Current through Register Vol. 48, No. 12, March 22, 2024
a) No person shall be allowed to construct,
drill, operate, perform HVHHF operations, or produce from a well for which a
permit is necessary under this Part if that well is not covered and protected
by a bond or other collateral securities as required by this Section.
b) All applicants for a permit under
this Part, and persons requesting permit transfers, shall
provide a bond at the time of filing an application for permit
pursuant to Section
245.210
or at the time of filing a request for transfer of permit pursuant to Section
245.340.
The bond shall be in the amount of $50,000 per permit or a blanket bond
of $500,000 for all permits. (Section 1-65(a) of the Act) All bonds
must meet the following requirements during the permit application process and
through the entire term of an issued permit until the bond is released as
provided by subsection (d):
1) Bonds shall be
signed by the permittee as principal and by a good and sufficient corporate
surety legally authorized to transact business as a surety in
Illinois.
2) Each bond shall
provide that the bond shall not be cancelled by the surety without at least 90
days' notice to the Department. Notice shall be served upon the Department in
writing by registered or certified mail to the Illinois Department of Natural
Resources, Attention: Office of Oil and Gas Resource Management, One Natural
Resources Way, Springfield IL 62702.
3) Within the 90-day notice period and before
the bond is cancelled the permittee shall deliver to the Department a
replacement bond. If the replacement bond is not delivered, all activities
covered by the bond shall cease at the expiration of the 90-day notice
period.
4) If the authority to
transact business in Illinois of any surety upon which a bond is filed with the
Department is suspended or revoked, the permittee, within 30 days after
receiving notice of the suspension/revocation, shall notify the Department and
shall make substitution by providing a bond or other security as required by
this Section. Upon the failure of the permittee to make the substitution of
bond or other security, all activities covered by the bond shall cease until
substitution has been made.
c)
In lieu of a bond, other
collateral securities such as cash, certificates of deposit, or irrevocable
letters of credit under the following terms and
conditions may be provided by a permittee (Section 1-65(a) of the
Act):
1) Cash: Cash shall be placed in the
Department's possession.
2)
Certificates of Deposit
A) Certificates of
deposit shall be payable to the permittee and assigned to the Department, both
in writing submitted to the Department and upon the records of the bank issuing
the certificates. If assigned, the Department will require the banks issuing
these certificates to waive all rights of setoff or liens against the
certificates.
B) The Department
will not accept an individual certificate of deposit in an amount in excess of
the maximum insurable amount determined by the Federal Deposit Insurance
Corporation.
C) Any interest
accruing on a certificate of deposit shall be for the benefit of the permittee
except that accrued interest shall first be applied to any prepayment penalty
when a certificate of deposit is forfeited by the Department.
D) The certificate of deposit, if a
negotiable instrument, shall be placed in the Department's possession. If the
certificate of deposit is not a negotiable instrument, a withdrawal receipt,
endorsed by the permittee, shall be placed in the Department's
possession.
3) Letters
of Credit
A) The letter may only be issued by
a bank organized or authorized to do business in the United States (issuing
bank). If the issuing bank does not have an office for collection in Illinois,
there shall be a confirming bank designated that is authorized to accept,
negotiate and pay the letter upon presentment in Illinois.
B) Letters of credit shall be irrevocable
during their terms. A letter of credit shall be forfeited and shall be
collected by the Department if not replaced by other suitable bond or other
collateral securities at least 30 days before its expiration date.
C) The letter of credit shall be payable to
the Department upon demand, in part or in full, upon receipt from the
Department of a notice of forfeiture issued in accordance with subsection
(e).
D) The Department will not
accept a letter of credit in excess of 10% of the issuing bank's total capital
and surplus accounts, as certified by the President of the bank providing the
letter of credit and as evidenced by the most recent quarterly Call Report
provided to the Federal Deposit Insurance Corporation.
E) The letter of credit shall provide on its
face that the Department, its lawful assigns, or the attorneys for the
Department or its assigns may sue, waive notice and process, appear on behalf
of, and confess judgment against the issuing bank (and any confirming bank) in
the event that the letter of credit is dishonored. The letter of credit shall
be deemed to be made in Sangamon County, Illinois, for the purpose of
enforcement and any actions thereon shall be enforceable in the Courts of
Illinois, and shall be construed under Illinois law.
d)
The bond or other
collateral securities shall remain in force until the well is plugged,
abandoned and restored, or transferred. Upon
plugging, abandoning and restoring, or transferring a
well to the satisfaction of the Department and in accordance with the Illinois
Oil and Gas Act, the bond or other collateral securities shall be promptly
released by the Department. Upon the release by the Department of the bond or
other collateral securities, any cash or collateral securities deposited shall
be returned by the Department to the applicant or permittee
who deposited it. (Section 1-65(b) of the Act)
e)
If, after notice and the
opportunity for hearing, the Department determines that any of the
requirements of the Act or this Part or the
orders of the Department have not been complied with within the time limit set
by any notice of violation issued thereunder, the permittee's
bond or other collateral securities shall be subject to forfeiture
pursuant to the following procedure (Section 1-65(c) of the Act):
1) A permittee's failure to comply with the
Department's order finding a violation of the Act or this Part constitutes
grounds for bond forfeiture.
2) The
Department will send written notification by certified mail, return receipt
requested, to the permittee and the surety on the bond, if any, informing them
of the determination to forfeit the bond pursuant to subsection
(e)(1).
3) The Department may allow
a surety to correct the violation if the surety can demonstrate an ability to
complete the corrective work in accordance with the requirements of the Act and
this Part. No surety liability shall be released until the successful
correction of the violation ordered by the Department.
4) In the event forfeiture of the bond or
other collateral securities is warranted by subsection (e)(1), the Department
will afford the permittee the right to a hearing, if the hearing is requested
in writing by the permittee within 30 days after the bond forfeiture
notification is received in accordance with subsection (e)(2). If the permittee
does not request a hearing within the 30-day period, the determination to
forfeit the bond shall be a final administrative decision. If a hearing is
requested by the permittee, the hearing shall be scheduled within 30 days after
the receipt of the request for hearing, and shall be conducted by a Hearing
Officer.
5) At the bond forfeiture
hearing, the Department will present evidence and has the burden of proof to
support its determination to forfeit the bond under subsection (e)(1). The
permittee may present evidence contesting the Department's determination. The
Hearing Officer may administer oaths and affirmations, subpoena witnesses and
written or printed materials, compel attendance of witnesses or production of
those materials, compel discovery, and take evidence.
6) Within 30 days after the close of the
record for the bond forfeiture hearing, the Hearing Officer shall issue
recommended findings of fact, recommended conclusions of law and
recommendations as to the disposition of the case.
7) The Director or his or her designee shall
review the administrative record in a contested case, in conjunction with the
Hearing Officer's recommended findings of fact, recommended conclusions of law
and recommendations as to the disposition of the case. The Director or
designee, shall then issue the Department's final administrative decision
affirming, vacating or modifying the Hearing Officer's decision.
8)
In no way will payment under this
bond exceed the aggregate administrative penalty as
specified in the Notice of Violation or Director's Decision. (Section
1-65(c) of the Act)
9)
Forfeiture under this subsection (e) shall not limit
any duty of the permittee to mitigate or remediate harms or foreclose
enforcement by the Department or the Agency. (Section 1-65(c) of the
Act)
f)
When any
bond or other collateral security is forfeited under the provisions of
the Act or this Part, the Department shall collect the
forfeiture without delay. The surety shall have 30 days to submit payment for
the bond after receipt of notice by the permittee or the Department
of the forfeiture. (Section 1-65(d) of the Act)
g) If the permittee's bond is subject to
forfeiture and used for anything other than plugging and restoration of the
well and well site, the permittee shall have 30 days from the date of the
Department's determination to forfeit the bond to replace the bond. Failure to
replace the bond within this time shall result in the immediate cessation of
activities covered by the bond and permit.
h)
All forfeitures shall be deposited
in the Mines and Minerals Regulatory Fund to be used, as necessary, to mitigate
or remediate violations of the Act or this Part.
(Section 1-65(e) of the Act)