Shale Daily / NGI All News Access

Illinois Oil and Gas Industry, Enviros Agree on Fracking Rules

Hoping to head off threats of a state moratorium on hydraulic fracturing (fracking), Illinois state legislative, oil/natural gas industry and environmental leaders on Thursday announced agreement on a bipartisan bill (HB 2615) establishing rules on the use of the contested well stimulation practice.

With support from the governor and both houses of the Illinois Assembly, along with environmental heavyweights like the Natural Resources Defense Council (NRDC), HB 2615 is seen as a "manageable, balanced" approach to the controversial industry practice that has been around for decades in other states, Illinois Oil and Gas Association (IOGA) Executive Vice President Brad Richards told NGI's Shale Daily on Friday.

Officials with some Illinois-based environmental groups told news media Thursday that the measure is likely to zip through the legislature because of the unusually broad-based coalition that is backing the bill, including regulatory agencies and Illinois Attorney General Lisa Madigan. "I would be surprised if we were still haggling over this at the last few days of the session," Richards said.

"It is not a perfect bill by any means," Richards said. "We have our share of concerns, but the political realities being what they are, we felt this is manageable and hopefully it will strike the balance we are searching for and allow development to move forward." In Associated Press reports, Richards' counterpart at the Illinois Petroleum Council (IPC), Jim Watson, a former Illinois state lawmaker, echoed these sentiments, saying the industry is "anxious to invest," despite what he characterized as "the nation's toughest [fracking] regulations."

Richards confirmed that interest is very hot in plays covering up to 12 counties in southern Illinois, including the New Albany Shale (see Shale Daily, Dec. 17, 2012).

Illinois's proposed Hydraulic Fracturing Regulatory Act would require oil/gas exploration and production (E&P) companies to test water before, during and after drilling, and it holds them liable for any contamination found after the drilling begins. It also carries chemical disclosure requirements that are typical of fracking legislation in other states.

HB 2615 would require E&P operators to disclose the chemicals used and to control emissions from the work, along with being subjected to scrutiny in public hearings and from potential lawsuits from residents who believe the drilling activity is harming them. For now, backers of the bill are claiming that its requirements go beyond what are now in place in states where fracking is ongoing.

The new law would authorize the state Department of Natural Resources to adopt rules "as may be necessary" to fulfill HB 2615's intent, and it would create a statewide "Mines and Minerals Regulatory Fund."

Even with the broad-based support, some critics and adamantly opposed lawmakers are calling for a two-year moratorium on fracking to study potential contamination and health effects. Richards predicted that this opposition will be drowned out if the House and then state Senate fast track the measure to the governor's desk before the scheduled adjournment of the Assembly in late May.

In the meantime, Richards said the leasing of acreage in the southern part of the state is booming. "We have probably had a half-million acres leased in southern Illinois," he said, adding that the per-acre prices paid have steadily gone up and are currently in the $350-500/acre range, with "pretty generous" royalty arrangements.

While there are up to a dozen counties experiencing the leasing spurt, Richards said the "epicenter" is found in Wayne, White and Hamilton counties, the heart of traditional oil production in the state.

The interest is mostly in oil, given today's market, he said. "In the deeper parts of the Illinois Basin, it is likely to be oil and natural gas liquids," he said.

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