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		Definitions Active Oil and Gas Bearing Formations in Michigan Antrim Shale Ageological 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% of the wells drilled into the formation yield marketable quantities of gas. - Problems - Extent of Antrim Development--Since the late 1980s, more than $1.5 billion has been spent in northern Michigan to drill more than 6,000 active Antrim gas wells, build scores of processing plants, lay hundreds of miles of pipelines, and construct new roads, making Michigan the nation's most active natural gas drilling state. State estimates range from 2,200 to 3,600 wells on state forest land. The development was spurred by a federal tax credit that now is worth an estimated $125 million annually to investors in the Antrim gas fields. Community Effects -- Noisy compressing stations built close to homes have diminished 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 reclamation bond of no more than $250,000 for all the wells they own in Michigan, an amount that is too low to clean up just one moderately contaminated site. Niagaran-Salina The Niagaran-Salina formation, which lies some 5,000 feet below the surface, runs in a nearly straight line from south of Ludington on Lake Michigan to Rogers City on Lake Huron. The 20-mile wide formation was extensively developed for oil and gas, including in the Pigeon River Country State Forest, starting in the early 1970s. Unlike the Antrim wells, many Niagaran wells contain moderate to high concentrations of hydrogen sulfide, a poisonous gas that has a distinctive "rotten egg" odor.The drilling waste from Niagaran wells often contain high concentrations of hydrocarbons and chlorides. State Regulatory Structure Department of Environmental Quality Role Michigan law gives the Supervisor of Wells (the Director of the DEQ) authority to oversee most aspects of oil and gas development under Part 615, Public Act 451 of 1994 (formerly Public Act 61). The DEQ exercises this authority through the Geological Survey Division using a set of administrative rules that govern permits to locate, space and drill wells. The DEQ also oversees operation and production, disposal of waste, injection wells, well plugging, and site restoration. - Problems - Conflict of Interest --The oil and gas oversight section of the Geological Survey Division is mostly funded by oil and gas revenues. The current funding formula is a built-in conflict of interest, because the state government is simultaneously the promoter, a direct beneficiary, and the primary regulator of the oil and gas industry. Lack of Oversight --Budget cuts have reduced the GSD staff from 128 persons in 1986 to 63 in 1996. This decrease occurred as more than 6,000 Antrim gas wells were drilled in northern Michigan. The staff cuts have resulted in less oversight of the oil and gas industry. Results of a recent GSD review show that in 1994 and 1995, the field staff actually carried out only one of five planned well site inspections, and completed less than half of the planned inspections for production facilities. Lack of Local Government Involvement --In 1990 the Michigan Supreme Court established a precedent in favor of local governments when it decided a case involving an oil processing plant in Addison Township, Oakland County.The Court, by a vote of 6-1, said that the state's exclusive jurisdiction "applies only to oil and gas wells, and does not extend to all aspects of the production process." However, the oil and gas industry and the Department of Environmental Quality are fighting any effort to change the current status of the DEQ as the industry's sole regulator. Local governments are seeking to share oversight with the state in issues involving safety, nuisance, soil erosion, and the location and operation of roads, pipelines, and processing plants. Department of Natural Resources Role The State of Michigan owns a total of 5.9 million acres of mineral rights, of which 3.8 million acres are beneath state-owned surface land, and 2.1 million acres are below privately-owned land. The Real Estate Division of the DNR oversees the leasing of state minerals. Lease royalties are directed to the Natural Resources Trust Fund, which is used for the purchase and management of state wild and recreational lands. - Problems - State Leasing --Three times in the past two years lease sales of public land for oil and gas development have been postponed due to problems with state leasing policy that significantly reduced the amount of royalties paid to the state. In addition, the Attorney General and the DNR currently are investigating whether the oil and gas industry wrongfully withheld millions of dollars in royalty payments due to the public. Natural Resources Commission The DNR is overseen by the Natural Resources Commission, a panel of seven officials appointed by the governor that provides advice, counsel and oversight to the DNR director. In the early 1990s, Governor John Engler issued an executive order that stripped the Natural Resources Commission of most of its independent authority.The commission still holds monthly public meetings and exerts considerable influence over the agency and its director. (continued on next page)