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Oil Drillers Eyeing Reserves Beneath Lake Michigan

June 1, 1997 | By Keith Schneider
Great Lakes Bulletin News Service

The DEQ's hands-off policies toward the
energy industry leave significant doubts
about the agency's resolve to effectively
oversee oil & gas development
on Lake
Michigan's shoreline.

* * *

Newstar Energy wants to drill a new well at this site, near Bar Lake north of Manistee, to tap oil underneath Lake Michigan.

The state Department of Environmental Quality is reviewing applications by a Canadian company to drill two more oil and gas wells beneath Lake Michigan.

The company, Newstar Energy USA, already drilled one well in March from a site along the Lake Michigan coast north of Manistee. Newstar is using directional drilling technology to tap energy reserves that are 5,000 to 5,800 feet deep and up to 2,600 feet offshore.

Since 1979, nine other directional oil wells have been drilled from the Manistee County coast under Lake Michigan, receiving little public attention. Statewide interest in the drilling was sparked in May when property owners along Lake Michigan learned of Newstar's permit applications, and contacted environmental organizations, the news media, and state Sen. Leon Stille (R-Spring Lake).

In June, the Department of Natural Resources issued leases to Newstar for nearly 200 acres of state-owned Lake Michigan bottom lands for the two new wells. The DEQ held a public meeting in Grand Rapids in mid- July to hear comments from citizens before issuing drilling permits.

Hal Fitch, Chief of the DEQ Geological Survey Division, said in an interview that directional drilling does not endanger Lake Michigan. He said Newstar's wells will be drilled through bedrock thousands of feet beneath the bottom of the lake, and that the rock acts as an impermeable seal that will not allow gas or oil to leak into the water.

Mr. Fitch said that the greatest potential risk to the environment comes at the well site. A fire, blowout, or explosion at the well-head could cause oil and gas to escape into Lake Michigan. He added that the risk of a catastrophic accident is low.

Critics of the drilling, however, have identified an array of safety and legal issues that they assert need to be addressed by state regulators.

•It is not known, for instance, how many new coastal sites will be proposed if Newstar's directional drilling development is successful. Many more sites could be constructed in an ecosystem already under intense development pressure.

•The Niagaran formation, which Newstar is seeking to tap, is a known source of hydrogen sulfide (H2S), a poisonous gas. Other wells in the Manistee area contain high concentrations of H2S. Safety issues associated with H2S have not been adequately addressed.

•Jim Olson, the Institute's general counsel, also has raised some significant legal questions in a letter to the Natural Resources Commission and the DNR. Mr. Olson said that the Great Lakes Submerged Lands Act, a cornerstone of the state's public trust doctrine, prohibits Michigan from entering into lease agreements for the benefit of private interests. The leasing of Great Lakes bottomlands, said Mr. Olson, can only be undertaken with legislative approval.

"The leasing or permitting for hydrocarbon exploration of our Great Lakes waters and bottomlands in such instance constitutes an impermissible plundering of the public trust, and any request should be denied," said Mr. Olson. The state has not yet replied to the letter.

The Institute is undertaking a comprehensive review of the Newstar application. The assessment is driven by the understanding that Lake Michigan is globally unique. It is the principal drinking water source for millions of people, a prime recreational resource, and is part of an ecosystem that contains 20% of the planet's fresh water.

Drilling beneath Lake Michigan requires a far more intensive level of scrutiny than the state has yet mustered for oil and gas development. The DEQ's hands-off policies toward the energy industry leave significant doubts about the agency's resolve to effectively oversee oil & gas development on Lake Michigan's shoreline.

With these considerations in mind, the Institute is calling on state government to take the following steps before issuing any more permits for drilling under Lake Michigan:

1). Undertake a formal environmental impact statement that addresses the potential risks to drinking water, the coastal environment, fisheries, land use, and communities from coastal directional drilling.

The environmental impact statement also should review the feasible and prudent alternatives to drilling along the coast.

2). Conduct a thorough examination of the requirements of the Great Lakes Submerged Lands Act, and issue a formal opinion about the legality of allowing directional drilling beneath Lake Michigan.

3). Complete an assessment of the potential risks to public safety from coastal wells that contain high concentrations of hydrogen sulfide, and establish formal guidelines prohibiting wells that pose an unacceptable risk to residents from being installed in populated areas.

For more information, contact: Keith Schneider at the Institute, 616-882-4723.

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