Deal reached on fracking fees

By Jamey Dunn

A day after House Speaker Michael Madigan said he supports a ban on hydraulic fracturing in Illinois, supporters of a bill to regulate it say they have reached a deal with the industry.

Rep. John Bradley, a Marion Democrat, said he expects a House committee to approve House Bill 2615 on Friday. (UPDATED: The Friday hearing on the bill was cancelled, and Bradley was excused from legislative session. The bill remains in committee.) “We’ve got a historic compromise here on the issue of horizontal high volume hydraulic fracturing, and we intend to move forward with that.”

Madigan told reporters yesterday that he supports a moratorium on the practice, commonly referred to as fracking. It is achieved by pumping water mixed with sand and chemicals through a well into rock that holds a carbon fuel, such as oil or natural gas. The sand holds the cracks open so the gas and/or oil can be extracted. Horizontal drilling allows gas and oil companies to drill down into the Earth and then permeate rock along a horizontal line, which is sometimes miles long. Industry experts say that it is likely both oil and gas will be extruded from fracking wells in southern Illinois, where drilling companies have spent about $150 million to lease mineral rights. “Until you really get down there and drill, you don’t know what’s going to come up,” said Mark Denzler, representing the Growing Resources and Opportunity for the Workforce in Illinois coalition, a business group supporting fracking in the state.

Each blue dot represents an oil and gas test drill. Data, which was obtained from the 
Prairie Research Center at the University of Illinois at Urbana-Champaign, 
was current as of Dec. 2012. Graphic by Andrew Thomason

Madigan referred to the fallout that fracking has caused in other states, particularly Pennsylvania, where methane leaked into drinking water wells. “Read about what happened in Pennsylvania,” he said. Methane is not toxic but is dangerous at certain levels because it is flammable. Negotiations over fracking regulations in Illinois have been going on for years. A regulatory framework in the Senate passed last year with no opposition. However, the plan fell apart in the closing days of the legislative session because a deal could not be reached over the fees and taxes that well operators would pay and last minute consideration of proposals to temporarily ban the process while a task force conducted research.

After Madigan’s talk to the press yesterday, industry representative met with Bradley and came to a deal on the taxes and fees. Denzler, who is also vice president and chief operating officer of the Illinois Manufacturers’ Association, said the state stands to gain an estimated $200,000 in revenue per well. He denies that industry concerns over Madigan’s statement pushed the negotiations. “I don’t think so. We’ve been negotiating on this for three years and focused on the revenue for about three weeks. So we were actually very close. We were close to an agreement before the comments yesterday, and we were hoping to get an agreement reached so the bill could move this week,” Denzler said. “I think we would have gotten the agreement yesterday regardless of comments that might have been made.” Operators would pay $13,500 in fees for each well. $11,000 would go to the Department of Natural Resources, which would oversee licensing, and $2,500 would to the Illinois Environmental Protection Agency.

Supporters say they do not expect the speaker’s stance to stop the bill from being approved in the House. “We feel really good about the package, and we’re moving it forward,” Bradley said.

“We feel pretty good about it,” Denzler said. “We think it’s a strong regulatory framework. It’s endorsed by the business community, the Farm Bureau, the major environmental interests in the state of Illinois. So we think it’s a good comprise. We have nearly 60 legislators who have signed on as [co-sponsors], so we feel pretty good about its chances.”

Environmental groups were encouraged by Madigan’s words. “We absolutely support the speaker’s call for a moratorium. ... That remains our first choice. That remains the safest thing for the state of Illinois to do, but if that doesn’t pass, we have to do whatever we can to protect ourselves,” said Jack Darin, director of the Illinois chapter of the Sierra Club. Darin and representatives of other environmental organizations have been criticized by some southern Illinois community groups for coming to the table over regulation instead of taking a hard line stance on a moratorium.
Darin said he takes Madigan’s statement at face value and does not see it as a strategic effort to push an agreement from the industry on takes and fees. “I do think that the speaker has been focused on this issue for over a year, and I do think the speaker understands the problems that have been created in other states. And we see that he’s been trying to get the strongest possible protections that we can. We worked with the speaker for the better part of 2012 to try to pass the moratorium. And if he supports the moratorium now, then we stand with him in trying to get that to happen.”

But Bradley said he does not expect that the bills calling for a two-year ban on fracking and a task force to study the issue will progress. They are currently assigned to the House Revenue and Finance Committee, where he serves as chairman. “If bill sponsors want to come to committees and call their bills [for hearings], they’re welcome to do that. It’s a democratic process. But I’m not expecting that to go anywhere.” Bradley was coy about his thoughts on the speaker’s intent or the possible effect the highly publicized statement had on negotiations yesterday. “Well, I’m just happy that we got something done and that we were able to resolve all the unfinished issues.”