2023 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.