Hydraulic fracturing affects residential, commercial, industrial and agricultural owners similarly, and also, differently. The scope of the recently enacted Illinois Hydraulic Fracturing Act is designed to protect sensitive populations in each variety of owner — that is, the people who live, work, visit or own real property used for or near a hydraulic fracturing operation.
Let’s be clear, the proc-ess can be safe, but it is in everyone’s interest to trust and verify.
It is important to recognize that there are currently more than 20,000 fractured wells in Illinois, and no credible evidence of risk due to contamination or seismicity.
What is an owner to do now that Illinois enacted the Hydraulic Fracturing Act?
Hire a qualified attorney. Much of the land where we expect to find hydraulic fracturing operations are in southern Illinois — where oil and mineral rights have been severed historically. The owner of the surface likely does not own, or likely has limited or no title to the subsurface. Who owns the subsurface rights and do they currently exist? Did those rights expire?
Illinois recognized this issue several years ago in the Severed Mineral Interest Act. In those instances, courts are authorized to appoint local representatives with fiduciary authority for unknown and undeter-mined owners of mineral rights. Those appointed representatives can, with court approval, enter leases and accept money from the operator/lessee and hold the royalties in trust until the rightful owners are determined. If the mineral rights have been severed more than 20 years ago, title to the mineral rights could merge with the surface owner if the unknown interests are not identified or fail to appear within one year of the lease.
Individual land owners may also have the right to deny access to drilling operations at their property. However, hydraulic fracturing can be accomplished horizontally or the material may be in a strata that lies beneath that land owners real estate. Access to the energy source may be accomplished through neighboring land and the Illinois Department of Natural Resources has authority to grant access to the subsurface in certain circumstances. In those instances, a court reviewing the circumstances must balance the private property interests and the interests of the community with a need to prevent waste and unnec-essary drilling. If that balance is struck in favor of the drilling operation, the landowner has a right to receive his or her share of the production royalties after paying his or her share of the costs.
Drillers and energy companies will seek lease terms, options and royalties — the same or similar terms that were involved in earlier negotiations associated with mineral rights this past century. Indeed, how are the royalties paid (only while the well is in production with a base rental payment)? When does the lease expire? What are the scope of the indemnities and warranties? What right does the landowner have to terminate the lease? Under what grounds? What about closure? What financial and other assurances that the site will be closed and clean at the termination of the lease? What happens at abandonment? What about violations?
Owners should also consider collecting pre-drilling soil and ground water samples. The administrative agency’s decision on permits and compliance is subject to a deferential standard of court review based on the record developed by those involved. A lawyer knowledgeable with real estate, hydraulic fracturing, environmental law and administrative principles would be ideal.
Finally, every land owner should investigate the proposed lessee and operator and determine: What is their compliance experience? How are the proposed lessee and op-erator structured? What about their compliance?
Hydraulic fracturing present opportunities to landowners. However, without a proper investi-gation, current owners face the same pitfalls experienced by their predecessors in the past.
BILL ANAYA is an environmental attorney with Arnstein & Lehr, LLP in Chicago. He can be reached at 312-876-7109 or at email@example.com