State of Illinois
90th General Assembly
Legislation

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[ Senate Amendment 001 ]

90_SB0304ham001

                                             LRB9002358DPcwam
 1                    AMENDMENT TO SENATE BILL 304
 2        AMENDMENT NO.     .  Amend Senate Bill 304  by  inserting
 3    immediately after the enacting clause the following:
 4        "Section 2.  The Oil and Gas Wells on Public Lands Act is
 5    amended by changing Sections 2 and 10 as follows:
 6        (5 ILCS 615/2) (from Ch. 96 1/2, par. 5002)
 7        Sec.  2. State issuance of extraction permits; prohibited
 8    activities.  The Department of  Natural  Resources  shall  be
 9    empowered  with  respect to public lands to grant permits and
10    leases in the  name  of  the  State  of  Illinois,  with  the
11    approval  of  the  Governor in writing, for the extraction of
12    oil, gas and other petroleum deposits, except that no surface
13    extraction  activities  shall  be  performed  nor  production
14    equipment located on lands owned by the Department of Natural
15    Resources if the State owns 100% of  the  underlying  mineral
16    interests  of  those lands.  Extraction activities underlying
17    lands owned by  the  Department  of  Natural  Resources  that
18    utilize  directional  drilling techniques may be permitted at
19    the discretion of the Department.   However,  the  Department
20    shall  not grant permits on leases for the extraction of oil,
21    gas,  and  other  petroleum  deposits  from   the   following
22    classifications  of  lands  if  the  State  owns  100% of the
                            -2-              LRB9002358DPcwam
 1    underlying mineral interests: (1) lands where  threatened  or
 2    endangered  species  occur,  as  determined  pursuant  to the
 3    federal Endangered Species Act  or  the  Illinois  Endangered
 4    Species  Protection  Act, (2) Illinois Natural Area Inventory
 5    sites, (3) nature  preserves  dedicated  under  the  Illinois
 6    Natural  Areas  Preservation Act, (4) lands containing a wild
 7    and scenic river as designated  under  the  Wild  and  Scenic
 8    River  Area  Act,  (5) lands registered under the Register of
 9    Land and Water Reserves under Part 4010 of Title  17  of  the
10    Illinois  Administrative Code, and (6) lands on which federal
11    or State laws or regulations prohibit the surface  extraction
12    or production facility activity. The grant of such permits or
13    leases   shall   be  subject  to  the  terms  and  conditions
14    hereinafter set forth in this Act.
15    (Source: P.A. 89-445, eff. 2-7-96.)
16        (5 ILCS 615/10) (from Ch. 96 1/2, par. 5010)
17        Sec. 10. Proceeds.  Except as hereinafter  provided,  the
18    proceeds  derived and bonuses, rentals and royalties from and
19    from other inducements and considerations for  the  execution
20    and  operation of the oil and gas leases provided for in this
21    Act provided shall be disposed of  as  provided  for  by  the
22    State Officers and Employees Money Disposition Act.  However,
23    all   bonuses,   rentals  and  royalties  received  from  the
24    permitting or leasing of lands which have been  purchased  by
25    the  Department of Natural Resources (formerly designated the
26    Department of Conservation) from moneys appropriated from the
27    Wildlife and Fish Fund and which at the time of permitting or
28    leasing are under the control of the  Department  of  Natural
29    Resources    (formerly    designated    the   Department   of
30    Conservation), shall be paid into the Wildlife and Fish  Fund
31    of  the  State  Treasury.  All  proceeds,  bonuses,  rentals,
32    royalties,  and other inducements and considerations received
33    from the permitting  or  leasing  of  Department  of  Natural
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 1    Resources   lands   that  have  not  been  purchased  by  the
 2    Department of Natural Resources with moneys appropriated from
 3    the Wildlife and Fish Fund shall be deposited as follows:  at
 4    least 50% of the amounts received shall be deposited into the
 5    State  Parks  Fund  and  not more than 50% shall be deposited
 6    into the Plugging and Restoration Fund.
 7    (Source: P.A. 89-445, eff. 2-7-96.)
 8        Section 4.  The Illinois Oil and Gas Act  is  amended  by
 9    changing Section 22.2 as follows:
10        (225 ILCS 725/22.2) (from Ch. 96 1/2, par. 5436)
11        Sec. 22.2.  Integration of interests in drilling unit.
12        (a)  As  used  in  this Section, "owner" means any person
13    having an interest in the right to drill into and produce oil
14    or gas from any pool, and to appropriate the  production  for
15    such owner or others.
16        (b)  Except  as  provided  in subsection (b-5), when 2 or
17    more separately owned tracts of land are embraced  within  an
18    established drilling unit, or when there are separately owned
19    interests  in  all or a part of such units, the owners of all
20    oil and gas interests therein may validly agree to  integrate
21    their  interests  and  to  develop  their lands as a drilling
22    unit.  Where,  however,  such  owners  have  not  agreed   to
23    integrate  their  interests  and  where  no  action  has been
24    commenced  seeking  permission  to  drill  pursuant  to   the
25    provisions of "An Act in relation to oil and gas interests in
26    land",  approved  July 1, 1939, and where at least one of the
27    owners has drilled or has proposed to  drill  a  well  on  an
28    established  drilling  unit the Department on the application
29    of an owner shall, for the prevention of waste  or  to  avoid
30    the  drilling of unnecessary wells, require such owners to do
31    so and to  develop  their  lands  as  a  drilling  unit.  The
32    Department, as a part of the order integrating interests, may
                            -4-              LRB9002358DPcwam
 1    prescribe  the  terms  and  conditions upon which the royalty
 2    interests in the unit or  units  shall,  in  the  absence  of
 3    voluntary  agreement,  be determined to be integrated without
 4    the necessity of a subsequent separate order integrating  the
 5    royalty  interests. Each such integration order shall be upon
 6    terms and conditions that are just and reasonable.
 7        (b-5)  When 2 or more separately owned tracts of land are
 8    embraced within an established drilling unit, or  when  there
 9    are  separately owned interests in all or a part of the unit,
10    and one of the owners is the Department of Natural Resources,
11    integration of the separate tracts shall be allowed only  if,
12    following   a   comprehensive   environmental  impact  review
13    performed by the Department, the Department  determines  that
14    no substantial or irreversible detrimental harm will occur on
15    Department  lands  as  a  result  of  any proposed activities
16    relating to mineral  extraction.   The  environmental  impact
17    review   shall  include  but  shall  not  be  limited  to  an
18    assessment of the potential destruction or depletion of flora
19    and fauna, wildlife and its supporting habitat,  surface  and
20    subsurface  water  supplies,  aquatic  life, and recreational
21    activities located on the land  proposed  to  be  integrated.
22    The  Department shall adopt rules necessary to implement this
23    subsection.
24        (b-6)  All proceeds,  bonuses,  rentals,  royalties,  and
25    other   inducements  and  considerations  received  from  the
26    integration of Department of  Natural  Resources  lands  that
27    have   not  been  purchased  by  the  Department  of  Natural
28    Resources with moneys appropriated from the Wildlife and Fish
29    Fund shall be deposited as follows:   at  least  50%  of  the
30    amounts received shall be deposited into the State Parks Fund
31    and  not  more  than 50% shall be deposited into the Plugging
32    and Restoration Fund.
33        (c)  All orders requiring such integration shall be  made
34    after  notice  and  hearing  and  shall  be  upon  terms  and
                            -5-              LRB9002358DPcwam
 1    conditions  that  are  just and reasonable and will afford to
 2    the owners of all oil and gas interests in each tract in  the
 3    drilling  unit  the  opportunity  to recover or receive their
 4    just and equitable share of oil or gas from the drilling unit
 5    without unreasonable expense and  will  prevent  or  minimize
 6    reasonably  avoidable  drainage from each integrated drilling
 7    unit which is not equalized  by  counter  drainage,  but  the
 8    Department  may  not limit the production from any well under
 9    this provision.
10        (d)  All operations, including, but not limited  to,  the
11    commencement,  drilling,  or  operation  of  a  well upon any
12    portion of a drilling unit shall be deemed for  all  purposes
13    the  conduct  of  such  operations upon each separately owned
14    tract in the drilling unit by  the  several  owners  thereof.
15    That  portion  of  the  production  allocated to a separately
16    owned tract included in a drilling unit shall, when produced,
17    be deemed, for all purposes, to have been  actually  produced
18    from such tract by a well drilled thereon.
19        (e)  In   making   the   determination   of   integrating
20    separately  owned  interests,  and  determining  to  whom the
21    permit should be issued, the Department may consider:
22             (1)  the  reasons  requiring  the   integration   of
23        separate interests;
24             (2)  the  respective interests of the parties in the
25        drilling unit sought to be established, and the  pool  or
26        pools  in  the  field where the proposed drilling unit is
27        located;
28             (3)  any parties' prior or present  compliance  with
29        the Act and the Department's rules; and
30             (4)  any  other  information relevant to protect the
31        correlative rights of the parties sought to  be  affected
32        by the integration order.
33        (f)  Each  such  integration  order  shall  authorize the
34    drilling, testing, completing, equipping, and operation of  a
                            -6-              LRB9002358DPcwam
 1    well  on the drilling unit; provide who may drill and operate
 2    the well; prescribe the time and  manner  in  which  all  the
 3    owners in the drilling unit may elect to participate therein;
 4    and  make provision for the payment by all those who elect to
 5    participate therein of the reasonable  actual  cost  thereof,
 6    plus a reasonable charge for supervision and interest. Should
 7    an owner not elect to voluntarily participate in the risk and
 8    costs of the drilling, testing, completing and operation of a
 9    well  as  determined by the Department, the integration order
10    shall provide either that:
11             (1)  the nonparticipating owner  shall  surrender  a
12        leasehold interest to the participating owners on a basis
13        and for such terms and consideration the Department finds
14        fair and reasonable; or
15             (2)  the  nonparticipating  owner  shall  share in a
16        proportionate part of the production of oil and gas  from
17        the drilling unit determined by the Department, and pay a
18        proportionate   part   of   operation   cost   after  the
19        participating owners have recovered from  the  production
20        of  oil  or  gas  from  a  well  all  actual costs in the
21        drilling, testing, completing and operation of  the  well
22        plus  a penalty to be determined by the Department of not
23        less than 100% nor more than 300% of such actual costs.
24        (g)  For the purpose of this Section, the owner or owners
25    of oil and gas rights in and under an unleased tract of  land
26    shall be regarded as a lessee to the extent of a 7/8 interest
27    in  and  to  said  rights  and  a lessor to the extent of the
28    remaining 1/8 interest therein.
29        (h)  In the event of any dispute relative  to  costs  and
30    expenses  of  drilling,  testing,  equipping,  completing and
31    operating a well, the Department shall determine  the  proper
32    costs  after  due  notice to interested parties and a hearing
33    thereon.  The operator of such unit, in addition to any other
34    right provided by the integration order  of  the  Department,
                            -7-              LRB9002358DPcwam
 1    shall  have  a lien on the mineral leasehold estate or rights
 2    owned by the other owners therein and upon  their  shares  of
 3    the  production  from  such  unit  to  the  extent that costs
 4    incurred in the development and operation upon said unit  are
 5    a  charge against such interest by order of the Department or
 6    by operation of law.  Such liens shall  be  separable  as  to
 7    each  separate owner within such unit, and shall remain liens
 8    until the owner or owners drilling or operating the well have
 9    been paid the amount due under the terms of  the  integration
10    order.   The Department is specifically authorized to provide
11    that  the  owner  or  owners  drilling,  or  paying  for  the
12    drilling, or for the operation of a well for the  benefit  of
13    all  shall  be  entitled  to  production from such well which
14    would be received by the owner or owners  for  whose  benefit
15    the  well  was drilled or operated, after payment of royalty,
16    until the owner or owners drilling or operating the well have
17    been paid the amount due under the terms of  the  integration
18    order settling such dispute.
19    (Source: P.A. 85-1334; 86-1177.)".

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