 Energy companies are leasing the rights to drill for oil from
landowners in southern Illinois, hoping hydraulic fracturing -- a
process used for decades in Illinois but now possible on a much
larger scale -- will let them extract oil once considered elusive.
The bills address hydraulic fracturing, which injects water, sand
and industrial fluids at high pressure to extract oil and gas.
Four measures in the General Assembly would amend the Illinois
Oil and Gas Act to regulate hydraulic fracturing:
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Senate Bill 3280 and
House Bill 3897, sponsored by Democrats, would require
companies to disclose the chemicals used in the fracturing
fluids and require companies to test the integrity of the cement
and steel well casings that protect groundwater during drilling.
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Senate Bill 3534 and
House Bill 5853, sponsored by Republicans, would require the
chemical disclosure.
Hydraulic fracturing is fueling an oil and gas boom in states
such as North Dakota, Wyoming and Pennsylvania, reviving
economically struggling communities with thousands of jobs and
royalties for landowners leasing their mineral rights to energy
companies.
It is also controversial. Some residents in other states have
blamed hydraulic fracturing for contaminating their drinking water
wells, although industry groups and companies dispute those claims.
State Sen. Michael Frerichs, D-Gifford, is sponsoring SB 3280.
The bill will be heard Wednesday in the Senate Environment
Committee, along with the Republican bill requiring disclosure only.
Frerichs said disclosure would give landowners the ability to
fingerprint the chemicals and hold the company liable in the event
of contamination.
"We're learning about potential problems associated with it, and
before it comes into Illinois, I think it's good to be proactive," Frerichs said.
State Rep. Dave Winters, R-Rockford, who is sponsoring HB 5838,
said he thinks hydraulic fracturing is safe, but like Frerichs, said
he wants to be proactive.
"We should have the law ready for it," Winter said.
About 2.8 million Illinoisans get their drinking water from
public systems that use groundwater, according to the
Ground Water
Protection Council, a national nonprofit that consists of state and
local water agencies. An additional 400,000 homeowners, mostly in
rural areas, have private water wells, according to the council.
"We don't have evidence to indicate that hydraulic fracturing
causes groundwater contamination," said Mike Nicholaus, a geologist
and spokesman for the council.
The council does support disclosure as a matter of transparency
and also helps run the online fracturing chemical disclosure website
FracFocus. Montana, Colorado, Texas, Louisiana and Pennsylvania all
require some form of public disclosure, Nicholaus said.
In Illinois, the oil and gas industry supports chemical
disclosure, said Brad Richards, executive vice president of the
Illinois Oil and Gas Association, a trade group representing state
petroleum companies. But he said hydraulic fracturing hasn't been
proven to be the cause of any water contamination, and he said oil
drilling has been done safely in Illinois for decades.
Brian Sauder, outreach and policy coordinator for the
environmental group Faith in Place, has been lobbying for disclosure
and regulations for more than a year.
"Our concern is protecting our water sources, whether it's in the
ground or on the surface," Sauder said.
Combined with horizontal drilling, advances in hydraulic
fracturing are allowing energy companies to extract oil and gas from
rock formations once out of the industry's reach. In southern
Illinois, the potential oil in the New Albany shale is getting a lot
of interest from the industry, Richards said.
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During the past year, energy companies have been spending
millions of dollars leasing mineral rights from farmers and rural
landowners in Wayne, Hamilton, Saline and other counties.
"Right now it's a lease boom," Richards said, speculating that
thousands of jobs could be created. "Whether or not it will work in
Illinois remains to be seen, but it has the potential to be a huge
economic driver."
Richards said only a few experimental wells have been drilled in
the New Albany shale, which holds oil and gas and in Illinois sits
about 4,500 feet underground, about a thousand feet above the
Maquoketa shale, which has been less explored.
"I think it's reasonable to assume that folks like what they've
found, because there's a tremendous amount of leasing," Richards
said. "We're going to find out soon."
One oilman who likes what he's found is Jack Overstreet,
president of the Denver-based oil and gas company Next Energy LLC.
Overstreet said samples of the New Albany shale the company has
tested show a lot of oil trapped in the rock.
Overstreet claimed that Next Energy so far has acquired more New
Albany shale leases than any other company, with about 175,000 acres
in southern Illinois under lease.
Illinois was once a major oil producer, and today companies
extract about 10 million to 12 million barrels a year, according to
the Illinois Department of Natural Resources.
While geologists and engineers still don't know how much oil the
New Albany shale contains or how much could be extracted, Overstreet
said he would expect to extract about 23,000 barrels of oil from
every square mile.
"But that's complete speculation," he admitted.
David White, a fourth-generation farmer and vice president of the
Wayne County Farm Bureau, has seen a lot of that speculation at
work.
White has leased the mineral rights to 39 of his 200 acres of
farmland -- where he grows wheat, corn and soybeans -- to
New
Century Exploration, an energy company based in Houston, Texas.
White declined to say how much he could earn from the lease, but
he said the base rate he's heard of is a 12.5 percent royalty rate
on the value of oil or gas produced, in addition to a signing bonus.
White negotiated the lease himself.
"Looking back," he said, "it might have been better to hire an
oil and gas attorney."
Laura Hammond, a lawyer specializing in mineral rights with the
Illinois Farm Bureau, an agriculture nonprofit, offers informal
advice to farmers considering leasing and recommends hiring a
lawyer.
Leases offered by energy companies "usually start off in the
favor of the company," Hammond said.
"But if they negotiate right, landowners can really be the
driver's seat," for example, by requiring provisions that let
landowners control aspects of land use, such as the location of the
well sites, she said.
White said his lease requires the potential well to be at least
500 feet from his home or barn and also lets him negotiate the
location of pipelines or roads that would be built to the well.
"Our main concern is to be good stewards of the land," White
said.
[Illinois
Statehouse News; By ANTHONY BRINO]
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