Thursday, January 21, 2010

House Hearing On ExxonMobil-XTO Merger

Jan 20: The House Energy & Commerce Committee, Subcommittee on Energy and Environment, Chaired by Representative Ed Markey (D-MA) held a hearing regarding, "The ExxonMobil-XTO Merger: Impacts on U.S. Energy Market." Chairman Markey commented in his opening statement that, "Last month, ExxonMobil announced a $41 billion merger with XTO Energy, one of the country’s largest natural gas producers and a pioneer in the production of natural gas trapped in shale rock formations and other unconventional sources. The combined entity will be, by far, the country’s largest natural gas producer and largest holder of natural gas reserves.”

Markey said, ". . .when America’s biggest company [worth $328 billion with $45 billion in annual profits] makes a big move in the energy sector, policy makers need to listen and understand what it means. That is why I have called today’s hearing. This merger heralds a fundamental long-term shift in U.S. energy markets, and one that deserves our close attention.” Markey pointed out that, “Over the last decade, a small group of companies that most Americans have never heard of has been developing huge deposits of natural gas in deep shale formations across America. Long believed uneconomic to produce, these reserves are now being tapped thanks to a revolution in technology. Using a technique called hydraulic fracturing, companies are now able to extract the natural gas that is locked within shales and other rock formations deep under the Earth’s surface. This involves drilling into these formations and breaking them up by injecting a high-pressure stream of fluid, composed mostly of water and sand, making extraction of the gas easier. Horizontal drilling also plays a key role in making these reserves economical to produce. . .

"The brightening outlook for domestic natural gas supplies changes the backdrop against which we consider energy policy here in Congress. Natural gas will play a critical role as a “bridge fuel” – a lower-carbon alternative to coal and oil that helps America transition from a high-carbon past to a clean energy future. An abundant domestic supply of natural gas – together with robust investment in efficiency and renewables -- can help make crossing that bridge faster and less costly. Natural gas can only play this role if it is produced in a safe and sustainable way. Congress recently urged EPA to study the potential impacts of hydraulic fracturing on drinking water sources. The results of that study will help to guide policy to ensure adequate protection of public health and the environment.”

At the hearing, Rex Tillerson, Chairman and CEO, ExxonMobil Corporation commented on hydraulic fracturing in his testimony and referred to it as, "time-tested." He said, "With recent advances in extended reach horizontal drilling, combined with the time-tested technology of hydraulic fracturing -- a process in use for more than 60 years -- we can now find and produce unconventional natural gas supplies miles below the surface in a safe, efficient and environmentally responsible manner."

The American Petroleum Institute (API) President and CEO Jack Gerard issued a statement following the discussion during the hearing where there was discussion about the need for federal regulation of the practice of hydraulic fracturing. Gerard said, “As Energy Secretary Stephen Chu said just last week, hydraulic fracturing is safe and lawmakers should be cautious in their efforts to restrict it. Hydraulic fracturing is a proven technology that has been used safely in this country for 60 years. It is crucial in the development of clean-burning natural gas needed to heat and cool homes, generate electricity, and create basic materials for fertilizers and plastics. More than one million wells have been completed in the United States using this technology, helping to produce more than 7 billion barrels of oil and 600 trillion cubic feet of natural gas. Unnecessary additional regulation of this practice would only kill jobs, threaten our economy and hamper our nation’s energy security. Studies estimate up to 80 percent of natural gas wells drilled in the next decade will require hydraulic fracturing.”

As previously reported [See WIMS 1/20/10], on January 20, the Environmental Working Group (EWG) released a highly critical report on hydraulic fracturing and the process, known as “fracking.” In their report entitled, Drilling Around the Law, EWG charges that companies drilling for natural gas and oil are "skirting federal law and injecting toxic petroleum distillates into thousands of wells, threatening drinking water supplies from New York to Wyoming." EWG said, "the petroleum distillates used in a single well could contain enough benzene to contaminate more than 100 billion gallons of drinking water to unsafe levels. . ."

Access the hearing website for links to the testimony and a webcast (click here). Access the statement from Chairman Markey (click here). Access the statement from API (click here). Access an executive summary and link to the complete 24-page EWG report (click here).