Shale Daily

Illinois County in New Albany Shale Rejects Fracking Measure

By a 58% margin, voters in a Southern Illinois county in the New Albany Shale, on Tuesday rejected a nonbinding measure about whether local elected officials should oppose the use of hydraulic fracturing (fracking) for unconventional drilling. Meanwhile, the state has yet to enact updated drilling rules, leaving producers waiting.

By a 58-42% margin (2,223-1,602), Johnson County voters said no to the recommendation. The Illinois Oil and Gas Association (IOGA) didn't enter the fray before the vote, leaving it to a citizens group to oppose the measure. IOGA Executive Vice President Brad Richards said the measure sought to ban "corporate fracking."

Gov. Pat Quinn last June signed the Illinois Hydraulic Fracturing Regulatory Act into law, and the state's regulators are preparing final rules (see Shale Daily, Jan. 3). The rules would govern fracking and the state's mining industry that include registration and permitting procedures; well site preparation/construction; water quality; chemical disclosure and trade secrets; and exploration and development preparations.

The formation underlies a substantial portion of the southern part of the state. Johnson County sits on the fringe of the New Albany, which many people are hoping will revitalize this once fossil fuel-dominated area. Proponents of fracking argued that the industry would challenge in court any locally enacted ban, while opponents raised fears of environmental and water contamination problems.

Richards said the initiative is the only one in the southern part of the state, and no oil or gas ever has been produced in Johnson County using conventional drilling. With the advent of shale, one exploration and production company leased about 200 parcels in the county for potential unconventional drilling, he said.

The purpose of the ballot measure in the state's primary elections was to gain a positive vote for a fracking ban and use the results to urge the elected county commissioners to pass a local "bill of rights" exerting control over a broad set of issues, Richards said. "The local bill of rights would go well beyond 'corporate fracking', although I am not sure anybody defined what that is."

A study by the Illinois Chamber of Commerce in 2012 said the gas deposits in the shale play hold the potential to create $9.5 billion in new investment and 45,000 jobs (see Shale Daily, Dec. 17, 2012).

Advocates to develop the play fear some exploration and production (E&P) companies are frustrated by the slow movement of the state rules now being reviewed. Absent the rules, no fracking may be used in drilling because of a de facto moratorium.

A year ago E&Ps anticipated they would begin to explore the New Albany by the end of last year or early this year, Richards told NGI’s Shale Daily.

Richards questioned whether state officials are motivated to enact the rules quickly, given what he said have been a number of other political "hot buttons" that have arisen in the past months.

"The governor signed the bill and we have had every indication from him and his administrative that they favor this responsible development [of shale resources]," Richards said. "It would be great for Southern Illinois and it would be great for the state's economy."

E&Ps, he said, are wondering whether state officials are serious.

"If we are still looking at another year for the rules, at some point leases will be expiring and companies will be faced with a decision of whether they want to renew at considerable cost, or do they walk away. Unfortunately, that is probably where we find ourselves right now."

Most of the leases have three- to five-year terms, but Richards said his members have a "bunch" of leases expiring later this year. Most of them have renewal clauses, but "there are companies that undoubtedly will question whether they want to continue to spend money here," he said.

"There have been a couple of horizontal wells drilled, but neither were able to be completed using hydraulic fracturing," Richards said. He acknowledged that technically operators may drill wells and wait to use stimulation, but in no E&P may be willing to operate with this level of uncertainty. "That regulatory uncertainty has cast a cloud over the whole thing. There is no question about that.

"It has gone from being hopeful of drilling last year, to being able to do so in the first quarter this year, and now it is maybe looking at this time next year. At some point, as I try to explain to state officials, companies are just not going to go forward, and there are some people in the state who might celebrate that."

A total of 147 drilling permits were issued in Illinois between January 1 and March 17, but none of them were in Johnson County and none were for natural gas, according to Illinois Department of Natural Resources data. The state issued 112 oil drilling permits during that time, with 43 in three counties northeast of Johnson County: White (23), Richland (10) and Wabash (10).

Recent Articles by Richard Nemec