S T A T E   O F   N E W   Y O R K
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                                  4542

                       2009-2010 Regular Sessions

                          I N  A S S E M B L Y

                            February 4, 2009
                               ___________

Introduced  by  M. of A. PARMENT -- Multi-Sponsored by -- M. of A. MAGEE
  -- read once and referred to the Committee on Environmental  Conserva-
  tion

AN  ACT  to  amend  the  environmental  conservation law, in relation to
  rights and obligations of a municipality electing integrated  non-par-
  ticipating owner status in gas and oil wells

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. Subparagraph 1 of paragraph a of subdivision 3  of  section
23-0901 of the environmental conservation law, as amended by chapter 386
of the laws of 2005, is amended to read as follows:
  (1)  "Integrated non-participating owner" or "non-participating owner"
means an owner who  elects  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  be  subject  to  a
risk penalty, and complies with all of the requirements for integration,
including  the  terms  of integration, as specified in an order of inte-
gration issued pursuant to the compulsory integration provisions of this
section. The non-participating owner shall receive  the  full  share  of
production  attributable  to  such owner's proportionate interest in the
spacing unit following the  recoupment  by  the  well  operator  of  the
owner's proportionate share of the actual well costs plus a risk penalty
of  two  hundred percent of the share of the actual well costs allocable
to such owner. In the case  of  a  leased  tract,  a  royalty  shall  be
deducted  from  the non-participating owner's share of production, which
shall not be subject to charges or costs, but shall be separately calcu-
lated and paid to the non-participating owner on behalf of  the  royalty
owner as follows:
  (i) During the recovery of the actual well costs, 1/16 or 6.25%,
  (ii)  During  the recovery of the first 100% of the risk penalty, 3/32
or 9.38%,

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD01122-03-9
              

A. 4542                             2

  (iii) During the recovery of the second 100% of the risk penalty,  the
lowest  royalty fraction set forth in an existing lease in the unit, but
no less than 1/8 or 12.5%.
  A  DULY  INCORPORATED  MUNICIPALITY UNDER THE LAWS OF THE STATE OF NEW
YORK, IF ELECTING INTEGRATED NON-PARTICIPATING OWNER STATUS, SHALL  HAVE
NO  OBLIGATIONS TO THE WELL OPERATOR OR ANY OTHER OWNER FOR ANY CHARGES,
TAXES OR FEES ASSOCIATED WITH THE OPERATION OF THE OIL OR GAS WELL  AND,
NOTWITHSTANDING  ANY  OTHER  LAW TO THE CONTRARY, SHALL NOT BE LIABLE BY
REASON OF THE OWNER'S STATUS AS AN  INTEGRATED  NON-PARTICIPATING  OWNER
FOR  ANY  CLAIMS  FOR PERSONAL INJURY OR PROPERTY DAMAGE SUFFERED BY ANY
PERSON RELATING TO THE DRILLING AND OPERATION OF THE WELL, AND THE OPER-
ATOR SHALL HOLD HARMLESS, DEFEND AND INDEMNIFY SUCH MUNICIPALITY IN  ANY
ACTION FOR DAMAGES ARISING OUT OF THE STATUS OF MUNICIPALITY AS AN INTE-
GRATED NON-PARTICIPATING OWNER.
  Nothing  in this subparagraph relieves any lessee of its obligation to
pay, from the commencement of  production,  any  remaining  royalty  and
overriding  royalty owed under the terms of its lease.  ANY MUNICIPALITY
ELECTING INTEGRATED NON-PARTICIPATING OWNER STATUS  SHALL  BE  DEEMED  A
LESSEE  FOR PURPOSES OF ROYALTY PAYMENTS UNDER ITEMS (I), (II) AND (III)
OF THIS SUBPARAGRAPH.
  S 2. This act shall take effect immediately.