N.Y. Environmental Conservation Law § 23-0503: Well spacing in oil and natural gas pools and fields

§ 23-0503. Well spacing in oil and natural gas pools and fields.

1. Spacing orders are not required for wells drilled, deepened,

plugged back or converted in oil fields or pools which were discovered,

developed and operated prior to January first, nineteen hundred

eighty-one. Spacing orders are not required for wells drilled, deepened,

plugged back or converted in natural gas fields or pools, which were

discovered, developed and operated prior to January first, nineteen

hundred ninety-five and which are not being extended.

2. The department shall issue a permit to drill, deepen, plug back or

convert a well, if the proposed spacing unit submitted to the department

pursuant to paragraph a of subdivision 2 of section 23-0501 of this

title conforms to statewide spacing and is of approximately uniform

shape with other spacing units within the same field or pool, and abuts

other spacing units in the same pool, unless sufficient distance remains

between units for another unit to be developed. Prior to issuing any

such permit, the department shall publish a notice of intent to issue a

well permit in the environmental notice bulletin, which shall include

information concerning the spacing unit associated with the well.

3. a. If the proposed spacing unit does not meet the requirements

described in subdivision two of this section, the department shall

determine if the proposed spacing unit satisfies the policy objectives

of section 23-0301 of this article.

b. If the department determines the proposed spacing unit meets the

policy objectives of section 23-0301 of this article, the department

shall issue a notice of intent to issue a permit and spacing order. The

well operator shall cause such notice to be published in a form and

manner prescribed by the department. If the notice of intent relates to

a proposed spacing unit that is not of a uniform size and shape with

other spacing units for the field or pool, the department shall, if

necessary, make such adjustment of the allowable production from the

well to be drilled thereon so that the owners in the spacing unit

receive their just and equitable shares of the production from the pool.

Any such adjustment of the allowables shall be included in the notice of

intent to issue a permit and spacing order.

c. Any comments regarding a notice of intent to issue a permit and

spacing order must be received by the department within thirty days of

the date of the notice of intent and must meet the substantive and

significant requirement for establishing an issue for adjudication. Any

challenge to a spacing unit must contain (i) a description and a map of

the proposed alternative spacing unit; (ii) a technical justification of

the proposed alternative spacing unit, which shall include a description

and analysis of the scientific data intended by the owner to support its

proposed spacing unit configuration; and (iii) the name, address and

experience of any expert witness proposed to support the proposed

alternative spacing unit configuration. The department may request the

owner challenging the spacing unit to present its scientific data to the

department.

d. The department shall determine whether substantive and significant

issues have been raised. If the department receives no comments or if

the comments do not raise a substantive and significant issue, the

department shall issue the permit and the final spacing order. If the

department determines that substantive and significant issues have been

raised in a timely manner, the department shall schedule an adjudicatory

hearing.

4. The department may issue permits to drill infill wells on a

reasonably uniform pattern within the spacing unit after an integration

order has been issued, if required, and only if it determines that

drilling infill wells is necessary to satisfy the policy objectives of

section 23-0301 of this article. The distances from the unit boundaries

set forth in paragraph b of subdivision 1 of section 23-0501 of this

title shall apply to any infill wells. For purposes of this section, new

lateral wellbores drilled from the original wellbore in the unit are not

considered infill wells if they are drilled prior to the first product

sales from the original surface location. In a spacing unit established

pursuant to clause (vi) of subparagraph 1 of paragraph b of subdivision

1 of section 23-0501 of this title, infill wells shall be deemed

necessary, and the number of infill wells required to satisfy the policy

objectives of section 23-0301 of this article must be drilled within

three years of the date the first well in the unit commences drilling.

5. For wells permitted prior to the effective date of this section

where a spacing order is required but has not been issued, the

department shall issue a notice of intent to issue a spacing order. The

well operator shall cause such notice to be published in a form and

manner prescribed by the department. The department may issue an order

without a hearing if the proposed spacing unit complies with the

requirements of subdivision two of this section and no substantive and

significant objections to the boundaries of the proposed spacing unit

are received within thirty days after publication of the notice by the

well operator. If the department determines that substantive and

significant issues have been raised in a timely manner, the department

shall schedule an adjudicatory hearing.

6. Unless it is extinguished pursuant to subdivision seven of this

section, a spacing unit established by the department shall be binding

upon all persons and their heirs, successors and assigns. Upon good

cause shown, an order establishing a spacing unit or a spacing unit

which conforms to statewide spacing may be modified by the department

without conducting a hearing if a finding has been made that no facts

are in dispute after all affected persons have been provided a

reasonable opportunity to comment. In a spacing unit established

pursuant to clause (vi) of subparagraph 1 of paragraph b of subdivision

1 of section 23-0501 of this title, failure to drill infill wells

pursuant to subdivision 4 of this section shall constitute good cause

for the department to initiate a modification of the spacing unit. If

necessary, upon issuance of an order which changes unit boundaries, the

well operator shall adjust the accounts for owners within the original

and modified units to reflect the modified boundary. Any participation

by new owners and any adjustment of revenue or royalties resulting from

participation by new owners shall be on a prospective basis only. If the

initial risk penalty phase pursuant to title 9 of this article is in

effect, any new owner added to the unit may elect to be integrated as a

participating owner, a non-participating owner or an integrated royalty

owner as defined by title 9 of this article. Full well costs shall be

assessed against new participating owners and non-participating owners

and included in the risk penalty calculation. If the initial risk

penalty phase has concluded, any new owner added to the spacing unit may

elect to be integrated as a participating owner or an integrated royalty

owner on a prospective basis only.

7. Upon the expiration of a well permit or the plugging and

abandonment of all wells in a spacing unit, the spacing unit shall be

extinguished. Upon extinguishment, all lands within such spacing unit

shall be eligible for inclusion in subsequent spacing units.

8. The department, without considering correlative rights, may grant a

permit to those entities described in paragraphs b and c of subdivision

3 of section 23-1901 of this article for the purposes of natural gas

development if the department determines, after notice and hearing, that

the natural gas resource would not be developed by any other entity

within twelve months of the close of the hearing record. In the event

that the department shall not receive timely notice of appearance prior

to the scheduled date of hearing, it may dispense with such hearing. In

making its determination the department shall require that the entity

described in paragraphs b and c of subdivision 3 of section 23-1901 of

this article submit a finding made by such entity that such drilling is

likely to be economically sound, and that the entity in question utilize

the resource for its exclusive use when granting such a permit.