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Illinois Fracking Law Moving Faster than Shale Rush

Betting that a shale gas industry may develop in the state in the future, the Illinois Senate on Thursday passed 54-0 a measure (SB 3280) to regulate hydraulic fracturing (fracking), which would require the disclosure of chemicals used in fracking operations.

With amendments since its original submittal (Amendment 4), the measure is now expected to be taken up in the Illinois lower house under the sponsorship of state Rep. Naomi Jacobson, according to an official at the Illinois Oil and Gas Association (IOGA), which along with various environmental groups is supporting the measure.

The bill is expected to go to the governor before the end of May, when the state legislative session is scheduled to close for the year.

Under SB 3280, the state Department of Natural Resources Oil and Gas Division will have responsibility for overseeing fracking as an extension of its oversight of exploration and production (E&P) activity in the state.

Amendment 4 has been worked out by IOGA, environmental groups and other stakeholders, the IOGA official said. "We think it is a good bill, and hopefully it will be introduced in the House by Rep. Jacobson. We're approaching her on that, and we are hoping to get the new law in place shortly, before the session ends."

Earlier this spring the shale debate picked up steam in Illinois as E&P companies and state officials got more engaged. As the energy companies have been seeking more leases from farmers, the lawmakers crafted the first drafts of SB 3280 (see Shale Daily, April 12).

With little or no shale development in the state as yet, the IOGA official conceded that the new law's impact would be prospective. "We see what is going on in the east side of the state [mostly in Wayne and Hamilton counties]," the IOGA official said. "We won't know if this unconventional resource play will develop in Illinois until the fall.

"To date, nothing has been drilled, and I am not sure anything has even been permitted [for drilling]. The Illinois Basin is one of the last areas to draw this activity." Oklahoma-based Continental Resources Inc., the largest leaseholders in the Bakken, is a major player in Illinois.

"We pretty much have everything in this basin from an operator with just one lease to divisions of very large companies operating in other shale formations," the IOGA representative said.

Nearby, Michigan has been getting some play, too, the IOGA official acknowledged, while adding that "they haven't been having very good luck there I am told. The last I heard was that they were not having very much development or very good results. We have to remember this is the oil business. It can be red hot one minute and cold as ice the next."

None of the fledgling E&Ps in Illinois are saying much about what they are doing and finding, the IOGA official said. "We just know there is a lot of leasing ongoing because of the activity at the courthouses, and some of the farmers now have called [the industry association] asking different questions. But we don't have a lot of concrete information."

Marketed natural gas production from Illinois has seen a significant increase since 2006, according to Energy Information Administration data. After 0.17 Bcf of Illinois natural gas production was marketed in 2006, that number increased to 1.394 Bcf in 2007 and stood at 1.203 Bcf for 2010.

Prices are ranging from $100 to $350/acre for lease and mineral rights, according to local news reports. Based on other U.S. shale areas that have taken off, if some of the early drilling proves successful, the leasehold prices easily could accelerate toward $1,000/acre.

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