Oil Spill Investing

As oil production increases around the world, so will the likelihood of accidents.

In Alberta, Canada, a water injection pipeline owned by Apache Corporation (NYSE: APA) had been leaking produced water across 104 acres of vegetation near the Zama River.

All plant life and trees that came in contact with the substance has died. So far, no wildlife perished as a result of the spill. The pipeline has since been shut down by Apache, and cleanup efforts are underway. The cause of the spill is yet to be determined, and the duration of the leak is unknown, but experts believe the breach had been going on for a few months.

The spill is considered one of the worst in Canadian history, and it could have a negative impact on public opinion regarding pipeline infrastructure in North America.

But from an investment angle, it is a sign there is money to be made in oil spills.

Some may see oil spill investments as a morbid venture, but there is another way to look at this.

Whether there is more investment in the oil spill industry or not, crude production will press on, and it is a safer bet in having a thriving cleanup sector than one that is outdated and ill-equipped due to lack of investment.

Support mechanisms need to be in place to respond to small or large scale disasters. Oil spill investments will secure a higher chance of efficient cleanups and environmental restoration.

Alberta Spill & Keystone XL

At a time when President Obama is on the cusp of making a final decision on TransCanda’s (NYSE: TRP) Keystone XL this year, the Zama spill in Alberta could not have come at a worse time.

But the spill is not going to sway supporters and detractors of Keystone XL in either direction.

Since Keystone is a transnational endeavor, there is a chance the Alberta spill could worry some U.S. lawmakers on the fence about the project. But don’t expect a heavy regulation hammer coming from the Canadian government. Prime Minister Stephen Harper has been a vocal supporter of Keystone XL, and the spill in Alberta is not likely to shift the government’s stance on the project.

And the Zama pipeline is in a different league than Keystone XL. Apache’s pipeline transported produced water, a natural layer of water that lies under hydrocarbon beds of crude and natural gas reserves. Once crude or natural gas is pumped to the surface, the produced water follows suit. It can also be injected back into the ground to invigorate reservoir pressure for maximum output in wells.

Produced water comprises salt, oil, organic compounds, and various minerals, but man-made chemicals are sometimes added to the mix.

The Canadian and U.S. governments view produced water as toxic waste, and there are restrictions regarding its disposal. To follow regulatory guidelines, companies can inject it back into the ground as a waste disposal method, or it can be treated and recycled. The leaking produced water from the Zama pipeline was already treated, according to an official statement from Apache.

GE’s (NYSE: GE) produced water evaporation and recycling generator will be used in the Canadian Oil Sands of Alberta by Calgary-based Sunshine Oil Sands Ltd. (TSX: SUO).

The Alberta spill is a sign that oil spills will occur as North America ramps up crude and natural gas production.

In Canada, crude production will reach over 6.7 million barrels per day by 2030. If Keystone XL and other major pipeline projects are not in place, it can pose a problem for drillers in the form of more backlogs, sluggish production, and price cuts on the oil market.

But regardless of the lacking pipelines in Canada or the U.S., the oil boom machine is too big to roll back.

Many companies would be forced to transport by train, but railway transport is a high-risk area for oil spills. Oil pipeline transportation is safer than shipping via truck or train, but as with any other industry, there is always a chance of accidents.

Oil Spill Prone Areas

As energy production heightened, the oil cleanup sector has lagged far behind. And there are energy companies that do not have the necessary failsafe technology and infrastructure to tackle major spills, especially in places like the Arctic.

Many governments are hoping to begin domestic energy operations to reduce gasoline prices and reduce imports.

More energy companies are investing in dangerous areas like Iraq and Colombia, places where pipelines and other infrastructure have been susceptible to terrorist attacks.

And exploration and drilling campaigns have been conducted in environmentally sensitive areas such as the Amazon and the Arctic.

In recent years, hurricanes and tornadoes have had devastating impacts on communities, which could spell wider implications for energy-related infrastructure in Oklahoma and the Gulf Coast region.

While oil accidents will undoubtedly hurt oil and gas companies, other companies within the energy sector can benefit.

Chemical

The latest equipment technology and chemicals are needed by companies to tackle oil spills in any form. When word got around that Corexit, a dispersant manufactured by Nalco Holding Co., was used during the 2010 BP (NYSE: BP) cleanup, stock for the company soared 11%.

Chemical dispersants essentially act as dishwashing detergent, tackling greasy surfaces. The chemicals break up congealed oil, making the cleanup process easier. And these surfactants can be mixed with bacteria that will consume oil deposits once the petroleum waste is broken down.

There are critics who counter that dispersants are just as harmful as oil spills – posing direct harm to marine life. Unfortunately, there are no easy answers when contending with oil spills, and there are other areas of the cleanup industry that can help in reducing the use of chemical dispersants.

Manufacturing

With enough investment, companies can develop safer dispersants, but there are also industrial vacuums and skimmers that can do just as good a job in cleaning polluted waters. Incinerators are generally considered a last resort and used only when all other options are exhausted. Booms are also needed to lock spilled oil into place.

The manufacturing sector could easily churn out such products and other accessories to help with the cleanup process. And the natural gas sector can benefit from increased investment in oil spill cleaning, since many manufacturers rely on the commodity to fuel their power plants.

Heavy-equipment vehicles like All Terrain Vehicles (ATVs) can trudge through muddy shores or wetlands.

Elastec/American Marine is a manufacturer and wholesaler of oil spill products, and its sister company American Marine was instrumental in the Exxon Valdez oil spill of 1989, whose fire boom technology helped contain oil-based fires.

Technology

Besides chemical and manufacturing, oil spill investing could cover unforeseen fields, including the drone industry.

Drones are controversial in nature, especially in regards to domestic use, but the energy industry is not the only area that can benefit from them. Even wildlife protection groups are entertaining the idea of using drones in parts of Africa as a deterrent against poaching.

Drones could survey mass landscapes to fully assess the extent of oil spill damage. And they could be useful tools in spotting sabotage in war-torn parts of the world. Most energy companies do not have the manpower to look for compromised pipelines, but drones will be able to cover vast areas, potentially spotting any damage to infrastructure or early spills.

By 2015, the public may see drones in use by the commercial sector, and Alaska could be a prime location for these flying machines, given its barren location and efforts by the Alaskan government to revive lagging production.

There is already maritime surveillance technology and oil spill sensors on the market, and such technology could easily be integrated with drones.

Organic/Natural

This area of oil spill cleaning may take some more creativity and investing to translate into a successful business model, but there is a market for organic/natural oil cleanup methods. Simple things like chicken feathers, perlite, sawdust ,and moss are great ways to soak up surface oil. Mushrooms and hair can also be used to absorb up oil messes.

During the BP spill, non-profit organizations asked the public to donate excess pet hair and pantyhose for absorbents. Things like hair and sawdust may seem backward and haphazard, but they are some of the cheapest and most direct ways of addressing oil catastrophes.

Cleanup crews can also take full advantage of Mother Nature in the form of natural bacteria that dwells in the ocean. These organisms automatically consume oil once it enters their habitats. Adding sulfate and nitrate fertilizers will increase bacteria colonies, making the job of oil spill cleaners that much easier.

All of these things can be explored, but investment is the key in unlocking the oil cleanup sector’s true prowess in confronting oil spills of any kind.

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