Section 23-1101. Procedure for obtaining oil and gas production lease

1.  The  department may make leases on behalf of this state, upon such
  terms and conditions including consideration as to the  department  seem
  just and proper for:
    a.  The  exploration, development and production of gas in state-owned
  lands, except state park lands and the lands under the  waters  of  Lake
  Ontario or along its shoreline; and
    b.  The  exploration, development and production of oil in state-owned
  lands, except state park lands and the lands under the  waters  of  Lake
  Erie and Lake Ontario or along their shorelines.
    2. All oil and gas leases shall:
    a.  Be  limited in duration to a period not to exceed ten years and as
  long thereafter as oil  and  gas  is  produced  in  commercially  paying
  quantities;
    b.  Provide  for  payment  to  the agency having jurisdiction over the
  leased lands of such  consideration,  royalties,  rentals,  bonuses  and
  other  compensation as shall, in the discretion of the department, be in
  the best interests of the people of the state of New York;
    c. Provide for prompt exploration followed within a reasonable time by
  operations for the production of oil and gas,  if  such  be  found,  and
  shall  also  contain  provisions  for  the  termination of such lease by
  reason of the lessee's failure to so explore or operate;
    d. Be invalid unless they shall have the prior approval of such  state
  department,  division,  bureau or agency thereof, or state agency having
  jurisdiction over the land in  question;  and  authority  to  give  such
  consent  is hereby conferred upon the head of any such state department,
  or a division, bureau or agency thereof, or any state agency,  and  with
  respect  to  lands  under  water  held  by  the  state  in its sovereign
  capacity, jurisdiction is deemed to be in the  Commissioner  of  General
  Services; and
    e.  Be  inapplicable  to  any  state  park  lands and to any lands the
  leasing of which is prohibited by the State Constitution.
    3. In addition to the requirements contained in paragraphs a, c and  e
  of  subdivision  two of this section, all gas leases with respect to the
  lands under the waters of Lake Erie shall:
    a. Provide  for  payment  to  the  general  fund  of  the  state  such
  consideration,  royalties,  rentals,  bonuses  or  other compensation as
  shall, in the discretion of the department, be in the best interests  of
  the people of the state of New York.
    b.  Require  that no well shall be permitted nearer than one-half mile
  from the shore, two miles  from  public  water  intake  areas,  and  one
  thousand  feet  from  any  other structure or installation in or on Lake
  Erie.
    c. Require that the following procedures be established  if  there  is
  evidence  suggesting  that  liquid  hydrocarbons  may exist in a stratum
  penetrated by the well bore:
    (i) Drilling or completion operations shall cease immediately.
    (ii) The department shall be notified of the evidence  indicating  the
  presence   of   liquid   hydrocarbons,  pursuant  to  such  notification
  arrangements as the department shall prescribe.
    (iii) A formation test  shall  be  conducted  in  the  presence  of  a
  department representative.
    (iv)  If  the  formation  test  indicates  the presence of appreciable
  liquid hydrocarbons, the well bore  shall  be  permanently  plugged  and
  abandoned from total depth to the lake bottom with cement.
    (v)   If  the  formation  test  does  not  indicate  the  presence  of
  appreciable liquid  hydrocarbons,  drilling  may  be  resumed  after  an
  intermediate string of casing has been set, cemented and tested.

    (vi)  If  there  is  any further indication of liquid hydrocarbons the
  procedures outlined in paragraphs  one  through  five  hereof  shall  be
  repeated.
    d.  Require  that  each  lessee, or other person desiring to install a
  pipeline,  bury  the  most  shoreward  portion  of  each  pipeline,   in
  accordance  with rules and regulations which shall be promulgated by the
  department, to obviate the risk  of  damage  from  ice,  wave  and  wind
  conditions.
    e.  Be  conditioned  upon  the posting by the responsible parties of a
  liability bond or liability insurance  coverage  in  such  form  as  the
  department  may  by  regulation  require  and  in  such  amount  as  the
  department shall deem to be reasonably sufficient to correct, repair  or
  remedy to the satisfaction of the department any environmental damage or
  hazardous discharge resulting from gas exploration or recovery.
    f.  Provide that each lessee shall be strictly liable to the state for
  all reasonable expenses involved  in  the  restoration  of  fresh  water
  supplies,  cleanup of beaches, piers and other similar facilities, which
  may be required as a  result  of  exploration,  drilling  or  production
  operations, and for liability claims arising therefrom.
    g.  Require  each  lessee  to immediately notify the department of any
  discharge of oil or other pollutant, to act expeditiously  to  terminate
  such discharge and to remove the substance discharged.
    h. Provide for the use and regular inspection of modern anti-pollution
  devices, including blow-out preventors on every drilling rig.
    i. Provide that when a well is permanently abandoned for any reason it
  shall  be  permanently  plugged  by  filling the well bore for its total
  depth, with cement or other suitable material.
    j. Provide that, where in the  department's  opinion,  damage  to  the
  environment  is  imminent  or  an emergency exists, the department shall
  order the  immediate  plugging  and  abandonment,  either  temporary  or
  permanent, of any well on lands beneath Lake Erie.
    4.  Any such oil, gas, or oil and gas lease or leases made and granted
  pursuant to this section shall be awarded  to  the  highest  responsible
  bidder after advertisement for sealed bids. Such advertisements for bids
  shall  be  published in the official newspaper or newspapers, if any, or
  otherwise in a newspaper or newspapers designated for such purpose. Such
  advertisement shall contain a statement of the time and place where  all
  bids  received pursuant to such notice will be publicly opened and read.
  All bids received shall be publicly opened and  read  at  the  time  and
  place  specified.  At  least  thirty days shall elapse between the first
  publication of such advertisement and the date specified for the opening
  and reading of bids. Bids shall be submitted on forms  provided  by  the
  department,  which  forms  shall  indicate  the  method  or  methods for
  computing compensation to the state for the lease and shall contain such
  other directions as may be appropriate to secure comparability  of  bids
  submitted  for any given lease. The department, in its discretion, shall
  determine  the  highest  bid  after  taking   into   consideration   the
  anticipated  compensation  to  be  returned  to the state under any such
  lease by way of royalty payments, delayed lease rental payments, bonuses
  or other compensation or consideration, or by a combination  of  any  or
  all  of  the same. In cases where two or more responsible bidders submit
  identical bids, the department in its discretion, may  award  the  lease
  involved  to  any of such bidders. The department in its discretion, may
  also reject any or all bids and readvertise for new bids. The department
  may disallow any bid  if  the  bidder  upon  request  fails  to  furnish
  satisfactory evidence of responsibility.
    5.  Notwithstanding  the requirements contained in subdivision four of
  this section, the department may negotiate and grant an oil or gas lease

  on small parcels of stateowned land  without  public  bid  in  order  to
  consolidate  large  drilling  or production units controlled by a single
  entity. The department shall make a determination  that  public  bid  of
  such   property  is  unreasonable  or  impracticable  and  publish  such
  determination in the state register prior to the granting  of  any  such
  lease.
    6.  Notwithstanding  subdivision  four of this section, the department
  may negotiate and grant an oil or  gas  lease  of  lands  identified  in
  subdivision  one  of  this  section  where  oil  and gas exploration and
  development  rights  are  co-owned  by  the  state  and  another  owner,
  including  the United States. The department shall publish its intention
  to enter into negotiations on such lease in the state register prior  to
  the granting of any such lease.