Assembly Bill A10772

                            
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  10772

                          I N  A S S E M B L Y

                              June 18, 2012
                               ___________

Introduced  by  COMMITTEE ON RULES -- (at request of M. of A. Rosenthal)
  -- read once and referred to the Committee on Environmental  Conserva-
  tion

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:

  Section  1.  Subdivision  2,  subparagraphs  4 and 5 of paragraph a of
subdivision 3 and subdivision 13 of section 23-0901 of the environmental
conservation law, subdivision 2 and subparagraphs 4 and 5 of paragraph a
of subdivision 3 as amended and subdivision 13 as added by  chapter  386
of  the laws of 2005, are amended and two new subdivisions 14 and 15 are
added to read as follows:
  2. The department shall not make any order requiring  the  integration
of  interests in any spacing unit or requiring the development or opera-
tion of any field, pool or part thereof as a unit unless it finds, after
detailed study and analysis, notice and hearing, that the integration of
interests in spacing units,  under  conditions  then  existing  in  this
state, or in the field or pool to be affected, is necessary to carry out
the  policy  provisions of section 23-0301 of this article.  THE DEPART-
MENT SHALL ALSO CONSIDER THE IMPACT  THAT  COMPULSORY  INTEGRATION  WILL
HAVE ON AN EXISTING MORTGAGE PRIOR TO MAKING AN INTEGRATION ORDER.
  (4)  "NON-INTEGRATED,  NON-PARTICIPATING  OWNER"  MEANS  AN OWNER, THE
OWNER'S HEIRS, SUCCESSORS AND ASSIGNS, WHOLLY OR PARTIALLY LOCATED WITH-
IN THE SPACING UNIT, WHO ELECTS NOT TO PARTICIPATE IN THE  INITIAL  WELL
IN  A  SPACING  UNIT,  REFUSES  TO PAY ANY COSTS ASSOCIATED WITH PARTIC-
IPATION, REFUSES TO REIMBURSE  THE  WELL  OPERATOR,  OUT  OF  PRODUCTION
PROCEEDS  FOR  SUCH OWNER'S PROPORTIONATE SHARE OF THE ACTUAL WELL COSTS
OF THE INITIAL WELL IN A SPACING UNIT, AND REFUSES TO  COMPLY  WITH  THE
REQUIREMENTS  FOR  INTEGRATION,  INCLUDING  THE TERMS OF INTEGRATION, AS
SPECIFIED IN AN ORDER OF INTEGRATION ISSUED PURSUANT TO  THE  COMPULSORY
INTEGRATION  PROVISIONS  OF  THIS  SECTION.  NOTWITHSTANDING  ANY  OTHER
PROVISION OF LAW TO THE CONTRARY, ALL NON-INTEGRATED,  NON-PARTICIPATING
PROPERTY  OWNERS,  IN ADDITION TO POSSIBLE PURCHASERS, SHALL BE PROVIDED

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
              

                                                           LBD13871-04-2

A. 10772                            2

WITH AN OPTION TO REFUSE INTEGRATION ALTOGETHER, AT OR BEFORE THE  INTE-
GRATION HEARING REQUIRED PURSUANT TO THIS SECTION.
  (5) "Risk penalty" means the percentage applied to well costs to reim-
burse  the  well operator for the risk involved with the exploration for
and development of a well or the percentage applied to other costs  that
are  subject  to  recoupment and a risk penalty, as provided herein.  At
any time during a risk penalty phase, an owner subject to a risk penalty
may pay to the well operator the full amount subject  to  recoupment  by
the  well  operator, to terminate the risk penalty phase and be eligible
for other opportunities for participation as provided herein.
  [(5)] (6) "Well costs" means the costs incurred  or  estimated  to  be
incurred  by  the well operator in relation to the drilling, completion,
and the installation of surface equipment, other than  as  described  in
item  E of clause (ii) of subparagraph 1 of paragraph c of this subdivi-
sion, including, without limitation, surveying, drill site  preparation,
leasing  of surface rights and access roads pertinent to the drill site,
construction of access roads, permitting, drilling,  stimulation,  test-
ing,  well  logging, drilling insurance, plugging and abandonment of the
well, environmental mitigation costs associated with  drilling  and  any
other costs associated with the foregoing that the operator has incurred
or  anticipates incurring, including a reasonable charge for supervision
of the foregoing activities.
  13. A. Any person taking title by operation of law to any oil and  gas
interests  integrated  into a spacing unit pursuant to an order of inte-
gration, shall take such interests subject to the terms  and  conditions
of the final order of integration issued by the department duly recorded
in  accordance  with the provisions of this section and shall be subject
to all  liabilities  and  benefits  associated  therewith,  unless  such
person,  within  sixty days of the taking of such interest, elects to be
an integrated royalty owner and  notifies  the  well  operator  of  such
election.
  B.  FULL  COST AND LIABILITY FOR ANY DAMAGES CAUSED BY WELL OPERATIONS
SHALL BE BORNE SOLELY BY THE WELL OPERATOR AND THE BURDEN OF PROOF  WITH
RESPECT TO LIABILITY FOR SUCH DAMAGES SHALL BE UPON THE WELL OPERATOR.
  14.  INTEGRATION  ORDERS  ISSUED  PURSUANT  TO  THIS  SECTION SHALL BE
SUBJECT TO JUDICIAL REVIEW.
  15. NO PARTY INVOLVED WITH COMPULSORY  INTEGRATION  MAY  HAVE,  ON  OR
WITHIN ONE THOUSAND OR MORE FEET FROM THE PROPERTY BOUNDARY OF ANY POOL,
ANY:    A.  SURFACE ACTIVITY INCLUDING, BUT NOT LIMITED TO ANY DRILLING,
COMPRESSOR PITS OR CLOSED WASTE SYSTEMS, OR B. SUBSURFACE GAS STORAGE.
  S 2. This act shall take effect on the sixtieth  day  after  it  shall
have become a law.