Shale-Related Projects Set to Bolster Illinois’ Struggling Economy

Shale development has yet to directly benefit Illinoisans, as regulatory delays and falling oil prices have kept high-volume hydraulic fracturing from beginning in the Land of Lincoln.

But that hasn’t kept Illinois from indirectly reaping the economic benefits of fracking. Illinoisans have already enjoyed lower energy and gasoline prices thanks to shale development, and now, four pipeline construction projects and a tank farm expansion are set to further boost the state’s struggling economy.

Enbridge is about to begin construction on a pair of pipeline extensions in Illinois this spring, and two Energy Transfer pipeline projects are expected to get underway in early 2016. The new pipelines will transfer crude both to and from the massive Marathon tank farm in Patoka, which is in the midst of a multi-million dollar expansion.

All told, $1.76 billion has been invested in these projects, which could generate 4,300 jobs and more than $4 billion in new tax revenue for a state that desperately needs both.  All five projects share a common theme – none of them would be taking place if not for shale development.

The new pipelines will allow crude to be transported from the Bakken and Three Forks shale plays in North Dakota to the Patoka storage facility, located in south-central Illinois, in addition to facilitating transport of oil from the Patoka tank farm to refineries along the Gulf Coast and Mississippi River.

All of this has been made possible due to technological advancements in horizontal drilling and hydraulic fracturing that have been responsible for North Dakota’s jump from 309,000 barrels of crude oil production a day in 2010 to more than one million barrels per day in 2014.

Construction of Enbridge’s Southern Access Extension pipeline is scheduled to begin on June 1. The 167-mile addition will extend from Enbridge’s Flanagan terminal in northern Illinois to Patoka.

Enbridge has made a $765 million capital investment in the project and up to $4 billion in additional tax revenue for Illinois is possible once the project is completed.

The new 24-inch pipeline will transport approximately 300,000 barrels per day. It is expected to create as many as 850 employment opportunities for construction professionals and new business for contractors hired to assist in the design, survey, environmental assessment and project planning process. Many of those workers are expected to be hired from local communities.

It should also greatly benefit the economies of communities along its path, as out-of-state workers will be renting property, eating in local restaurants, shopping at local stores and filling up hotels and campgrounds.

Okaw Valley Kampground, located within walking distance from the planned path of the pipeline in Fayette County, was struggling to stay in business a year ago. Now, all 14 of the facility’s full-hookup camper/RV lots are reserved and the campground’s 22 water and electric lots are expected to fill up soon. Owners Gary and Barbara Hoffmann are now talking about adding eight more full-hookup lots.  Barbara Hoffmann said in a recent interview with EID that the pipeline project has been a godsend for their business:

“Absolutely,” co-owner Barb Hoffmann said. “We bought this a year ago and we are trying to fix it up. The extra money will be nice.”

Workers started filtering into the area in November and they are expected to stay much longer than the Hoffmanns and others expected:

“The first guy that came in said he would be here two years. Then his boss asked him if he would mind if he doubled that, so he might be here four years.”

Enbridge is also planning to complete a 79-mile crude oil pipeline extension from its Pontiac Terminal to a terminal in Griffith, Ind. The $323 million project is expected to create 600 construction jobs. The company’s pipeline upgrade project just west of Chicago could add another 75 jobs.

Energy Transfer’s planned Dakota Access pipeline will also transfer North Dakota crude to the Patoka tank farm. Construction is expected to begin in early 2016. The 177-mile Illinois portion of the 1,134-mile pipeline is expected to create approximately 2,000 construction jobs, at least half of which will go to local residents. Energy Transfer has agreed to employ 100 percent union contractors, including at least 50 percent from local union halls, including welders, mechanics, electricians, pipefitters and heavy equipment operators. Regional manufacturers of steel pipes, fittings, valves, pumps and control devices will also be in high demand.

The project has a $516 million capital investment and will generate an estimated $750,000 in property taxes in 2017 and more than $27 million in estimated sales and income taxes during construction.

Energy Transfer is also in the process of converting 678 miles of an existing natural gas pipeline, including 131 miles of Illinois pipeline from the southern tip of the state in Joppa to the Wayne County community of Johnsonville, which is believed to be the possible focal point of potential shale development in Illinois.

The Energy Transfer Crude Oil Pipeline Project will be connected to the Patoka tank farm via a new 40-mile pipeline from Johnsonville to Patoka.

The total project would employ up to 800 people, including up to 15 permanent positions, and allow the transfer of crude all the way to the Gulf of Mexico. It would also facilitate oil booms in Wayne, Clay, Hamilton and White counties, where thousands of acres have been leased by producers interested in shale development.

Increased domestic oil production has also led to a $158 million of planned expansion projects at the Marathon tank farm in Patoka.

The first phase is underway and will involve the construction of four new tanks, increasing storage capacity by 1.25 million barrels. The second phase will add five new tanks for an increased storage capacity of two million barrels. The project has created 200 temporary jobs and will lead to 10 permanent positions.

Granted, the economic impact of these projects pales in comparison to the projected $9.5 billion of economic activity full-scale shell development could bring to the Land of Lincoln. But even with that development currently delayed, the resounding success of the fracking revolution in other parts of the country has managed to spread into Illinois.

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