Drilling in the large reserves of trapped natural gas in the east coast has kept gas prices, along with related exchange traded funds (ETFs), suppressed, but the cheap gas may mean a cleaner source for power generation. However, amid health and environmental concerns, one city is banning further drilling.

The Pittsburgh Pennsylvania city council recently voted unanimously to ban any drilling of natural gas within the city limits, writes Marie C. Baca for ProPublica. Mayor Luke Ravenstahl could veto the bill, in which case six council votes would be needed to override him. The bill was originally passed nine to zero. [Cool Weather Could Heat Up Natural Gas ETFs.]

Drillers use a technique called hydraulic fracturing, or “fracking,” on the Marcellus Shale, a gas-rich rock formation that has attracted energy producers to eastern United States, but studies have shown that fracking could cause “the deposition of toxins into the air, soil, water, environment and the bodies of residents,” according to the ordinance. [Which Way Is Up for Natural Gas ETFs?]

The Deutsche Bank believes that the shale gas boom could reduce greenhouse gas emissions if Congress does not pass a broad climate legislation, reports Timothy Gardner for Reuters. However, with a Republican majority in the House of Representatives, Congress is not expected to pass broad measures on renewable energy and climate.

Natural gas prices have plunged as newer technologies are now available to access natural gas from shale formations, and the lower prices have increased the use of natural gas in electricity generation. Natural gas releases half as much carbon dioxide as compared to coal. If coal prices continue to rise, natural gas in power generation could surge 35% by 2030 while reducing emissions by 44%.

If drilling bans become more popular in other major natural gas cities, a price spike for natural gas could be in the offing. Many of the long-only natural gas ETFs are above their long-term trend lines, so consider them if you believe that continued good performance is likely.

For more information on natural gas, visit our natural gas category.

  • United States Natural Gas (NYSEArca: UNG)
  • United States 12-Month Natural Gas (NYSEArca: UNL)
  • First Trust ISE-Revere Natural Gas (NYSEArca: FCG)

If you’re interested in leveraged natural gas exposure, check out Direxion Daily Natural Gas Related Bull 2x Shares (NYEArca: FCGL) or ProShares Ultra Oil & Gas (NYSEArca: DIG).

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.