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Bradley Brook Field

April 21, 2004

STATE OF NEW YORK
DEPARTMENT OF ENVIRONMENTAL CONSERVATION
NOTICE OF PUBLIC HEARING AND
NOTICE OF NEGATIVE DECLARATION
PROPOSED WELL SPACING AND INTEGRATION OF INTERESTS
DEC Project No. DMN 04-1

PROPOSED PROJECT: The New York State Department of Environmental Conservation ("DEC" or "Department") proposes to establish field-wide spacing and integration rules for portions of acreage located in the Towns of Lebanon and Eaton, Madison County, New York, identified as the Bradley Brook Field (the "Field"). The Field is situated between the villages of Eaton and Lebanon, New York, and produces natural gas from the Oneida and Oswego formations. Please consult the maps of this Field for a more precise description (see "Document Availability," below).

BACKGROUND AND PURPOSE: Development of the Field commenced in July of 1997 with the successful drilling and completion of the L.&C. Warren #1 well. At the present time, Nornew, Inc. ("Nornew") operates all fourteen wells which have been successfully drilled in the Field. Permits to drill were issued for the fourteen existing wells pursuant to Section 552.1 of Title 6 of the Official Compilation of Codes, Rules and Regulations of the State of New York ("6 NYCRR 552.1"). Nornew proposes to complete and produce additional wells to develop the existing Field and to identify similar producing reservoirs in adjacent areas.

Production into commercial pipeline has been necessary in order to collect data to determine appropriate unit sizes and shapes without wasting the resource. In order to ensure that all affected interest owners receive fair and equitable compensation upon issuance of a final spacing order, the DEC required that Nornew escrow royalties generated as a result of this production from wells drilled after July 1, 2001. Escrowed royalties can only be released to the landowners upon issuance of a final Commissioner's Order after conclusion of the public hearing process. Some of the proposed production units contain parcels where the right to develop the oil and natural gas has not been conveyed to Nornew or others through lease. Pursuant to ECL 23-0301, DEC Staff has determined that field-wide spacing and integration rules are necessary to regulate the development, production, and utilization of the natural resources of oil and gas of the Field in such a manner as will prevent waste and fully protect the correlative rights of all owners and the rights of all persons including landowners and the general public.

DEC Staff seeks a public hearing to allow all interested parties the opportunity to discuss the issues and facilitate a decision addressing the establishment of field-wide spacing and compulsory integration rules for the Field. According to DEC Staff, the primary issues to be addressed at the hearing are the establishment of fair and equitable production units for existing wells, development of a well spacing plan governing future well drilling in the Field, integration of interests within all spacing units, including the designation of the unit operator, and allocation of well production to integrated owners.

DEC and Nornew have executed a Stipulation which resolves issues pertaining to field wide spacing rules and establishes procedures for future wells. A copy of this Stipulation is available as indicated below under "Document Availability." According to DEC Staff, the Stipulation's provisions are based upon an analysis of available geologic, engineering and seismic data from wells within the Field and from similar reservoirs in the vicinity.

STATE ENVIRONMENTAL QUALITY REVIEW ACT (SEQRA) STATUS: The Department, as lead agency, has reviewed the establishment of field wide spacing rules and the integration of interests within units for the Field in accordance with the criteria set forth in 6 NYCRR 617.7 and determined that the proposed action would not have any significant adverse environmental impact. A Notice of Determination of Non-Significance (Negative Declaration) was issued on February 3, 2004.

PUBLIC HEARING: All persons, organizations, corporations or government agencies which may be affected by the proposed project are invited to comment thereon. A legislative hearing will be held on Thursday, May 20, 2004 at 7:00 p.m. at Colgate Inn, 1-5 Payne Street, Hamilton, New York 13346, telephone number (315) 824-2300, to receive unsworn statements from the public. All persons, organizations, corporations or government agencies who may be affected by the proposed project are invited to attend the legislative hearing and to submit oral comments on the proposed project. It is not necessary to file a written request in advance to speak in this portion of the hearing. Lengthy comments should be submitted in writing at the hearing. Written comments may also be filed with the Office of Hearings and Mediation Services, at the address indicated below, on or before the date of the legislative hearing. Equal weight will be given to oral and written statements.

The hearing location is reasonably accessible to persons with a mobility impairment. Interpreter services will be made available to deaf persons, at no charge, upon written request to the Administrative Law Judge named below at least five business days prior to the date of the hearing.

ISSUES CONFERENCE: A pre-adjudicatory hearing issues conference will be held on Friday, May 21, 2004, at 9:00 a.m. at Colgate Inn, 1-5 Payne Street, Hamilton, New York 13346, telephone number (315) 824-2300. The purpose of the issues conference is to define, narrow, and, if possible, resolve proposed adjudicable issues concerning the proposal. Participation in the issues conference is limited to the Applicant, DEC Staff, and persons who have petitioned for party status as discussed below. IT IS IMPORTANT THAT ANY PERSONS REQUESTING PARTY STATUS APPEAR OR BE REPRESENTED AT THE ISSUES CONFERENCE IN ORDER THAT ALL VALID ISSUES MAY BE FULLY DISCUSSED.

PETITIONS FOR PARTY STATUS: Those seeking to participate at this issues conference and at any subsequent adjudicatory hearing to challenge the DEC proposed field wide spacing and integration rules must file a written petition requesting party status, pursuant to 6 NYCRR 624.5 and 624.4(c). When appropriate to the issue being raised, acceptable scientific support for a petition for party status could include seismic and/or geologic data, reservoir engineering analysis and well testing results specific to the Field. Section 624.4(c)(4) of 6 NYCRR places the burden of persuasion that an issue is adjudicable on the participant presenting the issue, and a demonstration must be made that the issue is substantive and significant. Please see 6 NYCRR 624.4 and 624.5 for further information on party status and identification of issues.

All petitions requesting party status to participate in an adjudicatory hearing on this proposal must be received at the Office of Hearings and Mediation Services no later than the close of business on Friday, May 14, 2004. Such filings must be submitted to Richard R. Wissler, Administrative Law Judge, New York State Department of Environmental Conservation, Office of Hearings and Mediation Services, 625 Broadway, Albany, New York 12233-1550; telephone (518) 402-9003. Filings by telecopier transmission will not be accepted. At the same time, all persons must also send a copy of their petition to John H. Heyer, Esq., 604 Exchange National Bank Building, P.O. Box 588, Olean, New York 14760, telephone (716) 372-0395; and to Arlene J. Lotters, Esq., NYS Department of Environmental Conservation, Division of Legal Affairs, 625 Broadway, 14th Floor, Albany, New York 12233-1500, telephone (518) 402-9222.

DOCUMENT AVAILABILITY: The Stipulation with attached exhibits, and other relevant documents are available for public review at the following locations:

1. NYSDEC Office of Hearings and Mediation Services, 625 Broadway, First Floor, Albany, New York 12233-1550, contact ALJ Richard R. Wissler, (518) 402-9003.

2. NYSDEC Division of Mineral Resources, 625 Broadway, Third Floor, Albany, New York 12233-6500, contact Thomas E. Noll, (518) 402-8056.

3. NYSDEC Region 7 Headquarters, 615 Erie Blvd. West, Syracuse, New York 13204-2400, contact Joe Moskiewicz, (315) 426-7484.

4. Supervisor of the Town of Eaton, Town Office Building, 35 Cedar Street, Morrisville, New York 13408, contact David G. Puddington, (315) 684-9110.

5. Supervisor of the Town of Lebanon, Town Hall, 1210 Bradley Brook Road, Earlville, New York 13332, contact James Goldstein, (315) 837-4152.

APPLICABLE STATUTORY AND REGULATORY PROVISIONS: Environmental Conservation Law Article 1 (General Provisions); Article 3, Title 3, (General Functions); Article 8 (Environmental Quality Review); Article 23, Titles 3, 5 and 9 (Mineral Resources); Title 6 of the New York Compilation of Codes, Rules and Regulations (6 NYCRR) Parts 550 (Promulgation and Enforcement of Rules and Regulations), 552 (Permits to Drill, Deepen, Plug Back or Convert Wells), 553 (Well Spacing) and 624 (Permit Hearing Procedures).

ALL PERSONS HAVING AN INTEREST IN THE PROPOSED PROJECT ARE URGED TO ATTEND THE HEARING OR BE REPRESENTED EITHER INDIVIDUALLY OR COLLECTIVELY.

James T. McClymonds
Chief Administrative Law Judge

Albany, New York
April 21, 2004

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