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Legislature Passes Six Energy Reform Bills

12 more are pending

August 1, 1998 | By Hans Voss
Great Lakes Bulletin News Service

In response to overwhelming calls from citizens and broad political support from lawmakers, Gov. John Engler signed into law six bills last summer that will strengthen oversight of Michigan's oil and gas industry.

They are the first such laws passed by the Legislature after almost two decades of defending the status quo. Not since the 1970s, when statewide debate erupted over drilling in the Pigeon River Country State Forest, has there been such attention paid to the actions of the oil and gas industry. The galvanizing issue now is the intensive, damaging drilling for natural gas in the Antrim Shale formation in the northwest Lower Peninsula. At least 12 other bills designed to reduce environmental harm from drilling and protect the rights of citizens are pending in the Legislature.

"These changes will not solve the myriad of oil and gas problems, but they are certainly a positive first step toward comprehensive reform," said Julie Stoneman of the Michigan Environmental Council, a Lansing based group that has been instrumental in working for the new laws.

What the New Laws Do
The bills were introduced last year in the House of Representatives. After the legislative committee hearings and a public hearing in Gaylord that attracted more than 200 citizens, the bills gained widespread support from both Democrats and Republicans.

The new laws:

• Add protections to prevent drilling in the most scenic blocks of state-owned forest land, such as the Jordan River Valley in Antrim County.

• Give private landowners the option to buy the mineral rights beneath their property when the rights are owned by the state.

• Require the Department of Environmental Quality to (a) prevent public health and safety risks from oil and gas operations; (b) explain to anyone who asks whether hydrogen sulfide is expected in a well; (c) consider the recommendations of local units of government when reviewing well permits.

• Increase the budget for the oil and gas regulatory program by raising permit fees on energy companies.

• Require companies to provide mineral owners with monthly reports summarizing the deductions taken from royalty payments, and an annual accounting of natural gas sales.

• Lessen the burden on mineral owners who are being "forced pooled" by energy companies by moving the administrative hearings from Lansing to their own region.

Buying Mineral Rights from the State ...
The most far-reaching of the new laws is Public Act 117 of 1998, sponsored by State Rep. Bill Bobier (R-Hesperia), which changes the way the state manages its severed mineral rights. Minerals are called "severed" when the oil and gas rights are separate property from the surface land.

According to Mindy Koch, chief of the DNR's Real Estate Division, the reforms of PA 117 are a "huge issue" because there are 2.1 million acres where the state owns just the mineral rights. All money raised from the sale of state-owned minerals will be deposited in the Natural Resources Trust Fund.

It has been common practice in the past for the DNR to sign leases for drilling on private land to reach state-controlled oil and gas deposits. Under the new law, unless the state wants to reserve minerals to prevent damage in environmentally sensitive areas, or there is some other legitimate reason to keep the minerals in state ownership, the DNR, upon request from surface owners, must sell the minerals to them at fair market value. A deed restriction then will be added to the property that prohibits the minerals from being severed in the future.

The DNR is working on a policy to guide this process. The Michigan Land Use Institute and its partners in the Michigan Energy Reform Coalition are encouraging the DNR leadership to make sure the policy requires:
• Careful review of the potential environmental effects of selling off state-owned minerals.

• Substantive public participation in the process of determining which parcels should be sold.

... But Not from Private Mineral Owners
Severed minerals situations often cause widespread discord, because property owners who hold the surface land have no power to stop a well from being drilled on their land. And the problem is getting worse: in some regions of the northern Lower Peninsula it is almost impossible to buy land with the minerals still attached.

Rep. Bobier's bill initially included a tax on severed minerals that are privately owned. The idea was to provide an incentive to sell severed minerals to the surface owner. However, Rep. Bobier dropped this proposal in response to strong opposition from private mineral owners.

Surface owners interested in buying the mineral rights to their land from the state can contact Mindy Koch, chief of the DNR Real Estate Division, P.O. Box 30448, Lansing, MI 48909-7948. Tel. 517-373-1246.

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