Dimock, Pennsylvania (CNN) -- Bill Ely walked into his chicken coop with an empty five-gallon water jug.

The jug, punched with several finger-sized holes near the top to keep it from overflowing, was capped with a white plastic pipe. Using a garden hose fed from his water well, he filled the jug.

Leaning over the contraption, he flicked his yellow lighter above the pipe, and a blue flame appeared.

"I knew it [the water] went bad because we could light it," Ely said.

Dimock residents are at the forefront of one of the biggest energy developments this century.

Their township sits above the Marcellus Shale, one of the largest natural gas deposits in the nation found underneath parts of Pennsylvania, New York, West Virginia and Ohio. The natural gas reserve is attracting a flurry of gas companies wanting to drill.

Accessing the natural gas involves the controversial process of hydraulic fracturing, or "fracking."

Fracturing requires drillers to pump large amounts of water mixed with sand and chemicals into the shale formation under high pressure to depths 8,000 feet or greater or even wells less than 1,000 feet, according to the U.S. Environmental Protection Agency. This process fractures the shale around the well, which allows the natural gas to flow freely, according to the Pennsylvania Department of Environmental Protection.

See how fracking works

Over the past few years, technological advances and increased profit margins have spurred increased use of hydraulic fracturing, according to the EPA. The U.S. Department of Energy estimates shale gas will make up more than 20 percent of the nation's total natural gas supply by 2020.

The domestic drilling backlash

With the expansion of fracturing, there are increased concerns about its potential effects on the underground water table, public health and the environment. The concerns have prompted an EPA study of the potential problems with fracturing and public hearings to help decide how to conduct the study are almost finished.

"People have raised important concerns that require our attention," said Jeanne Briskin, EPA liaison on hydraulic fracturing from the agency's Office of Research and Development. "This is a case that is unusual."

The EPA will hold its final public hearing on hydraulic fracturing at the Broome County Forum Theater in Binghamton, New York, on September 13 and 15. In July, public hearings were held in Fort Worth, Texas; Denver, Colorado; and Canonsburg, Pennsylvania, to help determine how the EPA will conduct the study.

The EPA plans to begin the actual study in January 2011 and release initial study results by late 2012, said Briskin.

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Although hydraulic fracturing has been around for decades, it has never been done on such a massive scale so close to major population centers. Shale gas extraction has since spread to the Northeast and is occurring outside large population centers such as Philadelphia and New York City. Areas near Chicago, Illinois; Detroit, Michigan; and Cleveland, Ohio, could be next.

In 1992, the first horizontal well was used in the Barnett Shale around Fort Worth, where there was large-scale hydraulic fracturing. Before that, this extraction process was not profitable. This resulted in drillers having to bypass shale formations and drill only where pockets of natural gas were more easily accessed.

Drilling fractures town residents

The potentially adverse effects of fracturing also have those living near natural gas wells concerned, including Ely.

Ely signed a gas lease with Cabot Oil & Gas Corp. in 2006 because he believed the drilling for natural gas was safe and that he could make $50,000 to $60,000 in royalties from the 18 acres he leased, he said.

Fuel for the future?

He is among a group of residents, dubbed the "Carter 15," that filed suit in November 2009 against Cabot. They claim the independent producer of natural gas, headquartered in Houston, Texas, contaminated their well water, court records show.

According to the lawsuit, the following occurred as a result of the drilling in the natural gas wells:

-- Combustible gas was released into the head spaces of the water wells.

-- Elevated levels of dissolved methane were found in the water wells.

-- Natural gas was caused to be discharged into fresh groundwater.

In 2009, the Pennsylvania Department of Environmental Protection and Cabot Oil & Gas issued a consent order and agreement regarding a host of violations in Dimock and Springfield townships, including excessive pressure / improper or insufficient cemented casings; pollution of private water supplies; and the discharge of natural gas into the groundwater, court records show.

During its investigation that year, the Pennsylvania DEP collected samples from water wells that provide drinking water to 13 homes near the Cabot natural gas wells. Tests revealed the water contained elevated levels of dissolved methane gas, court records show.

As a result of the investigation, Cabot was ordered to provide and maintain potable water and/or gas mitigation devices for those affected by Cabot's drilling activities in the area, court records show.

Cabot, said they couldn't comment on the "Carter 15" lawsuit because it is active litigation, but Cabot spokesman George Stark maintained the fracking process is safe.

"You're talking about a technology that has been around for decades, and it's been proven to work," Stark said, citing a 2004 hydraulic fracturing study by the EPA that concluded the injection of hydraulic fracturing fluids "poses minimal threat" to underground sources of drinking water.

"From the fracking standpoint, we don't believe the process is contaminating the groundwater. As a technology, it's proven and safe," Stark said.

"Cabot is committed to both operating in a safe and environmentally secure way," he said.

Cabot is delivering water to Ely and to other residents in Susquehanna County, where "there is question as to their water quality," Stark said.

The size of this resource is massive. The Marcellus Shale is believed to hold trillions of cubic feet of natural gas, according to the Pennsylvania DEP.

Since 2006, Cabot says it has invested $500 million in Susquehanna County in Pennsylvania, where Dimock is located. Their budget for 2010 is $400 million, with a goal of drilling 70 wells, Stark said.

"We are committed to the community that is Susquehanna, and we plan to be here for a long time," he said. "When you spend the money that we are ... you are positively changing people's lives."

The advent of shale gas technological advancements has effectively doubled the nation's gas reserves, according to Melanie Kenderdine, executive director of Massachusetts Institute of Technology's Energy Initiative, which recently released a study on the issue.

Investment money is pouring into the sector. Exxon Mobil recently paid more than $40 billion for a company that specializes in extracting natural gas from shale, a deal many analysts took as a sign that the industry has hit the big time.

Shale gas production now accounts for about a fifth of the country's gas consumption, according to the MIT study. At current drill rates and consumption levels, it's expected to provide more than half the nation's natural gas by 2030.

"It's a game-changer," said Kenderdine, "It's significant supply at relatively low cost, an enormous opportunity."

Currently, most natural gas is burned to produce electricity or heat and cool buildings. When burned, it emits about half the carbon dioxide as coal. For this reason, most of the country's big environmental groups are cautiously supportive of increased shale gas development.

With relatively small modifications, natural gas can also be used to power vehicles. Although not yet popular for cars, the idea is catching on among operators of large fleets -- city buses, delivery trucks or 18-wheelers.

Pat Carullo is a retired graphic designer who lives in Damascus, Pennsylvania, roughly an hour from Dimock. He fears fracking will eventually pollute the Delaware River.

"I'm not a tree-hugger, I'm not a river-hugger. The river provides what we need for life," said Carullo, a member of the Damascus Citizens for Sustainability, a nonprofit organization calling for stricter drilling regulations in Pennsylvania and New York.

"To sacrifice and risk all of this for just another fossil fuel to me just seems mad," he said. "There must not be any fracking here in the water shed."

Tannis Kowlachuk and her husband, Greg Swartz, own Willow Wisp Organic Farm in Damascus, Pennsylvania, where an exploratory gas well is being drilled near their property.

They are shocked at the pace of development this industry is undergoing. Trucks and drilling rigs operate around the clock. Roads have been widened and pipes laid.

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The couple admits to being big fossil fuel users. They easily rattle off their list of offenses: two cars, a pickup, delivery truck, rototiller and heating oil for their farmhouse.

Still, they fear fracking will put them out of business.

"We are complicit in this, so, it's not an uninformed position," said Swartz. "We're not comfortable with it."

Water contamination is the result of isolated accidents, and it has nothing to do with fracturing, according to Daniel Whitten, a spokesman for the American Natural Gas Alliance. The industry points out that thousands of wells are drilled each year, and there have only been a handful of problems.

It says the fracturing occurs thousands of feet below the water table, far from the drinking water and when the wells do pass through the water table, companies protects the water by lining the wells with concrete and steel casing.

"We've drilled over a million wells in the last 60 years," said Whitten. "We think the process is safe."

Up until now, the federal government has generally agreed with industry. The EPA, which has said fracturing is safe, has left regulating the process largely up to the states.

But this is little comfort to the people whose lives have been affected by the drilling. They are quick to say that the federal government has been too close to the industry for years. The 2005 Energy Act signed under the Bush administration did not subject fracturing to oversight under the Clean Water Act. That has only stoked their fears.

At the very least, they want EPA to regulate the practice, require the companies to disclose what chemicals they are injecting into the ground and require greater treatment of the fluids when they are returned to the surface.

Julie Sautner of Dimock planned to attend the final EPA meeting originally scheduled in August with her husband, Craig, a cable splicer, and 17-year-old daughter Kelly. The Saunters are also part of the lawsuit against Cabot.

That public hearing was first scheduled for Binghamton, New York, but was moved to Syracuse before being postponed. There were 1,800 people who registered to speak for two minutes each, agency officials said.

"We might seem small, but we're here, too, and we're fighting the industry not to pollute," said Sautner, who says she has been unable to use her water well for nearly two years. "We're stuck here."