Energy Industry Lobbies to Avert Drilling Rules

The Wall Street Journal
5 June 2009
By Ben Casselman

The oil-and-gas industry is gearing up for a battle over the regulation of a high-tech drilling technique that has opened up huge new fields for drilling, but that environmentalists fear could contaminate ground water.

On Thursday, a congressional subcommittee held a hearing on the practice, known as hydraulic fracturing, and two Democratic lawmakers said they would introduce legislation that would regulate it at the federal level for the first time. Environmental groups and members of Congress are also pushing the Environmental Protection Agency to investigate the impact of fracturing on drinking-water resources.

Hydraulic fracturing -- known within the industry as "hydro-fracking," or simply "fracking" -- involves the injection of millions of gallons of water and chemicals into oil or natural-gas wells at high pressure. The process cracks open rock formations thousands of feet underground, allowing trapped hydrocarbons to flow to the surface.

Fracking has been used since the 1940s, but it has become far more common in recent years, as the industry has increasingly drilled in dense rock formations that require fracking to produce significant quantities of oil and gas. The industry estimates 60% to 80% of new wells require fracking to be profitable.

Environmental groups worry that chemicals used in the process -- which can include benzene, hydrochloric acid and other potentially harmful substances -- could contaminate drinking-water reservoirs on the surface or underground. Those concerns have increased as drilling has spread to more heavily populated areas such as Fort Worth, Texas; Shreveport, La.; and parts of Pennsylvania and New York.

Oil and gas producers say fracking is safe when done correctly, and that state regulations already adequately protect water supplies. State and federal authorities have generally concluded fracking poses little threat, but no large-scale studies have been done, leaving industry and environmental groups to battle over anecdotal cases.

On Thursday, Democratic Reps. Diana DeGette of Colorado and Maurice Hinchey of New York said they plan to introduce legislation to allow the Environmental Protection Agency to regulate fracking under the Safe Drinking Water Act, which would repeal a provision in a 2005 law that exempted it from EPA oversight.

"We're not opposed to gas drilling....We just want it to be done in a way that is not going to injure other people, not going to damage their property, not going to contaminate their water supply," Mr. Hinchey said.

In response, industry has launched a multimillion-dollar lobbying and public-relations campaign to defend the practice. Last month, a coalition of industry groups unveiled a Web site dedicated to hydraulic fracturing, and the American Petroleum Institute held a conference call with reporters on the subject ahead of Thursday's congressional hearing.

The issue is especially sensitive for gas producers, because the industry has been trying to portray itself as more environmentally friendly. Burning natural gas releases less carbon dioxide into the atmosphere than burning coal or oil.

In its lobbying, the industry is stressing the economic benefits of drilling, and warning that increased regulation could lead to layoffs, reduced state tax revenues and higher energy prices for consumers. Rising production and soft demand has driven gas prices down in recent months to less than $4 per million British thermal units, down from more than $13 per million BTUs last July.

The lobbying effort is concentrating on lawmakers from energy-producing states to make sure they "understand the implications," said Lee Fuller, vice president for government relations for the Independent Petroleum Association of America.

The fight joins a list of battles waged by the energy industry in the newly Democrat-controlled Washington. The industry also is challenging proposals that would restrict drilling in environmentally sensitive areas, eliminate tax breaks on some drilling projects and restrict carbon emissions.