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 oil
and 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, 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.

Existing law:

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.

Budget implications:

None.

Effective date:

This bill takes effect upon enactment.