More Opposition for Oil and Gas Drillers

Travis Hoium, The Motley Fool
Updated

Oil and gas developers in shale plays around the country may be getting a new challenge, and it isn't coming from the government regulators or environmentalists they usually complain about. Local communities are starting to form a backlash with a "not in my backyard" attitude toward drilling near their cities and towns. Part of the concern is over air and water quality, but what this really comes down to is whether or not drillers have the right to put holes in the ground anywhere they want.

Local communities are trying to use zoning restrictions to limit drilling in townships across Pennsylvania and West Virginia. Range Resources (NYS: RRC) CEO John Pinkerton said, "It's like having to have a different drivers license in every township." So the battle Range Resources, Chesapeake Energy (NYS: CHK) , EQT (NYS: EQT) , and others are having in various locales are probably headed for court.

It's another hurdle drillers have to face in expanding drilling throughout the U.S. But these battles will be focused on the more densely populated Marcellus shale area than other parts of the U.S.

East Coast problems
The Marcellus shale developers have to deal with problems on the East Coast that oil and gas developers in the Bakken shale play will never face. That has little to do with political or environmental pressure and more to do with the fact that almost no one lives in western North Dakota and eastern Montana. I grew up not far from the Bakken formation and believe me, it isn't a place for the faint of heart. Winter is long, the land is flat, and the wind can make the British Open look like a walk in the park.

And much of the Rocky Mountains are sparsely populated as well. So Kodiak Oil & Gas (NYS: KOG) , Petroleum Development Corporation (NAS: PETD) , and Double Eagle Petroleum have much easier local communities to deal with.

The courts will decide
For now, companies are trying to deal with local governments on their own, but this looks like a battle that will be decided in front of a judge. It isn't the kind of PR oil and gas companies need but it may be a necessary evil to expand drilling.

Interested in reading more about oil and gas developers? Add your favorites to My Watchlist and find all of our Foolish analysis on those stocks.

At the time thisarticle was published Fool contributorTravis Hoiumdoes not have a position in any company mentioned. You can follow Travis on Twitter at@FlushDrawFool, check out hispersonal stock holdingsor follow his CAPS picks atTMFFlushDraw.The Motley Fool owns shares of Range Resources and Double Eagle Petroleum.Motley Fool newsletter serviceshave recommended buying shares of Range Resources and Chesapeake Energy. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Advertisement