When the Illinois Hydraulic Fracturing Act was enacted in the summer of 2013, it was expected to have intense regulatory compliance requirements. Still, Illinois businesses thought the path to implementing high-volume hydraulic fracturing and a new job-generating industry for Southern Illinois communities would be created to succeed. Expectations were that permits could be processed and in place by late this summer with the siting and development of the infrastructure for the wells in full bloom this fall. Unfortunately, uncertainty has emerged in finalizing the rules to govern high-volume fracking in Illinois, and onerous requirements of the proposed rules now have business owners wondering if fracking will ever be developed in Southern Illinois.
Following passage of the act in 2013, the Illinois Department of Natural Resources (IDNR) issued draft implementing rules in November. A public comment period followed, closing in January. The industry was hopeful that the final rules would be forthcoming by early this year. However, with more than 30,000 public comments to consider, IDNR’s revised rules were just recently published on Aug. 29. These rules now must be reviewed and approved by the Illinois Joint Committee on Administrative Rules (JCAR) by Nov. 15 in order to become final.
What is shaping up is one of the broadest, most extensive regulatory schemes among the 50 states, covering items from permitting, groundwater monitoring, traffic management, chemical fluid disclosure, penalties for violations and seismicity. Almost every step in the process of well siting, permitting, development, operation and closure has been addressed and regulated.
Given the breadth of the fracturing act, its impact will go far beyond the drilling and gas development companies seeking permits to install the wells. Indeed, it will impact the trucking industry, consultants, geologists, scientists, sand industry, chemical suppliers and many other business sectors providing services to support high-volume fracturing in Southern Illinois.
Below are some of the key provisions of the fracturing act and proposed regulations:
“Guilty until you prove yourself innocent” Groundwater Provision: The act contains a provision which goes against one of the most fundamental precepts in our justice system -- namely that a party is innocent until proven guilty. It creates a regulatory groundwater scheme with a presumption that groundwater contamination, discovered in a defined area surrounding a high-volume horizontal fracturing well, was caused by the operator of the well. This presumption remains in place for up to two and a half years after the operation of the well has ceased and can be rebutted only by identifying an alternative cause of the contamination, evidence that the pollution occurred more than two and a half years after the fracturing operations or proof that the well site is outside a defined distance from the contaminated water source. A well operator must prove by clear and convincing evidence (a very high legal burden of proof) that the contamination is not a result of the fracking operation.
Permit Reporting Requirements: The sheer volume of plans, certifications, reports and information that must be submitted under the act is astounding. In one section of the act alone, there is a list of 28 separate plans or certifications that must be submitted to IDNR. It includes a directional drilling plan, an operations plan, a chemical disclosure report, a water source management plan, a fluids and flow back plan, a traffic management plan, a fugitive dust control plan, a radioactive materials management plan and more. This level of reporting stands in stark contrast to the requirement that IDNR approve, reject or approve with conditions any permit application within 60 days. Given this dichotomy, it seems likely that IDNR will be requesting that applicants waive this 60-day period requirement and the permit period will be lengthened.
Further, even if IDNR can move mountains and review each of the detailed operation plans required in the application, the multiple opportunities for public comment and input on the application will almost certainly require an extension of the 60-day time frame. Under the proposed regulations, multiple opportunities for public input and comment exist, including an initial 30-day public comment period which begins seven days after IDNR publishes the permit application, a public hearing which can be requested by an “adversely affected person” and an additional public comment period following the results of the public hearing. In addition, the industry is concerned that the breadth of an “adversely affected person” who can request a public hearing may lead to many more delays.
Newly Increased Penalty Provisions: In the recently revised rules, IDNR has exponentially increased the penalties that can be sought for violations of the act or regulations. IDNR has justified this by indicating the change was made to bring the penalties in line with other states’ fracking penalty provisions. Under the revised rules, IDNR can seek an administrative penalty of up to $5,000 per day for each violation, not to exceed $50,000. The per-day penalties increase greatly if the operator has been cited for a previous violation of the rule.
These onerous provisions, compounded with uncertainty about when the proposed rules will be finalized, have cast doubt on whether the New Albany Shale formation in the Southern Illinois base will ever be developed through high-volume hydraulic fracturing. Hopefully, this great opportunity for Southern Illinois will not be wasted.