Drillers warn on revised fracking rules in Illinois

Illinois could be 90 days away from the nation's strongest, 'possibly unworkable' environmental protection rules for hydraulic fracturing.

Revised rules regarding hydraulic fracturing recently released by the Illinois Department of Natural Resources are far more stringent than earlier versions that followed more than three years of negotiations between drillers and environmental groups and could seriously limit the level of drilling in the state's shale formations,.

The Department of Natural Resources (DNR) released the second draft of the fracking rules August 29 after what it called "unprecedented public involvement in the rulemaking process," largely from citizens pushing for stricter environmental protections. The state Legislature's Joint Committee on Administrative Rules now has up to 90 days to approve or reject the rules or make suggestions for changes. If approved, the department could begin to approve fracking permits.

The rules implement a law signed by Illinois Gov. Pat Quinn (D) in June 2013 that he said would ensure "the nation's strongest environmental protections for hydraulic fracturing."

The law, which reflected three years of negotiations between industry and green groups, mandated that the DNR write up specific permitting and enforcement requirements, but all parties agree that the latest rules issued by the department have more stringent environmental requirements than previous versions. Oil and gas companies have leased more than 500,000 acres in the New Albany and deeper Maquoketa Shale Formations in southern Illinois. Development of what is expected to be largely an oil play has stalled, however, due in part to the complex geology but also the fact that drillers have waited for the state to write the fracking regulations.

The latest version of the rules, however, goes beyond requirements in the legislation and could further harm oil and gas development in the state, Brad Richards, executive vice president of the Illinois Oil and Gas Association, told IHS The Energy Daily on Monday.

"There are elements of this rulemaking that are going to be impossible to live with," he said. "It's fair to say that this new draft will lead us to question whether [these rules] will be workable."

Among the changes he cited are new rules allowing DNR to consider "cumulative effects" on the environment from other oil and gas wells in the area where it is considering permitting a new well. Richards also pointed to new requirements for analyses of potential radioactivity of drilling waste and more stringent reviews of potential induced seismicity caused by wells.

Perhaps most sweeping are changes to the rules expanding who would have legal standing to call for public hearings on permitting decisions beyond affected landowners, he said.

"If every permit requires a public hearing, development of this resource will not go forward," Richards said. Negotiations over the fracking rules created a split between environmental groups who are demanding an outright ban or a moratorium on fracking in Illinois-as has happened in New York and Maryland-- and other green groups who worked for the relatively tough regulations.

The Illinois chapter of the Natural Resources Defense Council (NRDC) said last week that they still wanted the state legislature to place a moratorium on fracking due to health and environmental concerns, but that the latest version of the regulations is a "thorough, thoughtful and exhaustively researched" improvement over earlier drafts.

"They are a significant improvement over the department's first effort," wrote Ann Alexander, a senior attorney in the Illinois office of the NRDC, in an overview of the revised rules. "It addresses many of the problems we and thousands of others raised concerning the initial draft's weakening of protections in the statute."

Among other changes from earlier drafts she pointed to revisions in the latest draft that strengthen air emissions standards, limit use of open pits for wastewater storage and specify liability for any contamination. The regulations are meant to codify the original June 2013 legislation that also requires testing of groundwater prior to fracking; disclosure of chemicals used in fracking fluids prior to operations; and storage of fluids in above-ground tanks.

Quinn, industry groups and greens all touted the legislation as imposing some of the strongest and most comprehensive fracking requirements in the country.

Since then, however, many industry groups have expressed impatience as DNR has reviewed the more than 30,000 public comments received while drafting the rules based on the legislation.

Some industry officials have accused Quinn of stalling the implementation of the rules, and some drillers and business groups who backed the fracking legislation have increased their support for GOP gubernatorial candidate Bruce Rauner, a strong supporter of oil and gas development who has held an approximately 7 percentage point lead over Quinn in recent polls. In its revised rules, DNR said it took months to address the avalanche of public comments, and that the final revisions make for "an improved regulatory framework that fulfills the intent of the Hydraulic Fracturing Regulatory Act."

"DNR saw unprecedented public involvement in this rulemaking process: the comments received were more than DNR has received in all its other rulemakings combined, ever," according to DNR's response to public comments.

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This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.