News and Events Involving Environmental Law, Published by Chicago Environmental Attorney Dave Scriven-Young
of Peckar & Abramson, P.C. -- (312) 881-6309

New Law #3: DNR Determines Whether New Oil & Gas Leases Are Operative

Continuing our countdown of new Illinois environmental laws taking effect on January 1, 2016 is Public Act 99-0138, which allows the Department of Natural Resources to determine if oil and gas leases submitted with permit applications are operative because prior leases have terminated due to nondevelopment or nonproduction.

1-1-16 Campaign (4)The Illinois Oil and Gas Act governs the permitting, drilling, operating, and plugging of oil and gas production wells.  The new law adds additional sections to the Act providing that DNR “shall have the authority to adopt rules and hold hearings to determine if oil and gas leases submitted with an application for a permit or transfer of a permit for a well are operative on the basis that prior oil and gas leases covering the same lands have terminated due to non-development or non-production.”  The new law also provides standards by which DNR would make such a determination:

“Department determinations under this Section shall be based upon affidavits of non-development or non-production from knowledgeable individuals familiar with the history of development and production of oil or gas as to such lands, together with other evidence, which create a rebuttable presumption that the prior oil and gas leases have terminated and are of no further force and effect and that the submitted oil and gas leases are operative and effective.  To create a rebuttable presumption, such affidavits, together with other evidence provided to or available from the Department, shall reasonably indicate that there has been no development or production of oil and gas on the lands described in the prior leases for at least 24 consecutive months subsequent to the expiration of the primary term or any extension of the primary term as set forth in the leases.  A court order or judgment declaring the prior leases terminated is not required for determinations under this Section, except in extraordinary circumstances where such determinations cannot reasonably be concluded from the affidavits or evidence submitted to or available from the Department.”

After DNR makes a determination of a rebuttable presumption, it must provide the current permittee with notice and a 30-day opportunity to request a hearing to rebut the presumption before a final determination on a lease is made.  In any event, all determinations on leases must be made no later than 90 days after DNR’s receipt of a valid request for such determination.  Determinations that prior oil and gas leases have terminated due to non-development or non-production shall require the current permittee to properly plug all non-plugged and non-transferred wells within the lease boundaries of the prior leases.


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