The so-called FRAC Act, legislation introduced in June of last year by Rep. Diana DeGette (D-CO) and Rep. Maurice Hinchey (D-NY) in the House of Representatives and Senators Casey (D-PA) and Shumer (D-NY) in the Senate, received a fresh jolt of publicity this week when the House Energy and Commerce Subcommittee on Energy and Environment convened a hearing on the recently announced merger between ExxonMobil and XTO Energy, Inc., one of the nation’s largest independent natural gas producers. While nominally about the impact of the proposed merger on the natural gas market, the hearing, chaired by Rep. Ed Markey (D-MA), quickly focused in on hydraulic fracturing, the practice of injecting a high-pressure fluid mix of water, sand and a proprietary chemical mix into formations to release natural gas. Hydraulic fracturing is specifically exempted from EPA regulation under the Safe Drinking Water Act. The FRAC Act seeks to repeal this exemption and also to require operators to disclose the chemical constituents of the fracing fluid used at any given well.
Significantly, both CEO Rex Tillerson, testifying on behalf of ExxonMobil, and CEO Bob Simpson from XTO Energy, stated that they would be willing to disclose the chemical constituents of fracing fluid, provided that the specific proprietary formula could remain confidential. Both opposed EPA regulation of hydraulic fracturing under the SDWA, maintaining that existing and proposed state regulation of the practice is sufficiently protective of drinking water. Both CEOs also testified that the current expansion of natural gas production in the shale plays would be commercially impracticable without a relatively low barrier to fracing activity. Rep. DeGette, who is not in the Subcommittee on Energy and Environment but was allowed to participate by the consent of the members, had a sharp exchange with the witnesses wherein she challenged them to produce their current costs incurred complying with the “patchwork” of state regulations on gas drilling, an estimate of the costs of disclosing the chemical constituents of fracing fluid, and an estimate of the costs of complying with possible EPA regulations on the practice. Both CEOs committed to try to deliver estimates for the first two requests, but begged off on the last, citing the impossibility of guessing what EPA would do if the exemption were repealed.
The FRAC Act received little traction last year as Congress focused on climate change legislation. As the prospects of cap-and-trade have faded over the last few months, there is increasing speculation that Congress may instead turn its attention to an “environment-friendly” energy bill. While most of the representatives at the ExxonMobil-XTO hearing appeared to be in favor of deferring action on the issue until EPA issues the results of a new study on hydraulic fracturing, expected to commence some time this year, we expect that sponsors of the FRAC Act will make a concerted attempt to include it in any proposed energy bill.