Vermont Bans Fracking: Will Other States Follow?

 |  Includes: UNG
by: Jason Cimpl

With one swift motion from Governor Peter Shumlin’s pen, Vermont officially became the first state to institute a fracking ban.

Gov. Shumlin signed a bill this morning outlawing the practice of “fracking” – code for hydraulic fracturing, a technique used to extract natural gas from shale rock – in the Green Mountain State.

“This bill will ensure that we do not inject chemicals into groundwater in a desperate pursuit for energy,” Shumlin said. He called the science behind fracking “uncertain at best”, and encouraged other states to impose a similar fracking ban. The question is: Will they?

Even as someone who lives and works in the great state of Vermont, I’m under no illusion as to my home state’s importance – or lack thereof – in the natural gas world. Vermont is the second-smallest state by population and sixth-smallest in terms of area. Vermont doesn’t currently have any active natural gas drilling operations, and never has. This isn’t North Dakota.

So Vermont’s decision to ban fracking is no big loss for the natural-gas drilling industry. But if Gov. Shumlin’s wish comes true and other states do follow suit, then the natural-gas industry might not suddenly be so abundant.

It’s not out of the realm of possibility. A recent study by the U.S. Geological Survey links the escalating number of earthquakes in the Midwest to fracking. According to the study, the number of earthquakes in the middle part of the country -- where fracking is most prevalent – jumped nearly tripled last year. That revelation, plus some recent backlash over the amount of methane emissions fracking produced during fracking, have drawn the ire of the Environmental Protection Agency and led to some to question whether natural gas is really the “clean” alternative energy source it’s been billed as.

Natural gas is dirt cheap right now – close to all-time lows. That’s because there’s such an overwhelming surplus, with companies across the U.S. ramping up production thanks largely to new fracking technologies.

But if more states follow Vermont’s lead and start to ban fracking, production will eventually decline and prices will rise. That’s yet another reason to snatch up natural gas assets now, while the resource is still cheap.