Gas Fracking Poses Serious Environmental Risks, Panel Finds

Natural-gas companies risk causing serious environmental damage from hydraulic fracturing unless they commit to the best engineering practices, a task force named by Energy Secretary Steven Chu concluded.

Regulations to protect public health will work best when drillers embrace techniques that avoid “undesirable consequences,” according to a draft report today by a subcommittee of the Secretary of Energy Advisory Board. The increased use of fracturing, or fracking, which forces water and chemicals into rock, raises the potential for a “serious problem,” the panel found.

The report offered recommendations for companies involved in fracking, such as Chesapeake Energy Inc. and Southwestern Energy Co. (SWN), to follow, and guidelines for state regulators that oversee drilling.

“While many states and several federal agencies regulate aspects of these operations, the efficacy of the regulations is far from clear,” according to the report. “Effective action requires both strong regulation and a shale-gas industry in which all participating companies are committed to continuous improvement.”

The Environmental Working Group in Washington, which advocates for clean air and water, questioned the findings of a panel it said was dominated by the gas industry. The Independent Petroleum Association of America in Washington, which represents oil and gas companies, said the report marks “a useful starting point,” for discussions.

‘Disruptive Activities’

Communities “need to fully understand that there will be disruptive activities during drilling and industry needs to improve its response to local concerns,” Barry Russell, chief executive officer of the group, said in a statement.

In fracturing, millions of gallons of chemically treated water and sand are forced underground to break up rock and allow gas to flow. Advances in the technology have, in a few years, pushed gas from shale to almost 30 percent of U.S. production from a “negligible amount,” according to the report, which will be given to Chu on Aug. 18.

“What we’re recognizing in the report is the dramatic scale and speed which the growth of the industry has realized,” Kathleen McGinty, a subcommittee member who led President Bill Clinton’s Council on Environmental Quality, said in an interview. “Unless the imperatives that are sometimes articulated in regulation take deep root in every action out there, you will experience problems.”

Marcellus Shale

Lower drilling costs have lured companies to develop the Marcellus Shale, a formation from New York to West Virginia that includes regions not typically associated with gas production. The growth of fracking has raised questions “about whether both current and future production can be done in an environmentally sound fashion that meets the needs of public trust,” according to the report.

To resolve the concerns, the panel recommended creating an industry organization “dedicated to continuous improvement” of practices, such as measuring and reporting air pollution, minimizing water use and improving well casing and cementing. The subcommittee urged reducing emissions that contribute to ozone and called for a national database at a start-up cost of $20 million to link sources of public information on fracking.

The report underscores differences in public perception of the potential consequences of gas fracking. Industry advocates say the technique hasn’t caused a major incident for more than 60 years, though current techniques were introduced less than a decade ago. Opponents cite failures and accidents that result in tainting drinking water.

Fees, Taxes ‘Appropriate’

Fees and taxes are “an appropriate” way to fund better enforcement of environmental regulations, the report found.

While the report echoes industry’s claim of “remote” risks of fracturing fluids leaking into drinking-water sources from deep-shale reservoirs, it said companies must engage “the range of issues concerning the public.”

“Public concerns extend to accidents and failures associated with poor well construction and operation, surface spills, leaks at pits and impoundments, truck traffic, and the cumulative impacts of air pollution, land disturbance and community disruption,” according to the report.

Drillers should also disclose the mix of chemicals used in fracking fluids “with an exception for genuinely proprietary information,” the report found.

‘Some Balance’

“There will be some in the environment community or in the anti-fracking community who will be disappointed because it has a message of frack-with-caution rather than don’t frack at all,” Ben Grumbles, president of the Clean Water America Alliance in Washington, a group that backs the technique with precautions, said in an interview. “The spin zone of the industry is going to be very concerned about what’s between the lines when the report is recommending that there be much more aggressive efforts to control ozone precursors and other emissions. It shows some balance.”

The subcommittee, formed in January, is led by former CIA Director John Deutch and includes Fred Krupp, president of the Environmental Defense Fund, and Daniel Yergin, co-founder of IHS Cambridge Energy Research Associates. The group will hand up a full report in late November, Energy Department spokesman Tom Reynolds said.

Deutch, a professor at Massachusetts Institute of Technology, was paid more than $1.4 million by Schlumberger Ltd. (SLB), the world’s largest oilfield-services provider, and Cheniere Energy Inc. (LNG), from 2006 to 2009, and is on the board of Cheniere, the Environmental Working Group said in a statement before the report’s release. Six of the seven panel members have “substantial financial connections” to energy companies.

Industry Dominance

“The Department of Energy made no attempt to review financial disclosure records prior to selecting the members of its panel,” the group said. “The Department of Energy did not address industry’s dominance of the panel.”

The subcommittee includes Stephen Holditch, head of the department of petroleum engineering at Texas A&M University in College Station, Texas; McGinty, former secretary of the Pennsylvania Department of Environmental Protection; Susan Tierney, managing principal of the Boston-based Analysis Group; and Mark Zoback, professor of geophysics at Stanford University in Palo Alto, California.

“All of our relationships were completely disclosed,” Deutch said yesterday in an interview. “We were chosen because the mix of our backgrounds were considered important in addressing this problem and we have a unanimous report.”

The subcommittee said government must keep pace with the increase in fracking to extract natural gas.

“If effective environmental action is not taken today, the potential environmental consequences will grow to a point that the country will be faced a more serious problem,” according to the report.

To contact the reporter on this story: Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net

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