News From Terre Haute, Indiana

Local & Bistate

December 11, 2013

Oil drilling at ISU to start next week

Crews will start assembling equipment on Saturday

TERRE HAUTE — Oil drilling is about to begin on Indiana State University property.

After nearly two years of planning and surveying, crews with Lawrenceville, Ill.-based Pioneer Oil Co. are scheduled to begin setting up equipment Saturday, and drilling is expected to start early next week, university officials said Wednesday.

“Even though the drilling site is not on campus, we worked with Pioneer officials to schedule the start of the drilling operation during winter break in order to minimize the impact on students, faculty and day-to-day university operations,” said Diann McKee, vice president of business affairs and finance.

University trustees approved an oil and gas lease with Pioneer in February 2012. The company later commissioned seismic testing on the ISU campus and adjacent areas and has determined that sufficient reserves are present to warrant drilling.

Past production in the area many years ago, as well as a geophysicist’s analysis based on recent seismic surveys, “indicates there is a reservoir [of oil] there sufficient for us to take the risk to drill our initial well,” said Steve Miller, Pioneer’s chief financial officer. “We’re very excited to get going. We’ve spent considerable time and money getting prepared for this. We’re ready to find the results.”

Initially, the company will drill one well and future development will depend on what is found. Drilling a well takes about 30 days, Miller said.

The university’s agreement with Pioneer provides that equipment be located at a former industrial site on university-owned property east of campus and horizontal drilling will be used to reach oil and gas beneath the campus.

All pumping gear and related equipment will be below ground, and a screen will be constructed around any tank farm related to the project. Hydraulic fracturing will not be used, McKee said. Both a fence and wall have been constructed at the site where the company has its equipment.

The university has the right to halt drilling operations if any concerns develop, according to ISU President Dan Bradley.

“Pioneer Oil has experience in oil exploration in environmentally sensitive areas, including Harmonie State Park and the University of Southern Indiana, and we appreciate company officials working with us to ensure that this operation will have limited impact on the university and its neighbors,” McKee said.

ISU’s agreement with Pioneer provides for royalty payments of not less than 15 percent for all oil products that are produced. Proceeds will be placed in a dedicated fund to address deferred maintenance.  

Asked if there is the potential for ISU to make a significant amount of money from oil production, Miller said, “Yes, there is.”

But it’s too early to quantify how much oil might be produced and how much revenue ISU might make.

Assuming oil is found, production could continue for several years, Miller said. Pumping won’t be visible because it will be underground, and there will be minimal activity at the site.

Once a day, Countrymark would pick up the oil and transport it to its refinery, he said. Pioneer will sell the oil to Countrymark.

Pioneer has leases with several property owners downtown, including churches, businesses and the Vigo County School Corp. By signing a license agreement, if the wells produce oil, those who have signed the agreements will receive a share of the royalties, based on their acreage as part of the total property pool involved.

Pioneer will initially drill vertically several hundred feet down and then make a turn and angle it toward the reservoir in the downtown area. It will extend through various properties that own mineral rights.

“By state law, you have to have a lease from anyone within 330 feet of where you wish to produce the oil,” Miller said.

McKee said ISU “is happy to finally get it underway. We’ve been planning for this for more than two years now or close to that. It’s exciting to see it finally come to fruition.”

ISU has been aware of the history of oil in the area. In various facility projects, ISU has previously capped old wells that might have been drilled in the 1920s or earlier.   

“We’ve been aware of the existence of oil, and changes in technology and drilling techniques have made it much more feasible than what it would have been several years ago” to drill and produce oil, she said.

ISU doesn’t know how much revenue it could potentially make. “We haven’t even begun to think about what potential may be there,” she said. “Pioneer seems to be fairly confident they are going to find something.”

Any proceeds would go toward deferred maintenance on campus, which includes such things as roof replacement, windows, mechanical or electrical systems or other infrastructure needs. ISU has more than $100 million worth of deferred maintenance on campus.  

Many of those mechanical/electrical systems on campus have exceeded their useful life and need to be replaced, she said, “but because we haven’t had a lot of repair/renovation money from the state, it’s been difficult to address all of that,” McKee said.

Sue Loughlin can be reached at 812-231-4235 or sue.loughlin@tribstar.com.

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