Fracking: The Great Shale Gas Rush

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The Delaware River Basin Commission, which manages the watershed that supplies drinking water to 15 million people in New York, Pennsylvania, New Jersey, and Delaware, has put gas development on hold while it drafts rules. Wasner and LaTourette were among scores of people to comment at a Feb. 22 hearing in Honesdale, Pa., on a commission proposal to regulate the drilling. New York also has fracking on hold while it develops a drilling playbook. The Marcellus Shale runs beneath the watershed that supplies just over 1 billion gallons of water a day to New York City, the U.S.'s largest unfiltered water system.

The White House has sent mixed signals. "It's not necessarily federal regulation that will be needed," EPA Administrator Lisa P. Jackson told a Feb. 3 Senate hearing, noting that many communities and states already monitor parts of the process. Energy Secretary Steven Chu seems to differ. In a 2010 speech, he said fracking can be "polluting" and that rules were inevitable. "We continue to believe that state regulatory agencies have the appropriate expertise" to oversee gas production, says Dan Whitten, a spokesman for America's Natural Gas Alliance.

Even if the EPA stepped in, its authority would be limited. A clause in a 2005 energy law—dubbed the "Halliburton (HAL) loophole" for the company that helped pioneer fracking and is a supplier of fracking fluids—exempts fracking from parts of the Safe Drinking Water Act. Representative Maurice Hinchey (D-N.Y.) says Dick Cheney, once head of Halliburton, pushed for the exemption when he was Vice-President. Hinchey's evidence is circumstantial: Fracking was endorsed in Cheney's 2001 energy task force report, which led to the 2005 law and, according to Waxman, did not reflect the EPA's initial concerns about water pollution. Cheney declined to comment. Halliburton referred a request for comment to its website, which doesn't discuss fracking's risks.

So far, the EPA has begun a study of fracking's effect on drinking water. In February the agency said final results will come in 2014, two years after its initial target—and the 2012 elections. Its emphasis is "politics first and regulation second," says Kevin Book, managing director at ClearView Energy Partners, a Washington policy group. "It's impossible to miss the jobs power of fracking in the Marcellus."

The bottom line: The Obama Administration may need to rethink its hands-off policy on fracking, despite the national job and energy benefits.

Efstathiou is a reporter for Bloomberg News. Chipman is a reporter for Bloomberg News.