American Oil and Gas Reporter - February 2017 - 83

ConventionSection: Illinois Oil & Gas Association
review their operations and take new
looks at potential prospects, so now their
operations stand ready for new business
opportunities.
"With the prices we have now, people
are starting to develop and come back,"
he said in January. "If we get a big price
push, you will see a lot more activity, but
I think 2017 will be steady. Hopefully,
we can keep the prices we have now and
maybe get a little bump. People then
would feel confident."
Dicus observes how many companies
are not following the trends of previous
downturns by trimming expenses and
payrolls.
"Most larger operators and, for the
most part, the service companies as well,
have done a fairly good job of trying to
keep their core," Dicus says. "They do
that at a loss, but it appears companies
have done a fair job at it. Sometimes, the
industry may benefit from others' struggles.
Illinois' coal-mining industry has been
devastated, and was hit especially hard
in 2016. There are good people in that
industry with skills that somewhat relate
to the oil and gas industry, and maybe
that will help fill some of the voids in
our workforce."

huge impact on the oil and gas industry.
I am hoping that when the governor
comes out with his economic development
plan, it will include that exemption. That
would really help the oil and gas industry,"
Dicus assesses.
The November elections did little to
shift the political balance in the statehouse,
he says. The Democrats lost their supermajority status in the Illinois House of
Representatives, but still hold a 67-51
majority, Dicus points out, adding, "The
industry has worked through that political
environment for many, many years now.
It is a unique situation, but companies
seem to handle it pretty well."
The biggest wild card in the state's
political game is the absence of a budget
since July 2015, Dicus says. According
to media reports, the Illinois budget deficit
now exceeds $10.5 billion.
"Conceivably, Governor Rauner could
leave office without a budget," Dicus
poses. "I don't think that will happen.
State officials are working hard to come
up with some kind of compromise budget.
A lot of folks say the situation in Illinois
cannot be fixed, but the governor and his
team seem to think they can work through
this."

2017 State Legislature
The oil and gas industry will continue
to see support in the Illinois statehouse
in 2017, Dicus predicts, with no major
political or fiscal issues likely to emerge.
Some of the seats representing southern
Illinois legislative districts changed hands,
he says, but most area lawmakers seem
familiar with producers' needs.
Turning to the executive branch, Dicus
says Governor Bruce Rauner is expected
to support increased oil activities in the
state. One possible incentive for that
could be restoring a state sales tax exemption for exploration equipment, he
describes. That exemption was lost in
2003 as part of then-governor Rod Blagojevich's attempts to reduce a $5 billion
budget shortfall (AOGR, August 2003,
pg. 16).
Dicus notes IOGA supported twin
measures in the 2016 legislative session
to reinstate the exemption, but neither
HB 6165 nor SB 5718 advanced out of
committee.
Even so, he professes to be optimistic.
"In the overall grand scheme of things,
the oil and gas industry does not have
that huge an impact on Illinois' state
budget; however, that exemption has a

Working With Regulators
IOGA Executive Director Sam Barbee
says Illinois' budget woes do not threaten
operators directly, but fiscal uncertainties
could impose long-term impacts on industry activities.
"It is not good for business when the
state is unhealthy," he describes. "The
state regulatory agencies become a problem if there are severe layoffs of qualified
people. All that wreaks havoc on the industry, especially when a lot of the regulatory checks and balances start to be determined by different people at different
times and in different ways. That causes
confusion."
IOGA continues its positive and very
active relationship with state regulators
through direct communications and by
the Illinois Oil & Gas Advisory Board,
Dicus assesses. The association now is
most involved with state officials in what
he calls rule clarifications. "Some state
rules have not been rewritten for years,
and as time goes by, some of them are
hard to interpret in today's world," he
says. "IOGA constantly is working on
improvements to spacing regulations."
Dicus points to geology as the reason
some of the state's well-spacing regulations

need fixing. The Middle Mississippi producing horizon in the Illinois Basin typically lies around 4,000 feet deep, he explains, while Illinois imposes 20-acre
spacing requirements on carbonate wells
shallower than 4,000 feet and 40-acre
boundaries on deeper wells.
"Those spacing regulations simply did
not make sense, and always messed up
some operators, depending on where they
were in the basin," he says. "The Office
of Oil and Gas Resource Management at
the Illinois Department of Natural Resources has been very receptive to ideas
and adjustments to the rules. IOGA continues to try to provide feedback to help
OGRM) interpret the regulations. Certainly, oil and gas operators are very appreciative of state regulators' efforts."
The state's producers also have enjoyed
a positive relationship with the Illinois
State Geological Survey, Dicus applauds,
pointing to carbon sequestration research
as one example of how the industry benefits from working with governments.
Federal dollars have funded several
tertiary recovery demonstration projects
in Illinois, including two grants totaling
$10 million to the survey to fund research
into commercial-scale carbon dioxide
storage. According to a press release from
U.S. Senator Dick Durbin, D-Il., $8.9
million will support a study on the feasibility of storing CO2 in the Mt. Simon
Sandstone in Macon County, while the
remainder of the grant money will fund a
look at the challenges of commercialscale carbon capture and storage.
Without significant sources of CO2,
the oil industry is unlikely to see direct
benefits, Discus assesses, but he suggests
those efforts remain worthwhile.
"There will be residual benefits from
the reservoir characterization and engineering work that comes out of those sequestration studies," he says. "Even though
the research may show that there is recoverable oil in some of the rocks, the
likelihood of recovery happening, especially economically, is close to nil. The
take-away from this work is that we can
apply that reservoir characterization and
engineering data to what we do in the
basin."
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American Oil and Gas Reporter - February 2017

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