Los Angeles Times
October 14, 2004
WASHINGTON — Over the last four years, the Bush administration and Vice
President Dick Cheney's office have backed a series of measures favoring a
drilling technique developed by Halliburton Co., Cheney's former
employer.
The technology, known as hydraulic fracturing, boosts gas and
oil production and generates $1.5 billion a year for the company, about
one-fifth of its energy-related revenue. In recent years, Halliburton and other
oil and gas firms have been fighting efforts to regulate the procedure under a
statute that protects drinking water supplies.
The 2001 national energy
policy report, written under the direction of the vice president's office, cited
the value of hydraulic fracturing but didn't mention concerns raised by staff
members at the Environmental Protection Agency.
Since then, the
administration has taken steps to keep the practice from being regulated under
the Safe Drinking Water Act, which Halliburton has said would hurt its business
and add needless costs an d bureaucratic delays.
An EPA study
concluded in June that there was no evidence that hydraulic fracturing
posed a threat to drinking water. However, some EPA employees complained about
the study internally before its completion, and others have strongly criticized
it publicly since its release.
One of them, an environmental engineer
and 30-year EPA veteran in Denver, last week sought whistle-blower protection in
an 18-page statement sent to the agency's inspector general and members of
Congress. The statement alleges that the study's findings were premature, may
endanger public health and were approved by an industry-dominated review panel
that included a current Halliburton employee.
"EPA produced a final
report … that I believe is scientifically unsound and contrary to the
purposes of the law," Weston Wilson wrote to lawmakers.
EPA
spokeswoman Cynthia Bergman said Wednesday that the agency was reviewing
Wilson's statement but did not "believe that any of the concerns raised by his
analysis would lead us to a different conclusion."
Cheney declined to be
interviewed or to answer specific questions for this story. His spokesman,
Kevin Kellems, cited the vice president's commitment to keeping the 2001 energy
policy deliberations confidential, a principle Cheney is defending in federal
court.
"There is an important principle at stake in protecting the
ability of the office of the president and vice president to receive the most
candid and direct advice and counsel during the policymaking process," Kellems
said.
Halliburton, where Cheney was chief executive from 1995 to 2000,
is the leader among three large companies providing most fracturing services to
oil and gas drilling operations around the world. Fracturing affords access to
hard-to-reach energy deposits by forcing pressurized fluids deep into the earth,
creating underground fissures that permit oil and gas to flow toward surface
wells.
Halliburton and other energy compan ies have applauded the
administration's support of fracturing, which they say has proved safe for
decades.
Efforts to regulate hydraulic fracturing became a concern for
the industry during Cheney's tenure at Halliburton. A group of Alabama
residents went to court in 1995 seeking to force regulation of the practice
under the federal drinking water law. Halliburton filed a brief in the case,
arguing that environmental regulation of the practice "could have significant
adverse effects" on its business.
The company subsequently played a
leading role in lobbying against efforts to regulate fracturing under federal
drinking water laws.
Cheney, who left Halliburton in August 2000 to run
for vice president, has said he has severed all ties to the company.
Since he took office in January 2001, Cheney has received $398,548 in deferred
compensation, and he will continue to receive annual payments through 2005. He
also has 433,333 options to purchase Halliburton stock, according to financ ial
disclosure records filed in May 2004.
But his staff has pointed to an
insurance policy that guarantees that the vice president will receive the
deferred compensation no matter how Halliburton does — and to his
commitment to donate any profits from the stock options to charity.
The administration's ties to Halliburton have become an issue in the
presidential campaign. Democrats criticize the administration for awarding the
company billions of dollars in contracts in Iraq. Cheney has said he played no
role in the Iraq contracts.
Less attention has been paid to
Halliburton's domestic operations. The company, like many in the oil and gas
business, has benefited from an administration led by two former oil executives,
both of whom have made clear their belief that too many regulatory hurdles
hamper efforts to increase domestic energy production.
Energy
Breakthrough
In 1949, engineers from Halliburton Oil Well Cementing
Co. gathered in an Oklahoma field to experiment with a new drilling technique:
They pumped gasoline, napalm, crude oil and sand into the ground under enormous
pressure in hopes of stimulating oil from a 4,882-foot-deep well.
This
successful test of hydraulic fracturing would "forever change the workings
— and fortunes — of the energy business," said a Halliburton news
release commemorating the experiment's 50th anniversary.
The company
estimates that the technique has increased recoverable oil and gas reserves in
North America by as much as a third. About 28,000 wells a year are fractured.
Halliburton services at least one-third of the market, analysts say.
The
ingredients used in fracturing vary with the job and the terrain. Most of them
are as benign as food additives, but they can include toxic chemicals. In every
case, the fluid includes water and a "propping agent" — usually fine sand
or ceramics mixed with a chemical gel — that is pumped into the cracks to
keep them open. A second chemical m ixture liquefies the gel so that much of
the injected water and chemicals can be removed before the gas is
extracted.
But some of the fluid remains in the ground, a cause for
concern in heavily drilled areas.
Energy companies say there is not a
single proven case that fracturing fluids caused contamination.
But in
Alabama, a group of residents petitioned the EPA in 1994, saying that their
drinking water had been fouled by fracturing fluid used to extract methane from
coal beds.
They asked the agency to force the state to regulate
fracturing under the federal Safe Drinking Water Act. They argued that wells
subjected to fracturing should be held to the same pollution standards as wells
used to dispose of waste from energy production.
The EPA denied the
request. Residents asked the U.S. 11th Circuit Court of Appeals to overturn
the decision, and in 1997, the court ruled that fracturing should be regulated
under the federal drinking water law.
The Alabama case set off a
scramble in the industry, which feared it would lead to wider regulation of
fracturing — imposing costly requirements for permits, inspections and
testing.
While the court case was unfolding, lobbyists for Halliburton
and other energy companies began pressing the Clinton administration to exempt
fracturing from regulations under the drinking water law.
They made
limited progress. Former EPA Administrator Carol Browner was called to Capitol
Hill to meet with members of Congress from gas-producing states. She said more
study was needed, and the agency launched the drinking water study that ended
this year.
Cheney-Led Task Force
Nine days after his
inauguration in 2001, President Bush asked Cheney to head a Cabinet-level task
force to draw up a national energy strategy.
The task force consisted
of the vice president, nine Cabinet members and five senior administration
appointees. Research and writing was directed by two aides to Cheney supported
by a working group of representatives from participating Cabinet agencies. The
working group met through February and March, often in the vice president's
ceremonial office, to develop recommendations for the principals — Cheney
and Cabinet members.
The Cheney-led task force would tackle some of the
highest-priority issues on the new administration's energy agenda: expanding
oil and gas production, improving pipeline and power line transmission systems
and developing a new approach to regulating air and water pollution.
To
the surprise of some of those involved in the effort, the Cabinet-level panel
also would consider a narrower topic of importance to Cheney when he headed
Halliburton: hydraulic fracturing.
Cheney has cited executive privilege
to keep task force deliberations secret. But interviews and records obtained by
The Times show that Cheney's office was involved in discussions about how
fracturing should be portrayed in the report, and that it resisted EPA attempts
to inclu de concerns about its effects on the environment.
The Energy
Department drafted language for the task force that described hydraulic
fracturing as essential to increasing domestic gas production and that asserted
that production would be hurt by regulation under the Safe Drinking Water Act.
Documents obtained by The Times show that in the spring of 2001, EPA
officials corresponded with the vice president's office at least three times
requesting modifications in the proposed language. The EPA specifically asked
that the report note that the EPA was studying potential environmental
consequences of the technique.
A May 1, 2001, e-mail from the EPA to
Karen Knutson, a Cheney aide serving as deputy director of the task force,
proposed the addition of the following paragraph:
"As a result of the
… lawsuit on hydraulic fracturing of coalbed methane wells, the EPA
recognizes this issue raises concerns and is conducting an investigation to
evaluate the potential risks to ... drin king water." The proposed language
described the ongoing EPA study of fracturing and water quality, and noted that
it could culminate in "a regulatory determination."
On May 3, EPA
employees said, they received a final pre-publication draft of the report.
Agency staff members met into the evening to discuss the lack of responsiveness
from Cheney's office on fracturing and several other issues. They decided to
ask then-EPA Administrator Christie Whitman to write to the vice president
personally to request modifications.
The following day, Whitman
initialed a memo to Cheney asking him to reconsider parts of the final draft,
including the section on fracturing. Her note pressed Cheney to scale back the
recommendation exempting hydraulic fracturing from regulation.
Whitman
warned that the administration could be "walking into a trap" by taking a public
position against any regulation before the EPA completed its study of
drinking-water pollution.
Whitman, who resigned last year, d eclined to
be interviewed. Through a spokesman, she said, "EPA offered its expertise and
input on relevant issues whenever possible," but she said she didn't recall
details concerning the task force's handling of hydraulic fracturing.
"From my perspective, the vice president's office was driving the issue of
hydraulic fracturing," said Jeremy Symons, a former EPA staffer assigned to the
task force, who now works for a wildlife conservation organization.
When
the task force report was released on May 16, 2001, the reference to an
exemption from regulation was gone. But the report described the benefits of
fracturing in detail without any mention of the EPA study.
"In certain
formations, it has been demonstrated that the gas flow rate may be increased by
as much as twenty-fold by hydraulic fracturing," the report said, noting that
"most new gas wells drilled in the United States will require hydraulic
fracturing."
Although Cheney declined to answer questions about his
office's role in the fracturing discussions, his spokesman, Kellems, said the
task force encouraged "environmentally sound production" of energy.
During the next three years, the administration supported a regulatory exemption
for the practice on Capitol Hill and at the EPA.
Cheney participated
in House-Senate conference committee negotiations last year that produced a
sweeping national energy bill with a provision that would exempt fracturing from
EPA drinking water regulation. Bush and Cheney immediately endorsed the energy
bill. Some of those involved in the meetings said they could not recall or did
not know whether Cheney intervened on behalf of fracturing.
Halliburton spokeswoman Wendy Hall said the company "did not contact Vice
President Cheney or his office about hydraulic fracturing or the [provision
in] the energy bill."
The bill has passed the House, but has
languished in the Senate under the threat of a filibuster.
EPA Study
Attacked
Although stymied in Congress, the gas and oil industry won
an important victory within the administration.
In June, the EPA
released its long-awaited study initiated in response to the Alabama lawsuit.
The report focused on the use of fracturing to recover methane gas from coal
beds, which often lie close to the surface and near groundwater used for
drinking.
The report concluded that "injection of hydraulic fracturing
fluids into coal bed methane wells poses little or no threat" to drinking water
supplies and "does not justify additional study at this time."
Hall
said the study confirmed Halliburton's "long-standing belief that hydraulic
fracturing poses little or no threat to drinking water sources."
But the
EPA study has come under sharp attack within the agency. An EPA water expert,
who reviewed drafts of the report before its release, said he complained
internally about several flaws. The water expert, who did not want his name
used because he was speaking without authorization, said his concerns were
largely ignored.
Wilson, the EPA environmental engineer, and two other
specialists from the EPA Denver regional headquarters told The Times they were
not consulted, even though their territory included the country's richest coal
bed methane fields and some of the nation's most vulnerable water supplies.
In his statement to the EPA inspector general and members of Congress,
Wilson said the study did not follow approved methodology, relied on a panel of
experts with conflicts of interest and failed to include any field
investigation.
The report was based largely on a review of fracturing
studies, reports of water contamination and consultations with state regulatory
officials. The EPA decided against proceeding with a second phase of
independent fieldwork.
"This study was hijacked," Wilson said in an
interview. The EPA's multiple failures "may result in danger to public health
and safety," he said.
Wilson's statement said the study found that frac
turing fluids often contained hazardous chemicals. But because their patented
formulas are proprietary, all the potential compounds are not publicly
identified, he said.
"EPA cannot objectively nor scientifically defend
its claim that this practice does not risk endangering sources of underground
drinking water," Wilson said in an interview. Agency officials said the
chemicals were diluted and dispersed enough to minimize the risk. And they said
their analysis of incident reports found no firm proof that fracturing had
directly caused drinking water contamination.
"Unless we actually see
threats to drinking water supplies, the Safe Drinking Water Act admonishes EPA
not to regulate injection for oil and gas production unnecessarily," said EPA
spokeswoman Bergman.
The report did find that diesel fuel in
fracturing fluid posed a risk to drinking water. But EPA officials said no
regulatory action was necessary, because the three major fracturing companies
voluntarily agreed to stop using the fuel in coal bed methane operations.
Wilson's statement says the arrangement is inadequate, because the EPA has no
way of enforcing it and any of the parties can drop out at will.
The EPA
report was reviewed by a seven-person panel: a senior technical advisor at
Halliburton, a manager from an industry-funded research institute who previously
worked for Halliburton, a senior engineer with BP Amoco and two academics who
had worked for the energy industry. A sixth member, a state regulator with an
engineering background, also had worked for Amoco. The final member was an
expert on hydraulic fracturing from Sandia National Laboratories in New
Mexico.
"EPA selected panel members who we believed would be unbiased
and fair in reviewing this study, and selected a representative group," the
EPA's Bergman said.
One reviewer, Peter E. Clark, a professor at the
University of Alabama who specializes in hydraulic fracturing fluids and
previously worked for the industry, said the panel was fair. "Nobody tried to
grind any axes."
He said the original draft of the report reviewed by
the panel overstated the risks of fracturing and needed to be toned down. He
said he requested changes and that, in the end, "EPA made the right decision."
The EPA's Bergman said the final report incorporated only changes
suggested by the panel "to make the study as scientifically accurate as
possible."
In addition to the peer review panel, the agency sought
broad input through public meetings and notices and consultation within the EPA,
including the Denver regional office, officials said.
Cynthia C.
Dougherty, director of the agency's groundwater and drinking water office, said
there was no political influence on the selection of the peer review panel or
preparation of the report. Halliburton's Hall said the company did not
recommend its employee for the panel and "had no expectation of specific
benefit" from his participation.
The EPA report was a victory for
Halliburton. Alth ough only 1% of the company's fracturing business is in coal
bed methane fields, it is one of the fastest-growing sources of gas production
in the U.S. The study is seen as a boost to industry's efforts to win a blanket
exemption for fracturing.
Rep. Henry A. Waxman (D-Los Angeles), a
member of the House Energy and Commerce Committee who has followed the
fracturing study's progress, said the EPA review "made a faith-based leap to
conclude that injecting toxic materials" underground posed little or no threat,
he said. "The unanswered questions in EPA's report cry out for further study."
Geoffrey D. Thyne, a professor at the Colorado School of Mines who has
done consulting work for energy companies and local governments, said fracturing
is generally safe but needs to be monitored, particularly in areas where oil and
gas deposits are close to water supplies. Exempting fracturing from EPA
regulation "is premature, unwise and goes against the public interest," he
said.
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