Friday, September 1, 2017

Global Shale Law Compendium: Shale Governance in Illinois

Written by Chloe Marie – Research Fellow

The Global Shale Law Compendium series addresses legal developments and other issues related to the governance of shale oil and gas activities in various countries and regions of the world. In this article, we will focus on the legal, policy, and governance issues related to shale gas development in the United States, and more specifically in the state of Illinois.  

Though the state of Illinois sits atop the New Albany shale play, a major natural gas deposit in the Illinois Basin, shale gas exploration in the state remains in the earliest stage of development. The New Albany shale play stretches from the southeastern portion of Illinois to the states of Indiana and Kentucky where the shale oil and gas industry has had some level of activity. Indeed, natural gas production activities in the New Albany Shale using hydraulic fracturing date back to the 2000s. Based upon a January 1, 2015 estimate, according to the U.S. EIA, the state of Illinois possesses 3.3 Tcf of unproved technically recoverable shale gas reserves.

In May 2017, the first permit application for approval to drill a shale well, this in White County, has been submitted to the Illinois Department of Natural Resources’ Office of Oil and Gas Resource Management by Woolsey Operating Company, LLC. On August 31, 2017, this permit application was approved.

Despite the fact that shale gas development is not currently occurring in Illinois, the Illinois legislature anticipated such development and passed the Hydraulic Fracturing Regulatory Act on May 31, 2013, which was signed into law by Governor Pat Quinn and became effective on June 17, 2013. The decision to establish a regulatory framework for shale development followed an unsuccessful legislative attempt to institute a two-year ban on high volume hydraulic fracturing operations until a Hydraulic Fracturing Task Force could be created to develop findings and recommendations on the technique.

Following the enactment of the Hydraulic Fracturing Regulatory Act, on October 17, 2014, a number of landowners in Wayne County, Illinois, filed a class action lawsuit against Illinois Governor Pat Quinn and IDNR Director Marc Miller in the Wayne County Circuit Court challenging the delay in publishing the final rules implementing the Act. According to the lawsuit, this failure prevented them from developing their property in the areas of leasing interest. The landowners alleged that “because Defendants have refused and continue to refuse to issue permits allowing horizontal drilling and hydraulic fracturing, Plaintiffs’ private property has been taken without just compensation in violation of the Fifth Amendment of the United States Constitution.”

Shortly after this litigation was filed, the Illinois Joint Committee on Administrative Rules approved the final rules implementing the Act on November 6, 2014, which rules were published by the Illinois Department of Natural Resources on November 14, 2014. The rules were described as “the nation’s strictest for oil and gas drilling,” according to media reports.

The final rules provide that oil and gas operators must first register with the Illinois Department of Natural Resources (IDNR) at least thirty days prior to applying for a hydraulic fracturing permit. The regulations also require disclosure of all chemicals used in the hydraulic fracturing operations, provide for mandatory water and air quality monitoring, establish specific requirements relating to well site preparation and operations, and establish well plugging and restoration requirements among other things. The final rules also allow the IDNR to adopt additional rules as long as it serves the purposes of this Act.

Interestingly, on November 10, 2014, some landowners in Madison County filed a complaint for declaratory judgment and injunctive relief against the IDNR in order to prevent the implementation of the rules. The Circuit Court of Madison County denied such injunction request on November 21, 2014, stating that the landowners failed to address their concerns over the new regulations. Plaintiffs then filed appeal against the County Court’s judgment; however, the Appellate Court affirmed it in July 2015.

1 comment:

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