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The U.S. Environmental Protection Agency’s (EPA) credibility is being called into question after it dropped its water contamination claims against Range Resources (NYSE: RRC) on Friday. In December 2010, EPA issued an imminent and substantial endangerment order to protect drinking water in Parker County. EPA alleged RRC was responsible for methane contamination in water wells (effecting two Parker County homes) and filed its lawsuit in January 2011 against Range. Range appealed the suit arguing nearby water wells contained high concentrations of gas long before the company began drilling in that area. Oil & Gas 360® notes that natural gas can naturally migrate into water aquifers and contaminate drinking water. On Friday, EPA dropped its claims against Range and the lawsuit filed in January 2011.

As reported in the OAG360 December 2010 write-up: “Don’t Mess with Texas; Texas Railroad Commission Says EPA Endangerment Order Premature and Unprecedented”, the Texas Railroad Commission (TRC) called the original endangerment order premature in a public news release issued on December 7, 2010.

The TRC Chairman Victor G. Carrillo said in the December 7, 2010, press release: “As I repeatedly emphasized to EPA Region 6 Administrator Al Armendariz last Friday, EPA’s actions are premature as the Railroad Commission continues to actively investigate this issue and has not yet determined the cause of the gas. This EPA action is unprecedented in Texas, and commissioners will consider all options as we move forward.”

Interesting enough, on March 22, 2011, the TRC reported Range was not responsible for methane contamination of these wells in Parker County, more than a year before EPA dropped its claims against the company in last week’s announcement.

This is not the first time EPA has backtracked on its contamination thesis or study procedures. In a separate but related matter, testing for the Pavillion Wyoming Groundwater Investigation was called into question and on March 8, 201 the Wyoming Governor Matthew H. Mead, the Northern Arapaho and Eastern Shoshone Tribes, and U.S. EPA Administrator Lisa P. Jackson agreed to further sample and monitor the wells before the data can be submitted for peer review. Click here for EPA statement.

With the recent back and forth in testing procedures and dropped court cases, we are anxiously awaiting the results from a national study EPA is undertaking expected in 2012. EPA is seeking to understand the potential impacts of hydraulic fracturing on drinking water resources.  Click here for more information on the impact study.

Note to readers of Oil & Gas 360®:

On February 16, 2012, the Energy Institute at The University of Texas announced hydraulic fracturing of shale formations to extract natural gas has no direct connection to reports of groundwater contamination, based on evidence reviewed in a study conducted by the University.Other findings from the Energy Institute study include:

Natural gas found in water wells within some shale gas areas (e.g., Marcellus) can be traced to natural sources and probably was present before the onset of shale gas operations.

Although some states have been proactive in overseeing shale gas development, most regulations were written before the widespread use of hydraulic fracturing.

Media coverage of hydraulic fracturing is decidedly negative, and few news reports mention scientific research related to the practice.

Overall, surface spills of fracturing fluids pose greater risks to groundwater sources than from hydraulic fracturing itself.

The lack of baseline studies in areas of shale gas development makes it difficult to evaluate the long-term, cumulative effects and risks associated with hydraulic fracturing.

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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.