The Harvesting Of Natural Gas, Will Natural Gas Save Or Destroy America (UNG, FCG)

June 22, 2010 11:30am NYSE:FCG NYSE:UNG

In “Gasland,” Josh Fox investigates the lifecycle of natural gas production and finds widespread evidence of some very “costly” side-effects. “Natural gas is…a bridge fuel to slash our oil dependence while buying us time to develop new technologies that will ultimately replace fossil transportation fuels,”


 PickensPlan.com declares. “Natural gas…has the advantage of being cheap and significantly cleaner than coal.”  “But “that’s a PR campaign,” states Josh Fox. “Natural gas, when you burn it, is cleaner than coal. What they’re not looking at is the entire life cycle of natural gas.” Fox found that the methods used to harvest natural gas are leading to Cancer, brain damage (and other illnesses), contaminated water supplies, toxic emissions compounded by other health and environmental problems. In one segment of the documentary, Fox shows a man lighting on fire the water coming out of his kitchen sink.

The health problems seem to be stemming from a method used to extract natural gas called hydraulic fracturing. The technique of hydraulic fracturing is used to increase or restore the rate at which fluids, such as oil, gas or water, can be produced from a reservoir, including unconventional reservoirs such as shale rock or coal beds. The process, which is currently exempt from federal oversight under the Safe Drinking Water Act, forces millions of gallons of water, mixed with sand and chemicals, into the earth to break rock and release gas. Environmental concerns regarding hydraulic fracturing techniques include potential for contamination of aquifers with fracturing chemicals or waste fluids.

“Presently, there are about 450,000 active natural gas wells in 34 states. The next great frontier for the industry is the Marcellus Shale Field, which covers huge swaths of New York, Pennsylvania, West Virginia and Ohio. Fox’s family owns land in Pennsylvania near the New York border. An offer to lease that land for natural gas drilling spurred his interest in the subject, which became an obsession that turned into “Gasland”. The filmmaker’s prime concern is the Marcellus Field sits atop one of the world’s largest unfiltered water supplies, which serves about 15 million Americans, including residents of New York City, Philadelphia and the surrounding area.” Reports Aaron Task in Newsmakers, Commodities.

What does this mean to Natural Gas and your Natural Gas based ETF (UNG, FCG)? It is doubtful that much of anything will come of this, at least in the short term. This appears to be a dirty little secret involved with the production of natural gas that should be monitored while you have natural gas exposure. The documentary aired last night on HBO. See the videos below for more information, and interviews of the documentaries producer:

 

Related ETFs:

The United States Natural Gas Fund, LP (UNG)
The United States Natural Gas Fund is an exchange traded fund that seeks to track (percentage wise) the price movements of natural gas prices. UNG units are bought and sold on the New York Stock Exchange.

The investment objective of UNG is for changes in the percentage terms of the units net asset value (nav) based on the natural gas prices as trade on the New York Mercantile Exchange. The price is based on the near month contract that’s set to expire, except when the near month contract is within 2 weeks of the expiration of the contract. At that point the natural gas futures contract will be “rolled” over into the next contract month.

First Trust ISE-Revere Natural Gas Index Fund (FCG)
The investment objective for First Trust ISE-Revere Natural Gas Index Fund (FCG) is to seek returns that correspond to the price and yield (before expenses) of the equity called the ISE- Revere Natural Gas Index.

The ISE- Revere Natural Gas Index ™. Is an equal-weighted index made up of exchange-listed companies that derive a substantial portion of the income form the exploration and production of natural gas. The index is constructed based on the total population of stocks listed in the United States of companies involved in the production and exploration of natural gas. Stocks of companies whose natural gas reserves do not meet certain requirements are not included in the index. Stocks are then ranked using four different methods. These methods include Price/Earning ratio, Price/Book ratio, Return on Equity and to correlation to natural gas futures prices. The rankings are then averaged and the top 30 stocks based on final rank are then selected for the index. The index is then rebalanced on a quarterly basis.


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