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Royal Dutch Shell plc (ADR) (RDS.A), Chevron Corporation (CVX), CONSOL Energy Inc. (CNX): Could Pennsylvania’s Approach to Fracking Affect Your Energy Stocks?

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While much of the nation’s attention seems to be focused on the fracking moratorium in New York state, investors would be wise to keep an eye on what’s happening right next door. Pennsylvania has run the gamut — at times being staunchly anti-fracking, at times taking a more nuanced view that provides enough wiggle room to satisfy energy companies, environmentalists, and citizens.

The opposition

In June, Democrats in Pennsylvania drafted a resolution calling for a fracking moratorium in the state. While Republicans didn’t enter the fray, they didn’t have to, as splits within the Democratic caucus became heated.

Royal Dutch Shell plc (ADR) (NYSE:RDS-A)

In essence, representatives from the state’s western and southern communities — where the Marcellus and Utica shales are located — were pitted against those from the eastern side of the state, where there is less economic gain to be realized from fracking. The opposition was coming not from those in the shale-rich plays, but those outside of it.

In fact, two separate groups of Democrats from the former group got together to write letters saying the call for a moratorium were “short sighted” and “dumbfounded”.

A middle ground
With Republicans likely in favor of maintaining fracking within the state, and Democrats split on the issue, the moratorium isn’t likely to be passed any time soon. In fact, a more productive solution seems to be taking place, one that joins environmentalists with energy companies to find common ground.

In March, a new program was announced that would form a 12-person advisory board consisting of four industry officials, four environmental officials, and four independent members. As USA Today reported, the board would set standards on “emissions of methane … flaringgroundwater monitoring and protection; improved well designs; stricter wastewater disposal; the use of less toxic fracking fluids; and seismic monitoring before drilling begins.”

The environmental seats would likely include officials from the Environmental Defense Fund, Clean Air Task Force, and the Pennsylvania Environmental Council. For the energy industry, Royal Dutch Shell plc (ADR) (NYSE:RDS.A), Chevron Corporation (NYSE:CVX), CONSOL Energy Inc. (NYSE:CNXand EQT Corporation (NYSE:EQTwere all involved in the formation of the group. All four companies have a considerable presence in the Marcellus and Utica shale states of Pennsylvania, Ohio, and West Virginia.

Preliminary results from state study
One of the key pieces of information the new advisory board will consider is the result from the Southwest Pennsylvania Environmental Health Project’s recent report. The group studied cases where individuals reported ailments that were not caused by underlying conditions, and started only after the commencement of drilling operations in nearby locations.

The group’s findings were somewhat surprising. Instead of pointing a finger at possible water contamination because of the fracking process, the report said that air pollution caused by processing stations that connect to large, national pipelines were of greater concern.

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