Two Ways to Profit from New York's Uncertainty About Drilling for Natural Gas

New York City has a problem.

In addition to other hazards, the threat of another terrorist attack is an obvious, ongoing danger to one of the most populated cities in the world. But that’s not what I’m talking about here.

I’m highlighting a problem that most people wouldn’t even think of – but one so crucial, it could have a crippling effect on every single New Yorker. Drilling for natural gas. You see, these rig owners are about to start punching holes in the Marcellus Shale, high up in the Catskill Mountains in upstate New York.

So why would New York be concerned about drilling for natural gas over a hundred miles away? Simple..

New York’s Man-Made Water Problem

It’s where nearly half of New York City’s fresh water comes from.

The potential pollution problem stems from the toxins that come from tapping into the vast Marcellus Shale natural gas reserves and the possible contamination of water as a result. The process of drilling fluids means chemicals, dissolved heavy metals and salts are brought up from underground.

If these fluids found their way into New York City’s fresh water supply, it would only be a matter of hours before major portions of the city would shut down. And you can easily imagine the devastating economic and social consequences that would ensue.

That’s why drillers are forced to fight for permits. While they’re anxious to exploit New York’s acreage, the New York Department of Environmental Conservation (DEC) is mindful of the water pollution problems that Western Pennsylvania has experienced.

Western Pennsylvania has a long and well-documented history of groundwater pollution. Most of it stems from decades-old coalmines and oil wells and the acid mine drainage that emanates from them. However, some Pennsylvania landowners blame the new natural gas drilling operations as the source of the problem. And while no definitive conclusions have yet to be drawn yet, New York is wary.

Drilling for Natural Gas – Is Groundwater Pollution Possible?

Up to now, the DEC notes that there have been no known occurrences of groundwater pollution from drilling for natural gas in New York. And it wants to keep it that way.

So to ease New Yorkers’ fears, it proposed a 1,000-foot no-drill buffer zone around the city’s Catskill watershed. But that’s not good enough for the Big Apple.

New York wants the DEC to set a one-mile perimeter around the 2,000 square miles it covets. This buffer would put nearly 500,000 additional acres off limits to drilling for natural gas.

As usual, though, money is playing a big factor in the debate.

Proponents of tapping the Marcellus Shale are concerned that if the regulations get tied up in the legislature, or end up in the courts, natural gas drillers will move their rigs elsewhere.

And for a state whose budget crisis is right behind California’s, it would mean losing an estimated $1 billion in annual revenue.

Two Ways to Profit from the Uncertainty of Drilling for Natural Gas

Despite the uncertainty of drilling for natural gas in New York, we can still play this situation:

Range Resources Corporation (NYSE: RRC) and Chesapeake Energy (NYSE: CHK) are the two main natural gas drillers operating in Pennsylvania at the moment – and both have their sights set on New York State.

And to allay some of the perceived fears associated with their operations, they’re on a PR offensive.

• They’ve held dozens of town meetings, emphasizing the strict environmental controls they’re subject to, both during and after the drilling process, plus their efforts to meet them.
• They point out that chemicals are injected many thousands of feet below the water aquifers. When the drilling operation is complete, these chemicals are hauled away to sewage treatment facilities to be disposed of.

Ultimately, I believe New York will resolve these water issues and the potential pollution problems. And that regardless of the size of the Catskill watershed buffer, Marcellus Shale drilling will eventually proceed in the state.

Because they are in Pennsylvania, Range Resources and Chesapeake Energy will be two of the biggest players there. So if you want to play the development of the Marcellus Shale, you could consider a position in either or both.

Comments

[User 378002:]

People who speak out that hydrolic fracturing is going to potentially contaminate a state

Oct 28 12:02 PM

[User 378002:]

People who speak out that hydraulic fracturing is going to potentially contaminate a state's drinking water seem to be confused on it's track record. In 1988 hydraulic fracturing had been applied over a million times and today this technique is being used on average 35,000 times per year without one instance of a ground water source being polluted. This technology is not new but new innovations in how it can be used have put our country in a position to be not only the worlds larger consumer of clean natural gas but also a net exporter. With deficits (trade and budget) at all time highs we need to be manufacturing domestic goods and products not appeasing some environmental left winged Californian democrats that are running our countries legislature.

Oct 28 12:05 PM

[makeitsafe ...:]

You are wrong. Hydraulic fracturing has been around for decades, but it has also experienced hundreds of documented cases of ground/aquifer poisioning. The fact that so many are not documented (aka, lack "proof") is that the drilling companies were not required to disclose the chemicals they used in the fracking process. There

Oct 28 12:53 PM

[makeitsafe ...:]

You are wrong. Hydraulic fracturing has been around for decades, but it has also experienced hundreds of documented cases of ground/aquifer poisioning. The fact that so many are not documented (aka, lack "proof") is that the drilling companies were not required to disclose the chemicals they used in the fracking process. There's quite literally no way they can be held accountable if nobody can say for certain that fracking caused the pollution. However, this is about to change.
Now, you're referring to hydro-fracking having a solid, honorable history. However, HORIZONTAL hydro-fracking, a process developed by Halliburton, has only been around for the past 4 years or so. In fact, it was about the time that Dick Cheney had his closed-door meeting with the oil and gas industry and was able to get that industry inked into an exemption under the 2005 Safe Water Drinking Act. Don't you think it's odd? If Horiz. Hydro Fracking is so safe, why make it exempt? If it's so safe, why are there already hundreds upon hundreds of cases of alleged contamination?
This is not about protecting the environment. No, not at all. It's about protecting the lives of the American people, because even one innocent life being destroyed by unknowingly drinking this toxic sludge, is one too many.

Oct 28 12:53 PM

[apirri:]

David. Great article. Are you bullish on Nat Gas (UNG) or no? Thaoughts?

Oct 28 07:32 PM

[auto44:]

What facts do you have to offer?


On Oct 28 12:53 PM makeitsafe ornotatall wrote:

> You are wrong. Hydraulic fracturing has been around for decades,
> but it has also experienced hundreds of documented cases of ground/aquifer
> poisioning. The fact that so many are not documented (aka, lack "proof")
> is that the drilling companies were not required to disclose the
> chemicals they used in the fracking process. There

Oct 28 08:00 PM

[Mmarrkk:]

makeitsafe: you are a fool. the only difference between horizontal well frac'ing and the frac'ing that's been done for decades is that the well is laying horizontal. BTW, these wells are 6000 to 13000 feet below the surface and several thousand feet below any known fresh water aquifer. And the chemicals used are very similar to those found in your home today...Formula 409, Windex, etc. Do you ever, ever, ever, get Formula 409 in your sink or bath tub? Where does it go when you rinse it? Answer: into the fresh water supply! These chemicals are used in very very very low percentages (think less than 1%).

This is just another Greenie Weenie attempt at ruining American Industry.

And the difference between "alleged" and "proved" is a huge one! Anyone can "allege" that someone killed another person, but you gotta prove it! Many of the cases I've seen of "alleged" pollution of ground water by frac jobs are just crappola! The science doesn't back up the claim, and by science I mean simple things like physics, geometry, fluid dynamics.

Oct 29 08:14 AM