When we think fracking, we look at places like Texas or North Dakota, and now even California as it gets going. But there are whispers coming out of Illinois that have us wondering.
Yes. Illinois. For a couple years now we’ve been hearing the rumors; Illinois farmers have been leasing their land to drillers who have gone unidentified. We know it’s in southern Illinois, and we know that land is getting snatched up, but by whom and where they plan to drill – it’s been hush-hush.
If we don’t keep our ear to the ground, we could miss something big. There’s got to be a good reason everyone is keeping so quiet. And now a new state law has silently been implemented that tells us something is definitely going on.
The Illinois Department of Natural Resources opened its website to the fracking registration process this month. There you will find a registration form where would-be drillers can apply for a fracking permit after a 30-day wait. The company registers with the state, waits 30 days, and then can file an application to drill.
And the company’s intentions will be posted online, giving town officials and residents alike an idea of what they’re in for and just how much tax revenue they could receive. It’s all part of the new law.
It’s easy to forget, but Illinois has produced 4 billion barrels of oil and 4 trillion cubic feet of natural gas conventionally.
A big horizontal play could be right around the corner, and it would be big for the state of Illinois.
Companies are still keeping mum about it, but the Illinois Basin and its New Albany shale might just hold the prize.
Frack It
The Illinois Basin is roughly 60,000 miles in the central United States of southern Illinois, southwest Indiana, and northwest Kentucky.
Drilling dates all the way back to 1853, and like most oil discoveries, was a complete accident as early settlers searched for saltwater to help preserve food and agriculture.
And the basin has seen success through the years, especially during the 40s and 50s when it was the third largest oil producing basin in the U.S., according to 4-traders. Production peaked in 1940 at 147.6 million barrels.
After World War II, production started to fall, and since, there hasn’t been one new oil target that has been drilled. All the success it did have came from the traditional vertical wells.
The unconventional plays have never been touched, and underneath all those conventional oil pools, deep below the surface lies the New Albany Shale, where fracking can unlock a vast new play.
If we look at other shale plays around the U.S., the New Albany Shale was formed around the same time – 350 million years ago – right along with the Bakken, Woodford, Marcellus, and the Antrim shale.
Given the success of those other plays, I would say that New Albany has some pretty good company.
A 2002 study estimated that the New Albany Shale could possibly produce up to 300 billion barrels of oil, according to 4-traders. With that much possible recoverable oil, even if a fraction is realized, it could be a very big horizontal play.
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Production
Of the 140,000 wells that have been drilled into the Illinois Basin, 32,000 are still producing, according to 4-traders. That tells us drillers have had plenty of time to sniff around sites and follow a good lead, straight down to the New Albany.
The New Albany is getting comparisons to the Elm Coulee Bakken of Montana, where production has already surpassed 120 million barrels of oil from horizontal wells. The two formations appear to be very familiar – similar in age, size, and in all likelihood, oil – but no two shale plays are exactly alike.
If this is true, now we know why land has been getting leased out and why companies are doing their best to keep it a secret – the last thing they want is to let the cat out of the bag and see land prices skyrocket.
We know a few wells have been drilled, but once again, results have been kept quiet.
What we do know is that the play has something to offer. And it must be big because the amount of land that has been leased over the past couple years has been tremendous. In that time, the price per acre has already quintupled.
The way things stand now, as applications start rolling in, regulators will likely take months to finalize and approve permits.
Companies that have spent millions already on leasing land, like Strata-X Energy (TSX-V: SXE) with some 50,000 acres, are bound to be frustrated with the process.
It will be slow going as Illinois adopts its new fracking laws and regulations that seem to be some of the toughest in the country.
And Woolsey Energy is another; they will have to bide their time while their roughly 200,000 acres sits in limbo waiting to get fracking.
But it is coming and it’ll likely be big. Heck, even some environmental groups have gotten behind this new law, saying it is tough on drillers.
As things do unravel, many jobs will be created and a lot of money will go to a state that can surely use it.
It’s just a waiting game.
