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The US energy industry may have a big fracking problem. The technology that has ushered in a renaissance in US natural gas production, spurring ExxonMobil to offer $31bn for XTO Energy this week, may be polluting drinking water. Hydraulic fracturing, or fracking, pumps millions of gallons of water and chemicals into rocks at high pressure to break them apart and release hydrocarbons. The technology was exempted from federal clean water regulation in George W. Bush’s 2005 Energy Policy Act in what environmentalists call “the Halliburton loophole”.
A repeal through the pending “Frac Act” would trim drilling activity by a fifth over five years, says IHS Global Insight. It would also exempt Exxon from closing the XTO deal, though the bill’s passage by that time, if ever, looks iffy. Nevertheless, individual actions by states or private lawsuits could give the industry headaches. Locals may be understanding in states such as Texas, Louisiana and Oklahoma, where drilling derricks are part of the landscape. But latte-sipping urbanites in suddenly hot shale patches such as New York may be less understanding. New York City’s budget office estimates that drilling in the city’s main watershed might cause the already cash-strapped authority to spend an additional $6bn-$10bn in water filtration infrastructure. Guess who they might ask to foot the bill?
The boom in shale gas has driven other deals, such as oilfield service company Baker Hughes’ pending buy-out of pressure-pumping specialist BJ Services, while Exxon’s purchase is thought to be the opening shot in a hunt for gas producers. But a drag on fracking might temper the shale bonanza. Greener technologies already have been proposed by operators such as Schlumberger, but piling costs on to what is already an expensive form of drilling could make some fields uneconomical. If it’s not one fracking thing it’s another.
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