US energy group warns of ongoing policy threat to ‘fracking’

18 November 2010 22:03  [Source: ICIS news]

WASHINGTON (ICIS)--A top US energy group on Thursday warned that despite a major political shift in the US Congress, a critical drilling technology for oil and gas development remains vulnerable to possible federal and state restrictions.

The American Petroleum Institute (API) said that despite the 60-year record of hydraulic fracturing as a safe and reliable drilling technique, the process faces potential regulatory challenges by federal and state initiatives.

Sara Banaszak, the institute’s senior economist, told a press conference that hydraulic fracturing - known as fracking in the industry - still was not well-understood by the public and policymakers at federal and state levels.

Used by drilling companies for some 60 years, hydraulic fracturing involves high-pressure injection of water, sand and chemical additives to free oil and natural gas from deep rock formations. Fracking is essential to development of new US resources of shale gas.

The US petrochemicals industry and downstream chemical manufacturers are heavily dependent on natural gas as a feedstock and power fuel, and the prospect of new shale gas resources holds the promise of more dependable and affordable supplies for the industry.

“Fracking is getting a lot of attention, and some aspects of the process are getting lost” when policymakers consider restricting use of the technique, Banaszak said.

The state government of New York has imposed a one-year moratorium on fracking in development of the vast Marcellus shale gas play. Other states where shale gas is being produced, such as Pennsylvania, are considering increased taxes on drilling operations that employ hydraulic fracturing.

Environmental groups such as the Sierra Club contend that fracking is not sufficiently regulated by the states and should be controlled by the Environmental Protection Agency (EPA). A bill to give that agency permitting authority over fracking has been pending in Congress. Fracking is currently regulated by the states.

Widespread claims contend that chemical additives used in fracking have contaminated drinking water wells, allegations that API and other sources say are unfounded.

“Fracking is safe, and lawmakers should be careful in seeking to restrict it,” Banaszak said.

She noted that an earlier EPA study of the environmental impact of fracking practices and chemicals used in the process found no evidence of water table contamination.

The agency recently began a new two-year study of hydraulic fracturing, which is expected to be completed by the end of 2012.

“We are confident that the new EPA review will confirm what a half-century of use has already demonstrated, that fracking poses no risk to drinking water or the broader environment,” she said.

In response to a question, Banaszak said that the recent US national elections - in which Republicans won majority control of the US House and increased their representation in the Senate - do not necessarily insulate fracking from potentially hostile legislation.

“You can’t deny that the election changes the colour of the challenge we face,” she said, “but the dialogue so far makes clear that we haven’t done a good enough job of communication.”

“There are a lot of interested parties out there who don’t understand the legislative and regulatory process, and that’s why we remain concerned,” she added.

Banaszak said that if hydraulic fracturing were to be restricted by federal regulation, as much as 45% of current and future US natural gas production could be lost.

In addition to the new EPA review, the US Department of the Interior (DOI) plans a hearing later this month on the environmental impact of fracking in development of oil and gas reserves on federal lands.

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