SB3174sam001 100TH GENERAL ASSEMBLY

Sen. David Koehler

Filed: 4/6/2018

10000SB3174sam001 LRB100 19698 XWW 37953 a

AMENDMENT TO SENATE BILL 3174

AMENDMENT NO. ______. Amend Senate Bill 3174 by replacing everything after the enacting clause with the following:

"Section 5. The Illinois Oil and Gas Act is amended by changing Sections 1, 6, and 6.1 and by adding Section 6.3 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.

"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.

"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.

"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;

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

"Directional drilling" means controlled directional drilling where the bottom of the wellbore is intentionally directed away from the vertical position.

"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.

"Horizontal well" means a well with a wellbore drilled laterally at an angle of at least 80 degrees to the vertical and with a horizontal projection exceeding 100 feet measured from the initial point of penetration into the productive formation through the terminus of the lateral in the same common source of hydrocarbon supply.

"Survey" means the Illinois State Geological Survey.

"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.

(Source: P.A. 99-78, eff. 7-20-15.)

(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) Global Positioning System (GPS) surface and bottom hole locations for all wells drilled utilizing directional or horizontal drilling techniques, (F) a list of chemicals and additives intended to be used in the drilling or completion operations as identified in Section 6.3, and (G) (E) such other relevant information as the Department may deem necessary or convenient to effectuate the purposes of this Act.

Additionally, each applicant who has not been issued a permit that is of record on the effective date of this amendatory Act of 1991, or who has not thereafter made payments of assessments under Section 19.7 of this Act for at least 2 consecutive years preceding the application, 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, but not to exceed $5000, as determined by the Department for each well, or a blanket bond in an amount not to exceed $100,000 for all wells, before drilling, deepening, converting, or operating any well for which a permit is required that has not previously been plugged and abandoned in accordance with the Act. The Department shall release the bond if the well, or all wells in the case of a blanket bond, is not completed but is plugged and the well site restored in accordance with the Department's rules or is completed in accordance with the Department's rules and the permittee pays assessments to the Department in accordance with Section 19.7 of this Act for 2 consecutive years.

In lieu of a surety bond, the applicant may provide cash, 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 the effective date of this amendatory Act of 1991 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 1991 shall be released from the obligation of maintaining the bond if either 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 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) 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. Horizontal wells or wells drilled utilizing directional drilling, including, but not limited to, oil and gas wells, coalbed methane wells, and coal mine methane wells, shall be prohibited from classification as confidential. 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. Well drilling reports and completion reports for horizontal wells or wells drilled utilizing directional drilling shall be subject to the requirements of Section 6.3.

(5) To prevent "blowouts", "caving", "frac hits", 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.

(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. 86-205; 86-364; 86-1177; 87-744.)

(225 ILCS 725/6.1) (from Ch. 96 1/2, par. 5410)

Sec. 6.1. When the applicant has complied with all applicable provisions of this Act and the rules of the Department, the Department shall issue the permit. All applications for a permit submitted to the Department shall either be granted, denied, or a deficiency letter issued in writing within 20 business days after the date of receipt by the Department, unless the applicant and Department mutually agree to extend the 20-day period. If granted, the written permit shall be issued. If a deficiency letter is issued, the Department shall provide specific requirements for additional information or documentation needed for the application to be considered and the permit issued. Upon submission of the required information and documentation, the same process and timeframe as provided in this Section shall continue until either the permit is issued or it is determined that the permit cannot be issued because of legal or regulatory impediments. The Department shall respond in a timely manner to any application or submission of additional information and documentation after initial submission.

On a weekly basis, the Department shall post on its website a notice indicating all permits issued during the preceding week. The weekly permit notice shall include the surface and bottom hole locations for all wells drilled utilizing directional or horizontal drilling techniques in Global Positioning System (GPS) decimal degree format.

(Source: P.A. 98-926, eff. 9-1-14; 99-131, eff. 1-1-16.)

(225 ILCS 725/6.3 new)

Sec. 6.3. Horizontal and directional well; drilling and completion reports; trade secret.

(a) Well drilling and completion reports for horizontal wells or wells drilled using directional drilling shall contain the following information:

(1) the permittee's name as listed in the permit application;

(2) the dates of the drilling or completion operations;

(3) the county where the well is located;

(4) the well name and Department reference number;

(5) the Global Positioning System (GPS) surface and bottom hole locations for the well;

(6) a chemical disclosure report identifying each chemical and additive used during drilling or completion operations that includes the following information:

(A) the total volume of water used in the drilling or completion of the well or the type and total volume of the base fluid used, if the base fluid used is something other than water;

(B) each additive used during the drilling or completion of the well, including the trade name, vendor, a brief descriptor of the intended use or function of each additive, and the Material Safety Data Sheet, if applicable;

(C) each chemical intentionally added to any base fluid used during the drilling or completion of the well, including the Chemical Abstracts Service number for each chemical, if applicable; and

(D) the actual concentration in the base fluid, in percent by mass, of each chemical intentionally added to the base fluid.

(b) The Survey and the Department shall make all well drilling and completion reports subject to this Section public by posting them on their respective websites within 30 days after receipt of the reports.

(c) When an applicant, permittee, or a person subject to this Act furnishes chemical disclosure information to the Survey or Department under this Section under a claim of trade secret, the person shall submit redacted and un-redacted copies of the documents containing the information to the Survey or Department, and the Survey or Department shall use the redacted copies when posting materials on its website.

(d) Upon submission or within 5 calendar days after submission of chemical disclosure information to the Survey or Department under this Section under a claim of trade secret, the person claiming trade secret protection shall provide a statement of justification of the claim that contains the following: (i) a detailed description of the procedures used by the person to safeguard the information from becoming available to persons other than those selected by the person to have access to the information for limited purposes; (ii) a detailed statement identifying the persons or class of persons to whom the information has been disclosed; (iii) a certification indicating that the person has no knowledge that the information has ever been published or disseminated or has otherwise become a matter of general public knowledge; (iv) a detailed discussion of why the person believes that the information has competitive value; and (v) any other information that shall support the claim.

(e) Chemical disclosure information furnished under this Section under a claim of trade secret shall be protected from disclosure as a trade secret if the Survey or Department determines that the statement of justification demonstrates that:

(1) the information has not been published, disseminated, or otherwise become a matter of general public knowledge; and

(2) the information has competitive value.

There is a rebuttable presumption that the information has not been published, disseminated, or otherwise become a matter of general public knowledge if the person has taken reasonable measures to prevent the information from becoming available to persons other than those selected by the person to have access to the information for limited purposes, and the statement of justification contains a certification indicating that the person has no knowledge that the information has ever been published, disseminated, or otherwise become a matter of general public knowledge.

(f) Denial of a trade secret request under this Section shall be appealable under the Administrative Review Law.

(g) A person whose request to inspect or copy a public record is denied, in whole or in part, because of a grant of trade secret protection, may file a request for review with the Public Access Counselor under Section 9.5 of the Freedom of Information Act or for injunctive or declaratory relief under Section 11 of the Freedom of Information Act for the purpose of reviewing whether the Survey or Department properly determined that the trade secret protection should be granted.

(h) Except as otherwise provided in subsections (i) and (j) of this Section, the Survey or Department must maintain the confidentiality of chemical disclosure information furnished under this Section until the Survey or Department receives official notification of a final order by a reviewing body with proper jurisdiction that is not subject to further appeal rejecting a grant of trade secret protection for that information.

(i) The Survey or Department shall adopt rules for the provision of information furnished under a claim of trade secret to a health professional who states a need for the information and articulates why the information is needed. The health professional may share that information with other persons as may be professionally necessary, including, but not limited to, the affected patient, other health professionals involved in the treatment of the affected patient, the affected patient's family members if the affected patient is unconscious or a minor who is unable to make medical decisions, the Centers for Disease Control and Prevention, and other government public health agencies. Except as otherwise provided in this Section, any recipient of the information shall not use the information for purposes other than the health needs asserted in the request and shall otherwise maintain the information as confidential. Information so disclosed to a health professional shall not be construed as publicly available. The holder of the trade secret may request a confidentiality agreement consistent with the requirements of this Section from all health professionals to whom the information is disclosed as soon as circumstances permit. The rules adopted by the Survey or Department shall also establish procedures for providing the information in both emergency and non-emergency situations.

(j) When there is a release of a chemical or additive used for drilling or completing a well and it is necessary to protect public health or the environment, the Survey or Department shall disclose information furnished under a claim of trade secret to the relevant county public health director or emergency manager, the relevant fire department chief, the Director of Public Health, the Director of Agriculture, and the Director of the Illinois Environmental Protection Agency upon request by that individual. The Director of Public Health, the Director of the Illinois Environmental Protection Agency, and the Director of Agriculture may disclose this information to staff members under the same terms and conditions as apply to the Survey and Director of Natural Resources. Except as otherwise provided in this Section, any recipient of the information shall not use the information for purposes other than to protect public health or the environment and shall otherwise maintain the information as confidential. Information disclosed to staff members shall not be construed as publicly available. The holder of the trade secret information may request a confidentiality agreement consistent with the requirements of this Section from all persons to whom the information is disclosed as soon as circumstances permit.".