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3 Fossil Fuel Stock Fails

By Justin Loiseau – May 11, 2015 at 10:03AM

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Last week couldn't have been worse for these fossil fuel stocks.

This past week, fossil fuel stocks lived down to all environmentally damaging expectations. From fracking fears to coal ash contamination to oil explosions, here are three fossil fuel companies that had a hard week.

1. Fracking Fail

Source: Chesapeake Energy Corporation 

Who: Chesapeake Energy Corporation (NYSE: CHK)

Where: Bradford County, Pennsylvania

What: A new peer-reviewed academic paper found exactly what neither Chesapeake Energy Corporation nor Pennsylvanians wanted them to: traces of a fracking compound in drinking water samples from three homes located above the Marcellus Shale.

These findings have been a long time coming. In April 2011, the three households sued Chesapeake Energy Corporation , and by 2012 all three had settled and sold their homes to the company . Fracking companies generally maintain that the science is shaky and there's no way to know whether the chemicals originated from fracking or commonly used household products . The report's timing couldn't be worse for Chesapeake Energy Corporation, which just reported dismal quarterly earnings amid currently worthless oil and gas assets .

But perhaps even more important than these findings is the decision on scientists' part to point the probable finger at Chesapeake Energy Company without perfectly foolproof causal evidence. The scientific community has historically turned a blind eye to the policy implications of their publications, but this latest paper could be the first of many that takes a more proactive approach to critiquing fracking corporations.

2. Don't Drink the Duke Water

Source: Greenpeace USA 

Who: Duke Energy Corp (NYSE: DUK)

Where: Dan River, North Carolina

What: Duke Energy Corp (NYSE: DUK) can't seem to catch a break. Last year, coal ash (a harmful byproduct of coal-fired power generation) from Duke Energy spilled into the Dan River, contaminating waterways and costing the corporation $102 million in Clean Water Act violations. Duke Energy Corp is currently being sued for $25 million more , and any settlements seem further away than ever after this past week. State regulators issued new warnings to residents reliant on wellwater near the contaminated sites. For 152 of the 163 wells tested so far, officials told residents to neither drink nor cook with the contaminated water .

While the $102 million payment clears Duke of any wrongdoing at five of its plants, this latest news suggests that even more of Duke's 14 coal-fired power plants in North Carolina may have contaminated nearby water.

3. Exploding Expectations

Source: Hess Corp.

Who: Hess Corp. (NYSE: HES) and Berkshire Hathaway (NYSE: BRK-B) (NYSE: BRK-A)

Where: Heimdal, North Dakota 

What: Six train cars carrying 180,000 gallons of oil exploded last Wednesday as they made their way from the Bakken oil region. The train and railway were the property of Berkshire Hathaway's BSNF business, while the railcars and oil belonged to Hess Corp.. This is the fifth accident in just over a year involving this specific train model, which was recently federally mandated for phase-out or retrofit by 2020 . Hess owns 1,000 of these railcars, but has noted that the oil it carried complied with all regulatory standards . If both Hess Corp. and BNSF are found to have operated within regulatory standards, it may be that this explosion has almost no impact on their bottom lines, and is instead another sad example of too little regulation too late. While this latest event was without injuries , a similar Bakken oil-laden train explosion in 2013 killed 47 people in Lac-Megantic, Quebec, a town of 6,000 residents.

Fossil Fuel Failures
Whether it's fracking in Pennsylvania, coal ash in North Carolina, or oil in North Dakota, this past week was bad news for fossil fuel companies. While none of these events will destroy any of these companies, nor cause their respective industries irreparable damage, each acts as an important example to investors.

To some, these instances may be considered "shocks" that no one could've expected. But fracking has long been suspected of contaminating groundwater. Coal ash pits has been critiqued for as long as they've existed. Four other train accidents in less than two years occurred with similar railcars.

For smart investors, digging deeper means sniffing out risk where others choose to ignore it. Whether it's fossil fuels or otherwise, looking for telltale signs of failures waiting to happen is a good way to make sure those faults don't become your own financial failures.

Justin Loiseau owns shares of Berkshire Hathaway and relies on natural gas,coal, and oil to write articles critiquing all three. The Motley Fool recommends Berkshire Hathaway. The Motley Fool owns shares of Berkshire Hathaway. 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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Stocks Mentioned

Chesapeake Energy Stock Quote
Chesapeake Energy
CHKA.Q
Duke Energy Stock Quote
Duke Energy
DUK
$99.62 (1.10%) $1.08
Hess Stock Quote
Hess
HES
$144.76 (-0.10%) $0.14
Berkshire Hathaway (A shares) Stock Quote
Berkshire Hathaway (A shares)
BRK.A
$478,675.55 (0.35%) $1,655.56
Berkshire Hathaway (B shares) Stock Quote
Berkshire Hathaway (B shares)
BRK.B
$317.43 (0.40%) $1.25

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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