Chesapeake Energy Corporation (CHK), Talisman Energy Inc. (USA) (TLM), Halliburton Company (HAL): New York and Its Moratorium

In the summer of 2008, David Patterson, who took over as New York governor following the ouster of Elliot Spitzer, imposed a two-year moratorium on fracking within the state’s borders. The state’s environmental agency then started an intensive study of the environmental and public health concerns regarding fracking.

Ever since, New York has maintained its moratorium on the controversial process. It wouldn’t be such a big deal if upstate New York didn’t sit right in the middle of the natural-gas-rich Marcellus shale formation. As the years have passed, industry proponents — including a fellow Fool who hails from the state — have bemoaned the lack of progress on lifting the moratorium.

With every passing day, pressure is mounting on state officials to release the results of the studies, and for a decision to be made, once and for all, as to whether fracking will be allowed.

Between a rock and a hard place

Source: Bill Baker /Flickr via compfight.com.

It’s no secret that Gov. Andrew Cuomo’s political base is far more opposed to fracking than are his Republican counterparts from across the aisle. If the results of New York’s years-long health and environmental studies came back showing results similar to Pennsylvania’s — which showed that fracking itself wasn’t a major cause for concern, and instead pointed the finger at natural gas processing stations — it would be difficult to justify continuing the moratorium.

That’s especially true given that some residents in the state’s poorer southern tier are champing at the bit to lease their land to gas companies. In 2012, the state even considered lifting the ban in select locations within this area of the state.

Confusing things even more, even if the state allowed fracking, there are several townships that have outlawed it. Whether those bans could be upheld in the face of state rules allowing the practice is a matter that New York’s higher courts have already begun to ponder.

There’s no way to know what the reports will say with 100% certainty. It’s clear, though, that if the process were deemed safe, Cuomo would be in the tough spot of ignoring the concerns of many constituents and lifting the ban on fracking.

How this could affect your investments?

It’s clear that some energy companies are already getting frustrated with the amount of time New York is taking to come to a final decision. Just yesterday, Chesapeake Energy Corporation (NYSE:CHK) announced that it will terminate the leases on 13,000 acres in southern New York.

Before this move, the company already had 63 wells in the state, second only to Talisman Energy Inc. (USA) (NYSE:TLM) among publicly traded energy companies, which has just over 100 wells.