Newsletter of the Michigan Communities Land Use Coaliton
Summer 1995
Volume2, Number 3
INSIDE
Pleasanton Sues DNR
MCLUC Joins Michigan Land Use Institute
Along the Betsie River
State Doubles Well Spacing
Potter Road Perspective
Benzie County Lease Sale
Terra Energy Sold for $58.5 Million
New Well Listings
Sweetheart Deal Costs
Taxpayers Millions
Post Production Costs Deducted Before Royalties Paid
The Engler Administration quietly negotiated an agreement in late 1993 that allows the energy industry to write off nearly all the expenses of operating Antrim Shale gas projects on state land. The deal costs taxpayers millions of dollars every year in lost royalty payments, state officials acknowledged.
Legal experts say the agreement is in direct conflict with one of the basic tenets of leasing, which is to discourage companies from writing off so-called "post production costs" before paying royalties.
Critics of the Department of Natural Resources said the agreement was emblematic of the egregiously close ties between the state and the oil and gas industry. They noted that the agreement was negotiated in private with the Michigan Oil and Gas Association, without any effort to seek comment from the public or the Legislature.
State officials defended the pact, saying the DNR had the executive authority to set all the terms for leasing state-owned mineral rights.
Leo F. Rademacher, a supervisor in the DNR Minerals Lease Management Section, estimated that the agreement costs the state $4 million to $6 million annually in lost royalty payments from state-owned minerals.
"I don’t think it’s overly generous," said Mr. Rademacher, who helped negotiate the agreement. "I hope we are not giving anything away. We are trying to protect the interest of the state, and if you talk to industry, they would say we are pretty damn tough. We drove a fair deal."
Leasing experts outside the government, however, say the agreement saves the industry at least $8 million a year, and close to $20 million since it was signed on November 10, 1993.
Had the agreement not been in effect, royalties paid to Michigan last year would have totaled $40 million or more, said experts. Instead the state collected $31.1 million in royalties from oil and gas development on public lands.
"It’s a sweet deal," said Joe Quandt, a lawyer in Traverse City with Smith, Johnson and Brandt, and a former enforcement specialist with the DNR’s Geological Survey Division. "Any normal businessman would call these costs operating overhead."
"This deal allows the oil companies to have their cake and eat it too," Quandt added. "And the strangest thing is that the state did not have to agree to any of this. They hold all the cards. They’ve got millions of acres to lease. They could have cut any deal they wanted, but they just gave it away. You have to wonder what political process happened to get them to do that."
Several top industry executives, including Frank Mortl, president of the Michigan Oil and Gas Association, did not return phone calls seeking comment.
The agreement between the state and MOGA was the result of months of talks at the highest levels of the DNR. The agreement allows the industry to deduct from state royalties all labor, material, and service costs of operating Antrim wells for at least seven years. Deductible costs include installing pipelines, building and operating compressing stations, buying equipment, labor and maintenance costs, even the cost of snow removal.
Mr. Rademacher said the agreement was the first of its kind ever negotiated by the state for oil and gas development, and is the result of the distinctive aspects of Antrim gas production.
The industry contends that producing gas from the Antrim formation has been more expensive because it involves a much larger industrial infrastructure of pipelines, compressing stations, carbon dioxide removal plants and other facilities.
A Plausible Explanation
Critics of the industry have pointed out, though, that the primary reason such costs were so high is that Antrim producers overbuilt. A federal tax subsidy, instituted in 1980 and now worth an estimated $100 million in Michigan per year, paid gas developers to install three times as many wells, compressing stations, pipelines and roads than were needed to tap the Antrim formation.
Having spent hundreds of millions of dollars more than were necessary, the industry then turned to the state to bail them out of operating such an immense industrial infrastructure, said critics.
"It’s a very aggressive allowance," said Mr. Quandt. "It allows deductions for all types of costs—legal fees, personnel, administrative expenses. In a lot of cases it resultsin a 20 to 60 percent loss in royalties to the state."
Antrim Well Spacing Doubled
80 Acres is New Minimum
The Department of Natural Resources has directed gas developers to increase the distance among Antrim wells from 40 acres to an average of 80 acres. The spacing order applies to this year’s new drilling permits and well applications, and took effect on June 20.
The decision is the culmination of a three-year legal battle between environmentalists and the DNR, and was the minimum action the state could take under a court settlement reached in a lawsuit by the Michigan Environmental Trust, Ltd.
In the order, R. Thomas Segall, DNR Assistant Supervisor of Wells, said that the change in spacing grew out of concern that the web of wells, roads, and pipelines built to move the gas to market was causing considerable and unnecessary environmental damage.
The damage, said Mr. Segall, included "forest fragmentation, loss of standing timber, disruption of soil profile, reduction in forest aesthetics due to clearings, erosion and sedimentation impacting watercourses, infringement on threatened and endangered species habitat, aesthetic and noise pollution, and disruption of wetlands and other sensitive ecosystems."
Public hearings on the spacing order lasted from September 1994 to March 1995. The most striking aspect of the hearings was the ample evidence that showed 160 acre spacing of Antrim wells was the optimum development pattern for the environment and the economy. Testimony from conservationists, state officials, and several large energy companies, including Shell Oil and Amoco, all supported MCLUC’s position for 160 acre spacing.
For instance, Sidney J. Jansma Jr., president of Wolverine Oil and Gas Company, provided economic data showing that the difference in profits from projects with 80-acre spacing and 160-acre spacing was insignificant. The 80-acre projects yielded a 21.4 percent internal rate of return after taxes, versus 19.9 percent for 160-acre projects.
Despite the strong evidence for 160-acre spacing, Mr. Segall decided on 80 acres. Mr. Segall made his decision based on the life of the well at each spacing pattern.
Mr. Jansma testified that at 80-acre spacing wells are productive for 16.5 years, compared to 23.5 years for wells spaced 160 acres apart. Mr. Segall said this difference in production life represents "a significant loss of natural gas resources."
This logic seems flawed. For landowners and communities receiving royalty income, stretching payments out over a longer time is a bonus, not a penalty. For smaller gas companies and their investors, however, faster depletion of the gas means quicker profits.
A Summary of Antrim Development
Antrim Shale—A geological formation saturated with natural gas that lies 1,400 to 1,800 feet below the surface. Stretching in an arc through Michigan’s lower peninsula, Antrim Shale has an exceptionally high success rate. More than 90 percent of the wells drilled into the formation yield marketable quantities of natural gas.
Mineral Rights—Oil and gas are property, and owning them is called a mineral right. An owner can develop his rights by leasing to an energy company, and typically receives a royalty based on the volume produced.
Severed Rights—Michigan law allows a landowner to retain control of the underlying minerals when selling the surface property. The buyer of the surface then is known as a "severed rights owner." In such cases, which are very common, the owner of the mineral rights has the authority to develop them, while the severed rights owner has essentially no control.
Extent of Antrim Development—Since the late 1980s, nearly 5,000 natural gas wells have been drilled in the North Woods. About half of them were drilled on state forest land. The development was spurred by a federal tax credit that now is worth an estimated $100 million annually to investors in Michigan’s Antrim gas fields.
DNR Role—Under Public Act 61, the Geological Survey Division of the Michigan Department of Natural Resources is charged with overseeing the oil and gas industry. The division has been torn by an overriding conflict of interest. Its budget is paid entirely by the oil and gas industry, yet it is the industry’s primary regulator.
Environmental Effects—Antrim gas development has produced an array of effects on the environment and communities because of the sheer number of wells that have been drilled, and the extensive network of roads, pipelines, compressing stations, and processing plants built to move the gas to market. Antrim development has fragmented forests, caused widespread soil erosion and stream sedimentation, and raised concerns about groundwater contamination from the disposal of brine.
Community Effects—In Montmorency County, noisy compressing stations built close to homes lowered property values and disrupted the quality of life. Studies by the state and private groups found that companies did not adequately restore drilling sites, and there are significant concerns about what will happen when the wells run dry. The state requires only that companies post a $50,000 reclamation bond for all the wells they own in Michigan, an amount too small to clean up even one modestly contaminated site.
Community Action
Montmorency County officials in 1990 instituted tougher soil erosion control measures to slow industry development and protect the region’s clear streams. Aided by the Tip of the Mitt Watershed Council and the Northeast Michigan Council of Governments, comprehensive studies were conducted on the effects well-drilling, and road and pipeline construction, were having on land and water.
The Michigan Environmental Trust Limited filed a lawsuit in 1992 and won an injunction that barred developers from cutting stream banks to lay pipelines. The lawsuit concluded in June 1995, when the state issued an order that doubled the spacing between Antrim wells from 40 acres to an average of 80 acres.
A task force of senior DNR officials, responding to public concern in 1992, found numerous flaws in the oversight of Antrim gas development, and recommended, among other things, comprehensive, bioregional land use planning to reduce environmental damage. The recommendations were never put into effect.
The Michigan Communities Land Use Coalition was organized in February 1994 by citizens from Manistee and Benzie counties. The coalition held three well-attended town hall meetings, and built support in both counties for more sensitive Antrim Shale production practices.
Pleasanton Township in Manistee County approved an amendment to its zoning ordinance in August 1994 that asserts the authority of local officials to oversee compressing stations, and other aspects of oil and gas development with the exception of the wells. The ordinance requires energy companies to:
The Michigan Energy Reform Coalition, representing citizens from 10 counties, was formed in the spring of 1995 to strengthen oversight of the oil and gas industry and reduce environmental damage.
Potter Road Perspective
By Kitty Myers
Someplace in the neighborhood a well pump is blowing like a dying steam engine with emphysema. Every so often it increases in volume and intensity, and I half wonder if it will blow up. Then it backs down, but keeps on puffing.
A year ago we would have hopped into the car to find out which well, where—or is it the compressor station?—and speculate on what was going on. Now, despite a phone call with unanswerable questions from a neighbor more than a mile away, we only wonder silently to ourselves how long it will take "them" to fix this one, and will we be able to sleep tonight (it’s too hot to shut the windows). We try not to wonder if the blowing is a venting of toxic fumes, or something else that could cause further problems.
When the oil company representatives knock on your door, trying to lease drilling rights to your property—or send you the short letter announcing that they’re drilling a well for someone else on what you had thought was your property—they smile at your worries and concerns and assure you that it only takes three days at the most to drill an Antrim well, and then for a year or two you’ll have a nearly silent electric pump jack and someone with a pickup truck will check it once a day.
Who could reasonably object to that?
And yes, the site will be restored to as good or better shape than when they came, they say. These newcomer rabble-rousers, they add, are just trying to stir up trouble and cause bad feelings against a highly regulated, publicly necessary, good neighbor industry.
They don’t tell you how many other wells in the neighborhood you will hear being drilled, day and night, for three days. They don’t talk about how many trips up and down the road the bulldozers and Caterpillars and backhoes and other heavy equipment will make before all the pipelines are laid, or how many different times the road will be torn up.
They don’t tell you how many times they’ll come back to each well to refracture it, rework it, change from a pump jack to a spinner pump and back again; how many times the drilling rig will come in, be set up again, and—if not all night, at least from dawn until dusk—you’ll listen to engines roar and pipes clank and men shout, on what was supposed to be your quiet farm in the country.
They don’t talk about how many times in any neighborhood the pumps will start making noise (usually starting in late afternoon after all the inspections have been made), and whether it’s the wheezing steam engine or the squawking belt that reminds one of a wounded bull elephant trumpeting his agony.
Some companies seem to be making an effort to clean up after themselves. Oilfield Investments has reseeded the roadsides where they’ve laid their pipelines. It doesn’t replace the trees cut down, but does make the scars cleaner and helps reduce washouts.
Potter Road east of Chief Road has only weeds and washing sand and gravel. So does a couple of acres of our hay field, torn up 20 months ago. (DNR regulations only require reclamation when the well is finally shut down.) Other hay fields have been left open and still undrilled since last winter, or "smoothed" out, but with ruts too deep for the surface owners to take a tractor through to cut weeds.
So many time we think how beautiful Northern Michigan is, and all the blessings here—the birds singing and the fresh smells of a summer sunrise, the abundance of fresh fruits and vegetables, the deer grazing in the hay field, the lakes close by for swimming and boating—and we think, after two years, maybe the worst is over; maybe we really don’t want to move.
But then it comes again. The rigs pull in, or the trucks roar by, or someone’s pump starts complaining.
That pump is still blowing and it’s past my bedtime. At least the baby is sleeping through it—and it distracts from the distant roar of the compressor station and the quieter hum of the pump jack in our field. I wonder if we’ll get any sleep tonight. I wonder what it is blowing into the air...
Kitty Myers is a teacher, farmer, writer, and MCLUC member from Bear Lake Township in Manistee County.
MCLUC Joins the Michigan Land Use Institute
Full Time Coordinator Hired
MCLUC has matured into a regionally prominent grassroots organization with 140 member families and businesses. In light of our success, MCLUC has become a project of the Michigan Land Use Institute, a new nonprofit economic and environmental policy research center based in Benzonia.
The Institute is a natural evolution for MCLUC. The two groups share common goals, the foremost of which is to foster a new approach to economic development that respects the land and small town communities.
As part of the change in management, MCLUC has hired Hans Voss as its program coordinator. Mr. Voss is a natural resources specialist who was educated at Michigan State University. He spent three years working on the cleanup of contaminated sites for Groundwater Technology, Inc., an environmental consulting company in Farmington Hills.
The Institute has five professional staff members who conduct research, advise businesses and townships, and serve as communications specialists and organizers. A key part of the Institute’s work is to intensify MCLUC’s efforts to convince the state and the energy industry to more carefully develop the Antrim Shale gas reservoir.
The advantages to MCLUC for becoming a project of the Institute are numerous. MCLUC gains tax-exempt status, a valuable tool for reducing costs and raising money to serve the public interest. We now have office space in the Institute’s historic building, assistance in raising money, and better access to communications and publishing equipment.
MCLUC also benefits from the Institute’s seasoned board of directors. Two of Michigan’s finest environmental attorneys, Jim Olson and John Noonan, are members. The Institute’s president is Arlin S. Wasserman, former solid waste coordinator in Grand Traverse County and now a risk management specialist with Environmental Solutions, a consulting firm.
Dick Hitchingham and Keith Schneider, who were founding members of MCLUC, serve on the Institute’s board. Mr. Schneider is the executive director, and Florence Schneider, a MCLUC co-founder, is the publications editor.
The management improvements will strengthen MCLUC’s core work to reform oil and gas development practices and serve as an advocate for improved land use management in Manistee and Benzie counties. We will continue to publish the MCLUC Reporter.
MCLUC also is a co-founder of the Michigan Energy Reform Coalition, which has begun a statewide grassroots campaign to limit drilling and environmental damage from Antrim Shale gas development in the North Woods.
"Greetings, MCLUC Members"
By Hans Voss
It’s been quite a whirlwind so far. In July, through a wonderful sequence of improbable events, I found myself engaged in a conversation with Keith Schneider about land use, about MCLUC, and the newly established Michigan Land Use Institute. Bing, bang—the next thing I know I’m a full-time staff member dropped into a boiling debate over one of Michigan’s hottest land use issues, and joining a grassroots movement with tremendous momentum.
I have never made a conscious decision to be an environmentalist, never tried to fit any predetermined definitions. I’ve always considered myself a simple guy whose interests and passions are all related in some way to our natural world. In following a sort of subliminal logic to protect what I care about, I began to change my life and follow my heart to a lifestyle of environmental awareness and pursue a career in conservation.
My first stop was at Michigan State University, where I studied environmental and natural resource issues in the Resource Development program. I received a bachelor of science degree in 1991.
I then went to work in an environmental consulting firm, where I spent three years focusing on groundwater contamination—the laws that govern it, how to clean it up, and how to keep a consulting business profitable while doing it. From the inside I discovered how environmental regulations often can be counterproductive if they are too restrictive, leading to wasteful, unnecessary work. I learned to critically evaluate issues to avoid letting an uninformed mind and a green heart lead me in the wrong direction.
My wife and I, feeling the need to shake the routine, went after a longtime dream: we left our jobs in the summer of 1994 and set out on a ten-month journey to see the world. Our trip started in west Africa, where we volunteered in a small village on a school construction project. We continued east through Africa, India and Asia, interacting with people from diverse backgrounds and learning about different cultures.
Our world odyssey ended in one of the most beautiful places we encountered on our travels, Northwest Michigan. As the Michigan Land Use Institute’s North Woods Campaign Coordinator, my time will be dedicated primarily to MCLUC and the research and communication of natural gas issues. I am impressed with the intense effort MCLUC has put forth to keep this struggle alive. I view my role at the Institute and as part of MCLUC as a boundless opportunity to add new ideas and fresh energy to help build a statewide campaign to reform natural gas development.
Editorial
Citizens Tackle a Behemoth
By Keith Schneider
Since 1989, Northern Michigan has been the scene of the most intensive natural gas development in the United States. More than 4,500 wells have been drilled, most of them in Antrim, Crawford, Montmorency, Oscoda and Otsego counties. The wells are tied together by an elaborate industrial infrastructure of roads, pipelines, compressing stations, and processing plants that now sprawl across more than 500,000 acres. The North Woods, a magnificent sweep of quiet forests and serene lakes, is being turned into a vast energy colony.
And this is only the beginning.
Driven by improvements in technology, a generous federal tax break, and a state deal that allows developers to write off production costs, the gas industry is rapidly expanding its exploration territory. It is marching east into Alpena County, and taking control of thousands of acres of state and private land westward to Lake Michigan.
At this pace, Northern Michigan could have 9,000 Antrim gas wells by the end of the decade. Even though half of the wells to date have been drilled on state forest land, nearly all of the development has occurred without public hearings or substantive review of the consequences to the environment and communities.
The Engler Administration, including DNR Director Roland Harmes, defends the gas rush as well managed. The facts do not support such a view.
With Antrim development, the unceasing North Woods struggle between encouraging sound land management principles and discouraging exploitation has tilted the wrong way. Even as they tout so-called "economic development," state officials deliberately ignore the heavy federal subsidies and quiet state deals that have stoked the industrialization of the North Woods, and turned drilling and production into a classic case of corporate welfare.
In Montmorency County, where over 1,200 wells have been drilled since 1990, the headlong rush to gas riches disfigured the forests. It enraged landowners who did not own their mineral rights, and were helpless to stop the bulldozers. It ended the solitude of what had been one of Michigan’s most heavily forested counties, as truck traffic and 1,000-horsepower compressing stations pummel ear drums 24 hours a day. Antrim development in Montmorency and other counties is damaging the existing and much larger economic infrastructure based on tourism and recreation.
One big problem is the law. The 1939 Oil and Gas Act gives the DNR exclusive authority to decide every aspect of drilling the wells. By specifically discouraging public hearings and preventing convenient access to information, the law also set up nearly impassable barriers to public involvement. It insulated the DNR from people in Montmorency and other counties who appealed for help.
Citizens in 10 counties, including members of MCLUC, have organized a statewide group, the Michigan Energy Reform Coalition, to strengthen oversight of the oil and gas industry, reduce environmental damage from development, and increase economic returns for communities and property owners.
The coalition will achieve its goals by building a highly visible and influential campaign at the grassroots to give citizens equal voice in decisions, and dramatically increase the responsiveness of the state and the oil and gas industry to communities and their environment.
Since March, leaders of grassroots groups have held regular meetings to fine tune the coalition’s four-point strategy, which closely follows the plan outlined in the last issue of the MCLUC Reporter:
1). Improve land use management and reduce environmental damage by breaking the close ties between the DNR and the oil and gas industry.
2). Increase economic returns to counties and townships by establishing a non-renewable energy tax on Antrim Shale gas production. The tax receipts—a minimum of four cents per thousand cubic feet—will be shared among townships and counties.
3). Provide severed rights property owners with just compensation and much greater authority to decide how their land is used.
4). Protect Michigan’s rivers, streams, and lakes by requiring the oil and gas industry to prepare hydrocarbon development plans, based on the Pigeon River model of the 1970s, before new wells are drilled or any additional permits are issued in sensitive watersheds.
The energy industry’s abusive treatment of the land and communities is a blot on the record of Governor Engler and the DNR. State government missed a prime opportunity to manage the development in such a way that Michigan’s economy and its environment benefited.
Natural gas, after all, is less expensive and burns more cleanly than either coal or oil. All it would have taken to lower costs to the industry and prevent the scarring of the land would have been several thoughtful changes in approach, such as 160-acre spacing, noise restrictions, and shared road and pipeline corridors. Governor Engler has been ill-served by his staff, who abdicated their responsibility. Citizens now must take the lead.
Along the Betsie River
By Margaret Perry
I do not abhor progress, but I do not like nor respect avarice.
This observation came to me as I recounted my time spent with neighbors, good friends from outside Kalamazoo, who have a summer home up the road from me. They had just found out about the gas development in our area and, frankly, were appalled. I am talking about people of the land, who have farmed, who have poured their energy into the soil as growers and entrepreneurs.
I stress the latter, for they are not knee-jerk reactors to economic progress; they understand the notion of developing the land as a venture in the American way of life, but they are also lovers of nature and wish to see this progress develop in a manner that does not despoil the earth.
Where do I place myself? Do I have such a romantic view of nature that there is no place for exploitation of the land? I do not believe this is true. I was an administrator for so many years before I retired in 1993 that I know myself to be a rational and realistic citizen in the place I have chosen to spend the rest of my life. But I shall never abandon my belief that greed is not good, and that one must develop the land with respect, responsibility and love. Yes, love. And I am still innocent enough, in my sixth decade, to believe business can be done in a manner that demonstrates both respect and love for the land. If not, why are we here?
My friends know me to be a movie buff and I see many films in the theater and at home. One of my favorites is "The Shooting Party," based on the novel of the same name by Isabel Colegate, where Sir Randolph Nettleby (acted wonderfully by the late James Mason), the host of the "party," was a man of great moral consciousness. As a believer in his responsibility to care for the land, he said the following in the film: "...might it not cleanse us of our materialism, our cynicism, our lax, lazy hypocrisies, make us gird our sinews and find simplicity again? And, then, shall we not be fitter afterwards to make a better world, for that must be what we are here for, to leave the world a better place than we found it?"
Oh, profound words and so true, I think. But how strong are those who believe this, versus those who justify any action by the profits reaped?
I cannot think that the leaders in our state believe this, despite the presence of the DNR, which seems to seek compromise with the very developers who are less caring and respectful of the land. The state itself is seeking profits from its lands. Therefore, how do we expect the state to protect us? Isn’t it possible for the state to follow a measured, intelligent plan that makes it possible for business to prosper without making it necessary to continually correct mistakes?
The ammunition in my own "war" to help change the minds of those inextricably bound to gas and oil development in Northern Michigan consists of words. To you, the reader, and to persons in our state government—the governor, the head of the DNR—I plead not for the abolishment of development, but for a plan that is formulated region-wide, explaining where we are going, why, how, and ultimately what it will mean for how we will live and what we shall see.
Margaret Perry is an author and MCLUC member from Springdale Township.
Pleasanton Township Sues DNR
Local Oversight At Stake In a move with far-reaching implications for communities, the energy industry, and Michigan’s rural landscape, Pleasanton Township has filed a lawsuit against the state Department of Natural Resources to confirm its authority to oversee some aspects of oil and gas development.
The lawsuit is the second decisive action the township has taken in the past year to ensure that tapping the Antrim gas reservoir will be done with more care.
Pleasanton Township has become one of the most active areas for gas exploration in the state. More than a dozen wells have been drilled in the township this year, more than 70 others are proposed, and three compressing stations are planned.
Gas industry executives have expressed grave concern about Pleasanton’s ordinance, because of the potential for other townships to follow suit. The result, they fear, could be a new layer of regulations that slows development. Last November, in a letter to the DNR Geological Survey Division, the Michigan Oil and Gas Association asked the state to intervene.
"It appears that the Township may be attempting to exercise zoning control over the field production and processing facilities that are necessary in connection with the operation of Antrim gas wells," MOGA President Frank Mortl said in the letter. "In our view all such purported regulation by the Township is precluded by reason of the fact that these operations and facilities are subject to the exclusive jurisdiction of the Supervisor of Wells."
Following the industry’s lead, R. Thomas Segall, chief of the Geological Survey Division, notified Pleasanton Township in late 1994 that in his view local government had no authority to regulate any aspect of Antrim development.
In July, though, Mr. Segall amended his view, seeming to open the door to local oversight. In a letter to the Manistee County Planning Commission, he noted, "There are areas of local concern involving such oil and gas operations which are outside the jurisdiction of the Supervisor of Wells, and could be addressed at the local level." These include establishing reclamation bonds for some gasfield installations, Mr. Segall said.
At issue is a provision in Public Act 61, the state’s oil and gas law, that the energy industry contends gives the Supervisor of Wells exclusive power to regulate all aspects of oil and gas exploration and production.
Pleasanton Township disputes this broad power. The board believes that under its ordinance it has the authority to regulate compressing stations and other gas field processing plants.
The Michigan Townships Association agrees with Pleasanton, and the influential Lansing-based group has promised to contribute $5,000 to support the lawsuit. Both the Township and the MTA base their opinion on a 1990 legal case involving an oil processing station in Addison Township in Oakland County.
By a vote of 6-1, the state Supreme Court decided that the Legislature "did not intend" to give the DNR "regulatory control over the entire industry." In fact, said the Court, the DNR’s jurisdiction "applies only to oil and gas wells and does not extend to all aspects of the production process."(Emphasis added.)
Because it questions the state’s oversight of the energy industry, Pleasanton Township’s lawsuit is among the most significant and visible challenges involving land use policy ever filed in Michigan.
Last spring, Township leaders held two meetings to gauge public support for the lawsuit. Almost 100 people attended the meetings and the overwhelming sentiment, according to Jeanne Crampton, chairwoman of the Pleasanton Township Planning Commission, was to defend the Township’s ordinance.
"We know the supervisor of wells has the say so in what the industry is going to do with their wells," said Fred Alkire, who has been the supervisor of Pleasanton Township since 1970. "I think we have the say so with what we are going to do with our land."
Opposition from County Official
Pleasanton Township, though, has been opposed by several Manistee County officials, who argue that the Township’s action would slow economic progress.
The opponents are led by Calvin "Pete" Lutz, a member of the Manistee County Planning Commission, who has leased several properties for gas development.
Basing his dissent on "concern for landowners," Mr. Lutz said in a letter to the Manistee News Advocate: "If a duplicate set of regulations were to apply in Pleasanton Township and nowhere else in the state, the oil companies will simply invest their money and jobs somewhere else and the property owners with mineral rights would be the losers."
Township officials reply that Mr. Lutz’s analysis lacks a depth of understanding. The ordinance, they say, does not saddle energy companies with unnecessary or costly burdens. Nor are energy companies likely to simply pick up and move on, they argue. The Antrim gas wells already drilled in Manistee County are, on average, two to three times more productive than those in Otsego or Montmorency counties, according to state officials.
Despite Falling Gas Prices, Well Numbers Surge
Defying the free fall in the market price for natural gas, Michigan’s energy industry is aggressively pursuing new Antrim wells. In the first six months of 1995 there were applications for 1,050 new drilling permits, according to Tom Wellman, supervisor of permitting for the DNR Geological Survey Division. That is the highest number of permit applications recorded for any six-month period since Antrim gas exploration began in Michigan: 900 of the applications have been approved.
State officials and gas industry executives explained that most of the surge in permit applications was in anticipation of the state’s new spacing order, which increased the distance among wells to an average of 80 acres.
Even so, the record number of new Antrim well applications came despite the lowest natural gas prices of the century. By August, prices had slipped below $1.50 per thousand cubic feet, about one-third of the value in the late 1970s. Federal and state subsidies, worth between $110 million to $130 million annually, are maintaining the industry’s momentum.
Manistee, Alpena, Antrim, Ingham, Oscoda, Otsego, and Montmorency counties continued to attract intense exploration activity. In Manistee County, the number of Antrim gas wells and brine disposal wells that have been drilled, permitted and proposed has grown to approximately 373. The breakdown by township for the 361 gas wells is as follows: Bear Lake (162), Pleasanton (82), Springdale (59), Maple Grove (16), Onekama (12), Brown (12), Manistee (11), Cleon (4), Stronach (2), and Norman (1).
Since the last issue of the MCLUC Reporter, energy companies applied to drill 62 more gas and disposal wells in Manistee County. No new permit applications were received for Benzie County. (Sources: DNR; Michigan Oil and Gas News).
| Township Location Mineral Owner Gas Company Status |
| MANISTEE COUNTY |
| Bear Lake, Section 16 Maidens Savoy Oil and Gas Application Pending |
| Bear Lake, Section 19 Village of Onekama Savoy Oil and Gas Application Pending |
| Bear Lake, Section 22 Hoffman Oilfield Investments Application Pending |
| Bear Lake, Section 26 Sedlar Oilfield Investments Application Pending |
| Bear Lake, Section 29 Watson Terra Energy Application Pending |
| Bear Lake, Section 30 Lentz Savoy Oil and Gas Application Pending |
| Bear Lake, Section 31 Kline Savoy Oil and Gas Application Pending |
| Bear Lake, Section 32 Devuyst Savoy Oil and Gas Application Pending |
| Bear Lake, Section 32 Meister Savoy Oil and Gas Application Pending |
| Brown, Section 10 Chief Creek Miller Oil Application Pending |
| Manistee, Section 2 Anderson Savoy Oil and Gas Application Pending |
| Manistee, Section 2 Hadaway Savoy Oil and Gas Application Pending |
| Manistee, Section 3 Hadaway Savoy Oil and Gas Application Pending |
| Manistee, Section 3 Hadaway Savoy Oil and Gas Permit Issued |
| Manistee, Section 15 Schoedel Savoy Oil and Gas Application Pending |
| Manistee, Section 20 Smith Trust Savoy Oil and Gas Application Pending |
| Maple Grove, Section 4 Hekkanen Savoy Oil and Gas Application Pending |
| Maple Grove, Section 10 Hill Oilfield Investments Application Pending |
| Pleasanton, Section 16 Oligney Oilfield Investments Disposal Well |
| Pleasanton, Section 20 Agribank Oilfield Investments Disposal Well |
| Pleasanton, Section 23 Anderson Oilfield Investments Application Pending |
| Pleasanton, Section 23 State of Michigan Savoy Oil and Gas Application Pending |
| Pleasanton, Section 23 State of Michigan Savoy Oil and Gas Application Pending |
| Pleasanton, Section 23 State of Michigan Savoy Oil and Gas Application Pending |
| Pleasanton, Section 25 Pittenger Savoy Oil and Gas Application Pending |
| Pleasanton, Section 25 Pittenger Savoy Oil and Gas Application Pending |
| Pleasanton, Section 25 State of Michigan Savoy Oil and Gas Application Pending |
| Pleasanton, Section 25 State of Michigan Savoy Oil and Gas Application Pending |
| Pleasanton, Section 26 Gordon Savoy Oil and Gas Application Pending |
| Pleasanton, Section 26 Gordon Savoy Oil and Gas Application Pending |
| Pleasanton, Section 26 Kruger Savoy Oil and Gas Application Pending |
| Pleasanton, Section 26 Kruger/State of Michigan Savoy Oil and Gas Application Pending |
| Pleasanton, Section 26 Kruger/State of Michigan Savoy Oil and Gas Application Pending |
| Pleasanton, Section 27 Girven Oilfield Investments Disposal Well |
| Pleasanton, Section 27 State of Michigan Savoy Oil and Gas Application Pending |
| Pleasanton, Section 35 State of Michigan Savoy Oil and Gas Application Pending |
| Pleasanton, Section 35 State of Michigan Savoy Oil and Gas Permit Issued |
| Springdale, Section 15 Springdale Oilfield Investments Permit Issued |
| Springdale, Section 17 Faulkner HRF Exploration Application Pending |
| Springdale, Section 17 Faulkner HRF Exploration Application Pending |
| Springdale, Section 17 Gaddy HRF Exploration Application Pending |
| Springdale, Section 18 Hill HRF Exploration Application Pending |
| Springdale, Section 18 Hill HRF Exploration Application Pending |
| Springdale, Section 18 Humphrey HRF Exploration Application Pending |
| Springdale, Section 18 Humphrey HRF Exploration Application Pending |
| Springdale, Section 18 Humphrey HRF Exploration Application Pending |
| Springdale, Section 18 Humphrey HRF Exploration Application Pending |
| Springdale, Section 19 Humphrey HRF Exploration Application Pending |
| Springdale, Section 19 Tracy HRF Exploration Application Pending |
| Springdale, Section 19 Tracy HRF Exploration Application Pending |
| Springdale, Section 19 Tracy HRF Exploration Disposal Well |
| Springdale, Section 19 Tracy HRF Exploration Application Pending |
| Springdale, Section 20 Tracy HRF Exploration Application Pending |
| Springdale, Section 20 State of Michigan Savoy Oil and Gas Application Pending |
| Springdale, Section 28 Plagany Savoy Oil and Gas Application Pending |
| Springdale, Section 28 Plagany Savoy Oil and Gas Application Pending |
| Springdale, Section 29 State of Michigan HRF Exploration Application Pending |
| Springdale, Section 29 State of Michigan HRF Exploration Application Pending |
| Springdale, Section 29 State of Michigan HRF Exploration Application Pending |
| Springdale, Section 29 State of Michigan HRF Exploration Application Pending |
| Springdale, Section 29 State of Michigan Savoy Oil and Gas Application Pending |
| Springdale, Section 33 Hamilton Savoy Oil and Gas Application Pending |
Thousands of Acres of State
Land Leased in Benzie County
Also in Antrim, Montmorency, and Manistee Counties
More than 13,370 acres of prime woodland and meadow along the Betsie River in Benzie County have been leased for oil and gas development by the Department of Natural Resources.
The lease sale of state-owned mineral rights on July 26th also included 3,063 acres in Manistee County, 7,948 acres in Antrim County, and 6,280 acres in Montmorency County.
In all, oil and gas developers paid $2.345 million for 32,044 acres of state-owned mineral rights in Michigan, for an average price of $73.19 per acre.
The largest acreage by far was leased in southern Benzie County, in Joyfield, Weldon, and Colfax townships. It gives oil and gas developers their first crack at large scale Antrim gas development in one of Michigan’s most splendid regions: the Betsie River watershed.
The lease sale is almost certain to generate problems among some residents in Benzie County. More than 1,000 acres of mineral rights that were leased there are from privately-owned land. Under state law, those who own the mineral rights have supremacy over owners of the surface property, meaning that private landowners are at the mercy of the oil and gas companies that hold mineral leases.
In Manistee County, 1,251 acres were leased in Pleasanton Township, 731 of them from privately held land. In Springdale Township, 1,238 acres were leased.
$58.5 Million For Terra
Terra Energy, the Traverse City-based energy company that is the state’s largest developer of Antrim natural gas, was acquired in June by CMS Energy Corporation, the parent company of Consumers Power.
The price, $58.5 million, is the most ever paid in Michigan for an independent energy company.
Terra, founded in 1981 by attorney Martin Lagina, has drilled more than 1,400 Antrim wells in Michigan’s North Woods, or nearly a third of the total.
The company’s sale to CMS, which had revenues last year of $3.61 billion, reflects the expanding interest that major energy producers have in Michigan’s Antrim gas fields.
The sale is a marriage of well-suited partners. According to industry analysts, Terra makes the bulk of its income drilling and operating more than 80 Antrim projects in Northern Michigan. CMS, which derives almost a third of its revenue from natural gas sales, operates the largest pipeline distribution system in Michigan, providing natural gas to 1.5 million customers in 45 of the lower peninsula’s 68 counties. CMS purchases natural gas for under $2 per thousand cubic feet, and then ships it to customers who last year paid an average of $4.62 per thousand cubic feet, according to company figures.
The merger, though, comes with some visible defects. Terra Energy has sown public discord in dozens of North Woods communities with its aggressive development practices and belligerent attitude. It built noisy compressing stations next door to people’s homes in Otsego County, and left drilling sites unreclaimed on state land in Montmorency County. Its reputation has caused restiveness in several townships in Manistee County, where the company has proposed more Antrim projects.
Famous Last Words Department
"A modest development can be expected
in the future in the production of gas
from the Antrim Shale Formation."
Michigan State University Extension Bulletin
Michigan Land Use Institue
Staff
Keith Schneider, Executive Director
Hans Voss, North Woods Campaign Coordinator
Nancy Dilts, Program Coordinator
Florence Schneider, Publications Editor
Ann Bourne, Production Manager