Indiana oil production surges amid high prices

High crude-oil prices brought pain at the gasoline pump, but helped prime the output of Indiana’s oil-drilling industry last year.

Production jumped 8.3 percent, to just under 2 million barrels in 2011—the highest output in a decade since 2.02 million barrels were extracted in 2001, according to data from the Indiana Department of Natural Resources.

In contrast, production was flat from 2009 to 2010.

“Higher sustained prices I think have allowed more opportunities for operators to make more money … At $90 to $100 (a barrel) oil, it’s like, ‘Well, let’s give it a shot,’” said Jim AmRhein, assistant director of DNR’s Division of Oil and Gas.

Indiana ranks 24th among states in the production of oil and of natural gas, according to the U.S. Energy Information Administration. Texas, Alaska, California, and North Dakota lead the pack.

Most of Indiana’s oil comes from the Illinois basin, a bowl-shaped depression in the southwestern part of the state. It’s generally found at a depth of 1,000- to 3,000 feet.

Indiana’s oil production in the Illinois basin peaked in the early 1950s, at 12.6 million annual barrels, according to Indiana Geological Survey.

But with crude oil prices on the rise, some operators have found it worthwhile to revisit old wells to recover oil left behind. They’re using horizontal drilling or various injection techniques developed in modern times.

However, there have been some new discoveries in the last few years – most notably a large oil discovery on land owned by the Hulman family, of Indianapolis Motor Speedway fame, near Terre Haute. 

Agricultural fuels maker CountryMark ramped up extraction at that site last year.

“I have to believe the CountryMark wells in Vigo County are the biggest reason” for last year’s production jump, said Bill Herrick, a former CountryMark executive who now is president of Indianapolis-based Midwest Energy Partners. The firm raises money from investors to drill wells in southern Indiana and southern Illinois.

Midwest Energy Partners has investments in 82 wells through partnerships with Evansville-based Core Minerals and with Pioneer Oil Co. of Lawrenceville, Ill.

Herrick’s company says there are relatively few “virgin” areas in the Illinois basin that have not been drilled over the last century. But some geologists say up to 70 percent of the oil in a particular field may still be there due to poor production practices decades ago.

“High oil prices help everybody,” Herrick said of the oil drilling sector.

Indeed, Indianapolis gas, steam and water utility Citizens Energy Group generated an additional $1 million in revenues from oil drilling in Greene County last year, for a total of $6.2 million. 

Citizens said higher revenues resulted from higher oil prices.

The Illinois basin in the southwest corner of the state is not the only place to find oil. 

Oil and gas production in Indiana began in the 1880s in the so-called Trenton Field in east-central Indiana. At one point, wells were even drilled under what is now Broad Ripple Village in Marion County.  Historians attribute the discoveries to early settlers who used to drill for salt water to use as a food preservative.

By the mid-1920s, the Trenton, dubbed “America’s first giant oil field,” had played out.  Much of the natural gas had been burned off due to poor well management techniques.  Oil was contaminated with ground water. That and falling pressure in the field made extraction impractical.

There are still a handful of mom-and-pop drillers pumping oil from the Trenton, particularly in Delaware County.