An oil pump removes crude oil from a well outside South Heart, ND, on February 10, 2012 © Daniel Acker, Bloomberg via Getty Images

Fracking. The mere utterance of the word thrills investors in energy companies making big oil and gas finds in shale deposits in Texas, the Appalachians and North Dakota.

It makes environmentalists shudder because it involves so many unknowns.

But make no mistake: Fracking is a big deal. It has allowed oil and gas companies to develop on-land oil and gas prospects that almost no one had thought could be brought to market with any hope of profitability. It's one of the primary factors for the resurgence in U.S. production of natural gas and crude oil that's bringing the country closer to the long-sought goal of energy independence.

The U.S. imported 41% of its oil in the first five months of 2013, the Energy Department says, down from 65% in 2005. Some projections say the combination of new supplies from fracking and alternative energy sources and energy savings from conservation could make the U.S. energy self-sufficient by 2030, although the country will still be an oil importer.

Fracking is technically "hydraulic fracturing," which means using small explosions and lots of water and smaller amounts of chemicals to free up oil and gas resources locked in rocks that lie far below the earth's surface.

Fracking has set off a huge boom in natural gas exploration and production in Texas, North Dakota, Montana and the Appalachians. It was largely responsible for a 14.4% jump in U.S. oil production in 2012 to 6.47 million barrels a day -- the most since 1995.

Along the way, it has turned North Dakota into the country's fastest-growing state for three years running and has attracted thousands to Texas seeking jobs in energy.

Fracking info-graphic

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The secret to fracking's success is that exploration engineers figured out how to:

  • Drill 5,000 feet below the ground's surface into shale deposits packed tightly with oil and natural gas.
  • Bend the drilling pipe so wells can be laterally drilled out as far as several miles.
  • Set off small explosions in the hard shale deposits to free up the oil and gas.
  • Pump water, chemicals and sand at high pressure to release the gas and the oil and bring it all to the surface.

The modern form of fracking was developed after World War II, but big fracking emerged in the 1970s and 1980s. As oil analyst Fayed Gheit of Oppenheimer & Co. told MSN Money, fracking has "totally transformed" the domestic oil and gas industry.

Fracking's potential, particularly in exploring for natural gas, came on so swiftly that even mighty Exxon Mobil (XOM) realized it didn't have the in-house expertise. So it bought XTO Energy, one of the largest natural gas producers, for some $31 billion in stock.

Fracking has made a lot of money for its investors. EOG Resources (EOG), which split off from Enron in 1999, has seen its shares rise 1,520% since 2000 and 160% since the market bottom in 2009.

Fracking, however, isn't exempt from the laws of supply and demand. So much natural gas came to market that prices collapsed in 2012.

And yet -- and this is a big "and yet" -- fracking is reviled by many people and feared by many more. In part, this is the energy industry's fault. No one will forget the May 2010 BP (BP) oil spill in the Gulf of Mexico. When the industry creates a mess, it creates a big mess.

Fracking creates fears that the water-sand-and-chemical brews will escape concrete casings installed in virtually all U.S. oil-and-gas wells and contaminate below-ground aquifers, or that flammable natural gas will turn up in domestic water supplies. You can find videos, such as this one on YouTube, of people getting water from their kitchen tap to ignite.

One reason for the fear: In the 2005 Energy Policy Act, the fracking industry was specifically exempted from violations under the federal Safe Drinking Water Act. State regulations weren't affected, but the question is whether state regulators have the will or resources to act.

The energy industry likes to say there's never been a case where fracking has harmed an aquifer, but the record of problems is growing. A New York Times report documented a contamination in Jackson County, W. Va., in the mid-1980s. And a Vanity Fair magazine article documented groundwater contamination issues around Dimock Township, a small town in northeast Pennsylvania, from wells drilled by Cabot Oil & Gas (COG). The controversy was the basis for the anti-fracking movie "Gasland."

Fracking was halted in 2010 after regulators found that faulty Cabot drillings allowed methane to seep into 18 Dimock drinking-water wells. Drilling was permitted again last summer after many lawsuits filed by local residents and litigation from the state of Pennsylvania were settled. Cabot continues to claim it was not responsible.

Because of all the controversy, it's believed that drilling and environmental practices have improved greatly. The industry set up a voluntary reporting database called FracFocus so people can research the chemicals used at many drilling sites. But a Bloomberg News report said many wells aren't included in the database, and a Harvard Law School study this spring said FracFocus offers only spotty reporting, lacks a searchable database and allows an "overly broad" allowance for trade secrets.