Washington (Platts)--11Aug2011/321 pm EDT/1921 GMT

Everybody found something to like, but nobody fell in love with a Department of Energy natural gas advisory panel's recommendations Thursday on how to boost public confidence in, and improve, US shale gas extraction.

To increase the public's confidence in the shale "revolution" that has sent US gas production to record levels, the Natural Gas Subcommittee to the Secretary of Energy's Advisory Board recommended that drillers fully disclose the chemicals used in hydraulic fracturing and suggested the federal government investigate the impact of air emissions from shale plays.

The recommendations -- the first from any federal level body on the high-volume, high-intensity process of shale gas extraction -- stopped short of calling for any direct federal regulation of horizontal drilling and fracking but called for increased supervision at the state and regional level.

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The committee agreed with what it called "the prevailing view" that the risk of fracking fluids leaking into drinking water was "remote," given the wide separation between shale formations deep underground and fresh water aquifers near the surface.

Nevertheless, "the subcommittee believes there is no economic or technical reason to prevent public disclosure of all chemicals in fracturing fluids, with an exception for genuinely proprietary information," the report said. "While companies and regulators are moving in this direction, progress needs to be accelerated in light of public concern."

Environmental groups liked the call for disclosure of fracking compounds but were disappointed that the seven-member panel did not go further and recommend that fracking's exemption from the Safe Drinking Water Act be axed.

"Americans will not be fully protected until the natural gas industry's exemptions from key federal environmental laws are removed," Gwen Lachelt, director of Earthworks' Oil & Gas Accountability Project, said.

"While today's report outlines several helpful steps to reduce the environmental costs of natural gas drilling, it is unfortunate that the subcommittee stopped short of calling for the closure of a key loophole in the Safe Drinking Water Act and other environmental laws, leaving communities living amidst the shale boom at risk," Lachelt said.

Republican lawmakers blasted the report as a back-door attempt to introduce new regulations on an already regulated industry.

Oklahoma Republican James Inhofe, the ranking member on the Senate's Environment and Public Works Committee, said the report confirmed "what we have known all along."

"Natural gas is a cornerstone of the US economy and that it has brought lower prices, domestic jobs, and the prospect of enhanced national security," Inhofe said.

"However, as expected, any advisory panel coming out of Washington inevitably pushes for an increased regulatory agenda -- this report is no different," Inhofe added.

"We have seen the results of Washington's regulation on federal lands: it leads to less development, less jobs, and less economic growth. America became the largest producer of natural gas precisely because our immense shale deposits are located predominantly in areas of the country where states primarily regulate oil and gas development, not the federal government," Inhofe said.

Industry reaction was lukewarm. Independent Petroleum Association of America CEO Barry Russell praised the report for supporting state-based regulatory changes, but said its recommendations were "largely directed at improving public knowledge about development and enhancing the effectiveness of current management of shale gas development environmental risks."

"The report stands in stark contrast to the strident, hysterical demands for moratoria on hydraulic fracturing," Russell said.

America's Natural Gas Alliance chief spokesman Dan Whitten said the group was "particularly pleased with the recommendation to bolster the role of the multi-stakeholder group STRONGER and the Groundwater Protection Council to work within the state regulatory framework."

Subcommittee member Fred Krupp, president of Environmental Defense Fund and the lone environmentalist on the panel, said the report was balanced and marked an important step towards finding common ground, rare in Washington, where "so much of the debate is characterized by discord and paralysis."

"The subcommittee's recommendations won't solve every problem overnight. But if implemented, they would make real progress toward developing this abundant energy source in ways that safeguard public health and the environment," he said, adding: "Rigorous, well-designed standards and improved transparency and disclosure can help ensure that shale gas is developed responsibly now and in the future."

Appointed by Secretary Stephen Chu early in the spring, the committee, headed by former CIA Director and Massachusetts Institute of Technology Professor John Deutch included former energy regulators, Krupp and a petroleum engineer who helped pioneer current fracking techniques, said the US will not be able to reap the tangible rewards of the "shale gale" unless public confidence in the gas drilling process is rejuvenated.

"Public concern and debate about the production of shale gas has grown as shale gas output has expanded," the report, released early Thursday, said.

The committee made nearly 100 recommendations in four areas of public concern: pollution of drinking water from gas migration or fracking chemicals; air pollution; community disruption by the trucks, wells and pipes constructed to get gas to market; and the unexamined cumulative impacts shale gas production can have on communities and the environment.

The advisors' recommendations are sure to disappoint all sides in arguments over shale gas extraction as the committee trod a fine line between calling for more oversight while leaving much of that role in the hands of states and industry-sponsored organizations.

Industry -- already leery of any increased federal role in the process -- will not be comforted by a call for a federal investigation of such areas as air emission and the banning of diesel fluid from the fracking process.

The committee recommended a national database be established for all shale gas data, collecting both information on the chemicals being used for fracking and well design data and production results -- essentially collating data collected by states and industry organizations.

It called for greater federal funding for interstate alliances such as STRONGER -- the State Review of Oil and Natural Gas Regulation, which conducts audits on individual state regulatory regimes -- and the Ground Water Protection Council, which maintains FracFocus, a voluntary well-by-well database of fracking fluids, as well risk management software for designing shale gas wells.

The federal government should immediately launch an interagency effort to gather and analyze air emissions data to gauge the overall greenhouse gas footprint of shale operations and determine the lifecycle greenhouse gas impacts of natural gas versus other fuels, the committee recommended.

--Bill Holland, bill_holland@platts.com