§ 23-1101 — Procedure for obtaining oil and gas production lease

§ 23-1101. Procedure for obtaining oil and gas production lease.\n 1. The department may make leases on behalf of this state, upon such\nterms and conditions including consideration as to the department seem\njust and proper for:\n a. The exploration, development and production of gas in state-owned\nlands, except state park lands, state forests, reforestation areas,\nwildlife management areas, unique areas, the marine and coastal district\nas defined in section 13-0103 of this chapter, and the lands under the\nwaters of Lake Ontario or along its shoreline; and\n b. The exploration, development and production of oil in state-owned\nlands, except state park lands, state forests, reforestation areas,\nwildlife management areas, unique areas, the marine and coastal district\nas defined in section 13-0103 of this chapter, and the lands under the\nwaters of Lake Erie and Lake Ontario or along their shorelines.\n 2. All oil and gas leases shall:\n a. Be limited in duration to a period not to exceed ten years and as\nlong thereafter as oil and gas is produced in commercially paying\nquantities;\n b. Provide for payment to the agency having jurisdiction over the\nleased lands of such consideration, royalties, rentals, bonuses and\nother compensation as shall, in the discretion of the department, be in\nthe best interests of the people of the state of New York;\n c. Provide for prompt exploration followed within a reasonable time by\noperations for the production of oil and gas, if such be found, and\nshall also contain provisions for the termination of such lease by\nreason of the lessee's failure to so explore or operate;\n d. Be invalid unless they shall have the prior approval of such state\ndepartment, division, bureau or agency thereof, or state agency having\njurisdiction over the land in question; and authority to give such\nconsent is hereby conferred upon the head of any such state department,\nor a division, bureau or agency thereof, or any state agency, and with\nrespect to lands under water held by the state in its sovereign\ncapacity, jurisdiction is deemed to be in the Commissioner of General\nServices; and\n e. Be inapplicable to any state park lands and to any lands the\nleasing of which is prohibited by the State Constitution.\n 3. In addition to the requirements contained in paragraphs a, c and e\nof subdivision two of this section, all gas leases with respect to the\nlands under the waters of Lake Erie shall:\n a. Provide for payment to the general fund of the state such\nconsideration, royalties, rentals, bonuses or other compensation as\nshall, in the discretion of the department, be in the best interests of\nthe people of the state of New York.\n b. Require that no well shall be permitted nearer than one-half mile\nfrom the shore, two miles from public water intake areas, and one\nthousand feet from any other structure or installation in or on Lake\nErie.\n c. Require that the following procedures be established if there is\nevidence suggesting that liquid hydrocarbons may exist in a stratum\npenetrated by the well bore:\n (i) Drilling or completion operations shall cease immediately.\n (ii) The department shall be notified of the evidence indicating the\npresence of liquid hydrocarbons, pursuant to such notification\narrangements as the department shall prescribe.\n (iii) A formation test shall be conducted in the presence of a\ndepartment representative.\n (iv) If the formation test indicates the presence of appreciable\nliquid hydrocarbons, the well bore shall be permanently plugged and\nabandoned from total depth to the lake bottom with cement.\n (v) If the formation test does not indicate the presence of\nappreciable liquid hydrocarbons, drilling may be resumed after an\nintermediate string of casing has been set, cemented and tested.\n (vi) If there is any further indication of liquid hydrocarbons the\nprocedures outlined in paragraphs one through five hereof shall be\nrepeated.\n d. Require that each lessee, or other person desiring to install a\npipeline, bury the most shoreward portion of each pipeline, in\naccordance with rules and regulations which shall be promulgated by the\ndepartment, to obviate the risk of damage from ice, wave and wind\nconditions.\n e. Be conditioned upon the posting by the responsible parties of a\nliability bond or liability insurance coverage in such form as the\ndepartment may by regulation require and in such amount as the\ndepartment shall deem to be reasonably sufficient to correct, repair or\nremedy to the satisfaction of the department any environmental damage or\nhazardous discharge resulting from gas exploration or recovery.\n f. Provide that each lessee shall be strictly liable to the state for\nall reasonable expenses involved in the restoration of fresh water\nsupplies, cleanup of beaches, piers and other similar facilities, which\nmay be required as a result of exploration, drilling or production\noperations, and for liability claims arising therefrom.\n g. Require each lessee to immediately notify the department of any\ndischarge of oil or other pollutant, to act expeditiously to terminate\nsuch discharge and to remove the substance discharged.\n h. Provide for the use and regular inspection of modern anti-pollution\ndevices, including blow-out preventors on every drilling rig.\n i. Provide that when a well is permanently abandoned for any reason it\nshall be permanently plugged by filling the well bore for its total\ndepth, with cement or other suitable material.\n j. Provide that, where in the department's opinion, damage to the\nenvironment is imminent or an emergency exists, the department shall\norder the immediate plugging and abandonment, either temporary or\npermanent, of any well on lands beneath Lake Erie.\n 4. Any such oil, gas, or oil and gas lease or leases made and granted\npursuant to this section shall be awarded to the highest responsible\nbidder after advertisement for sealed bids. Such advertisements for bids\nshall be published in the official newspaper or newspapers, if any, or\notherwise in a newspaper or newspapers designated for such purpose. Such\nadvertisement shall contain a statement of the time and place where all\nbids received pursuant to such notice will be publicly opened and read.\nAll bids received shall be publicly opened and read at the time and\nplace specified. At least thirty days shall elapse between the first\npublication of such advertisement and the date specified for the opening\nand reading of bids. Bids shall be submitted on forms provided by the\ndepartment, which forms shall indicate the method or methods for\ncomputing compensation to the state for the lease and shall contain such\nother directions as may be appropriate to secure comparability of bids\nsubmitted for any given lease. The department, in its discretion, shall\ndetermine the highest bid after taking into consideration the\nanticipated compensation to be returned to the state under any such\nlease by way of royalty payments, delayed lease rental payments, bonuses\nor other compensation or consideration, or by a combination of any or\nall of the same. In cases where two or more responsible bidders submit\nidentical bids, the department in its discretion, may award the lease\ninvolved to any of such bidders. The department in its discretion, may\nalso reject any or all bids and readvertise for new bids. The department\nmay disallow any bid if the bidder upon request fails to furnish\nsatisfactory evidence of responsibility.\n 5. Notwithstanding the requirements contained in subdivision four of\nthis section, the department may negotiate and grant an oil or gas lease\non small parcels of stateowned land without public bid in order to\nconsolidate large drilling or production units controlled by a single\nentity. The department shall make a determination that public bid of\nsuch property is unreasonable or impracticable and publish such\ndetermination in the state register prior to the granting of any such\nlease.\n 6. Notwithstanding subdivision four of this section, the department\nmay negotiate and grant an oil or gas lease of lands identified in\nsubdivision one of this section where oil and gas exploration and\ndevelopment rights are co-owned by the state and another owner,\nincluding the United States. The department shall publish its intention\nto enter into negotiations on such lease in the state register prior to\nthe granting of any such lease.\n