News From Terre Haute, Indiana

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September 8, 2013

Another oil boom

Vigo County is experiencing a return to drilling levels not seen in a century

TERRE HAUTE — Residents of Vigo County haven’t experienced anything like it in a century – their county is in the grip of what could be called a miniature oil boom.

The quest for black gold has even entered the city of Terre Haute, where officials have granted permission for drilling downtown on Indiana State University property. And, next month, officials are expected to hear a request for drilling west of Terre Town, near the city’s northern boundary.

Interest in Vigo County oil really took off a few years ago after CountryMark, an Indianapolis-based producer, struck it big on Hulman-owned property near Terre Haute International Airport. For a time, that strike was producing as many as 2,000 barrels per day, said CountryMark CEO Charlie Smith.

“There’s nothing that attracts attention and interest like someone who has had success,” said Herschel McDivitt, director of the division of oil and gas under the Indiana Department of Natural Resources.

Since the Hulman strike, the DNR has issued a growing number of permits for drilling in Vigo County. In 2010, just one permit was issued. That jumped to 18 in 2011 and 25 in 2012. There have been nine permits issued so far in 2013, McDivitt said.

Drilling at ISU

Oil prices at more than $100 per barrel and improved technology have added to the boom in places, such as Terre Haute, where reserves may be relatively small and are difficult to reach. The planned ISU well is a case in point, said Steve Miller, chief financial officer for Pioneer Oil of Lawrenceville, Ill., the company behind the project.

Only in the past decade has the technology improved to the point where a project such as at ISU is now economically feasible, Miller said. Pioneer will likely drill straight down more than 1,000 feet and then turn its drilling equipment to run horizontally, he said. That will allow the company to access potential reserves that would be impossible to reach using traditional vertical drilling, he said.

“It’s incredibly sophisticated stuff,” said Dan Bradley, president of ISU and a former professor of petroleum engineering. “You can drill a well in any shape you want” these days, he said.

Pioneer believes there is “significant” potential for oil production under the ISU campus, Bradley said. The drilling is at no cost to the university, but ISU will receive royalties that could amount to a windfall. Other property owners downtown are also being contacted as Pioneer’s geologists use seismic data to determine the actual shape and size of the potential oil reservoir, he said.

Pioneer has experience drilling in unconventional locations. The company has a well on the campus of the University of Southern Indiana, Miller said. That well has proved very successful and has permitted USI to fund scholarships and other needs, he said.

“It’s gone very well,” Miller said. The company also drills in New Harmony State Park, he said.

Pioneer has already drilled a saltwater disposal at ISU, an expense not normally incurred until after oil is confirmed, Miller noted.

“We’ve put a lot of infrastructure up front,” Miller said. “It’s sort of the reverse” of a normal operation.

In fact, Pioneer is incurring “tremendous” upfront costs at the ISU site, such as landscaping and other measures to make the facility practically unnoticeable, Miller said. Pumps and other equipment will be underground and odor control measures will be state-of-the-art, he said.

“We’re actually improving the site,” Miller said.

History and fracking

Terre Haute has a history of oil drilling dating back to the 1880s, Miller said. A big oil strike downtown in 1889 was the “start of the Terre Haute oil field,” he said. The last successful well was drilled in 1903 on the site of what is now the Hulman Center and production continued in the city into the 1920s, he said.

“There’s been a lot of drilling and oil production in Vigo County over the years,” the DNR’s McDivitt agreed. Currently, Vigo County is fourth in the state for active drilling, he said.

But the new interest in oil production in the county has also triggered concern. The City Council recently imposed a moratorium on hydraulic fracturing, better known as “fracking,” within the city limits. And the DNR’s McDivitt recently made a trip to Terre Haute to brief members of the Area Plan Commission on drilling and fracking, which uses water, chemicals and small particles to create temporary fissures in underground formations, allowing oil or gas to seep through.

“People are worried” about hydraulic fracturing, Bradley said. However, he knows of no scientific or engineering studies that show documented cases of environmental contamination from the practice. Still, it’s hard for people to sort out the facts with so much information presented by radicals on both sides of the issue, he said. The U.S. Environmental Protection Agency is probably the most unbiased source available for good information, he said.

“In my view, the practice has minimal risks,” the DNR’s McDivitt said. However, he added, that’s not to say there are not concerns. Improper construction can lead to leaks at any well and fracturing in some areas of the U.S. uses tremendous amounts of water that can threaten local supplies, he said.

Concern over hydraulic fracturing is “blown way out of proportion, largely by folks who do not like fossil fuels or they’re from Hollywood,” CountryMark’s Smith said. Water aquifers are often only a few hundred feet underground while oil or gas reserves are often 1,500 to 4,000 feet underground, he said.

Whatever the case, McDivitt and others believe hydraulic fracturing is unlikely in Vigo County.

“It’s just not necessary” to remove oil and gas resources in Vigo County, McDivitt said. About 20 to 25 percent of wells in Indiana are completed using hydraulic fracturing, he said.

Pioneer has no intention to use fracking at the ISU site, Miller noted. CountryMark’s Smith also said his company has “no prospects in Vigo County that would involve fracking,” adding that the underground formations in this area would not be suitable for fracking.

More drilling expected

To drill any type of well associated with oil or gas production, it is necessary to obtain a permit from the Indiana DNR. In Vigo County, outside of the city of Terre Haute, it is also necessary to obtain a “mining overlay,” something ultimately granted by the County Commissioners after review by the county’s Area Plan Commission, said Ryan Wickens, general planner for the Vigo County Area Planning Department.

Within the city limits, different rules apply. Inside Terre Haute, oil or gas exploration may take place wherever property is zoned for heavy industrial or agricultural use with the approval of the Terre Haute Board of Zoning Appeals, Wickens said. The ISU property at 10th and Chestnut, where Pioneer is drilling, was already zoned M-2 industrial and, therefore, only BZA approval was needed.

In October, Adler Energy is expected to seek BZA approval to drill west of Terre Town, according to documents filed with the planning department.

Vigo County is part of a larger geological formation known as the Illinois Basin, which covers portions of three states. In Vigo County, the basin is most notable for oil production; however, there are some natural gas wells in the northwest portion of the county, according to the DNR’s website.

In addition to fracking, Vigo County residents have expressed concern about odors from oil production facilities. Last year, residents of Hawthorn Woods, a neighborhood near Hawthorn Park, successfully lobbied to prevent well drilling on property owned by Hunter von Leer, a former Terre Haute resident and long-time Hollywood actor.

While some older wells do emit odors, newer wells include vapor capturing technology that remove odors, Smith said. CountryMark takes added, voluntary steps to avoid odors at its facilities, he said. And in the near future, the EPA is expected to make those steps mandatory, he said.

Pioneer has taken several steps to avoid odors at the ISU site, Miller said.

“In this urban location, we’re very sensitive to the odors and will make sure there aren’t odors,” he said.

Reporter Arthur Foulkes can be reached at 812-231-4232 or arthur.foulkes@tribstar.com

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