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HYDRAULIC FRACTURING
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  1. HYDRAULIC FRACTURING IN ILLINOIS “FRACKING” Dan Eichholz, Illinois Petroleum Council

  2. WHAT IS HYDRAULIC FRACTURING? • Hydraulic Fracturing is a proven oil and gas well completion process. It uses water pressure to create tiny cracks in deep underground hydrocarbon formations that allow oil and natural gas to flow.

  3. WHY THE HYSTERIA?

  4. SCENE FROM “GASLAND”

  5. IS HYDRAULIC FRACTURING NEW? • First used in 1947 • First used in Illinois in the 1950’s • Safely performed thousands of times in Illinois • Safely performed over 1.2 million times in the United States

  6. SO WHAT IS THE BIG DEAL? • The combination and refinement of two existing technologies when used to extract resources from shale deposits, has transformed the U.S. oil and gas industry: • Horizontal Drilling • Hydraulic Fracturing

  7. NEW TECHNOLOGY ALLOWS FOR ADDITIONAL ACCESS TO RESOURCES

  8. HYDRAULIC FRACTURING -VIDEO-

  9. WHAT IS INVOLVED IN COMPLETING A WELL FOR PRODUCTION?

  10. COMPLETED PRODUCTION SITE

  11. GAME CHANGER • The United States has surpassed Russia as the worlds largest natural gas producer • The International Energy Agency forecasts that the United States will become the world’s leading oil producer by 2017

  12. WHY WE NEED MORE ENERGY? US Energy Information Administration – Global Outlook 2011 Reuters.comand US Census Bureau, United Nations, Socioeconomic Data and Applications Center, and Populationaction.org

  13. WHERE ARE SHALE DEPOSITS? Shale Resources, Lower 48 States Current Shale Resources Prospective Shale Resources Basins Stacked Resources Shallowest/ Youngest Mid-Depth/ Mid-Age Deepest/Oldest CURRENT AND PROSPECTIVE RESOURCES AND BASINS IN THE CONTINENTAL US Source: EIA based on data from various published studies – updated May 9, 2011

  14. JOBS!! 1.75 Million AMERICAN JOBS supported by shale energy development in 2012 ! (IHS Global Insight)

  15. $35.15 Average hourly pay of workers associated with shale energy development – 34% greater than average wages (IHS Global Insight)

  16. The Oil and Gas industry is responsible for 37% of all jobs created in the last decade.- Moodys Analytical

  17. EVERY TYPE OF ENERGY PRODUCTION COMES WITH CHALLENGES

  18. Source: energytomorrow.org: Big Screen Energy: A Fracking Film Festival

  19. PROPER WELL CONSTRUCTION KEEPS GROUNDWATER SAFE

  20. HOW MUCH WATER DOES HYDRAULIC FRACTURING USE?

  21. WASTES FROM PRODUCTION ACTIVITIES ARE MANAGED RESPONSIBLY

  22. NUMBERS DON’T LIE!! U.S. greenhouse gas (GHG) emissions in 2011(Latest Available Data) were down 6.9 percent from 2005 - source U.S. EPA

  23. SEISMIC ACTIVITY • Seismologists and geologists across the country have determined that hydraulic fracturing does not produce vibrations of noticeable size and there are no cases of damage as a result of the very low level of “seismicity” associated with fracturing. • While the injection of wastes into disposal wells can trigger seismic activity, these events are rare and typically a magnitude 3 or less on the Richter scale. According to the U.S. Geological Survey, a magnitude 3 earthquake on the Richter scale is similar to the vibrations felts by a passing truck.

  24. ON SEISMIC ACTIVITY “[E]xtremely small microseismic events occur during hydraulic fracturing operations. These microseismic events affect a very small volume of rock and release, on average, about the same amount of energy as a gallon of milk falling off a kitchen counter.”- Mark Zoback, Stanford University geophysics professor, adviser to U.S. Energy Secretary Steven Chu, 6/19/2012

  25. PROTECTING OUR GROUND WATER • “I am not aware of any proven case where the fracking process itself has affected the water” – Lisa Jackson, President Obama’s Environmental Protection Agency Adminstrator (U.S House Testimony)5/24/11 • “One of the primary areas of concern which has been raised about state regulation is in the area of groundwater and drinking water protection. There has been a misconception that the hydraulic fracturing of wells can or has caused contamination of water wells. This is false.”- Pennsylvania Department of Environmental Protection Secretary Michael Krancer, 5/31/2012

  26. ON THE SAFETY OF THE TECHNOLOGY “There’s a lot of hysteria that takes place now with respect to hydraulic fracking… My point of view, based on my own study of hydraulic fracking, is that it can be done safely and has been done safely hundreds of thousands of times.- Ken Salazar, President Obama’s Interior Secretary 2/15/2012

  27. WHAT ABOUT ILLINOIS? • Illinois has largely been just an observer of the transformation of the oil and gas industry….until now • More than 500,000 acres have been leased in Illinois with a conservative estimate of more than $200 million invested as companies have looked to Illinois for the next big oil and gas development

  28. WHY ARE COMPANIES LEASING IN ILLINOIS? • The oil is here • The Illinois Basin has produced more than 4 billion barrels of oil. • ISGS estimates the remaining resource is equivalent or more.

  29. ILLINOIS SHALE PLAY

  30. Today I am aware of leasing in 17 counties (there are probably more) • Edwards • Effingham • Franklin • Gallatin • Hamilton • Jasper • Jefferson • Johnson • Lawrence • Marion • Pope • Richland • Wabash • Washington • Wayne • White • Williamson

  31. HISTORY OF ILLINOIS HYDRAULIC FRACTURING LEGISLATION • SPRING 2011- Legislation initiated by Faith-in-Place passed Senate/held in House • SUMMER 2011- Leasing begins in southern Illinois • SPRING 2012- • Agreed bill passed Senate / held in House • Overly burdensome & prohibitive proposal floated by the house speaker • Legislation to impose moratorium introduced • SPRING 2013- • Extensively negotiated, comprehensive legislations passed into law • Moratorium legislation re-introduced • SUMMER 2013- Regulatory process begins

  32. THE LEGISLATIVE PROCESS WAS CONTENTIOUS

  33. HYDRAULIC FRACTURING REGULATORY ACT P.A.98-022 SETBACKS AND PROHIBITIONS • 500’ from schools, houses and hospitals Setbacks from mapped aquifers deleted • 1,500’ from any public water intake point • 300’ from streams, rivers, lakes and ponds • 750’ from any nature preserve • 500’ from any water well serving humans or livestock

  34. HYDRAULIC FRACTURING REGULATORY ACT P.A.98-022 PERMIT REQUIREMENTS – SECTION 35 • Completion activity requires a permit • Operators engaging in HVHHF must register with the state and provide proof of environmental liability insurance and summary of any violations of an HF related statute incurred in the last five years (nationwide) • Application must include list of chemicals “anticipated” to be used • Operator must submit a report to the local county identifying the primary roads that will be used by truck traffic servicing the well site • Plan identifying how flowback will be managed and disposed • Permit application fee - $11,000 to IDNR; $2,500 to IEPA

  35. HYDRAULIC FRACTURING REGULATORY ACT P.A.98-022 PERMIT PROCESSING • Permits must be processed and approved/denied within 60 days of submittal (excluding delays attributable to public hearings) • Notice of application must be sent to all property owners within 1,500’ of well site; Notice must direct them to website where details of permit application can be found • 30 day public comment period per each well application; Public comment period occurs during IDNR 60 day review period • Individuals “adversely affected” by the well site can request a public hearing to protest the permit

  36. HYDRAULIC FRACTURING REGULATORY ACT P.A.98-022 • BONDING REQUIREMENTS • Operator must maintain a $500,000 statewide bond; Bond can satisfy all other bonding requirements if the $500,000 level exceeds the level of other requirements • WELL CONSTRUCTION REQUIREMENTS – SEC. 70 • Prescriptive well construction and operation standards must be adhered to

  37. HYDRAULIC FRACTURING REGULATORY ACT P.A.98-022 HF OPERATIONS – SEC. 75 • Use of tanks required for managing all wastes; Use of unlined pits allowed for fresh water and non-oil based cuttings only • Flowback must be tested once per well site for VOCs, metals, etc. • Secondary containment for well sites and facilities required • Report on how flowback was transported and disposed must be included in the well file; Annual report on how produced water is managed must be filed with IDNR • Emissions must be minimized during flowback in accordance to USEPA green completion requirements (apply to oil and gas wells); Production flares must meet 98% efficiency standard per CFR 60.18 by 2015

  38. HYDRAULIC FRACTURING REGULATORY ACT P.A.98-022 WATER TESTING – SECTION 80 • Pre and post activity water testing required • Work plan must be submitted to IDNR • Testing required for all water resources within 1,500’ of well site • Post activity testing required 6, 18, and 30 months after HF operation is completed • Reclamation • Surface reclamation and removal of all facilities must be completed within 12 months of plugging the last well on a well site • Prior to conducting HF operations, operator shall cause any unplugged well to be plugged if it is within a 750’ radius of the well site and the bottom hole location occurs within 400’ of the stimulated zone

  39. GOVERNMENT OVERSIGHTREGULATED BY STATES AND UNDER THE FOLLOWING FEDERAL LAWS: • CLEAN WATER ACT – surface water discharge, storm water runoff • CLEAN AIR ACT – air emissions associated with processing equipment and engines • SAFE DRINKING WATER ACT –underground injection disposal/reuse of produced waste and flowback fluids • FEDERAL LAND POLICY AND MANAGEMENT ACT – permitting for federal onshore resources • NATIONAL ENVIRONMENTAL POLICY ACT – permits and environmental impact statements • OCCUPATIONAL SAFETY AND HEALTH ACT – requires information about chemicals used at every site • EMERGENCY PLANNING AND COMMUNITY RIGHT-TO-KNOW ACT – annual reporting to emergency responders of chemicals stored and used above certain quantities

  40. FEDERAL REGULATIONS PROVIDE A BROAD REGULATORY FOUNDATION Key federal regulations governing shale development include: • Clean Water Act • Clean Air Act • Safe Drinking Water Act • National Environmental Policy Act • Resource Conservation and Recovery Act • Emergency Planning and Community Right to Know Act • Endangered Species Act • Occupational Safety and Health Act

  41. Shared Values Sample Company Development Strategies • Companies often test surface and ground water and evaluate potential water sources and disposal options prior to drilling. • Companies reuse fracturing water and increasingly use non-potable water sources to reduce water use. Water Quality & Availability • Companies invest to develop “greener” additive alternatives and disclose the additives used in fracturing fluids on www.fracfocus.org. • Carefully trained and specialized employees manage fluids according to established protocols. Chemical Management • Companies often use cleaner burning fuels or renewables to power on-site equipment. • Emission mitigation technologies (e.g. green completion systems) separate gas and liquid hydrocarbons to reduce greenhouse gas emissions. Air Quality & Reduced Emissions Community Culture &Aesthetic • Companies hold meetings with community members before drilling begins to understand community culture and concerns and to coordinate specific work hours to address traffic, lighting and noise concerns. • Companies work with local universities and vocational/technical schools to help train workers for new jobs coming online due to shale energy and to conduct new research to continuously improve operational practices and environmental performance.

  42. INNOVATIONS PROMOTE SAFE &ENVIRONMENTALLY FRIENDLY PRACTICES • Sound control and surface management allows for safe drilling in close proximity to people • “Green” frac fluids (Example: Environmentally benign components) • Centralized water management systems that remove trucks from roads • “Pitless” drilling - use of aboveground tanks for managing well fluids so that there is limited danger of well fluids getting into groundwater • Closed loop drilling systems; all drilling fluid stored in steel tanks • Whole site liners

  43. SUMMARY • New technology (horizontal drilling and high volume hydraulic fracturing) has transformed the oil and gas industry in the United States and may soon transform the Illinois oil and gas industry • Illinois’ regulatory scheme will be the most comprehensive in the nation. We do not have to choose between oil and gas development and the environment.