Thanks A Lot Exxon Mobil; Oil Spill Devastates Yellowstone River Ecosystem

The governor of Montana, Brian Schweitzer, was on Rachael Maddow's show on MSNBC last night to discuss the effects of Exxon Mobil's XOM oil spill in the Yellowstone River. The spill occurred over the weekend and has contaminated water supplies and ranch lands along a scenic and pristine stretch of the river in Montana. Whatever you may think of Maddow's partisan rhetoric, where nearly any and every story is a great opportunity to twist facts and add acrimony to the political process, it was clear that her guest was not very happy with Exxon - a company that already has a sketchy environmental record. The governor said that he believes that the company has been dishonest about the facts of the spill and the attendant consequences and he also seemed to be more than a little aggravated about the speed of Exxon's response. Maddow also made a valid point in discussing the technological level of Exxon's response to the spill. Despite the fact that Exxon is one of the most profitable enterprises ever to exist on the planet earth, the scope of the company's technology to clean up its messes is lacking. Pictures from the spill area show that the primary technology used to clean up the oil are absorbent booms and absorbent pads, which are no more complicated than they sound. Essentially, the absorbent booms are just devices that resemble white fire hoses which are placed across the river in order to soak oil into its fabric. The absorbent pads are literally tantamount to paper towels. The pictures of the cleanup effort would be quite comical if it weren't for the severity of the situation and the consequences this spill is having on the people of Montana living along that stretch of the river. Furthermore, you can be sure that the ecosystem in the effected area will be significantly altered for the foreseeable future. The company's pipeline ruptured on Friday night around 150 miles downstream from Yellowstone National Park near the town of Laurel, Montana, southwest of Billings. Current estimates are that around 42,000 gallons of crude oil have been dumped into the river and surrounding area. A number of people have been reported to have been hospitalized due to toxic fumes which are apparently overwhelming the affected areas. Rancher Jerry Williams told the media that high water from the river washed oil across most of his 800 acre property. Mr Williams told Reuters: "It was the night the river peaked, so the river water was flooded all over the place, and that brought oil all over both ranches. All of our grasslands... have just thick, black crude stuck to all the grass, trees, low lands." According to Williams, drinking water supplies are also in limbo. 'We get all our drinking water from our wells and for our animals. We don't know if we'll be able to use them since the river was high. All the groundwater, I assume, is probably contaminated. We just don't know." Preliminary speculation suggests that the reason for the ruptured pipeline is damage from unusually heavy river flows. In fact, Exxon shut down the pipeline in May after the city of Laurel raised safety concerns due to the rapidly rising level of the river. The company, however, restarted the pipeline after reviewing its safety record and conducting an inspection. Given the preliminary facts, it appears that this spill may be due, at least in part, to reckless or incomplete safety procedures by Exxon. Where have we heard this story before? ACTION ITEMS:

Bullish:
If you believe that this entire situation has been blown out of proportion already, and that it is only a slight bump in the road for the company, Exxon XOM has been a great investment over almost any timeframe.

• The stock is up 41% over the last year.

• Exxon offers a 2.31% dividend yield at current levels.

• Over the last 5 years, Exxon has literally been the most profitable corporation in the history of mankind.

Bearish:
If you believe that the company's environmental record is a weak point and another disaster could strike imminently, similar to what happened to BP, consider shorting the stock.

• Shorts in BP made a boatload of money as the Gulf spill got worse day after day after day.

• XOM shares have already fallen slightly as a result of this spill. There could be more to come.

• On a longer term perspective, investors could bet against companies that have had recent environmental issues, such as Exxon and BP, while buying the stocks of other integrated oil majors such as ConnocoPhillips COP, Chevron Corp. CVX, and Royal Dutch Shell RDS.

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