The CEOs of Exxon Mobil and XTO told Congress today that they're confident hydraulic fracturing is safe: Over 1 million wells drilled with that method and no documented water table contamination, they said.
Yet, Exxon is worried enough about potential regulation of hydraulic fracturing that it wrote into the companies' $41 billion merger agreement that if Congress makes "hydraulic fracturing or similar processes ... illegal or commercially impracticable," the deal is off.
That raised a red flag for some members of the House Energy and Commerce Committee during today's hearing on the energy market implications of the merger.
There is no bill in Congress right now to outlaw hydraulic fracturing, a drilling technique that has opened the way to tapping extensive shale gas reserves. Both Exxon CEO Rex Tillerson and XTO Chairman Bob Simpson acknowledged that they knew of no members of the House, Senate or the Obama administration who were calling for the outlawing of hydraulic fracturing.
The only legislation even addressing hydraulic fracturing right now, two nearly identical bills, one in each chamber, would amend the Safe Water Drinking Act to (1) remove a special exemption for hydraulic fracturing in the definition of "underground injection" and (2) require that drillers disclose to the state the chemicals being used. The actual recipes for those chemical mixes, guarded by their makers, would only be required in an emergency.
"My bill would not make hydraulic fracking illegal," said Rep. Diana DeGette, the House bill's sponsor and a Colorado Democrat who stresses that natural gas is a clean domestic energy resource and a big source of jobs in her state.
"I support the use of hydraulic fracking. But I also support it being done in an environmentally responsible way."
Her concern that companies disclose the chemicals used in hydraulic fracturing followed the federal government's discovery two years ago of unsafe levels of benzene in a rural well near a natural gas field in Wyoming.
Fracking and Fluids
In hydraulic fracturing, or fracking, drillers pump fluid deep underground to fracture rock and capture the trapped inside gas. According to the industry, about 90 percent of wells in operation today have used the technique.
Without fracking, the two energy executives told Congress, gas couldn't be extracted from the Marcellus, Barnett and other shale formations that have greatly expanded the size of the country's exploitable natural gas reserves in recent years.
Estimates of the nation's recoverable gas reserves have increased 35 percent in the past two years to a level that can supply natural gas for a century at the current rate of consumption, and that's when companies are recovering only about 30 to 40 percent of the gas, a number Simpson expects to expand as technology and technique improve.
Tillerson cited the EPA's own work in arguing that the hydraulic fracturing process XTO uses is safe. A 2004 EPA study concluded hydraulic fracturing "poses little or no threat" to underground drinking water supplies "and does not justify additional study at this time." A year after that Bush administration report was released, the fracking process — pioneered by Halliburton — was exempted from the Safe Drinking Water Act. The act currently only requires drillers to seek a permit if they use diesel fuel in the process.
The industry describes its fracking fluids as 99.51 percent water and sand. However, a report released on Tuesday by the non-profit Environmental Working Group (EWG) questioned the additives involved — the ones DeGette's bill would require drillers to disclose.
The EWG investigation of chemical disclosure records in five states turned up drillers using "diesel, kerosene, mineral spirits and other petroleum products that often contain high levels of benzene, a known human carcinogen that is toxic in water at minuscule levels."
Governments have document several cases of local well contamination in gas drilling areas. In 2008, the Bureau of Land Management documented benzene at unsafe levels in a rural well in Sublette County, Wyo., a natural gas drilling area. An investigation by Pro Publica turned up "more than 1,000 other cases of contamination" documented by courts and state and local governments in Alabama, Colorado, New Mexico, Ohio and Pennsylvania.
State oversight over those projects is sporadic, as well, Pro Publica and EWG discovered. California, for example, has about one enforcement staff position for every 1,000 wells, according to the Pro Publica investigation.
EWG called on states to keep a closer eye on hydraulic fracturing and urged Congress to require companies to disclose the chemicals used — but it didn't call for an end to hydraulic fracturing.
Exxon Willing to Release Chemicals Used
Asked by members of Congress if the public has a right to know what chemicals are used, Tillerson and Simpson said they would not object to releasing a list. In fact, Tillerson said, those lists are already available at drilling sites.
"There's already some level of disclosure," Tillerson said, though he said there would be some concern among the companies that create the fracking fluids if they had to release their formulas.
"We would work with them to see if there was a way to accommodate," he said. "Based on our knowledge, there is nothing that gives us great concern."
When Rep. Mike Doyle, a Democrat from the heart of the Marcellus shale region, asked if a Pennsylvania law requiring companies to disclose their chemicals — similar to DeGette's national proposal — bothered XTO, Simpson said his company was accustomed to dealing with different regulations in different states and had no intention of pulling out of Pennsylvania.
So why the concern written into the merger, a combination that brings together Exxon's funding and expertise with XTO's vast unconventional resources?
"It's because the devil's always in the details, Tillerson told DeGette. "When you turn this over to EPA, I don't know how EPA is going to enact or implement."
"I don't know how the regulation is going to be written, and neither do you," Tillerson said.
"I've never seen a regulation that didn't add a layer of cost," he noted.
An Aside: Tillerson on Climate Change
The conversation took an interesting twist when Rep. Jay Inslee (D-Wash.) got his five minutes of questions.
He asked Tillerson: Does Exxon believe human-caused emissions of carbon dioxide and other greenhouse gases are changing the earth's climate?
"We have said for some time that there's no question climate is changing, that one of the contributions to climate change are greenhouse gases that result of industrial activity. The real challenge I think for all of us is understanding to what extent and therefore what we can do about it," Tillerson replied.
"We view it as a risk management problem," he said. "The consequences if those risks play out are pretty dire."
The investment in natural gas is good business, Tillerson said. With the shift to carbon regulation in Europe and talk of a price on carbon in the U.S., Exxon — which factors in a potential future price on carbon in its economic projections of the future, according to Tillerson — expects natural gas demand to grow about 20 percent, he said.