98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014
SB3329

 

Introduced 2/14/2014, by Sen. Ira I. Silverstein

 

SYNOPSIS AS INTRODUCED:
 
225 ILCS 732/1-35
225 ILCS 732/1-65

    Amends the Hydraulic Fracturing Regulatory Act. Establishes insurance requirements for operators when submitting a registration form. Authorizes the Department of Natural Resources to establish separate insurance requirements by rule if necessary. Adds references to "horizontal drilling with fracturing operations". Changes bonding requirements. Authorizes the Department to establish separate bonding requirements by rule.


LRB098 19584 MGM 54776 b

FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

SB3329LRB098 19584 MGM 54776 b

1    AN ACT concerning regulation.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Hydraulic Fracturing Regulatory Act is
5amended by changing Sections 1-35 and 1-65 as follows:
 
6    (225 ILCS 732/1-35)
7    Sec. 1-35. High volume horizontal hydraulic fracturing and
8horizontal drilling with fracturing operations permit
9application.
10    (a) Every applicant for a permit under this Act shall first
11register with the Department at least 30 days before applying
12for a permit. The Department shall make available a
13registration form within 90 days after the effective date of
14this Act. The registration form shall require the following
15information:
16        (1) the name and address of the registrant and any
17    parent, subsidiary, or affiliate thereof;
18        (2) disclosure of all findings of a serious violation
19    or an equivalent violation under federal or state laws or
20    regulations in the development or operation of an oil or
21    gas exploration or production site via hydraulic
22    fracturing or horizontal drilling with fracturing by the
23    applicant or any parent, subsidiary, or affiliate thereof

 

 

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1    within the previous 5 years; and
2        (3) proof of insurance to cover injuries, damages, or
3    loss related to pollution or diminution in the amount of at
4    least $5,000,000, from an insurance carrier authorized,
5    licensed, or permitted to do this insurance business in
6    this State that holds at least an A- rating by A.M. Best &
7    Co. or any comparable rating service. Subject to the
8    operator's right to maintain reasonable deductibles, and
9    subject to a maximum deductible or self-insured retention
10    of $250,000, the operator shall obtain insurance coverage
11    in the following types and amounts:
12            (A) Workers' compensation insurance with statutory
13        limits.
14            (B) Employer's liability insurance with the
15        following minimum limits for bodily injury: by
16        accident, $1,000,000 per accident; and by disease,
17        $1,000,000 per employee with a per-policy aggregate of
18        $5,000,000.
19            (C) Business automobile liability insurance
20        covering owned, hired, and non-owned vehicles, with a
21        minimum combined bodily injury, including death, and
22        property damage limit of $1,000,000 per occurrence.
23            (D) Commercial general liability insurance
24        covering explosion, collapse, underground blowout,
25        cratering, premises and operations, personal and
26        advertising injury, products and completed operations,

 

 

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1        independent contractors, and contractual liability
2        with the following minimum combined bodily injury,
3        including death, and property damage limits of:
4        $1,000,000 per occurrence; $2,000,000 products and
5        completed operations aggregate, and $2,000,000 general
6        aggregate.
7            (E) Environmental impairment or pollution legal
8        liability insurance covering handling, removal,
9        seepage, storage, testing, transportation, and
10        disposal of materials. The coverage shall include loss
11        of use of property, cleanup cost, and defense,
12        including costs and expenses incurred in the
13        investigation, defense, or settlement of claims in
14        connection with any loss arising from the operation
15        site. The coverage shall apply to sudden and accidental
16        pollution resulting from the escape or release of
17        smoke, vapors, fumes, acids, alkalis, toxic chemicals,
18        liquids or gases, waste material, or other irritants,
19        contaminants or pollutants; and, must be maintained
20        with a minimum combined bodily injury, including
21        death, and property damage limit of $10,000,000 per
22        occurrence;
23            (F) As an alternative to providing environmental
24        impairment or pollution legal liability insurance as
25        defined in this subsection, the operator may purchase
26        an umbrella policy that meets the requirements of

 

 

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1        subparagraph (G) of paragraph (3) of subsection (a) of
2        this Section, or the operator may provide evidence of
3        self-insurance. The operator shall remain sufficiently
4        self-insured until the operation site is abandoned and
5        restored. The operator shall provide the Department
6        with evidence of sufficient self-insurance every 6
7        months. This provision does not limit the operator's
8        full responsibility in the event of a loss. An operator
9        is sufficiently self-insured and the environmental
10        impairment and pollution legal liability insurance
11        shall be waived if the operator provides one of the
12        following as evidence of self-insurance: a restricted
13        cash fund equal to the required environmental
14        impairment or pollution legal liability insurance, or
15        a surety bond, in a form acceptable to the Department,
16        equal to the required environmental impairment or
17        pollution legal liability insurance. An operator is
18        sufficiently insured and the environmental impairment
19        and pollution legal liability insurance shall be
20        waived if the operator obtains an umbrella liability
21        insurance following the form of the primary liability
22        coverage described in this subsection and providing
23        coverage with minimum combined bodily injury,
24        including death, and property damage limit of
25        $25,000,000 per occurrence and $25,000,000 annual
26        aggregate. Increased primary liability limits

 

 

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1        equivalent to the umbrella liability insurance limits
2        specified will satisfy the umbrella liability
3        insurance requirements.
4            (G) If the operator does not purchase
5        environmental impairment or pollution legal liability
6        insurance or is not sufficiently self-insured, then
7        umbrella liability insurance with minimum limits of
8        $35,000,000 per occurrence and $35,000,000 annual
9        aggregate is required. A copy of the declaration page
10        of the policy shall be attached to the certificate of
11        insurance and the coverage shall include explosion,
12        collapse, underground blowout, cratering, sudden and
13        accidental pollution, handling, removal, seepage,
14        storage, testing, transportation and disposal of
15        materials. A copy of the endorsements providing this
16        coverage shall be attached to the certificate of
17        insurance.
18            (H) Control-of-well insurance to provide coverage
19        for the cost of regaining control of an out-of-control
20        well including the cost of re-drilling and clean up of
21        an incident with minimum limit of $10,000,000. This
22        coverage shall include seepage, pollution, stuck drill
23        stem, evacuation expense of residents, loss of
24        equipment, experts, and damage to property that the
25        operator has in the operator's care, custody, or
26        control.

 

 

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1        (4) If the insurance required in paragraph (3) of
2    subsection (a) is written on a claims-made form, coverage
3    shall be continuous, by renewal or extended reporting
4    period, for at least 60 months after the Department
5    approves the abandonment and restoration of the operation
6    site. Coverage, including renewals, shall contain the same
7    retroactive date as the original policy.
8        (5) The operator shall require each subcontractor
9    performing work on the operation site to obtain insurance
10    approved by the State, with an AM Best Rating of A or
11    better, or any comparable rating, that is appropriate for
12    the services the subcontractor is performing as follows:
13            (A) The subcontractor shall provide the
14        subcontractor's insurance at its own expense.
15            (B) The subcontractor's insurance shall name the
16        operator as an additional insured.
17            (C) The subcontractor shall keep the
18        subcontractor's insurance in effect until the
19        Department approves the abandonment and restoration of
20        the operation site.
21            (D) The operator shall provide the Department with
22        a copy of the certificates of insurance for each
23        subcontractor at least 30 days before the
24        subcontractor begins work at the designated site. The
25        operator shall provide to the Department copies of the
26        subcontractor's insurance policies and all

 

 

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1        endorsements upon request at no cost to the Department.
2        (6) All insurance contracts and certificates of
3    insurance shall have an endorsement:
4            (A) stating that the State is an additional insured
5        to all applicable policies;
6            (B) stating that coverage may not be cancelled,
7        non-renewed, or materially changed in policy terms or
8        coverage without 30-days advance written notice by
9        mail to the Department;
10            (C) waiving subrogation against the State, its
11        officials, and employees, for bodily injury, including
12        death, property damage, or any other loss;
13            (D) stating that the operator's insurance is the
14        primary insurance;
15            (E) stating that liability, duty, standard of care
16        obligations, and the indemnification provision are
17        underwritten by contractual liability coverage that
18        includes these obligations: identifying the operation
19        site by address; identifying the Department as the
20        certificate holder; and striking the wording "endeavor
21        to" and "failure to mail" under the cancellation
22        provision on the certificate of insurance.
23        (7) The approval, denial, or failure to act by the
24    Department regarding any insurance supplied by the
25    operator or a subcontractor does not relieve the operator
26    of subcontractor of full responsibility or liability for

 

 

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1    damages and accidents. Bankruptcy, insolvency, or the
2    insurance company's denial of liability does not exonerate
3    the operator or the subcontractor from liability.
4    A registrant must notify the Department of any change in
5the information identified in paragraphs (1), (2), or (3) of
6this subsection (a) at least annually or upon request of the
7Department.
8    (b) Every applicant for a permit under this Act must submit
9the following information to the Department on an application
10form provided by the Department:
11        (1) the name and address of the applicant and any
12    parent, subsidiary, or affiliate thereof;
13        (2) the proposed well name and address and legal
14    description of the well site and its unit area;
15        (3) a statement whether the proposed location of the
16    well site is in compliance with the requirements of Section
17    1-25 of this Act and a plat, which shows the proposed
18    surface location of the well site, providing the distance
19    in feet, from the surface location of the well site to the
20    features described in subsection (a) of Section 1-25 of
21    this Act;
22        (4) a detailed description of the proposed well to be
23    used for the high volume horizontal hydraulic fracturing
24    operations or horizontal drilling with fracturing
25    operations including, but not limited to, the following
26    information:

 

 

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1            (A) the approximate total depth to which the well
2        is to be drilled or deepened;
3            (B) the proposed angle and direction of the well;
4            (C) the actual depth or the approximate depth at
5        which the well to be drilled deviates from vertical;
6            (D) the angle and direction of any nonvertical
7        portion of the wellbore until the well reaches its
8        total target depth or its actual final depth; and
9            (E) the estimated length and direction of the
10        proposed horizontal lateral or wellbore;
11        (5) the estimated depth and elevation, according to the
12    most recent publication of the Illinois State Geological
13    Survey of Groundwater for the location of the well, of the
14    lowest potential fresh water along the entire length of the
15    proposed wellbore;
16        (6) a detailed description of the proposed high volume
17    horizontal hydraulic fracturing operations or horizontal
18    drilling with fracturing operations, including, but not
19    limited to, the following:
20            (A) the formation affected by the high volume
21        horizontal hydraulic fracturing operations or
22        horizontal drilling with fracturing operations,
23        including, but not limited to, geologic name and
24        geologic description of the formation that will be
25        stimulated by the operation;
26            (B) the anticipated surface treating pressure

 

 

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1        range;
2            (C) the maximum anticipated injection treating
3        pressure;
4            (D) the estimated or calculated fracture pressure
5        of the producing and confining zones; and
6            (E) the planned depth of all proposed perforations
7        or depth to the top of the open hole section;
8        (7) a plat showing all known previous wellbores well
9    bores within 1,500 750 feet of any part of the horizontal
10    wellbore well bore that penetrated within 400 vertical feet
11    of the formation that will be stimulated as part of the
12    high volume horizontal hydraulic fracturing operations or
13    horizontal drilling with fracturing operations;
14        (8) unless the applicant documents why the information
15    is not available at the time the application is submitted,
16    a chemical disclosure report identifying each chemical and
17    proppant anticipated to be used in hydraulic fracturing
18    fluid or fracturing fluid for each stage of the hydraulic
19    fracturing operations or horizontal drilling with
20    fracturing operations including the following:
21            (A) the total volume of water anticipated to be
22        used in the hydraulic fracturing or fracturing
23        treatment of the well or the type and total volume of
24        the base fluid anticipated to be used in the hydraulic
25        fracturing treatment, if something other than water;
26            (B) each hydraulic fracturing or fracturing

 

 

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1        additive anticipated to be used in the hydraulic
2        fracturing or fracturing fluid, including the trade
3        name, vendor, a brief descriptor of the intended use or
4        function of each hydraulic fracturing or fracturing
5        additive, and the Material Safety Data Sheet (MSDS), if
6        applicable;
7            (C) each chemical anticipated to be intentionally
8        added to the base fluid, including for each chemical,
9        the Chemical Abstracts Service number, if applicable;
10        and
11            (D) the anticipated concentration in the base
12        fluid, in percent by mass, of each chemical to be
13        intentionally added to the base fluid;
14        (9) a certification of compliance with the Water Use
15    Act of 1983 and applicable regional water supply plans;
16        (10) a fresh water withdrawal and management plan that
17    shall include the following information:
18            (A) the source of the water, such as surface or
19        groundwater, anticipated to be used for water
20        withdrawals, and the anticipated withdrawal location;
21            (B) the anticipated volume and rate of each water
22        withdrawal from each withdrawal location;
23            (C) the anticipated months when water withdrawals
24        shall be made from each withdrawal location;
25            (D) the methods to be used to minimize water
26        withdrawals as much as feasible; and

 

 

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1            (E) the methods to be used for surface water
2        withdrawals to minimize adverse impact to aquatic
3        life.
4        Where a surface water source is wholly contained within
5    a single property, and the owner of the property expressly
6    agrees in writing to its use for water withdrawals, the
7    applicant is not required to include this surface water
8    source in the fresh water withdrawal and management plan; .
9        (11) a plan for the handling, storage, transportation,
10    and disposal or reuse of hydraulic fracturing or fracturing
11    fluids and hydraulic fracturing or fracturing flowback.
12    The plan shall identify the specific Class II injection
13    well or wells that will be used to dispose of the hydraulic
14    fracturing or fracturing flowback. The plan shall describe
15    the capacity of the tanks to be used for the capture and
16    storage of flowback and of the lined reserve pit to be
17    used, if necessary, to temporarily store any flowback in
18    excess of the capacity of the tanks. Identification of the
19    Class II injection well or wells shall be by name,
20    identification number, and specific location and shall
21    include the date of the most recent mechanical integrity
22    test for each Class II injection well;
23        (12) a well site safety plan to address proper safety
24    measures to be employed during high volume horizontal
25    hydraulic fracturing operations or horizontal drilling
26    with fracturing operations for the protection of persons on

 

 

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1    the site as well as the general public. Within 15 calendar
2    days after submitting the permit application to the
3    Department, the applicant must provide a copy of the plan
4    to the county or counties in which hydraulic fracturing
5    operations or horizontal drilling with fracturing
6    operations will occur. Within 5 calendar days of its
7    receipt, the Department shall provide a copy of the well
8    site safety plan to the Office of the State Fire Marshal;
9        (13) a containment plan describing the containment
10    practices and equipment to be used and the area of the well
11    site where containment systems will be employed, and within
12    5 calendar days of its receipt, the Department shall
13    provide a copy of the containment plan to the Office of the
14    State Fire Marshal;
15        (14) a casing and cementing plan that describes the
16    casing and cementing practices to be employed, including
17    the size of each string of pipe, the starting point, and
18    depth to which each string is to be set and the extent to
19    which each string is to be cemented;
20        (15) a traffic management plan that identifies the
21    anticipated roads, streets, and highways that will be used
22    for access to and egress from the well site. The traffic
23    management plan will include a point of contact to discuss
24    issues related to traffic management. Within 15 calendar
25    days after submitting the permit application to the
26    Department, the applicant must provide a copy of the

 

 

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1    traffic management plan to the county or counties in which
2    the well site is located, and within 5 calendar days of its
3    receipt, the Department shall provide a copy of the traffic
4    management plan to the Office of the State Fire Marshal;
5        (16) the names and addresses of all owners of any real
6    property within 1,500 feet of the proposed well site, as
7    disclosed by the records in the office of the recorder of
8    the county or counties;
9        (17) drafts of the specific public notice and general
10    public notice as required by Section 1-40 of this Act;
11        (18) a statement that the well site at which the high
12    volume horizontal hydraulic fracturing operation will be
13    conducted will be restored in compliance with Section
14    240.1181 of Title 62 of the Illinois Administrative Code
15    and Section 1-95 of this Act;
16        (19) proof of insurance to cover the requirements under
17    paragraph (3) of subsection (a) injuries, damages, or loss
18    related to pollution in the amount of at least $5,000,000;
19    and
20        (20) any other relevant information which the
21    Department may, by rule, require.
22    (c) Where an application is made to conduct high volume
23horizontal fracturing operations or horizontal drilling with
24fracturing operations at a well site located within the limits
25of any city, village, or incorporated town, the application
26shall state the name of the city, village, or incorporated town

 

 

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1and be accompanied with a certified copy of the official
2consent for the hydraulic fracturing operations or horizontal
3drilling with fracturing operations to occur from the municipal
4authorities where the well site is proposed to be located. No
5permit shall be issued unless consent is secured and filed with
6the permit application. In the event that an amended location
7is selected, the original permit shall not be valid unless a
8new certified consent is filed for the amended location.
9    (c-5) The Department, in consultation with the Illinois
10Emergency Management Agency, shall investigate and determine
11the liability resulting from the operation of Class II
12injection wells that accept oil, liquid natural gas, or natural
13gas waste and fluids with regard to the financial
14responsibility typically tied to plugging costs of the well or
15other consequences of the injection operations. The Department
16shall establish separate insurance requirements by rule if
17necessary.
18    (d) The hydraulic fracturing or horizontal drilling with
19fracturing operations permit application shall be accompanied
20by a bond as required by subsection (a) of Section 1-65 of this
21Act.
22    (e) Each application for a permit under this Act shall
23include payment of a non-refundable fee of $13,500. Of this
24fee, $11,000 shall be deposited into the Mines and Minerals
25Regulatory Fund for the Department to use to administer and
26enforce this Act and otherwise support the operations and

 

 

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1programs of the Office of Mines and Minerals. The remaining
2$2,500 shall be deposited into the Illinois Clean Water Fund
3for the Agency to use to carry out its functions under this
4Act. The Department shall not initiate its review of the permit
5application until the applicable fee under this subsection (e)
6has been submitted to and received by the Department.
7    (f) Each application submitted under this Act shall be
8signed, under the penalty of perjury, by the applicant or the
9applicant's designee who has been vested with the authority to
10act on behalf of the applicant and has direct knowledge of the
11information contained in the application and its attachments.
12Any person signing an application shall also sign an affidavit
13with the following certification:
14        "I certify, under penalty of perjury as provided by law
15    and under penalty of refusal, suspension, or revocation of
16    a high volume horizontal hydraulic fracturing permit, that
17    this application and all attachments are true, accurate,
18    and complete to the best of my knowledge.".
19    (g) The permit application shall be submitted to the
20Department in both electronic and hard copy format. The
21electronic format shall be searchable.
22    (h) The application for a high volume horizontal hydraulic
23fracturing permit may be submitted as a combined permit
24application with the operator's application to drill on a form
25as the Department shall prescribe. The combined application
26must include the information required in this Section. If the

 

 

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1operator elects to submit a combined permit application,
2information required by this Section that is duplicative of
3information required for an application to drill is only
4required to be provided once as part of the combined
5application. The submission of a combined permit application
6under this subsection shall not be interpreted to relieve the
7applicant or the Department from complying with the
8requirements of this Act or the Illinois Oil and Gas Act.
9    (i) Upon receipt of a permit application, the Department
10shall have no more than 60 calendar days from the date it
11receives the permit application to approve, with any conditions
12the Department may find necessary, or reject the application
13for the high volume horizontal hydraulic fracturing permit. The
14applicant may waive, in writing, the 60-day deadline upon its
15own initiative or in response to a request by the Department.
16    (j) If at any time during the review period the Department
17determines that the permit application is not complete under
18this Act, does not meet the requirements of this Section, or
19requires additional information, the Department shall notify
20the applicant in writing of the application's deficiencies and
21allow the applicant to correct the deficiencies and provide the
22Department any information requested to complete the
23application. If the applicant fails to provide adequate
24supplemental information within the review period, the
25Department may reject the application.
26(Source: P.A. 98-22, eff. 6-17-13; revised 11-12-13.)
 

 

 

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1    (225 ILCS 732/1-65)
2    Sec. 1-65. Hydraulic fracturing permit or horizontal
3drilling with fracturing; bonds.
4    (a) An applicant for a high volume horizontal hydraulic
5fracturing or horizontal drilling with fracturing operations
6permit under this Act shall provide a bond, executed by a
7surety authorized to transact business in this State. The bond
8shall be in the amount of $100,000 $50,000 per permit, for the
9first 10 wells drilled per corporation, then the bond adjusts
10to $50,000 per well for any additional wells drilled after the
11first 10 wells, or a blanket bond of $1,000,000 $500,000 for
12all permits. If the applicant is required to submit a bond to
13the Department under the Illinois Oil and Gas Act, the
14applicant's submission of a bond under this Section shall
15satisfy the bonding requirements provided for in the Illinois
16Oil and Gas Act. In lieu of a bond, the applicant may provide
17other collateral securities such as cash, certificates of
18deposit, or irrevocable letters of credit under the terms and
19conditions as the Department may provide by rule.
20    (b) The bond or other collateral securities shall remain in
21force until the well is plugged and abandoned. Upon abandoning
22a well to the satisfaction of the Department and in accordance
23with the Illinois Oil and Gas Act, the bond or other collateral
24securities shall be promptly released by the Department. Upon
25the release by the Department of the bond or other collateral

 

 

SB3329- 19 -LRB098 19584 MGM 54776 b

1securities, any cash or collateral securities deposited shall
2be returned by the Department to the applicant who deposited
3it.
4    (c) If, after notice and hearing, the Department determines
5that any of the requirements of this Act or rules adopted under
6this Act or the orders of the Department have not been complied
7with within the time limit set by any notice of violation
8issued under this Act, the permittee's bond or other collateral
9securities shall be forfeited. Forfeiture under this
10subsection shall not limit any duty of the permittee to
11mitigate or remediate harms or foreclose enforcement by the
12Department or the Agency. In no way will payment under this
13bond exceed the aggregate penalty as specified.
14    (d) When any bond or other collateral security is forfeited
15under the provisions of this Act or rules adopted under this
16Act, the Department shall collect the forfeiture without delay.
17The surety shall have 30 days to submit payment for the bond
18after receipt of notice by the permittee of the forfeiture.
19    (e) All forfeitures shall be deposited in the Mines and
20Minerals Regulatory Fund to be used, as necessary, to mitigate
21or remediate violations of this Act or rules adopted under this
22Act.
23    (f) The Department, in consultation with the Illinois
24Emergency Management Agency, shall investigate and determine
25the bonding requirements for operation of Class II injection
26wells that accept oil, liquid natural gas, or natural gas waste

 

 

SB3329- 20 -LRB098 19584 MGM 54776 b

1and fluids. The Department shall establish separate bonding
2requirements by rule if necessary.
3(Source: P.A. 98-22, eff. 6-17-13.)