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Comprehensive Planning and Development of Oil and Gas Resources Beneath the Great Lakes

A Process for DNR minerals management and interagency coordination

May 23, 2001 | By Hans Voss
and Arlin Wasserman
Great Lakes Bulletin News Service

Submitted by the Michigan Land Use Institute
May 23, 2001

When the Michigan Environmental Science Board studied oil and gas drilling beneath the Great Lakes in 1997, they found that Michigan’s oil and gas regulations failed to provide sufficient protection. Their recommendations: Comprehensive planning, tight regulation, and citizen participation — an updated version of the same approach used in the Pigeon River model. Specific MESB findings in its October 1997 Evaluation of Directional Drilling under the Great Lakes included:

Involve the Public
“While technology and science can certainly help to lessen the impacts and even resolve several of the conflicts that may appear, most of these types of issues will require comprehensive environmental planning, communication between all stakeholders and compromise in order to be resolved.” [page 5]

Prohibit New Infrastructure
“In order to afford the greatest environmental protection, the Panel recommends that lease sales should specifically prohibit the construction of any new infrastructures and limit oil and gas development to areas where existing infrastructures (pipelines, transmission lines and roads) are already available.” [page 7]

Develop a Comprehensive Coastal Energy Development Plan

“The Panel recommends that comprehensive coastal zone environmental inventories be compiled for both Lake Michigan and Lake Huron in order to clearly identify and evaluate, at a minimum, areas that are already impacted with oil and gas development, areas where leases could not be issued for future development (e.g., due to non-resolvable environmental constraints) and areas where directional drilling development leases could be allowed provided that such development could be documented as to cause only minimal and mitigable environmental impacts and conflicts to the shoreline. The existing DNR MRIS system supplemented with local land use plans could be used as a basis to identify the above areas. Given the great complexity of the Lake Huron and Lake Michigan shorelines and the need to afford the greatest environmental protection, such coastal zone evaluations should be considered a prerequisite before leasing of any of the Great Lakes’ bottomlands.” [page 6]

Complete Planning and Infrastructure Issues Before Executing Leases and Permits
“The Panel suggests that the leasing process deal with environmental land use impacts and conflict analysis and that the oil and gas permit process focus more on the technological impacts of directional drilling to the environment. Applicants that cannot obtain a lease due to an inadequate or unacceptable environmental analysis should not proceed to the oil and gas permit process.” [page 5]

“[T]he Great Lakes’ aquatic and shoreline environments [will be] better protected if the lease agreement required an aggressive environmental impact assessment and stakeholder participation prior to the lease sale.” [page 5]

To meet the directives of the Science Board, the Michigan Land Use Institute recommends the following procedures:

1. Identify the Planning Region
The department’s Minerals Lease Management Section (MLMS) should define Planning Regions that extend four miles upland and four miles into bottomlands from the ordinary high water mark. The units should be no smaller than the lakeshore and bottomlands in a single county, but may extend beyond a single county to include a contiguous area where MLMS concludes that oil and gas exploration interest is likely. This unit, an eight-mile strip through at least one county along the coast, shall be known as a “Planning Region.”

2. Involve the Public
The director of the MDNR should form a “Citizen Oversight Board” to work in each Planning Region. The director should invite a member of each local government (municipal, township, and county) with land use authority in the Planning Region to serve on the Board. In some regions, townships may have no land use authority, but should be invited to serve at the director’s discretion. The director also should invite two members of the oil and gas industry, two members of the conservation and recreation community, and a member of the Natural Resources Commission (or designee) to serve on the Board.

This Board, operating by consensus, shall be responsible for conducting the public involvement process, developing coastal energy development plans, and overseeing implementation of these plans. Their work will meet the MESB observation that “most of these types of issues [conflicts between energy development, habitat conservation, and other land uses] will require comprehensive environmental planning, communication between all stakeholders and compromise in order to be resolved.”

3. Prohibit New Infrastructure

The MESB specifically recommends that the state “prohibit the construction of any new infrastructures and limit oil and gas development to areas where existing infrastructures (pipelines, transmission lines and roads) are already available.” So identifying where existing infrastructure exists is a crucial first step in the planning process. The Land and Mineral Services Division should lead the effort, relying on the DNR’s field staff as needed, to conduct field surveys in Planning Regions to identify existing active well sites.

The LMSD should identify those wells sufficiently served by access roads and pipelines to allow for production of oil and gas from Great Lakes bottomlands without adding any new equipment. As needed, the LMSD should consult the Michigan Department of Environmental Quality’s Geological Survey Division and the Michigan Public Service Commission to determine that pipelines, facilities, and access roads are sufficient to support development of oil and gas from Great Lakes bottomlands, and that the equipment meets current regulatory standards.

The LMSD should designate the active wells supported by sufficient current infrastructure as “Potential Eligible Wells.” The LMSD should enter data on active well locations, the location of existing infrastructure, and ownership information into the department’s GIS system.
The director of the Michigan Department of Environmental Quality and the director of the Public Service Commission shall issue an order prohibiting any new well, road, pipeline, or facility permits in the Planning Region.

4. Develop a Comprehensive Coastal Energy Development Plan

The MESB also recommended that the state develop a Comprehensive Coastal Energy Development Plan (“Energy Plan”) before leasing bottomlands. The director must order that a moratorium on bottomlands leasing remain in force in any Planning Region that does not have an approved Energy Plan, then work with urgency to develop this plan.

In each Planning Region, the Citizen Oversight Board (COB) must play a lead role in developing the Energy Plan and the LMSD must ensure that the plan is based on the best available scientific information. The MESB described a planning process that includes four steps:

1. Comprehensive coastal zone environmental inventories.
2. Identification of areas where leases could not be issued for future development (e.g., due to non-resolvable environmental constraints).
3. Resolution of conflicts to the shoreline.
4. Public participation and review.

State agencies already have gathered much of the necessary information, and the MLMS simply needs to compile and evaluate the date.

As a first step, the COB should select a chair, identify a party responsible for meeting notification, familiarize members with the consensus process, and work to confirm a schedule for developing the plan with the MLMS.

Next, the MLMS needs to gather this information, compile it in the department’s GIS system, and present it to the COB. The COB then will develop an Energy Plan for the Planning Region that covers infrastructure and leasing, and then work to implement the plan.

Infrastructure Issues
MLMS Should Create GIS Maps and Data Sets, Present Information to COB
For each Planning Region, the MLMS should create a natural features inventory in the GIS system. The inventory should include:

• Unique or sensitive areas, including wetlands, sand dunes, steep slopes, and other natural features and areas that are ecologically sensitive, special, or unusual.
• Unique biotic communities that the Natural Heritage Program lists or verifies.
• Critical habitat for endangered, threatened, special-concern, or sensitive species.
• Special or unusual recreation or scenic areas.
• Islands.
• Areas with archaeological or historical significance.
• Inland lakes and streams.
• Lands with likely dispersed occurrences of any of the above.

The MLMS also should gather data from other divisions in the DNR to identify any state land management issues, including all surface lands within a given region that are:

• Lands with specific deed or other legal restrictions prohibiting leasing or mineral development.
• Public parks and recreations areas, campgrounds, fish hatcheries, research areas, lands dedicated under wilderness and natural areas, and similar facilities and sites.
• State lands with deed or other legal restrictions that prohibit surface development
The MLMS should review the list of Potential Eligible Wells and remove any located on the above-mentioned areas that were identified during the natural features inventory.

The MLMS should secure zoning and master plan land use maps from each government with land use authority in the Planning Region, and enter this land use information into the department’s GIS system. MLMS staff should review the list of Potential Eligible Wells and remove any located in areas not currently zoned for industrial use, unless the master plan calls for converting the area to industrial use in the future. The remaining wells shall be included in an “Eligible Wells List.”

Resolution of Conflicts to the Shoreline

The COB shall receive the Eligible Wells List from the MLMS, and circulate it to all local governments in the Planning Region with land use authority. They will have 90-days to review land use information, identify any errors, and raise concerns to the COB.

Concurrently, the LMSD chief should send the draft plan component for review to the Surface Facilities component to the DNR Wildlife Division, Fisheries Division, Parks and Recreation Bureau, Forest Management Division and the Natural Heritage Program, Dept. of Military Affairs, Dept. of State, and U.S. Forest Service.

Public Participation

Then the COB shall hold a public hearing and meeting to review and approve the Eligible Wells List. The hearing shall assist the COB in addressing public concern, hear specific comment on concern from local land use authorities, and provide the public with information concerning the extent of anticipated oil and gas development activity.

It is also important to note that the COB will operate by consensus. This means that members — especially those representing local governments — decide on their own development plans as well as those of nearby communities. This incorporates the “good neighbor” planning policies embodied in the Coordinated Planning Act, now under consideration by the Michigan House of Representatives. Once approved, the LMSD chief shall provide the list to the DEQ supervisor of wells.

Once the Eligible Wells List is approved, and land use and environmental conflicts along the shoreline are resolved, the COB can turn towards leasing bottomlands for oil and gas exploration.

Identification of Potential Leasing Areas

MLMS shall identify parcels in the Planning Region suitable for leasing, and identify which well or wells on the Eligible Wells List leaseholders can use to tap oil and gas reserves beneath each parcel. The MLMS shall compile a list of “Eligible Lease Parcels” and present it to the COB.

Resolution of Conflicts Along the Shoreline, Public Participation and Review
The COB shall hold a public hearing on the Eligible Lease Parcels list, make changes as it sees fit, and approve the list.

Energy Plan Approval
At this time, the COB will have the two essential elements of the Energy Plan for the Planning Region — Eligible Wells and the Eligible Lease Parcels. Both items already will have been reviewed by local governments and the public and approved by the COB. LMSD can prepare the final Energy Plan for review and approval by the COB. This plan will identify:

• Each Eligible Lease Parcel.
• The Eligible Well or Wells that can be used to tap each parcel.
• Confirmation that use of the wells is consistent with local land use plans and protection of environmental features and the Public Trust, based on the natural features inventory and other state land management issues.

The COB should make the plan available for public comment for 30 days, send a copy to every local unit of government for review, and hold a public hearing at the end of the comment period. Then the COB should vote to modify or approve the Energy Plan.

The COB then should submit the Energy Plan for the Planning Region to the Natural Resources Commission and the LMSD chief.

The Natural Resources Commission shall place the Energy Plan on its agenda. It may vote either to approve the plan or reject it, sending it back with recommendations to the COB for additional work and resubmission to the Commission.

Upon the Commission’s approval of the Energy Plan, the director shall classify as “nonleaseable” any public minerals in the Planning Region not identified in the Energy Plan as “Eligible Lease Parcels,” and classify as “nondevelopment” any public minerals and lands that do not contain “Eligible Wells.”

Upon approval of the Energy Plan, the state will have met its responsibility to complete planning and infrastructure issues before executing leases and permits.

Leasing Bottomlands
The director should remove the moratorium on leasing any bottomland parcels identified as Eligible Lease Parcels in the approved Energy Plan for the Planning Region. Periodically, the MLMS staff then may set proposed lease auction sale dates and associated nomination periods for leasable state-owned minerals in the Planning Region. In addition to nominations by third parties, the state MLMS may nominate parcels where drainage is suspected or unleased state acreage is within a producing unit.

COB Review of Proposed Lease Sales
The LMSD chief shall provide notice of upcoming leases to the COB. After the close of nominations, the MLMS staff shall provide the COB with a list of lands proposed for leasing, Eligible Wells and existing infrastructure to be used, and an inventory of environmental features and local land use, preferably in GIS format.

Prior to the auction, the COB shall hold a public meeting to confirm that no key elements such as environmental features, zoning, or master plans have changed since the plan was last approved or updated. The COB shall approve for lease those parcels contained in its Planning Region.

Natural Resources Commission Certification
The director shall present the Commission with a list of parcels nominated for lease, including a projection of anticipated oil and gas production and revenue. The Commission should consider if the lease sale will result in production of an appropriate amount of oil and gas, and also consider if the timing of the revenues is beneficial to the state. For instance, can the Natural Resources Trust Fund receive new revenues as forecast or will the additional revenues push the fund balance over current maximum allowable limit? After consideration at a public meeting, the Commission may approve or modify the proposed list of parcels to be leased.

The MLMS staff then can mail the auction book of available parcels to individuals and companies, publicly advertise the lease auction, register bidders, and hold the auction according to established policies. Leases offered at auction shall be no longer than five years in length and shall provide the state a 1/6 royalty for upland acreage and a 1/4 royalty for bottomlands. Leases will also include a rental fee of $2 per acre and increase $1 each year.

Prior to executing a lease the MLMS must receive documentation from the successful bidder that they have secured the use of an appropriate Eligible Well and received all necessary permits to deepen or modify the well together with any other surface and subsurface activities from the DEQ and the Public Service Commission and local land use permits.

Involving stakeholders in the planning process and conducting the lease sale consistent with the approved Energy Plan will streamline the leasing process and eliminate special notification and hearings for permits issued in the Planning Region.

Ongoing Citizen Oversight

The COB must remain a partner in state efforts to develop coastal energy resources. The COB should have responsibility for ensuring the Energy Plan remains current, and advise the state on issues of concern, such as compliance, energy demands, and restoration of the shoreline once energy reserves are depleted.

Plan Maintenance and Update

The COB should review and update the plan as needed. It shall hold at least one meeting each year to consider changes in zoning or master plans by local governments with land use authority in the Planning Region. This may cause the COB to a change in the list of Eligible Wells, make new bottomland parcels available for lease, or remove unleased parcels from the list of Eligible Lease Parcels.

Compliance Concerns

Annually , the COB shall receive a report of compliance issues from companies leasing public minerals within the Planning Region. The COB also shall hold an annual public hearing to provide residents an opportunity to comment on compliance issues. The COB may consider compliance issues when updating the Energy Plan or in making special requests to exclude parcels or bidders from participation in future leases.

Energy Demands

Annually, the COB shall consider energy demands and technological advances when updating the Energy Plan. It may choose to add new Eligible Lease Parcels to the plan if energy demand and technological advances since the last plan update have made it possible to tap additional energy reserves from Eligible Wells.

Shoreline Restoration
Over time, Eligible Lease Parcels will be leased and, eventually, their energy reserves withdrawn. Annually, the MLMS shall report to the COB on productivity, taking care to identify parcels that are no longer productive and wells that are no longer in use. The COB will use this information to decide if Eligible Wells should be removed from the Energy Plan since they are no longer active, or if ongoing energy demand and technological improvements warrant keeping a well on the Eligible Wells List even if it is not currently active.

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