SB1302 95TH GENERAL ASSEMBLY

LRB095 04227 AJO 24268 b

95TH GENERAL ASSEMBLY
State of Illinois
2007 and 2008
SB1302

Introduced 2/9/2007, by Sen. Frank C. Watson - J. Bradley Burzynski

SYNOPSIS AS INTRODUCED:

765 ILCS 530/2	from Ch. 96 1/2, par. 9652
765 ILCS 530/3	from Ch. 96 1/2, par. 9653
765 ILCS 530/4	from Ch. 96 1/2, par. 9654
765 ILCS 530/6	from Ch. 96 1/2, par. 9656

Amends the Illinois Drilling Operations Act. Provides that the Act also applies to coalbed methane (at present, oil and gas). Adds production of coalbed methane to the definition of "production operation". Provides that a drilling operator must give a surface owner 30 days written notice of the commencement of drilling and do so by certified mail (at present, 10 days) or by personal delivery (at present, 8 days). Provides for adequate compensation for damage to the surface owner and his or her tenant (at present, surface owner) for damage caused by the drilling operations and adds personal property to the list of compensable items. Provides that the operator shall pay the owner and his or her tenant for losses to agricultural income, land value, access, and improvements caused by drilling. Provides a crop valuation method. Provides that if the owner and operator do not agree on compensation, the owner may bring a legal action and if in the action the court awards a greater amount of compensation than the operator offered, the court shall award costs, interest on the compensation from the day drilling began, and attorney's fees; however, no attorney's fees can be recovered if the operator relies on a third party appraisal. Provides that electrical flow lines (at present, flow lines and other underground structures) must be buried below the surface. Effective immediately.

A BILL FOR

AN ACT concerning property.

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

Section 5. The Drilling Operations Act is amended by changing Sections 2, 3, 4, and 6 as follows:

(765 ILCS 530/2) (from Ch. 96 1/2, par. 9652)

Sec. 2. As used in this Act:

(a) "Person" means any natural person, corporation, firm, partnership, venture, receiver, trustee, executor, administrator, guardian, fiduciary or other representative of any kind and includes any government or any political subdivision or agency thereof;

(b) "Drilling operations" means the drilling, deepening or conversion of a well for oil or gas production, core hole or drill hole for a stratigraphic test;

(c) "Entry" means the moving upon the surface of land with equipment to commence drilling operations, but shall not include entry for the survey for or ascertaining or identification of a well location;

(d) "Operator" means the person, whether the owner or not, who applies for or holds a permit for drilling operations or who is named as the principal on a bond for a permit for a well that was issued by the Department of Natural Resources;

(e) "Surface owner" means the person in whose name the surface of the land on which drilling operations are contemplated, and who is assessed for purposes of taxes imposed pursuant to the Property Tax Code according to the records of the assessor of the county where the land is located as certified by said assessor;

(f) "Assessor" means the supervisor of assessments, board of assessors, or county assessor, as the case may be, for the county in which the land is located;

(g) "Production operation" means the operation of a well for the production of oil, or gas, and coalbed methane, including all acts, structures, equipment, and roadways necessary for such operation;

(h) "New well" means a well that is spudded after the effective date of this Act and does not utilize any part of a well bore or drilling location that existed prior to the effective date of this Act;

(i) "Completion of the well" means completion of those processes necessary before production occurs, including the laying of flow lines and the construction of the tank battery. If the well is not productive, the date of completion of the well is the day it is plugged and abandoned.

(Source: P.A. 88-670, eff. 12-2-94; 89-445, eff. 2-7-96.)

(765 ILCS 530/3) (from Ch. 96 1/2, par. 9653)

Sec. 3. This Act shall be applicable only for the drilling operations of new wells except as explicitly provided in paragraph (c) of Section 6. It shall not apply for reworking operations on a well.

This Act shall be applicable only when the surface owner has not consented in writing to the drilling operations and:

(A) there has been a complete severance of the ownership of the oil, and gas, and coalbed methane from the ownership of the surface, or

(B) where the surface owner owns an interest in the oil, and gas, and coalbed methane, which interest is the subject of either:

(1) An integration proceeding brought pursuant to "An Act in relation to oil, gas, coal, and other surface and underground resources and to repeal an Act herein named", approved July 24, 1945, as amended, or

(2) A proceeding brought pursuant to "An Act in relation to oil and gas interest in land", approved July 1, 1939, as amended.

(Source: P.A. 85-1312.)

(765 ILCS 530/4) (from Ch. 96 1/2, par. 9654)

Sec. 4. Notice.

(a) Prior to commencement of the drilling of a well, the operator shall give written notice to the surface owner of the operator's intent to commence drilling operations.

(b) The operator shall, for the purpose of giving notice as herein required, secure from the assessor's office within 90 days prior to the giving of the notice, a certification which shall identify the person in whose name the lands on which drilling operations are to be commenced and who is assessed at the time the certification is made. The written certification made by the assessor of the surface owner shall be conclusive evidence of the surface ownership and of the operator's compliance with the provisions of this Act.

(c) The notice required to be given by the operator to the surface owner shall identify the following:

(1) The location of the proposed entry on the surface for drilling operations, and the date on or after which drilling operations shall be commenced.

(2) A photocopy of the drilling application to the Department of Natural Resources for the well to be drilled.

(3) The name, address and telephone number of the operator.

(4) An offer to discuss with the surface owner those matters set forth in Section 5 hereof prior to commencement of drilling operations.

(5) If the surface owner elects to meet the operator, the surface owner shall request the operator to schedule a meeting at a mutually agreed time and place within the limitations set forth herein. Failure of the surface owner to contact the operator at least 5 days prior to the proposed commencement of drilling operations shall be conclusively deemed a waiver of the right to meet by the surface owner.

(6) The meeting shall be scheduled between the hours of 9:00 in the morning and the setting of the sun of the same day and shall be at least 3 days prior to commencement of drilling operations. Unless agreed to otherwise, the place shall be located within the county in which drilling operations are to be commenced where the operator or his agent shall be available to discuss with the surface owner or his agent those matters set forth in Section 5 hereof.

(7) The notice herein required shall be given to the surface owner by either:

(A) certified mail addressed to the surface owner at the address shown in the certification obtained from the assessor, which shall be postmarked at least 30 10 days prior to the commencement of drilling operations; or

(B) personal delivery to the surface owner at least 30 8 days prior to the commencement of drilling operations.

(C) Notice to the surface owner as defined in this Act shall be deemed conclusive notice to the record owners of all interest in the surface.

(Source: P.A. 89-445, eff. 2-7-96; revised 10-19-05.)

(765 ILCS 530/6) (from Ch. 96 1/2, par. 9656)

Sec. 6. Compensation of surface owners for drilling and producing operations and duties after cessation of production.

(A) The operator shall pay the surface owner a sum of money equal to the amount of damages sustained by the surface owner and the surface owner's tenant, if any, for any shall be entitled to reasonable compensation from the operator for damages :

(1) Damage to growing crops, trees, shrubs, fences, roads, structures, improvements, personal property, and livestock thereon caused by the drilling of a new well. The surface owner shall also be entitled to reasonable compensation from the operator for

(2) Subsequent damage subsequent damages to growing crops, trees, shrubs, fences, roads, structures, improvements, personal property, and livestock thereon caused by subsequent production operations of the operator thereon.

(3) Loss of agricultural production and income, lost land value, lost use of and access to the surface owner's land, and lost value of improvements caused by drilling operations. For the loss of the value of agricultural production and income corresponding to lands taken out of production because of the use thereof by the operator for roads and production equipment, any recovery shall only be applicable if the area adjacent to the roads and production equipment are planted and harvested. The value of the commercial crop shall be calculated by: (1) determining the average per acre yield for the crop on adjacent lands; (ii) determining the price received for the sale of the crop on adjacent lands less the cost of seed planting, chemicals, fertilizers, and harvesting: (iii) determining the acreage of the area utilized by roads and production equipment; and (iv) attributing the determined crop yield to the determined acreage utilized and applying the determined price. The initial determination of the value of the crop shall be determined by the surface owner and submitted to the operator. The surface owner and operator shall mutually agree as to the value of the crop utilizing the above referenced formula for the initial crop year and all subsequent crop years.

The surface owner and surface owner's tenant, if any, shall also be entitled to reasonable compensation for all negligent acts of operator that cause measurable damage to the productive capacity of the soil. In addition, the operator shall not utilize any more of the surface estate than is reasonably necessary for the exploration, production and development of the mineral estate.

Except as provided for in subparagraph (3) above for loss of agricultural production and income, the amount of damage set forth in this paragraph (A) may be determined by any formula mutually agreeable between the surface owner and the operator. When determining damage, consideration must be given to the length of the period of time during which the loss occurs. The surface owner may elect to be paid damages in installments over a period of time. Provided, however, that the surface owner must be compensated for harm caused only by drilling the well (not by production) by a single lump sum payment. These payments will only apply to land directly affected by drilling operations. Payments under this Section are intended to compensate the surface owner for damage and disruption. Any reservation or assignment of the compensation apart from the surface estate, except to a tenant of the surface estate, is prohibited. In the absence of an agreement between the surface owner and a tenant as to the division of compensation payable under this Section, the tenant is entitled to recover from the surface owner that portion of the compensation attributable to the tenant's share of the damages sustained. The tenant shall not be entitled to file an additional or separate claim against the operator for compensation payable under this Section.

(B) The compensation required pursuant to paragraph (A) above shall be paid in any manner mutually agreed upon by the operator and the surface owner, but the failure to agree upon, or make the compensation required, shall not prevent the operator from commencement of drilling operations; provided, however, that operator shall tender to the surface owner payment by check or draft in accordance with the provisions herein no later than 90 days after completion of the well. If the The surface owner rejects the offer of the operator, the surface owner may bring owner's remedy shall be an action for compensation in the circuit court in which the lands or the greater part thereof are located on which drilling operations were conducted. If the amount of compensation awarded by the court is greater than that which had been offered by the operator, or the ; provided, however, that if operator fails to tender payment within the 90-day period the court shall award the or if the tender is not reasonable, surface owner reasonable shall be entitled to reasonable compensation as provided herein as well as attorney's fees, any costs assessed by the court, and interest at the statutory rate on the final amount of the final compensation awarded by the court from the day drilling is commenced.

If operator relies on a third party appraiser or fair market value, such amount shall be conclusively deemed to be reasonable, and there shall be no award of attorney's fees.

(C) In conjunction with the plugging and abandonment of any well, the operator shall restore the surface to a condition as near as practicable to the condition of the surface prior to commencement of drilling operations; provided, however, that the surface owner and operator may waive this requirement in writing, subject to the approval of the Department of Natural Resources that the waiver is in accordance with its rules.

(D) Where practicable and absent a written agreement to the contrary with the surface owner, all electrical lines, all flow lines, and other underground structures must be buried to a depth not less than 36 inches from the surface.

(Source: P.A. 89-445, eff. 2-7-96.)

Section 99. Effective date. This Act takes effect upon becoming law.