Exxon Mobil Goes To Washington

Exxon Mobil CEO Rex Tillerson

WASHINGTON —Representatives from Exxon Mobil Corp. and XTO Energy presented evidence to legislators on Wednesday that their companies can avoid damaging the environment or contaminating nearby drinking water supplies while producing natural gas from shale rock.

CEO of Irving-based Exxon Mobil, Rex Tillerson said “We can now find and produce unconventional natural gas supplies miles below the surface in a safe, efficient and environmentally responsible manner.”

Tillerson appeared before the House Energy and Commerce subcommittee hearing that is examining plans by Exxon Mobil, to acquire Fort Worth-based XTO, a pioneer in using hydraulic fracturing to produce natural gas.

Hydraulic fracturing, or “fracking,” is a process whereby gas locked within the shale are released by high pressured fluids injected underground. Despite state regulations governing the process, environmentalists worry it could introduce harmful chemicals into water supplies.

Hydraulic fracturing for releasing natural gas.

Exxon’s proposed acquisition, a $40 billion stock purchase, has an amorphous “out clause”. Tillerson said Exxon Mobil can pull out of the agreement if new federal statutes prohibit hydraulic fracturing or make it “no longer commercial.”

Potential Regulatory Issues

Federal intervention is a legitimate concern. Several bills pending in Congress aim to examine the technique, including a measure by Rep. Diana DeGette, D-Colo., that would require companies to disclose which chemicals are being used in fracking.

As DeGette explains, she wants “to make sure that we aren’t contaminating drinking water with the chemicals that are in the fracking fluid.”

Tillerson worries that new federal regulations would decrease cost efficiency by adding unnecessary compliance costs. He claims that state laws are better adapted to the needs of individual states and their geology. “I’ve never seen a regulation that didn’t add a layer of cost,” Tillerson said. Increased costs could make marginally viable wells economically useless while a complete ban would halt production of natural gas from shale rock, he said.

“Without hydraulic fracturing, the gas that is locked in the shale rock stays locked,” he said. “We’ve drilled through these shales for years.

“If you remove hydraulic fracturing as one of the key enabling technologies, this resource could no longer be recovered.”

Tillerson would support more disclosure of the contents of the chemical cocktails used in fracking — but opposes giving the U.S. Environmental Protection Agency the power to regulate the process.

Exxon contends it was unclear how the EPA would regulate fracking if DeGette’s proposal became law.

Tillerson’s stance on disclosure is not shared by all of his peers. Others in the industry raised concerns about releasing proprietary information if new disclosure requirements are federally regulated.

XTO founder Bob Simpson emphasized that hydraulic fracturing has been used for more than six decades. Only the objective and methodology has changed in recent years. Recently fracking has been combined with horizontal drilling techniques to tap shale discoveries in Texas, Louisiana and Arkansas, and stretching from New York to Tennessee. Energy experts claim that a 100-year supply of natural gas can be recovered in the U.S.

Rep. Gene Green, D-Houston, said he wants “to make sure we don’t throw so many regulatory roadblocks that we can’t have the shale production.”

Market Concerns Arise From Tightening Energy Oligopoly

Congresswoman Doris Matsui (D-California)

Rep. Doris Matsui, D-Calif., cited concerns about corporate concentration in the energy industry.

“Studies have shown that fewer participants in energy can lead to both lower and higher prices for consumers.” Matsui opined “The Exxon Mobil-XTO deal may prompt its peers to move forward similarly, consolidate an already tight oil and gas market and create additional concerns for the regulatory bodies that oversee the oil and gas supply,”

Tillerson refutes Matsui’s claim as he maintains that an Exxon Mobil-XTO collaboration “is unlikely to change the competitive balance.”