Fracking and Jobs in Illinois

Today I am giving Tom Wolf, the executive director of the Illinois Chamber’s Energy Council, the President’s Message forum to update you on the opportunities and legislative challenges associated with natural gas and oil development in Illinois through the use of hydraulic fracturing, or “fracking”, and horizontal drilling.

Can we get some fracking jobs in Illinois?

Many people don’t realize that southern Illinois is host to oil and gas development. Decades ago, Illinois was third in the nation when it came to oil production. Today, Illinois wells produce 26,000 barrels of oil per day. Sure, it’s not much (the U.S. consumes 19 million barrels per day), but they do provide some economic boost to the region and the state, especially when the price of crude oil hovers around $100 per barrel.

Nothing has changed more dramatically in the energy world in the past four years more than the supply and availability of oil and natural gas in the United States. Four years ago, many people were talking about importing liquid natural gas from foreign countries to supply our natural gas demands. Now, we’re debating whether or not we should be natural gas exporters and whether the cheap natural gas prices we are currently experiencing – about $2 per million BTUs compared with $12 in 2007 – can last.

What happened?

The industry has found better ways to extract natural gas and crude oil from underground shale deposits in the U.S. Producers have always known the product was there, they just couldn’t separate the oil or gas from the shale rock economically – until now. Producers have been fracking and using new horizontal drilling techniques to extract incredible amounts of natural gas and crude oil from these deposits. The result of successfully reaching the new energy sources is affecting the markets and our economy in major ways.   As this Chicago Tribune editorial attests, North Dakota is having a boom that is parallel to the California gold rush of the late 19th century. People, jobs and money are rushing into a state that produced only 7,500 barrels of oil a day in 2006 and today produces more than 600,000!

How could it affect Illinois?

Illinois has a shale “play” under the southern part of the state that could produce oil or natural gas. It’s unclear whether it is economical to produce oil or gas from this shale, but it would be prudent for the state to work with interested parties to set up a regulatory road map for future fracking and horizontal drilling in Illinois so we can find out.

If production of oil or gas does end up being economical, there could be a jobs boom in southern Illinois that will have a ripple effect on our state’s economy. East Texas has seen 47,000 new jobs from the oil and gas boom in its region. Western Pennsylvania has also seen a big expansion of employment and ancillary economic development, and southeastern Ohio is looking like the next boom area.

We’re not going to predict whether or not Illinois will reap these benefits, but it’s good public policy to set up a road map – perhaps even a red carpet – for producers to come here and find out.

Why do we need regulations?

The best kind of energy production is the kind that protects the land and people around it. Regulations help set up the parameters to meet that goal and provide certainty for the producers who are looking to extract energy from the shale deposits. Many states have or are looking to create this regulatory road map so, if and when production comes to their state, everyone knows what they have to do to “do it right.”

As this Chicago Sun-Times editorial points out, the Illinois Senate passed such legislation this past session but it got bogged down in the House. Negotiations are continuing this summer and we encourage everyone to look at best practices in other states and come to a consensus on regulations so we can begin to see if this natural resource could produce economic opportunities in Illinois.

Conclusion

The Illinois Chamber will be participating in these discussions with the goal of getting a bill passed through the General Assembly that shows appropriate certainty to producers that want to explore Illinois’ shale opportunities and do it in a way that brings common sense protections to landowners and the environment.

Finally, there is some talk about taxing the production of oil and gas in Illinois. The Chamber believes such discussions are premature, and that it is best to encourage early exploration and production and revisit taxation if and when the market takes off. Taxing the industry now could result in producers walking away from exploration and production in Illinois in favor of better opportunities in other states. Illinois has tremendous potential that could be realized if our legislature does not put undue burdens upon this industry.

It’s time to see if Illinois can share in the oil and gas boom that is sweeping parts of the nation. If the geology or technology doesn’t work, at least we looked at the opportunity and gave it a chance. If it does work, then let’s welcome the economic benefits with open arms!

For more information about fracking and oil and gas production in Illinois, contact Tom Wolf, executive director of the Illinois Chamber Energy Council at 312-983-7100 or twolf@ilchamber.org.