A Denver energy firm has become the first company to register for hydraulic fracturing in Illinois since regulations for the controversial oil production technique were approved in November.
As of last week, Strata-X Energy also was the only registrant.
Even proponents of fracking, as the practice of injecting a high-pressure mixture of chemicals, water and sand or gravel into rock formations to extract oil and gas is commonly known, say an extended regulatory fight, legal challenges and now low oil prices have discouraged energy companies from risky investments in still unproven shale oil fields.
“All these delays didn’t help. There’s a lot of fatigue out there from the industry,” said executive vice president Brad Richards of the Illinois Oil and Gas Association, based in the Southern Illinois community of Mount Vernon.
The economic potential is still there, Richards said, for the kind of domestic energy production, tax revenue and jobs promised early on by the industry. He said energy companies also have hundreds of millions invested in oil and mineral leases, predominately in Southern Illinois.
But he said the combination of Illinois regulations and cheaper oil has increased the risks.
“The regulatory scheme that was enacted was onerous, and it remains to be seen whether it is workable,” Richards said. “We expect companies to proceed a little more cautiously and a little more scaled back with the oil prices.”
Formal permit
The Illinois Department of Natural Resources approved the Strata-X Energy registration Nov. 14. Under state rules, companies then must wait at least 30 days to file a for a fracking permit.
Companies must pay a $13,500 nonrefundable fee in order to file for an operations permit. As of last week, Strata-X Energy had not yet followed up with a formal application to begin fracking.
“Generally, the agency has 20 business days to approve or deny a permit application,” DNR spokesman Chris Young said. “However, the time frame can be extended if an agreement is reached between the parties.”
Public hearings also are required once specific drilling sites and plans are filed.
While Strata-X Energy has been the only registrant, Young said two other companies have asked for information needed to complete registrations.
The department received approximately 30,000 public comments during months of regulatory analysis that preceded the November approval of final rules by a state legislative commission.
Test drilling
Strata-X Energy did not respond to calls and emails, but in December the company advised investors that $1.1 million had been raised in private equity to continue initial drilling in Southern Illinois. The funds were in addition to $500,000 already raised.
Early production has stayed below thresholds that would require a fracking permit, according to the company.
An initial 3,800-foot well was expected to cost $300,000, the company said, with production costs estimated at $10 per barrel. Crude oil has fallen as low as $48 per barrel in the past week.
Strata-X Energy reported that more than 65 potential shallow-well drilling sites had been identified at Southern Illinois lease sites. The goal, according to the regulatory report, was to drill one to two wells per month starting in February, “subject to rig availability and access.”
Court challenge
“They’re not going to get much out of it, but they’re still out there,” Annette McMichael, spokeswoman for Southern Illinoisans Against Fracking Our Environment, said of the oil companies.
The resident of Johnson County in the southern tip of Illinois was among organizers of a failed November referendum calling on the county board to ban fracking.
McMichael’s group is among those backing a landowner court challenge to state regulations as failing to consider scientific evidence of the environmental dangers of fracking.
A Madison County judge in November rejected a request for a temporary injunction to suspend the rules while the legal issues are settled. The rejection has been appealed to the 5th District Appellate Court in Mount Vernon.
McMichael said the plunge in oil prices has proven an unexpected ally of opponents in efforts to keep fracking out of Illinois.
“Personally, I think it’s probably gone away,” McMichael said. “From what we’re hearing, with the price of oil, it would be tough for them to break even.”
But she said legal challenges will continue, as will efforts to block even the kind of exploratory wells being drilled by Strata-X Energy.
“We would like to not have any fracking at all,” McMichael said.
