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Company Returns Illinois' First Fracking Permit, Citing 'Burdensome' Rules, Commodity Prices

Two months after regulators in Illinois issued the state's first permit for high-volume hydraulic fracturing (fracking), the Kansas-based company that received the permit has returned it, citing "burdensome, time consuming and costly" regulations, but also commodity prices.

Last September, the Illinois Department of Natural Resources' (DNR) Office of Oil and Gas Resource Management (OOGRM) awarded a permit to Woolsey Operating Co. LLC to conduct fracking operations at the Woodrow 1H-310408-193 well in White County. The well targeted the Grassy Creek Shale, a member formation of the New Albany Shale in the Illinois Basin.

But in an Oct. 30 letter to the OOGRM, the Wichita, KS-based company requested that the fracking permit be immediately released, and that an injection well permit be withdrawn.

"Woolsey understands and agrees that if in the future it determines it is economical to pursue the projects contemplated by either, or both, the permits and the injection well permit application, it will be required to begin the permit process in accordance with all applicable statutes and rules and regulations in effect at that time," Woolsey President Scott Fraizer wrote.

Illinois enacted the Hydraulic Fracturing Regulatory Act (HFRA) in 2013, and DNR oversees the fracking rules.

Mark Sooter, vice president for business development, told NGI's Shale Daily that Woolsey will focus its near-term efforts on existing operations in Kansas.

"The process we have gone through to receive a permit was burdensome, time consuming and costly due to the current rules and regulations of the State of Illinois, and it appears that this process would continue for future permit applications," Sooter said Monday. "Also, the drilling and completion requirements under the HFRA are stringent, which will make future development costs of the New Albany Shale excessive and the obligations for compliance on our staff demanding.

"We are still of the opinion that the New Albany Shale has potential and are disappointed to come to this conclusion. It is a difficult business decision, as the resources we committed were substantial. However, in consideration of the current price of oil and gas, the difficult regulatory environment in Illinois and exploration opportunities in other states, it is in our best interest to discontinue with high-volume horizontal hydraulic fracturing operations in Illinois."

Lawmakers in Illinois began considering ways to regulate fracking five years ago, with the state Senate passing a law in April 2012. To avoid a drilling moratorium, environmental groups and representatives of the oil and gas industry backed a bipartisan bill establishing the HFRA in February 2013. The bill, at the time dubbed the nation's most stringent on fracking, was signed by then-Gov. Pat Quinn. The DNR then published an initial version of proposed rules on fracking and scheduled a series of public hearings on the matter.

But in August 2014, supporters and opponents of shale gas development in Illinois were unhappy with DNR's proposed 150 pages of revised rules to the HFRA. Two months later, a legislative panel delayed a vote on the revised rules until after that year's election. The rules were unanimously approved by the panel two days after Bruce Rauner, a Republican, was elected governor.

In 2012, the Illinois Chamber of Commerce reported that shale formations in the southern part of the state could potentially create $9.5 billion of investment and 45,000 jobs. The New Albany Shale formation underlies a substantial portion of southern Illinois.

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