Ecosphere Technologies (OTC: ESPH): Offering a Cleaner Solution to Fracking
by Ryan Fitzwater, Investment U Research
Tuesday, December 20, 2011
Critics of the controversial natural gas drilling process called hydraulic fracking have recently had their suspicions confirmed.
After three years of extensive testing in Wyoming water wells, the Environmental Protection Agency (EPA) has concluded that hydraulic fracking can contaminate drinking water supplies.
This is the first time the EPA has confirmed what many have been debating for a years.
Early testing of water wells in 42 homes in Wyoming (where fracking is very prevalent) found serious contaminants that could or could not match the drilling industry. Note that the EPA did not rule out hydraulic fracking, unlike agricultural pollutions, which they did rule out.
These early findings led the EPA to dig two deeper, monitoring wells… and the results were substantial.
They found that pollution was much worse at deeper levels than they were in shallower, personal wells. At greater depths, 10 substances were found that match the additives and chemicals used in the fracking process.
This lead the EPA to conclude that fracking was the most likely cause of this pollution.
A Hit to the Industry?
Since complaints began, the natural gas and oil industry has argued that fracking wasn’t the cause of water well pollution. Companies had blamed wells that were improperly built for the pollution they were seeing.
Thing is, the EPA in its most recent Wyoming testing found that the concrete lining of well walls was degrading in a distinct way in areas near drilling zones. Basically, the force of fracking is either damaging weak areas in the cement or developing new ones.
Are the EPA’s findings really that surprising?
To think that drilling into rock could cause damage to underground wells in the area or that pumping chemicals directly into the ground could actually pollute underground water sources is outlandish, right? Please pardon my sarcasm; to me these findings are far from shocking.
But with all this bad news for the fracking industry, I, along with others, don’t see this leading to an all out ban on fracking.
The EPA study in Wyoming is about one specific geological area, and cannot draw conclusions on what could be happening in other areas like Pennsylvania, Texas, or New York. The natural gas industry will surely argue this point.
And then you have to ask what will actually happen in Washington, D.C. with regards to the EPA’s findings?
It is more than possible that these findings will do absolutely nothing considering oil and gas lobbyists have their hands in the pockets of countless congressmen. Not to mention, all you have to say is “jobs” and some automatically shut the door on the argument.
According to a recent survey conducted by the Deloitte Center for Energy Solutions, eight in 10 respondents agree that natural gas development can create job growth. The online survey consisted of 1,694 interviews and also found that only two in 10 felt that the risks of developing shale gas “far” or “somewhat” outweigh the benefits, with 58 percent believing that the benefits outweigh the risks.
But there’s still the possibility that this could put forth legislation that would closer regulate or all out ban fracking if it’s deemed unsafe and unclean to drinking water and the environment.
While this could become a big blow to the industry, there’s another opportunity here that could take fracking to a more environmentally friendly level.
A Cleaner Way for Fracking
Founded in 1998 Stuart, Fla.-based Ecosphere Technologies (OTC: ESPH) is a green-centered technology development, manufacturing and diversified engineering company.
The company focuses on green technologies, with the purpose of eliminating the use of toxic chemicals in many industrial applications.
Ecosphere has been an innovator in the water industry, and has been on the forefront in developing eco-friendly technologies to solve major water challenges on land and at sea.
With a broad patent portfolio of clean technologies, we’re most interested in their Ozonix® product.
Ozonix is a chemical-free water treatment solution that can be used in the oil and natural gas industry for a more eco-friendly fracking process.
The current fracking process uses a mix of sand, water and chemicals that’s pumped into the ground to unlock trapped gas.
With Ozonix, oil and gas companies can pump environmentally friendly ozone into drill wells to manage microbial growth, which provides the same disinfectant that liquid chemical biocides normally supply.
What makes this even more attractive is that Ecosphere’s product and process is cost effective.
Many of the chemicals currently used in the fracking process are actually more expensive than Ozonix.
And with chemical mixtures, oil and gas companies have to bring in wastewater trucks to remove contaminated flow back water that returns to the surface. Millions of gallons have to be trucked away to holding ponds or deeper injections sites. This trucking process greatly increases overhead.
With Ozonix, no secondary chemical waste stream is produced and you can recycle 100% of the fluids that return to the surface. So you not only do away with the expensive trucking process, but you also preserve precious water resources for present and future generations.
Normally going green means taking a hit in price, but with Ozonix Technology this isn’t the case.
Demand is Growing
Since 2008, Ecosphere has treated roughly 1.09 billion gallons of fracking water for oil and gas companies, removing chemicals and preserving vital water resources on over 375 natural gas wells. And demand for Ozonix is growing at a rapid pace.
The company’s CEO, Charles Vinick, recently stated that the Ozonix process being used in fracking has brought big business to Ecosphere, creating a 10-fold increase in revenue over the last two years.
This might help explain why the company recorded record revenue of $8.2 million in the third quarter of 2011, a 275-percent increase compared to the third quarter of 2010. And what’s more significant is that Ecosphere had over $1 million in cash on hand at the end of the third quarter of 2011, compared to a measly $46,387 it had on December 31, 2010.
Ecosphere Quarterly Revenue
And orders from energy exploration companies continue to come in.
Recently, Ecosphere got orders for two Ozonix EF8o units to be delivered to Hydrozonix LLC in the forth quarter. This was after very successful frack testing in Texas, where Ozonix processed over nine million gallons of fluid with zero equipment downtime over seven days. And this was all done with just one piece of mobile equipment.
No matter how the EPA’s recent report affects fracking’s future (unless they totally ban the practice), investor’s should keep a close eye on Ecosphere.
If no legislation comes out of Washington banning chemicals in fracking, it’ll be no skin off Ecosphere’s back. It will continue to sell Ozonix at competitive and cost effective prices to an oil and natural gas industry that’s estimated to be worth $85 billion by 2013.
But if legislation comes out banning the use of chemicals in the fracking process, get ready for Ecosphere’s profits to really soar.
Incredible demand for the Ozonix Technology would shoot through the roof considering they’re offering a chemical-free solution for fracking fluids.
Not to mention the company could sell their patented clean technologies for substantial premiums and would also become the ultimate takeover target for natural gas producers.
A cleaner future could be in store for hydraulic fracking – oil and gas companies and the environmentally conscious citizen should stay tuned.
Good investing,
Ryan Fitzwater
Article by Investment U
