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Natgas In These 4 Places Just Became Worthless

Natgas In These 4 Places Just Became Worthless

Boulder, Fort Collins, and Lafayette municipalities in Colorado. As well as Oberlin, Ohio.

All of those cities passed moratoriums or outright bans on hydraulic fracking this week, by popular vote.

My headline is somewhat hyperbolic in this case. Of the four municipalities, only Fort Collins has any existing natural gas exploration. Moves in the other towns are largely symbolic.

But it's a symbolism worth keeping an eye on. As these four cases are symptomatic of a small but growing anti-fracking movement in the U.S.

Across the country, an estimated 100 municipalities have now passed bans or freezes on fracking. In most cases the legalities of such moves are questionable, given that state governments--not local ones--generally have the mandate to regulate oil and gas activity. Lawsuits have in fact been filed recently by the state of Colorado to overturn municipal fracking bans.

Related article: Iran-Pakistan Natural Gas Pipeline Stumbles on Financing

But whether motions like those above stick or not, investors need to be aware that the sentiment is there. Legal experts for the oil industry in Denver have said that local actions like these could spur a state-wide ballot initiative on fracking in 2014.

Such developments represent one of the major "x-factors" for the U.S. petroleum sector today. Widespread frack bans may be unlikely (although blanket freezes in places like New York state demonstrate the potential scope). But given the devastating impact they would have on the oil and gas sector, it's important to be watchful on this front.

It's certainly not a given that all Americans oppose fracking. In fact, one town in Colorado and two others in Ohio voted down proposed frack bans this week.

But we all know that politics can drive a lot of change--with or without good logic to back it up. In our mental models on petroleum investing, this is a factor we need to be slotting in somewhere.

Here's to being ready for the unlikely,

By. Dave Forest




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