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Hydraulic fracturing, or "fracking" for short, is a method of extracting natural gas and oil where fluid is shot through a borehole in a rock formation in order to fracture it allowing for an easier mining process. The process has been in use since the 1940s, but recent record-level production (in an attempt to decrease energy dependence from the Middle East) has put it into the spotlight. The shale boom is now becoming an existential threat to OPEC's influence over energy markets.
It has come under fire due to a number of alleged instances of groundwater contamination in Pennsylvania and across the mid-western United States. The safety of fracking operations is also under question due to the fact that newer methods developed over the last decade or so allow much deeper wells to be drilled.
It's difficult to definitively link specific cases of groundwater contamination with fracking. The EPA has acknowledged past cases and a possible current case in Wyoming, but the extent to which current cases of contamination are caused by fracking or natural causes is still speculative. A 2011 study by Duke University researchers found increased levels of methane in drinking water near fracking sites but this doesn't demonstrate a "smoking gun" link. Another issue with the practice is that energy companies are not required to disclose what chemicals are used in the fracking fluid (most of it is just water and sand, but may include diesel oil as a Congressional probe revealed). In California, it was revealed that the state permitted oil companies to pump waste water into potentially potable aquifers.
Researchers are looking into tracer chemicals, which could lace the high-pressure liquids used for fracturing. That way, any nearby groundwater that became contaminated could be tested for these tracer chemicals, eliminating the was-it-us-or-wasn't-it guesswork that plagues the issue today. Getting fracking companies to agree to put these tracer chemicals in their liquid voluntarily is almost certainly a losing proposition, however; regulation and oversight would almost certainly be necessary.
A preliminary study of fracking in Carroll County, Ohio found that ground water contamination was not associated with hydraulic fracturing. The researchers measured non-biogenic methane as a marker for fracking activity. Only 4 homes with explosive levels of methane were identified, and in each case the methane was due to biogenic sources (i.e., soil bacteria).
Besides contamination of groundwater, another issue is the release of "fugitive" methane into the atmosphere. Because methane is a greenhouse gas more potent than carbon dioxide, it could significantly worsen global warming if sufficient amounts are released. And that's just fracked up.
Finally, there are the issues of earthquakes. The disposal of used fluid can cause small fault zones to come loose and cause an earthquake. While they are usually low-to-moderate strength earthquakes, they become impressively more frequent around areas with these wells. Though the fracking process itself does technically cause earthquakes, those earthquakes are small enough and deep enough that they're not felt at the surface. Because fluid disposal wells stay in operation longer and inject more fluid, they can trigger felt earthquakes. Mostly because of wastewater injection, the earthquake hazard in central Oklahoma is as high as in parts of California. 
The layer of black shale is down in the subsurface several thousand feet. If you can drill down to that level, the hydrofracturing cracks do not extend more than 1000 feet or so; the ends of the cracks are still going to be several thousand feet below the surface (where wells and aquifers sit). The image of turning on a water faucet and having natural gas leak out, in general those are situations where they have sunk their well into a sandstone that has already filled with gas; that gas is naturally accumulating.
The idea that deep-injected fluids will migrate into groundwater is false. Basic geology prevents such contamination from starting below ground. A fracture caused by the drilling process would have to extend through the several thousand feet of rock that separate deep shale gas deposits from freshwater aquifers. According to geologist Gary Lash of the Fredonia State University, the intervening layers of rock have distinct mechanical properties that would prevent the fissures from expanding a mile or more toward the surface. It would be like stacking a dozen bricks on top of each other, he says, and expecting a crack in the bottom brick to extend all the way to the top one. What's more, the fracking fluid itself, thickened with additives, is too dense to ascend upward through such a channel.
A video of a Colorado resident setting his tap water on fire due to gas seeping into the water supply has been circulating around the Internet for some time. Mike Markham, a landowner, ignites his tap water. However, according to the Colorado Oil and Gas Conservation Commission, which tested Markham's water in 2008, there were "no indications of oil & gas related impacts to water well." Instead the investigation found that the methane was "biogenic" in nature, meaning it was naturally occurring and that his water well was drilled into a natural gas pocket.
In 2005, the "Halliburton Loophole" inserted into the Energy Policy Act of 2005 by Joe Barton at the behest of Dick Cheney prevented EPA oversight of fracking. Which should tell you something. Two versions of a bill called the FRAC Act were proposed in 2009 and have been stuck in legislative purgatory ever since.
In 2012 the Council on Foreign Relations argued that the reduction of gas prices could have a major impact on Russia. 60% of Russia's federal revenues come from energy exports and any reduction in income from gas would be catastrophic, and in 2014 that became very relevant. Economic necessity and looming bankruptcy could one day force political reform. The article suggests that Russia has therefore financed environmental groups to oppose unconventional gas extraction methods like hydraulic fracturing, because there aren't normally protests in these countries. Because of large, country-wide protests, Bulgaria and Czech Republic have banned this technology.
In a nutshell
Some have argued that the output of the American shale industry is part of what induced the Saudis to abandon quotas and simply overproduce oil in an effort to maintain market share. This led to a precipitous drop in oil prices. The surprising resiliency of American shale oil producers has sustained this drop in prices. Some sources have also argued that the shale oil revolution did a major favor to the U.S. shipbuilding industry.
- FracFocus Chemical Disclosure Registry (It should be noted that participation in the registry is voluntary.)
- The Drillers Are Coming and What the Frack?, Scientific American
- Facts About Fracking, SciShow
- What’s the straight dope on fracking?, The Straight Dope
- Just the Fracking Facts, FactCheck
- My Water's on Fire Tonight, ProPublica
- Hydraulic Fracturing Considerations for Natural Gas Wells of the Marcellus Shale, New York State Department of Environmental Conservation
- All About Fracking and Stop Criticizing Fracking and Pipelines, Skeptoid
- U.S. Crude Output Advances to 28-Year High on Shale Boom, Bloomberg
- Oil prices keep plummeting as OPEC starts a price war with the US, Vox
- EPA probe of fracking contamination includes retrospective, Pittsburgh Post-Gazette
- EPA Releases Draft Findings of Pavillion, Wyoming Ground Water Investigation for Public Comment and Independent Scientific Review, EPA
- Stephen G. Osborn, Avner Vengosh, Nathaniel R. Warner, and Robert B. Jackson. Methane contamination of drinking water accompanying gas-well drilling and hydraulic fracturing, Proceedings of the National Academy of Sciences
- U.S. fracking firms may have broken environmental law: probe, Reuters
- State let oil companies taint drinkable water in Central Valley
- New tech to trace fracking fluid could mean more accountability, High Country News (The Goat Blog)
- No water contamination found in Ohio's fracking epicenter: Methane in local groundwater comes from biological sources, not fossil fuel drilling
- Fracking Methane, Real Climate
- Gas and Air, Nature 482, 131-132 (09 February 2012)
- The facts behind the frack
- Pumping carbon dioxide deep underground may trigger earthquakes
- Induced Earthquakes - Myths and Facts
- Here Are 5 Truths About Fracking That Are Not Up For Debate, Business Insider
- Is Fracking Safe? The Top 10 Controversial Claims About Natural Gas Drilling, Popular Mechanics
- Video of man setting his tap water on fire
- COGIS - Complaint Reports
- The Halliburton Loophole, New York Times
- Energy: The FRAC Act is Back in Congress, Summit County Citizens Voice
- The New Power Map, Foreign Affairs
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