Hydraulic fracing dominates ExxonMobil-XTO merger hearing

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Jan. 21 -- A congressional hearing that ostensibly was supposed to consider a proposed merger’s market impacts quickly became a forum for debating whether to federally regulate hydraulic fracturing.

Chairman Edward J. Markey (D-Mass.) convened the Jan. 20 hearing of the House Energy and Commerce Committee’s Energy and Environment Subcommittee to examine energy market impacts of ExxonMobil Corp.’s proposed $41 billion purchase of XTO Energy Corp. “This merger heralds a fundamental long-term shift in US energy markets, and one that deserves our close attention,” he said in his opening statement.

But the discussion quickly turned to hydraulic fracing because the proposed combination’s agreement includes a termination provision if Congress enacts legislation making hydraulic fracing too costly and uneconomic.

“This country has a propensity to regulate. We need to protect our shareholders,” ExxonMobil Chief Executive Officer Rex W. Tillerson told the subcommittee.

ExxonMobil wants to acquire the Fort Worth, Tex., independent because XTO’s US unconventional gas resource base and technical expertise would go well with the major’s global reach, research and development capabilities, and financial capacity, Tillerson said.

“The development of our combined resources will create the opportunity for more jobs and investment in the production of natural gas across many parts of the United States,” Tillerson said. “It will support our nation’s economic recovery, strengthen [its] energy security, and help meet [its] environmental goals.”

Focus on gas
Bob R. Simpson, XTO chairman and founder, said the company’s management decided soon after it started to focus not only on gas, but also on long-lived, high-producing reserves. That led it to tight shale gas, where it eventually became an industry leader, he indicated.

“In reviewing our future path, we realized that we needed to look at options to take what we have achieved and bring it to a new level,” he testified. “We recognized that the opportunities before us could best reach their potential if we could find an organization that could bring additional scale, technology, and financial capacity to the work we have been doing. We found that organization in ExxonMobil.”

Markey suggested that the proposed merger has positive aspects, including the signal that another multinational oil company is willing to invest in developing unconventional US gas resources. But he also said that Congress wants to make certain those resources are developed safely, which is why it asked the US Environmental Protection Agency to study hydraulic fracing’s operating record.

Republicans on the subcommittee said the technology is safe. “It is well known that gas will play a more prominent role in a carbon-restrained world,” said ranking minority member Fred Upton (R-Mich.). “In fact, the success of any climate-change policy will need to rely heavily on gas. Yet some members of Congress are seeking policies that would take a majority of our domestic gas off the table.”

Several Democrats said the process uses toxic substances that would create serious problems if they entered drinking water supplies. Rep. Diana DeGette (D-Colo.), who is not a member of this subcommittee, was allowed to participate because she introduced a bill last year to federally regulate hydraulic fracing under the Safe Drinking Water Act.

“I support hydraulic fracturing,” she said. “My bill would not make it illegal or impractical. It simply would require disclosure of ingredients in an emergency situation while protecting proprietary information.”

Fluid confined
Tillerson and Simpson both said they would not have a problem as producers disclosing ingredients in hydraulic fracing fluid, which is primarily water. They also pointed out that the process occurs several hundred feet below drinking water supplies, and that concrete casing keeps hydrofrac fluid confined while it’s pumped below the surface.

States already regulate hydraulic fracing aggressively, they continued. DeGette immediately challenged that idea, noting that only four states have regulations that specifically deal with the process. The executives responded that several others have water-management regulations that serve similar purposes.

They also contended that federally regulating hydraulic fracing simply would add another layer to a process that states already regulate well. Restricting its use would harm conventional production too, Tillerson added. “A lot of conventional wells use hydraulic fracturing to make production commercial,” he said.

When DeGette asked them how much they think having to comply with SDWA regulations in using hydraulic fracing would cost their companies, the ExxonMobil and XTO executives said they did not know. “Much of it would depend on how EPA decided to implement its regulation,” Tillerson told her. “I don’t know what would be in it, and neither do you.”

Markey concluded the hearing by stating, “There is no secret plot on this side of the aisle to ban hydraulic fracturing.” But when he was asked by reporters afterward if he planned to schedule DeGette’s bill for markup, the subcommittee chairman replied, “I’m going to have to have further discussions with her on it before I decide.”

Contact Nick Snow at nicks@pennwell.com.

Related Articles

Halliburton, Baker Hughes agree to extend DOJ review of planned merger

07/13/2015 Halliburton Co. and Baker Hughes Inc. reached a timing agreement with the US Department of Justice’s Antitrust Division to extend DOJ’s review of H...

EIA’s estimates for state crude oil production to be helped by direct survey

07/13/2015 Understanding how crude oil production in US key states has been affected by recent changes in crude oil prices and drilling activity is of great i...

Russia’s Rosneft inks deal for stake in Indian refinery

07/13/2015 OAO Rosneft has entered a preliminary agreement to purchase as much as 49% interest in Essar Energy PLC subsidiary Essar Oil Ltd., including its 20...

MPLX, MarkWest to merge in $15.8 billion deal

07/13/2015 MPLX LP, a Findlay, Ohio-based master limited partnership (MLP) formed by Marathon Petroleum Corp. in 2012, and Denver-based MarkWest Energy Partne...

EPP completes acquisition of EFS Midstream

07/13/2015 Enterprise Products Partners LP (EPP) said it has completed the purchase of EFS Midstream LLC from Pioneer Natural Resources Co. and Reliance Holdi...

BLM proposes updates to its oil, gas measurement requirements

07/13/2015 The US Bureau of Land Management proposed regulations to ensure more accurate measurement, accountability, and royalty payments for oil and gas pro...

Western Australia, Browse JV agree on gas supply plan

07/13/2015 The Western Australian government and the Woodside Petroleum Ltd.-led Browse joint venture have finally come to an agreement over the supply of gas...

MARKET WATCH: NYMEX crude oil prices down slightly pending Iran talk results

07/13/2015 US light, sweet crude oil prices settled down slightly July 10 on the New York market, ending a week in which the front-month contract saw its bigg...

PHMSA proposes pipeline accident notification regulations

07/13/2015 The US Pipeline and Hazardous Materials Safety Administration has proposed new federal oil and gas pipeline accident and notification regulations.
White Papers

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by
Available Webcasts


Operating a Sustainable Oil & Gas Supply Chain in North America

When Wed, Oct 7, 2015

Short lead times and unpredictable conditions in the Oil & Gas industry can create costly challenges in supply chains. By implementing a LEAN culture of continuous improvement you can eliminate waste, increase productivity and gain end-to-end visibility leading to a sustainable and well-oiled supply chain.

Please join us for this webcast sponsored by Ryder System, Inc.

register:WEBCAST


The Resilient Oilfield in the Internet of Things World

When Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.

register:WEBCAST



On Demand

Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors

register:WEBCAST


Driving Growth and Efficiency with Deep Insights into Operational Data

Wed, Aug 19, 2015

Capitalizing on today’s momentum in Oil & Gas requires operational excellence based on a clear view of what your business data is telling you. Which is why nearly half* of oil and gas companies have deployed SAP HANA or have it on their roadmap.

Join SAP and Red Hat to learn more about using data to drive process improvements and identify new opportunities with the SAP HANA platform running on Red Hat Enterprise Linux. This webinar will also show how your choice of infrastructure impacts the performance of core business applications and your ability to achieve data-driven insights quickly and reliably.

*48% use SAP, http://go.sap.com/solution/industry/oil-gas.html

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected