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USDA Excluding Rural Home Loans From Environmental Reviews

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March 20 (Bloomberg) -- The U.S. Department of Agriculture will continue to exempt rural housing loans from environmental reviews that may slow expansion of oil and natural-gas drilling.

Agriculture Secretary Tom Vilsack said he will authorize a notice today affirming that rural housing loans are “categorically excluded” from reviews under the National Environmental Policy Act, which requires some transactions to be examined for their affect on soil, air and water.

“As indicated in previous statements, USDA will not make any policy changes related to rural housing loans,” Vilsack said today in an e-mailed message.

President Barack Obama in his State of the Union address in January said natural-gas production from techniques including hydraulic fracturing, or fracking, would support 600,000 jobs by the end of this decade. Environmentalists say the process can contaminate drinking water and pollute the air.

The USDA decision is “regrettable,” Kate Sinding, senior attorney at the Natural Resources Defense Council in New York, said in an interview. As fracking revives oil fields near populated areas in the Eastern U.S., more people will be exposed to potential contamination, increasing health risks and the possibility of legal action against the government, she said.

Falling Prices

Natural-gas prices, which have fallen 44 percent in the past year as production rose, are already low, Sinding said. “Why not take the time to evaluate the risks?”

Adam Schultz, an attorney representing the Independent Oil and Gas Association of New York, said Vilsack’s statement “removes uncertainty” for farmers and rural residents who may be applying for USDA loans. Adding a federal review to state environmental tests would be redundant, said Schultz.

Fracking involves injecting water, sand and chemicals underground to break up shale-rock formations and release trapped gas. Texas is the largest U.S. natural gas-producing state, followed by Wyoming, Louisiana, Oklahoma and Colorado, according to the Energy Department.

The USDA offers loans and loan guarantees as part of its mission to develop housing and business in less populated areas. It has an active rural-development portfolio of more than $165 billion of loans and loan guarantees.

To contact the reporter on this story: Alan Bjerga in Washington at abjerga@bloomberg.net;

To contact the editor responsible for this story: Jon Morgan in Washington at jmorgan97@bloomberg.net.

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