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2/18/2012 12:41:00 PM
Indiana State University trustees OK drilling lease for oil, gas

Sue Loughlin, Tribune-Star

TERRE HAUTE — Indiana State University trustees on Friday approved “substantive” provisions of an oil and gas lease with Lawrenceville, Ill.-based Pioneer Oil Co.

The lease will allow the company to develop oil and gas resources on university property in Terre Haute.

The board also authorized the vice president for business affairs, Diann McKee, to negotiate and execute a contract.

Officials addressed concerns raised by students about any impact to campus and the potential for environmental or odor problems.

“The university will control the location of any equipment and drilling to ensure the integrity of the main campus is preserved,” McKee said.

Because of advances in technology, the company can drill horizontally underground from the perimeter of campus.

She also told trustees, “We have been very open with Pioneer that we want no odor or anything associated with that. If that happens, we will terminate this arrangement.”

Drilling, if it occurs would take place from one location, a former industrial site on university-owned property east of campus, across the CSX railroad tracks. All pumping gear and related equipment would be underground and a screen would be constructed around any tank farm related to the project.

ISU officials emphasize that the company must first determine if sufficient oil reserves exist to make drilling and production economically viable.

“This is just a first step of what will be an ongoing process for us,” said ISU Trustee Ed Pease. “It will be closely monitored.”

The university doesn’t yet know what this might lead to, he said. “This is exploratory. … We don’t know yet whether this is going to be a small amount of money, a large amount of money or no money.”

But if the best-case scenario plays out, “It provides tremendous opportunities for the university,” Pease said.

The company will provide an upfront fee yet to be determined and the university will receive royalty payments of not less than 15 percent for all oil products that are produced.

Any proceeds will be placed in a dedicated fund separate from university operating accounts, with trustees’ approval required before any oil revenue can be spent. The university envisions that any funding would probably be used for deferred maintenance projects, of which the university has “an enormous number,” McKee said.

The issue drew considerable discussion at Friday’s meeting, with ISU President Dan Bradley addressing concerns and questions raised by students and a faculty member on Thursday. A small group of students had staged a protest in front of Condit House, the president’s residence.

Bradley has expertise in the area, with both a bachelor’s and master’s degree in petroleum engineering.

The existence of oil in the area has been known since the 1860s, he said. Oil wells did exist, but production stopped by the 1940s.

Records are incomplete, and Pioneer’s first step will be to conduct “seismic” studies to better determine the location and amount of the oil resources.

After discussion with others who have dealt with Pioneer, Bradley said he and McKee “are very satisfied they are a reputable operator that will be responsive to our concerns and the concerns of the community.”

The company also is aware it would be operating in an “urban environment,” he said.

“The technology they are planning to use severely reduces the probability of any problems, but they are also dedicated to dealing with any problems if they come up,” Bradley said after the meeting. “We’ve told them we will insist, and it will be in the language of the agreement, that odor will not be allowed.”

The company will use horizontal technology and underground pumps. “The old pump jack you seeing going up and down will not be at this location,” he said.

Some wells in Vigo County that do produce odor use that older technology.

Pioneer approached ISU about the lease agreement, Bradley said.

ISU also hopes students and faculty can be involved with the project from an academic standpoint.

“I’m satisfied this is a good opportunity for the university that could give us some funds for much needed projects,” Bradley said. “It has the potential for being a fairly large number of dollars to the institution over probably a 15- or 20-year period.”

While a tank farm might be needed, McKee said it would be “appropriately screened” and there would be landscaping so it would blend in with the surroundings.

Bradley said that once drilling is completed, “Most people won’t even know anything is going on.” Also, the drilling period would be “fairly short,” he said.

During drilling, he anticipated there might be a truck-mounted drilling rig used. After that, “About the only thing you would see on the surface is a small building and some tanks” on the property east of the railroad tracks.

Bradley said the company wants to begin its seismic study in the next few months and potentially start drilling in summer.

First, it will need various permits and approvals from the state and city, he said.

Bradley said he’s been told that some oil wells east of town “are producing at a higher rate than any well in the Illinois basin” in many years.

Related Stories:
• Indiana State University considering lease for oil, gas drilling on campus

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