
telephonic communication regarding the accounting for the conversion of the
Notes into restricted common shares of the Company.  The Staff has informed
us that they disagree with the Company's accounting treatment and feel that
the conversion of the Notes should be accounted for as an induced conversion
pursuant to the guidance in SFAS No. 84 and EITF 02-15.  Although I believe
that this matter requires professional judgment on which accountants may
disagree, I recognize that the Staff's position is reasonable and supported
in the accounting literature.

Background

The substance of this transaction is that, on May 31, 2008, the maturity date
of the Notes, the Series A note holders ("note holders") each elected to take
the cash they were due and about to receive from the Company in repayment of
the principal and accrued interest of the Notes, and purchase restricted
shares of the Company's common stock on the same terms of a contemporaneous
private placement.  On May 31, 2008 the Company could (and would) have
written checks to the note holders to satisfy the repayment terms of the
Notes.  The note holders could (and would) have endorsed the checks back to
the Company to satisfy the requirements of executed subscription agreements
to purchase additional shares of the Company at the fair value of $2 per
share, as it was their desire to acquire restricted shares of the Company's
common stock on substantially identical terms as the contemporaneous private
placement offered to other investors.   The Company, in an effort to simplify
the transaction for the note holders, did not write the checks as the note
holders agreed this would not be necessary. The note holders never requested
any additional consideration from the Company, and the Company offered no
inducement to the note holders. Therefore, the Company believes that, from
the standpoint of appropriate accounting treatment, two separate transactions
took place: a) the maturity and settlement of the Notes followed by b) the
purchase by the note holders of shares in the Company's restricted common
stock.  The form in which these distinct transactions were accomplished (as a
single net transaction for purposes of ease and simplicity for all the
parties) does not change the substance of the two separate cash transactions.

It had been our view that this netted transaction actually represented two
distinct transactions, the maturity of the Notes and the simultaneous
purchase by the Note holders of restricted common shares of the Company and
therefore no inducement accounting was required.  However, we did consider
EITF 06-6 to determine whether a modification or exchange of the conversion
terms applied.  The Company accounted for the conversion as a modification
and exchange of a debt instruments that affected the fair value of an
existing embedded conversion option.  As such, the Company determined $42,000
to be the estimated impact under EITF 06-6.  This amount was calculated as
the difference between the fair value of the embedded conversion option
immediately before and after the exchange of the Notes for common shares of
the Company.  This amount was not material for the year ended June 30, 2008.
Our independent auditors concurred with this treatment and did not disagree
that the impact was immaterial to our financial statements.  The Staff
advised us that they viewed this conversion as an inducement and that the
difference between the original conversion price of the Notes of $6 per share
and the $2 the Notes were converted into should be recognized as expense at
the time of conversion.    Per review of SFAS No. 84 and EITF 02-15, I
believe the Staff's position is reasonable.  As a result, the June 30, 2008,
September 30, 2008, December 31, 2008 and March 31, 2009 financial statements
are misstated and an assessment needs to be performed to determine the
materiality of these prior period errors.

Assessment

SEC Staff Accounting Bulletin No. 99 - Materiality ("SAB 99") is the relevant
guidance that needs to be applied to the facts of our situation.  SAB 99
states that both quantitative and qualitative factors need to be taken into
consideration when assessing materiality. Per SAB 99 "quantifying... the
magnitude of a misstatement is only the beginning of an analysis of
materiality; it cannot appropriately be used as a substitute for a full
analysis of all relevant considerations.  Materiality concerns the
significance of an item to users of a registrant's financial statements.  A
matter is 'material' if there is substantial likelihood that a reasonable
person would consider it important."

SAB 99 also refers to Statement of Financial Accounting Concepts No. 2 which
defined materiality as "the omission or misstatement of an item in a
financial report is material if, in the light of surrounding circumstances,
the magnitude of the item is such that it is probable that the judgment of a
reasonable person relying upon the report would have been changed or
influenced by the inclusion or correction of the item."

SAB 99 specifically states, "In the context of a misstatement of a financial
statement item, while the 'total mix' includes the size in numerical or
percentage terms of the misstatement, it also includes the factual context in
which the user of financial statements would view the financial statement
item.  The shorthand in the accounting and auditing literature for this
analysis is that financial management and the auditor must consider both
'quantitative' and 'qualitative' factors in assessing an item's materiality."

Quantitative Factors

An analysis of the numeric impact of the misstatement to financial statements
is as follows:

                                   Three Months  Six Months    Nine Months
                     Year Ended    Ended         Ended         Ended
                     6/30/08       9/30/08       12/31/08      3/31/09
                     ------------  ------------  ------------  ------------
Net loss:
As reported          $  1,778,562  $    930,393  $    136,200  $    954,626
As corrected         $  2,297,944  $    930,393  $    136,200  $    954,626
$ Difference         $    519,382          -             -              -
% of Net loss              29%            0%            0%            0%

Loss per share:
As reported             $ 0.21        $ 0.09        $ 0.01        $ 0.09
As corrected            $ 0.27        $ 0.09        $ 0.01        $ 0.09

Additional paid in
capital:
As reported          $ 73,422,195  $ 73,665,312  $ 73,476,577  $ 74,098,100
As corrected         $ 73,941,577  $ 74,184,694  $ 73,995,959  $ 74,617,482
$ Difference         $    519,382  $    519,382  $    519,382  $    519,382
% of total                < 1%          < 1%          < 1%          < 1%

Accumulated deficit:
As reported          $(74,342,288) $(75,272,681) $(74,478,488) $(75,296,914)
As corrected         $(74,861,670) $(75,792,063) $(74,997,870) $(75,816,296)
$ Difference         $   (519,382) $   (519,382) $   (519,382) $   (519,382)
% of  total               < 1%          < 1%          < 1%          < 1%

Total shareholder
equity:
As reported          $   (920,093) $ (1,607,369) $ (1,001,911) $ (1,198,814)
As corrected         $   (920,093) $ (1,607,369) $ (1,001,911) $ (1,198,814)
$ Difference                 -             -             -             -
% of total                   -             -             -             -

Quantitatively, the error is material to the year ended June 30, 2008;
however, see discussion below of qualitative factors indicating that it is
not material to a reader.  Quantitatively, the amount is clearly not material
to the reporting periods subsequent to June 30, 2008.  In addition, as the
Company filed under Regulation S-B for the year ended June 30, 2008, it was
not required to disclose quarterly financial information in its 10-KSB for
the fiscal year ended June 30, 2008.  As this error relates to the fourth
quarter of fiscal 2008, no amounts previously reported related to quarterly
financial information for the fiscal year ended June 30, 2008 are affected.

The error had no quantitative impact on the previously issued statements of
cash flows or any discussion on liquidity in MD&A as this was a non cash
item.

Qualitative Factors

SAB 99 identifies certain qualitative considerations to take into account in
assessing the materiality of an error which is not intended to be an
exhaustive list:

1.   Is the misstatement subject to precise measurement? -   YES (See
     analysis above.)

2.   Does the misstatement mask a change in earnings or other trends? - NO.
     Since the Company had not yet re-commenced commercial activities and had
     no revenues during the relevant periods, there was no material change in
     the Company's 'earnings or other trends'.

3.   Does the misstatement hide a failure to meet analyst's expectations? -
     NO.  No analysts follow the Company, its market or its results.
     Therefore, the misstatement does not  'hide a failure to meet analyst's
     expectations'.

4.   Does the misstatement change a loss into income or vice versa? - NO. The
     Company continues to record a substantial loss during the relevant
     periods and, therefore, the misstatement does not 'change a loss into
     income or vice versa'.

5.   Does the misstatement concern a segment or portion of the business
     playing a significant role in operations-NO.  Since the Company had not
     yet re-commenced sales and/or commercial operations in any segment of
     its business during the relevant periods, the misstatement does not
     'concern a segment or portion of the business playing a significant role
     in operations'.

6.   Does the misstatement affect compliance with regulatory requirements? -
     NO.  As discussed above, the misstatement does not in any way 'affect
     compliance with regulatory requirements' because the Company is not
     subject to any substantive regulatory requirements in any jurisdiction
     (other than the SEC) related in any manner to its financial statements.

7.   Does the misstatement affect compliance with loan covenants or
     contractual requirements? - NO.  The misstatement does not 'affect
     compliance with loan covenants or contractual requirements' as the
     Company has no 'loan covenants or contractual requirements' which are
     affected in any manner by the Company's financial statements.

8.   Did the misstatement have the effect of increasing management
     compensation? - NO. The misstatements do not have the effect of
     'increasing management compensation' as the subject of the misstatements
     relates entirely to non-compensation matters.

9.   Did the misstatement involve concealment of an unlawful transaction? -
     NO. The misstatements do not involve 'concealment of an unlawful
     transaction' or any transaction but rather are limited entirely to
     questions of non-cash valuation of a portion of a debt conversion
     transaction which is fully disclosed.

10.  Was the misstatement intentional?  NO. The misstatement was not
     'intentional' but rather the result of a differing interpretation of
     applicable accounting principles as has been discussed at length in
     correspondence with the SEC prior to this date.

Conclusion

For September 30, 2008, December 31, 2008 and March 31, 2009, the
quantitative amount of the misstatement was not material to those financial
statements and there were no qualitative factors present to change this
assessment.  For June 30, 2008, while the quantitative amount was significant
to net loss, the weight of the above discussed qualitative factors leads me
to conclude that the misstatement should not be considered material to the
2008 statements.   I do not believe a reasonable person would have formed a
different conclusion regarding the Company if the financial statements had
been correctly stated at the time.

My conclusion is based on the following factors.  First, the Company has a
relatively limited number of shareholders and debt holders and management of
the Company believes based upon communications with them, current net losses
to date are not the basis for their investment decisions.  The shareholders
have invested based upon the technology the Company has developed and the
business opportunities to be pursued based on the Company's technology
including the expectation of future earnings once the technology is deployed.
Note that the Company has only begun to commercially deploy its technology
during the second half of fiscal year 2009 and the misstatements relate
entirely to prior periods before commercial deployment of the Company's
technology.   Second, recording the additional expense in 2008 would not have
turned income into a loss, changed any operating trend in the business, or
changed the reported cash flows from operations, financing or investing
activities.  I do not think a reader would have viewed a $2.3 million loss
any differently than a $1.8 million loss, particularly due to the fact that
the difference is based on a non-cash expense and the Company has a history
of losses, a significant portion of which have been the result of non-cash
items.  Third, the error had no bearing on contractual requirements, loan
covenants, expectations, compensation nor did it conceal an unlawful
transaction.  Fourth, the error was unintentional.  Management believed they
were properly accounting for the transaction. I do not believe there would be
any significant gain to the Company's security holders and/or the investing
public following the Company from restating the Company's financial
statements for these past periods.

Therefore, I propose that the June 30, 2008 financial statements not be
restated due to the qualitative factors of immateriality described above and
that the subsequent periods not be restated due to both the quantitative and
the qualitative factors of immateriality described above . I propose adding
the following language to the applicable footnote in our 10-K for the year
ended June 30, 2009 (and substantively similar language in the MD&A):

   "During the fourth quarter of 2009, we determined that the conversion
   of the 2006 Series A Convertible Promissory Notes during fiscal year
   2008 resulted in a non-cash inducement expense of $519,382 that should
   have been recognized for the year ended June 30, 2008.  Management
   evaluated this matter in the context of Staff Accounting Bulletin
   No.  99 - "Materiality" and determined that the error was not material
   to previously issued financial statements.'