Three Reasons Illinois Gasoline Prices Didn’t Crash Along With Oil Prices

UPDATE: May 13, 2020, 3:25 p.m. CDT

Data released this week by the U.S. Energy Information Administration show that 64 percent of the retail price of a gallon of gasoline across the country in March could be attributed to taxes and marketing and transportation costs. As the following IPRB graphic shows, pump prices attributable to taxes and marketing and transportation costs has increased significantly over the past 12 years, while the share attributable to oil prices and refining costs have declined. The trend is even more pronounced in Illinois, where 77 percent of the price at the pump on May 12 could be attributed to taxes and marketing and transportation costs.

Editors Note: Original blog published on May 7, 2020, was updated on May 13, 2020, with new supplementary information from the Energy Information Administration

In the wake of the recent oil price crash that resulted due to the demand shock created by the coronavirus pandemic, many Illinois consumers may be wondering why gasoline prices haven’t declined as sharply as the price of oil did.

Though the average Illinois retail gasoline price sat at $1.79 per gallon on April 29 – the lowest average Illinois pump price in recent memory – it was still well above the average cost in many neighboring states.

Here are three reasons Illinois pump prices haven’t necessarily reflected extremely low domestic oil prices over the past few weeks.

Reason #1: High State Taxes

State, federal and local gasoline taxes in Illinois total 72 cents per gallon combined (and even higher near Chicago), meaning that roughly 40 percent of Illinois pump prices in late April were attributable to taxes.

Illinois’ state gasoline tax doubled last summer from 19 to 38 cents per gallon and is now the third highest state gasoline tax in the country. That total piles onto the 18.4-cent per gallon federal excise tax and 15-to-17-cent per gallon of local taxes paid by Illinois drivers. So no matter how low the price of oil goes – and it went as low as it could go on April 21 – retail gasoline prices in Illinois could fall no lower than 72 cents per gallon.

Reason #2: Global Crude Standard Drives Pump Prices

Another reason Illinois gasoline prices didn’t completely crash when the domestic oil price standard – the West Texas Intermediate (WTI) – went below $0 on April 21 is because refined products such as gasoline are traded on the world market and are determined by global market prices, namely, the global Brent crude index.

As the following Oilprice.com chart shows, though the Brent price dropped dramatically on April 21, it came nowhere close to the freefall the WTI experienced.

Brent prices have also remained higher than the WTI standard throughout the COVID-19 pandemic, continuing a trend that has generally been observed in recent years.

Notably, U.S. crude exports have kept Brent prices – and, by extension, pump prices – lower than they otherwise would have been by adding supply to the global market and thwarting OPEC’s once tried-and-true efforts to keep prices artificially inflated.

Prior to the U.S. oil production renaissance that has been ongoing for the few years, Brent oil prices averaged nearly $100 in 2008 and remained near that level through 2014. Not coincidentally, gasoline prices were routinely over $3 a gallon during that time, and went over $4 a gallon in 2011.

But after the crude export ban was lifted in 2015, Brent oil prices declined dramatically, driving down the overall cost of gasoline and the share of retail gasoline costs attributable to oil prices, as the following Energy Information Administration graphics illustrate.

 

As the latest EIA graphic shows, global oil prices represented just 35 percent of the total cost of gasoline across the nation in March, compared to an average of 61 percent from 2008 to 2017.

Reason #3: Refining, Transportation and Marketing Costs Part of Equation

The third factor that explains why pump prices didn’t bottom out completely along with domestic oil prices last month are the necessary refining, distribution and marketing costs that are included. Marketing and transportation costs have ranged between 25-42 percent of pump costs from 2008 to the present.

Notably, local refining can reduce the cost of transporting gasoline to the market, reducing prices at the pump as well. The latest EIA data show that refining costs have declined dramatically since 2017 along with crude oil prices, while taxes and marketing and distribution costs have grown sharply.

Conclusion

The fact that the United States has emerged as the world’s top crude oil producer and a major exporter explains why the average American household has paid $500 a year less for gasoline each year since 2014. As USA Today recently reported “$3-a-gallon gasoline is becoming a distant memory” and “the main reason is the nation’s oil boom.” But the fact that gasoline taxes have generally increased – especially in Illinois – is the primary reason pump prices haven’t dropped even more. Essentially, increased taxes and marketing and transportation costs are the primary reasons why $1-a-gallon gasoline - even when the price of oil hits rock bottom - are a distant memory as well.


*UPDATE* Illinoisans Express Strong Support for State’s Oil Industry

UPDATE: May 1, 2020

A total of 18 Illinois oil-producing counties have passed resolutions of support for the state’s oil production industry over the past calendar year. Collectively, the oil production industry in these 18 counties are responsible for 7.7 million barrels of annual production – 93 percent of the state’s overall production – 2,500-plus direct oil production industry jobs and more than $1.1 billion in annual gross regional product. Check out IPRB’s new infographic for more details.

UPDATE: March 25, 2020

Gallatin County recently passed a resolution of support for the Illinois oil production industry. A total of 18 oil-producing counties have passed resolutions of support for the Illinois oil production industry over the past calendar year. Collectively, these counties accounted for 93 percent of Illinois oil production in 2019.

ORIGINAL POST: Jan. 30, 2020

Though it hasn’t gotten much attention, Illinois residents have demonstrated strong support for the Illinois oil industry in recent months.

Most recently, a survey of 700 Illinois residents commissioned by the Grow America’s Infrastructure Now (GAIN) coalition showed that a vast majority of Illinoisans recognize the importance of the industry to the state’s economy and endorse the United States’ continued march toward energy independence. As the Williston Daily Herald (North Dakota) reported:

“The poll found that Illinois residents not only support [expansion of the] Dakota Access [Pipeline], but the energy industry in general. Ninety-percent said they believe it’s important for the United States to be energy independent, while 85 percent agreed that the oil and gas industry is important to the economy in Illinois.”

Additionally, 17 Illinois oil-producing counties over the past several months have passed Resolutions of Support for the Illinois Oil Production Industry. Collectively, these 17 counties account for 90 percent of the state’s more than 8 million barrels of annual oil production.

These non-binding resolutions formally express that the respective county boards support and encourage the presence and further growth of the oil production industry in their county. The resolutions recognize the thousands of jobs the industry creates and supports in these counties, and the millions of dollars in sales and property tax revenues the industry generates.

The passage of these resolutions directly counter the common misconception that oil and natural gas development is widely unpopular.

“Every year the industry is attacked by outside groups who seek legislation that would effectively put a vital economic engine out of business,” Illinois Oil and Gas Association (IOGA) President Bryan Hood said. “These resolutions demonstrate that folks from the region of the state where production actually occurs are not in favor of policies that would adversely impact the industry.”

As IPRB has highlighted before, the Illinois oil production industry is responsible for more than 4,000 direct jobs – supporting more than 14,000 Illinois jobs overall – generating $770 million in annual personal and business income. The industry also generates $330 million in annual state tax revenue and $3 billion in overall economic impact in the Land of Lincoln. A vast majority of Illinois’ direct oil production industry jobs are based in the counties that have passed the above resolutions, while more than $82 million in local property tax revenues were generated from 2007-2018 in those 17 counties.

“The passage of these resolutions in counties collectively responsible for 90 percent of Illinois oil production clearly illustrates the strong support for the oil production industry in the area of the state where a vast majority of production occurs,” Illinois Petroleum Resources Board (IPRB) Executive Director Seth Whitehead said. “For more than a century, the industry has provided employment opportunities, tax revenue and school funding in a region of the state that is in dire need of all three. IPRB applauds the leadership of these counties for recognizing the importance of the industry to their communities.”

Signed copies of the resolutions that have passed in each of the 17 counties can be downloaded at the following links.


Guest Column: Oil and Gas Indeed ‘Essential’ to Combating Coronavirus

Editor's Note: The following guest column was recently published in the Robinson Daily News, Lawrence County Daily Record and Villagers Voice.

Some Illinoisans may be surprised to learn that Gov. J.B. Pritzker’s shelter-in-place executive order aimed at slowing the spread of the coronavirus designates the oil and natural gas industry under the “essential” business and services category. “Keep It In the Ground” groups no doubt object. But the governor’s recognition of the vital importance of the oil and gas industry is actually spot-on, underscoring how big of a threat that movement’s stated goal of destroying this essential industry is to public health and our nation’s economic security.

As daunting as the coronavirus pandemic has been, the prospect of tackling this crisis without the products and services the petroleum industry provides would be almost unconscionable. Most notably, health care professionals use a myriad of petroleum-based products every day to treat patients afflicted with COVID-19 and literally save lives.

IV bags, ventilator machines, hospital gowns, gloves and the 3.5 billion face masks used by medical professionals a year are comprised of or include components of single-use plastics. Doctor’s scrubs, sterilization trays and monitors are also made of plastic or include petroleum products. Even hand sanitizers, soaps and some medicines are derived from petroleum, while critical procedures such as X-rays and MRIs would not be possible without oil and gas.

Single-use plastic bags are also key to fighting the spread of COVID-19. This explains why New York, Maine and the City of Boston are all pumping the brakes on single-use plastic bag bans, while Gov. Pritzker has advised Illinois grocery stores to prohibit shoppers from using reusable bags until the crisis subsides.

To be clear, plastic waste is unnecessary and harmful to the environment. However, plastic and petroleum products are clearly vital components of our healthcare system and overall efforts to fight this pandemic, illustrating why we can’t simply keep oil and gas in the ground.

It would also be difficult to imagine where we would be if our diesel-powered over-the-road truckers were unable to deliver the products Americans need to weather this storm. Medicines, food and critical supplies would simply not be available if transportation fuels were not abundant and affordable. There’s an old saying that if it’s on your table, thank a trucker. But if the food on your table came from a grocery store, you should also thank an oil and gas worker, too.

Petroleum-based technology such as computers and cell phones also allow an unprecedented number of people to work from their homes and adhere to the social distancing safety precautions issued by the governor. Along with home heating and reliable electricity, these are all products and services made possible by fossil fuels such as oil and natural gas that many Americans take for granted.

So imagine a world in which the “Keep It In the Ground” movement’s stated goals were achieved and we were forced to make due without all these essential products and services. Affordable, reliable energy and thousands of products made from petroleum are absolute necessities. Gov. Pritzker has dubbed the oil and natural gas industry essential for good reason.

That said, Illinoisans can continue to rely on the 14,000-plus Illinois oil and natural gas industry workers to deliver the energy and products they need even as many of them face potential layoffs in the wake of the oil price crash and the economic uncertainty all Americans will feel as a result of this crisis. Times are tough. But much like the oil and gas industry itself, perseverance is essential.

Seth Whitehead

Executive Director

Illinois Petroleum Resources Board

The Illinois Petroleum Resources Board (IPRB) is a non-profit organization that provides public awareness and education programs regarding the Illinois oil and natural gas production industry. IPRB also works to clean up and restore abandoned oilfield sites throughout the state. IPRB programs are funded entirely by voluntary contributions of oil and natural gas producers and royalty owners in Illinois.


Chicago Tribune Letter to the Editor: Column on Production Cut Deal Misleading

Editor's Note: The following letter to the editor was submitted by IPRB to the Chicago Tribune on April 21 but has not been published by the paper.

A recent Chicago Tribune column headlined “Trump’s push for higher gas prices is misguided” hasn’t aged well for a number of reasons.

First of all, gasoline prices have actually declined significantly since the announcement of the deal to cut global oil production that the president helped broker. Pump prices could even drop below $1 a gallon, as oil prices continue to be extremely low due to the unprecedented demand shock attributable to the coronavirus pandemic.

Any policy aimed at deliberately raising gasoline prices would be insane to say the least – especially in an election year – and to suggest it was the president’s intent to do so is disingenuous. That is just one reason the columnist’s argument that the president’s actions were “overtly placing the needs of one industry above the interests of the average person” is also misleading.

It is important to remember why gasoline prices have been affordable for Americans for so long in the first place. U.S. oil and natural gas industry innovation over the past decade has allowed the United States to emerge as the world’s leading producer, become a net petroleum exporter, slash OPEC imports by 75 percent and make $3 gasoline a distant memory. And not only has the U.S. oil and natural gas industry kept pump prices low for American consumers, it is responsible for far more jobs than the columnist indicates.

The columnist’s states there are “only about 145,000” oil and gas extraction jobs in the U.S. But the upstream industry is actually directly responsible for more than three times that number of jobs, according to a recent Texas Independent Producers and Royalty Owners report. That report shows that the U.S. oil and natural gas industry directly employs more than 880,000 Americans overall, including 14,000-plus Illinoisans. Most of these jobs are high-skill, high-demand occupations, which explains why the average oil and natural gas industry wage is more than twice the private sector average. These jobs don’t exist in a vacuum, either. They bolster other industries, which is why the American Petroleum Institute estimates the industry supports 10.3 million U.S. jobs.

All this considered, a real gift to Russia and Saudi Arabia would be allowing the U.S. oil and natural gas industry to collapse and enabling hostile – and far less environmentally conscious – nations to reclaim the global market share they lost when the United States emerged as the world’s top producer.


Strong U.S. Oil and Gas Production Keeps Energy Costs Affordable

The cost of living in the United States has increased across the board over the past decade, with one notable exception. At the same time healthcare, education and food costs have exploded (see graphic below), the most recent government data show household energy costs – including utilities and expenditures on transportation fuels – were down just under seven percent from 2008 levels in 2018, the latest year in which data is available.

Considering 68 percent of America’s energy needs are met by oil and natural gas, the decline in overall energy costs can be traced to the fact that domestic oil and natural gas production increased 76 percent during that time-span.

As a result, the typical American family of four has saved $2,500 per year, according to the White House Council of Economic Advisers. Those savings make a huge difference for low-income households, which have historically spent a disproportionate amount of their incomes on energy, making energy price spikes disproportionately impactful as well (more on that in a bit).

Access to affordable and abundant energy is a fundamental need – and the U.S. oil and natural gas industry has met that need in a big way, reversing a troubling trend in the process.

Back in 2008, talk of “peak oil” and “peak gas” was commonplace. Domestic production was perceived to be in irreversible decline and imports were surging to all-time highs. Not coincidently, U.S. energy costs “reached their highest point on record in 2008, when they averaged $24.13 per million Btu,” according to a 2018 U.S. Energy Information Administration (EIA) report.

But thanks largely to industry innovation, the United States is now the world’s largest oil and natural gas producer, and energy costs have plummeted as a result. The EIA reported that in 2016, U.S. energy costs fell to a “record-low energy expenditure share,” adding:

“The U.S. average energy price was $15.92 per million British thermal units (Btu) in 2016, down 9% from 2015, and the lowest since 2003, when adjusted for inflation.”

U.S. households today spend less than four percent of their total budgets on energy costs, down from 5.1 percent a decade ago. Gasoline prices are currently about half of the record-high costs seen in 2008 and have averaged below $3 a gallon for six straight years, while retail natural gas prices declined 24 percent from 2008 to 2018.

However, oil and natural gas bans and restrictions being proposed by mainstream political factions pose a real threat to energy access and affordability moving forward. Such policies would negatively impact a large portion of the population if implemented.

A 2018 Energy Information Administration (EIA) report reveals that one of three U.S. households struggle with household energy insecurity, meaning that although they have adequate access to energy, they oftentimes can’t afford it. In fact, 25 million Americans report they’ve had to choose between energy and food or medicine in 2018, while 14 percent of those surveyed reported they had recently received a disconnection notice.

It is with those facts in mind that several civil rights leaders have advocated for access to natural gas for low-income minority communities, in addition to declining to endorse bans on hydraulic fracturing. As Axios recently reported:

“Revs. Al Sharpton and Jesse Jackson and National Urban League President Marc Morial said energy costs are hitting people of color unfairly hard. These concerns, expressed before the coronavirus pandemic, are poised to expand as paychecks shrink across America.”

As Energy In Depth recently highlighted, Rev. Jackson has worked with local officials in the Pembroke Township community of Hopkins Park – one of Chicago’s poorest suburbs – to bring a natural gas line to the community. The median income in this Chicago suburb is just $16,000 per year and residents have relied primarily on propane and wood stoves for home heating during the region’s often brutal winters.

As Energy In Depth noted, “Why natural gas? Households that use natural gas saved more than $4,000 over a 10-year period, according to a recent study by Shale Crescent USA and the Ohio Oil & Gas Energy Education Program. Low income households, which spend a disproportionate amount on energy, realized savings equal to 2.7 percent of their annual income.”

Hopkins Park Mayor Mark Hodge said in a recent TV interview that:

“This community has been overlooked for the past 48 years for natural gas, so we’re in need of industry and we’re in need of jobs, and our school is in need of natural gas.”

In the real world, access to affordable, reliable energy is a far bigger priority than idealistically driven renewable energy campaigns that deliver neither. Fortunately, America’s oil and natural gas industry is meeting those fundamental needs.


IPRB Letter to Gov. Pritzker: Oil and Natural Gas Industry Indeed 'Essential'

April 2, 2020

The Honorable Governor JB Pritzker

207 State House

Springfield, IL 62702

Dear Governor Pritzker,

I wanted to take a moment to thank you for designating the Illinois oil and natural gas industry as an “essential” industry in your recent shelter-in-place executive order. This has allowed our industry’s 14,000 workers carry out necessary day-to-day operations to help the state combat the COVID-19 crisis.

As your executive order correctly acknowledges, it is indeed essential for oil and natural gas workers to be able to execute their daily responsibilities in order to produce and transport the products and services Illinoisans need during these trying times. In addition to providing fuels and manufacturing feedstock necessary to transport and produce essential products and services, oil and natural gas are also critical to providing our healthcare industry the tools it needs to fight this pandemic.

IV bags, ventilator machines, hospital gowns, latex gloves and the 3.5 billion face masks used by medical professionals each year are comprised of or include components of single-use plastics. Doctor’s scrubs, sterilization trays and monitors are also made of plastic or include petroleum products. Even hand sanitizers, soaps and some medicines are derived from petroleum, while critical procedures such as X-rays and MRIs would not be possible without oil and gas. Petroleum-based technology such as computers and cell phones also allow an unprecedented number of people to work from their homes and adhere to the social distancing safety precautions you have mandated.

I encourage your staff to reach out at any time for more information on the essential nature of the Illinois oil and natural gas industry and petroleum in general.

Sincerely,

Seth Whitehead

Executive Director, Illinois Petroleum Resources Board

View PDF of letter


Fact Checking the Petition to Ban Fracking in Illinois

The Illinois Coalition Against Fracking (ICAF) has been circulating a petition that calls for governor J.B. Pritzker to ban hydraulic fracturing (HF) in Illinois, including the low- and medium-volume HF that has been used to complete conventional vertical oil wells in the state since the 1950s.

So far, the ICAF has collected 893 signatures – more than 700 shy of its goal – and far less than the “thousands and thousands” of signatures a spokesman for coalition member Southern Illinoisans Against Fracturing Our Environment (SAFE) has claimed would be collected.

Despite the petition’s lack of success thus far, it remains essential to understand and communicate that the primary claims used in the document to argue for a HF ban are demonstratively false. It is also important to understand that the petition drive’s future success poses a serious threat to the Illinois oil production industry as a whole, considering roughly 75 percent of new wells in the Illinois Basin have to be hydraulically fractured to be commercially productive.

Here are the most egregious claims made in the petition followed by the facts. And unlike the claims made in the petition – the facts listed below are verified by links to reputable third-party sources.

CLAIM: “Whereas, the evidence is now irrefutable that fracking contaminates water, pollutes the air, threatens public health, harms local economies, decreases property values and fuels and exacerbates the climate crisis we face today;”

FACT: The weight of scientific evidence shows HF poses no significant threat to groundwater, does not result in air pollution that exceeds U.S. Environmental Protection Agency (EPA) air quality thresholds and is protective of public health. Academic research also shows HF has boosted local economies and property values near development, and has allowed the U.S. to lower its greenhouse gas emissions by making clean-burning natural gas more affordable and abundant.

  • Groundwater: The current body of scientific research – which includes 15 peer-reviewed papers and eight reports commissioned by regulatory agencies – has examined more than 14,500 water wells across the United States and found no evidence of systemic water contamination issues attributable to HF. Many of the studies examined groundwater pollution and specifically ruled out HF as the cause of water issues. And notably, a landmark 2016 U.S. Environmental Protection Agency study concluded that, “[H]ydraulic fracturing operations are unlikely to generate sufficient pressure to drive fluids into shallow drinking water zones.”

 

 

 

 

 

 

 

 

 

 

 

 

  • Air Quality: Several state departments of environmental protection have installed air monitors at well sites and found that emissions during oil and natural gas development – and the HF process specifically – do not exceed public health thresholds. Activist researcher and executive director of the openly anti-oil and gas group Physicians Scientists & Engineers for Healthy Energy (PSEHE) Seth Shonkoff even admitted in a recent report that, “Air pollution near oil and gas production typically measures in concentrations within healthy air standards…” and that “it is unclear why ambient samples have failed to capture concentrations above health-based standards” near oil and gas development sites. In one of the most comprehensive reports based on actual air measurements to date, the Colorado Department of Public Health and Environment (CDPHE) took 5,000 air samples near oil and natural gas development. That report notes that the CDPHE “has not measured concentrations above what we expect would cause short- or long-term health impacts.”
  • Public Health: There is no research to support the oft-repeated activist claim that the health of those who live near oil and gas development has been harmed by exposure to additives used in hydraulic fracturing fluid. A 2013 Gradient report states “there is not scientific basis” for the claim that HF fluids can contaminate groundwater from depth, also concluding, “[I]t is implausible that the fluids pumped into the target formation would migrate from the target formation through overlying bedrock to reach shallow aquifers.” Several state departments of environmental protection have installed air monitors at well sites and found that emissions during oil and natural gas development do not exceed public health thresholds (see above). The Colorado Department of Public and Environment and Pennsylvania Department of Health recently conducted a joint analysis of studies claiming to link health impacts to oil and natural gas development, concluding there is “insufficient weight of evidence” to link living near oil and natural gas production sites with poor health outcomes.
  • Local Economic Impacts: A 2016 University of Chicago study finds HF is generating “enormous benefits” for communities with the most activity. The study finds average household incomes – “driven by increases in wages and other factors such as royalty payments from the drilling and local land owners” – are up seven percent in areas with the most development. The study also found that total employment was up 10 percent in areas with the most development, with annual net benefits of nearly $2,000 per household. Report co-author Michael Greenstone has said of the report’s findings: “In terms of the local economic impacts, I thought it was going to be big. … But the impact was bigger than I thought it was going to be.”
  • Local Property Values: The above-referenced University of Chicago study also found that home values near unconventional oil and gas development actually increased six percent after development began.
  • Greenhouse Gas Emissions: Experts agree that increased natural gas use – made possible by HF – is the primary reason the United States has reduced carbon dioxide (CO2) emissions more than any other country this century. The United Nations Intergovernmental Panel on Climate Change (IPCC) has noted, “A key development since AR4 is the rapid deployment of hydraulic fracturing and horizontal drilling technologies, which has increased and diversified the gas supply and allowed for a more extensive switching of power and heat production from coal to gas (IEA, 2012b); this is an important reason for a reduction of GHG emissions in the United States.” The U.S. Energy Information Administration (EIA) credits increased natural gas use in the United States for most of our country’s world-leading CO2 reductions over the past 15-plus years. The EIA finds that from 2005 to 2018, a shift to natural gas for electricity generation reduced emissions 57 percent more than the emissions reductions realized through renewables. The International Energy Agency (IEA) also credited natural gas for lowering U.S. emissions, noting that “Coal-to-gas fuel switching for power generation avoided 100 Mt of CO2 in advanced economies [in 2019] and was particularly strong in the United States due to record low natural gas prices.”

CLAIM: “Whereas, a transition to a renewable, efficient, and just energy system is impeded by the practice of fracking;”

FACT: HF has actually accelerated renewable energy growth by making natural gas – a necessary backup for intermittent renewable energy – far more abundant.

A 2016 National Bureau of Economic Research report found that renewable electricity generation has grown at roughly the same rapid rate as natural gas-fired electrical generation over the past two-plus decades. This can be explained by the fact that renewable sources of energy such as wind and solar are intermittent and require natural gas backup for times when the wind doesn’t blow and the sun doesn’t shine. As the paper notes, “… renewables and fast-reacting fossil technologies appear as highly complementary and that they should be jointly installed to meet the goals of cutting emissions and ensuring a stable supply.” Because the shale revolution has made natural gas abundant and affordable, renewable energy generation capacity has increased dramatically over the past decade. As former Clinton White House advisor Paul Bledsoe recently said of the shale revolution, “It’s a key reason renewables have grown so quickly.”

CLAIM: “Whereas any perceived financial benefit to the State of Illinois from allowing an expansion of oil and gas extraction in our State would be greatly exceeded by the harms that would ensue. Therefore, we, the undersigned organizations and individuals call upon Governor J. B. Pritzker to use his authority as governor of Illinois to impose an immediate ban on the granting of all new drilling permits for oil and natural gas that use any and all forms of hydraulic fracturing.”

FACT: Hydraulic fracturing is safely used to complete approximately 75 percent of new wells in the state. Banning HF would jeopardize more than 14,000 Illinois oil and natural gas industry jobs, hundreds of millions in annual state and local tax revenues and $3 billion in annual state economic impact.

Conclusion

To be clear, the ultimate objective of the ICAF is to ban all oil and natural gas development in the state, as evidenced by the group’s use of what it calls the “lifecycle” definition of HF, which encompasses every component of the oil and natural gas development process.

“Fracking is the entire above and below ground process of hydro-carbon extraction–from leases and well-site prep through waste disposal and well abandonment–where hydraulic fracturing is employed.”

Though the language in the petition appears to reference the actual hydraulic fracturing process in some parts of the document and the broad “lifecycle” definition elsewhere, it is more important to understand that the facts presented by IPRB apply to both the actual process of HF and broader oil and natural gas development in general. And those facts show that oil and natural gas development in the state has been conducted – and can continue to be conducted – in a way that protects the environment and public health while bringing undeniable economic benefits to the state.


What a Fracking Ban Would Mean For Illinois

Likely Democratic presidential nominee Joe Biden promised “no new fracking” during Sunday night’s debate. Such a policy would have dire economic and environmental consequences for the country as a whole, considering 95 percent of new oil and natural gas wells have to be hydraulically fractured, aka “fracked,” to be commercially productive and increased natural gas use – made possible by fracking – is the primary reason the United States has reduced carbon dioxide emissions more than any other country this century.

But what would a fracking ban mean to Illinois? Though it may not be as obvious as the national impact, a fracking ban would be devastating for the Land of Lincoln as well. Though there has been no high volume hydraulic fracturing conducted on horizontal wells in Illinois – the kind of development most associate with “fracking” – hydraulic fracturing has been safely used to complete thousands of the state’s vertical wells for decades and is used to complete roughly 75 percent of new Illinois vertical wells today. That is why a petition being circulated by the Illinois Coalition Against Fracking (ICAF) that calls for a ban all forms of fracking is a far bigger threat to the Illinois oil production industry than anything that’s being proposed on the national level. From the petition:

“Therefore, we, the undersigned organizations and individuals call upon Governor J. B. Pritzker to use his authority as governor of Illinois to impose an immediate ban on the granting of all new drilling permits for oil and natural gas that use any and all forms of hydraulic fracturing.”

To put it bluntly, three-quarters of potential new Illinois oil wells would potentially never be brought into production should the ICAF’s campaign prove successful. And even more importantly, while a president’s power to ban fracking is extremely limited, governors do sway significant authority – which is why talk of a state-wide ban is a far bigger threat than what is being proposed at the federal level.

A statewide fracking ban would obviously result in a huge economic blow to producing counties in the southern portion of the state, where the industry provides thousands of jobs and millions in annual tax revenues. And it would do nothing to help the state’s overall dire economic outlook, considering the oil production industry has a $3 billion annual economic impact and generates hundreds of millions in state tax revenues.

A fracking ban would effectively be a ban on almost all new oil and natural gas development – and “Keep It In the Ground” groups know that. This is one reason they use the boogeyman term “fracking” to describe anything oil and natural gas related. Though it might appear on the surface that these groups don’t understand the process they’re talking about, they are actually deliberately using the “fracking” label to consolidate the entire industry under a single unpleasant sounding term in an effort to achieve their ultimate objective – a total ban on oil and gas development.

As Daniel Raimi, senior research associate from Washington D.C. environmental think tank Resources for the Future, noted in his 2017 book “The Fracking Debate”:

“… opponents of the fossil-fuel industry writ large often refer to the ‘fracking industry’ instead of the ‘oil and gas industry,’ ‘fracking wells’ instead of ‘oil and gas wells,’ ‘fracking pipelines’ instead of ‘natural gas pipelines’ and so on…”

“If ‘fracking’ refers to the entire set of activities related to oil and gas development, it becomes easier for advocates to argue that ‘fracking’ is the cause of any high-profile case of pollution, whether or not those cases are the result of hydraulic fracturing itself. Pipeline rupture? Blame fracking. Local groundwater pollution from surface spills? Blame fracking.”

“And if the public believes that ‘fracking’ – rather than some more prosaic issue such as a pipeline leak or an oil spill at the surface – causes the damage to human health or the environment, it becomes easier to rally support behind a movement to ban fracking (meaning the discrete process of hydraulic fracturing).”

There are several examples of this tactic being employed by Illinois “Keep It In the Ground Groups.”

The ICAF refers to a “life cycle” definition of fracking as being “the entire above and below ground process of hydro-carbon extraction – from leases and well-site prep through waste disposal and well abandonment – where hydraulic fracturing is employed.” By this logic, one could use the terms “lifetime cycle” of spudding or the “lifetime cycle” of well logging instead, but those types of labels don’t incite negative connotations or garner any media attention.

Southern Illinoisans Against Fracturing Our Environment (SAFE) inaccurately defined fracking in 2018 as follows:

“Hydraulic fracturing, or fracking, is a mining technique that involves drilling deep into the earth, turning the drill bit 90 degrees and then drilling horizontally into rocks that contain little pockets of oil and gas…” 

SAFE is obviously describing horizontal drilling, which is in no way shape or form hydraulic fracturing. For those unfamiliar with hydraulic fracturing, it is actually a well completion process that occurs after drilling has been completed and involves pumping fluid — typically 99.5 percent water and sand, with an additional mixture of chemical additives — into the target formation at pressure in order to open up small fractures and allow oil and gas to flow through the rock.

In another example of this deliberate conflation of horizontal drilling and fracking, SAFE describes in this blog post that the directional discovery well (Warren No. 1) drilled under Forbes Lake in Marion County in the early 2000s as being Illinois’ “first high volume horizontal well.”

In reality, there was no high volume hydraulic fracturing – or any hydraulic fracturing at all, for that matter – conducted on this well.

Though the manipulation of the proper definition of hydraulic fracturing is infuriating to some, it is more important to realize that the overall goal is to ban all oil and natural gas development, period. In today’s era of misinformation overload, the moniker “fracking” – like it or not – essentially translates “oil and gas.” And these groups are fully aware that a ban of the actual hydraulic fracturing process that they deliberately try to confuse the public and politicians about would, ultimately, undermine the entire industry.

The is why ICAF petition should be viewed not only as existential threat to any potential high volume hydraulic fracturing of horizontal wells in Illinois, but a threat to the state’s oil production industry in general.

 

 

 

 


Guest Column: US Economic Growth Has More to Do With Oil Boom Than Occupants of White House

The United States is enjoying an unprecedented 11th consecutive year of sustained economic growth. Predictably, both of the occupants of the White House during this time-span have claimed credit. But in reality, our historic run of economic prosperity can be traced to an American energy renaissance that has spanned both the Obama and Trump administrations.

Energy is the one thing that all Americans use. And with that fundamental reality in mind, advances in hydraulic fracturing, aka “fracking,” and horizontal drilling have allowed us to literally drill our way to lower energy prices and economic prosperity.

Since the Great Recession in 2009, U.S. oil production has more than doubled while domestic natural gas production has increased almost 50 percent. We are now the world’s biggest crude oil and natural gas producer and a net petroleum exporter. Not coincidentally, the Department of Energy reported in 2018 that average U.S. energy costs fell 34% from 2008 to 2016, dropping from record-high levels to a “record-low energy expenditure share” in less than a decade. Gasoline prices are about $1.50 below record high levels seen in 2008. Natural gas prices are at 20-year lows. And as NPR reported in August, “Cheap and abundant energy has fueled a resurgence in domestic manufacturing.”

Click here to read the full Southern Illinoisan guest column.


Illinois Oil Production Totaled 8.25 Million Barrels in 2019

Illinois crude oil production totaled 8,250,793 barrels in 2019, according to data compiled by the Illinois Petroleum Resources Board (IPRB) that is based on first-purchaser reports. Click here to view IPRB’s annual report.

White County accounted for nearly a quarter of overall state production last year, as Illinois’ top-producing county surpassed the two million-barrel plateau with 2,049,462 barrels of production. That represents a 102,000-barrel (5.2 percent) increase from 2018 and is nearly twice the production the county had just a decade ago.

Marion (854,820 barrels), Crawford (743,027), Lawrence (639,774) and Fayette (577,505) counties rounded out Illinois' top-five producing counties in 2019.

Hamilton County saw the second-largest year-over-year production increase (38,100 barrels) in the state, vaulting past Richland County onto the top-10 list of producing counties with 238,416 barrels of production.

Franklin (7,152-barrel increase), Jefferson (3,939-barrel increase), Madison (2,729 increase), Brown (1,855 increase), Washington (1,687 increase), Moultrie (338 increase) and Schuyler (122 increase) counties also increased production from 2018 levels in 2019.

Overall state production declined 2.3 percent (194,295 barrels) from 2018 levels.

The state’s top-15 producing counties – White, Marion, Crawford, Lawrence, Fayette, Wabash, Wayne, Clay, Franklin, Hamilton, Richland, Clark, Jasper, Gallatin and Jefferson counties – once again accounted for 90 percent of production in the state. Fourteen of those counties – as well as Effingham and Brown counties – have passed Resolutions of Support for the Illinois Oil Production Industry in the past calendar year, formally acknowledging the importance of the industry to their local economies while also endorsing further growth of the industry in their counties.

Illinois oil production has ranged from 8.25 to 10.05 barrels since 2006, averaging 9.2 million barrels per year.