Royal Dutch Shell plc (ADR) (RDS.A), ConocoPhillips (COP), Concho Resources Inc. (CXO): Could This Tiny New Mexico County Rewrite Fracking Rules?

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Along New Mexico’s southeastern border sits the Permian Basin, a shale play rich in oil and natural gas. There’s nothing particularly distinct about New Mexico’s approach to fracking —the somewhat controversial practice which is making these resources available for the first time.

But earlier this year, Mora County—population 4,700 —became the first in the country  to ban fracking in any form.

Source: Flickr/Mike Tungate

The county, which is entirely rural and somewhat poor, relies entirely upon personal wells for drinking water and to feed cattle. Instead of embracing the potential for huge paydays and a more robust tax base, residents decided to shut the door on landmen they considered exploitative, and continuing their quiet way of life with aquifers unaffected by fracking.

Who’s in charge?
One of the biggest issues when it comes to fracking is who makes the rules. The federal government is expected to come out with rules in early 2014 that set standards for chemical disclosure, well integrity, and acceptable disposal methods for fracking wastewater for wells on public lands.

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

Already, several states—led by Texas  and North Dakota —are opposing federal government intrusion, saying that state laws are more than sufficient and further regulation will only slow economic development. But now, several municipalities are challenging state laws or simply implementing their own laws.

New Mexico has no ban on fracking, and many observers wondered aloud if Mora County could ever afford a legal fight should an energy company bring one against the municipality. But those worries were put to rest in July when the county announced that the New Mexico Environmental Law Center would be representing Mora County on a pro-bono basis should a suit be filed .

Eric Jantz, who would represent the county if need be, said that the key to the county’s decision is to assert the legality of community rights. His group claims that, “Community rights is a paradigm shift, a move away from unsustainable projects and practices at the cost of communities and nature, and toward community decision-making, while recognizing and protecting our interdependence with nature.”

What could this mean for your investments
With regards to Mora County, the company most directly affected by the ban is Royal Dutch Shell plc (ADR) (NYSE:RDS.A), which has leased around 100,000 acres  in Mora County for drilling.

But should other communities—especially ones that rely heavily upon local sources of water for themselves and their cattle—decide to follow in Mora’s footsteps, it could represent a landmark fight in fracking that affects several companies.

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