225 ILCS 725/22.2

(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.

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