97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
HB5889

 

Introduced 2/16/2012, by Rep. David Reis

 

SYNOPSIS AS INTRODUCED:
 
New Act

    Creates the Oil and Gas Leasing Act. Provides that the purpose of the Act is to clarify the rights of joint owners of oil and gas in this State, to promote and preserve the value of oil and gas reserves in the State, and to maximize the recovery of oil and gas through the orderly and efficient development of oil and gas reserves for the benefit of all joint owners in a fair and equitable manner. Provides definitions. Includes provisions concerning venue of an action seeking to impress a trust upon an oil and gas interest for the purpose of leasing and developing it, joint ownership of a freehold interest in an oil and gas estate, declaration of a trust in oil or gas land and the powers and duties of a trustee, court procedures, oil and gas leases, payments under an oil and gas lease, and construction of the Act. Effective immediately.


LRB097 19335 AJO 64584 b

 

 

A BILL FOR

 

HB5889LRB097 19335 AJO 64584 b

1    AN ACT concerning oil and gas leasing.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 1. Short title. This Act may be cited as the Oil
5and Gas Leasing Act.
 
6    Section 5. Purpose. In recognition of the fact that an
7estate of a joint owner in oil and gas can be enjoyed only by
8producing, removing, and selling the products of the oil and
9gas, and that the producing, removal, and sale of oil and gas
10by one joint owner therefore constitutes the use and not the
11destruction of the common estate, the purpose of this Act is to
12clarify the rights of joint owners of oil and gas in this
13State, to promote and preserve the value of oil and gas
14reserves in the State, and to maximize the recovery of oil and
15gas through the orderly and efficient development of oil and
16gas reserves for the benefit of all joint owners in a fair and
17equitable manner.
 
18    Section 10. Definitions. As used in this Act:
19    "Joint owner" means a person or entity that is a joint
20tenant, a tenant in common, or a tenant by the entirety.
21    "Oil and gas owner" means a person or entity vested with a
22whole or undivided fee simple interest or other freehold

 

 

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1interest in the oil and gas estate, but "oil and gas owner"
2does not include a person or entity with a leasehold or any
3other lesser estate.
4    "Producing, removing, and selling" includes drilling
5operations, seismic operations, and such other actions upon the
6surface of the land reasonably necessary to explore, drill,
7develop, produce, transport, store, and market oil and gas.
 
8    Section 15. Venue. Proceedings under this Act must be
9brought in the circuit court of the county in which the oil and
10gas land sought to be affected, or the major portion of that
11land, is located.
 
12    Section 20. Joint owners; trusts.
13    (a) If the title to oil and gas is owned by joint tenants,
14tenants in common, or tenants by the entirety, whether the
15title is derived by purchase, legacy, or descent, any oil and
16gas owner vested with at least a one-half interest in the oil
17and gas under the land, or any oil and gas lessee of the oil and
18gas owner, upon proper petition, shall be authorized to produce
19and remove oil and gas from the land in the manner provided in
20this Act. This Act affects only an oil and gas owner, as
21defined in Section 10 of this Act, and does not affect the
22rights of a surface owner, except to the extent that the owner
23may also be an oil and gas owner.
24    (b) The circuit court of the county in which the oil and

 

 

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1gas land or the major portion of that land lies has the power
2to declare a trust in that land, appoint a trustee for all
3persons owning an interest in the oil and gas who are not
4plaintiffs, and authorize the trustee to sell, execute, and
5deliver a valid oil and gas lease on that land on behalf of all
6of the defendants on terms and conditions approved by the
7circuit court for the purposes provided in this Act. The lease
8shall continue in full force and effect after the termination
9of the trust unless the lease has previously expired by its own
10terms.
 
11    Section 25. Proceedings for appointment of trustee.
12Proceedings for the appointment of a trustee may be instituted
13by any person or persons (i) vested in fee simple with at least
14an undivided one-half interest in the oil and gas sought to be
15developed or (ii) vested with a valid and subsisting oil and
16gas lease, the lessor of which is a person defined in item (i).
 
17    Section 30. Procedure.
18    (a) A person seeking to impress a trust upon an oil and gas
19interest for the purpose of leasing and developing it shall
20join as a defendant any person, other than the plaintiff,
21having a legal interest in the oil and gas, including any
22mortgagee thereof. A party not in being who might have some
23contingent or future interest in the oil and gas and all
24persons, whether in being or not in being, having any interest,

 

 

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1whether present, future, or contingent, in the oil and gas
2interest sought to be leased shall be fully bound by the
3proceedings.
4    (b) A verified petition shall be filed specifically setting
5forth the following:
6        (1) The request of the plaintiff that a trustee be
7    appointed to execute a lease granting the plaintiff the
8    right to produce, remove, and sell oil and gas from the
9    subject land.
10        (2) The legal description of the land.
11        (3) The interest of the plaintiff in the oil and gas
12    underlying the land.
13        (4) The apparent interest of the defendant in the oil
14    and gas underlying the land.
15        (5) That the plaintiff is willing to purchase a mineral
16    lease covering the interest of the defendant and that the
17    existence of this unleased mineral interest is detrimental
18    to and impairs the enjoyment of the interest of the
19    plaintiff.
20    (c) If in any action there are persons who would be unknown
21parties as defined in Section 2-413 of the Code of Civil
22Procedure, those persons may be made defendants to the action
23in the same manner and with the same effect as provided in the
24Code of Civil Procedure. The defendant shall be given notice of
25the pendency of the action by publication as provided in the
26Code of Civil Procedure.

 

 

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1    (d) The court shall appoint a guardian ad litem for any
2party to the proceeding who is a ward and is not represented by
3a guardian.
4    (e) If it appears that any person not in being, upon coming
5into being, is or may become or may claim to be entitled to any
6interest in the property sought to be leased, the court shall
7appoint a guardian ad litem to appear for and represent the
8interest in the proceeding and to defend the proceeding on
9behalf of the person not in being, and any judgment or order
10rendered in the proceeding is as effectual for all purposes as
11though the person were in being and were a party to the
12proceeding.
13    (f) The court shall take evidence and hear testimony as to
14the matters set forth in the petition. The court shall
15determine the prevailing terms of similar oil and gas leases
16obtained in the vicinity of the land described in the petition,
17including, but not limited to, length of primary term, bonus
18moneys, delay rentals, royalty rates, and other forms of lease
19payments. If, upon taking evidence and hearing testimony, it
20appears that the material allegations of the petition are true
21and that there has been compliance with the notice provisions
22of this Act, the court shall enter an order determining the
23interest of each defendant in the oil and gas sought to be
24leased. The court shall also appoint a trustee for the purpose
25of executing in favor of the plaintiff an oil and gas lease
26covering the interest of any defendant. The judgment appointing

 

 

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1the trustee and authorizing the execution of the lease shall
2specify the minimum terms which may be accepted by the trustee.
3Those terms shall be substantially consistent with the terms of
4other similar oil and gas leases obtained in the vicinity as
5determined by the court. The terms of the oil and gas lease
6shall also be substantially consistent with the terms of other
7existing leases, if any, covering the remaining oil and gas
8interests in the land described in the petition. All of the
9land to be covered by the oil and gas lease shall be
10contiguous. To the extent that any of the land described in the
11petition is not contiguous to other land in the petition, that
12land shall be the subject of a separate oil and gas lease. The
13court shall determine a reasonable fee to be paid to the
14trustee, and that fee, together with the reasonable attorney's
15fees and costs of the proceeding incurred by the trustee, shall
16be paid by the plaintiff.
17    (g) In the event that a defendant owns an interest in the
18surface of the land described in the complaint, the court shall
19also hear evidence and make an adjudication as to the terms and
20conditions of surface use by the lessee and as to the rights of
21the defendant surface owner to compensation with respect to
22such surface use, which shall be substantially consistent with
23the terms of other leases in the vicinity as to compensation
24for surface use and other terms calculated to protect the
25surface of the land.
26    (h) The plaintiff shall forthwith furnish the court with a

 

 

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1report of proceedings of the evidence received and testimony
2taken at the hearing on the petition, and the report of
3proceedings shall be filed and made a part of the case record.
4    (i) In any action under this Act, the court may investigate
5and determine all questions of conflicting or controverted
6titles, remove clouds from the title to the oil and gas, and
7establish and confirm the title to the oil and gas or the right
8to mine and remove oil and gas from any of the land.
9    (j) An action filed under this Act may be joined with an
10action under the Severed Mineral Interest Act.
 
11    Section 35. Oil and gas lease; report by trustee. The
12trustee shall enter into negotiations with the plaintiff and
13shall execute an oil and gas lease in favor of the plaintiff
14covering the interest of the defendant. The terms of the oil
15and gas lease shall be in accordance with the findings and
16judgment of the court. The trustee shall forthwith prepare and
17file a report of the sale of the oil and gas lease stating the
18terms of the lease and the payments received for the lease and
19give notice to all parties appearing of record. If the court
20finds that the sale was in accordance with its judgment, the
21sale shall be confirmed by court order and the court shall
22order the trust terminated and the trustee and his or her bond
23discharged.
 
24    Section 40. Payment. All moneys due to the defendant under

 

 

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1the lease executed by the trustee shall be paid by the
2plaintiff directly to the defendant.
 
3    Section 45. Binding effect of lease. The sale of and
4execution of any oil and gas lease under this Act is binding in
5all respects as to all of the interest in the oil and gas and
6the right to mine and remove the oil and gas owned by the
7defendant to the action in the same manner as if the defendant
8had personally signed and delivered the lease. The lease shall
9be binding upon the heirs, legatees, personal representatives,
10successors, and assigns of the defendant.
 
11    Section 50. Incapacity of trustee; subsequent proceedings.
12    (a) In the event of the death or resignation of the trustee
13or the refusal or inability of the trustee to act, the court,
14upon its own motion or upon the motion of the plaintiff, shall
15appoint a successor trustee.
16    (b) After the entry of the initial judgment authorizing a
17lease, all subsequent proceedings pertaining to the land and
18the oil and gas interest involved in the initial litigation,
19including subsequent leasing proceedings or proceedings by the
20trustee requesting authority to execute and deliver additional
21documents pertaining to a oil and gas lease, shall be commenced
22and prosecuted in the same case as the proceedings for the
23initial lease. The acting trustee at the time of any subsequent
24proceedings shall act as the trustee in those proceedings. The

 

 

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1court shall retain continuing authority and jurisdiction to
2conduct the subsequent proceedings.
 
3    Section 55. Costs. All court costs incident to the
4proceedings authorized under this Act shall be paid by the
5plaintiff.
 
6    Section 60. Construction. This Act shall be liberally
7construed so that any lease issued under this Act conveys
8merchantable title.
 
9    Section 99. Effective date. This Act takes effect upon
10becoming law.