Criticism Muted at Exxon-XTO Hearing

WASHINGTON (Dow Jones), Jan. 20, 2010

U.S. lawmakers on Wednesday opened a hearing into Exxon Mobil Corp.'s (XOM) planned purchase of gas producer XTO Energy Inc. (XTO) with upbeat comments about natural gas and limited criticism of the controversial drilling technique that is at the heart of the merger.

Rep. Ed Markey, (D., Mass.) said the deal highlighted "the brightening outlook for natural gas supplies," which he said would be essential to helping meet U.S. energy needs as the country shifts away from dirtier fossil fuels. "Natural gas can only play this role if it is produced in a safe and sustainable way."

Hydraulic fracturing involves pumping water, sand and other fluids into shale under pressure, creating fissures in the underground rock that allows the gas to escape. The practice has resulted in access to vast new supplies in states including Texas, Pennsylvania, and Louisiana. Critics fear that fracking could pollute drinking water if the drilling mixture escapes. The industry says the practice is safe.

The completion of the Exxon-XTO deal depends in part on how the practice is viewed within Congress, where some lawmakers have been considering tougher oversight of hydraulic fracturing, or fracking. The companies have included language in their merger agreement allowing Exxon to terminate the deal if Congress makes the practice "commercially impracticable."

"We see a lot of regulation that comes out of the Congress and the U.S. government that provides little benefit," Exxon Chief Executive Rex Tillerson told a U.S. House Energy and Commerce Committee subcommittee. But XTO Founder Bob Simpson said he isn't worried that Congress will pass laws.

"I just don't believe" that "there's any real risk of legislation that would prohibit that practice," Simpson said.

Rep. Diana DeGette (D., Colo.) is among those seeking to legislate. On Wednesday, she said companies should be required to disclose what chemicals are being used in hydraulic fracturing.

"I support the use of hydraulic fracturing but I also support it being done in an environmentally responsible way," she said.

But mostly, Democrats emphasized that natural gas, which emits less carbon dioxide than fuels such as coal, will be essential to fighting climate change.

"We know that natural gas is the cleanest of fossil fuels," said Rep. Lois Capps (D., Calif.). Though "there are legitimate public health and global warming concerns," she said that securing U.S. energy supplies was also important.

Rep. Jay Inslee (D., Wash.) one of the most environmentally minded members of the Democratic caucus, said it was "good news" that a "major energy producer" sees the potential of natural gas. He urged Exxon to do more to invest in zero-emissions technology.

Republicans emphasized the need for more domestic energy supplies.

"We should encourage domestic investment and domestic energy production, especially as our energy needs are expected to grow," said Rep. Fred Upton (D., Mich.).

Copyright (c) 2010 Dow Jones & Company, Inc.


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