You Don't Have to Be a Tree Hugger to Consider These Environment Plays

The environment isn't the hot-button issue it once was. But that doesn't mean the problems have been solved. Consider:

North America produces about 300 million used tires every year. The current stockpile exceeds 900 million, and right now there's no clean, economic way to get rid of them. They're expensive to recycle, dirty to burn and they don't compost.

North American hospitals produce about four pounds of hazardous waste per bed per day. That's nearly 2 million tons a year, much of it too toxic for landfills. But incinerating it is costly, dirty and, increasingly, unpopular.

The military has huge stockpiles of aging chemical weapons and other lethal things that can't be disposed of safely with current technologies.

There is, in short, one hell of an opportunity for whoever comes up with a clean, cheap way to get rid of this stuff. And while a lot of emerging companies are trying, only two (as far as I can tell) have a real shot at the brass ring. I'm long both of them, so let's be clear about the risks: To live up to their potential, these guys have to convince a skeptical world to buy big, expensive, commercially unproven systems. History says the odds are against them. So while their stories are fascinating, their stocks belong in only the most aggressive portfolios. See what you think:

EWMC International

EWMC International has a system called reverse polymerization that involves flooding a nitrogen-atmosphere chamber with microwave energy. Instead of hazardous waste burning, as it would if exposed to oxygen, it is heated to the point that its molecular bonds break down into non-hazardous carbon residue, which can either be sold or dumped into regular landfills.

The company built pilot plants for tires and medical waste a few years back, both of which, by all accounts, live up to their promise. But management couldn't sell a full-scale model, and as the company slid toward insolvency, it brought in a new CEO, veteran utility executive Robert Bryniak. He created some financial breathing room by renegotiating debt and selling stock while marketing the technology around the world. This has begun to pay off, with an order for a medical waste plant from an Irish firm in December and several serious nibbles that might turn into orders by summer.

Right now, EWMC is targeting scrap tires and medical waste. But reverse polymerization theoretically works on all kinds of other things, including pesticides, chemicals and human cremation (which is going to be huge, as the world runs out of land for cemeteries). The company has a patent covering the whole spectrum of applications, and is in discussions with possible partners for commercializing them.

Other things to note about EWMC:

• The board includes some heavyweights, including John Fox (a member of President Bush's Commission on Environmental Quality and managing director of Perseus, a Washington/New York investment company) and Emanuel Gerard (chairman of Manhattan investment bank Gerard Klauer Mattison). Gerard owns 7% of EWMC's stock.

• Despite the financial troubles of the past few years, most of the original people -- including the scientists who developed the technology -- are still there.

• Insiders are buying stock on the open market.

• Sunny Jain and Dan Behroozi, money managers who have appeared in this column before and who have a Midas touch with Canadian stocks, have been following this company closely and think it has a good chance of succeeding.

Because EWMC trades on the Canadian Dealers Exchange, you have to go through a Canadian stock quote service to find it. Try www.stockhouse.com (where the ticker is O.EWMI), which also features EWMC's only message board.

Startech

Even hotter -- literally and maybe figuratively -- is Startech (STHK Quote), whose Plasma Waste Converter, or PWC, runs electrical current through a chamber filled with conductive gas. Stars are made of plasma, as is lightning, giving an idea of the heat that's generated inside one of these machines.

Startech claims to be able to convert just about anything -- medical waste, scrap tires, chemical weapons, old land mines -- into its molecular components, reducing its volume by more than 99% and producing several marketable byproducts.

The most interesting of these is a gas that, via the system's patented StarCell membrane, can be converted to hydrogen. So as fuel cells start to replace internal combustion engines in cars and elsewhere, this technology might (and I stress the might) become a supplier to the hydrogen economy. Management even speculates that the PWC/StarCell combination can be used to mine landfills, converting previously buried trash to hydrogen.

Before you laugh this one off, note that the U.S. military recently tested a PWC unit for eliminating chemical weapons, and it passed with flying colors. The Taiwanese equivalent of the Defense Advanced Research Projects Agency gave Startech its stamp of approval for munitions disposal.

Orders for three PWC units (complete with down payments) have come in, and Startech is now building a total of five plants, three for the current orders, two for deals now being negotiated. By this time next year the company projects that a minimum of three plants will be up and running.

For both companies, the key is new orders. If either fails to generate at least one big order by June, then dump them (I know I will). On the other hand, if the plants work as advertised, and companies start buying them, get ready for an interesting few years -- and a lot of bad puns about cleaning up.