U.S. readies proposal to clamp down on fracking

WASHINGTON (Reuters) - The Obama administration wants to clamp down on shale gas drilling on public lands and set standards that proponents of tougher regulation hope will provide a blueprint for drilling oversight nationwide.

Industry sources said the Interior Department could propose a new rule on hydraulic fracturing, or fracking, as early as Friday.

The measure would require natural gas drillers to disclose chemicals they use to frack wells, a controversial process that involves injecting water, sand and chemicals deep underground to extract fuel from rock formations.

Fracking has been essential to unlocking the nation's massive shale gas reserves, but critics argue that the practice has polluted water and hurt the environment.

The administration has said it supports shale oil and gas development, but has also called for strong oversight.

Administration officials have said they hope the rules could provide a template for states, which handle most of the regulation of fracking.

The Bureau of Land Management estimates that companies use the fracking technique on about 90 percent of wells drilled on federal lands. But only about 14 percent of U.S. natural gas production occurred on those lands in 2010.

An Interior Department official, who did not speak for attribution, said the administration has been clear about its aim throughout the process.

"We intend to propose a rule that supports the administration's goal of continuing to expand production of America's abundant oil and gas resources on federal and Indian lands by taking steps to ensure public confidence in hydraulic fracturing and other technologies that will play an integral role in our nation's energy security."

Industry and other stakeholders will have a chance to comment on the draft before it is finalized.

A draft of the rules that leaked in February proposed that companies disclose the "complete chemical makeup of all materials used" in fracking fluids, a provision that has been opposed by industry.

That draft plan also would require drillers to ensure the stability of underground casing in wells and that waste water from fracking does not leak into the environment.

The Environmental Protection Agency late last year issued a draft study that said fracking fluids likely polluted an aquifer that supplies public drinking water in Wyoming.

The energy industry has complained the draft rules were overkill as companies were voluntarily revealing the fluids.

One of the largest natural gas drillers, Chesapeake Energy Corp, said it has been voluntarily disclosing its information on chemicals for nearly a year on all its wells on public or private lands on the Web.

Other major producers include Exxon Mobil, Chevron, and Range Resources.

(Additional reporting by Laura MacInnis; Editing by Ed Davies)