Industry campaign targets 'hydraulic fracturing' bill

Fearing a push by House Democrats to regulate a controversial form of natural gas production, an industry coalition launched a campaign yesterday arguing that new rules would kill jobs and batter the economy.

The coalition of independent oil and gas companies says a Democratic proposal to allow new oversight over hydraulic fracturing would slash domestic oil and gas production and cost the Treasury $4 billion in lost taxes, royalties, rents and other payments. But environmentalists and an aide to a Democratic lawmaker backing regulation say the claim amounts to "scare tactics."

The industry group says hydraulic fracturing, which uses high-pressure injections into the ground to force oil and gas to flow more freely, has a track record of safety and is regulated sufficiently by the states. Environmentalists and some congressional Democrats argue it threatens groundwater. In addition to adding oversight, they want companies using the process to reveal what chemicals are used -- information that is now considered proprietary.

The 2005 Energy Policy Act exempted hydraulic fracturing from regulation under the Safe Water Drinking Act. But Rep. Diana DeGette (D-Colo.) proposed a bill last year to repeal that exemption. DeGette is now talking with Energy and Commerce Chairman Henry Waxman (D-Calif.) about either inserting her bill into pending climate legislation or reintroducing the measure on its own.

"We're hoping to move this forward shortly," DeGette spokesman Kristofer Eisenla said. Without federal oversight, he said, there is no way to really track whether the process is safe.


The possibility of new regulations triggered the industry's public relations campaign.

"The key question is how vulnerable lawmakers are going to be to being persuaded" by the data the coalition is sharing, said Kevin Book, managing director at ClearView Energy Partners, an energy market analysis firm. With the next election still 19 months away, he said, lawmakers "may not be as persuadable."

In addition to sending its data to the press, the group Energy in Depth delivered its information to "key oversight committees" in Congress.

"This campaign is designed to dispel some of the myths and showcase some of the technologies" used by companies in the hydraulic fracturing business, said Brian Kennedy, spokesman for the Energy in Depth coalition. "We've got to make the point that federal policy should be fostering more domestic energy production, not less."

Despite Democratic majorities on Capitol Hill, "if we're successful in communicating the facts," Kennedy said, the odds of defeating a legislative move for federal regulation "are quite good."

Economic argument

Some of the proposed regulations, Kennedy said, would put producers out of business. The coalition's marketing campaign is telling lawmakers that the industry employs 1.2 million people, spent $226 billion in 2007 on domestic exploration and production and that same year paid private landowners $30 billion in royalties.

New regulations, the coalition said, could "force the closure of more than half of America's oil wells and a third of our gas wells." That loss of production in addition to hitting the federal purse would cost state treasuries $785 million, the group said, and would shrink domestic oil production by 183,000 barrels per day and natural gas by 245 billion cubic feet per year.

Environmentalists say they have heard this before. "Whenever they are facing any kind of regulation, they point to some sort of apocalyptic economic impact," said Josh Dorner, spokesman for the Sierra Club.

"As these things are playing out now on the Hill, obviously these industries remain very powerful," Dorner said. But with the Obama administration and Democratic leaders in Congress opening the door to more regulation, he said, "clearly the days of the Dick Cheney energy policy have passed."

Even if Congress can pass a repeal of the exemption on regulation for hydraulic fracturing, it could take U.S. EPA some time to write new regulations, Book said, "but gas producers' mandatory disclosures of fracking fluid contents under the Safe Drinking Water Act could potentially trigger state-level regulations even before the EPA rulemaking has been finalized."

"In our view, the outcome of regulation is likely to be a higher variable cost of production ... rather than an outright prohibition on natural gas production," Book said in an advisory to investors and energy companies. But, he added, production could stall in some areas.

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