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Rationale for Reviving the Hydrocarbon Development Plan

The 1990s And Energy

In the late 1980s, Michigan's oil and gas industry began tapping a new energy reserve that has turned into the most important hydrocarbon development in state history. By the end of 1996, more than $1.5 billion had been invested and more than 6,000 wells drilled into the Antrim Shale formation. The state is unable to determine the precise number of wells that have been drilled on public land -- estimates from different departments in state government range from 2,200 to 3,600.

No more than 1,800 feet deep in most places, the formation is a layer of gas-saturated rock more than 50 miles wide that arcs across the northern Lower Peninsula from Lake Michigan to Lake Huron. Antrim's productivity, boosted by a generous federal tax credit and a significant state subsidy, has enabled Michigan to produce more than 25% of the natural gas it uses, up from roughly 5% a decade ago. At current market prices and production levels, energy companies are earning gross revenues of more than $500 million annually from Antrim gas. Production is increasing about 5% to 8% annually.

Environmental Problems With Antrim Shale Development

Just as the economic arguments associated with Antrim Shale drilling seem familiar to students of the Pigeon River Country controversy, so do the environmental concerns. Each Antrim well comes with a new road and pipeline. Every 15 to 25 wells are connected to compressor stations powered by 1,000-horsepower engines. All wells are interconnected, and linked to huge processing plants to remove carbon dioxide and other impurities.

Critics of the development warned as early as 1990 that the sheer intensity of the surface infrastructure would cause forest fragmentation, erosion, water pollution and other damage. The harm, they said, would be of a much greater magnitude than the damage from the development of the Niagaran formation in the 1970s. These critics, some of whom were staff members of the DNR, urged the state to give concern for the land and future generations at least as much consideration as the bottom line.

For the most part, their warnings were ignored. To fly over northern Michigan, not long ago a largely unbroken expanse of green forest, is to witness the dismaying consequences. Thousands of miles of new roads and pipelines have been cut in the forest to link the more than 6,000 drill sites. It is an intricate tangle that has fragmented the forest, disrupted natural habitat, and caused what the Detroit Metro Times called "environmental havoc."

Tranquil towns and quiet rural areas have been transformed into noisy, congested industrial zones. Property values within hearing distance of the more than 300 compressing stations have stagnated in a region where land values elsewhere are soaring.

- Overdevelopment Caused by Subsidies -

The intensity of development is not due to market forces. Natural gas is in worldwide surplus, and until this winter prices had been in free-fall for a decade. Rather, the Antrim gas rush was propelled by a $125 million annual federal tax credit, (which lasts until January 1, 2003), and a $5 million to $7 million annual state subsidy, (which was cut back in June 1996).

The subsidies encouraged at least three times as many wells, three times as many miles of roads and pipelines, and three times as many compressing stations than were necessary to extract the gas. Not since Michigan's white pine forests were cut to the ground a century ago has the state sanctioned such rampant exploitation of its natural resources.

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