After a nearly unanimous vote by the Illinois legislature, on June 17, 2013, Governor Pat Quinn signed the Hydraulic Fracturing Regulatory Act ("HFRA") into law. Citing the need for jobs in southern Illinois and the need to ensure protection of Illinois' natural resources, Governor Quinn lauded the efforts of environmentalists, labor and industry to "make Illinois a national model for transparency, environmental safety and economic development." With the national debate over fracking in mind, this alert looks at the details.

Background

Illinois' HFRA is a bill that provides a comprehensive framework for the adoption of regulations, and applies to all wells in which high-volume, horizontal fracking operations have occurred, are occurring or are planned to occur. Environmental groups were pushing for a hydraulic fracking moratorium, but once it was clear that such a moratorium was unlikely, they worked with governmental, labor and industrial representatives to fashion a bill that could put requirements in place to ensure that hydraulic fracturing in Illinois did not go unregulated.

The HFRA applies to high-volume, horizontal hydraulic fracturing operations, which are defined as the stimulation of a horizontal well using pressurized water in an amount exceeding 80,000 gallons per stage or more than 300,000 gallons total of hydraulic fracturing fluid and proppant to initiate or propagate fractures in a geologic formation to enhance the extraction of oil and gas. The Illinois Department of Natural Resources (DNR) has primary authority to administer the HFRA with the assistance of the Illinois State Geological Survey, the Illinois State Water Survey, the State Fire Marshal and the Illinois Environmental Protection Agency regarding investigation and prosecution of alleged violations.

What the New Law Requires

The HFRA requires that hydraulic fracturing operators obtain a permit from the Illinois Department of Natural Resources (DNR). However, an applicant must register with the DNR at least 30 days prior to applying for a permit. For example, the registration must include the disclosure of any serious violations of federal or state laws, or regulations within the past five years concerning developing or operating an oil or gas exploration or production site using hydraulic fracturing. This disclosure covers not only the applicant but also any parent corporation, subsidiary or affiliate. Finally, the registration must include proof of insurance of at least $5 million to cover injuries, damages and losses regarding groundwater or surface water quality.

The permit applicant must submit a significant amount of information to the DNR including, but not limited to:

  • the estimated depth and elevation of the lowest potential freshwater source
  • a description of the proposed hydraulic fracking operations including the name and description of the geologic formation, surface treating, injection and fracture pressures
  • the disclosure of chemicals and proppant anticipated to be used, subject to trade secret protection
  • a water withdrawal and management plan
  • a hydraulic fluid/flow-back management plan
  • a well site safety plan
  • a well site containment plan
  • a well casing and cementing plan
  • a traffic management plan

The applicant must also submit the names/addresses of all property owners within 1,500 feet of the proposed well site, drafts of the required public notices and the proof of insurance of at least $5 million. If the proposed well is located within a municipality, the applicant must submit the municipality's consent. The application must be accompanied by a bond and a non-refundable application fee of $13,500.

The DNR has 60 days to act on the permit application, but this deadline may be waived by the applicant. In an effort to be transparent, the DNR also must post a copy of the permit application on its website and provide notice of the application to the Illinois EPA, State Fire Marshal, State Water Survey and Geological Survey.

The permit application must provide notice of the application to the property owners within 1,500 feet of the well site and a notice by publication once every week for two consecutive weeks in a local newspaper. A public comment period is established beginning seven days after permit receipt and lasting for 30 days. Also, a public hearing may be requested by any person having an interest that is or may be adversely affected by the proposed well, including any government agency or county board.

In addition to well development standards, including well casing and cementing standards, mechanical integrity/pressure testing and monitoring, the HFRA requires that all additives, fluids, flow-back and produced water be stored in above-ground tanks until removed from the site. A lined reserve pit may be used only for temporary storage if approved by the DNR. Hydraulic fracturing fluids and flow-back must be removed from the well site within 60 days, but any excess flowback fracturing stored in the temporary reserve pit must be removed within seven days.

Finally, the HFRA imposes requirements for water quality monitoring prior to the operations being started as well as periodically after the operations have stopped with such periods being 6, 18 and 30 months.

Enforcement

With respect to enforcement, the HFRA enables a person who believes that they have been impacted by fracturing operations, to notify the DNR and request an investigation. If the sampling results obtained as part of the investigation indicate that concentrations exceed establish groundwater or surface water standards, the DNR must issue an order to the permittee requiring a permanent or temporary replacement of the water source. The DNR shall also forward all the information to the Illinois EPA for investigating potential for violations of the Environmental Protection Act.

Interestingly, there is a rebuttal presumption established under the HFRA in which it is presumed that any person conducting hydraulic fracking shall be liable for pollution of a water supply if the water source is within 1,500 feet of the well, water quality data indicated no pollution prior to the start-up, and the pollution occurred during operations or no more than 30 months after completion of the operations.

The HFRA establishes criminal offenses for knowing violations (a Class 4 felony), as well as civil penalties from $50,000 to $100,000 per violation with additional daily penalties, depending on the nature of the violation. In addition, a citizen suit provision provides that any person having an interest that is or may be adversely affected may commence a civil action against any agency or any other person who appears to be in violation of the HFRA or any rule, order or permit.

The DNR is getting ready to implement the HFRA's requirements by hiring more personnel and adapting regulations that mirror the law's requirements. Although it may be six months to a year before this program is fully operational, companies appear to be getting their engineering and geological studies underway.