Skip to content
  • Key Investors

Fracking could have billion-dollar impact on Illinois: study

December 14, 2012

Hydraulic fracturing in Southern Illinois has the potential to create more than 47,000 jobs and more than $9.5 billion in economic impact, according to a study released Thursday by the Illinois Chamber Foundation.

The study, conducted over the last four months, is the first of its kind to focus entirely on the state’s potential with regard to increased horizontal drilling and hydraulic fracturing, or fracking, the chamber said. The study, based on the potential of the state’s New Albany shale field, was administered by economist David Loomis, a professor at Illinois State University.

Laying out three possible scenarios for exploring natural gas production — low, medium and high — Mr. Loomis determined a range of economic outcomes that could benefit Illinois based on the amount of labor and equipment supplied from inside and outside the state.

The lowest translates into only 10 percent of the labor and materials sourced from Illinois, totaling 1,034 jobs and $1 billion in economic impact. The highest shows 90 percent of the labor and materials sourced from Illinois, totaling 47,312 jobs and $9.5 billion in economic impact.

The study cites other states with fracking operations that include Pennsylvania, which added 44,000 jobs in 2009 when it began hydraulic fracturing in the Marcellus Shale, and Texas, with 47,000 jobs and nearly $25 billion in total economic impact from the Eagle Ford Shale.

“We wanted this study to be based in some realistic assumptions,” said Tom Wolf, executive director of the energy council at the Illinois Chamber of Commerce.

The study looks only at drilling costs and does not include the economic impact of land leases and royalties, nor does it include the possibility that the state’s shale field could hold extractable oil deposits similar to what was found in western North Dakota.

Beyond the direct employment resulting from drilling oil and gas wells, the study formulated that sectors with the largest employment impact are food services, private hospitals, real estate, wholesale trade businesses, health practitioners, architects and engineers.

Messrs. Wolf and Loomis explained that this formula does not necessarily account for the impact on industries benefiting from fracking, such as manufacturing and transportation. “We tried to be cautious and conservative and make linkages where historically there have been linkages,” Mr. Loomis said in an interview. As the supply chain grows — more steel pipes and more trucked-in sand and water, for example — it is inevitable that other industries also will benefit, he said.

Still, the state has a long way to go before any drilling begins. Due to a lack of state regulations surrounding drilling for natural gas, the New Albany shale has yet to be tested. This, according to Messrs. Wolf and Loomis, makes it difficult to know the true potential of the shale. “Anyone who tells you that they know how it is going to turn out knows something we don’t know,” Mr. Wolf said.

The fracking revolution has stirred controversy with environmental groups, who worry about the threat to local water resources. Still, fossil fuel extraction is nothing new in Illinois — Mr. Loomis estimates that the state extracts 27,000 barrels of oil a day in Southern Illinois by drilling straight down rather than horizontally.

 

Natural gas interests, environmental groups and business organizations are attempting to negotiate a compromise that would result in state legislation to regulate the nascent industry.

Mr. Wolf, who has been involved in those discussions, said it could be heard by the General Assembly as early as the next lame duck session in January or the spring session. Natural gas, Mr. Wolf said, is “an industry that is not looking for a handout but a regulatory roadmap.”

According to Mr. Wolf, getting facts in front of legislators and putting real numbers to drilling for natural gas in Illinois in order to pass the bill was a main reason for commissioning the study.

“Nobody is saying this is the Beverly Hillbillies down there, but there is the promise of opportunity,” Mr. Wolf said.

Share this:

Print this