NATURAL GAS:

U.S. fracking regulation won't halt 'shale gale' -- report

This story was updated at 6:30 p.m. EST.

HOUSTON -- Federal regulation of fracturing would have little effect on companies' ability to drill for shale gas, according to a new study by an energy analysis firm. But analysts also found a regulatory expansion is not needed to protect drinking water.

"Drinking water supplies appear to have been safeguarded from contamination" by state regulators, says an executive summary of the report authored by Daniel Yergin, chairman of IHS Cambridge Energy Research Associates and the well-known author of "The Prize," a Pulitzer Prize-winning history of the oil business.

The protection of water supplies would be unlikely to change even if the federal government removes fracking's exemption from the federal Safe Drinking Water Act, since U.S. EPA usually delegates enforcement of that law to the states, the report says.

The report, released today at an annual energy conference hosted by IHS CERA here, dubs development of shale gas reserves in Pennsylvania, Texas, Louisiana and elsewhere "the shale gale" and says it has doubled the country's discovered gas reserves to a 100-year supply.

"This is simply the most significant energy innovation so far this century," Yergin said. "As recently as 2007 it was widely thought that natural gas was in tight supply and the U.S. was going to become a growing importer of gas. But this outlook has been turned on its head by the shale gale."

The development of shale has been made possible largely by advances in the decades-old technology of hydraulic fracturing, a process that pumps water, sand and chemicals into gas wells at extremely high pressure to pry open rock and release more gas.

Environmentalists and some communities near drilling sites are concerned that chemicals could contaminate the drinking water aquifers that the wellbores are drilled through. They want Congress to remove fracturing's exemption from safe drinking water laws, granted in the 2005 energy bill.

But oil and gas companies have vehemently fought federal regulation under the Safe Drinking Water Act (SDWA), saying the process is perfectly safe and adequately regulated by state governments.

Rep. Diana DeGette (D-Colo.) and Sen. Bob Casey (D-Pa.) have introduced legislation -- the Fracturing Responsibility and Awareness of Chemicals Act, or FRAC Act -- that calls for EPA to regulate fracturing, but the bills have not moved out of committee. But the House Energy and Commerce Committee has undertaken an investigation of the practice.

Chris Tucker of Energy In Depth, a group formed by industry to ward off federal regulation of fracturing, disputed the study's assertion that regulating the process under safe drinking water laws wouldn't affect production.

"Anyone suggesting the FRAC Act will only have a minor impact on shale gas exploration efforts isn't quite shooting you straight," Tucker said. "For starters, not all states currently have primacy over SDWA enforcement -- Pennsylvania, New York and Michigan among them. ... We're talking about the possibility of a significant disruption of shale gas activity across the board -- not just in states without primacy.”

Environmental groups have asserted that state regulation is too lenient. They say regulators are deferential to industry, because in many states regulation is handled by industry-dominated oil and gas commissions.

The study by IHS CERA -- an adviser to energy companies, governments and other clients -- is called "Fueling North America's Energy Future: The Unconventional Natural Gas Revolution and the Carbon Agenda." The report says the abundance of shale gas will allow utilities to reduce their greenhouse gas emissions by building gas-fired instead of coal-fired power plants.

But that will not get to the oft-discussed target of an 80 percent reduction in greenhouse gas emissions by 2050, the study says. For that to happen, industry will need to deploy more nuclear and renewable power and find significant advances in carbon capture and storage (CCS).

IHS CERA Vice President Lawrence Makovich warned that utilities should maintain a "resilient, diversified" portfolio.

"The power industry has a multiple-decade planning horizon," Makovich said. "Because the uncertainty of the stringency of climate changes policy and the viability and cost competitiveness of CCS, there is the possibility that new gas-fired power plants may not run for their intended life spans."