Natural Gas Companies Wary Of EPA Involvement In Fracturing Regulation; Natural Gas Sectors Nervous About EPA GHG Tailoring Rule

Editor's note: Due to an internal mistake March's print edition of P&GJ included an out-of-date Government article. This is the article that was meant to appear.

The ExxonMobil purchase of XTO Energy has sparked new congressional interest in the environmental safety of horizontal shale gas drilling, a concern also lately exhibited by the Environmental Protection Agency (EPA) which has urged New York state to expand its analysis of the impact of shale gas drilling in the Marcellus Shale area. A House energy and environment subcommittee held hearings on the XTO sale Jan. 20 where the heads of both companies - ExxonMobil and XTO - said they had a problem with a new piece of congressional legislation requiring natural gas producers to disclose the chemicals they use when fracturing gas deposits in shale. Both men said they had no problem making the disclosure; however, they would oppose including that disclosure requirement in the Safe Drinking Water Act, a law enforced by the EPA.

That is what the Fracturing Responsibility and Awareness of Chemicals Act (FRAC ACT) would do. It was introduced in both the House and Senate last summer. Both Rex Tillerson, Chairman and CEO, ExxonMobil Corp. and Bob R. Simpson, Chairman of the Board and Founder, XTO Energy Inc., opposed the bill. Tillerson said he opposed EPA's involvement because "the devil is always in the details." Pressed by Rep. Diana DeGette (D-CO), one of the key sponsors, on what he meant, Tillerson expanded on his original statement by saying, "It means I don't know how the EPA is going to enact or implement the regulation that you are promoting in your bill." Neither the House nor the Senate has held hearings on the FRAC Act, much less has a vote been taken.

The back-and-forth between DeGette and Tillerson is important because ExxonMobil insisted that a clause be put in the contract allowing it to cancel the deal if Congress passes a law making hydraulic fracturing "illegal or commercially impracticable." Neither Tillerson nor Simpson said the DeGette bill would do that, but Tillerson clearly implied that EPA regulatory involvement in hydraulic fracturing could be a problem.

Any congressional legislation seen as hamstringing new shale gas development would be a crimp in some pipeline expansions, undoubtedly. For example, Texas Eastern has announced two separate projects in anticipation of bountiful Marcellus shale gas. One expansion project could handle 300 MMcf/d, the second 500 MMcf/d. According to Spectra Energy Corp. (which owns Texas Eastern) spokeswoman Wendy Olson, Marcellus gas would account for 80% of the first project's contracts and "a significant amount" in the second instance.

The production of Marcellus gas in New York state is already a red-hot political issue there.