Does Natural-Gas Drilling Endanger Water Supplies?

A debate is heating up over whether the fracturing technique used in natural-gas drilling could result in chemicals contaminating drinking water

By Abrahm Lustgarten

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EPA's Dhieux says the drillers' secrecy makes it tough to vouch for the safety of the process Jamie Kripke

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Lisa Bracken of Silt, Colo., worries about the water she draws from Divide Creek Jamie Kripke

Editor's Note: Lustgarten is a reporter with ProPublica, a nonprofit journalism organization in New York. For more on the controversy surrounding natural-gas drilling, go to http://www.propublica.org and to http://bx.businessweek.com/oil-and-gas.

Natural-gas operations are proliferating from Wyoming to New York. At the same time, Halliburton (HAL) and other gas-service giants are fighting to keep secret the potentially hazardous chemicals they use to split thick layers of rock and release the fuel beneath.

Some regulators and many environmentalists worry that the fluids injected into many U.S. gas fields could be contaminating drinking water with benzene, methanol, and other toxic substances. The industry counters that its methods are safe. Drillers point to a 2004 study by the U.S. Environmental Protection Agency that supports their position, as well as a key legislative exemption from federal oversight they won in 2005.

The debate is heating up as reports of water pollution near gas drill sites accumulate and the incoming Obama team considers reversing a recent Bush Administration move to permit more drilling in Utah. A close look at the EPA's 2004 study reveals that the agency may have played down evidence of health dangers. And now some regional EPA officials say it's time for the industry to disclose precisely what it's pumping into the ground.

Energy companies are taking a tough stance. Last summer, Houston-based Halliburton threatened to cease natural-gas operations in Colorado if regulators there persisted in demanding the chemical recipe used in a common drilling process known as hydraulic fracturing. Using this method, drillers shoot vast quantities of water, sand, and chemicals into the earth to break up rock and release gas. "A disclosure to members of the public of detailed information…would result in an unconstitutional taking of [Halliburton's intellectual] property," the company said in a filing to Colorado's Oil & Gas Conservation Commission. The industry has adopted similar positions in New York, Wyoming, and New Mexico.

"Competitive Advantage"

Halliburton says its reluctance to release information about drilling chemicals reflects only a desire to protect valuable trade secrets. "If these formulas were to become available to other companies, it is possible that we could lose our competitive advantage with respect to those companies, not only in Colorado but throughout the world," says Halliburton spokeswoman Diana Gabriel. Rival drillers have similar motives for their secrecy, according to the Independent Petroleum Association of America, a Washington trade group.

In Colorado, Halliburton recently reached a compromise with regulators, but it's one that appears to favor the industry. The company agreed in August to disclose the chemicals it uses in hydraulic fracturing to state health officials and regulators, though not to the public. But the agreement applies only to chemicals stored in drums that contain 50 gallons of drilling fluid or more. As a practical matter, drilling workers in Colorado and Wyoming say in interviews that the fluids are often kept in smaller quantities. That means at least some of the ingredients still won't have to be disclosed. Halliburton didn't respond to questions about the Colorado compromise.

Regulators "will never get [the chemical data]," predicts Bruce Baizel, a lawyer with the Oil & Gas Accountability Project, a nonprofit in Durango, Colo. "Not unless they are willing to go through a lawsuit." So far such a suit hasn't been filed in Colorado—or anywhere else—since regulators have only lately sought to learn more about the effects of hydraulic fracturing.

Three companies—Halliburton, Schlumberger (SLB), and BJ Services (BJS)—control the vast majority of the $15 billion hydraulic-fracturing market. They work as subcontractors for the world's largest natural-gas developers, including BP (BP), Shell (RDSA), Chesapeake Energy (CHK), and Chevron (CVX). The drillers have zealously refused to reveal the combinations of chemicals they use in fracturing. "It's like Coke protecting its syrup formula for many of these service companies," says Scott Rotruck, Chesapeake's vice-president for corporate development. Chesapeake and its contractors are facing disclosure demands from New York state officials before they can drill in a massive Appalachian gas reserve known as the Marcellus Shale. Schlumberger and BJ Services didn't respond to requests for comment.