Why Are Exxon Mobil and XTO Energy Meeting With Congress? (Hint: It May Be About Drilling in the Marcellus Shale)
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A curious note in a January 12 MarketWatch report alludes to the fact that executives from Exxon Mobil and XTO Energy will meet with Congress next week to, “discuss their merger plans.” For those following the natural gas story, Exxon Mobil’s acquisition of XTO--a company with large holdings in the Marcellus Shale--for $31 billion in December was big news. It was the company’s most ambitious move since it acquired Mobil in 1999. Shortly thereafter, it was revealed that a clause buried in the 76-page legal agreement essentially said that Exxon could back out of the deal if Congress regulates hydraulic fracturing to the point that it makes the process or similar processes, “illegal or commercially impracticable.”
According to the Wall Street Journal , William Hederman of Concept Capital picked up on the clause, which is filed under “company material adverse effect” in the 8-k filing form.
Hydraulic fracturing is a controversial method of drilling that pumps millions of gallons of water, sand, and chemicals into the well bore to shatter the rock and release the gas. In the last year, it has become the industry’s bete noire as it seeks to expand natural gas production in the northeast.
The industry, which has been exempt from the Safe Drinking Water Act, the Clean Water Act, Clean Air Act, and CERCLA since 2005, has never been forced to publicly disclose the contents of the fluids it uses to fracture wells. The so-called Halliburton Loophole, inserted into the 2005 energy bill, was a gift of the Bush-Cheney administration (Halliburton invented the process of hydraulic fracturing), and essentially said that the EPA no longer had the authority to regulate the process.
However, in the last year, Congress has moved to reverse the exemptions granted the industry in 2005 and the EPA has undertaken its first full review of hydraulic fracturing.
So one might wonder what will be on the agenda when executives from Exxon Mobil and XTO meet with Congress.
Perhaps the FRAC Act, a bill pending in Congress that would effectively remove the 2005 exemption and force the gas industry to abide by the Safe Drinking Water Act. It would hardly be a surprise. According to OpenSecrets, “The company long has enjoyed a close relationship with Congress, successfully lobbying to gain commercial access to federal lands as well as the rollback of several Environmental Protection Agency initiatives deemed unfriendly to the oil industry.”