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Cutler Creek Field - Decision and Order, October 1, 2002

Decision and Order, October 1, 2002

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION

In the Matter of

the order of field-wide well spacing rules and the integration of interests pursuant to
Environmental Conservation Law ("ECL") §§ 23-0501 and 23-0901 for
the Cutler Creek Field located in Steuben County, New York

DECISION AND ORDER

DEC File No. DMN 02-2

WHEREAS:

  1. This Decision and Order relates to the proposal of the New York State Department of Environmental Conservation Staff ("Department") to establish a well spacing unit, integrate interests and set field-wide spacing rules in the Cutler Creek Field, a discovery of natural gas, in portions of Steuben County. The well spacing and compulsory integration proposals are made pursuant to ECL Article 23, Titles 5 and 9, respectively;
  2. Pursuant to a Notice of Public Hearing published on July 29, 2002, a public hearing and an issues conference were held before Administrative Law Judge ("ALJ") Molly T. McBride on August 28, 2002, and August 29, 2002, respectively, at the Holiday Inn Painted Post in Painted Post, New York.
  3. As stated in the Notice of Public Hearing, Pennsylvania General Energy, Corp. ("PGE") and Department Staff reached agreements on matters raised in the Department Staff's proposal and embodied those agreements in an executed Stipulation, dated April 9, 2002 ("Stipulation");
  4. As stated in the Notice of Public Hearing, requests for party status were required by close of business on August 19, 2002. None were received.

NOW, THEREFORE, in the absence of any adequate late-filed petitions for party status and having found that the Stipulation will result in the efficient and economical development of the gas pool as a whole; that no dispute exists regarding Department Staff's proposal; and that an order establishing a spacing unit, integrating acreage therein and setting field-wide spacing rules is necessary to carry out the policy provisions of ECL Section 23-0301, it is hereby ORDERED that:

  1. The Stipulation executed by PGE and Department Staff, dated April 9, 2002, and its terms and conditions, including Exhibits "A" through "E", are hereby incorporated by reference into and made a part of this Decision and Order. As set forth in the Stipulation, updated Exhibits "A" and "B1" which reflect changes in property ownerships and descriptions may be prepared, if necessary, within 90 days of the effective date of this Decision and Order and made part hereof;
  2. The Stipulation resolves the following issues: (1) well spacing in the Cutler Creek Field, (2) allocation of royalty interest due to unit owners affected by the production from the existing well in Cutler Creek Field, and (3) procedures for permitting future wells and establishing future units in Cutler Creek Field. The Stipulation applies only to natural gas and/or oil production realized from that area in Steuben County, New York, as identified on the map attached to the Stipulation as Exhibit "A," which shows those surface lands overlying the natural gas bearing pool within the Ordovician Trenton-Black River carbonates;
  3. PGE is authorized to immediately release royalty payments for the Spacing Unit established by this order and shown on Exhibit "B1"; and
  4. As set forth in the Stipulation, PGE shall file a copy of this Order, including the Stipulation and Exhibits "A" and "B1", with the Steuben County Clerk against all parcels in the Spacing Unit established by this Order and shall submit proof of such filing to the Director of the Department's Division of Mineral Resources by three months after the effective date of this Order.

For the New York State Department
of Environmental Conservation

_____________/s/_____________
By: ERIN M. CROTTY, COMMISSIONER

Dated: Albany, New York
October 1, 2002

To: Arlene J. Lotters, Esq.
NYSDEC Division of Legal Affairs
625 Broadway, 14th Floor
Albany, New York 12233-1500

Bradley J. Field, Director
NYSDEC Division of Mineral Resources
625 Broadway, 3rd Floor
Albany, New York 12233-6500

David A. Lind, President
Pennsylvania General Energy, Corp.
208 Liberty Street
Warren, PA 16365

John Heyer, Esq.
P.O. Box 588
604 Exchange National Bank Building
Olean, New York 14760

STATE OF NEW YORK
DEPARTMENT OF ENVIRONMENTAL CONSERVATION

Office of Hearings and Mediation Services
625 Broadway
Albany, New York 12233-1550

In the matter of

the proposed well spacing rules and integration of interests pursuant to
Environmental Conservation Law Article 23 for the

CUTLER CREEK FIELD

Steuben County, New York

File No. DMN-02-2

Summary Hearing Report

by

____________/s/____________
Molly T. McBride
Administrative Law Judge

September 9, 2002

Summary

The New York State Department of Environmental Conservation (the "Department") proposes to establish spacing and integration rules for portions of acreage located in the Towns of Corning and Erwin, Steuben County and designated as the Cutler Creek Field. Pennsylvania General Energy, Inc. ("PGE"), has been conducting a natural gas exploration and development program on portions of leasehold acreage in the Cutler Creek Field. This proposal is Division of Mineral Resources Project No. DMN-02-2.

PGE proposes to operate producing wells for natural gas in the Cutler Creek Field. To date, one well has been drilled in the Field.

The Department has requested a Commissioner's Order for field wide spacing and integration rules for the Cutler Creek Field. The permit hearing procedures under Title 6 of the New York State Official Compilation of Codes, Rules and Regulations, Part 624, ("6 NYCRR Part 624") govern the proceeding. PGE and the Department are parties to the hearing under the DEC permit hearing procedures.

Proceedings

Pursuant to the New York State Environmental Conservation Law ("ECL"), Article 23, and 6 NYCRR Part 553, the Department proposes that the Commissioner of the DEC issue an order establishing field wide spacing rules that will result in the efficient and economical development of the natural gas pool in the Cutler Creek Field. The DEC regulates the development, production and utilization of natural resources within the State, including natural gas. It is the policy of the DEC to prevent waste of the resource(s) while protecting the correlative rights of all landowners and the public.(1) The DEC is responsible for establishing spacing units for each natural gas pool and for specifying the location of gas wells within the unit(s)(2) by issuance of an Order of the Commissioner.

The Department and PGE entered into a written Stipulation regarding the Cutler Creek Field dated April 9, 2002. This Stipulation provides for the creation of unit sizes and shapes and the spacing of wells to ensure that all affected interest owners receive a fair and equitable compensation upon issuance of a final Commissioner's Order. DEC Staff has also indicated that the integration of interests in spacing units is necessary to carry out the policy provisions of ECL section 23-0301. The ECL directs that such an order shall result only after a public hearing is held.

A notice of hearing was published in the Department's Environmental Notice Bulletin on July 31, 2002 and in The Leader on August 2, 2002. The notice was also mailed to the Towns of Corning and Erwin, to the Clerk of Steuben County and to others believed to be interested in the proposed action. The notice stated that the hearing would be conducted pursuant to the procedures of 6 NYCRR Part 624 which are the Department's permit hearing procedures.

Pursuant to the notice, a hearing for unsworn public comments convened on August 28, 2002 at 7:00 P.M. at the Holiday Inn, Highways 15 & 17, Painted Post, New York before Administrative Law Judge ("ALJ") Molly T. McBride. The Department appeared by Arlene J. Lotters, Esq., senior attorney, Kathleen Sanford, Thomas Noll and John K. Dahl, DEC Division of Mineral Resources. PGE appeared by David Lind, general manager and John H. Heyer, Esq., attorney for PGE. The Department and PGE gave a brief presentation regarding the project. No members of the public spoke. The hearing concluded at approximately 7:30 p.m. Approximately 45 people attended the hearing.

An issues conference was convened at 9:00 a.m. on August 29, 2002 at the Holiday Inn in Painted Post. 6 NYCRR Part 624 allows for participation at the issues conference by Department Staff and the Applicant (PGE). Also, those seeking party or amicus status pursuant to 6 NYCRR §624.4 may participate. The Notice of Public Hearing directed that those seeking party or amicus status file a written request to the ALJ by August 19, 2002. No petitions for party status were filed. In addition, no one appeared at the issues conference to request party status after the deadline. No issues have been proposed which could require an adjudicatory hearing regarding this proposal.

On August 27, 2002 John K. Dahl, Director of the Bureau of Oil and Gas Regulation, sent a letter and a Commissioner's Decision and Order to me. The letter requested that, in the absence of any adequate late filed petitions, the Decision and Order be provided to the Commissioner for review and signature.

Recommendation

I recommend that the Decision and Order which the Department Staff has prepared be forwarded to the Commissioner immediately for her review and signature.

1 ECL 23-0301

2 ECL 23-0501

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