Shale Daily / NGI All News Access

Illinois Looks at Fracking, Possible Shale Development

Shale talk and action are both picking up in Illinois as oil/gas exploration and production (E&P) companies and state officials are getting more involved in the fields and in the state capital in Springfield. As the energy companies seek more leases from farmers, the lawmakers have a proposed state law (SB 3280) covering hydraulic fracturing (fracking).

Sponsored by State Sen. Michael Frerichs (D-Champaign), the bill would require prospective oil/gas drillers to disclose all of the chemicals they intend to use in their mixtures, along with establishing standards for concrete well casings and wastewater storage. The legislation is reportedly supported by the industry and is scheduled to be taken up in the state Senate when it returns from recess April 17.

SB 3280 earlier was passed out of the lower house of the Illinois Assembly. NGI's Shale Daily could not reach anyone with the Illinois Oil and Gas Association (IOGA) to confirm it was still supporting the measure.

Meanwhile, local business media are reporting increased activity by energy operators in downstate counties 250 to 300 miles south of Chicago. They are generally identified as the southeastern part of Illinois, places like Wayne County, about halfway between St. Louis, MO, and Louisville, KY, where farmers are leasing at least portions of their land to energy companies.

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

Prices are ranging from $100 to $350/acre for signing over lease and mineral rights, according to local news reports quoting officials at the Mount Vernon, IL-based IOGA. 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 to give E&P operators access to the property for a pre-specified number of years.

Talk about Illinois has been picking up generally, with some mid-major companies apparently eyeing the potential there, but refusing to say much publicly about it in recent months.

In the latest saga of the domestic U.S. oil/gas boom, the Illinois potential has reportedly developed royalty payment rates of up to 17.5%, compared to the 12.5% that traditionally has been paid in royalties in this section of the state. A major focus is liquids-rich gas.

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