This from David:

A few weeks ago, during a particularly bad cold snap, we had a pipe freeze underneath our 200-year-old farmhouse, causing us to go without water for a few days. I eventually managed to unfreeze the pipe, but there was no question it was disruptive for a busy household of four.

Here in the United States, we don’t realize how much we take our fresh water supply for granted, until it’s suddenly cut off. We’re used to turning on the faucet and there it is.

But for the folks in California, 2009 is shaping up to be a big fresh water disaster in the making. Last Thursday, state water officials reported that the snow pack in the Sierra Nevada Mountains is only 61% of what is considered normal for this time of year.

An with only eight weeks left in the rainy season, significant rain and snow is needed for the next two months in order to divert a disaster.

That’s on top of back-to-back dry years in 2007 and 2008. The situation is so bleak, officials may be forced to ration water on a statewide basis for the first time since the 1990s.

Lester Snow, the Director of California’s Department of Water Resources, put the situation in perspective: “We may be at the start of the worst California drought in modern history. It’s imperative for Californians to conserve water immediately – at home and in their businesses.”

The fallout has already hurt the wild salmon population, and if the drought continues, it will get even worse. Farmers, who use 80% of California’s water for irrigation, will have to cutback on the number of acres they plant. That will have a devastating impact, as agriculture is one of the most important sectors of California’s economy.

Fresh Water: The New Oil

Fresh water has been talked about as the “new oil,” but it’s far more important. The human race can survive without crude oil, but not without water. We can’t live more than a week without it.

And for that reason – unlike oil – it is completely immune to demand destruction. We need a pint a day, on average, to maintain a healthy existence. If you include the amount used to produce our food, the number jumps to nearly 1,000 gallons per day per person, and even more in countries whose citizens eat a lot of meat.

The main problem with oil is finding more of it. With water, it’s the distribution system that’s the issue, as it primarily flows through pipes. Many were installed when Edison was fooling around with electricity.

While California has its own set of special problems when it comes to water and its distribution, the problem is monumental nationwide:

• 650,000 miles of antique water pipes are in need of repair or replacement.
• Nearly 30% of the water infrastructure in New York City – and most other big metropolitan areas in the east – dates back to when Lincoln was president.
• Many of the nation’s water purification facilities are more than 50 years old, and completely outdated.

But don’t think the United States is alone in this dilemma. China has lots of water, but much of it is polluted or untreated. Roughly 300 million of its 1.3 billion people don’t have access to clean drinking water out of the tap.

China is spending tens of billions of dollars annually to try to fix the problem.

2 Ways to Play the Coming Water Boom

While the recession has consumers hunkering down – and cutting back their purchases of computers, cell phones, toys and other discretionary items – it hasn’t decreased their demand for clean, fresh water.

And one of the biggest companies in the world that’s able to provide the infrastructure to deliver it is Veolia Environment (NYSE: VE). It provides bumper-to-bumper environmental management services for both water and wastewater.

Whether it’s supplying clean water, recycling wastewater, or developing waste conservation systems, Veolia has a solution.

In China, it’s operating freshwater plants, wastewater decontamination and recycling plants and sewerage treatment facilities.

And now you can add some shares to your portfolio at more than a 75% discount to what they were trading a year ago. Veolia currently trades with a P/E of 8.8 and sports an 8.1% dividend yield.

A different, but no less lucrative, way to invest in water stocks is the Calgon Carbon Corporation (NYSE: CCC). Calgon is a manufacturer of activated carbon granules, a material that’s essential in many of the world’s water purification systems and over 700 other liquid purification and odor control applications.

Carbon granules remove impurities from water, air and many industrial processes.

And business is booming for Calgon:

• The company’s shares are up over 200% since September 2006, and worldwide demand is continually increasing for its products.
• Sales in 2008 were $351 million, with roughly 62% of that coming from the Americas, and only 7% coming from Asia.

Clearly the opportunities for the company are enormous. This past year, the company signed a contract with the Jiaxing Jiayuan Water Company to provide 1.1 million pounds of carbon granules for water purification.

James Fishburn, Calgon Senior Vice President, commented on the significance of the order: “Over the last 40 years, Calgon Carbon has supplied millions of pounds of activated carbon to municipalities all over the world, and we are committed to serving the rapidly growing markets in China.”

In summary, both companies mentioned above are addressing a market that will be rapidly expanding for the foreseeable future. Fresh water is clearly the new oil. And now’s a great time to make it part of your infrastructure and energy portfolio.

Source: Fresh Water: California Drought Reveals the “New Oil”

The farms are well tended, and the agricultural productivity is awe inspiring. There are wind farms up, and going up, on many a hillside. Power lines crisscross the landscape. There are dams and impoundments on many of the rivers. And the trains of the Canadian Pacific Railway are rolling in both directions, hauling grain, ag products, coal, phosphate and so much else.

North Dakota Oil Rush

In Saskatchewan and North Dakota, the big story is the Bakken Shale formation. I’ve seen over a dozen working rigs and dozens of brand-new oil wells. The pump jacks are still in the break-in period. Heck, the paint on some of them is still drying.

[Stories like this are also popping up.]

It’s a mixture of old and new. There are old farm buildings, and all of the traditional agricultural effort of the region. Right next to the buildings, you might see a new oil well. And in the distance, there might be a wind farm going up.

The highways are crowded with working trucks. Trucks are hauling pipe and equipment to well sites. The motels are crowded with oil field workers. In some small towns, real estate prices and rents are actually rising. People around here have seen nothing like it in many years.

Or if the trucks are not hauling drilling equipment, they are hauling agricultural products. Or there is farm equipment driving down the roads from one area to another. It’s all just plain busy.

At the customs station at Noonan, N.D., the U.S. agent told me that the traffic in energy-related commerce is just burning up the roads in both directions. There are simply not enough skilled workers. Some companies are poaching staff from others.

At the same time, I can almost feel the slowdown that is afflicting the North American energy sector. Costs for everything have risen too far, too fast. Now the whole sector is starting to feel the pinch.

Couple the rising costs with a serious difficulty in obtaining financing. The banks have cut back on lending, even to the best of energy projects. It’s not for lack of investment merit of the energy projects. It’s because the banks are struggling with their own solvency.

So the mess in the financial sector has infected the rest of the economy. Just when the U.S. and Canada need to be investing in energy projects, the financial system is letting us down.

It reminds me of what I heard from an old rancher a long time ago: “Out here in the prairies, we farmers work hard and raise the cows. Back East on Wall Street, they milk us farmers.”

I’ll be out in the field for the next few days, looking at other points of energy and geological interest. All of this travel helps my perspective in coming up with better advice for you, dear reader.

Until we meet again…

Byron W. King

Source: North Dakota Oil Is “Burning Up The Roads”

Indonesia no longer has the ”E” to stay in OPEC (Organization of Petroleum Exporting Countries). It had been a net importer of oil since 2004.

Casey Research’s Energy Division attended the recent oil and gas show in Jakarta, and it’s plain to see where the new oil demand is coming from. Greater Jakarta, Indonesia’s capital, hosts 23 million people, and while ten years ago the majority of them rode bicycles, now nearly everyone has a new 2-stroke Honda motorbike. Those who were riding motorbikes are now driving cars. (And those who were driving cars have moved to Australia to escape the smog.) In this light, it’s not surprising that Indonesia’s oil consumption has more than doubled since 1990.

As to their slumping oil production, it is no doubt partially due to a lack of reinvestment. Foreign oil companies are tired of paying 85% of their revenue into government coffers, and are looking to areas of the world where the fiscal regime is not as severe.

The main problem, however, is an extremely common one. Indonesia has exploited its fattest hydrocarbon targets, and the remaining exploration sites cannot make up for the decline from its existing oil fields. There’s certainly plenty of oil left to be found in Indonesia’s archipelago, but it’s equally certain that they’ll never regain their peak production rates of 1.6 million barrels per day.

Source: Indonesia Says ‘Goodbye OPEC, Hello Peak Oil’

Not only is he forecasting higher and higher prices for black gold, but he’s also putting money into new oil companies.

According to the 13F Disbursement Plan, Pickens just bought Sandridge Energy Inc. (SD:NYSE) in the first quarter of 2008. It just went public in late 2007.

So far, it’s been on a solid run, returning an 83% gain in only four months. But it’s still cheaper than the major oil companies like BP and Exxon Mobil.

Sandridge is based in Oklahoma. It looks for natural gas and oil reserves in Texas and drills for other companies. It also provides CO2 to third-party oil recovery projects.

After an initial buy in the first quarter of 2008, I anticipate Pickens buying more and more of this oil company at its still low price of $55 per share. The safest way to invest in oil is to follow Pickens’ picks… especially since this expert says oil is going to $150, far from its current level near $130 per barrel.

Ann Sosnowski

Editor, Safe Haven Investor

U.S. Government Unlocks $35 Billion in “Free Money” Payouts to American Citizens!

The “13F Disbursement Plan” offers you a fantastic wealth-building opportunity with very little risk. It’s safe, simple and, best of all, generates lots of income.

Read on and learn how you can get your share of “free money”…

Source: Follow T. Boone’s Oil Pickings!

–The Fed is trying to soften the blow of falling asset prices by making it possible for homeowners to refinance into longer-term loans at lower rates, and then ride out the bear market in housing and credit. In other words, the Fed has kicked the dollar to the curb. It’s on its own now.

–That doesn’t mean the dollar won’t really from time to time. As a proxy for economic growth, there will be times in the coming years, let’s call them false dawns, where the U.S. economy appears to be emerging from the slump, or is at least growing faster than Europe’s sluggish economy. But the long-term trend for the dollar index is lower highs and lower lows. For gold and oil, it’s just the opposite, higher highs and higher lows.

–Speaking of highs and lows, our friend Dr. Joanne Nova at GoldNerds.com read our note yesterday about the challenges of deep-water drilling. But drilling deep is a challenge anywhere, even on land.

–”Here’s another perspective on the difficulty of drilling Brazil’s new oil field a full 10km below the surface,” Joanne writes. “Did you know the deepest hole ever dug reached down to 12km, but it took 19 years to get there? The Soviets started planning the Kola Superdeep Borehole in 1962 and began drilling in 1970 reaching the record depth in 1989.

–”They initially aimed to reach 15km, but were forced to give up a few years after they set the record. Things were too hot, too strange, and too expensive. And this was not a hole designed to produce anything except interesting scientific papers. Twelve kilometers down, the rocks were under so much heat and pressure they behaved more like plastic than rock. The hole apparently kept flowing closed whenever they had to replace a drill bit. Makes production hard if the hole keeps disappearing.”

–Yes it does.

–Incidentally, Australia’s deepest on-shore drilling effort doesn’t have anything to do with oil, gas, or mining. It is energy related though. Geothermal hopeful Geodynamics (ASX:GDY) finished drilling its Habanero 3 well in early February to a depth of 4,221 metres.

–Even if you don’t get all the way through the Earth’s crust at that depth, it’s still pretty hot down there, which is the whole point. Geodynamics hopes to be operating Australia’s first commercial geothermal electric generating plant by the end of this year, with a capacity of 50 megawatts per year.

–We know a bit about the project and the share because we tipped it in the Australian Small Cap Investigator. The credit crunch has not been kind to small-cap stocks in general or alternative energy stocks in particular. But if you look at these stocks in terms of their ability to generate future earnings, there is a lot to like. The assets should produce growing cash flows, and who doesn’t like that?

–We showed a chart a few weeks ago demonstrating that GDP growth and electricity are pretty well correlated. A growing economy needs its energy doesn’t it? Australia’s economy is growing and so are its energy needs.

–Perhaps that’s why Citigroup reckons Origin Energy (ASX:ORG) will grow its earnings by 16% a year for the next five years, according to Rebecca Keenan at Bloomberg. And perhaps that’s why Britain’s BG Group Plc. offered to buy Origin for $12.9 billion. That represented a 40% premium on yesterday’s closing share price of $10.47. Proving that markets can sometimes be pretty darn efficient, Origin is up 37% in early trading.

–As a trade, we might even consider shorting or buying puts. After all, Origin hasn’t accepted the bid yet. But our interest isn’t in trading these events, it’s in anticipating them. BG’s bid is based on asset quality and earnings growth. It’s a stock picking story, not a China narrative, although the two are related. Take iron ore.

–”Right now, I think this is the best stock picker’s market in resources that we’ve seen for quite some time,” says fund manager James Bruce in today’s Financial Review. He could not be more right.

–He was referring to today’s breaking news that China’s first-ever hostile takeover of an Australian company-Sinosteel’s $1.37 billion bid for Midwest (ASX:MIS)-looks like it will go through. Midwest is in a trading halt this morning, suggesting an announcement could be forthcoming.

–Sinosteel raised its bid for Midwest from $5.60 a share to $6.38 a share. This seemed to please the board of Midwest, which had been holding out for $7 a share. It probably doesn’t hurt that, as Michael Vaughan reports in today’s Financial Review, Sinosteel agreed to support the issue of 15 million options to two Midwest directors.

–The exercise price on the options is $1.46. With the bid at $6.38, that means those 15 million options are worth about $73.8 million. That’s a nice pay day, if you can get it. We’ve always said that owning your own business is the only real way to get wealthy.

–”China was busy last night,” writes Diggers and Drillers editor Al Robinson. “It closed the net around one little iron miner, and took stakes in a couple of others. It looks like Chinese steel mills are focusing on the leaders in the second tier of iron companies. By that, we mean the companies outside of BHP, Rio Tinto and Fortescue who have the best-developed assets.

–The “other” company which Sinosteel appears to have set its sights on is Murchison Metals (ASX:MMX). Al has more details over at Money Morning. The entire mid West region of Western Australia is ripe for this sort of Sino-Japanese financing and takeover. The ore in the region is a little lower quality than the famous hematite of the Pilbara. The infrastructure doesn’t exist yet, either, to move that ore from mine to port and on to points North.

–On that score, keep your eyes on May 9th . That’s the deadline for proposals to be submitted to the WA government for building out the iron ore infrastructure in the mid West. There are two major proposals, one backed by China and one essentially backed by Japan.

–In the meantime, if you want to catch up on who the junior producers are in the mid West, you may want to introduce yourself to the Geraldton Iron Ore Alliance. Don’t be shy. She’s friendly.

–There are seven firms in the alliance. Mount Gibson (ASX:MGX), MidWest (ASX:MIS), Gindalbie (ASX:GBG), Murchison (ASX:MMX), GoldenWest Resources (ASX:GWR), Royal Resources (ASX:ROY), Asia Iron Holdings (not listed), and Atlas Iron Limited (ASX:AGO).

–Who will win? This is where we reach the limits of the free security analysis we provide in the DR. The heavy lifting and deeper digging goes on at Diggers and Drillers. We will tell you that valuing the companies comes down to looking at the quality of their assets and their ability to finance projects without a lot of debt.

–Better hurry, though. “The Chinese invasion of corporate Australia is continuing apace with Chinese Iron and Steel Group announcing plans to lift its stake in outback prospector Apollo Minerals to 19.9pc, just short of the 20pc level that would require it to mount a full takeover under Australian law,” according to David Litterick in Britain’s Telegraph.