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Fracking stalls while coal companies hope for rebound

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Illinois

* Illinois’ hoped-for fracking boom will have to wait…

A recent study by IHS, an industry research firm, concluded four-fifths of the oil estimated to be pumped this year from tight geological formations such as sandstone or shale still can be profitable at $50 to $69 a barrel — a span an IHS executive said would “cast a big chill on the level of activity.”

“Low oil prices are going to test the resilience of tight oil production,” said Jim Burkhard, IHS’ vice president of global oil research.

Some companies have drilled exploratory wells and remain optimistic. Kansas-based driller Wayne Woolsey’s company, with 260,000 acres under lease in southern Illinois, has drilled 10 evaluation wells at a cost of more than $2 million apiece, and “everything we’ve done at this point looks very favorable.”

But the lengthy rules-making process has complicated his prospects. Many of the four-year lease deals he’s struck with land owners will expire in the next year or so.

“I was hoping to evaluate (that land) in the first year, which hasn’t occurred,” he said. “It’s been extremely time-consuming and costly.”

* Wall Street Journal has context…

OPEC Secretary-General Abdalla Salem el-Badri said in an interview with Reuters on Monday that with prices between $45 and $55 a barrel, “I think maybe they reached the bottom and will see some rebound very soon.”

Prices, which had been trading in the red overnight, turned positive on the news.

U.S. oil for March delivery rose as high as $46.11 a barrel, up from $45 a barrel earlier in the day, on the New York Mercantile Exchange.

* Meanwhile, Erickson writes about Illinois coal…

Gov. Bruce Rauner’s pledge to remake state government could include an overhaul of the way Illinois regulates the coal mining industry.

In a situation that has some environmental groups on alert and coal industry supporters applauding, the governor is expected to push for a more streamlined permitting process for companies wanting to extract coal from the ground. […]

Phil Gonet, executive director of the Illinois Coal Association, said he has told Rauner that the key to improving coal regulations is to hire more people to review and process applications.

In one instance, Gonet said an application for a new coal mine in Vermilion County sat idle for 13 months because of a manpower shortage at the Department of Natural Resources. […]

Foresight Energy was among a top contributor to Rauner’s inaugural festivities, giving up to $100,000 to help fund the events two weeks ago.

Since 2009, the company has pumped $1.9 million into the campaign funds of Illinois politicians, including $10,000 to Rauner’s campaign fund and $12,500 to Rauner’s new IDNR chief Wayne Rosenthal.

posted by Rich Miller
Monday, Jan 26, 15 @ 8:47 am

Comments

== ?the key to improving coal regulations is to hire more people to review and process applications. ==

Expand the state burocracy? I thought Rauner was committed to putting it on a crash diet and to cutting costs, not to raising them.

Comment by anon Monday, Jan 26, 15 @ 9:09 am
We keep hearing about Illinois coal without also noting that Illinois coal isn’t used for a real reason. Illinois coal isn’t like other kinds currently used. Illinois coal is very dirty and when it was last burned regularly, it created nightmare environmental problems that wouldn’t be accepted by anything with a pair of lungs and a nose today.

So Illinois might have a lot of coal, but Illinois coal needs a lot of expensive processes before it can be used, which causes the savings to become far less than hoped. I would like to see Illinois find a way to benefit from this natural resource and support investigating technologies to perhaps make this possible, but I have discovered that most politicians touting our coal production, aren’t considering all the facts.

With all this natural gas available, we’ll be continuing to reach our CO2 goals without the renewable energy efforts. Natural gas is a real market changer and will continue to shake up energy policies.

Comment by VanillaMan Monday, Jan 26, 15 @ 9:09 am
Vanilla Man,

You’re ignoring a key fact about coal here: a lot of it is exported to countries that do use it

Comment by Anonymoiis Monday, Jan 26, 15 @ 9:15 am
Like he was on most things that would have helped the Illinois economy PQ on fracking was a day late and a dollar short.

Comment by anon. Monday, Jan 26, 15 @ 9:54 am
==In one instance, Gonet said an application for a new coal mine in Vermilion County sat idle for 13 months because of a manpower shortage at the Department of Natural Resources.==

Prepare for a lot more manpower shortages, in DNR and elsewhere.

Comment by jerry 101 Monday, Jan 26, 15 @ 10:07 am
Anon, by your logic, I guess we all owe Quinn a big thanks for cutting the price of gas in half?

Koo-koo

Comment by Wordslinger Monday, Jan 26, 15 @ 10:13 am
Alternative headline

==Illinois misses fracking boom due to comatose pace of government==

Comment by Formerly Known As... Monday, Jan 26, 15 @ 10:17 am
Importing Illinois coal to poorer countries to use is like putting sawdust into baby food. If it isn’t good enough for us without considerable processing, it probably isn’t doing much good for them either.

Comment by VanillaMan Monday, Jan 26, 15 @ 10:19 am
VanillaMan, fair point (for once). Except there are two kinds of coal, high-sulphur coal like we have in Illinois and high-mercury coal that they take out of huge pits in Wyoming and Utah and ship east. High-sulphur coal was blamed for acid rain in the 1980s and the feds basically regulated it out of use.

Who knows what damage we’ll see from burning high-mercury coal, but it’s turning up more and more in the fish we eat, so the poison is in the food chain already.

There is no such thing as clean coal.

Comment by 47th Ward Monday, Jan 26, 15 @ 10:54 am
We could probably make coal clean enough for using, but doing so would probably be cost prohibitive when compared to other fuels.

Comment by VanillaMan Monday, Jan 26, 15 @ 11:18 am
@47th Ward,

Illinois coal is still being burned in the state (as well as nearby states), particularly in the newer, more modern coal-fired power plants that were built after 2000. The older power plants in the state tend to burn western coal. Illinois was one of the first states in the country to adopt mercury pollution control requirements for power plants. Many of our plants now have updated controls for mercury.

@VM

Natural gas will play a greater role in reducing CO2 emissions, but there are concerns about increasing its usage for electricity production in the Midwest, particularly in the winter months when gas is in high demand for heating buildings. We’re not going to make meaningful carbon reductions without renewables, energy efficiency and carbon capture and storage.

Comment by Going nuclear Monday, Jan 26, 15 @ 1:36 pm
Since oil prices are now artificially low forever…Oh wait, they’re not. Keep making progress and catch the next wave. It’s always coming.

Comment by A guy Monday, Jan 26, 15 @ 2:06 pm
How is the current price of oil “artificial?” Seems the classic result of rising supply and declining demand.

Comment by Wordslinger Monday, Jan 26, 15 @ 2:24 pm
About a year and a half ago, the Center for Tax and Budget Accountability published “The Impact of Coal on the Illinois State Budget, FY2011.” Among the findings:

Overall, taking all revenues and expenditures into account, we estimate that the coal industry’s impact on the Illinois state budget in Fiscal Year 2011 amounted to a net cost of $19.8 million.

Conclusions and recommendations.
Implement a state severance tax on coal and distribute a portion of the revenues to local
governments.

 Create a permanent mineral trust fund.

 Conduct a detailed analysis of the full costs and benefits of grant programs supporting coal-related projects, and implement greater transparency and oversight.

Source:
http://www.ctbaonline.org/reports?by_word=coal

FWIW, I agree. We already have severance taxes on oil and lumber; we should have one on coal (and for that matter, gravel, sand, and stone) as well.

If CTBA is right — then taxpayers have been subsidizing Big Coal. At the very least, things should be revenue-neutral.

Ah……but politically, of course, a very tough job to move that idea through the GA.

I’m outta here.

Comment by Third Reading Monday, Jan 26, 15 @ 2:32 pm
Illinois coal is generally high sulfur, but it is also bituminous coal and has a relatively high heat content. Illinois coal is still in demand because of the heat content. Western coal has low sulfur but also lower heat content. As the requirements for scrubbing sulfur ratchet up, Illinois coal will become more attractive because of the higher heat content and the proximity to high demand in the eastern U.S.

As of 2009, Illinois has appx 2400 million tons of lower sulfur (

Comment by Pot calling kettle Monday, Jan 26, 15 @ 3:48 pm
=== Wordslinger - Monday, Jan 26, 15 @ 2:24 pm:

How is the current price of oil “artificial?” Seems the classic result of rising supply and declining demand.===

Have we really not seen this before? The market stimulates this commodity. Other factors involved too. Promise me oil will never get back to close to or over $100/barrel. The whole crazy pricing system of oil is artificial. I’m just as much in favor of energy independence as rational pricing.

Comment by A guy Monday, Jan 26, 15 @ 3:56 pm
My post got cut!

As of 2009, Illinois has appx 2400 million tons of lower sulfur coal (less than 2.5%). Our total coal reserves are over 211 billion tons.

Coal is not going away anytime soon, our hunger for this relative cheap fuel is enormous. The full cost of burning coal is in the effects of pollution (global warming, sulfur emissions, mercury emissions, even radioactive elements), but much of this cost is not borne by the users.

http://isgs.illinois.edu/research/coal

http://isgs.illinois.edu/sites/isgs/files/files/coal-maps/Illinois-coalgeology.pdf

Comment by Pot calling kettle Monday, Jan 26, 15 @ 4:07 pm
Guy, I have no idea what you’re trying to say. Again, what’s artificial?

Demand is on a downward arc, supply, due to fracking, is on an upward swing. Price is finding its natural level.

Due to politics, OPEC is unable to act in concert as a cartel to set production quotas to artificially inflate price.

Comment by Wordslinger Monday, Jan 26, 15 @ 4:54 pm
Germany is a particularly hot market for coal exports these days, as the Merkel administration’s drive to eliminate nuclear power and substitute it with renewable-fuels has done a lot of the former, without being replaced by the latter as forcefully as hoped. Yes, this has caused CO2 emissions to slightly rise in the country due to coal’s being used to fill the gap, even as renewables are providing a remarkable percentage of power recently in Germany.

http://instituteforenergyresearch.org/analysis/germanys-renewable-energy-transition-misses-carbon-reduction-goals/

Comment by Six Degrees of Separation Monday, Jan 26, 15 @ 9:03 pm