Bloomberg News

Safe Gas Fracking Touted by Obama Disputed by Environmentalists

January 27, 2012

Jan. 26 (Bloomberg) -- President Barack Obama’s promotion of fracking as a safe way to boost natural gas production is disputed by environmentalists who say the government lacks tough rules to safeguard air and water.

Groups such as Protecting Our Waters say hydraulic fracturing -- in which a mix of water, sand and chemicals are shot underground to break apart rock and free gas -- is tainting drinking water and causing more pollution than is cut by the cheap gas. The broad new federal legislation and regulation the groups advocate would tangle up fracking in miles of red tape, industry leaders counter.

“We’re disappointed in his enthusiasm for shale gas,” Iris Marie Bloom, director of Protecting Our Waters in Philadelphia, said in an interview. Obama “spoke about gas as if it’s better for the environment, which it’s not.”

Bloom’s group is seeking a moratorium on fracking in Pennsylvania, where companies such as Chesapeake Energy Corp. and Talisman Energy Inc. have contributed to a drilling boom.

For the first time in a State of the Union address, Obama on Jan. 24 offered detailed, broad praise for the development of natural gas, and directed his administration to ensure its continued production.

“The development of natural gas will create jobs and power trucks and factories that are cleaner and cheaper, proving that we don’t have to choose between our environment and our economy,” Obama said. He said new rules would require disclosure of chemicals used when fracking on federal lands; he didn’t pledge other rules to ensure its safety.

Stocks Buoyed

Brian Uhlmer, head of equity research at Global Hunter Securities LLC, said in a report yesterday that “Bafrack” Obama buoyed energy stocks a day before his speech as word of his embrace of gas circulated among traders.

The Standard & Poor’s 500 Oil and Gas Exploration and Production Index of 16 companies climbed 5.1 percent this week through yesterday.

Producers including Marathon Oil Corp., Continental Resources Inc. and Exxon Mobil Corp. have expanded use of fracking to penetrate geologic formations from North Dakota to Pennsylvania overlooked for decades because the gas was difficult to extract. Halliburton Co. is the world’s largest provider of hydraulic fracturing services, followed by companies such as Schlumberger Ltd. and Baker Hughes Inc.

The U.S. holds an estimated 2,214 trillion cubic feet of gas, enough to meet domestic demand for more than a century at current consumption rates, according to the Energy Department. Fracking accounts for a third of the U.S. gas supply, up from 14 percent in 2009.

Limits Needed

Environmental groups are skeptical of that boom, saying new federal rules are needed to govern how wells are drilled, limit how fracking water is disposed and curb related air pollution. They say the process of shooting large amounts of water and chemicals into the ground can contaminate drinking water, and cause earthquakes nearby.

Already the Environmental Protection Agency linked fracking to polluted groundwater in Pavillion, Wyoming, and has begun delivering water in Dimock, Pennsylvania, to residents who say drilling by Cabot Oil & Gas Corp. contaminated their wells. An EPA study of the issue is set to be completed in 2014.

“What we are very concerned about is the disconnect between the aggressive nature with which the industry is moving forward and the ability of the government” to put safeguards in place, Frances Beinecke, president of the Natural Resources Defense Council in New York, told reporters yesterday.

While Obama highlighted disclosure of the chemicals used in fracking, “that’s only the tip of the iceberg,” she said.

Gas vs. Coal

While some activists such as Bloom advocate for a moratorium, leaders such as Michael Brune, executive director of the Sierra Club in San Francisco, say that cheap gas can be better for the environment if it’s used to replace coal-burning power plants.

Still, fracking isn’t subject to laws for safe drinking water and has exemptions under the Clean Water Act, and Congress needs to end both exclusions, Brune said in an interview. Getting lawmakers to act “is a problem,” he said.

Industry also has complaints. A raft of rulemakings from the Obama administration threatens to crimp the gas boom just as the president offers a full-throated defense, they say.

“We don’t see the same actions we see in the rhetoric,” Lee Fuller, vice president for government relations at the Independent Petroleum Association of America in Washington, said in an interview. Pending regulations “are creating at the minimum red tape and delay,” and may shut fracking down in some states or areas, he said.

‘No Confidence’

After the preliminary report from Wyoming, industry “has no confidence” that the larger EPA study will be fair, said Erik Milito, director of upstream and industry operations at the American Petroleum Institute in Washington, which represents companies such as Exxon Mobil Corp.

“Given that the industry often disagrees with the Obama administration on what is reasonable to protect the public safety -- we think there could be disagreements and negative headlines ahead,” Whitney Stanco, a Washington-based senior policy analyst for Guggenheim Securities LLC in New York, said in a report yesterday.

For industry, the possibility of further government rule making remains. Environmentalists say it is happening now, as fracking booms nationwide.

“President Obama showed he is misreading local sentiment from communities overwhelmed in their David versus Goliath battle against large drilling companies,” Dusty Horwitt, senior counsel of the Environmental Working Group, said in an e-mail. Drillers “under-regulated activities have jeopardized property values and contaminated water supplies across the country.”

--Editors: Steve Geimann, Jon Morgan

-0- Jan/27/2012 15:49 GMT

To contact the reporters on this story: Mark Drajem in Washington at mdrajem@bloomberg.net; Katarzyna Klimasinska in Washington at kklimasinska@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net


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