Fracking Industry Keeps Eye on Obama; EPA Report Could Doom its Future
The drilling process that has brought U.S. energy independence within reach faces renewed scrutiny from the Obama administration and an uncertain future in many states.
Oil and gas industry leaders remain enthusiastic yet cautious that hydraulic fracturing, commonly known as "fracking," will be fully embraced by the newly re-elected President Obama and state leaders.
Fracking is a controversial but highly successful practice that has unlocked massive amounts of fuel. Endorsements from Mr. Obama and state leaders would make fracking the cornerstone of U.S. energy policy for decades to come.
Industry leaders won't have to wait long for their first clue to what the future holds.
Next month, the Environmental Protection Agency is expected to release a draft of its long-awaited report on suspected links between water pollution and fracking, which uses huge amounts of water, combined with sand and chemical mixtures, to crack underground rock and release trapped oil and gas.
The completed EPA study won't be finished until 2014, but the draft will provide an early indication to which energy path the Obama administration will take in the next four years.
Many in the energy sector, along with congressional Republicans, fear the report will paint fracking in a negative light and give the White House political cover for cracking down on it in the name of science, something environmentalists have hoped for since Mr. Obama came into office in 2009.
But economics may outweigh environmental arguments. Energy leaders now, more than ever, are portraying oil and gas production as a key way of generating tax revenue, spurring job creation and saving the nation from going off the looming "fiscal cliff."
"It's going to take tax reform, but we can't tax our way out of this. It's going to take entitlement reform, but we can't save our way out of this. And we're not going to be able to grow out of this. ... We need another [way] to make this achievable, and we believe that's energy," said Karen A. Harbert, president and CEO of the U.S. Chamber of Commerce's Institute for 21st Century Energy. "Every dollar that we generate from energy is a dollar that we don't have to take out of the Defense Department, the entitlement area, or increase taxes."
Ms. Harbert and others remain optimistic that the White House will recognize that, and they are heartened by what they heard from the president during his campaign. While Republicans and some industry analysts at times have doubted his sincerity, Mr. Obama voiced strong support for expanded oil and gas drilling throughout his race against Republican challenger Mitt Romney.
Politically, it has become increasingly difficult to oppose such expansion, especially in light of research that shows drilling will be vital to the effort to free the U.S. from reliance on Middle Eastern oil.
The International Energy Agency last week predicted that the U.S. will become the world's largest oil producer by the next decade, overtaking Saudi Arabia and putting the nation on course to be energy self-sufficient by 2030. The shift is driven by increases in oil extraction and the production of natural gas, which since 2007 has gone up from 20.2 trillion cubic feet per year to more than 24 trillion cubic feet and likely will go even higher.
The new energy reality, unimaginable even five years ago and driven primarily by fracking, puts pressure on the Obama administration to fully embrace the extraction method and avoid taking steps that could hamper it, analysts say.
"We believe you cannot be for the potential energy development in the U.S. and be against hydraulic fracturing," said Jack Gerard, president of the American Petroleum Institute.
As the White House weighs its options, fights over fracking are heating up in state capitals.
North Carolina Gov.-elect Pat McCrory, a Republican, recently said he plans to get his state "in the energy business," signaling that he will take a different path from that of his predecessor, Gov. Bev Perdue, who vetoed legislation to allow fracking.
New York Gov. Andrew Cuomo must decide whether to allow the practice in the Empire State, though he continues to equivocate, and it's unclear when he will make a decision. Last month, a coalition of environmental groups sued California to stop fracking, claiming that the toll it may take on water supplies has not been fully studied.
Meanwhile, states such as Pennsylvania and North Dakota continue to expand drilling, creating tens of thousands of jobs and pumping millions of dollars into local economies.
Any federal action to limit fracking would pour cold water on the growth in those states and give fresh ammunition to the vocal environmental opposition in New York, California and elsewhere. Although some new federal rules and oversight are almost inevitable, many analysts say, the administration can't turn back the tide.
"It's clear that the EPA, the Interior Department, may impose some more regulations on drilling both nationally and on federal lands, but it cannot and will not stop all the momentum. ... It's too big," Robert Bryce, an energy scholar at the Manhattan Institute, said in a recent interview with Fox News. "The Obama administration would be foolish, absolutely insane, to try and stop it."