On June 17th, 2013, Illinois Governor Pat Quinn signed Public Act 98-22 – the Illinois Hydraulic Fracturing Regulatory Act (Act). The contents of the Act have been compiled into 225 Ill. Comp. Stat. 732 (2013) and 35 Ill. Comp. Stat. 450 (2013). The Act provides for the regulation of high volume horizontal hydraulic fracturing (fracking) activities in Illinois. Its provisions were effective immediately. The legislation has no impact on low-pressure vertical hydraulic fracturing activities.

Oil drilling in Illinois first occurred near Champaign in 1853. By far the biggest currently known oil and gas reserve contained within Illinois is the New Albany Shale formation. The formation’s highest anticipated area of opportunity is concentrated in south-east Illinois. The perimeter of the formation extends into Southwest Indiana, Western Kentucky and Western Tennessee. Drilling first occurred into the formation in the 1860s.   Since then, more than 500 oil and gas wells have been drilled into the formation. To date, the wells in Illinois have primarily been small scale vertical wells using low-pressure injection techniques. With recent gains in fracking technology, interest in exploring the oil and gas opportunities provided by the formation has significantly increased.

The Act was formulated in an effort to pro-actively regulate fracking before it became wide-spread in Illinois. A coalition of industry, environmental groups, legislators, regulatory and enforcement agencies negotiated the details of the Act before it came to a vote. As a result, there was broad support for the provisions of the Act.

Key provisions of the Act are as follows:

  • Illinois Department of Natural Resources (IDNR) is the regulatory agency tasked with drafting and implementing rulemaking, as well as enforcement.
  • Operators must register with IDNR at least 30 days before submitting a permit application. Registration involves financial disclosure by the registering entity, disclosure of related entities, disclosure of previous violations, a description of the proposed operations in detail and proof of minimum liability insurance of $5 million.
  • Once registered, operators can apply for a permit from IDNR for proposed activities. The permit must contain detailed information regarding the proposed activity, including disclosure of each chemical to be used, as well as plans for containment of the well, fluid storage and traffic management plans. This information is provided to all property owners within 1,500 feet of the well site. It also must be posted in the local newspaper. The information is also shared with a number of state agencies. A public hearing will be held if requested (by the public) to be adjudicated by an administrative law judge, based upon the disclosures contained within the application. IDNR is required to issue the resulting permit, if approved, within 60 days of the application.
  • Storage of fracking fluid prior to injection, and flowback following injection, must be contained in closed tanks. Storage in open, lined pits is permitted on a temporary basis.
  • Within 60 days of completing its activity, the permittee must submit a completion report, including disclosure of chemicals actually used.
  • All chemicals used in the process must be disclosed to IDNR. Absent designation as a trade-secret, this information will also be made available to the public. If it is deemed a trade-secret, general public disclosure will not occur, but the information will be made available to health providers and public health officials by IDNR. The public can also challenge the trade secret designation.
  • Water quality monitoring will begin at each site prior to the commencement of fracking activities. If water contamination is discovered within 30 months of the completion of activities, there will be a rebuttable presumption that the fracking activities are responsible for the contamination. The permittee will have the burden to prove otherwise.
  • Well construction standards using best practices are incorporated.
  • Setbacks are required from water sources, neighbors, and nature preserves.

The IDNR is currently engaged in the rulemaking process. Once the proposed rules are complete, they will be subject to review and approval by the Joint Committee on Administrative Rules, a bi-partisan legislative oversight committee. Once the proposed rules are finalized, permits can be issued. This is expected to occur mid-2014. Until rules are finalized, no permits can be issued. The only activity operators have engaged in to date under the Act is registration.

All parties involved claim a benefit: industry wanted certainty, environmental groups wanted strong controls and the state wanted a means to balance economic opportunity with environmental considerations. Many of the parties involved claim it is a model act which could have far reaching implications for other jurisdictions interested in addressing the regulation of fracking activities.

Until the Act is fully implemented, its impact in Illinois cannot be determined. The ultimate feasibility of oil and gas development activities in Illinois will depend upon the productivity of the shale. If it produces primarily natural gas, absent an increase in natural gas prices, productivity will be limited. If, on the other hand, oil is produced in substantial quantities, the shale’s productivity will be much higher. Until the Act is fully implemented, and the shale can be further explored, the ultimate production possibilities are unknown.

Sources:

225 Ill. Comp. Stat. 732 (2013)

35 Ill. Comp. Stat. 450 (2013)

Upstream Pumping Solutions, The New Albany Shale,www.upstreampumping.com/article/shale=coverage/new-albany-shale (accessed November 5, 2013).

ProPublica, What is Hydraulic Fracturing, www.propublica.org/special/hydraulic-fracturing-national (accessed November 3, 2013)

Best, Robert, Partner, K&L Gates & Cassel, Jennifer, Staff Atty., Env. Law & Policy Ctr., Speech,The Illinois Hydraulic Fracturing Regulatory Act: Perspectives from environmentalists and industry on the history and future of Illinois fracking law (Chicago, Ill. Oct. 24, 2013) (archive available at the Chicago Bar Association YLS Environmental Law Committee)