NY Env Conserv L § 23-1101 (2021)
2021 New York Laws ENV - Environmental Conservation Article 23 - Mineral Resources Title 11 - Leases for Production and Storage of Oil and Gas on State Lands 23-1101 - Procedure for Obtaining Oil and Gas Production Lease.

§ 23-1101. Procedure for obtaining oil and gas production lease.   1.  The  department may make leases on behalf of this state, upon such terms and conditions including consideration as to the  department  seem just and proper for:   a.  The  exploration, development and production of gas in state-owned lands, except state park lands,  the  marine  and  coastal  district  as defined  in  section  13-0103  of  this chapter, and the lands under the waters of Lake Ontario or along its shoreline; and   b. The exploration, development and production of oil  in  state-owned lands,  except  state  park  lands,  the  marine and coastal district as defined in section 13-0103 of this chapter,  and  the  lands  under  the waters of Lake Erie and Lake Ontario or along their shorelines.   2. All oil and gas leases shall:   a.  Be  limited in duration to a period not to exceed ten years and as long thereafter as oil  and  gas  is  produced  in  commercially  paying quantities;   b.  Provide  for  payment  to  the agency having jurisdiction over the leased lands of such  consideration,  royalties,  rentals,  bonuses  and other  compensation as shall, in the discretion of the department, be in the best interests of the people of the state of New York;   c. Provide for prompt exploration followed within a reasonable time by operations for the production of oil and gas,  if  such  be  found,  and shall  also  contain  provisions  for  the  termination of such lease by reason of the lessee's failure to so explore or operate;   d. Be invalid unless they shall have the prior approval of such  state department,  division,  bureau or agency thereof, or state agency having jurisdiction over the land in  question;  and  authority  to  give  such consent  is hereby conferred upon the head of any such state department, or a division, bureau or agency thereof, or any state agency,  and  with respect  to  lands  under  water  held  by  the  state  in its sovereign capacity, jurisdiction is deemed to be in the  Commissioner  of  General Services; and   e.  Be  inapplicable  to  any  state  park  lands and to any lands the leasing of which is prohibited by the State Constitution.   3. In addition to the requirements contained in paragraphs a, c and  e of  subdivision  two of this section, all gas leases with respect to the lands under the waters of Lake Erie shall:   a. Provide  for  payment  to  the  general  fund  of  the  state  such consideration,  royalties,  rentals,  bonuses  or  other compensation as shall, in the discretion of the department, be in the best interests  of the people of the state of New York.   b.  Require  that no well shall be permitted nearer than one-half mile from the shore, two miles  from  public  water  intake  areas,  and  one thousand  feet  from  any  other structure or installation in or on Lake Erie.   c. Require that the following procedures be established  if  there  is evidence  suggesting  that  liquid  hydrocarbons  may exist in a stratum penetrated by the well bore:  (i) Drilling or completion operations shall cease immediately.  (ii) The department shall be notified of the evidence  indicating  the presence   of   liquid   hydrocarbons,  pursuant  to  such  notification arrangements as the department shall prescribe.  (iii) A formation test  shall  be  conducted  in  the  presence  of  a department representative.  (iv)  If  the  formation  test  indicates  the presence of appreciable liquid hydrocarbons, the well bore  shall  be  permanently  plugged  and abandoned from total depth to the lake bottom with cement.  (v)   If  the  formation  test  does  not  indicate  the  presence  of appreciable liquid  hydrocarbons,  drilling  may  be  resumed  after  an intermediate string of casing has been set, cemented and tested.  (vi)  If  there  is  any further indication of liquid hydrocarbons the procedures outlined in paragraphs  one  through  five  hereof  shall  be repeated.   d.  Require  that  each  lessee, or other person desiring to install a pipeline,  bury  the  most  shoreward  portion  of  each  pipeline,   in accordance  with rules and regulations which shall be promulgated by the department, to obviate the risk  of  damage  from  ice,  wave  and  wind conditions.   e.  Be  conditioned  upon  the posting by the responsible parties of a liability bond or liability insurance  coverage  in  such  form  as  the department  may  by  regulation  require  and  in  such  amount  as  the department shall deem to be reasonably sufficient to correct, repair  or remedy to the satisfaction of the department any environmental damage or hazardous discharge resulting from gas exploration or recovery.   f.  Provide that each lessee shall be strictly liable to the state for all reasonable expenses involved  in  the  restoration  of  fresh  water supplies,  cleanup of beaches, piers and other similar facilities, which may be required as a  result  of  exploration,  drilling  or  production operations, and for liability claims arising therefrom.   g.  Require  each  lessee  to immediately notify the department of any discharge of oil or other pollutant, to act expeditiously  to  terminate such discharge and to remove the substance discharged.   h. Provide for the use and regular inspection of modern anti-pollution devices, including blow-out preventors on every drilling rig.   i. Provide that when a well is permanently abandoned for any reason it shall  be  permanently  plugged  by  filling the well bore for its total depth, with cement or other suitable material.   j. Provide that, where in the  department's  opinion,  damage  to  the environment  is  imminent  or  an emergency exists, the department shall order the  immediate  plugging  and  abandonment,  either  temporary  or permanent, of any well on lands beneath Lake Erie.   4.  Any such oil, gas, or oil and gas lease or leases made and granted pursuant to this section shall be awarded  to  the  highest  responsible bidder after advertisement for sealed bids. Such advertisements for bids shall  be  published in the official newspaper or newspapers, if any, or otherwise in a newspaper or newspapers designated for such purpose. Such advertisement shall contain a statement of the time and place where  all bids  received pursuant to such notice will be publicly opened and read. All bids received shall be publicly opened and  read  at  the  time  and place  specified.  At  least  thirty days shall elapse between the first publication of such advertisement and the date specified for the opening and reading of bids. Bids shall be submitted on forms  provided  by  the department,  which  forms  shall  indicate  the  method  or  methods for computing compensation to the state for the lease and shall contain such other directions as may be appropriate to secure comparability  of  bids submitted  for any given lease. The department, in its discretion, shall determine  the  highest  bid  after  taking   into   consideration   the anticipated  compensation  to  be  returned  to the state under any such lease by way of royalty payments, delayed lease rental payments, bonuses or other compensation or consideration, or by a combination  of  any  or all  of  the same. In cases where two or more responsible bidders submit identical bids, the department in its discretion, may  award  the  lease involved  to  any of such bidders. The department in its discretion, may also reject any or all bids and readvertise for new bids. The department  may disallow any bid  if  the  bidder  upon  request  fails  to  furnish satisfactory evidence of responsibility.   5.  Notwithstanding  the requirements contained in subdivision four of this section, the department may negotiate and grant an oil or gas lease on small parcels of stateowned land  without  public  bid  in  order  to consolidate  large  drilling  or production units controlled by a single entity. The department shall make a determination  that  public  bid  of such   property  is  unreasonable  or  impracticable  and  publish  such determination in the state register prior to the granting  of  any  such lease.   6.  Notwithstanding  subdivision  four of this section, the department may negotiate and grant an oil or  gas  lease  of  lands  identified  in subdivision  one  of  this  section  where  oil  and gas exploration and development  rights  are  co-owned  by  the  state  and  another  owner, including  the United States. The department shall publish its intention to enter into negotiations on such lease in the state register prior  to the granting of any such lease.