Shale Development Opportunities in Illinois

A Renaissance for Southern Illinois. Powering our economy thru job growth, capital expenditures and reinvestment of revenues

Review of Emerging Resources found in Shale Gas and Shale Oil Plays

• Background • The use of horizontal drilling in conjunction with hydraulic fracturing has greatly

expanded the ability of producers to economically recover gas and oil from low –permeability geologic plays in particularly shale plays. Application of fracturing techniques to stimulate oil and gas production began to grow rapidly in the 1950s. Starting in the mid-1970s a partnership of private companies, the Department of Energy (DOE)and the Gas Research Institute (GRI) worked together to develop technologies for the economic development of natural gas and oil from shale in the eastern US. This endeavor helped foster technologies that eventually have allowed for the economic development of gas and oil from shale rock using horizontal well, and multi-stage slick water fracturing.

• As these technologies have been applied to several shale plays the shale gas production has increased in the US from 1 trillion cubic feet in 2006 to 4.8 trillion cubic feet or 23 percent of the total US dry natural gas production. Shale oil production has increased substantially also during the same time.

• Shale resources assessments estimates that in the Lower 48 states there are 20 shale plays that contain a total of 750 trillion cubic feet of technically recoverable shale gas and over 23.9 billion barrels of technically recoverable shale oil.

Illinois Basin Potential Shale Plays

• The Devonian age New Albany Shale (age equivalent of the Marcellus and Antrim shale’s) has produced gas along the eastern margins of the basin in Indiana and Kentucky since the early 1900s. Moderate development of the shale in Indiana occurred in the last 10 years until low gas prices slowed the play. Based upon new evaluations of the shale’s maturity it appears that there is significant potential for a liquids rich play in the shale in southeastern Illinois. This has resulted in numerous large companies acquiring large lease-blocks in counties in southeastern Illinois. It is estimated that over 250,000 acres have been leased with an estimated expenditure of over 30 million dollars to date with much more to be expended.

• The Ordovician age Maquoketa shale (age equivalent of the Utica) has similar characteristics as the Utica which is producing gas in Pennsylvania and gas and oil in Ohio. The development of which in Ohio has sparked a large amount of leasing activity with drilling starting to increase dramatically. Based upon initial studies of the Maquoketa it appears that it may also have good potential for a liquids rich gas play in the southeastern portion of Illinois.

What Impact can a Shale Play Create

• Jobs (lots of Jobs), Good Paying Jobs

• Massive Capital Expenditures within the State and Counties

• Large Royalty Income in Mineral Owners

• Significant Wage Taxes to State

• Ad Valorem Tax income to Counties

• See the comparisons of the impact Shale plays have in other states to follow

Projected Jobs Created by Shale Development in Ohio for Comparison

• YEAR JOB IMPACT

• 2011 4,614

• 2012 22,297

• 2013 102,924

• 2014 178,088

• 2015 204,520

Projected Job Gains from Shale Development in other States

State Shale Play Year Job Gains

Arkansas Fayetteville 2008 9,683

Louisiana Haynesville 2009 57,637

Texas Barnett 2008 132,497

Pennsylvania/West Virginia

Marcellus 2009 57,357* 2010 3rd q 141,000

Source: Center for Energy Policy and the Environment, “The Economic Opportunities of Shale Energy Development,” May 2011.

Shale Development Requires Massive Capital Expenditures and Reinvestment of Revenues within

the State

• For Comparison, in Ohio over the next five years, oil and gas producers are projected to spend over $34 billion in exploration and development, midstream, royalty and lease expenditures

• 2011 $ 246 million

• 2012 $ 1.4 billion

• 2013 $ 6.8 billion

• 2014 $12.4 billion

• 2015 $14 billion

Impact of Shale Development in PA

• Nearly 48,000 people have been hired in the last year by industries related to drilling in the Marcellus Shale, and 71 percent of those people were Pennsylvania residents. 2009

• The average wage in the core industries was $69,995, which is more than $24,500 greater than

the statewide average. (Center for Workforce Information &

Analysis – a research arm of the Dept. of Labor & Industry)

Economic Impact of Marcellus Shale on Pennsylvania

2009 2010 2011 2012 2015 2020

Employment 60,168 139,889 156,695 181,335 215,979 256,420

Value Added $MM

4,703 11,161 12,844 14,531 17,195 20,246

State and Local Taxes $MM

573 1,085 1,231 1,402 1,677 2,003

Output Bcfe*/day

.3 1.3 3.5 6.7 12 17.5

* bcfe is billion cubic feet of natural gas equivalents per day

Source: Timothy J. Considine, Robert Watson, Seth Blumsack, “The Pennsylvania Marcellus Natural Gas Industry: Status, Economic Impacts and Future Potential,” Penn State, July 20,2011

Impact on Unemployment in PA

Direct Jobs Related to Shale Development

• It takes 75 jobs to take a typical well from planning to production

• Every shale well site requires about 400 workers…covering over 150 job titles. Providing good paying jobs that will boost local economies

• 2010 Q3 Marcellus Shale industries total employment is 141,000,which was 2% of PA total employment

Jobs Created and Wages

• Industry Title Average Wage • Crude Petroleum & Natural Gas Extraction $81,219 • Natural Gas Liquid Extraction $93,341 • Drilling Oil & Gas Wells $69,169 • Support Activities for Oil & Gas Operations $61,913 • Oil & Gas Pipeline Construction $63,590 • Pipeline Transportation of Natural Gas $79,574 • Average $69,995

Pennsylvania Dept of Labor & Industry

Indirect Jobs and Industries Impacted Local

• Hotels/Motels/Housing

• Restaurants

• Construction/Excavation

• Trucking

• Mechanics

• Welders

• Manufacturing

• Aggregate Industry

Issues that Need to be Addressed to Facilitate this Shale Development Opportunity

• Valid Information needs to be made available to the public to put to rest any fears about hydraulic fracturing*

• The Illinois State Legislators needs to promote the passing of a appropriate Bill governing hydraulic fracturing

• The Illinois Department of Natural Resources division of Oil and Gas needs to have in place the streamlined ability to permit and process proposed horizontal units so that the shale development does not become stymied.

• *See next slide defining the components used

This http://youtu.be/YemKzEPugpk is an updated HF video. It is licensed by API.