* Fracking has been linked to groundwater pollution
* Suspected of raising the risk of earthquakes
* Method was exempted from clean water rules under Bush
By Jason McLure
May 8 (Reuters) - Vermont will be the first state to outlaw a controversial oil and gas drilling method known as fracking when Governor Peter Shumlin signs a bill banning the practice, a largely symbolic move given the state's apparent lack of energy reserves.
Hydraulic fracturing has helped companies tap potentially decades of gas supply and huge amounts of oil from previously inaccessible shale formations dotted across the United States in recent years.
Environmentalists say the practice, which involves injecting millions of gallons of chemical-laced water into underground wells, may contaminate groundwater and trigger earthquakes.
"Governor Shumlin does support the fracking ban," said Sue Allen, a spokeswoman for Vermont's Democratic governor. "He will sign the legislation when it reaches his desk."
Vermont's House and Senate approved the measure last week and the bill is undergoing a final review by legislative staffers before being sent to the governor, Allen said.
It is a largely token gesture, given that Vermont does not have any natural gas reserves to speak of, sitting just outside the boundaries of the vast Marcellus shale formation.
The Marcellus formation has been aggressively drilled in other states such as Pennsylvania. Vermont did not produce a drop of oil or natural gas between 1960 and 2009, and consumes the smallest amount of energy of all U.S. states, according to the Energy Information Administration.
The move is the latest in an effort by states to regulate or curtail fracking, which was exempted from many federal clean water regulations during the George W. Bush administration.
New York and Maryland both have moratoriums on the practice pending environmental review. In 2010, Wyoming became the first state to require energy companies to disclose what chemicals they use in the process, followed by Texas and Michigan.
Ohio Governor John Kasich, a Republican, has also sought to limit the dumping of millions of gallons of fracking wastewater containing anti-rusting and anti-bacterial chemicals in wells in his state. Kasich's proposal came after a series of earthquakes occurred near the city of Youngstown that were linked to a nearby 9,200-foot wastewater well.
This year, Pennsylvania's Republican-controlled legislature bucked the trend toward tighter regulation by passing a bill that prevents municipal officials from banning the practice in their towns.
Countries in Europe are divided on the practice, with France, Bulgaria and the Czech Republic halting shale gas exploration, while Poland, which has huge potential reserves, is moving ahead.
A trade group for the oil and gas industry, which lobbied against the Vermont bill, condemned the law.
"The decision by the Vermont legislature to pass a statewide ban on hydraulic fracturing follows an irresponsible path that ignores three major needs: jobs, government revenue and energy security," said Rolf Hansen, director of state government relations for the American Petroleum Institute, in a statement.
"Robust regulations exist at the federal and state levels nationwide for natural gas development and environmental protection," Hanson said.
Environmental groups praised the move, saying strong state legislation is needed in the absence of effective oversight by the Environmental Protection Agency.
"Vermont's policy makes sense given the high risks of drilling and fracking and the lack of science showing how or whether this process can be conducted safely," said Dusty Horwitt, a senior counsel at the Environmental Working Group.
"The drilling industry has shrunk EPA's enforcement power down to the size of a matchbox," Horwitt said. "There's not a lot the EPA can do." (Additional reporting by Ed McAllister; editing by Barbara Goldberg and Todd Eastham)