Beware the radicals
Friday, May 2, 2014 - Posted by Rich Miller
* From an anti-fracking op-ed by William Rau…
Last year, I emailed Illinois legislators showing how the definition of high-volume horizontal fracturing in the Illinois Hydraulic Fracturing Act created a loophole exempting oil producers from the law. Legislators dismissed the warning and passed the Frack Act last May. Now, Denver-based Strata-X is preparing to frack a horizontal well next month with a permit filed under the old Illinois Oil & Gas Act.
The consequences? First, permit fees drop from $13,500 per well to $15 per well when Strata-X drills its 100-plus planned wells. Second, production taxes, which are 11 percent in North Dakota, drop from about 3 percent to one-tenth of 1 percent in Illinois with all revenue going to an oil promotion board. Counties can forget about receiving state funds for highway repairs.
Third, blanket bond moneys for plugging defunct wells and cleaning up well sites drop from $500,000 — already inadequate for preventing bond forfeiture — to $25,000. For 100 wells, that’s $250 per well, about 1/100th of actual plugging and cleanup costs.
Guess who will be stuck with the cleanup costs?
Finally, public notice requirements, baseline water testing, insurance provisions, modest environmental protections and setbacks, earthquake mitigation, bans on open pit storage of frack waste water, etc., are all gone.
* There’s also another claimed loophole. SJ-R…
Environmental groups dismissed draft rules released in November as riddled with loopholes favoring the oil and gas industry.
Opponents of the practice of using high-pressure water and chemicals to free oil and gas from rock formations also are pushing for a fracking moratorium in the spring legislative session.
“The big issue with us is the fact that we are pretty convinced the industry is already dry fracking,” said Annette McMichael, spokeswoman for Southern Illinoisans Against Fracturing Our Environment.
McMichael said dry fracking relies on nitrogen and propane to circumvent limits on the volume of water and chemicals permitted.
* I asked Mark Denzler of the IMA to respond…
Thank you for the opportunity to comment on Mr. Rau’s continued forays against energy development in Illinois. Mr. Rau and IPA are publicly on record as opposing any form of hydraulic fracturing in Illinois so his latest op ed is simply more of the same on this topic.
For the record, there are no loopholes in the Illinois law. The General Assembly, working in concert with industry, environmental community and the Attorney General’s office, crafted a strong law regulating the new generation technology known as high volume hydraulic fracturing. It’s interesting to note that a few days ago, the Bakken Shale in North Dakota and Montana reached a milestone of producing its 1 billionth barrel of oil while we continue to wait for the Department of Natural Resources to promulgate final rules.
The definition of a high volume hydraulic fracturing operation is 300,000 gallons of fluid (not simply water) or 80,000 gallons per stage. The total gallonage standard was a last second request by the environmental community during negotiations and inclusion of a conversion factor is being discussed as part of the rulemaking process. Generally speaking, HVHF operations use millions of gallons of water so in reality Illinois set a very low threshold in order to ensure that the new regulations captured a wide range of operations. these operations must comply with the new law. Illinois policymakers clearly wanted to delineate the difference between conventional wells and new HVHF wells and they took the time to do their homework to craft a law that recognizes the differences.
Secondly, Illinois set a very stringent standard by defining a horizontal well as one that deviates more than 100 feet from surface to bottom hole location. Nearly every well has deviation and Illinois’ definition is very strong.
The legislature was diligent in making sure the law was tailored to address precisely the types of unconventional operations that have been the subject of media and policy discussion in other states.
So, actually, there is sort of a loophole for “dry fracking” in the legislation, but the conversion factor between nitrogen or propane and water is currently under discussion.
Also, I’m told it’s very likely that Strata-X’s project can’t circumvent the current law. We’ll see, but the standards are pretty darned tough.
In other words, the sky most likely isn’t falling.
- Formerly Known As... - Friday, May 2, 14 @ 10:54 am:
Does anyone know if Rau is accurate on the difference in production taxes between North Dakota and Illinois?
Oil production is taxed at a lower rate than personal income? And only about 1/4 that of the North Dakota rate?
- 1776 - Friday, May 2, 14 @ 11:01 am:
The Illinois tax rate is graduated rate with a top rate of 6 percent for production over 100 barrels per day. Rau was being disingenuous by not referring to the Fracturing Act.
- Going nuclear - Friday, May 2, 14 @ 11:10 am:
It would be interesting to hear from the Natural Resources Defense Council, which was involved in the legislative negotiations with IMA and the other business groups. If there is an issue with dry fracking, it sounds like it could be easily addressed through the regulatory process by tightening up the definitions.
- Formerly Known As... - Friday, May 2, 14 @ 11:10 am:
Thank you very much, 1776.
- Sunshine - Friday, May 2, 14 @ 11:17 am:
To my knowledge there are no laws, rules, regulations, or considerations for either forcing or encouraging the use or any portion of the oil produced in Illinois to actually stay in the US.
As far as I know any and all oil produced can be exported, with little value to Illinois or the US. Same holds true with all oil produced in the US.
One of the key issues with the Keystone pipeline is that very little, if any additional oil that is refined in Houston will be used here in the US.
Oil companies have great clout and own many politicians. Any legislation will likely be filled with loopholes.
Illinois residents can dream on about us becoming energy independent. The oil will go to where the money is, like all oil produced stateside. Believe me, there is a lot of innuendo and suggestion about how great this is for Illinois, when in fact it will not serve to do much at all for us.
The hundred’s of improperly or inadequately completed or plugged oil and gas wells throughout Illinois will prove to be disastrous for our fresh water supply. But hey, big money talks and politicians get in line to get theirs.
- Arizona Bob - Friday, May 2, 14 @ 11:18 am:
I have extensive experience in NG pipelines and gathering systems in Pennsylvania, and this guy Rau is either ignorant for the facts or is just plain dishonest.
For example, his statement, “Counties can forget about receiving state funds for highway repairs.” ignores the fact they counties and other jurisdictional authorities typically charge permit fees for the water trucks and require bonding with said authorities for road repairs. Only certain roads are allowed to carry the heavy water trucks, and if adequate roads to the drilling sites don’t exist, there usually a side agreement to upgrade the roads to meet the heavier truck demand. Roads to be used are clearly marked, and deviations from the permitted paths lead to tickets being issued to the truck drivers and serious fines.
It’s almost funny how Rau complains about using nitrogen and propane in current fracking practice as a “Loophole”. Nitrogen is the primary element in air, and is inert and nonreactive so there’s no reason to regulate it. Propane is gaseous at normal temperatures and pressures, and you’ll find it all over farming comunities and remote areas. Properly stored and operated it presents little explosion threat and even less environmental threat.
I’m a strong believer in strict oversight and control of the fracking process, and inspectors being present at key times and milestones of the project. Drilling casings should be checked before operation to ensure they will not leak after the process. Continuous monitoring should be preformed to ensure that any leakage of toxic or explosive materials are detected and appropriate remedial action taken.
Some frackers, IMHO, have not been the most dililgent in these actions. That’s where good regulatory oversight comes in.
Done right, its very safe and is a necessary facet to our energy policy. It’s government’s responsiblity to ensure that it’s done properly. Of course, if you hire inspectors based on how much time and money they spent on political campaigns instead of tecnically qualified professionals, you’re going to have problems.
Pennsylvania’s law for this are tried and true and may be a better model that ND. Of course I haven’t done projects in ND, so I really can’t say.
- Rich Miller - Friday, May 2, 14 @ 11:18 am:
===To my knowledge there are no laws, rules, regulations, or considerations for either forcing or encouraging the use or any portion of the oil produced in Illinois to actually stay in the US===
So what?
- Anonymous - Friday, May 2, 14 @ 11:29 am:
Yes, Rich. You are absolutely correct.
From what I am hearing, Devonian wells that have been drilled in Southern Illinois (so far) have actually had problems from water that is already present in the bores at that depth. In other words, they “make water.”
The original effort of the anti’s seemed to be centered on the idea that fracking would somehow drain us dry of water resources. The potential need for different methods of stimulating wells in our area is now forcing the anti’s to change the stories that they are telling.
- Sunshine - Friday, May 2, 14 @ 11:39 am:
Water much below 500 feet is brackish salt water. Non potable.
As to your “so what” Rich…It is simply a fact that there are no guarantees of lower oil prices/gas prices for anyone. The resource is being exported. Many are not aware of that. It is part of our “free enterprise” system. As long as folks know they are receiving a benefit from the operations, via fees and taxes, then fine. But any illusion that Illinois will benefit through lower prices at the pump, or through lower home heating oil prices simply is a pipe dream.
I support oil and gas production, and also support strong and enforceable regulations to protect fresh water sources.
- wordslinger - Friday, May 2, 14 @ 11:47 am:
–It’s interesting to note that a few days ago, the Bakken Shale in North Dakota and Montana reached a milestone of producing its 1 billionth barrel of oil while we continue to wait for the Department of Natural Resources to promulgate final rules.–
Well, they’ve been going full bore there since 2006 and the Illinois law just passed. So it’s that kinda interesting, I guess….
Real boom times in North Dakota.
The average rent in Wiliston, ND, is now higher than Manhattan.
http://www.nydailynews.com/life-style/real-estate/average-rent-williston-n-tops-costs-nyc-article-1.1617187
- Rich Miller - Friday, May 2, 14 @ 11:55 am:
===The average rent in Wiliston, ND, is now higher than Manhattan. ===
A buddy of mine has a son who’s making a small fortune out there by putting shower stalls on flatbed trucks. Apparently, his biz is in very high demand and he’s added several trucks to his stable.
lol
- W - Friday, May 2, 14 @ 11:58 am:
If there’s anything I’ve learned from the fracking debate it’s that representatives of the oil industry tell the entire truth without spin 100% of the time and any statement from them ends the discussion. hahaha!
If you read Denzler’s statement carefully, he doesn’t actually address Rau’s letter in any meaningful way, except to once again use participation by a few green groups and the Attorney General as cover for rules that the legislature spent less than three hours debating.
Seriously, this campaign to paint all opposition as “radicals” that Capitol Fax has been participating in is coming off as desperate. Upwards of 40% of people in conservative Republican counties of southern Illinois who oppose fracking are not a radical fringe, no matter how badly you try to paint them as such.
- wordslinger - Friday, May 2, 14 @ 11:59 am:
Rich, it’s really something out there, like the San Francisco and Deadwood gold rushes.
Tons of new people (mostly young men), very little infrastructure and lot of ways to make money (legally and illegally) if you’re willing to hunker down in your own Winnebago.
- wordslinger - Friday, May 2, 14 @ 12:09 pm:
It took about five years for fracking to really take off in North Dakota.
- W - Friday, May 2, 14 @ 12:11 pm:
“Generally speaking, HVHF operations use millions of gallons of water”
This is true for natural gas fracking, which is what the Illinois law was written to regulate. However, most fracking in Illinois may be for oil. Denzler’s comments about the intentions of “policymakers” who wrote the law sound comforting, but let’s remember that oil industry representatives were in the room to help write the law. They understand how to create loopholes in ways that the inexperienced representatives from environmental groups do not.
- Pot calling kettle - Friday, May 2, 14 @ 12:14 pm:
===As far as I know any and all oil produced can be exported, with little value to Illinois or the US. Same holds true with all oil produced in the US.===
First of all, pretty much any natural resource or manufactured good produced in the U.S. can be exported. Corn, coal, copper, cedar, couches, cars, etc.
The second part of your statement “with little value to Illinois or the US” is complete BS. It benefits the owners, workers, transporters, government, and on and on and on.
===It is simply a fact that there are no guarantees of lower oil prices/gas prices for anyone.===
It is not a fact simply because you put it into writing. The opposite is actually true. Putting more oil (or more of anything) on the open market will lower prices for consumers.
- DuPage - Friday, May 2, 14 @ 12:48 pm:
If the oil is exported, at least some of the money is spent here and adds to the economy.
- Formerly Known As... - Friday, May 2, 14 @ 12:54 pm:
No snark: isn’t North Dakota one of the pioneers of fracking?
Shouldn’t the turnaround time on implementation and benefits be much faster than five years in the states following the leaders? I just don’t want to see this turn into another video poker situation.
- Formerly Known As... - Friday, May 2, 14 @ 12:58 pm:
That story on the rent levels in ND compared to NY is crazy.
Time to go long on flatbed shower trailers in southern Illinois. I wonder if the son of Rich’s buddy offers franchises? “Frick & Frack, we clean your back”
- In Absentia - Friday, May 2, 14 @ 1:00 pm:
To Formerly Known As- No. ND is not a pioneer of fracking. The late George P. Mitchell made it work. He also developed The Woodlands, TX and was a great man all the way around.
- Formerly Known As... - Friday, May 2, 14 @ 1:17 pm:
In Absentia - thanks for replying. Mr. Mitchell’s work is certainly impressive, and it is sad to see he has passed away. My thinking was geared more towards the state level, in terms of getting the oversight procedures in place as well as the revenue, oil and gas flowing.
In other words, it doesn’t seem like this should take extremely long to get up and running since we are following in the footsteps of other states who are already out front on this.
- wordslinger - Friday, May 2, 14 @ 1:32 pm:
–The late George P. Mitchell made it work–
Definitely the game changer.
- In Absentia - Friday, May 2, 14 @ 2:11 pm:
The best source for state regulatory oversight would come from the Texas Railroad Commission. They’ve got online research features to help with any question. http://www.rrc.state.tx.us/
- In Absentia - Friday, May 2, 14 @ 2:22 pm:
===To my knowledge there are no laws, rules, regulations, or considerations for either forcing or encouraging the use or any portion of the oil produced in Illinois to actually stay in the US===
So what?
The export of unrefined crude oil is against the law.
- yinn - Friday, May 2, 14 @ 2:51 pm:
Rich Miller usually isn’t terribly biased but on this topic I am continually shocked.
- Rich Miller - Friday, May 2, 14 @ 2:55 pm:
===but on this topic I am continually shocked. ===
You’re shocked that I took the side of the National Resources Defense Council and the Illinois Sierra Club against a small bunch of radicals? You’re shocked that I want some job growth in one of the poorest, least populated regions of this state?
Sheesh.
- wordslinger - Friday, May 2, 14 @ 3:01 pm:
ND is still working things out as this goes along, making changes. They couldn’t see all this coming so fast.
If you look at a map, there was no place in the country less equipped with infrastructure or labor to accommodate a boom from fracking.
But that’s where the oil is, and it’s a whale of a story.
Lot of money to be made up there, too. A guy I went to high school with is up there with a mini-Winnie and gas grill, making breakfast and lunch and selling sundries out by the rigs. Big margins.
- wordslinger - Friday, May 2, 14 @ 3:08 pm:
–The best source for state regulatory oversight would come from the Texas Railroad Commission.–
The Texas Railroad Commission, an elected body, decides who can drill where and how much they can take out.
I can smell the meat a’cookin.
Counter-intuitive to it’s reputation, Texas has some very strong economic regulatory powers.
The Texas Railroad Commission runs the oil industry. You can’t take a drop out of the ground without them.
And Texas rode through the housing collapse better than most states because they had strict state regulations on predatory lending and home equity lending.
- FormerParatrooper - Friday, May 2, 14 @ 3:13 pm:
I am all for creating jobs in southern Illinois. The money would benefit not only the State, but the total economy of several areas. People would be spending that money, paying tax on their earnings and in sales tax.
What i wonder about is the rumors of what is caused by tracking. I’ve heard earthquakes in Oklahoma occur near the fracking sites. Whether true or not i don’t know. The ecoLogical damage is of concern. Has anyone found sound science on these subjects?
- In Absentia - Friday, May 2, 14 @ 3:35 pm:
A barrel of crude is selling for $100 barrel. It helps our economy. The energy sector kept our economy alive when without it, who knows where we’d be now?! http://www.cbsnews.com/videos/technology-is-driving-americas-oil-boom/
- Keyser Soze - Friday, May 2, 14 @ 4:12 pm:
Long, long ago there was a huge controversey, probably dwarfing Keystone and Fracking combined, over construction of the Alaskan Pipeline. The complaints then were many and varied, but mostly emotional. History is repeating.
- wordslinger - Friday, May 2, 14 @ 4:15 pm:
–You’re shocked that I want some job growth in one of the poorest, least populated regions of this state?–
The world economy has been making choices and sending maximizing capital for a long time –
=- the fact is, it’s tough to make a buck in Southern Illinois.
I’ll take the fracking over the coal, which is what’s happening.
When was coal was a kumbiyah moment? Plenty of people in the ground down there over that dirty business.
- wordslinger - Friday, May 2, 14 @ 4:17 pm:
–What i wonder about is the rumors of what is caused by tracking. I’ve heard earthquakes in Oklahoma occur near the fracking sites. Whether true or not i don’t know.–
You’re on a computer, dude. Try the google. Takes seconds. You might have to read and make up your own mind.