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Obama backs shale gas drilling

By Ayesha Rascoe and Edward McAllister

WASHINGTON/NEW YORK (Reuters) - President Barack Obama on Tuesday pledged support for the U.S. shale gas boom, but said government must focus on safe development of the energy resource.

In his State of the Union address, Obama called for government to develop a roadmap for responsible shale gas production and said his administration would move forward with "common-sense" new rules to make sure drillers protect the public.

"America will develop this resource without putting the health and safety of our citizens at risk," Obama said.

Obama's proposals on natural gas were similar to previous administration comments, and would do little to satisfy oil and gas industry backers who argue that the federal government needs to stay out of the way of burgeoning shale development.

Some industry groups had hoped Obama might streamline government oversight or offer specific plans to increase access for oil and gas drilling.

Instead, Obama pressed again for ending tax breaks for the oil and gas industry in his speech, something he has pushed for repeatedly without success.

The American Petroleum Institute, the top oil and gas lobbying group, said the policies Obama promoted in his speech are at odds with expanding energy output.

"It's a contradiction because he calls for further regulation that will slow down the production of energy and then increasing costs by raising taxes," said the institute's president, Jack Gerard.

Chris Jarvis, president of Caprock Risk Management in Rye, New Hampshire, said Obama avoided tackling key issues regarding natural gas, such as switching to using more gas in transportation.

"He was basically using his discussion on energy to deflect away from his critics versus really doing major changes with the U.S. energy sector and natural gas," Jarvis said.

SHALE GAS REVOLUTION

Improvements in drilling techniques have transformed the U.S. energy landscape in recent years by unlocking the country's immense shale oil and gas reserves.

But the drilling boom has raised concerns about the safety of natural gas extraction techniques like hydraulic fracturing, or fracking, which environmentalists say could pollute water supplies.

Still, with fracking mostly exempt from federal oversight and most shale gas production occurring on private lands, the Obama administration is limited in its authority over the practice.

Obama said the administration would move forward with rules that would require companies to disclose chemicals used during the fracking process on public lands.

In wide-ranging comments about the energy industry, Obama also said he would direct his administration to open 75 percent of the country's potential offshore oil and gas resources to drilling.

This proposal would be carried out in the latest offshore drilling plan released by the Interior Department in November.

PROMOTING CLEAN ENERGY

Obama strongly defended his record in investing in renewable energy.

The high profile collapse of solar-panel maker Solyndra last year - after the company received $535 million in loan aid from the administration - led critics to argue that government should not be in the business of backing energy companies.

"Some technologies don't pan out; some companies fail," Obama said. "But I will not walk away from the promise of clean energy ... I will not cede the wind or solar or battery industry to China or Germany because we refuse to make the same commitment here."

Though Congress failed to move on a proposal he put forward last year to set a target for power plants to produce mostly clean electricity by 2035, Obama said the administration would establish zones to develop 10 gigawatts of solar and wind power projects on public lands.

In addition, the Defense Department will purchase one gigawatt of renewable energy, with the Navy purchasing enough capacity to power a quarter of a million homes a year.

(Additional reporting by Eileen Houlihan; Editing by David Storey and Eric Beech)

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