LANSING - The Department of Natural Resources has announced its plan to lease more than 107,000 acres of state forest land for oil and gas development.

Virtually all of the land lies in an arc that crosses northern Michigan in the region that has become the focus of intensive Antrim gas development. Twenty counties are affected by the lease. When it announced the lease sale in mid-September, the state published a 209-page document that listed about 3,000 parcels that are proposed for leasing, including 1,200 parcels in Manistee, Benzie and Mason counties.

Few counties have more land up for lease than Manistee County, where the state has offered some 22,500 acres for development. The state also has made available about 11,000 acres in Mason County, and roughly 5,400 acres in Benzie, Wexford, and Grand Traverse counties.

Under its rules for leasing state land, the DNR is set to hold an auction on December 9 in Lansing. Energy companies are invited to bid for the leases, most of which have been divided into 40-acre parcels.

But unlike previous auctions, in which vast forest holdings owned by the state were haphazardly leased for Antrim gas development, the new sale is being much more closely monitored by state foresters, by landowners and by community groups like MCLUC.

The reason is that more careful leasing practices make economic and environmental sense. In the mid-1980s, some 1,200 oil wells and 220 gas wells were recovering energy resources from state-leased land. In 1985, the state earned $60.3 million in royalties, rentals, bonuses and fees, the highest ever recorded. These revenues were generated principally from oil development, which is much more valuable than natural gas.

In the 1990s, the situation has almost reversed. The state is leasing more, and fragmenting more of its best forest lands for gas development, but is receiving much less in royalities and other revenue. In 1993, the most recent year for complete figures, there were 2,100 gas wells and 1,300 oil wells on state land. Revenues to the state totaled $37.2 million.

Partly in response to statistics like these, the DNR Forestry Division has recommended that Antrim gas development on state lands be restricted to 160-acre spacing to reduce damage to land and streams. The state foresters also have classified a sizeable portion of the leases as either "non-development," meaning no gas wells or roads are to be constructed, or "development with restrictions," in which damage to the surface is minimized.

Landowners also are urging caution from the state. A portion of the state’s minerals lie beneath land that is privately owned. All of the nearly 700 acres up for lease auction in Arcadia Township is privately owned, according to research conducted by MCLUC.

Of the 38 parcels the state has proposed for leasing in Pleasanton Township, 10 are held by surface owners who do not own their mineral rights, including one parcel owned by Gerard Grabowksi, a baker and member of the Pleasanton Township Board.

This month, the Pleasanton Board formally requested that the DNR put off limits to development the Grabowski parcel and a neighboring seasonal homesite, contending that developing the heavily wooded and steep land "no matter how carefully done, would result in a degraded landscape."

MCLUC also has requested that before the DNR conducts the auction, it should do a much better job of informing all the severed rights owners that their land could be developed. That would enable the landowners to compete with the gas industry and make their own bids for the mineral rights.

Anyone can bid on any parcel that is being offered in a lease sale. The miminum bid is $10 an acre.

In a related action that could affect the auction, the Natural Resources Commission, an appointed body that oversees the DNR, is considering a proposal to substantially improve the state’s leasing policy. The proposed policy, which was written in large part by DNR foresters and biologists, is a response to the haphazard gas development that has fragmented state forests in Montmorency County since 1990. It is designed to strengthen environmental safeguards on state land, giving ecological protection the same political standing as gas and oil development.

EAST JORDAN - Oilfield Investments Ltd., one of the major players in developing Michigan’s Antrim Shale gas fields, was fined and sanctioned by the state Department of Natural Resources in September for installing a pipeline across state land in Antrim County without permission.

The proposed penalties include a $931.50 fine for damages and an order to remove the pipeline and restore the land to its original condition by November 18. They are the first state sanctions leveled against an Antrim gas developer in Michigan.

The state also said it would not consider any of OIL’s applications for drilling new Antrim wells until all the legal issues surrounding the unlawful pipeline are resolved.

The state’s decision to halt the company’s permits could substantially delay OIL’s aggressive plans to develop Antrim gas wells in Northwest Michigan. The company has drilled five wells in Manistee County this year and has either received permission or applied for permits for 125 more in Pleasanton, Springdale and Bear Lake townships, according to the Michigan Oil and Gas News.

Earlier this year, during a public meeting in Pleasanton Township Hall, OIL Vice President Greg Fogle said that the state’s regulatory program for overseeing the industry was adequate and that his company would comply with the rules. However, the company’s actions raise questions about OIL’s willingness to abide by state law.

The sanctions against OIL stem from the discovery that the company had built a pipeline without permission in the Jordan Valley Management Area, a 20,000-acre stretch of wild land that the DNR has protected from oil and gas development. According to Bill O’Neill, area forester for the DNR, OIL installed the pipeline along Deadman’s Hill Road in a county road right-of-way that crosses state forest land.

Mr. O’Neill said that last spring OIL applied for an easement from the state to build the pipeline and the company’s application was denied. Mr. O’Neill said he personally told Mr. Fogle that the permit request had been turned down. Mr. O’Neill also said he met with Mr. Fogle on two or three occasions to explain the state’s decision.

"I called him and met with him to tell them the easement will be denied because it’s within the Jordan Valley Management Area and the plan written for that area states that oil and gas development will not be allowed," said Mr. O’Neill in an interview.

Mr. Fogle declined to respond to several requests from MCLUC for a response. In an interview with the Traverse City Record Eagle, Mr. Fogle said that the easement was not denied, but that the state just never responded to the permit application. Mr. Fogle said the Antrim County Road Commission granted OIL permission to install the pipeline in the road right-of-way. However, Mr. O’Neill pointed out that the state owns the land and that OIL also was required to get an easement from the state to cross state land.

Mr. O’Neill said the pipeline was installed sometime in July, but that the state did not discover it until the first week of September. On September 19, the state issued a notice of violation, citing OIL for breaking state law, and ordered the company to remove the pipeline, pay for damaging state land, and restore the property to the condition that existed before the pipeline was built.

The state also said it was conducting a criminal investigation because OIL cut down trees and damaged state property.

Although OIL is the target, the sanctions also are a critical test of the state’s authority to oversee the $500 million a year Michigan natural gas industry. The pipeline OIL installed without permission services two wells that the company drilled on private land within the Jordan Valley Management Area. The state sought to prevent the development by denying the pipeline. The state also is challenging OIL’s plan to drill a third well in the Jordan Valley that is on state land with privately owned mineral rights.

The state and OIL now are negotiating a settlement. According to several state officials, the state might agree to drop its demand that OIL remove the pipeline. In return, OIL would not drill the third well. If that occurs, OIL would have saved itself not only the cost of ripping out the pipeline and restoring the right-of-way, it also will be able to recover natural gas from the two wells it already has drilled at a cost of roughly $500,000.

Since early this year, Kitty Myers, who lives on Potter Road in Bear Lake Township, has provided an eyewitness account of what it’s like to live in an Antrim gas development.The 2,320-acre Bear Lake Project is under construction by Savoy Oil and Gas. We asked Mrs. Myers, who recently was elected vice-chairwoman of MCLUC, to keep a diary for us.

It is essential to keep gates closed on a farm because of the cows and horses. Ever since drilling activity began on our property last December, work crews for Savoy have regularly left the gate open in the hayfield where the well is located.

July 25 -- Gate left open.

July 27 -- Gate left open.

August 2 -- Gate left open.

August 3 -- Gate left open.

August 11 -- Gate left open

August 16 -- Gate left open.

August 23 -- Gate left open. During this time, various trucks would come in to work on the pumpjack at different times throughout the day, or perhaps just to observe it. Sometimes the gate would be closed when they left, or sometimes it would be left open until evening. Sometimes they would come in once; other times it would be continuous, several trucks at a time, with periodic horn honking, we assume to signal others somewhere else.

For a couple of weeks at the end of August and beginning of September, they stayed off our property while installing pumpjacks at the other completed wells and working (we assume, from the size and type of huge things moving down the road in that direction) on the compressor station.

About this time we started hearing noise, usually at night, coming from the direction of the compressor station. We took several 1 a.m. drives to try to pinpoint the source, but as we had found in Montmorency County, sound travels in strange directions. The Shell compressor station on Big Four Road, near Thirteen Mile Road, was usually louder at these times than we had ever heard it before. On Potter Road, directly south of the facility (which is located at least a quarter mile back from the road, down in a hollow) there was little or no sound, but the worst of it ironically seems to funnel through a rift in the land formations, directly to our house

September 14 -- Gate left open.

September 21 -- Gate left open

September 23 -- Awakened at 4 a.m. by assumed compressor station noise and heavy truck traffic up and down the road from then on. Gate left open.

September 24 -- Turned our cows into the hayfield where well is located. The truck coming into the field just at that time did quickly close the gate. There has not been a problem since then with the gate being left open.

September 25 -- A QUIET Sunday for a change with no gas company related noise.

September 26 -- Pumpjack squawking with every stroke. Really nerve-wracking when outside and still audible inside the house. It quieted to some extent for about half an hour around 5 p.m., during which time gas company people came in to check it. After dark, the neighbors called to find out who they could call to complain to about the noise. They had a fan going to dampen the noise so their children could sleep. They had decided it sounded like a beached whale. I thought it was more like an elephant trumpeting every few seconds. Sometimes it would change to a three or four note complaint like a very loud record on a worn out groove. We were tired enough that we finally got to sleep with the windows closed, but at 3 a.m. the cows were mooing and the dog barking and we were up again.

September 27 -- Savoy fenced off the pumpjack and electric box. The electric box is NOT within their final 50-foot diameter circle. No noise. They left plastic ribbon on the barbed wire, which we later removed so the cows wouldn’t eat it and get sick.

September 30 -- Pumpjack sounds like an elk bugling at 10 p.m.

October 1 -- Pumpjack off. Backhoes or something working next door on Edwards’ well most of the day.

October 2 -- Sunday morning. Big machinery loud at Edwards at 9 a.m. -- left for something to the east.

October 3 -- Personnel out hanging plastic streamers on the fence around the pumpjack. When asked why, they replied "For safety reasons. We don’t want some kids running into it and getting hurt." The only kids with any business in our hayfield are our own, and they certainly know the fence is there. When asked to, they removed the ribbons and left.

October 4 -- Pumpjack squawking through the evening and night.

October 7 -- Major explosive type bangs every few minutes from working on Edwards’ well all afternoon.

October 10 -- Two men in a truck came out to paint fence posts, etc., around the pumpjack. Then they went into our hayfield to paint the pipe on a water well of ours. We asked them not to and they left. This afternoon they began working on Edwards’ well next door, with a series of explosive type sounds, a few minutes apart, all afternoon.

October 13 -- A tower rig is back up over the well in our field, pulling rods or something. Loud engine noise all afternoon and evening. Left mid-day Friday.

October 14 -- From our place the rig was moved to Fruithaven, down the road, where the noise was still clearly audible. Our pumpjack remained off for the weekend.

MCLUC Seeking Negotiations With Oilfield Investments Ltd.

Last March, during a public meeting at Pleasanton Township Hall, Greg Fogle, vice president of Oilfield Investments Ltd., said he was willing to work with citizens and respond thoroughly to their concerns about Antrim gas development. Then on June 1, Mr. Fogle wrote a letter to landowners in Pleasanton Township that said MCLUC represented a minority viewpoint, and that its work would result in "a reduction in royalty income due to reduced drilling and production."

That is not true. MCLUC has consistently advocated spacing wells 160 acres apart, which is the same spacing that Mr. Fogle says his company uses in its Antrim gas developments.

In addition, MCLUC has spent several thousand dollars to prepare a leasing information packet that has been distributed free of charge to hundreds of area residents who requested it. This packet helped landowners gain confidence and negotiate much more favorable leasing terms. Landowners now are being offered as much as $70 an acre and a one-sixth royalty to sign leases. In January, the going rate was $5 to $10 an acre for the signing bonus and a one-eighth royalty.

On September 22, MCLUC Chairman Keith Schneider spoke to landowners in Antrim County about Antrim gas development. Mr. Fogle attended the meeting and afterwards Mr. Schneider urged Mr. Fogle to sit down with MCLUC representatives. Mr. Fogle declined, saying said he would not talk with MCLUC because Mr. Schneider "could not get the facts straight" and was "misrepresenting the facts."

What follows are letters exchanged by Mr. Schneider and Mr. Fogle since that meeting:

October 5, 1994, from Mr. Schneider to Mr. Fogle:

At the September 22nd meeting of the Friends of the Jordan River Watershed, you stated that you would not discuss your company’s Antrim gas development projects with me because I "could not get my facts straight," and that I was "misrepresenting the facts."

It has always been my intent as the chairman of the Michigan Communities Land Use Coalition to conduct our work with the highest standards of accuracy and integrity. If I am, indeed, misstating facts I want to be the first to correct them.

With that in mind, I would ask that you specify the points you believe I have misstated or misrepresented so that we can develop a cordial and respectful working relationship.

With this letter, I also am seeking more information about the noise reduction technology you are using at OIL’s compressing stations. You noted during the East Jordan meeting that OIL is spending additional money to quiet the motors at its compressing stations. You said that one of these compressors was so quiet that people camped next to it.

We would like to know the location of this compressing station. As you know, Benzie and Manistee counties are establishing a task force on oil and gas development. One of the primary issues the task force will work on is limiting the noise made by compressing stations.

I look forward to your reply.

October 17, 1994, from Mr. Fogle to Mr. Schneider:

I have not been in the practice of retaining your articles and newsletters since I have not considered them worthy of the space required to do so. Therefore, I am not in a position to give you specific cites of errors of fact and misrepresentation. I will be certain to communicate to you in the future when I hear or read your statements and they contain similar errors, as time permits.

I can only respond to your letter in general terms at this time. I think any objective person will agree that your characterization of the industry’s activities in Otsego and Montmorency counties as highly destructive and your assertions of long lasting severe degradation of the environment as the Antrim formation has been developed are grossly inaccurate.

At one time you also used a Society of Petroleum Engineers paper and a Gas Research Institute report to support your belief that a well density of one per 160 acres is proper for the Antrim formation. That paper and that report do not claim that 160 acres per well is the proper density and the author of the SPE paper has personally repudiated your interpretation to my associate, Mr. Kent Fink, who was previously employed by the Gas Research Institute.

The articles authored by you and statements made by you and other members of your organization which have been reported in the press lead me to believe you and your organization are categorically opposed to Antrim development in spite of your public proclamations of neutrality. I feel that anything I sent to you or tell you will not be used to develop a cordial and respectful working relationship, but will instead be used to interfere with and obstruct my drilling and development activities in Manistee and Benzie counties.

I will continue to work with all government agencies which have jurisdiction over my activities to insure I comply with all statutes and regulations governing my actions. I will continue to work with the mineral owners with whom I have leases. And I will continue to try to mitigate the impacts on all surface owners, whether or not they own the minerals under their land, to try to be inconspicuous and a good neighbor to everyone.

October 23, 1994, from Mr. Schneider to Mr. Fogle:

Thank you for your response to my letter of October 5. With this reply I hope to convince you that MCLUC will conduct the debate over Antrim gas development with the highest standards of accuracy and integrity.

1. Your company and MCLUC already have reached some points of agreement:

• At the September 22 meeting of the Friends of the Jordan River Watershed in East Jordan, you said that OIL has adopted a 160-acre well density for its Antrim developments. MCLUC supports this spacing pattern, since it minimizes the amount of construction necessary to recover and transport the gas and dispose of wastes.
• You also said at the East Jordan meeting that OIL is spending an additional $30,000 per compressing station to reduce noise. MCLUC’s members, many of whom have leased, also are concerned about noise from compressing stations and some of them are researching technical means for reducing it. I am again asking that you make public the location of the OIL compressing station, which you said was so quiet that people camped next to it.
• MCLUC also is concerned about the location and routes of pipelines, and wants to improve the ability of severed rights owners to manage what happens on their land. We appreciate your desire to be "a good neighbor to everyone," and again invite you to sit down with the members of MCLUC to talk about all these issues and fashion a workable resolution.

2. Regarding your initial assertions last month about my credibility, it seems to me that if you accuse someone of something as serious as "misstating and misrepresenting facts," such accusations should be supported by specific examples. That is what I requested in my letter of October 5, because I am sincerely interested in correcting the record if it is warranted. However, in your letter of October 17, you decline to do so and instead rely on general accusations, all of which are either off the mark or simply inaccurate.

Never have I characterized the development of Antrim gas reserves in Montmorency and Otsego counties as "highly destructive" or asserted that the industry’s work in that region had produced "long-lasting severe degradation of the environment," as you claim. In fact, I have deliberately avoided such hyperbolic language because it does not accurately convey what occurred in those counties.

What I have reported is that in installing more than 4,000 wells and over 190 compressing stations in Montmorency and Otsego counties, the industry fragmented the forests, cut stream banks, and caused erosion that damaged clear streams with silt. The development also increased noise and heavy truck traffic, poses a risk to groundwater, and caused a deterioration of the quality of life in a quiet region that had been unaffected by big industry.

This description of the Antrim gas development in Montmorency and Otsego counties is confirmed by virtually every group that has assessed the conditions in that region, except gas industry executives. The Department of Natural Resources, the Tip of the Mitt Watershed Council, the Northeast Michigan Council of Governments, the Gazette, the Detroit Free Press, and an array of independent scientists and ecologists who have studied the industry’s development in Northeast Michigan all have reached the same conclusion as MCLUC.

In response to the concerns expressed by these groups, the Department of Natural Resources is taking two critical steps to better manage Antrim gas development:

• The DNR is considering important new changes to its policy for leasing state lands that emphasize greater environmental protection.
• As a result of a lawsuit, brought by the Michigan Environmental Trust Limited in response to Antrim development in Montmorency and Otsego counties, the DNR also is conducting a public hearing to increase the spacing between wells from 40 acres to up to 160 acres. Increased spacing between wells would substantially reduce damage to the environment and a county’s quality of life.

3. Regarding MCLUC’s use of data from the Society of Petroleum Engineers and the Gas Research Institute:

Last March we received several documents from these groups, one of which I described during a town hall meeting in Pleasanton Township. The SPE technical paper, which was based on computer models and actual data from Antrim wells in Michigan, compared gas production from wells spaced 40, 80 and 160 acres apart.

The paper indicated that at 160-acre spacing, the gas reserves could be recovered in full, but not as quickly as if the wells were spaced 40 acres apart. The paper also indicated that over the long term, production would be considerably higher for a much longer time from wells spaced 160 acres apart than from wells spaced more closely.

I said the paper was an important piece of evidence that supported what many companies in Michigan already are doing. Shell Western, for example, is spacing its wells 160 acres apart, a density that causes less damage to the land and reduces expenses, since each Antrim well costs an average of $250,000.

My characterization of the SPE paper and graph was accurate. The 160-acre spacing density is becoming the consensus view of energy companies, the state, and thousands of landowners in Michigan.

4. Your conclusion that MCLUC is "categorically opposed" to Antrim development is wrong. Ever since forming MCLUC, we have consistently maintained that Antrim development represents an opportunity to diversify this region’s economy. We also have said that if the development is done carefully and sensibly, it will not cause widespread deterioration of our land and our quality of life.

The questions MCLUC has raised about how this development will occur, and the work we have done to alert our political officials and our neighbors, represents a legitimate effort to safeguard what we hold most valuable: our beautiful land, our clean air and water, and our quiet days and nights uninterrupted by the roar of unmuffled compressing stations and processing plants.

Our message has resonated throughout this community. We are seen, for good reason, as a technically proficient and reasonable community group that is contending with an industry that has the potential to alter this landscape and our lives.

I urge you to work with us.

MANISTEE - MCLUC Chairman Keith Schneider has accepted an invitation from Manistee and Benzie counties to join an 18-member task force that will study oil and gas development and help Northwest Michigan townships gain greater authority to manage the industry.

The task force was developed by Kurt Schindler and David Neiger, respectively the planning directors in Manistee and Benzie counties, who received a $28,600 grant from the Department of Natural Resources for the project. Most of the money will be used to hire a land use expert, Mark Wyckoff, who will coordinate the task force’s work.

According to Mr. Schindler and Mr. Neiger, a goal of the task force is to determine where state authority to oversee oil and gas development ends and where local authority begins.

The task force will write model legal language that townships can adopt as part of their zoning ordinances to manage energy development. A starting point for this work is likely to be Pleasanton Township, which amended its zoning ordinance in July to give residents more authority to review the energy industry’s development plans before wells are drilled.

Another principal goal of the task force is to serve as a mediator for differences between residents and the energy industry. The task force will explore ways to reduce noise from compressing stations and minimize the construction of wells, roads and pipelines. It also will develop a means for protecting scenic areas and ecologically-sensitive regions, such as watersheds and wetlands.

The task force will meet at least nine times, beginning this fall, and will write a final report with recommendations by September 1995. It will be made up of Department of Natural Resources officials, oil and gas industry executives, local citizens, landowners, and business and political leaders.

MCLUC is encouraging the task force to set its goals very high. The project represents a welcome opportunity to establish an enduring model for careful industrial development, and should protect the resources that make our region such a wondrous place to live.

LANSING - The first of several formal public hearings to increase the spacing between wells in Antrim gas developments was held on September 12.

The hearings, called by DNR Assistant Supervisor of Wells R. Thomas Segall, result from the settlement last June of a lawsuit against the state and the gas industry that was filed on behalf of the Michigan Environmental Trust Limited, a group from Otsego and Montmorency counties.

As part of the settlement, METL and the Michigan Oil and Gas Association agreed to jointly file a petition with the state to increase Antrim well spacing to a maximum of 160 acres. State law currently allows Antrim wells to be spaced 40 acres apart.

The hearing process is similar to a court proceeding and is overseen by William Fulkerson, a DNR Hearing Examiner. Six days of public hearings are scheduled between late October and February, and more likely will be added as teams of lawyers from the energy industry take turns introducing evidence and cross-examining witnesses. A final spacing order could be issued as early as March 1995.

There are two key players representing citizens: the Department of Natural Resources, and Ann Arbor attorney Dick Daane of METL. As of this writing, the Department of Natural Resources has not decided its position, although the agency’s foresters and biologists are pressing the Engler Administration to support 160-acre spacing in Antrim development.

Mr. Daane, who has worked on the METL litigation and the spacing hearing pro bono for more than two years, will present a technical and biological case that supports 160-acre spacing.

The spacing of Antrim gas wells is one of the most contentious political and economic issues the DNR now faces. MCLUC and other community groups contend that Antrim wells are too closely spaced, and that wider spacing will reduce the unwelcome aspects of gas development -- fragmented forests, noise, truck traffic, soil erosion, and risks to groundwater -- without sacrificing energy production over the long term.

MCLUC also has pointed out that wider spacing substantially reduces the expense of developing Antrim gas reserves since it means fewer wells, roads and pipelines, and less overall construction.

Some of the larger energy companies, most notably Shell Western, have adopted 160-acre spacing for their Antrim developments. Even so, many smaller companies are opposed to a wider spacing requirement, since more densely packed wells result in higher production over a shorter period of time. The smaller companies then are able to recover their costs more quickly.

MCLUC this month contributed $300 to METL’s legal work on the spacing issue and urges its members to make their own contributions to support this valuable effort. Please send your donation to Dick Daane, c/o METL, 126 South Main Street, Ann Arbor, Michigan 48104.