State of Illinois
2017 and 2018


Introduced , by Rep. Jerry Costello, II


35 ILCS 450/2-15
225 ILCS 732/1-35

    Amends the Illinois Hydraulic Fracturing Tax Act. Provides that the tax rate for the severance and production of oil or gas shall be 1.5% (rather than 3%) of the value of the oil or gas. Provides that for oil the tax shall be: (i) 1.5% of the value of the oil (rather than 3%) where the average daily production from the well in a month is less than 25 barrels; (ii) 2% of the value of the oil (rather than 4%) where the average daily production from the well in a month is between 25 barrels and 50 barrels; (iii) 2.5% of the value of the oil (rather than 5%) where the average daily production from the well in a month is between 50 barrels and 100 barrels; and (iv) 3% of the value of the oil (rather than 6%) where the average daily production from the well in a month is 100 barrels or more. Provides that for gas the tax shall be 3% (rather than 6%) of the value of the gas. Amends the Hydraulic Fracturing Regulatory Act. Deletes language stating that every applicant for a high volume horizontal hydraulic fracturing permit shall include a traffic management plan on his or her application.

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HB5748LRB100 20082 LNS 35365 b

1    AN ACT concerning hydraulic fracturing.
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4    Section 5. The Illinois Hydraulic Fracturing Tax Act is
5amended by changing Section 2-15 as follows:
6    (35 ILCS 450/2-15)
7    Sec. 2-15. Tax imposed.
8    (a) For oil and gas removed on or after July 1, 2013, there
9is hereby imposed a tax upon the severance and production of
10oil or gas from a well on a production unit in this State
11permitted, or required to be permitted, under the Illinois
12Hydraulic Fracturing Regulatory Act, for sale, transport,
13storage, profit, or commercial use. The tax shall be applied
14equally to all portions of the value of each barrel of oil
15severed and subject to such tax and to the value of the gas
16severed and subject to such tax. For a period of 24 months from
17the month in which oil or gas was first produced from the well,
18the rate of tax shall be 1.5% 3% of the value of the oil or gas
19severed from the earth or water in this State. Thereafter, the
20rate of the tax shall be as follows:
21        (1) For oil:
22            (A) where the average daily production from the
23        well during the month is less than 25 barrels, 1.5% 3%



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1        of the value of the oil severed from the earth or
2        water;
3            (B) where the average daily production from the
4        well during the month is 25 or more barrels but less
5        than 50 barrels, 2% 4% of the value of the oil severed
6        from the earth or water;
7            (C) where the average daily production from the
8        well during the month is 50 or more barrels but less
9        than 100 barrels, 2.5% 5% of the value of the oil
10        severed from the earth or water; or
11            (D) where the average daily production from the
12        well during the month is 100 or more barrels, 3% 6% of
13        the value of the oil severed from the earth or water.
14        (2) For gas, 3% 6% of the value of the gas severed from
15    the earth or water.
16    If a well is required to be permitted under the Hydraulic
17Fracturing Regulatory Act, the tax imposed by this Section
18applies, whether or not a permit was obtained.
19    (b) Oil produced from a well whose average daily production
20is 15 barrels or less for the 12-month period immediately
21preceding the production is exempt from the tax imposed by this
23    (c) For the purposes of the tax imposed by this Act the
24amount of oil produced shall be measured or determined, in the
25case of oil, by tank tables, without deduction for overage or
26losses in handling. Allowance for any reasonable and bona fide



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1deduction for basic sediment and water, and for correction of
2temperature to 60 degrees Fahrenheit will be allowed. For the
3purposes of the tax imposed by this Act the amount of gas
4produced shall be measured or determined, by meter readings
5showing 100% of the full volume expressed in cubic feet at a
6standard base and flowing temperature of 60 degrees Fahrenheit,
7and at the absolute pressure at which the gas is sold and
8purchased. Correction shall be made for pressure according to
9Boyle's law, and used for specific gravity according to the
10gravity at which the gas is sold and purchased.
11    (d) The following severance and production of gas shall be
12exempt from the tax imposed by this Act: gas injected into the
13earth for the purpose of lifting oil, recycling, or
14repressuring; gas used for fuel in connection with the
15operation and development for, or production of, oil or gas in
16the production unit where severed; and gas lawfully vented or
17flared; gas inadvertently lost on the production unit by reason
18of leaks, blowouts, or other accidental losses.
19    (e) All oil and gas removed from the premises where severed
20is subject to the tax imposed by this Act unless exempt under
21the terms of this Act.
22    (f) The liability for the tax accrues at the time the oil
23or gas is removed from the production unit.
24(Source: P.A. 98-22, eff. 6-17-13; 98-756, eff. 7-16-14.)
25    Section 10. The Hydraulic Fracturing Regulatory Act is



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1amended by changing Section 1-35 as follows:
2    (225 ILCS 732/1-35)
3    Sec. 1-35. High volume horizontal hydraulic fracturing
4permit application.
5    (a) Every applicant for a permit under this Act shall first
6register with the Department at least 30 days before applying
7for a permit. The Department shall make available a
8registration form within 90 days after the effective date of
9this Act. The registration form shall require the following
11        (1) the name and address of the registrant and any
12    parent, subsidiary, or affiliate thereof;
13        (2) disclosure of all findings of a serious violation
14    or an equivalent violation under federal or state laws or
15    regulations in the development or operation of an oil or
16    gas exploration or production site via hydraulic
17    fracturing by the applicant or any parent, subsidiary, or
18    affiliate thereof within the previous 5 years; and
19        (3) proof of insurance to cover injuries, damages, or
20    loss related to pollution or diminution in the amount of at
21    least $5,000,000, from an insurance carrier authorized,
22    licensed, or permitted to do this insurance business in
23    this State that holds at least an A- rating by A.M. Best &
24    Co. or any comparable rating service.
25    A registrant must notify the Department of any change in



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1the information identified in paragraphs (1), (2), or (3) of
2this subsection (a) at least annually or upon request of the
4    (b) Every applicant for a permit under this Act must submit
5the following information to the Department on an application
6form provided by the Department:
7        (1) the name and address of the applicant and any
8    parent, subsidiary, or affiliate thereof;
9        (2) the proposed well name and address and legal
10    description of the well site and its unit area;
11        (3) a statement whether the proposed location of the
12    well site is in compliance with the requirements of Section
13    1-25 of this Act and a plat, which shows the proposed
14    surface location of the well site, providing the distance
15    in feet, from the surface location of the well site to the
16    features described in subsection (a) of Section 1-25 of
17    this Act;
18        (4) a detailed description of the proposed well to be
19    used for the high volume horizontal hydraulic fracturing
20    operations including, but not limited to, the following
21    information:
22            (A) the approximate total depth to which the well
23        is to be drilled or deepened;
24            (B) the proposed angle and direction of the well;
25            (C) the actual depth or the approximate depth at
26        which the well to be drilled deviates from vertical;



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1            (D) the angle and direction of any nonvertical
2        portion of the wellbore until the well reaches its
3        total target depth or its actual final depth; and
4            (E) the estimated length and direction of the
5        proposed horizontal lateral or wellbore;
6        (5) the estimated depth and elevation, according to the
7    most recent publication of the Illinois State Geological
8    Survey of Groundwater for the location of the well, of the
9    lowest potential fresh water along the entire length of the
10    proposed wellbore;
11        (6) a detailed description of the proposed high volume
12    horizontal hydraulic fracturing operations, including, but
13    not limited to, the following:
14            (A) the formation affected by the high volume
15        horizontal hydraulic fracturing operations, including,
16        but not limited to, geologic name and geologic
17        description of the formation that will be stimulated by
18        the operation;
19            (B) the anticipated surface treating pressure
20        range;
21            (C) the maximum anticipated injection treating
22        pressure;
23            (D) the estimated or calculated fracture pressure
24        of the producing and confining zones; and
25            (E) the planned depth of all proposed perforations
26        or depth to the top of the open hole section;



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1        (7) a plat showing all known previous wellbores within
2    750 feet of any part of the horizontal wellbore that
3    penetrated within 400 vertical feet of the formation that
4    will be stimulated as part of the high volume horizontal
5    hydraulic fracturing operations;
6        (8) unless the applicant documents why the information
7    is not available at the time the application is submitted,
8    a chemical disclosure report identifying each chemical and
9    proppant anticipated to be used in hydraulic fracturing
10    fluid for each stage of the hydraulic fracturing operations
11    including the following:
12            (A) the total volume of water anticipated to be
13        used in the hydraulic fracturing treatment of the well
14        or the type and total volume of the base fluid
15        anticipated to be used in the hydraulic fracturing
16        treatment, if something other than water;
17            (B) each hydraulic fracturing additive anticipated
18        to be used in the hydraulic fracturing fluid, including
19        the trade name, vendor, a brief descriptor of the
20        intended use or function of each hydraulic fracturing
21        additive, and the Material Safety Data Sheet (MSDS), if
22        applicable;
23            (C) each chemical anticipated to be intentionally
24        added to the base fluid, including for each chemical,
25        the Chemical Abstracts Service number, if applicable;
26        and



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1            (D) the anticipated concentration in the base
2        fluid, in percent by mass, of each chemical to be
3        intentionally added to the base fluid;
4        (9) a certification of compliance with the Water Use
5    Act of 1983 and applicable regional water supply plans;
6        (10) a fresh water withdrawal and management plan that
7    shall include the following information:
8            (A) the source of the water, such as surface or
9        groundwater, anticipated to be used for water
10        withdrawals, and the anticipated withdrawal location;
11            (B) the anticipated volume and rate of each water
12        withdrawal from each withdrawal location;
13            (C) the anticipated months when water withdrawals
14        shall be made from each withdrawal location;
15            (D) the methods to be used to minimize water
16        withdrawals as much as feasible; and
17            (E) the methods to be used for surface water
18        withdrawals to minimize adverse impact to aquatic
19        life.
20        Where a surface water source is wholly contained within
21    a single property, and the owner of the property expressly
22    agrees in writing to its use for water withdrawals, the
23    applicant is not required to include this surface water
24    source in the fresh water withdrawal and management plan;
25        (11) a plan for the handling, storage, transportation,
26    and disposal or reuse of hydraulic fracturing fluids and



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1    hydraulic fracturing flowback. The plan shall identify the
2    specific Class II injection well or wells that will be used
3    to dispose of the hydraulic fracturing flowback. The plan
4    shall describe the capacity of the tanks to be used for the
5    capture and storage of flowback and of the lined reserve
6    pit to be used, if necessary, to temporarily store any
7    flowback in excess of the capacity of the tanks.
8    Identification of the Class II injection well or wells
9    shall be by name, identification number, and specific
10    location and shall include the date of the most recent
11    mechanical integrity test for each Class II injection well;
12        (12) a well site safety plan to address proper safety
13    measures to be employed during high volume horizontal
14    hydraulic fracturing operations for the protection of
15    persons on the site as well as the general public. Within
16    15 calendar days after submitting the permit application to
17    the Department, the applicant must provide a copy of the
18    plan to the county or counties in which hydraulic
19    fracturing operations will occur. Within 5 calendar days of
20    its receipt, the Department shall provide a copy of the
21    well site safety plan to the Office of the State Fire
22    Marshal;
23        (13) a containment plan describing the containment
24    practices and equipment to be used and the area of the well
25    site where containment systems will be employed, and within
26    5 calendar days of its receipt, the Department shall



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1    provide a copy of the containment plan to the Office of the
2    State Fire Marshal;
3        (14) a casing and cementing plan that describes the
4    casing and cementing practices to be employed, including
5    the size of each string of pipe, the starting point, and
6    depth to which each string is to be set and the extent to
7    which each string is to be cemented;
8        (15) (blank); a traffic management plan that
9    identifies the anticipated roads, streets, and highways
10    that will be used for access to and egress from the well
11    site. The traffic management plan will include a point of
12    contact to discuss issues related to traffic management.
13    Within 15 calendar days after submitting the permit
14    application to the Department, the applicant must provide a
15    copy of the traffic management plan to the county or
16    counties in which the well site is located, and within 5
17    calendar days of its receipt, the Department shall provide
18    a copy of the traffic management plan to the Office of the
19    State Fire Marshal;
20        (16) the names and addresses of all owners of any real
21    property within 1,500 feet of the proposed well site, as
22    disclosed by the records in the office of the recorder of
23    the county or counties;
24        (17) drafts of the specific public notice and general
25    public notice as required by Section 1-40 of this Act;
26        (18) a statement that the well site at which the high



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1    volume horizontal hydraulic fracturing operation will be
2    conducted will be restored in compliance with Section
3    240.1181 of Title 62 of the Illinois Administrative Code
4    and Section 1-95 of this Act;
5        (19) proof of insurance to cover injuries, damages, or
6    loss related to pollution in the amount of at least
7    $5,000,000; and
8        (20) any other relevant information which the
9    Department may, by rule, require.
10    (c) Where an application is made to conduct high volume
11horizontal fracturing operations at a well site located within
12the limits of any city, village, or incorporated town, the
13application shall state the name of the city, village, or
14incorporated town and be accompanied with a certified copy of
15the official consent for the hydraulic fracturing operations to
16occur from the municipal authorities where the well site is
17proposed to be located. No permit shall be issued unless
18consent is secured and filed with the permit application. In
19the event that an amended location is selected, the original
20permit shall not be valid unless a new certified consent is
21filed for the amended location.
22    (d) The hydraulic fracturing permit application shall be
23accompanied by a bond as required by subsection (a) of Section
241-65 of this Act.
25    (e) Each application for a permit under this Act shall
26include payment of a non-refundable fee of $13,500. Of this



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1fee, $11,000 shall be deposited into the Oil and Gas Resource
2Management Fund for the Department to use to administer and
3enforce this Act and otherwise support the operations and
4programs of the Office of Oil and Gas Resource Management. The
5remaining $2,500 shall be deposited into the Illinois Clean
6Water Fund for the Agency to use to carry out its functions
7under this Act. The Department shall not initiate its review of
8the permit application until the applicable fee under this
9subsection (e) has been submitted to and received by the
11    (f) Each application submitted under this Act shall be
12signed, under the penalty of perjury, by the applicant or the
13applicant's designee who has been vested with the authority to
14act on behalf of the applicant and has direct knowledge of the
15information contained in the application and its attachments.
16Any person signing an application shall also sign an affidavit
17with the following certification:
18        "I certify, under penalty of perjury as provided by law
19    and under penalty of refusal, suspension, or revocation of
20    a high volume horizontal hydraulic fracturing permit, that
21    this application and all attachments are true, accurate,
22    and complete to the best of my knowledge.".
23    (g) The permit application shall be submitted to the
24Department in both electronic and hard copy format. The
25electronic format shall be searchable.
26    (h) The application for a high volume horizontal hydraulic



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1fracturing permit may be submitted as a combined permit
2application with the operator's application to drill on a form
3as the Department shall prescribe. The combined application
4must include the information required in this Section. If the
5operator elects to submit a combined permit application,
6information required by this Section that is duplicative of
7information required for an application to drill is only
8required to be provided once as part of the combined
9application. The submission of a combined permit application
10under this subsection shall not be interpreted to relieve the
11applicant or the Department from complying with the
12requirements of this Act or the Illinois Oil and Gas Act.
13    (i) Upon receipt of a permit application, the Department
14shall have no more than 60 calendar days from the date it
15receives the permit application to approve, with any conditions
16the Department may find necessary, or reject the application
17for the high volume horizontal hydraulic fracturing permit. The
18applicant may waive, in writing, the 60-day deadline upon its
19own initiative or in response to a request by the Department.
20    (j) If at any time during the review period the Department
21determines that the permit application is not complete under
22this Act, does not meet the requirements of this Section, or
23requires additional information, the Department shall notify
24the applicant in writing of the application's deficiencies and
25allow the applicant to correct the deficiencies and provide the
26Department any information requested to complete the



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1application. If the applicant fails to provide adequate
2supplemental information within the review period, the
3Department may reject the application.
4(Source: P.A. 98-22, eff. 6-17-13; 98-756, eff. 7-16-14;
599-139, eff. 7-24-15.)