NCPA - National Center for Policy Analysis

Securities and Exchange Commission Bears Down on Fracking

September 9, 2011

The Securities and Exchange Commission (SEC) is asking oil and gas companies to provide it with detailed information about their use of a controversial drilling process used to crack open natural gas trapped in rocks.  Some lawmakers and environmental watchdogs have criticized the process of hydraulic fracturing (or "fracking"), which involves pumping water, chemicals and sand underground to free difficult-to-reach natural gas in shale basins, says the Wall Street Journal.

  • Their concerns are that air and water may be contaminated when the process causes natural gas to seep into residential water wells.
  • But there have been few if any documented cases of contamination by the chemicals used in hydraulic fracturing.
  • The industry acknowledges that improperly constructed wells can allow gas to escape, but says such cases are rare and aren't directly tied to fracturing itself.

Additionally, the SEC is seeking information on chemicals used and efforts by companies to minimize environmental impact.

  • While the Environmental Protection Industry is collecting information about the process, the SEC has explained that its involvement in fracking cases is meant to insure that investors are being told about risks a company may face related to its operations, such as lawsuits, compliance costs or other uncertainties.
  • The SEC is also investigating whether companies are overstating the long-term productivity of their natural-gas wells and has issued subpoenas to at least two firms.

Fracking is primarily regulated by states and is largely exempt from some federal statutes, such as the Safe Water Drinking Act. 

Source: Deborah Solomon, "SEC Bears Down on Fracking," Wall Street Journal, August 25, 2011.

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