Right now, the Illinois basin’s New Albany shale is, in many ways, a mess of red tape and uncertainty. In Illinois, its future is particularly murky. But once the dust settles, the New Albany could possibly be the scene of the industry’s next big thing.

However, some say the shale may not be the most important aspect of the Illinois basin, where horizontal drilling in conventional reservoirs has been the summer’s hottest trend. As the region continues to take shape, one thing is almost certain: Once the potential of the Illinois basin is unlocked in its entirety, the midstream will play a significant role in providing the necessary build-out.

Indeed, the story of the New Albany is still unfolding. Within the up-and-coming play— which stretches across 60,000 square miles in southern Illinois, Indiana and Kentucky— wells are being drilled, acreage positions are being held and the regulatory red tape that long dogged Illinois activity is being cut through. The focus here is on oil, though insiders and researchers aren’t yet sure what the future holds.

“I can’t say whether a boom is on the way because the New Albany is still in what we would call the wildcat phase,” Joan Crockett, an Illinois State Geological Survey geologist who has researched the region extensively, tells Midstream Business. “The interest is there. It’s one of those things where they are going to have to do a lot of tweaking of their drilling and completion plans.

“We won’t know anything about this shale until people roll up their sleeves and start drilling. We won’t even be able to talk about it until those wells come off confidentiality.”

There are reasons for optimism. For example, numerous companies have established acreage positions in the shale, says Brad Richards, executive vice president of the Illinois Oil and Gas Association.

“But until we see oil and gas coming out of the ground, it’s all pretty speculative,” Richards adds during an interview with Midstream Business. “If this is a successful play, we will certainly see infrastructure built here to meet, what we hope will be, increasing production.”

Regulatory hurdles

Although Illinois has been producing oil for more than a century, it until recently lacked regulations specific to hydraulic fracturing. For this reason, legislation was drafted to address the issue. Stakeholders spent years hammering out the details of a comprehensive bill on regulating high-volume hydraulic fracturing in Illinois before ultimately passing the legislation last June.

The state’s Hydraulic Fracturing Regulation Act is considered by some to contain the country’s toughest fracing rules. For example, it requires drillers to disclose chemicals used in the fracing process, and makes companies liable for water pollution. Though the bill passed, lawmakers are still working on its rules-making component.

It is unlikely hydraulic fracturing permits will be issued before early next summer, Richards adds.

The Hoosier side

Meantime, the Indiana portion of the New Albany is a little ahead of the curve, since it isn’t constrained by new regulations and is in a better position to pursue the resource play. Rex Energy drilled a horizontal well in Indiana, which was given a large hydraulic fracture treatment. There has been no notable activity in Kentucky.

Some companies are staying away from the New Albany shale entirely and are, instead, focusing on more conventional horizontal targets. Crockett says horizontal drilling in the Illinois basin’s conventional reservoirs has been the summer’s hottest trend.

The benefits of drilling for shale gas in the New Albany have been studied as well. Illinois State University economics professor Dr. David G. Loomis, who is also director of the Center for Renewable Energy, conducted a report released last December titled The Potential Economic Impact of New Albany Gas on the Illinois Economy. The study examines the possible economic benefits of fracing for shale in Illinois. While the report notes that it’s too early to quantify the potential impact, it adds that conservative estimates can be developed.

“The New Albany shale play is still unproven but has the potential to be a significant creator of jobs for the State of Illinois,” says the study, performed by Loomis Consulting for the Illinois Chamber of Commerce Foundation. “Even with the modest ramp-up of jobs assumed in this study, a minimum of 1,000 jobs would be created or supported each year with the potential of 47,000 jobs annually if the highest scenario is realized. This highest scenario translates into over $9.5 billion of economic impact for the state.”

Crockett cautioned against weighing the interpretations of an economic boom too heavily. After all, the Illinois basin is shallow with low pressure. Many of the shale plays that have found success are deeper with higher pressures.

“Southern Illinois’ economy could use a boost, and there is a lot of hope and optimism,” says Crockett. “If horizontal drilling does find success, whether in shale or more conventional reservoirs, then this may create jobs and boost the economy, but perhaps not to the degree anticipated in some studies.”

Enter the midstream

Though there are other interests in the Illinois basin, its New Albany shale portion is where the primary interest resides. Given the geology of the basin, it is anticipated to be more of an oil play.

“Until they actually start drilling these wells, no one knows for sure, but certainly the perception is this will be an oil play,” says Richards. “If the expectations are that it is more of an oil type play, it is fair to say that the build-out—the infrastructure from midstream—will be a little different than what you see in the gassier plays.

“Having said that, we do have some existing infrastructure for handling crude oil. There are pipelines, but much of our production in Illinois is trucked.”

The midstream has also been a source of contention for fracing critics. Crockett says some activists worry about the high volume of truck traffic that might emerge with heightened production.

“If you’re thinking about hundreds of semi-trucks with frac fluid in them driving through small country towns, [it’s troublesome],” she said. “That’s part of why the whole regulation issue came about, because no one wants to see truck after truck going through their town. If high volume hydraulic fracturing in horizontal wells takes off in Illinois, there are on-the-ground safety and traffic issues and some of the transportation issues are going to be important.”

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