Relates to compulsory integration and unitization in oil and natural gas orders; provides homeowners with an option to refuse integration; authorizes judicial review of integration orders.
STATE OF NEW YORK
________________________________________________________________________
2274
2017-2018 Regular Sessions
IN ASSEMBLY
January 17, 2017
___________
Introduced by M. of A. ROSENTHAL, ABINANTI -- read once and referred to
the Committee on Environmental Conservation
AN ACT to amend the environmental conservation law, in relation to
compulsory integration and unitization in oil and natural gas orders
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Subdivision 2, subparagraphs 4 and 5 of paragraph a of
2 subdivision 3 and subdivision 13 of section 23-0901 of the environmental
3 conservation law, subdivision 2 and subparagraphs 4 and 5 of paragraph a
4 of subdivision 3 as amended and subdivision 13 as added by chapter 386
5 of the laws of 2005, are amended and two new subdivisions 14 and 15 are
6 added to read as follows:
7 2. The department shall not make any order requiring the integration
8 of interests in any spacing unit or requiring the development or opera-
9 tion of any field, pool or part thereof as a unit unless it finds, after
10 detailed study and analysis, notice and hearing, that the integration of
11 interests in spacing units, under conditions then existing in this
12 state, or in the field or pool to be affected, is necessary to carry out
13 the policy provisions of section 23-0301 of this article. The depart-
14 ment shall also consider the impact that compulsory integration will
15 have on an existing mortgage prior to making an integration order.
16 (4) "Non-integrated, non-participating owner" means an owner, the
17 owner's heirs, successors and assigns, wholly or partially located with-
18 in the spacing unit, who elects not to participate in the initial well
19 in a spacing unit, refuses to pay any costs associated with partic-
20 ipation, refuses to reimburse the well operator, out of production
21 proceeds for such owner's proportionate share of the actual well costs
22 of the initial well in a spacing unit, and refuses to comply with the
23 requirements for integration, including the terms of integration, as
24 specified in an order of integration issued pursuant to the compulsory
25 integration provisions of this section. Notwithstanding any other
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD05362-01-7
A. 2274 2
1 provision of law to the contrary, all non-integrated, non-participating
2 property owners, in addition to possible purchasers, shall be provided
3 with an option to refuse integration altogether, at or before the inte-
4 gration hearing required pursuant to this section.
5 (5) "Risk penalty" means the percentage applied to well costs to reim-
6 burse the well operator for the risk involved with the exploration for
7 and development of a well or the percentage applied to other costs that
8 are subject to recoupment and a risk penalty, as provided herein. At
9 any time during a risk penalty phase, an owner subject to a risk penalty
10 may pay to the well operator the full amount subject to recoupment by
11 the well operator, to terminate the risk penalty phase and be eligible
12 for other opportunities for participation as provided herein.
13 [(5)] (6) "Well costs" means the costs incurred or estimated to be
14 incurred by the well operator in relation to the drilling, completion,
15 and the installation of surface equipment, other than as described in
16 item E of clause (ii) of subparagraph 1 of paragraph c of this subdivi-
17 sion, including, without limitation, surveying, drill site preparation,
18 leasing of surface rights and access roads pertinent to the drill site,
19 construction of access roads, permitting, drilling, stimulation, test-
20 ing, well logging, drilling insurance, plugging and abandonment of the
21 well, environmental mitigation costs associated with drilling and any
22 other costs associated with the foregoing that the operator has incurred
23 or anticipates incurring, including a reasonable charge for supervision
24 of the foregoing activities.
25 13. a. Any person taking title by operation of law to any oil and gas
26 interests integrated into a spacing unit pursuant to an order of inte-
27 gration, shall take such interests subject to the terms and conditions
28 of the final order of integration issued by the department duly recorded
29 in accordance with the provisions of this section and shall be subject
30 to all liabilities and benefits associated therewith, unless such
31 person, within sixty days of the taking of such interest, elects to be
32 an integrated royalty owner and notifies the well operator of such
33 election.
34 b. Full cost and liability for any damages caused by well operations
35 shall be borne solely by the well operator and the burden of proof with
36 respect to liability for such damages shall be upon the well operator.
37 14. Integration orders issued pursuant to this section shall be
38 subject to judicial review.
39 15. No party involved with compulsory integration may have, on or
40 within one thousand or more feet from the property boundary of any pool,
41 any: a. surface activity including, but not limited to any drilling,
42 compressor pits or closed waste systems, or b. subsurface gas storage.
43 § 2. This act shall take effect on the sixtieth day after it shall
44 have become a law.
