Exxon says new rules slow gas production

01/21/2010 12:00 AM

01/21/2010 12:06 AM

WASHINGTON — Exxon Mobil Corp., defending its planned acquisition of gas producer XTO Energy Inc., told a House subcommittee on Wednesday that the cost of complying with new environmental regulations would slow development.

The $41 billion acquisition would enable Exxon to exploit growing domestic gas reserves as the new rules make natural gas more economical than coal or oil. Most of the new gas discoveries were made by independents such as XTO, but major oil companies are increasingly buying into the fields.

Meanwhile, gas producers have been trying to stop a separate legislative effort to regulate an underground injection technique known as hydraulic fracturing. Oil companies say the process, which involves shooting a mixture of water and toxic chemicals deep underground, is essential to freeing gas from rock formations such as the Barnett Shale. Environmentalists say the chemicals could contaminate water supplies.

Wednesday's hearing before a subcommittee of the House Energy and Commerce Committee often touched on a bill by Rep. Diana DeGette, D-Colo., that would require companies to disclose the chemicals they use in hydraulic fracturing.

Energy companies say hydraulic fracturing has not contaminated any water sources. Exxon and XTO say they don't object to disclosing to regulators the chemicals used in the process, but suggest that DeGette's bill might lead to a ban on hydraulic fracturing.

"The devil is always in the details when you turn this over to EPA," Exxon Mobil chief executive Rex Tillerson told DeGette. "I don't know how EPA is going to enact or implement the regulation you are promoting in your bill."

The deal with XTO would allow Exxon to void its purchase if Congress prohibits hydraulic fracturing or adds regulations that make the wells commercially "impracticable." Late last year, Congress directed the Environmental Protection Agency to study hydraulic fracturing and its effect on water supplies.

Tillerson told the House panel that gas production from unconventional sources could support the creation of more than 300,000 jobs over the next 20 years.

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