The Illinois Department of Natural Resources (IDNR) on August 29, 2014 filed proposed rules that if adopted, will create additional burdens on companies seeking to extract natural gas in Illinois.  The proposed rules, filed with the Joint Committee on Administrative Rules (JCAR), represent IDNR’s final rules implementing the Hydraulic Fracturing Regulatory (Act), the comprehensive law which permits, and strictly regulates, high volume horizontal hydraulic fracturing (fracking) in Illinois.  These new rules (Rules) could be argued to impose requirements well-beyond those expressly provided by the Act and the proposed rules issued by the IDNR on November 13, 2013.  The following are among the ways in which the Rules could be viewed to go beyond requirements of the Act.

Chemical Disclosure and Trade Secret Requirements

The Rules appear to impose additional burdens on chemical disclosure and trade secret protection.  Specifically, the Rules purport to require an applicant to provide its master list of chemicals (and more accurate chemical disclosure report) to IDNR at the time of application unless claiming trade secret protection, while the Act allows the applicant to submit the list up to 21 days prior to the start of operations.  Further, when making a claim of trade secret to IDNR, the Rules posit that a claimant to affirm under penalty of perjury that the chemical at issue is, in fact, a trade secret, and require the claimant to provide a new explanation for the claim and to disclose all government entities to which the trade secret information has previously been disclosed.

Emergency Access to Chemical Information

The Rules could be read to expand the degree of access health care professionals will have to the trade secret information by allowing those professionals to contact the claimant by phone or email 24 hours a day/7 days a week and requiring in emergency situations that the trade secret holder provide the requested information to the professional within 2 hours, rather than merely respond “as quickly as possible.”  The Rules delete provisions requiring that health care professionals with whom trade secret information was shared only use the information for the purposes of the request and which allowed a claimant to enter into confidentiality agreements with those health care professionals, two requirements set forth in the Act.

Base Fluid

The Rules specify how to quantify non-water based materials (e.g. gases or foams used to fracture) by defining “base fluid” more expansively to ensure that the regulations apply to any fracking operation above the 300,000 gallon threshold, regardless of the type of base fluid used.  In the Act, “base fluid” is defined merely as the continuous phase fluid type, including, but not limited to, water used in a high volume horizontal hydraulic fracturing operation.

Local Government Involvement

The Rules impose a new requirement that an applicant must demonstrate to the IDNR in its application that it has delivered water compliance certifications to the applicable local Soil and Water Conservation District and Community Water Supply.  The Rules further require IDNR to notify local public health departments, in addition to the sister state agencies specified in the Act, when it receives an application.  IDNR is also required under the Rules to consider input from local and regional governments when determining whether fracking operations will be sufficiently protective of public health and the environment.  Additionally, the Rules seem to mandate that IDNR notify county and certified local health departments when there is a discharge or water pollution issue, and that permittees notify county and certified local public health departments when fracking fluid has escaped the confining zone.

Emergency Management/Public Health

The Rules appear to impose new provisions related to emergency management and public health.  Specifically, they posit that applicants must comply with OSHA regulations and employ proper safety measures during an emergency, including whether local responders have appropriate equipment and training to respond to an emergency at a well.  In addition, the Rules permit IDNR to consider information related to earthquake, flood or other natural disasters when determining whether to issue a permit.  Further, IDNR is to consider any input received from local, regional, or state public health agencies, officials or representatives of the public health community, any relevant baseline knowledge of public health in the population area impacted and any specific facts or opinions received bearing on public health impacts of the proposed permit in determining whether fracking operations will be sufficiently protective of public health and the environment.

Radiation

The Rules state that a radioactive materials management plan is to be submitted with an application.  Through that plan applicants are required to identify, manage, transport, and dispose of any radioactive materials utilized or generated during the course of fracking operations.  The plan must include baseline radiation monitoring, imposition of a worker training program that covers radiation, routine radiation surveys of the site, equipment, tanks, access roads, and nearby water sources, compliance with hazardous materials regulations, decontamination activities for releases of radioactive materials, demonstration that operations caused no radiological impacts, and ultimately requires an assessment of no radiological impact which must be verified by the Illinois Department of Emergency Management and IDNR prior to site release.

Plan For Gas Capture

The Rules also include a requirement for applicants to submit an emissions management statement in each fracking application.  Specifically, an applicant must set forth the methods it will employ to manage natural gas and hydrocarbon fluids produced during the flowback period and production period.

Seismic Management

The Rules create an application requirement to address the risk of earthquakes as a result of fracking.  Specifically, the Rules provide that, if any part of a proposed well is to be located in an area identified by the U.S. Geological Service as being at risk, then the application must identify measures the applicant will take to protect against an earthquake, and the applicant’s insurance policy must have a rider providing coverage against loss or claims resulting from earthquakes.

IDNR Hearing Process

The Rules appear to modify the hearing process set forth in IDNR’s original proposed rules by requiring that a hearing be held within 30 miles of the well site.  Further, the Rules omit the prior proposed requirement that the hearing be restricted only to issues related to the validity of the objection cited in the hearing request, delete the prior provision placing the burden of proof on the hearing requestor to establish the viability of their objection through credible evidence, delete the prior proposed requirement that hearing requestors provide witness lists and documents to support an objection and delete the prior provision which expressly allowed the parties to enter into settlement discussions prior to a hearing decision.

Rebuttable Presumption for Water Pollution

The Act provides for a rebuttable presumption that a permittee is responsible for pollution or diminution of a water supply within 1,500 feet of a well if laboratory results indicate pollution or diminution from one of five specified pollution sources: 1.) pH; 2.) total dissolved solids, dissolved methane, dissolved propane, dissolved ethane, alkalinity, and specified conductance; 3.) chloride, sulfate, arsenic, barium, calcium, chromium, iron, magnesium, cadmium, lead, manganese, mercury and silver; 4.) BTEX; or 5.) gross alpha and beta particles to determine the presence of any naturally occurring radioactive materials.  These Rules delete these 5 specified sources of pollution, potentially altering the scope of pollution or diminution for which a permitee may presumed liable.

Fee Increases

The Rules purport to increase enforcement fees from those set forth in IDNR’s originally proposed rules.  They create two separate $13,500 fees for permit modifications that represent significant deviations or which presents a possible serious risk to public safety, public health, life, property, aquatic life, wildlife, or the environment (the original proposed rule only had one $13,500 fee for a significant deviation, which was defined as a serious risk to public health, life, property, aquatic life, or wildlife).  Further, the Rules raise the administrative violation penalty cap to $5,000/day, not to exceed $50,000 (from $1,000/day, not to exceed $5,000) and the operating violation penalties to $25,000 (from $2,500).  IDNR also prescribes additional fee increases for violations that were serious (up to $20,000) or were incurred as a result of certain permittee actions (up to $5,000).

To become effective, the Rules must be adopted by JCAR by November 15, 2014 (one year from the date on which the proposed rules were issued).  Such adoption could happen as soon as September 16, 2014 when the Rules first appear on JCAR’s meeting agenda.  If adopted by JCAR prior to November 15, 2014, the Rules would become effective upon filing with the Secretary of State for publication in the Illinois Register.

The Rules can be viewed at IDNR’s website.  Please contact us with any questions about the Rules or their implementation.

Raghav Murali represented the Office of Governor Pat Quinn in the development of the Hydraulic Fracturing Regulatory Act.