SB3113enr 104TH GENERAL ASSEMBLY

SB3113 Enrolled LRB104 19645 BAB 33094 b

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 1, 6, 8a, 8e, 14, and 26 as follows:

(225 ILCS 725/1) (from Ch. 96 1/2, par. 5401)

Sec. 1. Unless the context otherwise requires, the words defined in this Section have the following meanings as used in this Act.

"Department" means the Department of Natural Resources.

"Director" means the Director of Natural Resources.

"Drilling unit" means the surface area allocated by an order or rule of the Department to the drilling of a single well for the production of oil or gas from an individual pool.

"Enhanced recovery method" means any method used in an effort to recover hydrocarbons from a pool by the injection of fluids, gases, or other substances to maintain, restore, or augment natural reservoir energy, or by introducing immiscible or miscible gases, chemicals, or other substances, or heat, or by in-situ combustion, or by any combination thereof.

"Field" means the same general surface area that is underlaid or appears to be underlaid by one or more pools.

"Fresh water" means surface and subsurface water in its natural state useful as drinking water for human consumption, domestic livestock, irrigation, industrial, municipal, and recreational purposes, and that will support aquatic life and contains less than 10,000 ppm of total dissolved solids.

"Person" means any natural person, corporation, association, partnership, governmental agency or other legal entity, receiver, trustee, guardian, executor, administrator, fiduciary or representative of any kind.

"Oil" means natural crude oil or petroleum and other hydrocarbons, regardless of gravity, which are produced at the well in liquid form by ordinary production methods or by the use of an oil and gas separator and which are not the result of condensation of gas after it leaves the underground reservoir.

"Gas" means all natural gas, including casinghead gas, and all other natural hydrocarbons not defined above as oil.

"Mineral owner's royalty" means the share of oil and gas production reserved in an oil and gas lease, free of all costs by an owner of the minerals, whether denominated royalty or overriding royalty.

"Mining Board" means the State Mining Board in the Department of Natural Resources Office of Mines and Minerals.

"Oil" means natural crude oil or petroleum and other hydrocarbons, regardless of gravity, which are produced at the well in liquid form by ordinary production methods or by the use of an oil and gas separator, which are not the result of condensation of gas after it leaves the underground reservoir.

"Orphan well" means a well for which: (1) no fee assessment under Section 19.7 of this Act has been paid or no other bond coverage has been provided for 2 consecutive years; (2) no oil or gas has been produced from the well or from the lease or unit on which the well is located for 2 consecutive years; and (3) no permittee or owner can be identified or located by the Department. "Orphan well" includes a well that has been drilled for purposes other than those for which a permit is required under this Act if the well is a conduit for oil or salt water intrusions into fresh water zones or onto the surface, which may be caused by oil and gas operations.

"Owner" means the person who has the right to drill into and produce from any pool and to appropriate the production either for the person or for the person and another, others, or solely for others, excluding the mineral owner's royalty, if the right to drill and produce has been granted under an oil and gas lease. "Owner" includes a person granted the right to drill and operate an injection (Class II UIC) well independent of the right to drill for and produce oil or gas. When the right to drill, produce, and appropriate production is held by more than one person, then all persons holding these rights may designate the owner by a written operating agreement or similar written agreement. In the absence of such an agreement, and subject to the provisions of Sections 22.2 and 23.1 through 23.16 of this Act, the owner shall be the person designated in writing by a majority of the persons in interest holding these rights.

"Permit" means the Department's written authorization allowing a well to be drilled, deepened, converted, or operated by an owner.

"Permittee" means the owner holding or required to hold the permit, and who is also responsible for paying assessments in accordance with Section 19.7 of this Act, and, where applicable, executing and filing the bond associated with the well as principal, and who is responsible for compliance with all statutory and regulatory requirements pertaining to the well.

When the right and responsibility for operating a well is vested in a receiver or trustee appointed by a court of competent jurisdiction, the permit shall be issued to the receiver or trustee.

"Person" means any natural person, corporation, association, partnership, governmental agency, including any other legal entity, receiver, trustee, guardian, executor, administrator, fiduciary, or representative of any kind.

"Pool" means a natural, underground reservoir containing in whole or in part, a natural accumulation of oil or gas, or both. Each productive zone or stratum of a general structure, which is completely separated from any other zone or stratum in the structure, is deemed a separate "pool" as used herein.

"Produced water" means water, regardless of chloride and total dissolved solids content that is produced in conjunction with oil and natural gas production or natural gas storage operations.

"Temporary abandonment status" means a well that has received an authorization for temporary abandonment status from the Department.

"Vacuum" means pressure that is reduced below the pressure of the atmosphere.

"Field" means the same general surface area which is underlaid or appears to be underlaid by one or more pools.

"Permit" means the Department's written authorization allowing a well to be drilled, deepened, converted, or operated by an owner.

"Permittee" means the owner holding or required to hold the permit, and who is also responsible for paying assessments in accordance with Section 19.7 of this Act and, where applicable, executing and filing the bond associated with the well as principal and who is responsible for compliance with all statutory and regulatory requirements pertaining to the well.

When the right and responsibility for operating a well is vested in a receiver or trustee appointed by a court of competent jurisdiction, the permit shall be issued to the receiver or trustee.

"Orphan Well" means a well for which: (1) no fee assessment under Section 19.7 of this Act has been paid or no other bond coverage has been provided for 2 consecutive years; (2) no oil or gas has been produced from the well or from the lease or unit on which the well is located for 2 consecutive years; and (3) no permittee or owner can be identified or located by the Department. Orphaned wells include wells that may have been drilled for purposes other than those for which a permit is required under this Act if the well is a conduit for oil or salt water intrusions into fresh water zones or onto the surface which may be caused by oil and gas operations.

"Owner" means the person who has the right to drill into and produce from any pool, and to appropriate the production either for the person or for the person and another, or others, or solely for others, excluding the mineral owner's royalty if the right to drill and produce has been granted under an oil and gas lease. An owner may also be a person granted the right to drill and operate an injection (Class II UIC) well independent of the right to drill for and produce oil or gas. When the right to drill, produce, and appropriate production is held by more than one person, then all persons holding these rights may designate the owner by a written operating agreement or similar written agreement. In the absence of such an agreement, and subject to the provisions of Sections 22.2 and 23.1 through 23.16 of this Act, the owner shall be the person designated in writing by a majority in interest of the persons holding these rights.

"Department" means the Department of Natural Resources.

"Director" means the Director of Natural Resources.

"Mining Board" means the State Mining Board in the Department of Natural Resources, Office of Mines and Minerals.

"Mineral Owner's Royalty" means the share of oil and gas production reserved in an oil and gas lease free of all costs by an owner of the minerals whether denominated royalty or overriding royalty.

"Waste" means "physical waste" as that term is generally understood in the oil and gas industry, and further includes:

(1) the locating, drilling, and producing of any oil or gas well or wells drilled contrary to the valid order, rules and regulations adopted by the Department under the provisions of this Act;

(2) permitting the migration of oil, gas, or water from the stratum in which it is found, into other strata, thereby ultimately resulting in the loss of recoverable oil, gas or both;

(3) the drowning with water of any stratum or part thereof capable of producing oil or gas, except for secondary recovery purposes;

(4) the unreasonable damage to underground, fresh or mineral water supply, workable coal seams, or other mineral deposits in the operations for the discovery, development, production, or handling of oil and gas;

(5) the unnecessary or excessive surface loss or destruction of oil or gas resulting from evaporation, seepage, leakage or fire, especially such loss or destruction incident to or resulting from the escape of gas into the open air in excessive or unreasonable amounts, provided, however, it shall not be unlawful for the operator or owner of any well producing both oil and gas to burn such gas in flares when such gas is, under the other provisions of this Act, lawfully produced, and where there is no market at the well for such escaping gas; and where the same is used for the extraction of casinghead gas, it shall not be unlawful for the operator of the plant after the process of extraction is completed, to burn such residue in flares when there is no market at such plant for such residue gas;

(6) permitting unnecessary fire hazards; and

(7) permitting unnecessary damage to or destruction of the surface, soil, animal, fish or aquatic life or property from oil or gas operations.

"Drilling Unit" means the surface area allocated by an order or regulation of the Department to the drilling of a single well for the production of oil or gas from an individual pool.

"Enhanced Recovery Method" means any method used in an effort to recover hydrocarbons from a pool by injection of fluids, gases or other substances to maintain, restore or augment natural reservoir energy, or by introducing immiscible or miscible gases, chemicals, other substances or heat or by in-situ combustion, or by any combination thereof.

"Well-Site Equipment" means any production-related equipment or materials specific to the well, including motors, pumps, pump jacks, tanks, tank batteries, separators, compressors, casing, tubing, and rods.

"Temporary abandonment status" means a well that has received an authorization for temporary abandonment status from the Department.

(Source: P.A. 102-1017, eff. 1-1-23.)

(225 ILCS 725/6) (from Ch. 96 1/2, par. 5409)

Sec. 6. The Department shall have the authority to conduct hearings and to make such reasonable rules as may be necessary from time to time in the proper administration and enforcement of this Act, including the adoption of rules and the holding of hearings for the following purposes:

(1) To require the drilling, casing and plugging of wells to be done in such a manner as to prevent the migration of oil or gas from one stratum to another; to prevent the intrusion of water into oil, gas or coal strata; to prevent the pollution of fresh water supplies by oil, gas or salt water.

(2) To require the person desiring or proposing to drill, deepen or convert any well for the exploration or production of oil or gas, for injection or water supply in connection with enhanced recovery projects, for the disposal of salt water, brine, or other oil or gas field wastes, or for input, withdrawal, or observation in connection with the storage of natural gas or other liquid or gaseous hydrocarbons before commencing the drilling, deepening or conversion of any such well, to make application to the Department upon such form as the Department may prescribe and to comply with the provisions of this Section. The drilling, deepening or conversion of any well is hereby prohibited until such application is made and the applicant is issued a permit therefor as provided by this Act. Each application for a well permit shall include the following: (A) The exact location of the well, (B) the name and address of the manager, operator, contractor, driller, or any other person responsible for the conduct of drilling operations, (C) the proposed depth of the well, (D) lease ownership information, and (E) such other relevant information as the Department may deem necessary or convenient to effectuate the purposes of this Act.

(2.5) Additionally, for each applicant who has not been issued a permit that is (i) not of record with the Department on the effective date of this amendatory Act of the 104th General Assembly, or (ii) a permittee on record with the Department but who has failed to make payments of the assessments as required under Section 19.7 of this Act at any time in the preceding 5 years of the application, the permittee or applicant shall execute, as principal, and file with the Department a bond, executed by a surety authorized to transact business in this State, in an amount estimated to cover the cost of plugging the well and restoring the well site and shall set at the following rates:

(A) $10,000 for one well;

(B) $25,000 in total covering a blanket bond for up to 10 wells;

(C) $50,000 in total covering a blanket bond for up to 50 wells; or

(D) $100,000 in total covering a blanket bond for up to 100 wells.

A blanket bond covering more than 100 wells shall be increased to include the bond amount, as provided in this paragraph (2.5), for the total number of wells more than 100 that are covered by the blanket bond. Such bond shall be submitted to the Department before drilling, deepening, converting, or operating any well for which a new or transfer permit is required and that has not previously been plugged and abandoned in accordance with the Act. The Department shall release the bond if any of the following are met:

(i) all wells covered by the bond are plugged and all well sites are restored in accordance with this Act and administrative rules;

(ii) all wells covered by the bond are transferred in accordance with this Act and administrative rules; or

(iii) the permittee pays assessments to the Department in accordance with Section 19.7 of this Act for 5 consecutive years from the date of issuance of a permit after the effective date of this amendatory Act of the 104th General Assembly and the permittee is not in violation of this Act or any administrative rules.

In lieu of a surety bond, the applicant may provide certificates of deposit or irrevocable letters of credit under such terms and conditions as the Department may provide by rule.

The sureties on all bonds in effect on this amendatory Act of the 104th General Assembly shall remain liable as sureties in accordance with their undertakings until released by the Department from further liability under the Act. The principal on each bond in effect on the effective date of this amendatory Act of the 104th General Assembly shall be released from the obligation of maintaining the bond if the well covered by a surety bond has been plugged and the well site restored in accordance with the Department's rules or the principal of the surety has paid the initial assessment in accordance with Section 19.7 and no well or well site covered by the surety bond is in violation of the Act.

No permit shall be issued to a corporation incorporated outside of Illinois until the corporation has been authorized to do business in Illinois.

No permit shall be issued to an individual, partnership, or other unincorporated entity that is not a resident of Illinois until that individual, partnership, or other unincorporated entity has irrevocably consented to be sued in Illinois.

(3) To require the person assigning, transferring, or selling any well for which a permit is required under this Act to notify the Department of the change of ownership. The notification shall be on a form prescribed by the Department, shall be executed by the current permittee and by the new permittee, or their authorized representatives, and shall be filed with the Department within 30 days after the effective date of the assignment, transfer or sale. Within the 30-day 30 day notification period and prior to operating the well, the new permittee shall pay the required well transfer fee and, where applicable, file with the Department the bond required under subsection (2.5) of this Section.

(4) To require the filing with the State Geological Survey of all geophysical logs, a well drilling report and drill cuttings or cores, if cores are required, within 90 days after drilling ceases; and to file a completion report with the Department within 30 days after the date of first production following initial drilling or any reworking, or after the plugging of the well, if a dry hole. A copy of each completion report submitted to the Department shall be delivered to the State Geological Survey. The Department and the State Geological Survey shall keep the reports confidential, if requested in writing by the permittee, for 2 years after the date the permit is issued by the Department. This confidentiality requirement shall not prohibit the use of the report for research purposes, provided the State Geological Survey does not publish specific data or identify the well to which the completion report pertains.

(5) To prevent "blowouts", "caving" and "seepage" in the same sense that conditions indicated by such terms are generally understood in the oil and gas business.

(6) To prevent fires.

(7) To ascertain and identify the ownership of all oil and gas wells, producing leases, refineries, tanks, plants, structures, and all storage and transportation equipment and facilities.

(8) To regulate the use of any enhanced recovery method in oil pools and oil fields.

(9) To regulate or prohibit the use of vacuum, including charging a vacuum permit application fee of up to $300 per permit.

(10) To regulate the spacing of wells, the issuance of permits, and the establishment of drilling units.

(11) To regulate directional drilling of oil or gas wells.

(12) To regulate the plugging of wells.

(13) To require that wells for which no logs or unsatisfactory logs are supplied shall be completely plugged with cement from bottom to top.

(14) To require a description in such form as is determined by the Department of the method of well plugging for each well, indicating the character of material used and the positions and dimensions of each plug.

(15) To prohibit waste, as defined in this Act.

(16) To require the keeping of such records, the furnishing of such relevant information and the performance of such tests as the Department may deem necessary to carry into effect the purposes of this Act.

(17) To regulate the disposal of salt or sulphur-bearing water and any oil field waste produced in the operation of any oil or gas well.

(18) To prescribe rules, conduct inspections and require compliance with health and safety standards for the protection of persons working underground in connection with any oil and gas operations. For the purposes of this paragraph, oil and gas operations include drilling or excavation, production operations, plugging or filling in and sealing, or any other work requiring the presence of workers in shafts or excavations beneath the surface of the earth. Rules promulgated by the Department may include minimum qualifications of persons performing tasks affecting the health and safety of workers underground, minimum standards for the operation and maintenance of equipment, and safety procedures and precautions, and shall conform, as nearly as practicable, to corresponding qualifications, standards and procedures prescribed under the Coal Mining Act.

(19) To deposit the amount of any forfeited surety bond or other security in the Plugging and Restoration Fund, a special fund in the State treasury which is hereby created; to deposit into the Fund any amounts collected, reimbursed or recovered by the Department under Sections 19.5, 19.6 and 19.7 of this Act; to accept, receive, and deposit into the Fund any grants, gifts or other funds which may be made available from public or private sources and all earnings received from investment of monies in the Fund; and to make expenditures from the Fund for the purposes of plugging, replugging or repairing any well, and restoring the site of any well, determined by the Department to be abandoned or ordered by the Department to be plugged, replugged, repaired or restored under Sections 8a, 19 or 19.1 of this Act, including expenses in administering the Fund.

For the purposes of this Act, the State Geological Survey shall co-operate with the Department in making available its scientific and technical information on the oil and gas resources of the State, and the Department shall in turn furnish a copy to the State Geological Survey of all drilling permits as issued, and such other drilling and operating data received or secured by the Department which are pertinent to scientific research on the State's mineral resources.

(Source: P.A. 104-150, eff. 1-1-26.)

(225 ILCS 725/8a) (from Ch. 96 1/2, par. 5413)

Sec. 8a. When an inspector or other authorized employee or agent of the Department determines that any permittee, or any person engaged in conduct or activities required to be permitted under this Act, is in violation of any requirement of this Act or the rules adopted hereunder or any permit condition, or has falsified or otherwise misstated any information on or relative to any application, permit, required record, or other document required to be submitted to the Department by this Act or any rules or procedures adopted under this Act, a notice of violation shall be completed and delivered to the Director or his designee.

The notice shall contain:

1. the nature of the violation;

2. the action needed to abate the violation, including any appropriate remedial measures to prevent future violation such as replacement, repair, testing and reworking a well and any appurtenances and equipment;

3. the time within which the violation is to be abated; and

4. any factors known to the person completing the notice of violation in aggravation or mitigation and the existence of any factors indicating that the permit should be conditioned or modified.

Upon receipt of a notice of violation, the Director shall conduct his investigation and may affirm, vacate or modify the notice of violation. In determining whether to take actions in addition to remedial action necessary to abate a violation, the Director shall consider the person's or permittee's history of previous violations including violations at other locations and under other permits, the seriousness of the violation including any irreparable harm to the environment or damage to property, the degree of culpability of the person or permittee and the existence of any additional conditions or factors in aggravation or mitigation including information provided by the person or permittee.

The Director shall serve the person or permittee with his decision at the conclusion of the investigation. Modification of the notice of violation may include:

1. any different or additional remedial action required to abate the violation and the time within which the violation must be abated;

2. the assessment of civil penalties not to exceed $5,000 for each and every falsification or misstatement of information and civil penalties not to exceed $4,000 per and $1,000 a day for each and every act of violation not including a falsification or misstatement of information;

3. probationary or permanent modification or conditions on the permit which may include special monitoring or reporting requirements; and

4. revocation of the permit.

The Director's decision shall provide that the person or permittee has the right to request a hearing.

The Director's decision affirming, vacating or modifying the notice of violation shall be considered served when mailed by first class mail to the person or permittee at his last known address.

A person or permittee shall have 30 days from the date of service of the Director's decision to request a hearing. If the Director's decision includes the assessment of a civil penalty, the person or permittee charged with the penalty shall pay the penalty in full or, if the person or permittee wishes to contest either the amount of the penalty or the fact of the violation, submit the assessed amount, with the request for a hearing, to be held in escrow. The filing of a request for a hearing shall not operate as a stay of the Director's decision. All civil penalties finally assessed and paid to the Department shall be deposited in the Underground Resources Conservation Enforcement Fund.

Any person who willfully or knowingly authorized, ordered, or carried out any violation cited in the Director's decision shall be subject to the same actions, including civil penalties, which may be imposed on the person or permittee under this Section.

Upon receipt of a request, the Department shall provide an opportunity for a formal hearing upon not less than 5 days notice. The hearing shall be conducted by the Director or anyone designated by him for such purpose, and shall be located and conducted in accordance with the rules of the Department. Failure of the person or permittee to timely request a hearing or, if a civil penalty has been assessed, to timely tender the assessed civil penalty, shall constitute a waiver of all legal rights to contest the Director's decision, including the amount of any civil penalty. Within 30 days of the close of the hearing record or expiration of the time to request a hearing, the Department shall issue a final administrative order.

If, at the expiration of the period of time originally fixed in the Director's decision or in any subsequent extension of time granted by the Department, the Department finds that the violation has not been abated, it may immediately order the cessation of operations or the portions thereof relevant to the violation. Such cessation order shall be served in the manner and within the time prescribed in Section 19.1 of this Act.

Pending the holding of any hearing or entry of a final administrative order under this Section, the person or permittee to whom the cessation order was issued may file a written request for temporary relief subject to the same terms and conditions as are provided for in Section 19.1 of this Act.

If the Department finds that a person or permittee has failed to comply with a final administrative order, the Department may immediately order the cessation of operations or the portions thereof relevant to the final administrative order. Such cessation order shall be served in the manner and within the time prescribed in Section 19.1 of this Act. The Department shall commence a hearing within 5 days after issuance of a cessation order and shall conclude such hearing without appreciable delay. At the hearing the Department shall have the burden of proving that the person or permittee has not complied with the final administrative order. A cessation order issued under this paragraph shall continue in effect until modified, vacated, or terminated by the Department.

The Department shall refuse to issue a permit or permits, and shall revoke any permit or permits previously issued if:

(1) the applicant has falsified or otherwise misstated any information on or relative to the permit application;

(2) the applicant has failed to abate a violation of the Act specified in a final administrative decision of the Department;

(3) an officer, director, partner, or person with an interest in the applicant exceeding 5% failed to abate a violation of the Act specified in a final administrative decision of the Department; or

(4) the applicant is an officer, director, partner, or person with an interest exceeding 5% in another entity that has failed to abate a violation of the Act specified in a final administrative decision of the Department.

(Source: P.A. 99-137, eff. 1-1-16.)

(225 ILCS 725/8e)

Sec. 8e. Temporary abandonment status fees.

(a) The Department shall assess and collect annual fees of $100 per well for each well that is in temporary abandonment status.

(b) All annual fees collected pursuant to subsection (a) shall be deposited into the Plugging and Restoration Fund, and one-half of all such deposited fees shall be used solely for the Landowner Grant Program. deposited as follows: (1) one-half of all such fees shall be placed in the Plugging and Restoration Fund; and (2) one-half of all such fees shall be placed in the Landowner Grant Program.

(Source: P.A. 102-1017, eff. 1-1-23.)

(225 ILCS 725/14) (from Ch. 96 1/2, par. 5420)

Sec. 14. Each application for a permit to drill, deepen, convert, or amend shall be accompanied by the required fee of $400. The fee for an application for a permit to oil lease road shall be $150. A fee of $75 for the first 100 wells and $50 for each well in excess of 100 shall be paid by the new owner for each transfer of well ownership. Except for the assessments required to be deposited in the Plugging and Restoration Fund under Section 19.7 of this Act and any other deposits required to be deposited in the Plugging and Restoration Fund under this Act, all fees assessed and collected under this Act shall be deposited in the Underground Resources Conservation Enforcement Fund. The moneys monies deposited into the Plugging and Restoration Fund or the Underground Resources Conservation Enforcement Fund under this Section or deposited into the Plugging and Restoration Fund under Section 26 shall not be subject to administrative charges or chargebacks unless otherwise authorized by this Act.

On and after July 1, 2022, any fees that are created by or increased by this amendatory Act of the 102nd General Assembly in this Section shall be deposited into the Plugging and Restoration Fund.

(Source: P.A. 102-1017, eff. 1-1-23.)

(225 ILCS 725/26) (from Ch. 96 1/2, par. 5456)

Sec. 26. (a) Any person who violates any provision of this Act or any valid rule, regulation, permit or order of the Department made hereunder, or who repeats or continues the violation thereof, shall be subject to a civil penalty not to exceed:

(1) $1,000 a day for each and every act of violation lasting 90 days or less.

(2) $2,000 a day for any violation lasting more than 90 days but less than 180 days.

(3) $4,000 a day for any violation lasting 180 days or more.

Any civil penalties that are assessed in excess of $1,000 per day shall be deposited into the Plugging and Restoration Fund.

Civil penalties may not be assessed until notice has been sent to the permittee. Such notice may be sent electronically at the time the notice of violation is sent to the Springfield office of the Department.

A permittee may notify the Department if an extraordinary circumstance prevents abatement of a violation for which civil penalties are sought to be assessed against the permittee. If the permittee notifies the Department, the permittee shall then provide evidence of the extraordinary circumstance to the Department, as set forth by rule. The assessment of a civil penalty shall not begin until the extraordinary circumstance terminates, as set forth by rule. The process to declare an extraordinary circumstance, the Department's review and approval of the extraordinary circumstance, and any appeal of the Department's determination shall be set by rule. An extraordinary circumstance shall include, but not be limited to, roads being posted with a weight limit that prevents the movement of equipment, wet field conditions that prevent mitigation activities, or flooding that prevents the movement of equipment for the abatement.

(b) Any person willfully wilfully aiding or abetting any other person in the violation of any provision of this Act, or any rule, regulation and order made hereunder, shall be subject to the same penalties as are prescribed herein for the violation by such other person.

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