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Hydrocarbon Development Planning Proposal

Michigan set a trend

February 2, 1997 | By Keith Schneider
Great Lakes Bulletin News Service

The Problem

Michigan is a major producer of oil and gas. Since the late 1980’s it has been home to the most intensive natural gas development in the United States. The drilling, which has fragmented hundreds of thousands of acres of forest, and damaged rivers and streams, has occurred without a clear or cohesive management plan. The lapse in state oversight has put at risk the natural resource-based economy that supports Michigan’s Northern Lower Peninsula.

The state legislature must act to ensure that our natural resources, local economies and communities are not irreparably harmed by this development.


II. The Model

A model for appropriate energy development is Michigan’s own Pigeon River Hydrocarbon Development Plan, established in 1980. Under this plan, damage from energy exploration and development in one of northern Michigan’s great forested areas was minimized, even as the region yielded oil and gas resources worth more than $500 million.


III. The Plan

Hydrocarbon development plans are needed more than ever as energy exploration moves across Northern Michigan’s watersheds and towards the coasts of Lake Michigan and Lake Huron.

Such a planning process requires coordinated effort from the Department of Natural Resources, the Department of Environmental Quality, the Michigan Public Service Commission, affected local governments and citizens.

These hydrocarbon development plan guidelines shall:

• Consider the effects of oil and gas drilling on the environment, local economies and private property values.

• Coordinate with the land use plans of local governments.

• Balance fairly the rights of property owners with the need for orderly development.

A. Such plans should include the planning, permitting, and oversight of all existing and proposed oil and gas activity within the boundaries of the designated watershed or coastal area. The first plans to be developed shall be for the Jordan River Watershed in Antrim County and the Lake Michigan Coastal Zone. These plans will be in place by December 1, 1998. The hydrocarbon development plans for these two regions will serve as models for other watersheds and coastal areas.

Until these plans are in place the state will place a moratorium on all permitting of wells, pipelines, and processing facilities within the Jordan River Watershed and the Lake Michigan Coastal Zone.

B. Five hydrocarbon development plan coordinators from the DNR, DEQ and MPSC will be assigned from existing personnel to support hydrocarbon development planning efforts.

In each watershed and coastal area, a Citizens Advisory Council will be established. Membership to the Council will include representatives from:

• local government (4 members)

• the oil and gas industry (1 member)

• county road commission (1 member)

• public interest groups (2 members)

• citizenry at large, speaking for diverse interests including recreation, forestry, agriculture, and small business (4 members)

The Council will work with the DNR, the DEQ, and the MPSC to develop the hydrocarbon development plans, and oversee these agencies on all matters concerning leasing, permitting, and oversight of oil and gas development. The Advisory Council in conjunction with these state agencies shall:

• Identify those areas of special environmental value that should be restricted to oil and gas development.

• Identify those areas where surface facilities are allowed.

• Identify those publicly-owned minerals that may be developed from appropriate surface locations.

• Establish specific criteria to guide development in sensitive areas.

These recommendations will be put forward in draft hydrocarbon development plans that will first be delivered to the appropriate counties and townships for review. Once the hydrocarbon plans are coordinated with local land use plans, the state will organize a series of open hearings in each watershed to receive public comment. All comments raised by the public at these hearings will be given consideration for incorporation into the final plan, and written responses to each comment will be provided.

At a minimum these plans will require:

i. Minimum setbacks for all surface facilities including wellheads, pipelines, processing facilities and service roads from critical dunes, wetlands, surface waters, public recreational areas, residences, schools, hospitals and other public facilities.

ii. No wellheads, pipelines, processing facilities and service roads in areas zoned for residential development or identified for residential development in local master land use plans without a permit from the local government wherein the development is proposed.

iii. Private oil and gas developers to submit complete development plan proposals that include all facilities necessary to extract, process and deliver gas and oil to market. The DEQ, MPSC, DNR, and the Advisory Council will coordinate their review with local governments.

iv. The DNR to identify and classify sensitive areas in each watershed. In these sensitive areas:

• Directional drilling technologies will be utilized to avoid surface disruption.

• Minimum well spacing will be increased.

• On-site waste pits, used to bury drilling muds and rock cuttings, will be prohibited. Waste generated in these areas must be delivered to a solid waste facility licensed by the Michigan Department of Environmental Quality.

C. The DEQ and the MPSC shall minimize the number of surface facilities constructed in all sensitive areas and along the shoreline. In these areas, all surface facilities, processing plants, roads and pipelines shall be shared by private oil and gas developers, whenever possible. Applicants for new facilities must demonstrate need, including a lack of available capacity. In the case of service drives, permits shall stipulate that they are open for use by all parties involved in hydrocarbon development activities.


IV. Oversight of Public Lands Leasing

The Department of Natural Resources shall establish a two part public participation process prior to leasing publicly-owned minerals. This shall include a statewide commission responsible for placing mineral reserves on the list for each auction sale and a process for notifying the public. Additionally, no public minerals will be leased until the DNR has conducted an economic evaluation of the mineral resources (see section V) and a certified hydrocarbon development plan is established for the proposed lease area.

A. An Auction Commission for State-Owned Minerals, which is appointed by and reports to the Natural Resources Commission, shall be formed that is composed of one member of the Natural Resources Commission, one member of the Natural Resources Trust Fund Board of Trustees, the chief of the DNR Real Estate Division or their assignee, one representative of the oil and gas industry, one representative from a public interest group, and one representative from local government. The five hydrocarbon development plan coordinators shall hold non-voting seats on this commission.

The Commission must certify all state-owned mineral reserves prior to lease. The Commission may remove any nominated parcel from a lease sale and may nominate any state-owned mineral reserve into the lease sale. All actions must be approved by a majority vote.

B. Prior to leasing any mineral reserve, the DNR must notify in writing the clerk of the county or municipality where the reserve is located of the proposed sale. Such notice shall be delivered no later than ninety days prior to the proposed lease sale.

The local unit of government or any two or more citizens has the right to request a public hearing prior to the lease sale. Hearings will be held in the region where the lease is proposed. Requests for public hearings must be made at least forty five days prior to the lease sale.

Citizens and local governments can present information to be considered by the Auction Commission such as inconsistencies between the lease proposal and local land use plans. Citizens and local governments can also appeal the decision of the Auction Commission through existing administrative processes.





V. Economic Analysis

The DNR must complete an economic analysis prior to leasing additional public minerals. This analysis must be approved by the Natural Resources Commission and the Natural Resources Trust Fund Board of Trustees. Such an analysis will specify which mineral resources are suitable for development at a given time and may be updated and represented at the discretion of the department. At a minimum, this analysis will:

• Identify the potential revenue to the Natural Resources Trust Fund for each tract of minerals proposed for leasing.

• Identify the actual cost to the state, including damage to public recreational areas, administrative costs, and other cost factors for each lease sale.

• Identify the loss in revenue from any reduction in timber production.

• Identify the lost revenue to local businesses and loss in property value expected as a result of the development, if any, and identify the effects on local tax revenues as a result of the development, if any.

• Assess regional and national hydrocarbon markets to determine the most beneficial time for delivering specific amounts of hydrocarbon resources to market.

• Determine if the cost of development exceeds the expected benefit to the state.


VI. More Effective Regulations

A. The DEQ will establish minimum standards for noise and odor based on an evaluation of best available abatement technologies. The Department also will establish procedures for coordinating noise and odor oversight with local nuisance ordinances.

B. The DEQ will establish minimum standards for shielding, screening and otherwise minimizing the visual appearance of facilities. Local governments may adopt more restrictive standards through local ordinances.

C. The DEQ and MPSC shall not issue permits for wells, pipelines and processing facilities without receiving written confirmation from county road commissions that service drives have been permitted.

D. The DEQ and MPSC shall not issue permits for wells, pipelines and processing facilities without receiving written confirmation by County Drain Commissioner that a stormwater management plan has been approved.

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