Like a fish story, the “Halliburton loophole” grows a little with every telling.

It started 10 years ago as a narrow, little-known exemption to a federal environmental law embedded in sweeping energy legislation.

In the intervening years, it has grown to be an all-purpose bogeyman for environmentalists raging against “fracking,” or hydraulic fracturing. And in a new twist, even fracking boosters have now cast it as a bulwark against federal regulation of oil and gas drilling.

The one-paragraph section of the 551-page Energy Policy Act of 2005 exempted hydraulic fracturing from the Underground Injection Control (UIC) provisions of the Safe Drinking Water Act (SDWA). The UIC portion regulates holes drilled to inject contaminants deep underground and wells used to force oil and gas to the surface.

It doesn’t cover the Clean Air Act, the Clean Water Act or any other environmental law. It doesn’t cover other aspects of oil and gas, such as drilling or production. And if an oil company is found to be polluting drinking water, U.S. EPA can still use SDWA to penalize it.

But to some, particularly the harshest critics of domestic production, the Halliburton loophole turned the oil field into the Wild West.

“Certain groups have used it to suggest there is no federal regulation of fracturing, which is not fully accurate,” said Hannah Wiseman, a Florida State University professor of law who studies regulation of oil and gas. “There are many other ways for states and the federal government to regulate hydraulic fracturing.”

In a recent posting on the 10th anniversary of the bill, Food and Water Watch Executive Director Wenonah Hauter called the infamous loophole “an egregious regulatory exemption that ushered in the disastrous era of widespread oil and gas fracking that currently grips our nation.”

However egregious the provision might be, that description discounts the significant technological changes in both hydraulic fracturing and horizontal drilling that led to a surge in drilling from Texas to Pennsylvania, underway long before 2005.

A news release from the group on the bill’s anniversary said “the provision specifically exempted fracking operations from critical parts of benchmark environmental regulations like the Clean Water Act and Clean Air Act.” Which is not true.

Asked about the assertion, a spokesman said it was an “unintentional mistake” and the text was corrected on the website.

But the misinterpretation is pervasive. The Wikipedia entry for the 2005 energy bill says the provision in SDWA also exempted “the process of hydraulic fracturing” from protections of the Superfund law, the Clean Air Act and Clean Water Act.

The most ubiquitous myth about the SDWA exemption is that it somehow allows oil and gas companies to keep secret the chemical ingredients of fracking fluid. But the law’s UIC provisions for oil- and gas-related wells have never required chemical disclosure.

Hydraulic fracturing was never widely regulated under the safe drinking water law. But in 1997, a federal appeals court ruled that the UIC provisions of the law applied to fracturing in Alabama. The exemption in the 2005 law ended that and prevented the precedent from spreading to other states.

Oil and gas spokespersons have contended that the energy bill did not “exempt” hydraulic fracturing from the law, because EPA had not previously regulated fracturing under SDWA outside of Alabama. But the language in the bill specifically carved hydraulic fracturing out of the law. It stated that the definition of underground injection “excludes … injection … pursuant to hydraulic fracturing operations.”

Halliburton Co., the oil services firm that became a target of liberals during the Iraq War, had lobbied for the exemption while Dick Cheney ran the company. As vice president under President George W. Bush, Cheney shepherded the energy bill for the Bush administration.

As opposition to shale drilling grew, critics took to calling the exemption the Halliburton loophole. Opponents linked the exemption to Halliburton when the bill was debated in 2005, but the term Halliburton loophole doesn’t show up in LexisNexis in the context of oil and gas until May 2009.

Through a spokesman, Halliburton declined to comment.

The myth grows

The legend of the fracturing loophole grew in an odd new direction recently when supporters of drilling invoked some of the same misinterpretations as critics.

Attorneys for Colorado and Wyoming, seeking to block new federal rules for hydraulic fracturing on federal land, argued that the fracturing exemption prevents the Bureau of Land Management from regulating oil and gas activity.

“Through the Energy Policy Act, Congress removed federal oversight of hydraulic fracturing, leaving the right to regulate fracking in the capable hands of the states,” the states argued as part of the challenge to regulations known as the “BLM fracking rule.”

The pleading cites a law review article by Florida State’s Wiseman. But Wiseman says her article was quoted out of context and that the states’ argument is misguided.

“They’re trying to turn an argument used by environmental groups into an argument against federal fracturing regulation,” Wiseman said in an interview. “It’s an odd argument to say this narrow exception applies to all areas of federal law.”

The states’ pleading also quotes Sen. Ed Markey (D-Mass.), who criticized the overall bill and the fracturing provision when he argued against the bill as a House member in 2005. He called it a “special provision” that would “protect Halliburton from ever facing any federal regulation” of fracturing.

Though their exaggerations are similar, Markey says the states’ argument “fractures credulity,” and chides those trying to block the BLM rule.

“Congress,” Markey said in a July statement, “didn’t write a get-out-of-any-regulation-forever-free card for fracking.”

Markey rarely agrees with the public relations advocates for the oil and gas industry. But on the fracturing provision, they’re of like mind.

In 2010, the industry’s rapid-response PR campaign, Energy in Depth, ridiculed the idea that the energy bill exempted oil and gas from the Clean Water Act, the Clean Air Act, SDWA, the Superfund law and more Greenwire, Feb. 24, 2011).

“This assertion, every part of it, is false,” the industry group stated in its rebuttal to the anti-drilling documentary “Gasland.” “The oil and natural gas industry is regulated under every single one of these laws.”

A spokesman for the Colorado attorney general’s office declined to comment. Officials at the Wyoming attorney general’s office did not respond to emailed requests for comment.

Wiseman said she was surprised that the state cited her article, since it called for closing the “loophole” and increases for federal scrutiny of oil and gas production.

While the states’ argument took the exaggeration “a step beyond,” she said environmental groups might be hurting their own cause by spreading the idea that fracking isn’t covered by federal environmental laws.

“Exaggeration of the loophole could lead parties to think there are not other avenues for enforcing environmental laws,” Wiseman said. “They’re missing out on other opportunities.”