Replies to post #505 on The Rising Influence of Rising Affluence

[DewDiligence]

Charlie et al: I agree that the NYT article is somewhat slanted against industry. However, shale gas does seem like a business where regulation needs to be upgraded. The problem, as I see it, is that no alarm bell goes off when the water supply has been compromised by trace amounts of industrial contaminants. By the time such a problem is discovered, irreversible damage to residents’ health may already have occurred.

I would think it would be in the NG industry’s interests to be arguing for tighter regulation of shale drilling in order to avert an outcome similar to what happened in Woburn, MA (the impetus for the 1998 movie, “A Civil Action”). Regards, Dew

[DewDiligence]

Exxon’s Tillerson Presents Merger Case to Congress

[From the Dallas Morning News.]

http://www.dallasnews.com/sharedcontent/dws/bus/y!finance/exxon/stories/DN-exxonxto_21bus.ART0.State.Edition1.3cfaa44.html

›Exxon defends XTO Energy deal, warns against new regulation on hydraulic fracturing

January 21, 2010
By DAVE MICHAELS

WASHINGTON – Exxon Mobil Corp. told lawmakers Wednesday that its merger with natural gas producer XTO Energy Inc. wouldn't violate antitrust laws and warned Congress against new regulations that could slow the development of wells.

Irving-based Exxon's $41 billion deal is widely viewed as an opportunity to exploit the boom in domestic natural gas production that has occurred in regions including North Texas. Exxon says it is seizing that chance as the U.S. and other countries consider greenhouse-gas limits that would give natural gas an advantage over coal and oil.

But Exxon first wants Congress to drop plans to regulate a common underground injection technique known as hydraulic fracturing, which is used by Fort Worth-based XTO in the Barnett Shale. Lawmakers at Wednesday's hearing, scheduled to review the Exxon-XTO merger, often focused on a bill that would require companies to disclose the mixture of chemicals they shoot underground.

A report by the Environmental Working Group said this week that the fracturing fluids include petroleum distillates that often contain benzene, a carcinogen. Environmentalists say the chemicals could leak into underground water supplies.

Energy companies insist hydraulic fracturing is safe and hasn't contaminated water sources. While some companies say they don't object to disclosing "fracking" chemicals, they worry that handing regulation to the Environmental Protection Agency could lead to expensive new rules or a ban on the practice.

"Anytime you add a layer [of regulation], you add a cost," Exxon chief executive Rex Tillerson told lawmakers. "And when you add a cost, you just knocked off an increment of production because somewhere out there is the marginal-cost well, and it doesn't get drilled."

Oil and gas companies say state regulators, such as the Texas Railroad Commission, adequately oversee the production techniques that are used in the Barnett Shale and other fields.

But Rep. Diana DeGette, D-Colo., the bill's author, said Wednesday that only four states have laws directly regulating hydraulic fracturing. Her legislation would subject the activity to regulation under the federal Safe Drinking Water Act.

Exxon's deal with XTO allows Exxon to void its purchase if Congress prohibits fracturing or adds regulations that make the wells "commercially impracticable." Late last year, Congress directed the EPA to conduct a peer-reviewed study of hydraulic fracturing and its impact on drinking water.

Many Democrats, including several from Texas, are lukewarm to DeGette's proposal. With Democrats getting blame for high unemployment, Exxon's message that natural gas production would support new jobs may turn more Democrats against DeGette's proposal.

Some Democrats also expressed concern that the Exxon-XTO merger could lead to further consolidation in the oil and gas industry. Tillerson told lawmakers that the merger, which is being reviewed by the U.S. Justice Department and the Federal Trade Commission, would not violate antitrust laws.

The hearing also was notable for providing a rare window into Exxon's views on energy policy, which the company rarely discusses in public.

Exxon opposes the cap and trade system approved by the House in June, Tillerson said. But Exxon, which has funded groups that deny global warming, recognizes that industrial emissions contribute to climate change, he said.

Some Democrats, including Rep. Jay Inslee of Washington, pressed Tillerson on whether Exxon's acquisition signaled its acceptance that greenhouse-gas limits are inevitable, and that such rules would favor natural gas over coal and oil, which emit more carbon dioxide.

"We have identified over the last few years the growing importance of natural gas," Tillerson said. "Already there are policies in place, in Europe and elsewhere, that do put a price on carbon, and that does shift you toward natural gas demand."‹