Interior Secretary Ken Salazar Says U.S. Needs Federal Fracking Rules

* Critics of new fracking rules "simply wrong" - Salazar

* Oil production offshore Alaska still years away - Salazar

By Balazs Koranyi

KRISTIN OIL AND GAS PLATFORM, NORWEGIAN SEA, June 25 (Reuters) - Defending the Obama administrations drive for federal regulation of fracking, Secretary of the Interior Ken Salazar said on Monday that the United States must toughen up its rules to protect the environment.

State level oversight of hydraulic fracturing or fracking is not sufficient and criticism levelled at the Obama administration for its proposed rules is not valid, Salazar told Reuters in an interview.

"I think the criticism is simply wrong," Salazar said on Statoil's Kristin oil and gas platform in the North Sea, about a 100 kilometres offshore Norway.

"There are some who are saying that it's not something we ought to do, it should be left up to the states. That's not good enough for me because states are at very different level, some have zero, some have decent rules."

The Obama administration unveiled long-awaited rules in May to bolster oversight on public lands of oil and natural gas drilling using fracking technology, running into criticism it was creating a duplicate layer of bureaucracy and infringing on states' rights.

Some energy companies also oppose its plans to require the full disclosure of the chemicals they use in fracking, which they regard as proprietary information.

Fracking is the process of creating small cracks, or fractures, in underground rock formations to extract gas and oil from shale. Water, sand and chemicals are then blasted in the fractures, forcing oil and gas to the surface.

"Shale gas has provided the United States the opportunity to have 100 years of supply that is domestically produced. If we are going to develop natural gas from shale, it has to be done in a safe and responsible manner," Salazar said in the rigs canteen, which he said resembled a hotel rather than an oil installation.

Fracking has unlocked vast new reserves, but environmental groups claim the technique pollutes drinking water and the new rules do not go far enough.


Salazar added that the abundance of shale gas is an opportunity to convert much of the U.S. economy to natural gas from diesel and gasoline.

"We can do a lot more to increase demand of natural gas within the United States," Salazar said, adding that U.S. oil consumption is already falling as cars use less fuel and the cheap natural gas should be an incentive for industries to change their technology.

The gas glut has cut America's energy dependence, but also depressed natural gas prices, even as Asian markets, particularly in Japan and South Korea, are hungry for liquefied natural gas.

The Energy Department, which must approve gas exports to all but about a dozen countries, has said it is not opposed in principle to LNG exports, but will hold off on any further export permits until it has received a study on the economic impact of sending gas abroad.

Offshore oil in the Arctic will also play a key role in America's energy self sufficiency, but drilling in the waters of Alaska must proceed only slowly and with great caution, and production is still many years away, Salazar added.

"We believe we have the rules and the framework we have in place to move forward with cautious exploration," Salazar said. "However, development of the Arctic (waters) would still be many years away and additional science has to be developed. And the infrastructure necessary for development is still years away."

Royal Dutch Shell's is in the most advanced stage for making plans to drill in the area, but Salazar declined to say how long it will take before the company has the final go ahead.

He added that his department will soon refine the draft of its five-year oil and gas development program, particularly to ensure Alaska's environmental safety.

"We'll be looking at a tailored approach to how we decide where it is we're going to lease in the Chukchi and Beaufort Seas, and you'll also see that there are some additional areas with high environmental and subsistence values that will be protected ... so you'll see surgical work that we've done on the draft five-year plan," Salazar added. (Additional reporting by Ayesha Rascoe; editing by Andre Grenon)

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