More Opposition for Oil and Gas Drillers

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 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 (NYSE: 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 (NYSE: CHK  ) , EQT (NYSE: 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 (NYSE: KOG  ) , Petroleum Development (Nasdaq: PETD  ) , and Double Eagle Petroleum (Nasdaq: DBLE  ) 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.

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Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

The Motley Fool owns shares of Range Resources and Double Eagle Petroleum. Motley Fool newsletter services have recommended buying shares of Range Resources and Chesapeake Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

 

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 14, 2011, at 9:11 AM, coler1 wrote:

    People, to be a "Energy Sufficient Nation” we need to get all our available energy resources from within the United States Boundaries. The attitude “Not in my back yard” or “They can get it somewhere else” is why we are dependent on our energy from countries that don’t like us and hold us “Hostage” with their oil. The scrutiny and the legalities of the Oil Companies in the USA have to be legitimate and careful about what they do here, even if an accident happens, like the one with Chesapeake Energy a while back, they will take care of it and the people, the point is we need to make some sacrifices to drive towards being an “Energy Sufficient Nation”. I know if was in my backyard, I would say “Drill, Drill, Drill”.

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