LENAPE ENERGY,. INC.

40 CHAMBERS STREET, SPENCERPORT, NY 14559 585.344 .1200 Fax: 585.344.3283

July 26, 2012

New York State Department of Environmental Conservation Commissioner Joseph Martens 625 Broadway Albany, NY 12233-1011 Re: Town Law T-A-5-2012/Lenape Dear Commissioner Martens: Resources Inc.

The Town of Avon, Livingston County, New York ("Avon") recently adopted Avon Town Law T-A-5-2012 captioned as a "Moratorium on and Prohibition of Gas and Petroleum Exploration and Extraction Activities, Underground Storage of Natural Gas, and Disposal of Natural Gas or Petroleum Extraction, Exploration and Production Wastes" (hereinafter the "Law Prohibiting Natural Gas"). A copy of the Law Prohibiting Natural Gas is attached for your reference. The Town of Caledonia enacted the virtually identical local law on June 28, 2012 and the identical law is being contemplated in the Town of York. The towns of Avon, Caledonia and York are hereinafter referred to simply as the "Towns." Violation of the Law Prohibiting Natural Gas is punishable by fines and imprisonment. Environmental Conservation Law ("ECL") § 23-0303(2), enacted in 198 I, states that

The provisions of this article [Article 23] shall supersede all local laws or ordinances relating to the regulation of the oil, gas and solution mining industries; but shall not supersede local government jurisdiction over local roads or the rights of local governments under the real property tax law. Lenape Resources Inc. or its predecessors have been safely and responsibly developing natural gas in the Towns under the exclusive regulatory authority of the New York State Department of Environmental Conservation (the "Department") since 1982. Following the enactment ofECL §23-0303(2), the Department routinely enforced the provisions ofECL §23-0303(2) by sending letters to local government officials advising of the Department's exclusive authority to regulate all aspects of oil and natural gas development, except for the issues of taxation and impacts on local roads. A representative copy of a Department letter to a local municipality is attached hereto for your reference. Pursuant to EeL § 7] -1311 (1), the Department has a legal obligation to preclude enforcement of the Law Prohibiting Natural Gas. EeL § 71-13] 1(1) states that

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Whenever it appears that any person is violating or threatening to violate any provision of article 23 of this chapter or is committing any offense described in section 71-1305 of this title, the department, acting by the Attorney General, may bring suit against such person in any court of competent jurisdiction to restrain such person from continuing such violation or from carrying out the threat of violation. In any such suit, the court shall have jurisdiction to grant to the department without bond or other undertaking, such prohibitory or mandatory injunctions as the facts may warrant, including temporary restraining orders and preliminary injunctions. The regulations and requirements imposed by the law Prohibiting Natural Gas conflict with the statutory requirementsimposed under Article 23 of the Eel, the regulations set forth in 6 NYCRR Part 550 et seq. and the existing Generic Environmental Impact Statement that is currently undergoing extensive revision. Lenape has been forced to shut-in a number of wells in Avon because the operation of those wells may result in violations of the Law Prohibiting Natural Gas if production continued. Lenape nor its agents, employees or contractors should be subject to arrest, fines and possibly jail for conducting activities authorized under the exclusive authority of state law. ECL §23-0303(2) unquestionably and natural gas industries. precludes local government entities from regulating oil

The Law Prohibiting Natural Gas unquestionably attempts to regulate oil and natural gas industry activities. EeL §71-1311 (1) unquestionably grants the Department with the authority to enforce the provisions of Article 23, which includes the preemption provisions set forth in ECL §23-0303(2), upon notice that the provision of Article are being, or are threatened with being violated. By and through this letter, Lenape is notifying you that the Towns are violating, or are threatening to violate, provisions of Article 23 [the EeL. Lenape respectfully requests that your office, as the regulatory body with authority over Lenape's oil and gas industry activities in ew York State, take the following actions: (1) advise the owns that the Law Prohibiting atural Gas is an illegal and unenforceable act; (2) affirm to Lenape that its lawful conduct of operations under the exclusive authority of New York State law will not subject Lenape, its agents, employees or contractors to .local enforcement proceedings, including fines and imprisonment, Linder the Law Prohibiting Natural Gas; and (3) acting through the Office of the New York State Attorney General or 011 your own volition, take legal action to extinguish the Law Prohibiting atural Gas provisions in conflict with the EeL or the complex oil and natural gas regulatory scheme administered by the Department. Given the importance of these issues to Lenapes continued operations in New York, please take the requested action with in ten (10) days. This letter serves as Notice requ ired under EeL §711311 (2) that Lenape may in itiate legal action authorized by EeL §71-1311 (1) to enforce EC L §23-

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0303(2) if the Department, through the Attorney General fails to act, naming the Department as a

party to any proceedings. Your prompt attention to these important matters is greatly appreciated.

resident Attachments Avon Law Caledonia Law York Proposed Law

CC:

Hon. Eric Schneiderman Office of the Attorney General

The Capitol Albany, NY 12224-0341
Brad Field - Director of the Division of Mineral Resources

ew York State Department of Environmental Conservation Commissioner Joseph Martens 625 Broadway Albany, NY 12233-101]
Linda Collart - Region 8 Division of Mineral Resources 6274 E. Avon-Lima Road Avon, NY 14414-9519 Michael P. Joy. esq. Reed Smith, LLP Reed Smith Center 525 Fifth Avenue Pittsburgh, PA 15222

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New York State Department of Environmental Conservation
50 Wolf Road, Albany, New York 12233·0001

Henry G. Williams
Commb3ionar

Harch 28, 1984

The Honorable William O. Smith Mayor of the City of Olean Olean Municipal Building Olean, New York 14760 Dear Hayer Smith: This Department recently became aware of the City of Olean's proposed ordinance to r egu'l.at the drilling and maintenance of e oil and gas wells within the City limits and regulating strip mining and pit mining within the City limits. Among other things, this ordinance requires mining and well operators to obtain permission from the City to ope rate-, mine or well within a the City's borders and to file Indemnd t ybonds or public liability insurance for the benetit of the City.
The New York State Mined Land Reclamation Law and lts regulations (EeL Article 23, Title 27 and 6 NYCRR Parts 420-426 permit local governments to regulate the mining industry, provided the local requirements are at least as strict as the State requirements. With respect to regulation of the oil and gas industry, however. I respecttully draw your attention to subdivision 2 of ;23-0303 of the Environmental Conservation Law which states:

The provisions of this article shall supersede all local laws or ordinances relating to the regulation of the oil. gas and solution mining industries; but shall not supersede local government jurisdiction over local. roads or the rights of local governments under the real property tax law. Hence. only the State, through the Department of EnvironmentaL Conservation, has the authority to regulate the oil and gas industry, except as to matters concerning local roads and real property taxation. See Envirogas. Inc. v. Tow"Uof Kiantone, :i12 Hisc. 2d 432, 441. N.y.s.1d 221 ~Ctq Erie Co., 1982), af£'d 454 K.Y.S.2d·694 (4th Dept. 1982). The Departme~regulations concerning the oil and gas industry are contained in Parts 550-558 of Title 6 of the Official Compilation of Codes. Rules and Regulations of the State of New York. I also draw your
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attention to EeL 23-0WS.13, which requires every person granted a permit to drill to give notice by certified mail to any local government affected and to any landowner whose surface rights 'Will be affected by drilUng operations of the location of the drilling site before starting those operattons. In summary, then, 'While it has the power to regulate the mining industry at least as strictly as is those provided for in State law and regulations, the City of Olean is without statutory authority to regulate any ot the matters set forth in the proposed ordinance pertaining to oil and gas wells. If you have any questions on this matter, please do not hesitate to contact me. Sincerely yoyrs,

Charles E. S~llivan. Jr. Senior Attorney cc: William J. O'Reilly. Esq. bee: C. Sovas J. Corr J. Spagnoli
L. Nelson B. McGranahan

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