Development of shale gas resources using hydraulic fracturing has been one of the most significant advances in US energy production in the past decade. By combining horizontal drilling and hydraulic fracturing, previously unrecoverable gas reserves have become economically viable. This development offers enormous potential for economic growth and energy security. In response, regulators have begun issuing new rules and guidance governing the use of hydraulic fracturing.

Shale formations are comprised of fine-grained, organic-rich sedimentary rock. Natural gas is trapped in small pores within shale formations, but does not flow through the rock unless natural or artificial fractures connect the gas pores. As a result, these gas deposits, or "plays" cannot be effectively and economically developed using conventional drilling technology. However, by combining horizontal drilling and hydraulic fracturing, it is possible to recover significant quantities of natural gas from shale formations. In addition to "dry gas" plays, which are comprised solely of natural gas, some shale plays produce "wet gas," from which both natural gas and petroleum fractions can be recovered.

Both horizontal drilling and hydraulic fracturing have been used for many decades in oil and gas development across the US. With advances in technology, the two techniques have been combined to develop shale gas resources. Initially, a vertical well bore is drilled deep into the shale formation, often more than a mile below the surface. Steel and cement casings are then added to isolate the target shale formation and prevent migration out of the well bore. Once the vertical well bore is completed, the drill bit is turned laterally, and the well bore is extended horizontally (in some cases for another mile or more) through the shale formation. After the horizontal well casing is in place, that portion of the well casing is perforated, and small charges are used to create fractures in the surrounding shale. Fracturing fluid (primarily made up of water and a "proppant" (usually sand)) is then pumped into the well bore at high pressure to stimulate the well. The proppant fills the newly created fractures in the shale and ensures that they remain open during production. Fracturing fluids also include very small concentrations of other proprietary and non-proprietary chemical additives, which are used to prevent bacterial growth and corrosion, reduce friction in the well bore, and manage well pressure. The fracturing process takes several days to complete and a portion of the fracturing fluids return to the surface as produced water. Once the well development is finished (or the well is "completed"), the drilling equipment is removed and production occurs on a small well pad.

Shale plays containing natural gas and oil are found throughout the US. The major plays include:

The US Energy Information Administration (EIA) estimates that there are 482 trillion cubic feet (tcf) of unproved, technically recoverable shale gas resources in the US, which accounts for a third of domestic natural gas resources (EIA Annual Energy Outlook 2012). As a comparison, total US natural gas consumption in 2011 was 24.3 tcf. EIA 2012. In the past decade, shale gas production has increased dramatically, from 0.4 tcf in 2000 to 4.8 tcf in 2012 (EIA Annual Energy Outlook 2012). EIA projects that production will increase to 13.6 tcf by 2035.

The expansion of shale gas production using hydraulic fracturing has important energy security implications, and the EIA projects that the US will become a net exporter of natural gas by 2021.

The development of shale gas resources using hydraulic fracturing also promises significant economic benefits. A recent study found that in 2010 the shale gas industry directly employed 148,000 workers and was responsible for an additional 450,000 indirect and induced jobs (IHS Global Insight, The Economic and Employment Contributions of Shale Gas in the US (2011)). The IHS study found that the shale gas industry contributed US$76 billion to the US GDP and nearly US$20 billion in federal, state, and local taxes and royalty revenues. In addition to energy production, shale gas development is spurring growth in other industries. For example, ethane, the second largest component of natural gas after methane, is a primary raw material for ethylene production. In response to ample supplies of natural gas, four petrochemical producers have recently announced plans to build or recommission ethane crackers and production facilities near shale gas plays.

Despite its promise, shale gas development using hydraulic fracturing has been controversial, as some have raised concerns over potential environmental impacts. In 2011, the Secretary of Energy Advisory Board (SEAB) solicited the views of interested organisations, and SEAB's final report summarises environmental concerns raised by some commenters, although the concerns are disputed by industry (Secretary of Energy Advisory Board, Shale Gas Production Subcommittee 90-Day Report (Aug. 18, 2011) (SEAB Report)). For example, commenters expressed concern that:

Historically, states have played the primary role in regulating oil and natural gas development in the US, and this trend has continued for the regulation of hydraulic fracturing. State regulation allows each state to evaluate the unique characteristics of its oil and gas plays by tailoring regulations to address the specific issues that are presented. Therefore, even in the absence of specific new regulations, hydraulic fracturing is subject to the general oil and gas regulations in each state.

Virtually every state with significant shale gas reserves has responded in some manner to the development of hydraulic fracturing. Many states have embraced hydraulic fracturing by adopting new regulations that specifically address natural gas development using hydraulic fracturing and allow these activities to proceed. Opponents of hydraulic fracturing typically have an opportunity to challenge such regulations in court. The natural gas industry has also been proactive in developing best management practices for hydraulic fracturing operations that supplement and, in many cases, inform state regulations, including the:

A few states have issued temporary moratoria on hydraulic fracturing to conduct additional studies before developing new regulations. However, a majority of states with shale gas reserves have issued new technical regulations for hydraulic fracturing, including:

State disclosure requirements for chemical additives included in fracturing fluids also exist in the following states:

The scope and content of state regulations varies considerably. Some states, such as Colorado, Ohio, and Pennsylvania, have adopted comprehensive regulations that impose a range of requirements on the well development process, including background water sampling, well construction and casing, well stimulation, and wastewater storage and disposal (Colo. Code Regs. § 404-1 et seq; Ohio Admin. Code § 1501:9; 25 Pa. Code § 78.1 et seq). In some cases, state agencies have adopted regulations in response to new hydraulic fracturing laws passed by state legislatures. Other states have taken more modest approaches. Texas has adopted regulations requiring disclosure of chemical additives in fracturing fluids (16 Tex. Admin. Code § 3.29) but relies on established technical regulations for well construction and hydraulic fracturing. Michigan has not adopted new regulations specifically designed for hydraulic fracturing, but has instead issued guidelines applying pre-existing regulations to hydraulic fracturing operations (Michigan DEQ, Supervisor of Wells Instruction 1-2011). Despite their diversity, hydraulic fracturing regulations typically address a similar suite of technical issues.

Although the federal government does not have primary responsibility for regulating oil and gas development, a number of broad environmental programmes administered by EPA could potentially be applied to hydraulic fracturing. Any federal regulations would overlap with the state regulations described above, requiring natural gas developers to comply with both state and federal regulations. While EPA has not been active in regulating natural gas development to date, some non-governmental organisations have urged the agency to take a more active role, and there have been reports that the agency intends to increase its regulatory efforts. The following sections describe the EPA programmes that could be used to regulate hydraulic fracturing.