A prominent financial management firm is opening an oil sands ETF -- and soon.

Canadian oil sand stocks aren’t exactly a state secret, so why are investors likely to be lining up waving their checkbooks to get in first?

The U.S. Energy Information Administration is certainly high on Canadian oil sands. The agency estimates that oil sands production in the Great White North will hit 5.0 million barrels per day in 2035.

According to Dublin, Ireland-based Research and Markets, Canada has the third-largest oil reserves in the world, with 97% of that oil in the form of oil sands.

Of course, that’s not to say that Canadian oil sands are a portfolio grand slam. In fact a lot can go wrong before even a little can go right.

This from Research and Markets:

“The country has witnessed an increase in oil production capacity from its oil sands resources over the past few years. The development of Canada's oil sands resources provides various economic advantages for the country as well as its key export market-- the U.S. However, oil sands development faces challenges due to concerns raised by environmentalist groups about heavy water usage and Greenhouse Gas (GHG) emissions. Concerns have also been raised over the proposed route for a pipeline project, Keystone XL, which will transport oil from the oil sands region to the US Gulf Coast. The project is currently on hold to check for possible alternate routes for the pipeline.”

Ultimately, the analytical firm is bullish on oil sands:

“Considering the potential economic benefits for the U.S. and Canada in terms of crude oil trade, tax revenues, employment generation, and its effect on allied industrial sectors, it seems that the economics of oil sands development outweigh the environmental concerns raised by various groups.”

Other analysts see Canada’s vast oil sands with a wider, historical lens. Chris Lee, a principal analyst at Deloitte, Canada, says that the “debate” about Canada’s oil sands and its “future direction” should not dissuade investors from dipping their toes in the oil sands pool.

“The opportunity at hand is considerable,” says Lee. “Canada is poised to forge a global leadership role in sustainable hydrocarbon resource development, much the way Germany has in the renewable energy research and development (R&D) and manufacturing sectors.”

Lee says that oil sands, as an industry, has reached a critical stage of its growth, and has to adjust, adapt and overcome if the sector is to hit critical commercial mass:

“We see 2012 as bringing into sharp relief the need for producers to adopt entirely new approaches to recruiting, managing and retaining skilled people across the sector,” he says. “While some gains in the area of workforce management have been made, the old ways of doing things are by necessity coming to a close in 2012.”

He says 2012 should see an oil sands industry that will “flesh out” new practices that should make it more commercially viable, and pump up the share prices of sector companies. He points to critical areas like “cutting waste from the system, realizing better collaboration in a number of key areas and creating and managing public perception of the industry.”

With analysts lining up to tout the potential of Canada’s oil sands, it was only a matter of time before some enterprising financial services company rolled out a new oil sands ETF – and that’s happening now.

That rollout is coming from two financial services firms – Sustainable Wealth Management and Exchange Traded Concepts (which would act as the actual fund advisor) -- that have jointly filed the necessary paperwork with the U.S. Securities and Exchange Commission. The proposed ETF would be called the Sustainable North American Oil Sands ETF and will trade under the ticker symbol SNDS, once it clears regulatory hurdles.

By and large, the fund would track the Sustainable North American Oil Sands Index, a benchmark of U.S. and Canadian linked directly or at least indirectly to the oil sands sector.

According to the SEC filing, the ETF would aim for oil sands company investments with market capitalizations of at least $3 billion, and would include oil sands firms from the exploration, production, refinery, storage, marketing, transportation, and equipment and servicing sections of the oil sands industry.

The filing does note the risk of legal claims from environmentalist groups that could threaten the financial health of oil sands companies that could be included in the fund. “These companies may be at risk for environmental damage claims,” the filing says, a clear warning shot across the bow for any risk-averse investor.

The two investment companies say the oil sands ETF should hold between 25 and 40 stocks, and will be listed on both U.S. and Canadian stock exchanges.

The actual Sustainable Oil Sands Index only holds 18 companies, with an average weighting of 5.56%. There’s no word yet on what stocks the new ETF will hold, but good candidates include Exxon Mobil, Chevron, Suncor Energy and Conoco Phillips, along with smaller companies focused on oil sands such as Baytex Energy, Nexen, and Canadian Natural Resources.

The new fund may face some stiff competition from a fund that dabbles in some of the same territory--the Guggenheim Canadian Energy Income ETF. That fund, which is trading at $17.90 per share, and has about $114 million in assets. Also, it’s a good performer – it’s returned $20.94% in the past three years.

Suncor and Baytex are two of the 10 stocks that comprise the Guggenheim ETF.

Surely, the new oil sands ETF will get more vertical than the Guggenheim offering, but it’s only a matter of time -- and some serious tire-kicking -- before investors who see the oil sands market as a big cash cow get their heads out of the sand and jump into the ETF with both feet.

Time will tell if it’s a happy landing.