Mario Gabelli's Natural Gas Play—Water Treatment

Mario Gabelli said all roads lead to natural gas development, but he's looking beyond the energy drilling itself—and digging into water-treatment companies.

Why water? The chairman of Gamco Investors told CNBC Tuesday that someone has to clean up the contaminated water resulting from hydraulic fracturing, or fracking, in which chemical-laced water and sand are blasted underground to break apart rock and release natural gas.

"How do we take the bad out of fracking? How do you contain the water? How do we make a profit out of that? Get there early," he said. He did not name specific companies.

"When you take the water out, where do you put it? You use a fracking tank. You build a pond and have a liner under the pond," he said.

"How do you clean the water up? Even if it doesn’t need to [be cleaned], you should go through the process of cleaning because the industry needs to have a cosmetic play here."

If the U.S. wants to cut its dependency on foreign oil and create an internal source of energy, it must turn to natural gas, Gabelli said. "We need the project Sputnick, we need the Manhattan Project of our time, and we have to do it now."

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Disclosure information was not available for Mario Gabelli or his company.