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Washington, DC

June 9, 2008

VIA EDGAR AND
FEDERAL EXPRESS

Securities and Exchange Commission
Davison of Corporation Finance
100 F Street, N.E.
Washington, DC 20549

Attention:		Peggy Fisher
		Thomas Jones
Re:		Energy Recovery, Inc.
		Amendment No. 2 to the Registration Statement on Form S-1
		Initially Filed April 1, 2008
		File No. 333-150007

Dear Mr. Jones:

     On behalf of Energy Recovery, Inc. (the “Company”), we submit this letter in response to comments from the staff (the “Staff”) of the Securities and Exchange Commission (the “SEC”) received by letter dated May 30, 2008 relating to the Company’s Registration Statement on Form S-1 (File No. 333-150007) (the “Registration Statement”).

     On behalf of the Company, we are concurrently filing via EDGAR Amendment No. 2 to the Registration Statement (“Amendment No. 2”), and for the convenience of the Staff, we are providing copies of this letter and marked copies of Amendment No. 2 to Mr. Jones by overnight delivery.

     In this letter, we have recited the comments from the Staff in italicized, bold type and have followed each comment with the Company’s response. Capitalized terms used but not defined herein shall have the meanings ascribed thereto in Amendment No. 2.

Prospectus Summary

1.		Please provide supplemental support for your leadership role, including that you “are the largest global supplier of energy recovery devices” and that your “PX product was selected for a significant majority of the new SWRO plants commissioned in China.”
		The Company supplementaly advises the Staff that its belief that it is “the largest global supplier of energy recovery devices for SWRO” is based on publicly available information gathered from competitors’ published information regarding the total number of awarded projects, databases published by Global Water

      

		Intelligence and the number of projects that the Company has been awarded. As indicated on Exhibit A attached hereto, approximately 63% of the plant capacity awarded in 2007 used the Company’s PX device. The Company has revised pages 3 and 46 of Amendment No. 2 to clarify that the Company believes it is the largest global supplier of energy recovery devices for SWRO plants exceeding 15,000 cubic meters per day capacity.
		The Company’s belief that its “PX product was selected for a significant majority of the new SWRO plants commissioned in China” is based on the database published by Global Water Intelligence for the total number of projects awarded by China and the number of projects that the Company has been awarded in China. As indicated on Exhibit B attached hereto, approximately 72% of the plant capacity awarded for new SWRO plants in China from 2002-2007 used the Company’s PX device.
2.		In the fourth bullet on page 3, clarify that three EPC customers accounted for 56% of your net revenue for 2007.
		The Company has revised page 3 of Amendment No. 2 in response to the Staff’s comment.

     Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 25

Stock-Based Compensation, page 27

3.		We refer to your response to prior comment 11. Please expand to more specifically describe the models used to value your common shares for purposes of estimating stock-based compensation. Please also describe significant assumptions on which the valuations are based, including how those assumptions have migrated as you move closer to the actual offering.
		The Company has revised page 28 of Amendment No. 2 in response to the Staff’s comment.

Annual Review Process, page 59

4.

We note your response to prior comment 18 and the market data from three national benchmark salary survey firms. If a registrant uses benchmarking and it is material to its compensation policies and decisions, Item 402(b)(2) of Regulation S-K requires the registrant “to identify the benchmark and, if applicable, its components (including component companies).” Please comply. See Staff Observations in the Review of Executive Compensation Disclosure for further discussion.

Securities and Exchange Commission		Page 2
June 9, 2008

      

The Company has revised page 60 of Amendment No. 2 in response to the Staff’s comment.

Base Salary, page 60

5.		We note your response to prior comment 19. Please revise vague statement with specific information of the factors taken into account in setting the base salary levels of your named executive officers. It is not clear what you mean in the second sentence under this caption.
		The Company has revised pages 60 and 61 of Amendment No. 2 in response to the Staff’s comment.

Cash Bonuses, page 60

6.		We reissue comment 20 with regard to performance targets. Please see Item 402(b)(2) of Regulation S-K and the detailed discussion in Staff Observations in the Review of Executive Compensation Disclosure that describes the disclosure issues. Specifically describe the performance targets that were applied to the named executive officers, rather than a couple of general examples, and quantify the targets. If you believe disclosure of any of the quantified targets that were applied in 2007 would continue to cause competitive harm now, please furnish us with a detailed explanation to support your position.
		The Company has revised page 61 and 62 of Amendment No. 2 in response to the Staff’s comment.
7.		In the event that you are able to establish that the registrant would be competitively harmed if certain targets were disclosed, please revise to disclose how difficult it would be for the named executive officers or how likely it would be for the company to achieve the undisclosed key corporate goals and annual performance goals.
		Please refer to the Company’s revised disclosure on page 61 and 21 of Amendment No. 2 in response to the Staff’s comment #6 above.
8.		We note your response to prior comment 21. The bonus amount for Dr. Stover appears to exceed the 30% maximum of base salary paid. Please revise footnote (6) to the summary compensation table to explain the difference.
		The Company has revised page 66 of Amendment No. 2 in response to the Staff’s comment.

Securities and Exchange Commission		Page 3
June 9, 2008

      

Financial Statements

Note 9, Stockholders’ Equity, page F—23

Stock Option Plans, page F—24

9.		You disclose that you used an independent valuation firm to assist you in the valuation of the Company’s common stock for 2007, 2006 and 2005. While management may elect to take full responsibility for the valuations, if you choose to continue to refer to the expert in any capacity, please revise the filing to name the independent valuation expert and include its consent as an exhibit. Refer to Rule 436 and Item 601(b)(23) of Regulations S-K.
		The Company has revised page 28 of Amendment No. 2 to disclose the name of the independent valuation firm and included its consent as Exhibit 99.3 to the Registration Statement.
10.		We refer to your response to comment 31. Please tell us why you rejected the $5 per share private placement offer in March 2008.
		The Company supplementally advises the Staff that its management did not deem the terms and structure of the March 2008 private placement offer to be attractive for the Company or its stockholders. The Company had met with the private equity firm on several occasions in the fall of 2007 and the first two months of 2008. In March 2008, the private equity firm presented a formal written offer to the Company. The investment was structured in the form of Series A Redeemable Preferred Stock with a cumulative dividend of 8.0% per annum, compounded annually. The Company has only issued common stock historically and did not believe that providing a liquidation preference and other rights superior to those of the outstanding shares of common stock would be beneficial to its existing stockholders. In addition, the terms of the private placement offer stipulated that the investor be granted three board seats (out of a total of seven) and representation on all board committees. The Company did not view the requested board representation to be appropriate given that the investment only would have represented one-third of the total ownership of the Company after the investment.
11.		We refer to your response to comment 32. While we understand that the discussions with your underwriters are preliminary, please provide us a history of those pricing discussions.
		The Company supplementally advises the Staff that in August 2007, it began to consider the possibility of an initial public offering as well as a sale in order to provide liquidity for its stockholders. Because sea water desalination is more

Securities and Exchange Commission		Page 4
June 9, 2008

      

		prevalent outside of the U.S and the majority of its customers are located outside of the U.S., the Company initially considered a listing on a foreign stock exchange. Nine investment banks presented proposals to the Company in October 2007 in connection with a potential initial public offering. The enterprise value estimates ranged from $275 million to $650 million. Please note that these estimated enterprise values were based on solely the Company’s marketing materials and did not involve any due diligence procedures on the part of the investment banks.
		In November 2007, the Company hired a Chief Financial Officer to facilitate the initial public offering process. The two co-lead investment banks, Citi and Credit Suisse Securities (USA) LLC, were selected in November 2007 and several co-mangers were being considered. Shortly after the Company hired its Chief Financial Officer, the Company decided to undertake an initial public offering and list on the NASDAQ Global Market rather than a foreign exchange in order to have access to a broader investor base. On December 10, 2007, the Company convened a formal organizational meeting for the initial public offering. The purpose of the organizational meeting was to introduce the team members and to provide the participants with a better understanding of the Company’s business. No valuations were discussed. The underwriters’ legal counsel provided a due diligence request list to the Company on December 20, 2007.
		During January and February 2008, the Company provided due diligence materials and the underwriters and their legal counsel conducted due diligence. The Company began drafting the Registration Statement at the same time. No valuations were discussed during this period as the underwriters continued their due diligence.
		In March 2008, the Company met with several research analysts to provide information regarding the Company’s technology, manufacturing process, sales and marketing approach and historical financials. The Company did not discuss valuations with such research analysts. The limited number of initial public offerings in the first quarter of 2008 and the disruptions in the capital market in March 2008 raised concerns about the timing of the Company’s planned initial public offering.
		During April and May 2008, the Company filed and amended the Registration Statement. The Company met with the underwriters on June 6, 2008 to begin preliminary discussions regarding a valuation range.
		Due to the uncertainty of the valuation range, the Company issued only a limited number of options in 2008. The majority of the options to employees granted in the first quarter of 2008 were issued to two key new hires. The Company has not issued any options in the second quarter of 2008 and is waiting for the initial public offering to be completed before issuing additional options.

Securities and Exchange Commission		Page 5
June 9, 2008

      

Other Matters

     Pursuant to Rule 472, Amendment No. 2 is filed herewith in response to the Staff’s comments. The Company confirms that no additional material changes were made in Amendment No. 2 for reasons other than (i) in response to a specific Staff comment, (ii) as noted in this response letter and (iii) to correct certain disclosures that relate to the Company’s financial results.

     Please direct your questions or comments to Stephen J. Schrader of this office (415-576-3028) or me (650-251-5926). In addition, we would request that you provide a facsimile of any additional comments you may have to Mr. Schrader at 415-576-3099 and me at 650-856-9299. Thank you for your assistance.

Very truly yours,

/s/ Jenny C. Yeh

Jenny C. Yeh

cc:		Thomas Willardson Alan Denenberg, Esq.

Securities and Exchange Commission		Page 6
June 9, 2008

      

Exhibit A

2007 Total Desalination Projects > 15,000 m³/day

		Plant Size
Project Name		(m3/day)				Country
Won by PX
Torrevieja			230,000			Spain
Barcelona			200,000			Spain
Tlemcen — Hounaine			200,000			Algeria
Shuaibah			150,000			Saudi Arabia
Chennai Minjur Minjur			100,000			India
Hamriyah			90,000			UAE
Swakopmund			65,000			Namibia
Bajo Almanzora			65,000			Spain
Yue Qing			21,600			China
Erin			21,200			Turkey
Las Palmas III			16,800			Spain
Omex			16,000			China
Arucas			16,000			Spain
Kalba (CH2MHill)			15,000			AUE
Total (14 Projects Won)			1,206,600

		Plant Size
Project Name		(m3/day)				Country
Won by DWEER
Aguilas			180,000			Spain
Gold Coast			125,000			Australia
Total (2 Projects Won)			305,000
Won by Turbine Makers
Shuqaiq (calder Pelton)			216,000			Saudi Arabia
Kaust (Pelton)			52,000			Saudi Arabia
Spain Andracht			45,000			Spain
Pearl Qatar (PEI)			37,000			Qatar
PTT Chemicals (turbo)			34,500			Thailand
Tenerife			18,000			Spain
Santa Eulalia			15,000			Spain
Total (7 Projects Won)			417,500

Summary		By # of Plants				By Plant Size
PX Technology			61	%			63	%
Competing Technology			39	%			37	%

Securities and Exchange Commission		Page 7
June 9, 2008

      

Exhibit B

China Desalination Market (Source: GWI Dealstracker)

				Projects awarded 2002-2007
Project Name		ERI PX		Country		Capacity (m3/d)				Contract date				Online date				Status		ERI PX				Other Technology
Anbang				China			8400				2006				2007			N/A			0				8400
Changdao		Yes		China			300				2006				2006			Operating			300
Changtu				China			5000				2007				2007			N/A			0				5000
Changzhou				China			300				2006				2006			N/A			0				300
Daishan County		Yes		China			3000				2006				2007			Operating			3000
Dalian		Yes		China			1200				2004				2004			Operating			1200
Dalian Petrochemical Company		Yes		China			5500				2002				2003			Operating			5500
Dayang, Yangshan				China			1000				2006				2007			Operating			0				1000
Dongji				China			150				2007							N/A			0				150
Fujian				China			1600				2006				2006			N/A			0				1600
Ganjingzi				China			20000				2006							N/A			0				0
Huangdao		Yes		China			10000				2005				2007			Operating			10000
Huludao City				China			50000				2004				2007			Delayed			0				50000
Kunshan				China			10800				2006				2006			N/A			0				10800
Leqing		Yes		China			21600				2006							Operating			21600
Mayi Town		Yes		China			300				2005				2006			Operating			300
Qingdao Power Plant		Yes		China			9000				2005				2006			Operating			9000
Rongcheng		Yes		China			10000				2003				2004			Operating			10000
Shengshan				China			1000											Operating			0				1000
Shengsi		Yes		China			4000											Operating			4000
Shengsi County		Yes		China			2000				2004				2006			Operating			2000
Shengsi County		Yes		China			1000				2003				2004			Operating			1000
Shidao		yes		China			10000				2002				2003			Operating			10000
Tianjin Dagang		Yes		China			100000				2004				2006			Construction			100000
Tianjin		Yes		China			1000				2002				2003			Operating			1000
Wangtan		No		China			10000				2004				2005			Operating			0				10000
Xiazhi Town, Zhoushan City		no		China			600				2004				2005			N/A			0				0
Xiushan Town I		yes		China			1000				2007				2007			Operating			1000
Yangshan		Yes		China			1000											Operating			1000
Yangshan Town, Zhoushan City		Yes		China			1000				2004				2005			Operating			1000
Yingkou Power Plant		Yes		China			10000				2006				2007			Operating			10000
Yuhuan Yuhuan Power		Yes		China			34560								2006			Operating			34560
Yuhuan Yuhuan Power				China			11500				2006				2006			Delayed			0				0
Zhejiang		yes		China			2000				2006				2006			Operating			2000
Zhejiang		yes		China			1000				2006				2006			Operating			1000
Zhoushan City		yes		China			2000				2004				2005			Operating			2000
							351810														231460				88250
																		Market share			72.40	%			27.60	%

Securities and Exchange Commission		Page 8
June 9, 2008