Mine It, Drill for It, then Push It Back Underground

Fossil fuels are usually found underground; we mine for them or drill for them.  Occasionally we find fossil substances boiling up to the surface, as in the LaBrea Tar Pits in Los Angeles, a major source of fossils of mastodons and sabre-toothed tigers and giant sloths. 

LaBrea Tar Pits -- Page Museum Los Angeles

LaBrea Tar Pits -- Page Museum Los Angeles

Interestingly enough we tend to want to store both fossil fuels and various other substances back underground, sometimes at pretty great depths too.  Everyone has read about the Strategic Petroleum Reserve (http://www.fossil.energy.gov/programs/reserves/spr/spr-facts.html) which consists of 4 sites where crude oil for national security reasons is stored in deep underground salt domes, where it is safely held, and cannot bleed out into the surrounding geology. 

As we become more and more aware of the effects of greenhouse gases, there is an assumption that those gases can be stored underground too.  http://www.enn.com/top_stories/commentary/39987.  Would it allow us to burn coal, for instance, if we could capture the CO2 and force it back underground, perhaps even deeper than the coal that contained it?   Shell certainly thinks so: http://www.reuters.com/article/environmentNews/idUSTRE54687K20090507?rpc=64.

That activity would be regulated by the EPA’s underground injection control unit (http://www.epa.gov/safewater/uic/wells_sequestration.html), which is the same group that regulates the injection of water into underground wells to keep it from flowing into surface water, and sometimes to increase the pressure in the well itself.

If there is an industry in storing things underground, how would an investor find companies that might benefit from it?  Well, to start off with you could look at some o f the energy industry giants like Shell, but that is clearly not a pureplay in underground storage.

There are several US-based energy-oriented companies that  have major natural-gas storage caverns, injecting future fuels and chemical feedstocks into underground facilities, most frequently salt domes, such as occur naturally around the western end of the Gulf of Mexico in Texas and Louisiana.

Kansas City MO-based Inergy (Nasdaq: NRGY, http://www.inergypropane.com/) operates a natural-gas underground storate facility in upstate New York (salt domes occur everywhere, not just in TX and LA).  Although it is a full-spectrum natural gas company, an investor could look at their shares, which are trading around $24.58 vs a year-high of $29.49, with average daily volume of about 260,000 shares and a market cap of about $1.4 billion.

Other companies with significant underground natural-gas storage include Houston-based Spectra Energy Corp (NYSE: SE, http://www.spectraenergy.com/) .   SE, with a market cap of around $10 billion, is solidly outside out area of interest, but its shares are selling for $15.60,  around half the 52-week high of $29.18.  Another big company with strong underground storage capabilities is Dallas-based Atmos Energy Corp (NYSE: ATO, http://www.atmosenergy.com/) , whose shares are trading at $23.55 vs a 52-week high of $28.66 and a market cap of $2.1 billion, still a small cap in an industry of big guys.

Calgary-based TransCanada Corp (NYSE: TRP, http://www.transcanada.com/) is yet another candidate for those seeking companies with underground storage capabilities.  TRP shares are trading in the range of $28.78 vs a year-high of $40.25, and a solidly midcap market cap of over $17 billion.

There are some small companies that have their feet wedged in the door as well.  Have a look at Sirius Exploration (AIM: SXX or OTC Pink Sheets: SRUXY, http://www.siriusexploration.com/), a small UK-based diversified resources company with significant salt and potash deposits in North Dakota that has recently acquired 51% of Dakota Salts (http://www.dakotasalts.com/), which has the potential to be a freelance storer of natural gas or electricity (in the form of compressed air, which would be used to drive turbines when needed) in their own salt caverns that are local to the ND wind-energy industry (the largest in the US).  Certainly the smallest of these companies, Sirius may also be the dark horse for an investor looking to capitalize on way-underground real estate opportunities.  Sirius ADRs have only recently been listed on the Pink Sheets, and it is hard to get a current quote, but their common shares trade very high volumes on AIM in London.  There are 500 AIM shares, which are currently trading for about 1.8p (around US $0.03) in 1 US ADR share.

2 thoughts on “Mine It, Drill for It, then Push It Back Underground

  1. Pingback: Strong Buy Sirius Exploration PLC - Page 6 - StockRants Stock Market Forum

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