State Land Leasing Process
Leases can be generated for state-owned land under three processes:
Most state land leases are awarded through a public, competitive bid process.
- Tract Nomination - Companies may nominate areas for future leasing. The fact that a particular parcel is available for nomination does not guarantee that the parcel will be included in a lease sale. The DEC reserves the right to accept or reject any nomination. All nominations must be accompanied by a bid guarantee of $500 per area plus $1.00 per acre. The bid guarantee is applied to the bonus bid if the nominee is the highest bidder; if not, it will be returned. The bid guarantee is forfeited to the Department if the nominating party fails to submit a bid. Bid guarantee deposits will be returned for all tracts nominated, but not included, in the sale.
- Tract assessment/lease stipulations - The Division of Mineral Resources, acting as leasing agent, must obtain approval of the state land surface manager before any areas are offered in a lease sale. Division staff work closely with the surface managers to assess the environmental suitability of the area for leasing and to develop special lease conditions to protect or exclude sensitive areas from surface impacts and protect public safety and the environment. The *special conditions (70 KB) are made part of the proposed lease for each specific area. Surface entry may be restricted in parts of the areas due to steep slopes, wetlands, cultural resources and public recreation.
- Public workshops - When a sale is planned, lists of areas will be posted on this web site and will be sent to everyone who has asked to be included on a lease sale mailing list. In addition, the Department schedules and advertises public workshops prior to the decision to hold a state lease sale to gather comments and provide information. Information from the workshops is taken into account in making final decisions on areas to lease and lease conditions. The Department prepares a responsiveness summary of comments for distribution to the interested parties.
- Public advertisements - The Department advertises public notice of proposed sales in the Environmental Notice Bulletin, this web site, local newspapers and national oil and gas industry publications.
- Bid packages - The Department makes bid packages available on paper and CD-ROM for a set fee and also for free download following public notice of a proposed lease sale. A separate bid package is prepared for each area offered for sale. Each package consists of a cover letter; an *Invitation for Bids (101 KB) describing lease-specific terms and conditions; a map of the parcels offered for lease; a map showing lease exclusions and conditions; and standard contract (108 KB) and appendices.
- Lease terms - The Department awards competitive leases based on the highest responsible cash bonus bid (lump sum up-front payment). Leases have a primary term of five years to give the lessee time to explore and potentially begin production. Delay rental payments are required during the primary term. If production is established, the lease enters the secondary term, which continues as long as there is production. Leases require royalty payments of a specific percentage of the wellhead value of total production. A shut-in royalty is required if a well is shut in. Shut-in royalty payments are evaluated annually after conclusion of the primary term.
- Bid opening and award - The Invitation for Bids specifies the day and time by which sealed bids must be submitted to the Department. At the public bid opening, the highest responsible bidder is identified. Once a bid winner is selected, the Department prepares necessary lease documents for signature by the Department and the winning bidder. The lease is reviewed and approved by the Comptroller and the Department of Law.
- Drilling a well on State land - Following the award of an oil and gas lease, any drilling permit issued by the Division of Mineral Resources will be subject to and conditioned on a site inspection and overview by Department staff. Participants in the review will include the operator, regional Minerals staff and the surface manager (usually the Regional Forester or Wildlife Manager or their designated representative). Location of the drill site and access roads and the required mitigation measures to protect the public and the environment will be decided at this meeting and made part of the drilling permit conditions. Any lessee planning to drill a well in New York State must comply with all applicable laws and regulations pertaining to such activity. The lessee must obtain all required permits prior to any surface disturbance.
The Department is also authorized by law to use a non-competitive leasing process in certain circumstances.
- Small tracts of land may be leased non-competitively in order to consolidate drilling and production units. An example of such a situation is a no-entry lease for state roads.
In addition to oil and gas production leases, the Department is authorized to make leases for underground natural gas and liquefied petroleum gas storage.
- Storage leases may be awarded competitively or non-competitively.