Makes amendments to the calculations of statewide spacing requirements for oil and gas wells.
BILL NO A10526
04/08/2008 referred to environmental conservation
TITLE OF BILL: An act to amend the environmental conservation law, in relation to statewide spacing for oil and gas wells
Purpose of the bill
This bill amends Article 23 of the Environmental Conservation Law (ECL), the State`s Oil, Gas and Solution Mining Law, to provide statewide spac- ing for oil wells and horizontal wells, and to make other technical corrections to the statewide spacing provisions.
Summary of provisions:
Section 1 of this bill amends ECL S23-0501(1)(b)(1) to apply its provisions to oil as well as gas wells, and to make the following amend- ments related to statewide spacing unit sizes:
* Clause (i) is amended to provide statewide spacing for horizontal Medina and shale gas wells and to reduce the required setback from the unit boundary from 660 feet to 460 feet.
* Clauses (ii), (v), (vi), (vii) and (viii) are amended to provide statewide spacing for horizontal gas wells, clause (v) is amended to reduce the required setback from 660 feet to 460 feet, and clauses (iii) and (iv) are amended to make technical corrections.
* A new clause (ix) is added to provide statewide spacing for oil wells, including horizontal wells, in the Bass Island, Trenton and Black River oil pools and the Onondaga reef and other oil-bearing reefs.
* A new clause (x) is added to provide statewide spacing for all other oil pools.
* A new undesignated clause is added to specify that a spacing unit established for an oil pool must be modified prior to production of solely gas from a well in the unit.
Section 2 of this bill amends ECL S23-0503(6) to clarify that spacing units established pursuant to statewide spacing provisions are binding upon all persons and their successors and assigns, and may be modified by the Department of Environmental Conservation (DEC) upon good cause shown.
Section 3 of this bill provides for an immediate effective date.
ECL S23-0501(1)(b)(1) currently establishes statewide spacing for gas pools but not oil pools, and there are no provisions which directly address horizontal drilling. ECL S23-0503 provides that spacing orders
are binding upon all persons and may be modified by the DEC upon good cause shown.
Prior legislative history:
This is a new proposal.
Statement in support:
The existing Oil, Gas and Solution Mining Law (OGSML), as amended by Chapter 386 of the Laws of 2005, provides for the regulation of oil and gas wells and similar wells in New York State. The law addresses the distance that wells are spaced from each other, to ensure efficient and economic recovery of oil and gas resources while protecting the correla- tive rights of mineral resource owners (i.e., ownership rights, usually of the surface owners). The law establishes standard "statewide spacing" for wells, which varies according to the target geologic formation and depth, and provides flexibility for spacing units of plus or minus ten percent to account for site-specific circumstances that may require movement of the surface location of the wellbore. Setback distances are also established for spacing units to help ensure that wells do not drain oil and gas from under adjacent spacing units.
The 2005 amendment did not address oil wells or horizontal wells or make provision for adjusting the required 660-foot setback when a spacing unit is smaller than 40 acres by the authorized 10-percent tolerance. Horizontal wells are wells that are drilled vertically to a point above the target formation, then drilled at an angle to reach the target formation and subsequently drilled horizontally across the formation to provide more efficient recovery of the resource. Horizontal drilling requires that unit sizes be expanded to accommodate the length of the wellbore.
This bill amends Title 5 of the OGSML to expand the definition of state- wide spacing to address oil wells and horizontal wells, to decrease the setback from 660 feet to 460 feet for smaller units, and to make other technical corrections. Absent this legislation, oil wells in new fields must be drilled on 40 acres, which would not always foster efficient resource recovery. At least one new shallow oilfield has been discovered recently, and efficient processes are needed to address spacing of oil wells in a practical fashion. In addition, the DEC projects a signif- icant increase in the number of horizontal wells to be proposed, espe- cially to target shale formations.
The vast majority of proposals that are expected for oil wells and hori- zontal wells would not conform to current statewide spacing sizes, and would therefore require notice, public comment and possibly a hearing on an individual well basis. With hundreds of such wells likely to be proposed in the near future, the potential burden on the DEC and the industry would be substantial, with no commensurate benefit in ensuring that the policy objectives of ECL S23-0301 are met. By accommodating smaller oil field spacing and the length of horizontal well bores but
requiring protective setbacks, this bill furthers the policy objectives of preventing waste of the State`s oil and gas resources and development of oil and gas properties in a manner that results in a greater ultimate recovery, while protecting the rights of mineral rights owners and the general public.