Dec. 28 is still more than two months away. Nevertheless, it's predictable that on that day, most of us will be enjoying holiday reverie, exchanging too-small socks that were gifted by loving Aunt Bessie, or catching early versions of the now-excessive number of bowl games.
It's a safe bet, however, that this year more than a few of us will be heading off to view a newly released Matt Damon film that just might add fuel to the ongoing battle about the perceived dangers from fracking. Apparently in the film, Damon plays an operative for a gas company whose function is to lease drilling rights from landowners in Pennsylvania.
At this point, nobody but those close to its production knows what sort of light the film will cast on hydraulic fracturing. What is known is that it'll be called Promised Land, that it was co-written by Damon -- an award-winning actor and writer -- and that it's being produced and distributed in a joint effort be a subsidiary of Comcast (NASDAQ: CMCSA) and Participant Media LLC. However, I must admit to a strong sense that the Hollywood film's theme won't involve resounding praise for the controversial oil and gas production technique.
A Fox in the gas house
You no doubt recall that in the spring of 2010, just as BP's (BP -0.40%) massive Gulf of Mexico explosion and oil spill had industry types and the general public ringing their hands, an HBO documentary, Gasland, was being viewed on TV sets across the country. The film, which was nominated for an Oscar last year, was written and directed by Josh Fox, a neophyte Pennsylvania-based documentary filmmaker. As the story goes, Fox had been offered $100,000 in lease money by an oil company that wanted to drill on his family's Marcellus shale land in Milanville, Penn.
The offer precipitated a research effort by Fox, who spent time with those who lived near fracking sites. Gasland ultimately emerged from that effort. It contained a plethora of tales of woe about contaminated surface or well water and chronic illnesses that were tied to the chemicals in fracking. Those with whom he spoke were located across a wide spectrum of states, including Colorado, Wyoming, Utah, Texas, and, of course, Pennsylvania.
Let there be light
The highlight of the film involved Mike Markham, a resident of Weld County, Colo. In one scene, Markham flicked a cigarette lighter at his kitchen sink, igniting gas in the water from his faucet. The presumption was that the presence of the high levels of gas was related to fracking. However, the Colorado Oil and Gas Information System noted in a report -- based on an investigation -- that the gas in Markham's water appeared to be biogenic in origin. Basically, biogenic gas occurs near the earth's surface, frequently near marshes. Thermogenic gas, however, of the type that would result from hydraulic fracturing, is the product of deeper heat and pressure.
It's not possible to state with certainty whether the vignettes in Fox's film were accurate vis-a-vis dangers from hydraulic fracturing. It's certainly possible for natural gas producers to sustain accidents at drilling sites, as Chesapeake Energy (CHKA.Q) did last year in Bradford County, Penn. Nevertheless, in June, an industry group, the Independent Petroleum Association of America, began running a documentary called Truthland, which contests many of the assertions in Gasland.
Fracking frenzy spreads
As time passes, fracking fighting is becoming progressively more contentious. In the U.S., a battle rages regarding the possibility that drilling by Canada's Encana (OVV 0.37%) was responsible for the contamination of groundwater at tiny Pavillion, Wyo. The company disputes Environmental Protection Agency findings, maintaining that, in arriving at them, the agency didn't drill wells appropriately. If, however, the findings remain, look for a new round of fracking regulations that will at least moderately shackle U.S. companies.
The Wall Street Journal weighed in on the EPA's ultimate objectives in the Wyoming skirmish late last year. In an editorial, the newspaper's editors said, "The agency is dominated by the anticarbon true believers, and the Obama Administration has waged a campaign to raise the price and limit production of fossil fuels." Could they also have been referring to the kibosh that's also been placed on the approval of Transcanada's (TRP 0.15%) proposed Keystone XL pipeline?
The effects on your energy investments
You're as capable as I am of positing the effects of tighter federal regulation -- or even the elimination -- of fracking. I'm willing to bet that your set of likely consequences would include, as mine does, significantly higher natural gas prices and a far rougher road toward energy independence for our country. Beyond that, it's difficult to conclude how a continued ratcheting up of EPA oversight and rules could result in benefit to such producers as Chesapeake and even ExxonMobil (XOM -2.50%), the nation's biggest gas producers.
Obviously, with those potential repercussions in mind, and with a wary eye on a potential negative thrust from Daman's film, the industry is apparently preparing a bevy of public relations materials and approaches to counter what it believes could become more ammunition for fracking fighters. According to the Journal, those materials already include studies intended for film reviewers, leaflets for those who attend Promised Land showings, and "truth squads" that will concentrate on communicating with target audiences via social media.
As we move closer to late December, we'll likely gain a better sense on the direction taken in the film. In the meantime, what's the meaning of all this for your for your energy investments?
For my money, it heightens the need to monitor those companies, like Chesapeake and ExxonMobil, that are at or near the top in domestic gas production. The ideal way to do that is to ascertain that those two companies -- and others of your choice -- occupy positions on My Watchlist by clicking the green plus signs above.
