Natural gas vs. contaminated water

Fill up with natural gas

More Videos

Special Reportfull coverage

Oil rises on surprise inventory drop Exxon's drilling juggernaut Oil climbs above $74 Oil pares gains, settles lower Oil rises on weaker dollar Oil dips near $72 on stronger dollar

Quick Vote

I believe gas prices will:

• Continue to drop
• Fluctuate up and down
• Rise much higher

or View results

NEW YORK (CNNMoney.com) -- New technology and higher prices have brought vast domestic oil and natural gas deposits within reach to a country desperate for new energy sources. But danger comes with this bounty: Chemicals used to extract this energy may contaminate the groundwater.

Striking the right balance between drilling and protecting the environment is in everyone's best interest and new questions are surfacing about whether regulators are up to the task.

New natural gas fields located in Texas, Louisiana, Arkansas, New York, Pennsylvania and elsewhere have been heralded as something of a godsend for the U.S. energy picture.

Not only are they big, possibly boosting the nation's natural gas output by 20% - they are also domestic and burn relatively clean - natural gas produces about half the greenhouse gas emissions of coal.

But these shale locations are lose to major population centers including New York City, Dallas, Houston, Cleveland and Pittsburgh. Environmentalists are pushing for stricter regulations to protect the groundwater but experts say these concerns shouldn't delay the development of the fields.

Although these fields are new to development, oil and gas companies have known about them for years. But only now - with a four-fold increase in natural gas prices over the last four years - have they become profitable enough to tap.

Companies active in shale development include Chesapeake (CHK, Fortune 500), Anadarko (APC, Fortune 500), Range (RRC), XTO (XTO, Fortune 500) and Devon (DVN, Fortune 500).

The fields are more expensive to develop because they deep lie in shale rock, which is less porous than sandstone or other rock in conventional fields and thus harder to pump oil or gas through.

To bring the gas to the surface, companies often have to fracture the rock, a process known as fracing (pronounced "fracking"). This is done by injecting millions of gallons of water - and lots of chemicals - into the ground.

Last week, a report from WNYC public radio and ProPublica, an independent, non-profit newsroom, accused New York state environmental officials of glossing over the dangers of using these chemicals in the Marcellus Shale, part of which sits close to the drinking water for New York City.

The state officials, the report said, gave the drilling a green light, even though they have no idea what chemicals are being used. That's because in 2005, Congress passed a law that made the chemicals proprietary business information, and said they do not need to be made public.

Moreover, the report said the thumbs up from regulators came despite hundreds of cases of groundwater contamination in other states where these chemicals are used - contamination that included chemicals known to cause birth defects and evidence of naturally occurring radiation making its way to the earth's surface.

"Obviously, natural gas is important and we don't have any interest in shutting down the operations," said Amy Mall, a policy analyst for the Natural Resources Defense Council. "But all the right policies might not be in place."

Mall confirmed the reports of hundreds of cases of contamination in places like Texas and Colorado. Mall said regulation nationwide is not up to the task of protecting the groundwater.

She called for the gas companies to let state officials know what chemicals they are using, disclosures that did not have to be made public, she said. That way, a proper assessment of the risks could be made without jeopardizing the competitive position of individual companies, she said.

She also said the drilling has other environmental issues - like air pollution from both venting gas and the drilling equipment, disruptions to land surface areas, and issues of waste management.

The industry says proper regulations are in place, and that most of the reports of contamination come from collapsed wells - not the fracing that takes place in shale drilling.

"I'm not saying there has never been a problem with an oil and gas well, but the case against hydraulic fracing has been notoriously poor," said Lee Fuller, a spokesman the Independent Petroleum Association of America.

Fuller also said to put the number of contaminated sites into perspective: There may be hundreds of cases of contamination, but the country has some 800,000 oil and gas wells.

Industry analysts did not see these environmental concerns as a big obstacle to bringing this gas to market.

"I hear these arguments, and I think they create fear among the public," said Kevin Petak, a natural gas analyst at the consultancy ICF International and a former petroleum industry engineer. "For every hundred cases where there is contamination, there are 10,000 that are fine. And we have real energy issues."

Petak said drilling technology has come a long way - they now use more advanced plugs made of better concrete to contain the chemicals.

"This isn't going to derail shale development," said Petak.

Plus, the chemical injections are happening thousands of feet below the surface, whereas groundwater is usually just hundreds of feet deep, said Phani Gadde, a gas supply analyst at the energy consultancy Wood Mackenzie.

Gadde also said the industry has a huge incentive to keep the chemicals out of the groundwater - to breach the two would kill production in the well.

Even Natural Resources' Mall said most of the time there isn't a problem.

"If they do everything absolutely right, the risks could be small," she said. "But there's always the possibility for human error."

"The industry has a lot of sustainable technology available to it, and they are using it in some places," Mall said. "But only where they are required to."

She said the regulation should be more uniform from state to state.