US Shale Boom and the Illinois Basin
Since the 1970s – when oil production in the US peaked – the oil and gas industry in America has taken hit after hit. Many forecasters assumed that the slow decline would continue and that there would be an ever-increasing reliance on foreign oil. This has certainly been the case; at least, right up until a few years ago.
Fracking, controversial though it is, has finally brought the spectre of complete dependence on OPEC nations to an end. Gas production in the middle of this century’s first decade even surpassed production at its previous 1970s peak. Technology has developed to the point where previously unexploited resources are now ripe for development. While most of the current production is centered around the Marcellus basin in the North West and Eagle Ford in Texas, Chicago and Illinois have the aptly named Illinois Basin right on their doorstep.
Indeed, this geological formation has produced oil, coal and gas for over 100 years. Coal still plays an important part and in 2008 this basin represented as much as 8% of the US coal output (shared roughly equally between Illinois, Indiana, and western Kentucky). However, traditional oil production peaked at 140 million barrels a day in the 1940s and has declined ever since. Technological developments may now mean this can be exploited further.
Currently, it is Indiana that is the focus of much development; however, what holds true for Indiana may well apply to Illinois, as this is all part of the same geological formation. In Chicago alone there are six major oil and gas companies in operation. Unfortunately, exploration and potential exploitation are hampered by controversy over new regulations surrounding the fracking industry.
While Illinois is not a major producing state – and likely never will be – a 2012 study by the Illinois Chamber of Commerce Foundation shows that the industry could be worth more than $9 billion in economic investment, creating more than 45,000 jobs. This is a potential boon to the state that should not be ignored.
Opposition from environmental groups means that the new regulatory framework has been put on hold. The Joint Committee on Administrative Rules (JCAR), a bipartisan legislative oversight committee, has until 15th November 2015 to accept, change or block the proposed rules. The rules would be used to implement the Hydraulic Fracturing Regulatory Act, which was approved by the Illinois General Assembly and signed into law by Gov. Pat Quinn in June 2013. This act already has some of the toughest legislation concerning oil and gas exploration and production in the whole US.
Hopefully, those poised to take advantage of the opportunity provided by the Illinois Basin won’t have to wait too long for an answer. It is also to be hoped that the talented and hardworking engineers needed to develop the oil and gas industry in Illinois won’t be tempted by offers elsewhere while the state’s industry languishes waiting for new legislation.
By Adam Faust, Founder at Deep Blue Financial