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

                                  2996

                       2009-2010 Regular Sessions

                            I N  S E N A T E

                              March 9, 2009
                               ___________

Introduced  by  Sen. VALESKY -- read twice and ordered printed, and when
  printed to be committed to the Committee on Environmental Conservation

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

              

S. 2996                             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.