Last week, environmentalists danced in the street in front of Governer Cuomo's office to celebrate his decision to ban hydraulic fracturing ("fracking") in New York State. But this anti-fracking frenzy might not actually mean much: here are three reasons why New York's fracking ban changes nothing.
1) It's already been banned
Politicians love a good rubber stamp. In New York's case, the state has already had a de facto ban on fracking for six years. And in June of this year, its highest court ruled that individual municipalities could decide to ban fracking on their own. That's put political power behind 217 local ordinances that already knocked 63% of New York's lucrative Marcellus Shale off the fracking front line.
When you consider that New York fracking players like Norse Energy Corp lost faith and shut down operations (read: declared bankruptcy) in the state as early as October 2013, Governor Cuomo's decision last week simply doesn't mean much. In fact, the biggest losers from this latest ruling aren't major natural gas players -- they're holding companies hoping for lucrative land leases. The other company that filed a legal complaint alongside Norse Energy wasn't an energy corporation -- it was a dairy farm.
That bet didn't pan out, and it's the exact reason natural gas corporations like Chesapeake Energy Corporation and Anadarko Petroleum Corporation haven't touched New York with a thirty-nine and a half foot pole. Anadarko's website boasts about the $1.6 billion in tax revenue and 275,000 jobs its Marcellus Shale has created for Pennsylvania. Chesapeake notes its "strong relationships" with West Virginia landowners and 2 billion cubic feet of natural gas it produces every day in Pennsylvania. Fracking companies haven't relied on New York, and they're not about to start now.
2) Every state for itself
New York might be celebrating within its borders, but its decision may be another setback for any federal affront to fracking. As long as states continue to make moves independently, a nationwide ban continues to become less meaningful and less plausible.
Granted, New York is the first state with significant natural gas resources to ban fracking. But it might be the only one. A quick glance at the Marcellus Shale, the major fracking frontier for New York State, makes it painfully obvious that the Empire State's rejection isn't doing much at all to stop more than 10,000 fracking wells from pumping gas across Pennsylvania, Ohio, and West Virginia. Fracking corporations have made their claims elsewhere, and states that currently benefit from millions and billions in tax revenue won't be so keen to freeze fracking in the future.
In the midst of a global recession, natural gas production in the Marcellus Region has soared, and now accounts for around 40% of our nation's total production. The government-run Energy Information Administration expects drilling to continue to expand, with more rigs and increasingly efficient extraction in the years to come.
3) They lost the climate change battle
In the political world, everything is about precedence. And in this case, for environmentalists expecting a ban on natural gas due to its alleged disastrous climate change effects, they won on a technicality. In his announcement, Governor Cuomo made painstakingly clear that climate change effects were one small sliver of a much larger public health pie. In a seminal 184-page New York State Department of Health report, the Governor cited almost exclusively local issues: air and water contamination, earthquakes, and even boom-town community impacts like more traffic and strained medical care systems. On climate change, in particular, the main study cited in the report notes that "the literature has been limited in either its geographic scope or its coverage of greenhouse gases" and that simulations of New York fracking show a relatively small effect on carbon emissions. New York may have banned fracking, but it limits its purview to primarily local public health issues.
The Flip Side of Fracking
The trifecta of politics, science, and money are enough to make anyone skeptical of any decision -- and New York may be no different. But with issues as controversial and emotional as fracking, it's important to consider both sides of a debate. While New York's fracking ban may have changed nothing, there are also good reasons to believe it changes a whole lot. Staying current with every angle of our energy economy is important, and the only real way to have any idea where we're headed.
Justin Loiseau has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.