American Oil and Gas Reporter - February 2016 - 84

ConventionSection: Illinois Oil & Gas Association
"We have not been able to prove the resource even exists."
"Illinois got a hydraulic fracturing bill
that is workable, but onerous," Dicus
characterizes. "The jury is still out on
whether a shale play with horizontal
drilling and multistage HVHF will work
in the Illinois Basin. There is not enough
data, and with these prices, the jury is
going to be out awhile longer."
Nevertheless, some considerations
suggest commodity markets are not the
only aboveground factor. According to
the metric of lease bonus payments,
Richards says, tri-state area leasing activity
was most intense and competitive in Illinois. "Southwest Indiana saw leasing activity, but certainly not at the same level
or intensity as we saw in Illinois' Wayne,
White and Hamilton counties," he reports.
"Despite that, we saw some companies
move to Indiana and drill horizontal wells
they stimulated with HVHF because they
were not encumbered by Illinois' 130
pages of new regulations."
The reasoning is tough to escape, he
suggests. "Companies moved 30-50 miles
east of where they originally wanted to
drill to test this resource in a friendlier,
more conducive regulatory environment,"
Richards deduces. "Companies have gone
to Posey County, In., which is adjacent
to Illinois, drilled horizontal wells and
used HVHF with no negative consequences-both in the lower Mississippian
or middle Mississippian carbonates above
the New Albany-and then actually drilled
horizontal wells in the shale. We know
they are producing oil. I know nothing
about those wells' profitability-especially
at today's prices-but there is oil coming
out of the New Albany Shale."
Kimmerridge Energy, which holds one
of the basin's largest acreage positions,
says it remains interested in the plays'
long-term viability. According to Richards,
during remarks at IOGA's 2015 fall convention, Kimmerridge Chief Executive
Officer and Managing Director Benjamin
Dell said the company remained committed to the Illinois Basin.
Dell indicates that remains true. "Kimmerridge Energy continues to develop the
New Albany Shale and Mississippian Lime
unconventional concepts in the Illinois
Basin," he states. "Their initial two horizontal
tests have been encouraging and despite
the low commodity price, the company intends to undertake additional horizontal
wells in 2016 to refine completion designs
and increase each well's productivity."
84 THE AMERICAN OIL & GAS REPORTER

Keeping Capabilities
Even when stronger commodity prices
prompted some producers to experiment,
Richards says, plenty of IOGA members
never strayed from the Illinois Basin's
standard exploration plays. "We have a
lot of stratigraphic traps, discontinuous
reservoirs, stacked pay and deeper possibilities in existing fields," he details. "It
was modest, but we were still drilling
wells, finding new production, and occasionally making true wildcat discoveries."
Moreover, he indicates, some wells
essentially split the difference between
the innovative and the tried-and-true. Although none of those vertical wells employed HVHF, he says, the growing size
of many treatments started to push the
basin's envelope. "Folks were doing much
larger fractures in vertical wells, typically
in the middle Mississippian carbonates,"
Richards describes. "Although we have
not seen a resource play develop, some
of that technology has been brought to
the basin with terrific success."
He goes on to express hope that Illinois'
industry will make sufficient use of numerous technologies to allow them to
maintain a foothold in the basin. "I think
about keeping critical infrastructure, service companies and their technical capabilities and resources here," Richards intones. "An extended downturn can be
very difficult."
Even so, Dicus says his own consulting
workload has not dropped off significantly.
"I have been very blessed to have forward-looking clients who know that stopping all work is a good way to go out of
business," he reports. "We will see how
work holds as we move forward in 2016."
Policymaking
Like many of its members, Richards
says IOGA has been figuratively tightening
its belt, but the organization also has been
mindful of maintaining its primary focus.
"We have not reduced our budget in legislative and regulatory/government affairs
activities at all," he reports. "That is the
reason we exist, so we are going to continue
to do it. We have a rainy day fund that will
allow us to continue marching forward."
Some of those undertakings include
IOGA's push to properly implement a
few oil and gas bills that the association
persuaded the 2015 Illinois General Assembly to pass (AOGR, July 2015, pg.
37). Among their provisions, the bills:
* Lay out the requirements needed to
gain a reasonable presumption of the ter-

mination of previous oil and gas leases;
* Establish fines for anyone submitting false information on any application, permit, required record or other
document submitted to the Illinois Department of Natural Resources;
* Update the trigger for royalties remitted to payees annually; and
* Write into statute changes made
when Illinois created the Office of Oil
and Gas Resource Management.
"Last year, we took advantage of a
better political environment and the fact
that Illinois now had a business-friendly
governor in Bruce Rauner," Richards recounts. "We worked with various agencies,
primarily IDNR, to push those bills
through and see them signed into law.
"They all were designed to improve
Illinois' regulatory and permitting environment," Richards continues. "Those
bills have been sent to the Joint Committee
on Administrative Rules and hopefully,
over the course of the next several months
will work their way through the process
toward final implementation."
"We could not be happier with the
process to this point," Dicus affirms. "We
have solid cooperation from Illinois regulators and politicians. This legislation
was not earth shattering, but it was necessary cleanup and maintenance. We are
working on the second phase of that."
And although the process has been
refreshingly smooth, Richards emphasizes
that IOGA is taking nothing for granted.
"It will require some work to shepherd
them," he allows. "We anticipate opposition from groups who stand against anything sought by the oil and gas industry."
The basin's prospective resource plays
helped put Illinois on such groups' collective radar, Richards reflects, which
can complicate legislative and regulatory
proceedings. In the 2016 Illinois General
Assembly, that is perhaps best manifested
by a forthcoming bill for which the antifossil-fuel group 350.org is the impetus.
"It is a House resolution that urges any
company transporting fossil fuels not to
lay any pipe before it has conducted an
environmental impact study by a thirdparty scientific organization with no ties
to the industry," Richards describes. "Although most of my membership is not in
the pipeline business, we are concerned
about it because we know that such measures are ways to gum-up the works."
Aiming High
Meanwhile, Dicus promises, IOGA

http://www.350.org

American Oil and Gas Reporter - February 2016

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