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Shale gas drillers face scrutiny in U.S.

North American drilling companies' methods are facing growing scrutiny that may curtail their efforts to tap a key U.S. source of natural gas.

In the latest signal of the increasing public and political concern over the drilling, a U.S. congressional committee is investigating drilling firms, including two Calgary companies, over concerns that their drilling for shale gas deposits may be contaminating water supplies.

Calfrac Well Services Ltd. and Sanjel Corp. have received letters from the House committee on energy and commerce, requesting information on all wells they've drilled over the past four years using a method known as hydraulic fracturing - including proximity to ground water sources and the chemicals used in the process.

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The congressional investigation is part of a growing controversy in the U.S. over the practice of hydraulic fracturing, which injects solvents into gas-bearing geologic structures to break open the rock and release the hydrocarbons. The technique is key to the commercial development of North American shale gas deposits, an immense resource that has transformed the continent's energy picture.

The oil and gas industry warns that unwarranted regulatory burdens could slow the development of the strategic resource. And it insists that there is no threat to drinking water from the drilling practice - solvents are injected thousands of metres below any drinking water sources.

However, New York state, which sits atop stretches of the immense Marcellus shale gas deposit, has imposed a moratorium on drilling until it ensures the development won't threaten water sources.

There is also a push in Washington to increase federal regulation of the industry.

In Canada, provinces regulate the drilling industry. The B.C. government has raised questions about waste water treatment from deep drilling in the Montney and Horn River gas basins in the rugged northeastern part of the province, but there has been little public debate.

Calfrac received its letter late last week, but Tom Medvedic, its senior vice-president for corporate development, said the company could not comment until it had more fully reviewed it.

"At this stage, we're not really in a position to provide any comment … There is a lot of information that is being requested," Mr. Medvedic said.

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"The fracturing process has been around for decades and, in that context, we certainly haven't been presented with any challenges like are now being projected."

Officials with Sanjel, a privately owned, Alberta-based company, could not be reached for comment.

The investigation is being conducted by the House subcommittee on energy and environment, amid growing calls for the U.S. Environmental Protection Agency to regulate the drilling industry. The subcommittee is chaired by Massachusetts Democrat Edward Markey, who is acting with Henry Waxman, the California Democrat who heads the full House energy and commerce committee.

In addition to Calfrac and Sanjel, the committee requested documentation from Halliburton Co., BJ Services Co., Schlumberger Ltd., Frac Tech Services Ltd., Superior Well Services Inc., and Universal Well Services Inc.

In a memorandum explaining their action, Mr. Markey and Mr. Waxman said the development of shale gas is "one of the most promising trends in U.S. energy supplies," with the potential to meet American gas demand for decades.

"But as the use of these [drilling]technologies expands, there needs to be oversight to ensure that their use does not threaten the public health of nearby communities," they said.

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The congressmen said Halliburton, BJ and Schlumberger had agreed with the EPA to end the use of diesel and other highly toxic chemicals in their hydraulic fracturing, but that Halliburton and BJ had continued to use diesel.

The oil and gas industry argues state regulators are already providing that oversight, and worry that excessive federal regulation could discourage investment in the new energy source.

"Hydraulic fracturing is a safe technology critical to developing the nation's vast natural gas reserves," the American Petroleum Institute said in a release.

"It has been used for more than 60 years in more than one million U.S. wells without a single confirmed instance of groundwater contamination."

The environmental controversy could delay development of the Marcellus reservoir, said Bill Gwozd, vice-president of gas services for Ziff Energy Group in Calgary.

There are some 65 rigs operating in Pennsylvania - most of them doing horizontal drilling required for shale gas plays - and none at work across the state line in New York.

In addition to raising concerns about waste water treatment, Pennsylvania Gov. Ed Rendell has proposed a 5-per-cent tax on all gas produced in the state, a measure that the industry says could seriously undermine the economics of the shale gas development.

"The goose with the golden egg story pops up here," Mr. Gwozd said.

"Operations-type limitations include perceived and real environmental issues … although getting the facts on the table would be a huge first step."

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