The House Energy and Commerce Committee’s inquiry into the potential health and environmental risks of hydraulic fracturing (hydrofracing) of unconventional natural gas resources is no cause for alarm among producers, says an industry analyst.

“There was concern expressed that this could lead to legislation hindering this technology [hydrofracing], harming natural gas supply and possibly even the ExxonMobil-XTO deal,” said William Hederman, senior vice president of Concept Capital’s Washington Research Group in a “Washington Energy Bulletin” Friday. But he said he seriously doubts the inquiry would lead to a measure that would “materially harm” either.

To kick off the inquiry, Committee Chairman Henry Waxman (D-CA) and Rep. Edward Markey (D-MA) Thursday said they sent letters to eight companies engaged in hydrofracing around the country — Halliburton, BJ Services and Schlumberger, as well as Frac Tech Services, Superior Well Services, Universal Well Services, Sanjel Corp. and Calfrac Well Services — asking them to identify the types and quantities of chemicals used in hydrofracing fluids. They also asked the companies to respond to whether they injected these fluids in, near or below an underground source of drinking water (see Daily GPI, Feb. 19).

In January ExxonMobil CEO Rex W. Tillerson told a House Energy and Commerce subcommittee that its pending $41 billion merger with unconventional gas powerhouse XTO Energy Inc. would be called off if Congress took any action to limit or restrict the use of hydrofracing in the prolific shale gas plays (see Daily GPI, Jan. 21). “We see no danger to the [ExxonMobil-XTO] deal now in progress, which does have an ‘out’ clause for [ExxonMobil] if legislation were to harm shale gas production economics,” Hederman said.

“Based on conversations with industry experts familiar with this technology and industry practices, we do not expect this investigation to reveal some major problems. It is our understanding that no company uses diesel fuel [in hydrofracing] at this time” or “other dangerous hydrocarbons,” he said.

Both Halliburton and BJ Services reported that they used diesel fuel as a hydrofracing fluid between 2005 and 2007 in violation of the memorandum of agreement (MOA) with the Environmental Protection Agency, according to data that Waxman requested and received when he chaired the House Oversight and Government Reform Committee in the last Congress. Halliburton, BJ Services and Schlumberger were responsible for 95% of the hydrofracing in 2003 when they signed the MOA.

Hydrofracing, which is used in almost all oil and gas wells, is a process where fluids are injected at high pressure into underground rock formations to blast them open and increase the flow of fossil fuels. Some chemicals that are known to have been used in hydrofracing include diesel fuel, benzene and industrial solvents.

Because diesel is no longer common practice, “this would indicate to us that any proposed legislative restrictions would not harm development or the economics of shale production. In fact, if any legislative proposal appears to pose the danger of harming shale gas development, we would expect the Republicans to aggressively oppose it and be effective in this opposition,” Hederman said. Rep. Robert Barton of Texas, the ranking Republican on the House energy panel, is a strong proponent of the oil and gas industry.

“The only legislation that might be successful might restrict diesel, benzene, etc. use and/or require reporting of fluid contents. This may affect some companies, but given that at least major player Schlumberger is reported to be comfortable with such a provision, we see no danger to development of this resource,” he noted.

“There is potential headline risk for any company that refuses to cooperate [with the House committee]. It is our understanding that Schlumberger has already indicated a willingness to reveal fluid content. We do not know the position of others.”

While the purpose of the House investigation is couched in terms that appear to be somewhat supportive of the oil and gas industry, Waxman and Markey are known for their anti-producer views.

There are several bills pending in Congress to regulate hydrofracing at the federal level under the Safe Drinking Water Act (SDWA). The oil and gas industry is the only industry exempted from the SDWA. Presently hydrofracing activities are regulated by the states.

Legislation restricting hydrofracing could shut down production from the country’s prolific shale plays, including the Barnett, Fayetteville, Haynesville and Marcellus plays, producers told Congress last year (see Daily GPI, June 10, 2009).

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