HB5567 98TH GENERAL ASSEMBLY

LRB098 19182 ZMM 55641 b

98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014
HB5567

Introduced , by Rep. Brandon W. Phelps

SYNOPSIS AS INTRODUCED:

225 ILCS 725/6.1	from Ch. 96 1/2, par. 5410
225 ILCS 725/21.1	from Ch. 96 1/2, par. 5433
225 ILCS 725/22.2	from Ch. 96 1/2, par. 5436
225 ILCS 725/23.3	from Ch. 96 1/2, par. 5440

Amends the Illinois Oil and Gas Act. Establishes procedural requirements that the Department of Natural Resources must follow upon receiving certain applications or permits under the Act. Provides that all such applications or petitions for a permit submitted to the Department shall be accepted and filed or not accepted and filed by the Department within 5 business days after the date of receipt by the Department. Further provides that if the application or petition is accepted and filed, a public hearing on the application or petition shall be scheduled not less than 30 days but not more than 60 days after the acceptance and filing by the Department, and if not accepted and filed, requires the Department to provide specific requirements for additional information or documentation. Further provides that the application or petition shall not be accepted and filed if it is determined by the Department that legal or regulatory impediments would prevent such acceptance and filing. Provides that if the Department does not timely respond to any application or petition or the submission of additional information or documentation after initial submission, the application or petition shall be deemed to be sufficient for acceptance and filing and that the Department shall proceed with the scheduling of a public hearing. Provides that, after a public hearing, the Department shall either grant or deny the application or petition within 20 working days after the conclusion of the hearing.

A BILL FOR

AN ACT concerning regulation.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Illinois Oil and Gas Act is amended by changing Sections 6.1, 21.1, 22.2, and 23.3 as follows:

(225 ILCS 725/6.1) (from Ch. 96 1/2, par. 5410)

Sec. 6.1. When the applicant has complied with all applicable provisions of this Act and the rules of the Department, the Department shall issue the permit. All applications for a permit submitted to the Department shall either be granted or denied in writing within 5 business days after the date of receipt by the Department. If granted, the written permit shall be issued. If denied, the Department shall provide specific requirements for additional information or documentation needed for the application to be considered and the permit issued. Upon submission of the required information and documentation, the same process and timeframe as provided in this Section shall continue until either the permit is issued or it is determined that the permit cannot be issued because of legal or regulatory impediments. If the Department does not timely respond to any application or submission of additional information and documentation after initial submission, then the application shall be deemed granted and the permit shall be issued by the Department within 3 working days after the expiration of the time to respond.

(Source: P.A. 85-1334.)

(225 ILCS 725/21.1) (from Ch. 96 1/2, par. 5433)

Sec. 21.1. (a) The Department is authorized to issue permits for the drilling of wells and to regulate the spacing of wells for oil and gas purposes. For the prevention of waste, to protect and enforce the correlative rights of owners in the pool, and to prevent the drilling of unnecessary wells, the Department shall, upon application of any interested person and after notice and hearing, establish a drilling unit or units for the production of oil and gas or either of them for each pool, provided that no spacing regulation shall be adopted nor drilling unit established which requires the allocation of more than 40 acres of surface area nor less than 10 acres of surface area to an individual well for production of oil from a pool the top of which lies less than 4,000 feet beneath the surface (as determined by the original or discovery well in the pool), provided, however, that the Department may permit the allocation of greater acreage to an individual well than that above specified, and provided further that the spacing of wells in any pool the top of which lies less than 4,000 feet beneath the surface (as determined by the original or discovery well in the pool) shall not include the fixing of a pattern except with respect to the 2 nearest external boundary lines of each drilling unit, and provided further that no acreage allocation shall be required for input or injection wells nor for producing wells lying within a secondary recovery unit as now or hereafter established.

(b) Drilling units shall be of approximately uniform size and shape for each entire pool, except that where circumstances reasonably require, the Department may grant exceptions to the size or shape of any drilling unit or units. Each order establishing drilling units shall specify the size and shape of the unit, which shall be such as will result in the efficient and economical development of the pool as a whole, and subject to the provisions of subsection (a) hereof the size of no drilling unit shall be smaller than the maximum area that can be efficiently and economically drained by one well. Each order establishing drilling units for a pool shall cover all lands determined or believed to be underlaid by such pool, and may be modified by the Department from time to time to include additional lands determined to be underlaid by such pool. Each order establishing drilling units may be modified by the Department to change the size thereof, or to permit the drilling of additional wells.

(b-2) Any petition requesting a drilling unit exception shall be accompanied by a non-refundable application fee in the amount of $1,500 for a Modified Drilling Unit or Special Drilling Unit or a non-refundable application fee in the amount of $2,500 for a Pool-Wide Drilling Unit.

(c) Each order establishing drilling units shall prohibit the drilling of more than one well on any drilling unit for the production of oil or gas from the particular pool with respect to which the drilling unit is established and subject to the provisions of subsection (a) hereof shall specify the location for the drilling of such well thereon, in accordance with a reasonably uniform spacing pattern, with necessary exceptions for wells drilled or drilling at the time of the application. If the Department finds, after notice and hearing, that surface conditions would substantially add to the burden or hazard of drilling such well at the specified location, or for some other reason it would be inequitable or unreasonable to require a well to be drilled at the specified location, the Department may issue an order permitting the well to be drilled at a location other than that specified in the order establishing drilling units.

(d) After the date of the notice for a hearing called to establish drilling units, no additional well shall be commenced for production from the pool until the order establishing drilling units has been issued, unless the commencement of the well is authorized by order of the Department.

(e) After an order establishing a drilling unit or units has been issued by the Department, the commencement of drilling of any well or wells into the pool with regard to which such unit was established for the purpose of producing oil or gas therefrom, at a location other than that authorized by the order, or by order granting exception to the original spacing order, is hereby prohibited. The operation of any well drilled in violation of an order establishing drilling units is hereby prohibited.

(f) Any application or petition by any interested person for a drilling unit as provided in this Section shall be accepted and filed or not accepted and filed by the Department within 10 business days after receipt by the Department. If the petition is accepted and filed, a public hearing on the petition shall be scheduled not less than 30 days, but not more than 60 days, after the acceptance and filing by the Department. If not accepted, and filed, the Department shall provide specific requirements for additional information or documentation needed for the petition to be considered, accepted, and filed. Upon submission of the required information and documentation, the same process and timeframe as provided in this subsection (f) shall continue until the petition has been accepted and filed at which time a hearing shall be scheduled as previously stated in this subsection (f). The petition shall not be accepted and filed if it is determined by the Department that, under any circumstance, legal or regulatory impediments would prevent such acceptance and filing. If the Department does not timely respond to any petition or the submission of additional information or documentation after initial submission, then the petition shall be deemed to be in sufficient form for acceptance and filing and the Department shall proceed with the scheduling of a public hearing. The Department, after public hearing, shall either grant or deny the petition within 20 working days after the conclusion of the hearing.

(g) Any petition by an interested person to establish drilling units for a pool as provided in this Section shall be accepted and filed or not accepted and filed by the Department within 10 business days after receipt by the Department. If the petition is accepted and filed, a public hearing on the petition shall be scheduled not less than 30 days, but not more than 60 days, after the acceptance and filing by the Department. If not accepted and filed, the Department shall provide specific requirements for additional information or documentation needed for the petition to be considered, accepted, and filed. Upon submission of the required information and documentation, the same process and timeframe as provided in this subsection (g) shall continue until the petition has been accepted and filed at which time a hearing shall be scheduled as previously stated in this subsection (g). The petition shall not be accepted and filed if it is determined by the Department that, under any circumstance, legal or regulatory impediments would prevent such acceptance and filing. If the Department does not timely respond to any petition or the submission of additional information or documentation after initial submission, then the petition shall be deemed to be in sufficient form for acceptance and filing and the Department shall proceed with the scheduling of a public hearing. The Department, after public hearing, shall either grant or deny the petition within 20 working days after the conclusion of the hearing.

(Source: P.A. 97-1136, eff. 1-1-13.)

(225 ILCS 725/22.2) (from Ch. 96 1/2, par. 5436)

Sec. 22.2. Integration of interests in drilling unit.

(a) As used in this Section, "owner" means any person having an interest in the right to drill into and produce oil or gas from any pool, and to appropriate the production for such owner or others.

(b) Except as provided in subsection (b-5), when 2 or more separately owned tracts of land are embraced within an established drilling unit, or when there are separately owned interests in all or a part of such units, the owners of all oil and gas interests therein may validly agree to integrate their interests and to develop their lands as a drilling unit. Where, however, such owners have not agreed to integrate their interests and where no action has been commenced seeking permission to drill pursuant to the provisions of "An Act in relation to oil and gas interests in land", approved July 1, 1939, and where at least one of the owners has drilled or has proposed to drill a well on an established drilling unit the Department on the application of an owner shall, for the prevention of waste or to avoid the drilling of unnecessary wells, require such owners to do so and to develop their lands as a drilling unit. The Department, as a part of the order integrating interests, may prescribe the terms and conditions upon which the royalty interests in the unit or units shall, in the absence of voluntary agreement, be determined to be integrated without the necessity of a subsequent separate order integrating the royalty interests. Each such integration order shall be upon terms and conditions that are just and reasonable.

(b-5) When 2 or more separately owned tracts of land are embraced within an established drilling unit, or when there are separately owned interests in all or a part of the unit, and one of the owners is the Department of Natural Resources, integration of the separate tracts shall be allowed only if, following a comprehensive environmental impact review performed by the Department, the Department determines that no substantial or irreversible detrimental harm will occur on Department lands as a result of any proposed activities relating to mineral extraction. The environmental impact review shall include but shall not be limited to an assessment of the potential destruction or depletion of flora and fauna, wildlife and its supporting habitat, surface and subsurface water supplies, aquatic life, and recreational activities located on the land proposed to be integrated. The Department shall adopt rules necessary to implement this subsection.

(b-6) All proceeds, bonuses, rentals, royalties, and other inducements and considerations received from the integration of Department of Natural Resources lands that have not been purchased by the Department of Natural Resources with moneys appropriated from the Wildlife and Fish Fund shall be deposited as follows: at least 50% of the amounts received shall be deposited into the State Parks Fund and not more than 50% shall be deposited into the Plugging and Restoration Fund.

(c) All orders requiring such integration shall be made after notice and hearing and shall be upon terms and conditions that are just and reasonable and will afford to the owners of all oil and gas interests in each tract in the drilling unit the opportunity to recover or receive their just and equitable share of oil or gas from the drilling unit without unreasonable expense and will prevent or minimize reasonably avoidable drainage from each integrated drilling unit which is not equalized by counter drainage, but the Department may not limit the production from any well under this provision. The request shall be made by petition accompanied by a non-refundable application fee of $1,500. The fee shall be deposited into the Underground Resources Conservation Enforcement Fund. The monies deposited into the Underground Resources Conservation Enforcement Fund under this subsection shall not be subject to administrative charges or chargebacks unless otherwise authorized by this Act.

(d) All operations, including, but not limited to, the commencement, drilling, or operation of a well upon any portion of a drilling unit shall be deemed for all purposes the conduct of such operations upon each separately owned tract in the drilling unit by the several owners thereof. That portion of the production allocated to a separately owned tract included in a drilling unit shall, when produced, be deemed, for all purposes, to have been actually produced from such tract by a well drilled thereon.

(e) In making the determination of integrating separately owned interests, and determining to whom the permit should be issued, the Department may consider:

(1) the reasons requiring the integration of separate interests;

(2) the respective interests of the parties in the drilling unit sought to be established, and the pool or pools in the field where the proposed drilling unit is located;

(3) any parties' prior or present compliance with the Act and the Department's rules; and

(4) any other information relevant to protect the correlative rights of the parties sought to be affected by the integration order.

(f) Each such integration order shall authorize the drilling, testing, completing, equipping, and operation of a well on the drilling unit; provide who may drill and operate the well; prescribe the time and manner in which all the owners in the drilling unit may elect to participate therein; and make provision for the payment by all those who elect to participate therein of the reasonable actual cost thereof, plus a reasonable charge for supervision and interest. Should an owner not elect to voluntarily participate in the risk and costs of the drilling, testing, completing and operation of a well as determined by the Department, the integration order shall provide either that:

(1) the nonparticipating owner shall surrender a leasehold interest to the participating owners on a basis and for such terms and consideration the Department finds fair and reasonable; or

(2) the nonparticipating owner shall share in a proportionate part of the production of oil and gas from the drilling unit determined by the Department, and pay a proportionate part of operation cost after the participating owners have recovered from the production of oil or gas from a well all actual costs in the drilling, testing, completing and operation of the well plus a penalty to be determined by the Department of not less than 100% nor more than 300% of such actual costs.

(g) For the purpose of this Section, the owner or owners of oil and gas rights in and under an unleased tract of land shall be regarded as a lessee to the extent of a 7/8 interest in and to said rights and a lessor to the extent of the remaining 1/8 interest therein.

(h) In the event of any dispute relative to costs and expenses of drilling, testing, equipping, completing and operating a well, the Department shall determine the proper costs after due notice to interested parties and a hearing thereon. The operator of such unit, in addition to any other right provided by the integration order of the Department, shall have a lien on the mineral leasehold estate or rights owned by the other owners therein and upon their shares of the production from such unit to the extent that costs incurred in the development and operation upon said unit are a charge against such interest by order of the Department or by operation of law. Such liens shall be separable as to each separate owner within such unit, and shall remain liens until the owner or owners drilling or operating the well have been paid the amount due under the terms of the integration order. The Department is specifically authorized to provide that the owner or owners drilling, or paying for the drilling, or for the operation of a well for the benefit of all shall be entitled to production from such well which would be received by the owner or owners for whose benefit the well was drilled or operated, after payment of royalty, until the owner or owners drilling or operating the well have been paid the amount due under the terms of the integration order settling such dispute.

(i) Any petition submitted to the Department for integration as provided in this Section shall be accepted and filed or not accepted and filed by the Department within 10 business days after receipt by the Department. If the petition is accepted and filed, a public hearing on the petition shall be scheduled not less than 30 days, but not more than 60 days, after the acceptance and filing by the Department. If not accepted and filed, the Department shall provide specific requirements for additional information or documentation needed for the petition to be considered, accepted, and filed. Upon submission of the required information and documentation, the same process and timeframe as provided in this subsection (i) shall continue until the petition has been accepted and filed at which time a hearing shall be scheduled as previously stated in this subsection (i). The petition shall not be accepted and filed if it is determined by the Department that under any circumstance, legal or regulatory impediments would prevent such acceptance and filing. If the Department does not timely respond to any petition or the submission of additional information or documentation after initial submission, then the petition shall be deemed to be in sufficient form for acceptance and filing and the Department shall proceed with the scheduling of a public hearing. The Department, after public hearing, shall either grant or deny the petition within 20 working days after the conclusion of the hearing.

(Source: P.A. 97-1136, eff. 1-1-13.)

(225 ILCS 725/23.3) (from Ch. 96 1/2, par. 5440)

Sec. 23.3. The Department, upon the petition of any interested person, shall hold a public hearing to consider the need for operating a pool, pools, or any portion thereof, as a unit to enable, authorize and require operations which will increase the ultimate recovery of oil and gas, prevent the waste of oil and gas, and protect correlative rights of the owners of the oil and gas.

(1) Such petition shall contain the following:

(a) A description of the land and pool, pools, or parts thereof, within the proposed unit area.

(b) The names of all persons owning or having an interest in the oil and gas rights in the proposed unit area as of the date of filing the petition, as disclosed by the records in the office of the recorder for the county or counties in which the unit area is situated, and their addresses, if known. If the address of any person is unknown, the petition shall so indicate.

(c) A statement of the type of operations contemplated for the unit area.

(d) A copy of a proposed plan of unitization signed by persons owning not less than 51% of the working interest underlying the surface within the area proposed to be unitized, which the petitioner considers fair, reasonable and equitable; said plan of unitization shall include (or provide in a separate unit operating agreement, if there be more than one working interest owner, a copy of which shall accompany the petition) the following:

(i) A plan for allocating to each separately owned tract in the unit area its share of the oil and gas produced from the unit area and not required or consumed in the conduct of the operation of the unit area or unavoidably lost.

(ii) A provision indicating how unit expense shall be determined and charged to the several owners, including a provision for carrying or otherwise financing any working interest owner who has not executed the proposed plan of unitization and who elects to be carried or otherwise financed, and allowing the unit operator, for the benefit of those working interest owners who have paid the development and operating costs, the recovery of not more than 150% of such person's actual share of development costs of the unit plus operating costs, with interest. Recovery of the money advanced to owners wishing to be financed, for development and operating costs of the unit, together with such other sums provided for herein, shall only be recoverable from such owner's share of unit production from the unit area.

(iii) A procedure and basis upon which wells, equipment, and other properties of the several working interest owners within the unit area are to be taken over and used for unit operations, including the method of arriving at the compensation therefor.

(iv) A plan for maintaining effective supervision and conduct of unit operations, in respect to which each working interest owner shall have a vote with a value corresponding to the percentage of unit expense chargeable against the interest of such owner.

(e) A non-refundable application fee in the amount of $2,500.

(2) Concurrently with the filing of the petition with the Department, the petitioner may file or cause to be filed, in the office of the recorder for the county or counties in which the affected lands sought to be unitized are located, a notice setting forth:

(a) The type of proceedings before the Department and a general statement of the purpose of such proceedings.

(b) A legal description of the lands, oil and gas lease or leases, and other oil and gas property interests, which may be affected by the proposed unitization.

(3) Upon the filing of such notice:

(a) All transfers of title to oil and gas rights shall thereafter be subject to the final order of the Department in such proceedings, and

(b) Such notice shall be constructive notification to every person subsequently acquiring an interest in or a lien on any of the property affected thereby, and every person whose interest or lien is not shown of record at the time of filing such notice shall, for the purpose of this Act, be deemed a subsequent purchaser and shall be bound by the proceedings before the Department to the same extent and in the same manner as if he were a party thereto.

(4) Any petition by any interested person for a unit as provided in this Section shall be accepted and filed or not accepted and filed by the Department within 10 business days after receipt by the Department. If the petition is accepted and filed, a public hearing on the petition shall be scheduled not less than 30 days, but not more than 60 days, after the acceptance and filing by the Department. If not accepted and filed, the Department shall provide specific requirements for additional information or documentation needed for the petition to be considered, accepted, and filed. Upon submission of the required information and documentation, the same process and timeframe as provided in this paragraph (4) shall continue until the petition has been accepted and filed at which time a hearing shall be scheduled as previously stated in this paragraph (4). The petition shall not be accepted and filed if it is determined by the Department that under any circumstance, legal or regulatory impediments would prevent such acceptance and filing. If the Department does not timely respond as to any petition or the submission of additional information or documentation after initial submission, then the petition shall be deemed to be in sufficient form for acceptance and filing and the Department shall proceed with the scheduling of a public hearing. The Department, after public hearing, shall either grant or deny the petition within 20 working days after the conclusion of the hearing.

(Source: P.A. 97-1136, eff. 1-1-13.)