2 Stocks for America's Biggest Energy Breakthrough of the Decade

One of the biggest energy discoveries of the decade has been made in our own back yard.

It's not really a new discovery at all. In fact, we've known about the potential for years. It's just that, until now, no one's been able to do anything about it.

But that's all changed...

Let me give you a little background on what I'm talking about. The United States east coast is home to one of the largest natural gas deposits known to man -- the Marcellus Shale Formation.

The Marcellus Shale is a geological formation named for a rock outcropping near Marcellus, N.Y. The Marcellus covers some 54,000 square miles, roughly the same land area as Iowa, and is spread over eastern Pennsylvania, New York, West Virginia and Ohio.

This region is sitting on roughly 4.359 quadrillion cubic feet of natural gas, some 30% of which is currently recoverable.

To give you an idea of how much gas that is, the United States uses roughly 25 trillion cubic feet of natural gas a year. With the current usage rate, the Marcellus formation could easily supply all of the natural gas needed in the country for half a century.

But there's a problem. In order to harvest oil and natural gas, the rock trapping the hydrocarbons needs to be porous. This way the hydrocarbons can easily flow from the ground to the surface.

But shale is less porous than other types of sedimentary rock formations. Some formations are like a bucket of gravel -- pour a gallon of water over the rocks and you can pour the water right back out. Shale, on the other hand, is more like concrete: it's still porous to some degree, but it's not possible to pull large volumes of liquid , or even gas, through it.

This has prevented exploration companies from producing in the Marcellus region for years. But a recent technological advancement has made extraction from shale possible.

Traditionally, oil and gas are pretty easy to get to with nothing more than a vertical hole. The well is drilled to the anticipated bottom of the formation and, over time, it can draw petroleum through the porous rock, eventually draining a 10 to 40 acre area of its crude or natural gas.

But if you drill a vertical well into a shale formation it might be able to produce some gas for a short while, drawing from the immediate vicinity of the well. It would be a limited vicinity, only inches that might add up to feet rather than feet that add up to hundreds of yards.

To solve this problem, some slick engineers from Texas expanded on a process known as "fracking," industry slang for hydraulic fracturing. The idea is that by pumping sand and ai down into oil wells, you can fracture the formation, making it more porous. This allows the well to produce a vast quantity of gas. As well, the use of horizontal drilling has helped increase the productivity of shale fields.

This process has revolutionized the natural-gas business, creating billions of dollars in investment opportunities.

In fact, land that was once selling for $1,000 an acre is now likely to be worth as much as $18,000 to $20,000 as landmen -- oil-company representatives who pore over county plats to determine who owns what -- camp out on card tables at county courthouses trying to stake their claim.

The money "will change the lives of many in the county," said Chris Lines-Burgess, the spokesman for the group of landowners in Wyoming County, Penn. That's undoubtedly true. What's also true is the leading companies that develop these wells will be sitting atop not just one of the largest supplies of natural gas in the world, but also a pile of cash.

But what does this mean for you as an investor?

For investors looking for aggressive growth and can stomach the commodity risk, investing in a pure play Marcellus shale operator may be worthwhile. Carrizo Oil & Gas (Nasdaq: CRZO ) , a leading expert in horizontal drilling, may provide this opportunity. Their largest amount of leaseholding is in Marcellus, where they have the right to explore and develop 173 square miles in the region.

If you don't want exposure to drilling risk, then you might be better off with a fund like the ECA Marcellus Trust (NYSE: ECT ) . The trust, formed by Energy Corp. of America, is designed to hold royalty interests in 14 producing horizontal natural-gas wells in the Marcellus region. As a trust, it is obligated to pass the bulk of its income along to its shareholders. It's an income play with some pretty impressive growth potential.

Action to Take-- > It's important to remember investing in petroleum and gas carries commodity risk, a type of downside that is absent from many stocks. If you're not comfortable with commodity risk, these aren't the investments for you.

But for those who can stomach the risk and the other ups and downs that come with the energy patch, the Marcellus region offers investors a plethora of possibilities. And with the general consensus that our nation now has as much as natural gas as Saudi Arabia has oil, this opportunity may be too big to miss.

[ Note: In a recent issue of Game-Changing Stocks I listed a half-dozen other companies in prime position to benefit from this game-changing breakthrough. If you're not already a subscriber, you can visit this link to watch a presentation detailing the type of opportunities you'll find within this advisory.]

--Andy Obermueller

Disclosure: Neither Andy Obermueller nor StreetAuthority, LLC hold positions in any securities mentioned in this article.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.