HB0313sam001 99TH GENERAL ASSEMBLY

Sen. Gary Forby

Filed: 5/7/2015

09900HB0313sam001 LRB099 06177 MLM 35194 a

AMENDMENT TO HOUSE BILL 313

AMENDMENT NO. ______. Amend House Bill 313 by replacing everything after the enacting clause with the following:

"Section 5. The Illinois Oil and Gas Act is amended by adding Section 6.2 as follows:

(225 ILCS 725/6.2 new)

Sec. 6.2. Oil and gas leases; termination due to non-development or non-production. The Department shall have the authority to adopt rules and hold hearings to determine if oil and gas leases submitted with an application for a permit or transfer of a permit for a well are operative on the basis that prior oil and gas leases covering the same lands have terminated due to non-development or non-production. Department determinations under this Section shall be based upon affidavits of non-development or non-production from knowledgeable individuals familiar with the history of development and production of oil or gas as to such lands, together with other evidence, which create a rebuttable presumption that the prior oil and gas leases have terminated and are of no further force and effect and that the submitted oil and gas leases are operative and effective. To create a rebuttable presumption, such affidavits, together with other evidence provided to or available from the Department, shall reasonably indicate that there has been no development or production of oil and gas on the lands described in the prior leases for at least 24 consecutive months subsequent to the expiration of the primary term or any extension of the primary term as set forth in the leases. A court order or judgment declaring the prior leases terminated is not required for determinations under this Section, except in extraordinary circumstances where such determinations cannot reasonably be concluded from the affidavits or evidence submitted to or available from the Department. Upon the Department's determination of a rebuttable presumption under this Section, the Department shall provide the current permittee with notice and a 30-day opportunity to request a hearing to rebut the presumption before a final determination on a lease is made. Any determination made by the Department under this Section shall not diminish the rights or obligations of any current permittee of a well that are otherwise provided by statute or regulation of the Department. Any request for a determination under this Section shall require the payment of a nonrefundable fee of $1,000 by the applicant. All determinations on leases by the Department under this Section shall be made no later than 90 days after the Department's receipt of a valid request for such determination. Determinations that prior oil and gas leases have terminated due to non-development or non-production shall require the current permittee to properly plug all non-plugged and non-transferred wells within the lease boundaries of the prior leases. If the current permittee fails to properly plug all non-plugged and non-transferred wells within 30 days after the issuance of the determination, the wells shall be deemed abandoned and included in the Department's Oil and Gas Well Site Plugging and Restoration Program. Department determinations under this Section shall not have res judicata or collateral estoppel effect in any judicial proceedings.

Section 10. The Oil and Gas Rights Act is amended by changing Section 10 as follows:

(765 ILCS 520/10) (from Ch. 96 1/2, par. 4910)

Sec. 10. (1) in this Section:

(a) "Payee" means any person or persons legally entitled to payment from the proceeds derived from the sale of oil or gas from an oil or gas well located in this State.

(b) "Payor" means the first purchaser of production of oil or gas from an oil or gas well, but the owner of the right to produce under an oil or gas lease or pooling order is deemed to be the payor if the owner of the right to produce and the first purchaser have entered into arrangements providing that the proceeds derived from the sale of oil or gas have been paid by the first purchaser to the owner who assumes the responsibility of paying those proceeds to the payee.

(2) (a) the proceeds derived from the sale of oil or gas production from an oil or gas well must be paid to each payee on or before 150 days after the end of the month of first purchase by a payor. After that time, payments must be made to each payee on a timely basis according to the frequency of payment specified in a lease or other written agreement between payee and payor. If the lease or other agreement does not specify the time for payment, subsequent proceeds must be paid no later than:

(1) 60 days after the end of the calendar month in which subsequent oil production is sold; or

(2) 90 days after the end of the calendar month in which subsequent gas production is sold.

(b) Payments may be remitted to payees annually for the aggregate of up to 12 months' accumulation of proceeds, if the total amount owed is $100 $25 or less.

(3) (a) If payment has not been made for any reason in the time limits specified in subsection (2)(a) of this Act, the payor must pay interest to a payee beginning at the expiration of those time limits at the rate charged on loans to depository institutions by the New York Federal Reserve Bank, unless a different rate of interest is specified in a written agreement between payor and payee.

(b) Subsection (a) of this Section does not apply where payments are withheld or suspended by a payor beyond the time limits specified in subsection (2)(a) of this Act because there is:

(1) a dispute concerning title that would affect distribution of payments;

(2) a reasonable doubt that the payee does not have clear title to the interest in the proceeds of production; or

(3) a requirement in a title opinion that places in issue the title, identity, or whereabouts of the payee and that has not been satisfied by the payee after a reasonable request for curative information has been made by the payor.

(4) (a) If a payee seeks relief for the failure of a payor to make timely payment of proceeds from the sale of oil or gas or an interest in oil or gas as required under Section (2) or (3) of this Act, the payee must give the payor written notice by mail of that failure as a prerequisite to beginning judicial action against the payor for nonpayment.

(b) The payor has 30 days after receipt of the required notice from the payee in which to pay the proceeds due, or to respond by stating in writing a reasonable cause for nonpayment.

(c) A payee has a cause of action for nonpayment of oil or gas proceeds or interest on those proceeds as required in Section (2) or (3) of this Act in any court of competent jurisdiction in the county in which the oil or gas well is located.

(Source: P.A. 84-872.)".