A10526 Summary:

BILL NO    A10526

SAME AS    Same as S 8169

SPONSOR    Parment

COSPNSR    Sweeney

MLTSPNSR

Amd SS23-0501 & 23-0503, En Con L

Makes amendments to the calculations of statewide spacing requirements for oiland gas wells.

A10526 Actions:

BILL NO    A10526

04/08/2008 referred to environmental conservation

A10526 Votes:

A10526 Memo:

BILL NUMBER:A10526

TITLE OF BILL:  An act to amend the environmental conservation law, inrelation 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 technicalcorrections to the statewide spacing provisions.

Summary of provisions:

Section 1 of this bill amends ECL S23-0501(1)(b)(1) to apply itsprovisions 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 horizontalMedina and shale gas wells and to reduce the required setback from theunit boundary from 660 feet to 460 feet.

* Clauses (ii), (v), (vi), (vii) and (viii) are amended to providestatewide spacing for horizontal gas wells, clause (v) is amended toreduce 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 Riveroil pools and the Onondaga reef and other oil-bearing reefs.

* A new clause (x) is added to provide statewide spacing for all otheroil pools.

* A new undesignated clause is added to specify that a spacing unitestablished for an oil pool must be modified prior to production ofsolely gas from a well in the unit.

Section 2 of this bill amends ECL S23-0503(6) to clarify that spacingunits established pursuant to statewide spacing provisions are bindingupon all persons and their successors and assigns, and may be modifiedby the Department of Environmental Conservation (DEC) upon good causeshown.

Section 3 of this bill provides for an immediate effective date.

Existing law:

ECL S23-0501(1)(b)(1) currently establishes statewide spacing for gaspools but not oil pools, and there are no provisions which directlyaddress horizontal drilling. ECL S23-0503 provides that spacing orders

are binding upon all persons and may be modified by the DEC upon goodcause shown.

Prior legislative history:

This is a new proposal.

Statement in support:

The existing Oil, Gas and Solution Mining Law (OGSML), as amended byChapter 386 of the Laws of 2005, provides for the regulation of oil andgas wells and similar wells in New York State. The law addresses thedistance that wells are spaced from each other, to ensure efficient andeconomic recovery of oil and gas resources while protecting the correla-tive rights of mineral resource owners (i.e., ownership rights, usuallyof the surface owners). The law establishes standard "statewide spacing"for wells, which varies according to the target geologic formation anddepth, and provides flexibility for spacing units of plus or minus tenpercent to account for site-specific circumstances that may requiremovement of the surface location of the wellbore. Setback distances arealso established for spacing units to help ensure that wells do notdrain oil and gas from under adjacent spacing units.

The 2005 amendment did not address oil wells or horizontal wells or makeprovision for adjusting the required 660-foot setback when a spacingunit is smaller than 40 acres by the authorized 10-percent tolerance.Horizontal wells are wells that are drilled vertically to a point abovethe target formation, then drilled at an angle to reach the targetformation and subsequently drilled horizontally across the formation toprovide more efficient recovery of the resource.  Horizontal drillingrequires that unit sizes be expanded to accommodate the length of thewellbore.

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 thesetback from 660 feet to 460 feet for smaller units, and to make othertechnical corrections. Absent this legislation, oil wells in new fieldsmust be drilled on 40 acres, which would not always foster efficientresource recovery. At least one new shallow oilfield has been discoveredrecently, and efficient processes are needed to address spacing of oilwells 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, andwould therefore require notice, public comment and possibly a hearing onan individual well basis. With hundreds of such wells likely to beproposed in the near future, the potential burden on the DEC and theindustry would be substantial, with no commensurate benefit in ensuringthat the policy objectives of ECL S23-0301 are met. By accommodatingsmaller oil field spacing and the length of horizontal well bores but

requiring protective setbacks, this bill furthers the policy objectivesof preventing waste of the State`s oil and gas resources and developmentof oil and gas properties in a manner that results in a greater ultimaterecovery, while protecting the rights of mineral rights owners and thegeneral public.

Budget implications:

None.

Effective date:

This bill takes effect upon enactment.