Illinois is poised to tap into a rich vein of money by allowing an oil and gas drilling method known as “fracking,” but environmental concerns and disagreement over state taxes are keeping that financial well plugged for now.
Hydraulic fracturing of shale rock – called “fracking” for short – has been used since the 1940s to free up deposits of oil and natural gas buried deep underground. The practice mostly died out in Illinois when many oilwells around the state dried up by the 1980s. But fracking has come back into vogue recently because it can be paired with newer techniques like horizontal drilling, which allows a drill pad to reach mineral deposits up to a mile away.
The practice involves pumping water, sand and chemicals underground at high pressure to fracture bedrock. The sand keeps the fractures open, while the chemicals allow the oil or gas to flow out of the well more quickly. Some of the fluid returns to the surface and can be recycled or pumped into offsite disposal wells.
Illinois law doesn’t ban fracking, though any oil or gas drilling requires a permit from the Illinois Department of Natural Resources. Len Kurfirst, a Chicago attorney who practices environmental and commercial law, says natural gas exploration companies are reluctant to begin fracking here until state lawmakers create a regulatory program. Several such companies have already leased land in southern Illinois, Kurfirst says, and a bill to regulate fracking in Illinois passed the Senate unanimously in April 2012. However, Kurfirst notes that the bill stalled because of several factors.
He says the specifics of a regulatory program still must be ironed out, and there is no consensus on whether municipalities will be able to ban fracking within their boundaries. State lawmakers must also decide on a “severance tax” rate on natural gas exploration.
“It can generate some additional revenue for the state,” Kurfirst says, “but where you have to be careful is if a severance tax is too high, where it would discourage investment.”
The Illinois House seeks to tax natural gas extraction at 12 percent of the gas’s value. Of the states that tax natural gas extraction as a percentage of value, most states have rates between 3 percent and 8 percent.
Estimates of how much tax revenue fracking could create for Illinois are hard to come by because the extent of natural gas exploration is still unknown and the tax rate still has to be set. For reference, the state of Texas, which has the highest yearly volume of natural gas extraction, made about $1.5 billion in natural gas taxes with its 7.5 percent tax during its 2012 fiscal year, according to information from the Texas Comptroller of Public Accounts.
Fracking has drawn criticism from environmental groups for potential contamination of surface water and underground aquifers. The natural gas industry counters those criticisms by saying properly built concrete well casings don’t leak, and the chemicals used in fracking are injected far below the depths reached by aquifers.
The federal U.S. Geological Survey echoes the industry’s response.
“Conducted properly, hydraulic fracturing has little possibility of contaminating water supplies,” USGS says on its website. “Properly constructed wells prevent the introduction of drilling fluids, hydraulic fracturing fluids, deep saline formation waters, or oil and gas from entering aquifers. Carefully constructed and operated well sites have the ability to contain potential spills and minimize runoff into surface waters.”
Still, there are examples of fracking fluids apparently leaching into underwater drinking supplies. Two experimental wells dug by the U.S. Environmental Protection Agency in an aquifer near a fracking site in Pavillion, Wyo., found synthetic chemicals used in hydraulic fracturing. Residents in the area have since switched to bottled drinking water. The EPA is currently conducting a long-term nationwide study on the potential effects of fracking on water supplies. That report is expected to be released in late 2014.
Environmental groups have also raised concerns about increased seismic activity related to fracking. David Hayes, deputy secretary for the U.S. Department of the Interior, says fracking itself has not been shown to increase incidence earthquakes, though injection of fracking wastewater into deep disposal wells has been linked to increased seismic activity.
In arid parts of the country, fracking is criticized for its heavy use of water – between two and four million gallons of water per well.
Kurfirst says it’s unclear when Illinois will move forward with fracking, but it’s pretty certain to happen. He says it’s important that the public be informed about fracking through scientific studies.
“Be careful about believing all the hyperbole you hear,” he urges. “Look at what the facts are.”
Contact Patrick Yeagle at email@example.com.
USGS video on fracking: http://youtu.be/vb-BNDx2iIQ
EPA on Pavillion, Wyo.: http://www.epa.gov/region8/superfund/wy/pavillion/index.html#9
EPA groundwater study: http://www.epa.gov/hfstudy/index.html
Illinois fracking legislation: http://ilga.gov/legislation/BillStatus.asp?DocNum=3280&GAID=11&DocTypeID=SB&LegId=64455&SessionID=84&GA=97
Fracking regulation by state: http://www.rff.org/centers/energy_economics_and_policy/Pages/Shale_Maps.aspx