NATURAL RESOURCES
COMMISSION
KEITH J. CHARTERS, Chair
JIM CAMPBELL
NANCY A. DOUGLAS
PAUL EISELE
BOB GARNER
WILLIAM U. PARFET
FRANK WHEATLAKE  

Adoption of Procedures Related to Oil and Gas Leasing
Statement by: Director K. L. Cool
Date: September 14, 2001
Location: Natural Resources Commission Meeting at Waterloo Recreation Area
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The Michigan Department of Natural Resources has an 80-year history of caring for this State's natural resources. Our employees are conservationists. They are scientists who have devoted their careers in public service to appropriate management of Michigan's natural resources. They are committed to making the "Right Decision" - not the politically correct decision. They care deeply about our public trust responsibilities to safeguard natural resources and assure outdoor users a quality environment.

The public respects this agency and supports our management decisions. In a recent poll Michigan Citizens gave our agency a 68% public approval rating (only 8 % disapproval) for our management of natural resources.

Today these same scientists and career conservationists recommend that we resume leasing of oil and gas by directional drilling under the Great Lakes. They cite science based experience and have worked hard to develop new state of the art procedures with the input of the environmental community and the oil and gas industry that ensure that best possible methods are used and regulations are enforced to insure public and environmental safety.

As you know oil and gas development under the bottomlands of the Great Lakes has been a successful ongoing regulated activity for decades. Records reflect that the first Michigan lease issued for the development of oil and gas under the bottomlands of the Great Lakes was issued in 1945. Currently the bottomlands leasing program including the seven producing bottomland wells have contributed more than $17 million dollars to the Michigan Natural Resources Trust Fund (MNRTF).

Hydrocarbon development from beneath the bottomlands of the Great Lakes is not a venture limited to the confines of the State of Michigan. Since 1913, Canada has drilled more than 2,200 wells in Lake Erie and continues to drill an average of 20 new wells each year in the Lake without negative environmental impact.

Revenue from the development of State owned minerals is the sole source of funding the MNRTF. Since the inception of the Trust Fund in 1976 more than $400 million dollars have been provided to State and local units of government to acquire and protect environmentally sensitive and special lands for this and future generations to enjoy.

Current projections indicate that up to an additional $100 million dollars could be deposited into the MNRTF from leasing and development of bottomlands. Our Department must, by Constitutional responsibility, manage the oil and gas leasing program in a sound, business-like manner as well as protect and manage the State's natural resources.

As you also know, the DNR ceased the leasing of Great Lakes bottomlands in 1997 to conduct a comprehensive review of our leasing process. At the same time, the Michigan Environmental Science Board (MESB), at the request of Governor Engler, initiated a study of the technical, environmental and social issues associated with directional drilling. The MESB report concluded "...that there is little to no risk of contamination to the Great Lakes bottom or waters through the releases directly above the bottom hole portion of directionally drilled wells into Niagaran Reef and deeper reservoirs." They did not recommend a ban on drilling under the Great Lakes.

The DNR, Department of Environmental Quality (DEQ) and MESB are in agreement that any environmental contamination that might result from directional drilling under the Great Lakes would most likely occur upland, at the drill site. To address this concern, the DNR and DEQ adopted leasing and regulatory changes that instituted a minimum 1,500-foot setback from the Great Lakes for wells drilled directionally beneath the Great Lakes, and for new storage and treatment equipment and access roads associated with these wells.

In addition, the regulatory changes prohibit wells, equipment and access roads in sensitive coastal environments and the use of excavated pits for the disposal of drill cuttings. Further, all well and production equipment must be screened from the shoreline and public recreation areas. Both DEQ and DNR staff are confident that existing laws, rules and procedures will ensure adequate environmental protection of the lakeshore and adjoining areas.

In March of this year, our Department formed a diverse work group to discuss issues related to our leasing program and to provide a recommendation for updating leasing procedures. Invited participants included members of several environmental groups, other State departments, agencies representing local units of government and industry. Meetings were held in March, April, and June.

The result of this collaborative effort is the updated procedures before the public and this Commission awaiting final approval by the DNR Director. These procedures include many changes that enhance local government and public involvement in Great Lakes bottomlands leasing and incorporate additional recommendations of the MESB regarding public notice and input into the leasing process. For example:

* DNR, DEQ and the Public Service Commission will identify potential areas for oil and gas development under the Great Lakes to provide for better planning and greater public involvement.

* DNR will develop a Coastal Inventory prior to considering a bottomland lease in a given geographic area. We will gather and analyze data on existing wells, pipelines, and access roads. We will establish the location of 1,500 foot setbacks, and we will identify unique or sensitive features such as sand dunes, wetlands, endangered species and public parks, and location of sites potentially suitable for infrastructure.

* DNR will put information in GIS format and provide it to Township or other local government officials prior to reviewing Great Lake bottomlands lease applications.

* DNR will provide an opportunity for Township or other local government officials to review relevant DNR databases and provide applicable supplemental information, such as special features like public parks.

* DNR will publish notice on our web site, local newspapers and inform the Township Supervisor of location of parcels, surface location of well and infrastructure and provide increased time for comment. The Township supervisor will also receive updated GIS information and analysis and,

* DNR will conduct a public meeting in close proximity to well site to provide for public comment and information sharing prior to providing a staff recommendation to the Director.

The DNR cares deeply about our public trust responsibilities. We listen and learn from the public and from science. We are the right entity to make this decision because we are professionally trained to do so. We are caring professionals who have carefully evaluated all the factual information surrounding directional drilling under the Great Lakes.

In 1997 we voluntarily stopped leases under the bottomlands of the Great Lakes so we could focus on improving our management of this resource using the best available science. The new procedures before us today are recommended for adoption by DNR Chiefs of Forest, Mineral and Fire Management, Mindy Koch; Parks and Recreation, Rod Stokes; Wildlife, Becky Humphries; Fisheries, Kelley Smith, and Resource Management Deputy, George Burgoyne. Their recommendation is consistent with Natural Resources Commission policy that states it shall be our policy " to manage State-owned minerals in a manner that protects and enhances the public trust. Minerals shall be developed in an orderly manner to optimize revenue consistent with other public interest and natural resources values."

I applaud our staff's thorough evaluation of these procedures and their comprehensive understanding of directional drilling under the bottomlands of the Great Lakes. I also applaud the NRC for providing the public with forums where we could listen and then review this issue.

I am also extremely impressed with the passion of many citizens who have taken the time to participate in this lengthy decision making process. We have received factual, scientific information from many of them that this commission, our staff and I have used in reaching a decision.

However, I find it extremely disappointing that several of the State’s environmental organizations have chosen to ignite and exploit this issue with misleading and false information, such as the recent newspaper advertisement paid for by the Lake Michigan Federation, Michigan Land Use Institute and the Michigan Environmental Council, which depicts a little girl and phantom oil wells superimposed on the Great Lakes Shoreline, as well as statements that oil wells could dot the Lake Superior shoreline. Nothing could be further from the truth.

I came to this position by way of Montana and North Dakota where oil and gas development is also conducted. I have over 12 years of professional natural resources management experience with the oil and gas industry in those states and here in Michigan. I can therefore assure you that Michigan regulates this industry much more closely from an environmental standpoint than any of those western states.

I commend the Michigan oil and gas producers for their collaboration and cooperation with this department in the responsible development of Michigan’s mineral resources. They have done so in a professional manner and that should be noted by this Agency, this Commission and our constituents.

I intend to approve the Procedures related to Oil and Gas Leasing with the full knowledge and confidence that our professional staff and Commission support its adoption. To do otherwise would be irresponsible and a breach of my professional ethics as the Director of the Michigan Department of Natural Resources.

I also intend to ask our mineral staff to give priority to leases that can be accomplished from existing infrastructure. This will insure an opportunity for the oil and gas production industry to demonstrate by their actions their commitment to public and environmental safety as well as aesthetics. We pledge to work with them to gain greater public understanding and therefore confidence.

We will report lease activity and provide opportunities for this Commission to visit actual drilling sites in the months that follow. We will also provide opportunities consistent with the new procedures for public input.

Thank you for your confidence in this decision.

See also Attorney General Jennifer Granholm's letter to K.L. Cool, Director of the Department of Natural Resources-->Attorney General Jennifer Granholm's letter to K.L. Cool, Director of the Department of Natural Resources