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Senate Examines Implications of Shale Revolution

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U.S. natural gas policy, from hydraulic fracturing to exports, came under the microscope on Tuesday as environmental and industry groups presented their views on the issue to Congress and divided along mostly familiar lines.

On a day President Barack Obama was set to lay out his agenda in the annual State of the Union address, the Senate Energy Committee examined the implications of a shale gas revolution that has upended the American energy outlook.

Technological breakthroughs in the drilling technique known as hydraulic fracturing, or fracking, have unlocked massive reserves of U.S. shale natural gas in recent years.

The dramatic change in the energy landscape has sparked debates over the environmental impacts of rapidly expanding shale gas development and how much of the nation's gas should be allowed to be shipped abroad.

In his first hearing as chairman of Senate energy committee, Democratic Sen. Ron Wyden of Oregon lauded the growth in natural gas production, but stressed the need for adequate regulation and urged a thorough review of gas export guidelines.

"It is clearly time for a fresh look at our current policies and to start thinking about how to update those policies to reflect a very new reality," Wyden said.

Booming shale gas output has opened the door to substantial LNG exports. More than a dozen companies are lined up waiting for approval to send gas abroad.

The issue has divided lawmakers and manufacturers however, with some raising concerns that copious exports will hurt certain energy intensive domestic industries that recently have used low gas prices to gain a competitive advantage.

"Unchecked LNG export licensing can cause demand shocks, and the resulting price volatility can have substantial adverse impacts on U.S. manufacturing and competitiveness," Andrew Liveris, chief executive of Dow Chemical, said in prepared testimony.

Dow, one of the most vocal critics of unfettered exports, left the National Association of Manufacturers over its opposition to any bans on gas exports.

While stressing the belief that LNG exports should be governed by free trade, a NAM official said at the hearing that policy should not favor exports or domestic gas use.

"If the United States went down the path of export restrictions, even more countries would quickly follow suit and could easily limit U.S. access to other key natural resources or inputs that are not readily available in the United States," NAM's Ross Eisenberg said in prepared testimony.

Fracking Exemptions

The shale gas bonanza has also spurred a backlash from environmentalists and some communities near drilling sites, who complain that fracking is a threat to public health.

Fracking, is a drilling technique that involves the injection of water, sand and chemicals underground at high pressure to extract fuel.

Frances Beinecke, head of the Natural Resources Defense Council, said the government should repeal exemptions for oil and gas industry in various environmental laws. Currently, fracking is mostly exempt from federal regulation.

"Now shale gas production is expanding with supersonic speed without having in place even the basic environmental and public health requirements that apply to other industries," Beinecke said in prepared testimony.

The NRDC opposes expanded fracking until "effective safeguards" are in imposed. Oil and gas drillers dispute the notion that fracking poses a threat to the environment and argue that states are best placed to regulate drilling.

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