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BruceMark Petroleum Inc | Fracking in the Land of Lincoln: Top Four Myths
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Fracking in the Land of Lincoln: Top Four Myths

Fracking in the Land of Lincoln: Top Four Myths

20:12 10 February in Industry Headlines

Hydraulic fracturing (“€œfracking”€) has been a hot topic in Illinois for three years now.

So much has been written in the time between the leasing activity of 2011-12 and November’€™s finalization of the Illinois Hydraulic Fracturing Regulatory Act that most Illinoisans have at least some knowledge of fracking — a technology that has helped revitalize the country’s sluggish economy and make the United States the world’€™s top petroleum producer.

But some stubborn misconceptions still linger. Most are perpetuated by the anti-fracking movement, and the fact that a handful of media outlets continue to reinforce these misconceptions doesn’€™t help advance a fact-based dialogue around “€œfracking”€ and future oil and gas production in Illinois.

So let’€™s set the record straight. Here are four of the most common myths about fracking in the Land of Lincoln.

MYTH: The Shawnee Forest Will Be the Focal Point of Illinois Shale Development

REALITY: Most Activity Will Occur Where Oil Is Already Being Produced

Most U.S. shale development has occurred in areas with significant history in the oil and gas industry, and experts agree that trend is likely to continue in Illinois.

That is precisely why the bulk of leasing activity has occurred in Wayne, Hamilton and White counties, located in southeastern Illinois, the region responsible for the vast majority of Illinois’€™ crude oil production (see attached map). Surrounding counties such as Clay, Marion, Saline, Richland, Edwards, Gallatin, Franklin and Jefferson have also seen significant leasing.

Based on this map showing where existing oil wells (green) are in Southern Illinois, it’s easy to see why.

illinois-map-oil-gas-wells

That’€™s notable, because there are no active oil or gas wells in the Shawnee National Forest.

Unfortunately, much of the media’s attention has been focused on a county with no history of oil production (Johnson) and another that has seen zero leasing activity (Jackson).

The reason for the media’s focus is clear.

Johnson County -€“ half of which is covered by the Shawnee National Forest – garnered national coverage before its residents rejected a fracking ban by an overwhelming 58-42 percent margin.  The Pennsylvania-based Community Environmental Legal Defense Fund (CELDF) got involved in the ordeal, continuing its trend of targeting rural communities with no history in the oil and gas industry.

Jackson County happens to be home of Southern Illinois University and the bulk of the Southern Illinois anti-fracking movement, not to mention the region’s dominant media outlets.

But the focus should really be on Southeastern Illinois.

Woolsey Companies has leased 50,000 acres in Wayne County, roughly one-fourth of its Illinois lease-holdings. The fact that Woolsey is building a $2.5 million headquarters just a mile south of the county seat in Fairfield speaks volumes as to where the company expects the middle of Illinois’ shale development to occur.

Granted, land has been leased in the Shawnee Forest. But the main reason for this leasing activity was economics. Land in the White, Wayne and Hamilton county areas – areas considered to have very good chances of success – went for as much as $500 per acre.

Land in Johnson County and other areas in the Shawnee Forest was available for as little as $50 per acre due to the fact that its chances of producing oil was considered very low. However, the prices were so low, some companies decided to take a flier, mainly to drill exploratory wells in the region.

Areas that have little to no history in the oil and gas industry tend to fear the unknown, which is probably one of the reasons why county boards in Pope, Hardin, Johnson, Jackson and Union counties sent letters to General Assembly calling for a fracking moratorium. White, Hamilton and Wayne counties never considered such actions, however. And for good reason – they support fracking and know its many benefits, as well as the fact that it can be and is being done safely.

MYTH: Low Oil Prices Will Drive Fracking Companies Out of Illinois

REALITY: Nobody Has Bailed, And Nobody Plans To

Fracking opponents have claimed an Illinois shale boom would be temporary and unsustainable – a Ponzi scheme, as they like to suggest. And they feel such claims are being proven true before the first HVHF permit is even issued, as oil prices have fallen to below $60 per barrel.

Problem is, companies operating and exploring in Illinois aren’t panicking, as they remain committed to Illinois for a number of reasons.

First of all, the opportunity is too great. Woolsey president Wayne Woolsey has stated numerous times that his company’s core samples from Illinois test wells have been “very favorable,” even going to far as to compare the New Albany Shale to the prolific Bakken in North Dakota. Woolsey has invested more than $100 million in Illinois.

Companies have also waited more than 500 days for the state to finalize regulatory rules, so they figure they can wait on Saudi Arabia and the rest of OPEC.

By refusing to cut its production and deliberately driving down oil prices, Saudi Arabia is playing a risky game of “who will blink first” with the U.S. fracking industry.

The consensus seems to be that oil prices are bound to stabilize, considering the Saudis’ game is one that fellow OPEC members such as Iran and Venezuela simply can’t afford. Saudi Arabia likely can’t afford this tactic in the long haul, either, as it relies heavily on oil revenue to fund social programs to support a dependent citizenry hampered by a high unemployment rate.

Another factor in drilling companies’ commitment to staying the course is the belief that the process of horizontal drilling and completion will be cheaper in Illinois.

For instance, companies will be drilling to depths between 4,500 and 5,000 feet in Illinois, as opposed to 10,000 to 15,000 feet in other shale plays throughout the country. That means lower costs of operation.

MYTH: Fracking Will Not Help the Local Economy

REALITY: Evidence of Shale Development’s Economic Benefits is Overwhelming

First of all, drilling companies have doled out more than $250 million in lease bonuses to Illinois landowners so far. That influx of money has helped thousands of landowners, as well as the local restaurants, car dealers and retailers they’ve spent the extra money at.

Once production begins, between 15 and 19 percent of the oil revenue will go directly to mineral owners.

Shale development will also generate millions in tax revenue for a state that desperately needs it. State revenue would be generated by a 3-6 percent severance tax on oil produced, as well as corporate income taxes and sales tax.

Ad valorem taxes stay local and will have the greatest impact on cash-strapped public schools, as nearly 62 percent of local taxes go to education.

Clay County Chief Assessment Officer Kevin Logan estimates that a well producing an average of 200 barrels per day (bpd) would generate $172,000 of local tax revenue annually, including $100,000 for the Clay City School District. Strata-X, which has leased more than 72,000 acres in Clay County, already has brought in a well producing 300 bpd without the advantage of using HVHF well completion.

The significant tax revenue shale development would create is undeniable, and the job creation it would spark is impressive as well.

Some have scoffed at an Illinois Chamber of Commerce study that found fracking could create up to 47,000 jobs and have a $9.5 billion economic impact in Illinois. But it is important to note that not all of these jobs will be in the oilfield. The Manhattan Institute estimates that every oil and gas industry job creates three jobs in other industries.

The numbers don’t lie: The unconventional oil and gas industry supports 2.1 million jobs nationwide, including 444,000 jobs in Texas and 94,000 in Colorado. And those numbers are expected to nearly double by 2025.

Southeastern Illinois is uniquely positioned to take advantage of this economic opportunity. The conventional oil and gas industry is already the largest employer in White County , Illinois’€™ top oil-producing county €“ and is poised to expand exponentially.

The oilfield services industry -€“ including drilling and completion rigs, pulling units, suppliers, acidizing and stimulation, cased hole logging and perforating, drill pipe and casing inspection, coring services, down-hole completion tools, rock bit services, down hole production chemical services, and injection pump and valve repair – is already well established in the area.

There are also four refineries in Illinois and several pipeline projects in the works, including one that would employ 800 people.

There will be plenty of work in the oil patch as well, and the Illinois Hydraulic Fracturing Regulatory Act includes tax incentives to companies who hire more than 50 percent of their workers in state.

It’s no wonder that of the top eight states in terms of non-farm payroll increase since the Great Recession, six are shale boom states.

MYTH: Earthquakes From Fracking Are Inevitable

REALITY: Fracking Does Not Pose a High Risk Of Inducing Felt Seismic Events

This is a common talking point used by anti-fracking activists to scare people into believing shale development will cause a major earthquake in Southern Illinois, which sits on the New Madrid Fault.

But the Natural Research Council and a number of experts and government officials, including members of the Obama Administration, have concluded that risk just isn’t credible.

A recent peer-reviewed paper from Durham University found that of the 198 human-caused earthquakes since 1929, only one was indirectly linked to hydraulic fracturing. Other sources cite three quakes linked to fracking-related activities during that time, but two of those were linked to wastewater injection, a separate process.

A handful of minor seismic events have been linked to injection wells, but are still very rare.

€œInjection for disposal of wastewater derived from energy technologies into the subsurface does pose some risk for induced seismicity, but very few events have been documented over the past several decades relative to the large number of disposal wells in operation.€“ National Research Council

Section 1-96 of the Illinois Hydraulic Fracturing Regulatory Act requires the IDNR to adopt rules in conjunction with the Illinois Geological Survey to establish a protocol for controlling operational activity of injection wells in instances of induced seismicity. Essentially, if a significant level of seismicity is detected near an injection well, injection will be scaled back or shut down completely.

Class II injection wells are also regulated by the U.S. Environmental Protection Agency and have been deemed safe by the EPA.

Considering California has the most seismic events of any state in the United States, it is notable that the Golden State has never had ANY seismic event linked to fracking or injection wells. California has used injection wells for decades.

“Not only have there been no felt seismic events linked to hydraulic fracturing in California, there have also been no earthquakes linked to wastewater disposal in California. Not one!California State Geologist John Parrish

The IHFRA also makes producers liable if an earthquake of a 4.5 magnitude or more on the Richter scale occurs in an area that the U.S. Geological Survey says has more than a two percent probability of an earthquake.

CONCLUSION

For the past few years, there has been no shortage of information made available regarding Illinois’€™ vast potential for shale development. Unfortunately, a lot of misinformation -€“ chiefly around the term “€œfracking” -€“ has been put out there as well.

Only by separating the fact from the fiction and putting key concerns into proper context can one understand the tremendous opportunity that lies ahead for the Land of Lincoln to develop its full energy and economic potential.


Source: Illinois Energy In Depth

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