Fracking Coming to Illinois

Environmental groups and the oil and gas industry in Illinois have reached a fragile  agreement on legislation that would regulate hydraulic fracturing (fracking) for oil and gas in  Illinois.  

If the legislation is enacted, as is generally expected, exploratory drilling may begin in  the state in the coming year. Attention will be focused primarily on the New Albany oil field in  southeastern Illinois (and Indiana). 

The decision by environmental advocates and industry to negotiate reflected the political  reality that neither side was likely to achieve its fondest objectives—a moratorium on drilling for  the environmentalists and light regulation for the oil interests—on its own efforts.  

Here was a situation where two interests, roughly equal in strength, could each gain more  from sitting down to bargain than from battling it out to unknown consequences. According to Jennifer Cassel, who negotiated for the Environmental Law and Policy  Center, “The present regulations are wholly inadequate, leasing was going on, and the  moratorium effort was going nowhere.” 

Illinois is surprisingly rich in carbon-based natural resources. Two-thirds of Illinois lies  over coal deposits, which some day could be mined for methane gas. During the World War II,  Illinois was the third or fourth largest producer of oil in the country, at 400,000 barrels a day.  That has dwindled to about 25,000 barrels a day at present.

But rapidly improving drilling technology now makes it possible to drill down vertically  and then “build a curve” that can drill, horizontal to the surface, for a mile or more through  seams of shale rock potentially rich in oil and gas. 

As a result of these advances, the U.S. is now the leading producer of natural gas in the  world and will in about five years become the leading producer of oil as well, surpassing Saudi  Arabia. 

Fracking has been met with emotional opposition elsewhere in the U.S. from people who  contend it has polluted drinking water and wreaked surface damage as well. So the environmental negotiators have had a high bar to clear to satisfy critics of the  process, and only time will tell if their work has justified the collaboration with industry. “We have some of the strongest protections in the nation in the bill,” contends Cassel.  She cites provisions that waste water from the drilling process be stored in tanks rather than in  ponds, which have overflowed elsewhere.  

And the well casings used in the drilling must meet much higher standards than in  Wyoming, where there may have been problems with water pollution. 

Further, abandoned wells near new drilling must be capped.  

Significant public participation in the permitting process is also required, and there are  requirements for disclosure regarding the chemicals as well as the water used in the process— how much and where from. 

“The major amount of information ‘capture’ required in the bill,” says Cassel, “will be  valuable in the future when we can revisit this issue. We’re not done with this issue.” On the other hand, the setback of wells from buildings and homes is only 500 feet, which  sounds rather close to me. 

But as Cassel says, “This bill is the result of compromise.” 

And then there are fees and taxes. State taxes on oil would be 3 percent of gross revenue  and after two years could go up as high as 6 percent, according to Brad Richards, executive  director of the Illinois Oil and Gas Association. 

If ever production again reached World War II levels, which is mere speculation on my  part, that could mean about $750 million a year in tax revenue. 

Although more than $200 million has already been spent by the industry leasing mineral  rights across broad swaths of south-central and southeastern Illinois, nobody seems to know how  effective and successful the lateral fracking process will be in Illinois. 

“Our geology is different from Ohio and Pennsylvania,” notes Richards. And the play in  Illinois will be primarily for oil rather than for gas, as in the East and North Dakota. The economic benefits from fracking could be major. A study by Illinois State University  professor David Loomis finds that new jobs created from fracking could range from 1,000 to  47,000. The latter figure is probably over the top, as it equates Illinois to Pennsylvania, Texas  and Louisiana, where the shale fields are much bigger than in Illinois. 

I think it better to have the best possible regulatory legislation in place before the  fracking begins, and the bill hammered out by environmentalists and industry representatives  sounds like a product that is in the public interest.