U.S. panel to report on natgas drilling safety by mid-August

WASHINGTON Wed May 18, 2011 5:46pm EDT

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WASHINGTON (Reuters) - A new government panel looking into ways to improve the safety of a controversial natural gas drilling technique will issue its recommendations by mid-August, U.S. Energy Secretary Steven Chu told Congress on Wednesday.

Regulators are scrutinizing the drilling method known as hydraulic fracturing, or fracking, after some studies showed it could contaminate drinking water and following the blowout of a natural gas well in Pennsylvania in April.

"We are very concerned about the environmental impact," Chu said at a Senate appropriations subcommittee. "It does raise some questions."

Fracking fluids, which are a mixture of water, sand and chemicals, are forced underground to loosen rock formations that hold trapped gas.

Environmentalists and some government officials fear chemicals used in the process could contaminate underground drinking water sources and pollute above-ground streams.

The new panel set up by the Energy Department to address those concerns met for the first time on Wednesday. Its preliminary recommendations will be out in 90 days.

"We want to get all the perspectives and find out what's really going on," said Chu.

The safety of fracking was again called into question this week when Chesapeake Energy Corp was fined a record $900,000 by Pennsylvania regulators for contaminating drinking water while drilling in the Marcellus shale gas formation.

(Reporting by Tom Doggett; Editing by Lisa Shumaker)

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