MCLUC Reporter, Fall 1995

LANSING — Responding to criticism about a sweetheart deal that was costing taxpayers millions of dollars, the Department of Natural Resources has cancelled a nearly 400,000-acre lease sale of state-owned mineral rights for oil and gas development.

The DNR action followed a unanimous vote of the Natural Resources Trust Fund Board in October to postpone the sale until state leasing policy was reviewed. The DNR now has formed such a committee, which includes members of the Natural Resources Commission, the Natural Resources Trust Fund Board, and the Attorney General’s office. A report of the committee’s findings is scheduled for release on February 1, 1996.

The cancelled lease auction, which had been scheduled for early December, was the largest proposed since 1972. It covered a huge swath of land running from Alpena County in the northeastern part of the Lower Peninsula, through Missaukee County and southwest to Oceana County.

Calls to oil and gas industry executives from the MCLUC Reporter seeking comment were not returned. In an interview with the Traverse City Record Eagle, Martin Lagina, vice chairman of the Michigan Oil and Gas Association, said the cancellation of the lease sale was "ill advised." He added that the industry is competing with other states for investment capital, and that such decisions could scare off investors.

Conservation advocates and local community leaders said the pause in leasing was welcome and needed after years of frenzied drilling in Michigan’s North Woods. They noted that even as the DNR staff has been drastically cut back, the state has gone forward with leasing hundreds of thousands of acres of public forest and issuing permits for more than 2,100 natural gas wells on public lands.

The decision to cancel the sale follows weeks of public protest by conservation groups and property owners over an agreement, which was privately negotiated between the DNR and the oil and gas industry, that allowed the industry to write off nearly all of its production costs before paying royalties to the state.

The write-offs, known as "post production costs" totalled more than $4 million a year, and more than $10 million to date, according to a state audit. That money would have gone to the Natural Resources Trust Fund, which is used to buy state land and improve parks.

In addition, energy companies are taking the same deductions from private mineral owners, citing the state agreement as a precedent. In testimony before the Natural Resources Commission in October, mineral owners said they noticed a sudden drop-off in the amount of their royalty checks. The unauthorized deductions reduced their payments by 40% to 60%.

The agreement, signed in 1993, was negotiated in private between executives of the Michigan Oil and Gas Association and officials in the DNR Real Estate Division. Neither the Legislature, the Natural Resources Commission, nor the public knew about the negotiations. The existence of the agreement and its ramifications were described in an article in the Summer 1995 issue of the MCLUC Reporter.

In testimony before the Natural Resources Commission, Rodney Stokes, chief of the Real Estate Division who headed the state’s negotiating team, said there was no deliberate effort to prevent disclosure of the agreement. Mr. Stokes said he and his staff did their best to interpret the terms of the state’s leasing policy, which he argued allowed for deducting virtually all management costs, legal expenses, fence-building, road maintenance, and a host of other expenses. (See listing on page 7.) Mr. Stokes said he did not think the agreement was especially generous.

A survey of other oil and gas producing states prepared by the DNR in 1989 takes issue with that assessment. The report, which was obtained by the MCLUC Reporter under the Freedom of Information Act, shows that of the nine other energy-producing states that were polled, Michigan has the most generous deduction policy. The report shows that Texas collects significantly higher royalties and disallows many of the deductions approved by Michigan.

"Postponing this lease sale had to happen," said Tom Washington, executive director of the Michigan United Conservation Clubs and a member of the Natural Trust Fund Board. "When everybody started finding out about these deductions they started raising h--l about it. What went on here was a classic example of what you get when you close the process to the public. This was a conniving, scheming, under the table, back room deal."

"We really should work to make sure that decisions like this are made out in the open," added Tom Edison, director of the Center for Wildland Conservation, a non-profit environmental group in Atlanta, Michigan. "All decisions for utilization of natural resources deserve public scrutiny. We’re glad they are looking into policies that have been made in a vacuum."

BELLAIRE — The staff of the new Department of Environmental Quality has broken with a long-standing land management policy and recommended the approval of two gas drilling permits in Antrim County’s magnificent Jordan Valley.

The recommendation moves the energy industry significantly closer to developing one of Michigan’s wildest natural areas. Opponents say that allowing these wells would establish a precedent that will open the Jordan Valley to extensive drilling.

By supporting energy development, the staff of the DEQ is setting up a pivotal confrontation with the Department of Natural Resources, which has managed the 22,000-acre forest as an industry-free zone under the Jordan Valley Management Plan since 1975. The Jordan River, which flows through the valley, was chosen as the state’s first natural river in 1972.

Surprisingly, the DNR itself has aided the developers by leasing two 40-acre blocks of state-owned minerals adjacent to the sites where the private minerals were leased. Although the leased parcels of state-owned minerals are classified as non-development—meaning they can not be drilled on—Terra Energy paired them with the privately owned minerals to meet the 80-acre spacing requirement for Antrim development.

The recommendation to allow drilling was approved by Hal Fitch, the DEQ district geologist in Cadillac. It now is being reviewed by R. Thomas Segall, chief of the Geological Survey Division, which became part of the DEQ in October.

DNR foresters in Gaylord oppose drilling in the Jordan Valley State Forest, calling it one of the most valuable and unique stretches of wild land in the lower peninsula. It comprises 22,000 acres of forested hills surrounding a picturesque river as close to its natural state as any in Michigan.

"It’s the one spot in the northern lower peninsula we would like to have development-free," said Bill O’Neill, the DNR area forest manager. "With its small creeks, steep slopes and unbroken forests, it’s not a good area to develop. We have established the forest for more of a quiet recreational experience, and putting gas and oil in there compromises that goal."

In an interview, Mr. Fitch said that now that his division is part of the DEQ, it is divorced from the land management responsibilities of the DNR. Mr. Fitch said that drilling permit applications in the Jordan Valley would be treated the same as any other applications.

He added that the DEQ regards the Jordan Valley Management Plan as an internal guidance document that does not cover DEQ activities. "It doesn’t have any legal jurisdiction," said Mr. Fitch. He added that the outcome of the Nordhouse Dunes case, in which the state was directed by a judge to pay nearly $120 million for barring an oil company from drilling in a protected area, also played a role in his recommendation. "Denying a permit in the Jordan Valley could put us in a similar position," he said.

The Friends of the Jordan River Watershed, an East Jordan-based advocacy group founded in 1991, is battling to prevent the first permit from being issued. "We are strongly opposed to gas wells within the boundary of the Jordan River Valley," said Bud Jones, an electronics technician and president of the group. "It’s not just the wells, but all this stuff that goes with them: the gas lines, the clearing of rights of way, the production facilities, the noise. All these effects are cumulative, and all are contrary to the entire concept of managing these public land for naturalness, for recreation, for quiet uses."

The contest for the fate of the Jordan Valley began earlier this year when Terra Energy, a subsidiary of CMS Energy, the parent company of Consumers Power, applied to drill wells in the northeast corner of the Jordan Valley State Forest.

Initially, Mark Cromell, area geologist for the Geological Survey Division, recommended denying the permits on the basis that the drilling would take place in a protected area, and that the terrain was steep and not suited for development.

In October, after the Geological Survey Division was transferred to the DEQ, Mr. Fitch traveled to the site and told Mr. Cromell to review his recommendation. Mr. O’Neill and other DNR forestry officials regarded Mr. Fitch’s directive as an effort to intimidate a subordinate into changing a decision. "Anytime you are asked to go back and review a recommendation, that is a very unusual circumstance," said Mr. O’Neill. "The land didn’t change. The hills are still the same. The trees are still there."

Mr. Fitch said his actions were proper and there was no effort to intimidate Mr. Cromell. "If the wells were anywhere else they would be approved," he said.

That is precisely the point, said Mr. O’Neill, who has called in support from the DNR executive office to prevent the drilling permits from being issued.

It is not at all clear why CMS Energy and the rest of Michigan’s Antrim gas industry is pushing so hard to gain entry to the Jordan Valley and risk a public relations backlash. When asked such questions, industry executives generally respond that they have to go where the resource is.

With natural gas prices at the lowest levels of the century, however, the market is clearly not asking for more fuel. The more likely answer, say state foresters, is that having committed to drilling the wells, neither CMS Energy nor the staff of the new DEQ can now back away because it would be perceived within the industry as a sign of political weakness.

"We don’t feel this is a breach of the public trust," said Kelly Farr, a CMS Energy spokesman. "We are sensitive to the environment and we are very careful to minimize our impact on the environment. We only drill in areas where we receive a permit from appropriate regulatory agencies and in this case that is the Michigan Department of Environmental Quality."

The DNR has spent more than $160,000 since 1972 restoring the Jordan River and the Valley by controlling erosion, improving stream banks, preventing siltation and rebuilding fisheries. The work has produced an unmatched natural landscape, unscarred by industrial activities and among the most stunning in the upper Midwest.

Mr. Segall has assured the DNR he will not issue a decision on the drilling permit applications until senior officials of his agency tour the Jordan Valley. Russell Harding, DEQ director, is scheduled to visit the well sites on December 19. "Director Harding has not formed an opinion regarding the permits, and will tour the sites with an open mind," said Ken Silfven, spokesman for the DEQ.

EAST JORDAN — A plan to replace the old concrete bridge over the Green River at the entrance to the Jordan Valley has important implications for the future use of one of the state’s most beautiful forests, say residents and local leaders.

The plan is being sponsored by Lee’s Petroleum, the Northwest Michigan Resource Conservation and Development Council, and the Antrim County Road Commission. All three groups have promoted building a new timber bridge as a gift to the community that will improve fishing and water quality in the Jordan River and the Green, one of its tributaries. Lee’s Petroleum and C.A.P. Land Company have offered to finance one-half the cost of the new bridge.

Critics of the proposal say Lee’s offer may sound generous, but a new bridge would allow drilling rigs and other heavy equipment to service Lee’s new Antrim gas development unit near the Green River, which flows along the western edge of the Jordan Valley State Forest. Eight gas wells, a deep injection disposal well, and brine pits already have been installed in the new unit; a compressing station, and dehydrator unit are planned. The benefits of a new bridge to gas producers are clear.

Amy Beyer, Associate Director of the Northwest Michigan Resource Conservation and Development Council, said the environment also could benefit from a new timber bridge. She said it would reduce soil erosion and aid the state’s forest products industry. "We definitely agree the Jordan Valley needs protection," she said. "The method for controlling oil and gas development is not stopping projects like this at the local level. This is treating a symptom, not the cause."

Conservationists, including Bud Jones, president of Friends of the Jordan River Watershed, disagree. He and other members of the group say that along with opening the Valley to gas development, the new bridge will permit increased traffic, and accelerate the deterioration of the road surface and sedimentation into the Jordan River.

The Department of Natural Resources and private groups have spent hundreds of thousands of dollars over the years to restore the Jordan River by stabilizing stream banks, trapping sand, installing rip rap, and controlling erosion from roads.

FILER TOWNSHIP — Backed by strong support from residents, officials of Filer Township in Manistee County say they intend to block the construction of an oil and gas separation plant in a prime residential area.

The plant, proposed by the Manistee Gas Limited Liability Co., would be built on a forested parcel of land two miles from Lake Michigan that the township has zoned for future recreation and home construction.

The plant would separate oil and water from sour gas piped in from three wells in the area. The gas is called "sour" because it contains poisonous hydrogen sulfide.

During a township Planning Commission public meeting on November 21, Dwain Immel, president of Manistee Gas Limited, said his company was not wedded to the proposed site and would welcome the township’s help in locating a new one. "We remain open," said Mr. Immel. "We are not one hundred percent sold on this facility’s current location. If there is a better location, we are very flexible. If the township board can pick an alternative site, we are amenable. We are very open to those suggestions."

However, later in the meeting, Mr. Immel said that if the township stops him, Manistee Gas would pursue every legal avenue available to build the separation plant near its current proposed location.

"We will look for some compensation if we are denied our property rights," he said. "Are we going to pack up and go if a permit is denied? I seriously doubt that would be the case."

"You guys are in business to make money on our backs," said Doug Cermak, a resident and sergeant in the county Sheriff’s Department. "Let’s be honest about it. The township won’t benefit from this plant. You’re about as welcome here as a leper colony."

Marjorie Johnson, secretary of the Filer Township Planning Commission and an opponent of the plant, says residents intend to be persistent. "A gas and oil company is no better than any other company," she said. "They should abide by the same regulations. I don’t think anyone is for it."

Township residents now have packed three public meetings to voice virtually unanimous opposition to the separation plant in their neighborhood, citing as concerns noise, odor, weaknesses in safety planning and communication, increased truck traffic, road wear, a potential decline in property values, and the hazards of hydrogen sulfide gas.

The federal Occupational Safety and Health Administration considers concentrations of hydrogen sulfide in air greater than 300 parts per million (ppm) as immediately dangerous to life and health. One of the wells supplying gas piped to the proposed station has been tested at 450 ppm. Residents, and the township’s fire safety chief, said they fear a leak of the deadly gas from

Duane Marquand, chairman of the planning commission and a property owner, said, "Hydrogen sulfide gas is bad news. We don’t want it piped around the neighborhood."

Manistee Gas executives said they are confident they will be able to build the plant, and are seeking to bypass local zoning. If the company can prove it is a public utility as defined by the township ordinance, the piped gas would be considered an "essential service" and the township would have no authority to regulate the installation.

Savoy Oil and Gas has sold its interests in 24 producing wells and thousands of leased acres in Manistee County to Belden & Blake, an Ohio-based energy company. The sale, which included the entire Potter Road development in Bear Lake Township, was for $10.3 million.

Oilfield Investments Limited also has notified Pleasanton Township officials that it has sold or transferred its operations in the township to Lee’s Petroleum, a Traverse City-based developer closely associated with O.I.L. A sales price has not been disclosed.

These sales further complicate the efforts of township officials and citizens to respond to haphazard development in Manistee County. When citizens expressed concerns about fly by night oilfield operations a little more than a year ago, Savoy and O.I.L. executives said residents had nothing to fear. In well-attended public meetings, the executives stated they were in the county for the "long haul."

With the purchase of Savoy’s Manistee holdings, Belden & Blake solidifies its position as Michigan’s second largest Antrim gas producer. In February 1995, the company bought Ward Lake Energy, which is second only to Terra Energy in the number of Antrim wells in Michigan.

Savoy began drilling the Potter Road development, Manistee County’s first Antrim project, in late 1993. Belden & Blake already owned a 78% working interest in the Potter Road project, and a 94% interest in Savoy’s other Manistee operations. Before the sale, Savoy controlled 17,000 acres of leased minerals in the county and 93 well drilling locations, many of which have been approved by the state.

Such ownership transfers make it more crucial than ever to establish greater oversight, especially by increasing financial bonding, to ensure that companies live up to their responsibilities to communities and the environment.

LANSING — Five environmental groups have filed a formal motion in the Michigan Supreme Court to appeal a lower court’s order directing the state to pay $120 million to an oil company and a group of mineral owners.

The payment was ordered in October by Michigan Court of Claims Judge Peter Houk. It stems from a 1987 decision by the Department of Natural Resources to prevent Miller Brothers Oil Corp., one of Michigan’s wealthiest independent oil companies, from drilling in the Nordhouse Dunes wilderness, the largest protected stretch of natural dunes in the Great Lakes basin.

The groups that filed the motion contend that the award is excessive and unlawful, and they are pressing the Supreme Court to take up the case.

The environmental groups are the Sierra Club and its 11,000-member Mackinac Chapter based in Lansing; the West Michigan Environmental Action Council in Grand Rapids; the Tip of the Mitt Watershed Council in Harbor Springs; the Hamlin Lake Association in Mason County; and the Michigan Land Use Institute in Benzonia, of which MCLUC is a part. They are represented by attorneys James Olson and John Noonan of Traverse City, Fred Dilley of Grand Rapids, and John Forester of Grand Haven.

The Engler Administration moved to prevent the high court from considering the case in September, when it announced a secretly negotiated settlement deal to pay Miller Brothers $59.5 million. The governor said the settlement was a good faith effort to reduce the size of the award. In November, after initially balking, the Legislature approved the settlement and added $30 million more for the mineral owners.

In mid-November, the state Treasury paid Miller Brothers $59.5 million, the largest award ever in a U.S. environmental "takings" case.

The mineral owners, however, refused to accept their part of the Legislature’s settlement offer. That decision gives the environmental groups more legal room to maneuver in their appeal of all aspects of the case.

In seeking a substantive review by the Supreme Court, the environmental groups want Miller Brothers to return the money to the state treasury. They also are seeking to help the public understand the ramifications of the case.

Like a gale gathering force, the precedent set in the Nordhouse Dunes legislation is pounding a revered American ideal: the notion that in some instances the right of society to safeguard land is paramount over individual needs. At risk are Michigan’s last wild spaces, as well as community land use decisions made under local zoning.

The Nordhouse Dunes just north of Ludington are a 2,500-acre stretch of wind-blown sand, wetlands, and forests along six miles of undeveloped Lake Michigan shore. For decades, the dunes have been one of the state’s most popular coastal recreation areas.

Lying almost one mile below the sand, though, is a narrow band of oil-saturated rock, known as the Niagaran formation, which is privately owned. In March 1986, Miller Brothers submitted a plan to the DNR to drill five wells in the Nordhouse Dunes. The DNR conducted an environmental review and refused the request after determining that drilling in the dunes would harm the area’s distinctive natural character and would violate the Michigan Environmental Protection Act.

Miller Brothers sued, arguing in the Court of Claims that the decision deprived them of the right to recover oil under leases obtained years before. The oil company was joined in the suit by the mineral owners who had leased their rights. Both groups argued that, in effect, the denial of their application to drill was a seizure or "taking" of private property, and that under the Fifth Amendment of the Constitution they were entitled to "just compensation."

The ultimate goal, said Mr. Olson, is to reverse the lower court ruling. If the settlement, and the takings legal theory, are allowed to stand, he said, the notion that there is an abiding public interest in enforcing laws to safeguard the state’s environment is truly threatened.

The Michigan Supreme Court now faces one of the great legal issues to come before it in years. It can direct politically influential companies to do what ordinary citizens expect of themselves every day—obey the law.

MANISTEE — The Department of Natural Resources is spending $400,000 to plug one abandoned well near Manistee, and is studying many others in a new program designed to prevent contamination of drinking water around Manistee Lake.

According to state geologists, natural gas developers are planning to drill several deep injection wells in the Manistee Lake area to dispose of millions of gallons of brine, a byproduct of Antrim development.

The DNR explained that in the late 19th and early 20th centuries, there may have been as many as 100 wells drilled around the lake for oil and to tap rich deposits of salt. Many were improperly plugged, or not plugged at all. If the old wells remain open, DNR geologists said, brine from Antrim disposal wells could flow through the rock layers and migrate back to the surface through the unplugged wells.

The problem was identified earlier this year by Walter W. Poimboeuf, a petroleum engineer from Manistee who works as a consultant to several large industries. Mr. Poimbouef said failing to plug old wells is "probably one of the worst groundwater contamination situations that we face today, anywhere. The big reason why people don’t pay much attention to it is because they don’t understand it, so they ignore it, and by ignoring it they hope it will go away."

Mr. Poimboeuf said it is important that the new Antrim disposal wells be drilled at least two miles from the lake to avoid the problem.

Mr. Poimboeuf said in the next few years Antrim gas producers could drill six or more injection wells within two miles of Manistee Lake. Each of them would handle tens of thousands of gallons of brine disposal a day. "If that amount of volume goes in that close to Manistee Lake, and haphazard injection wells are allowed, my feeling is it’s a good probability that fresh water will be contaminated," he said.

Mr. Poimboeuf said brine disposal from Antrim gas production could affect drinking water in other areas of the county where wells were abandoned without plugging. "It’s a worry," he said. "It would take four or five years for the contamination to become apparent. By that time people have got their pockets full."

The money to plug old wells comes from a $1 million-a-year state fund, paid for by oil and gas taxes. The first to be plugged, at a cost of $400,000, is on an island in Manistee Lake near East Lake Village. The cost is so high, said the DNR, because it is expensive to move a drilling rig to the island. The average cost to plug an abandoned well is between $15,000 to $20,000.

Despite the increasing concern expressed by citizens throughout Michigan’s North Woods, legislators have been slow to respond to the harm being caused to private property and the environment by oil and gas development.

Perhaps the most important thing any one can do is to contact their legislators, voice concern about real problems observed and experienced, and ask them what they intend to do about it.

( - Introduced by Rep. Susan Munsell (R-Brighton), HB 4927 is designed to reduce noise and night-time nuisance by allowing counties to adopt ordinances to regulate hours during which oil, gas, brine, or any other substance can be transported to or from an oil and gas well.

Rep. Munsell has asked the chairman of the House Conservation Committee, Rep. Mick Middaugh (R-Paw Paw), to take up the bill, but at this writing there has been no response.

( - Rep. Jim McBryde (R-Mt. Pleasant) and Sen. Joanne G. Emmons (R-Big Rapids) have introduced identical bills to reduce the severance taxes for older wells. The intent, they say, is to serve as an incentive to keep older wells in use and thus slow down new drilling. Opponents of the legislation say the tax break is another giveaway to the industry, since new wells are going to be drilled anyway, and these bills would allow companies to continue collecting a taxpayer supported subsidy for their older wells.

The bills have been referred to the House Tax Policy Committee, chaired by Rep. Willis Bullard Jr. (R-Milford) and to the Senate Finance Committee, chaired by Sen. Emmons. For more information call Rep. McBryde at 517-373-1789 and Sen. Emmons at 517-373-3760.

( - Rep. Beverly Bodem (R-Alpena) and Rep. Bill Bobier (R-Hesperia) are working on several bills that they plan to introduce as a package. Rep. Bodem’s proposal would:

3). Provide for state retention of subsurface rights for property it acquires only if the minerals could be feasibly extracted within 20 years.

2). Codify standards for spacing and other aspects of oil and gas development currently under consideration in a proposed rules package. (See Rules Threatened, page 8).

3). Establish a drilling permit application fee. The proceeds would be returned to local governments to hire technical experts, provide financing for legal assistance, and to take other measures to improve land use management and planning in areas of oil and gas development.

Julie Stoneman, a citizens’ environmental advocate for 14 years, is Land Programs Director for the Michigan Environmental Council in Lansing.

Naturalist Aldo Leopold taught that unless people stop viewing themselves as conquerors of the land, any success in protecting resources will be short-lived. The essence of his land ethic is awareness, of being a member of a larger community of plants and animals; in effect, of the entire ecosystem.

Leopold’s vision served as a theoretical model for a new kind of public resource policy starting in the early 20th century. It was revolutionary at the time—the concept of the State as steward of the land.

In recent years, though, Michigan’s resource policy has begun to stray far from this idea. Shifting political trends have encouraged resource management emphasizing economic production on public lands. This shortsighted leadership is focused on generating quick profits, while ignoring the long-term economic and social value of untarnished lands.

A striking example is the state’s mismanagement of oil and gas development. Since the surge in Antrim gas drilling in the late 1980s, the state has allowed the oil and gas industry to build a sprawling infrastructure of wells, pipelines, and access roads that has fragmented the land and cleared thousands of acres of forest.

Narrow two tracks, once peacefully domed with hardwood canopies, have been widened for the heavy traffic of drilling rigs and service trucks. Antiquated rules, exemptions from local ordinances, and generous state and federal subsidies all have enabled the energy industry to reap vast profits at the expense of public lands.

Some Department of Natural Resources officials, however, have spoken out. A 1992 DNR task force on oil and gas cited numerous harmful effects from the current practices, and made a strong recommendation to implement regional land use planning to reduce environmental damage. Neither the DNR nor the new Department of Environmental Quality has responded to the task force findings, and state regulators have given even less attention to calls from citizens to strengthen oversight of the industry.

Public advocates fought a successful battle over Niagaran oil development in the Pigeon River State Forest in the early 1970s because courageous citizens could not bear to stand aside and watch the DNR shirk its responsibility. Former DNR employees joined with citizens to file suit against the oil industry to protect one of the few remaining wilderness areas in the state. In a sweeping decision, the Michigan Supreme Court prevented exploratory wells from being drilled in the Pigeon River area because they would cause "unquantifiable damage."

After the court ruling Joseph Sax, a law professor at the University of Michigan and author of the Michigan Environmental Protection Act, reflected on the fight. "Lawsuits over environmental issues are always a matter of last resort," he said. "They are a kind of desperation strategy. When those who are supposed to administer the law—in this case, the DNR and the Natural Resources Commission—do not do the job that they ought to do, when other institutions in the society, like the press, the Governor’s office, or citizens’ expressions of opinion, however strong and well meaning, are unable to bring about much-needed change, then with great reluctance we as citizens have no choice but to go to court."

In 1992, in the midst of the Antrim gas drilling frenzy, the Michigan Environmental Trust Limited, Trout Unlimited, and Anglers of the AuSable found that in order to protect the forests and trout streams, they too had to resort to a lawsuit. After a long legal battle that cost the conservation groups more than $100,000, they finally succeeded in convincing the court to require the industry to bore underneath streams when laying pipelines, and they reached a compromise to widen the spacing between wells to a minimum of 80 acres.

The Pigeon River and METL lawsuits achieved needed policy changes that have resulted in a lasting benefit for state resources. Neither initiative was led by radicals who were anti-industry or anti-development. These were ordinary people who cared about land. Today, one is hard-pressed to find anyone outside of the oil and gas industry who is not thankful for the heroic effort of those concerned citizens. Yet glaringly missing from both cases was support by the very agency, the DNR, charged by law to "protect and conserve the resources."

The lines now are being drawn for what looks to be the next resource management battle, gas development in the Jordan River Valley. A unique stretch of 22,000 acres of forested hills surrounding a river as close to its natural state as any in lower Michigan, the Jordan River Valley has been protected since 1975 from oil and gas development under a management plan drawn up by the DNR.

Now the Engler Administration has allowed the valley’s subsurface minerals to be put on the auction block. The new Department of Environmental Quality has recommended approval for two natural gas wells in the protected area. If allowed, the wells would set a chilling precedent for gas development in the whole valley.

The move to open the Jordan Valley is emblematic of a disregard within state government of the long-term value of healthy public lands. If state officials are so casual and cavalier about one of Michigan’s jewels, doesn’t that tell us how they are treating the rest of our public lands?

Revered by hunters, fishermen, and nature lovers across the state, the Jordan River Valley will not be given up without a fight. It is time for the DEQ and the DNR to step up to their duty as stewards of the land. As the messages of land stewardship gain a broader audience, and we contemplate our own personal land ethic, it is important to challenge policy makers, legislators, and the executive office to fulfill their responsibility to safeguard public land. We must remind, insist, and demand that the state live up to its charge.

Hans Voss is the North Woods Campaign Coordinator, working on behalf of MCLUC and the Michigan Energy Reform Coalition, at the Michigan Land Use Institute.

Watch the shadows, not the puppets, Billy Kwan tells Guy Hamilton in the film The Year of Living Dangerously, a modern classic about morality and chaos set in Indonesia. Yes, I am back to movies.

Billy Kwan was talking about shadow and substance, or Henry James’s notion of appearance and reality, as one sees in his story, The Beast in the Jungle. There are times when we only understand something at the conclusion, when it’s too late to enjoy a life that could have been. Those who believe that some of us are "talking through our hats," or who are alarmist, cannot perceive that beast who really could rob us of our future. Those of us who are concerned are hunting down the beast and saying, "You will not haunt us because we will fight your slow, draining tactics. We will obliterate you before you pounce and destroy our lives. We will not let you destroy beauty."

I witnessed the beginning chaos started by the gas development in my neighborhood one day not long ago. The soil was upturned and rendered helpless by the earth movers preparing a space for the compression station approximately half a mile from my home.

I decided to rename this the depression station, for I am not prepared emotionally for the inevitable view and sound of this station. The people in my subdivision had a meeting with Oilfield Investments concerning this matter, and most people were satisfied that we would have good and responsible neighbors. "Why am I so depressed about this?" I asked myself. I knew that my neighbors, especially the men who knew something about drilling and oil wells, were sincere in their beliefs that we would be able to live as before, except for the obvious view of the compression station buildings. Well this may be true. I may never hear a thing after all is built. I certainly hear a lot right now, as I write this essay; indeed, I must relate what happened to me one morning as I was sleeping comfortably.

It was in October, and my bedroom window was open, as it is most of the time, even during the coldest winter night. I jumped up, realizing I had been hearing this drone for some time, feeling the house tremble, as did my mother. Ah, the construction of the compression station, I said to myself. We had been told it might be noisy at times, but at 5:44 a.m.?

I am an early riser and decided to forgive the workers until I realized my 93-year-old mother was up, too, and she is hard of hearing. She was wandering around, confused, saying "What’s happening?" Quite truly, she had felt the vibrations of the machinery.

This was the defining moment, when forgiveness fled and I became angry. I got my mother back in bed, after giving her some cocoa. I checked the phone number and then called the president of Oilfield Investments at 5:55 a.m., awakening his sleepy son—sorry, young man—who came back to the phone after a consult with his father and said, "Can I take a message?"

He came to the phone, and I explained the problem, in a civilized manner, I might add, and he said he would take care of the matter, and he has.

Only the first problem, I decide. Shadow and substance again: I think I shall not suffer too greatly, because I live in the woods and we here are a vocal people who will try to keep the business people honest, but I still worry about the implications for the lands around me. Moral people must not care only for themselves; they must have an objective concern for the environment in a general manner and must fight for a respect of the land.

I say, watch the shadows and the puppets. No matter what the gas developers tell us, they are only the puppets, and hope that we are unaware of the shadows, which stand for the illusions. We have to see and understand both; in part we have to pay attention to the shadows, which will help us to see the total story. The puppets in the State of Michigan are casting a different shadow, a false one, and only we, citizens here in Northern Lower Michigan, can correct the images.

The creation of the DNR Review Committee on state leasing policy provides citizens with a rare opportunity to improve how oil and gas fields are developed in Michigan.

MCLUC and its partners in the Michigan Energy Reform Coalition are working to include a citizens’ representative on the committee. Currently, the committee is made up only of state officials. A member of the public should have a place at the table where the fate of public lands is decided.

A committed conservationist also would serve as a reminder to the DNR that their primary responsibility is sound land stewardship and protection of the public trust.

2). Studying the post production cost policy to determine whether it needs to be amended. A fundamental decision is to determine whether state royalties should be paid on the market value of natural gas, or on the value at the wellhead. The wellhead value, which is considerably lower, is determined after all production costs are deducted.

2). The same standards should apply to private mineral owners so that they also receive fair royalty payments in return for leasing their land.

3). Severance taxes and royalties should be based on the market value of the gas, instead of the contrived and considerably lower "wellhead" value. That figure now is determined after all production costs have been deducted. As a result, payments to the state and private leaseholders are lower.

4). Strengthen state leasing policy to account for results that years of aggressive drilling have had on public lands and on the economies of communities near the well fields. The DNR needs to conduct a very careful comparative study of this issue as part of the review committee’s work.

5). There needs to be a much more careful evaluation of the environmental effects from the huge lease sales of recent years. Currently, there is no public disclosure of the data that the DNR is using to support the sales. Until there is more accountability, the amount of state land offered for each lease sale should be substantially reduced.

Two years after the Michigan Oil and Gas Association (MOGA) and the environmental community reached an agreement to improve energy exploration and production practices, industry executives are seeking to undermine the pact, according to state officials.

The focus of the industry’s effort is to delay action on the rules package in order to miss a legislative deadline early next year. Under the agreement, the package must be finished and sent to the Joint Committee on Administrative Rules by February 22, 1996, or it could be discarded. In effect, say state officials, the industry is seeking to kill the package by stringing it out just as it is about to be considered by lawmakers.

MOGA’s efforts have been aided by the Engler Administration’s decision last summer to transfer oversight of oil and gas development from the Department of Natural Resources, which negotiated the agreement, to the new Department of Environmental Quality.

According to state officials, the industry has turned to the governor’s office and the DEQ for help in dissolving the agreement. The industry is concerned about well-testing requirements, and about a plan to increase the financial bond energy companies must pay before drilling. The higher bonds are meant to protect communities from improper practices after the wells have been shut down.

MCLUC, its partners in the Michigan Energy Reform Coalition, and other groups have urged the DEQ to set a new timetable for the adoption of the rules. These groups also have asked Russell Harding, director of the DEQ, to meet with the task force members, to publicly support adoption and implementation of the rules, and to inform MOGA that further changes are unwelcome and will not be accepted.

The Department of Natural Resources also has expressed dismay at MOGA’s actions. In a letter dated August 30, 1995, C. Edwin Meadows Jr., deputy director of the Department of Natural Resources, admonished MOGA for attempting to back out of the agreement, which was struck after more than a year of negotiations. "The existing proposed rule package was a consensus agreement negotiated in good faith with all parties," said Mr. Meadows in the letter.

He added, "It would not be appropriate for the Michigan Department of Natural Resources to independently negotiate on a substitute to resolve the issues you identified, especially the proposed bonding rules. We have significant concern that you have brought forth these issues at this late stage of the rule promulgation process."

MOGA executives declined to return phone calls seeking a response. Ken Silfven, DEQ spokesman, said, "There are ongoing discussions with the industry, and we certainly will hold a public hearing before rules are forwarded for promulgation."

Energy exploration and production is regulated under 40-year-old rules authorized by Public Act 61, Michigan’s oil and gas law. In 1985, the DNR and MOGA began meeting in private sessions to amend the rules. Citizens were able to pry the door open and become an equal partner at the negotiating table in 1993, when a task force was convened by former DNR director Roland Harmes. The task force, led by Virginia Pierce, district director of the DNR Waste Management Division, was charged with reviewing the draft rules and moving all parties to agreement.

Representatives of environmental organizations, the Northeast Michigan Council of Governments, the energy industry and the DNR worked for a year to reach consensus. The task force concluded its work with a proposed rules package that called for higher bonding, phasing out waste pits, increasing set back requirements from environmentally sensitive areas, strengthening environmental assessments, reducing noise from compressing stations, and many other improvements.

In the winter of 1994, hearings were held to receive public comment. In April 1995, the DNR reconvened the task force to address lingering contentious issues—whether to ban the use of oil and gas production brines on roads to control dust and melt ice, and restrictions affecting the gas storage industry. The task force had completed its work, and the package was headed to the Legislature, before the industry intervened on its own.

Ann Hunt, an educator and professional safety and compliance consultant for manufacturers, is executive director of Citizens for Alternatives to Chemical Contamination in Lake, Michigan.

BENZONIA — After two years of aggressive leasing and drilling in Benzie and Manistee counties, Antrim gas development activity slowed dramatically this fall. The only new development occurred in Benzie County, where Terra Energy applied to drill four wells in Joyfield Township, including one along Demerly Road just south of Benzonia.

Industry executives and state leasing officials say the calmer conditions are due to record low natural gas prices, and a desire by the industry to complete wells already permitted in other counties, such as Antrim, Alpena, and Montmorency.

In Manistee County, the number of Antrim gas wells and brine disposal wells that have been drilled, permitted and proposed is 373, unchanged since the last issue of the MCLUC Reporter. The number of wells proposed for Benzie County has grown to 22; 18 in Colfax Township and 4 in Joyfield Township. (Source: Michigan Oil & Gas News).

After ten months of often acrimonious debate, the 18-member Benzie-Manistee Oil and Gas Task force concluded its work in October, publishing two reports but unable to reach agreement on any of the crucial issues affecting energy development in the two counties.

Established in January by Kurt Schindler and David Neiger, the directors of planning in Manistee and Benzie counties, the task force brought senior officials of the Department of Natural Resources and the energy industry together with local business owners, landowners and conservationists.

Funded with a $28,600 grant from the DNR, the task force originally was intended to serve as a forum for negotiating a voluntary set of principles for Antrim gas development. The aim was to reach a consensus on how best to minimize damage to the environment while lowering costs and impediments for the industry.

The tone of the project was set in the early minutes of the first meeting, held at the Sail Inn restaurant in Benzonia. With just one dissenting vote, from the MCLUC representative, the task force approved a motion by the president of the Michigan Oil and Gas Association (MOGA) to remove from the meeting two reporters from the Benzie County Record Patriot. As its second act, again with only MCLUC dissenting, the task force established a public information policy to prevent members from speaking or writing about the proceedings.

Also at that first meeting, the president of MOGA, Frank Mortl, and a representative of the Department of Natural Resources, Hal Fitch, made it clear they would oppose any proposals to change state leasing or gas development policies. If the task force headed in that direction, they said, they would walk out.

In the next four meetings, as talk turned to adjusting state policy, Mr. Mortl repeated his threat to abandon the task force. Mr. Fitch, the normally unflappable state geologist from Cadillac, also threatened to quit the panel on at least two occasions.

Faced with an unyielding ideological barrier, the group spent most of its time conducting research on state policy, exploring industry practices, and studying problems that had arisen from Antrim development in other communities. Led by Mark Wyckoff, president of the Lansing-based Planning and Zoning Center, the group established a curious stability as it examined issues familiar to readers of the MCLUC Reporter—noise, fragmentation, traffic, erosion, brine disposal, leasing, drilling practices, gas production, processing, and environmental effects.

If discussion edged close to weaknesses in state policy, DNR representatives would jerk upright to defend the agency. If it strayed into mild rebuke of the oil and gas industry, Mr. Mortl or Greg Fogle, vice president of Oilfield Investments Ltd., would sputter to attention. When the state or the industry attempted to minimize the problems, landowners and conservationists would set the record straight.

The task force was an unqualified success for industry executives, and a disappointment for local government officials and conservation advocates because it did not recommend a single needed change in state oversight or drilling practices.

The failure to reach consensus on any key issue led directly to two outcomes that could have much greater ramifications for the industry and the state:

1). Pleasanton Township filed suit last summer to defend its land use plan for oil and gas development that goes beyond state law.

2). The Michigan Communities Land Use Coalition helped organize a statewide alliance, the Michigan Energy Reform Coalition, that now has ten partners, represents more than 100,000 state residents, and is seeking changes in public policy that benefit the environment, property owners and communities.

As an exercise in data gathering and political understanding, though, the task force was a worthwhile undertaking. The facts turned up confirmed what MCLUC and other groups have been reporting for years. And for the first time, local political leaders like Millie Smith, supervisor of Colfax Township, and business owners like Jim MacInnes, general manager of Crystal Mountain Resort, were able to see just how close the state geologists and state leasing officials are with industry executives.

Most revealing, though, was how sore of spirit the DNR officials seemed. As a group they voiced a fairly well-formed sense of stewardship, but exhibited a great reluctance to act on it. Somewhere amidst the paper shuffling and policy groping, whatever ideas they harbored about protecting communities and the environment appeared to have been pounded out of them. Sitting in those meetings, month after month, it was painful to realize that the Engler Administration has succeeded in its dismaying mission to turn this once trend-setting agency with an excellent staff and a national reputation into an enfeebled shadow of its former self.

The House Conservation Committee has been conducting hearings around the state, taking testimony from developers and landowners who say that environmental restrictions are lowering their property values. The meetings are designed to advance the idea that environmental rules can interfere with a property owner’s ability to use land, which constitutes a seizure, or "taking," of private property that merits just compensation under the Fifth Amendment.

Representative Ken Sikkema (R- Grandville), the Majority Floor Leader who is organizing the hearings, is sponsoring legislation to require the state government to review all new regulations for their takings potential. Such a policy is likely to produce an even bigger and more expensive regulation reviewing bureaucracy. The plan also could have the effect of weakening Michigan’s environmental statutes. All this for the personal profit of relatively few individuals, when the larger obligation to public stewardship of land is violated.

Takings cases to date have been advanced typically by rural landowners reacting to government restrictions on the use of their property. They usually are isolated situations that attract a great deal of attention by outspoken landowners.

Lost in this debate has been the most compelling example of a taking. The injustice of severed rights is a true taking, a government-sponsored action that completely strips landowners of control of their land and leaves them with diminished property values.

It is a taking, not by overly restrictive state action, but by government action encouraging activity that physically interferes with the use and enjoyment of property, and substantially reduces property values. The government is reallocating the rights of the homeowner to the oil and gas industry as profits, while providing little in return.

The state Dormant Minerals Act of 1963 allows the separation of mineral ownership from surface ownership. Michigan is one of 14 states in which the landowner can retain control of the mineral rights when selling the surface property. The next buyer of the property becomes known as a "severed rights" owner.

The owner of the minerals has the authority to develop them, while the surface owner has essentially no control, even though developing the minerals means also using the surface. This law allows wells, pipelines, and compressing facilities to be put on hundreds of privately owned parcels, creating widespread dissent from irate landowners and rural communities.

The scope of this issue is enormous. The State of Michigan acquired millions of acres of tax reverted land during the Depression. The policy of the state when selling off the land was to retain the mineral rights. Today the state owns the mineral rights beneath 2.1 million acres of privately held land.

How much of that land has been leased for oil and gas development has not been publicly disclosed by the Department of Natural Resources. A July 1995 lease of state-owned mineral rights in Benzie County, though, indicates the scale: of 13,370 acres leased, more than 1,000 acres, or 7.5%, were under privately-owned land.

Here’s a typical scenario. A landowner receives a notification letter from an energy company stating that the mineral rights beneath the land have been leased and development will start in a matter of weeks. The landowner is told where the well will be placed, and where the pipeline and access road running to it will be constructed.

Each well requires clearing at least one acre of land. In some cases noisy compressing stations also are placed on the property. There is rarely a meeting to work out mutually agreeable well and pipeline locations, or to hear any concerns of the landowner.

If the landowner objects to the way the land is being used, he or she soon realizes that there is no redress. There is no forum to hear the complaints of the landowner. There is no law that requires the oil and gas company to respond to the landowner’s concerns.

The law does require that the landowner receive monetary compensation for the value of surface land used, although generally at a rate far below what the property owner believes is a fair price for the damage. The landowner does not share in royalties, and although the energy company uses the surface, it is not required to contribute to property taxes.

Who wants to buy 40 acres of land with a gas well humming day and night, and service trucks rumbling in and out? MCLUC receives calls every week from prospective land buyers who have shied away from their planned investment because the mineral rights have been leased or there is a well on the property. There are numerous documented cases of stagnant property values and landowners unable to sell their land due to oil and gas development.

If Mr. Sikkema’s committee is serious about solving unfair state-sanctioned control of private property, this issue of severed rights must be elevated to the top of the takings agenda.

The Michigan Energy Reform Coalition welcomes Anglers of the AuSable, the Pigeon River Country Association, and Manistee County’s Filer Township as new partners. They join MCLUC, the Center for Wildland Conservation, Citizens for alternatives to Chemical Contamination, Friends of the Jordan River Watershed, the Michigan Environmental Council, Pleasanton Township, and the Tip of the Mitt Watershed Council.

The Coalition now consists of eight citizens’ groups and two townships. There has been strong interest in joining the Coalition from several other groups and homeowners’ associations, which are concerned about oil and gas development and want to participate in bringing about positive changes.

For more information about the Michigan Energy Reform Coalition, call 616-882-4723, or write to P.O. Box 228, Benzonia, MI 49616.

MERC representatives held a strategy session in Roscommon last October. The productive meeting resulted in a strengthening of goals, the establishment of short-term campaign priorities, and the reinforcement of strong support for two research studies.

1). Support the proposed state oil and gas rules revisions. — Approval of the rules is long overdue. After years of discussion and preparation, the rules package is nearing final approval. However, the oil and gas industry appears intent on sinking the whole package. (See article, page 8). MERC sent a letter to the director of the Department of Environmental Quality in support of the proposed revisions, and requesting the establishment of a timeline for final approval.

2). End post production cost deductions. — MERC testified at the Natural Resources Commission on November 11 in opposition to the deductions, which now siphon millions of taxpayer dollars from the public treasury. (See article, page 7). MERC also sent a letter to the Natural Resources Commission, which asked for the postponement of an upcoming lease sale of more than 400,000 acres of state-owned mineral rights until the issue could be investigated.

3). protect the Jordan River Valley. — The oil and gas industry is pushing for the development of this 22,000-acre protected wilderness area. (See article, front page). In November, board members from the Friends of the Jordan led a field trip for MERC partners to the proposed well sites, and provided background on the implications of gas development in the Jordan Valley.

MERC then sent a letter to the director of the Department of Environmental Quality, opposing the proposed gas development in the Jordan River State Forest, and requesting a statement of support for the 1975 Jordan Valley Management Plan, which prohibits oil and gas development there.

With the help of Keith Breuker, a mechanical engineer and noise monitoring specialist who lives in Benzie County, the first study will be a review of noise nuisances caused by gas compressing stations. It will include an evaluation of current technologies to measure and muffle sound, and the type of regulations that could effectively control it.

The noise project is part of a larger second study, which will be a comprehensive economic analysis of the effects of oil and gas development on tourism-based economies and property values in Michigan.

2). Increase economic returns to counties and townships by establishing a non-renewable energy tax on oil and gas producers, modeled on those adopted by several other states.

4). Protect Michigan’s rivers, streams, and lakes by requiring the industry to prepare hydrocarbon development plans, based on the Pigeon River model, before oil and gas drilling permits are issued in sensitive watersheds.

Of all the complaints from citizens about Antrim natural gas development, no issue raises the same intense emotion as the noise from compressing stations. People may be able to put up with the sight of a pumping gas well or tolerate the clearing of trees for well pads and pipelines, but when the development travels through the air and actually enters eardrums it takes on a more personal dimension.

"It’s like living in a truck stop," says Tom Edison, a Montmorency County homeowner who lives half a mile from a compressor. "The reason we bought the place was because it was at the end of two dead-end roads. We came here because of the remoteness. Now it’s gone."

These sentiments, along with concerns of devaluation of property, are common in regions where Antrim development is widespread. On average, there is one compressing station for every 20 Antrim wells. With about 5,000 of these wells in the Lower Peninsula, the noise from compressing stations is no minor issue. The Montmorency County Soil Erosion Department estimates that once the proposed compressors are completed, 38% of the county will be within one mile—the distance where the noise is generally audible—of a compressing station.

The oversight of noise from compressing stations in Michigan is almost non-existent. The oil and gas law, Public Act 61, does not address noise from compressors, which means that the state has no authority to regulate sound levels.

Some townships and counties have ordinances that place a decibel limit at certain distances on compressing stations, but they rarely are enforced. Oil and gas companies often refuse to abide by such ordinances, claiming that Public Act 61 exempts compressing stations from local zoning. The companies determine which noise muffling methods will be used, and any modifications or improvements usually are done on a voluntary basis.

With the wide range of oil and gas companies doing business in Michigan, the disparity of noise control at different compressors is enormous. Some companies use specially designed buildings lined with noise absorbing insulation, while others start up the compressors with no sound control features whatsoever.

Proposed revisions to Public Act 61, currently awaiting approval, assert that noise can be considered a nuisance when measured at 45 decibels at a distance of 1,320 feet. At this level, the state could require the noise to be reduced.

The problem with this method, however, is that it is difficult, if not impossible, to quantify the degree of nuisance using a decibel meter. The wind in the trees often can indicate readings of up to 50 decibels, making accurate outdoor measurements at long distances extremely difficult.

People who live next to the continuous drone of a compressor say it is not even feasible to determine the level of nuisance based on a noise reading from a machine. What a meter considers background levels can be thoroughly disturbing to a neighbor trying to read a novel on the back porch.

The Michigan Energy Reform Coalition has identified noise pollution from compressors as a top priority, and is planning a comprehensive study of the issue. The intention is to work with the industry and the regulatory agencies to improve industry practices and reduce noise levels. The study will document the magnitude of the problem, evaluate the extent of township and county authority, study the effects on property values, and determine the costs and applicability of noise control technologies.

ATLANTA — There have been four different gas well production compressors built within earshot of my place in northern Montmorency County during the past ten years, so I know first hand of what I speak.

The first compressing station was about half a mile north of my cabin. It was a small one, but except for a sheet steel enclosure and the standard size muffler, without any special noise abatement features. I could hear it from my place from time to time in the summer when the operator generally left the sliding doors open, despite the fact that the area between the installation and my place is heavily forested, mostly with hardwood. Yet for some reason or other, a quarter of a mile farther away to the south and 20 to 30 feet lower at the stream level, the compressor’s noise would come through loud and clear. In the winter, when the doors of the shed were closed, the thing was seldom heard except immediately downwind, despite the fallen leaves. After eight years of dwindling Niagaran gas production, that compressor was dismantled.

Sound is a phenomenon that behaves strangely. During the American Civil War, observers remarked on how sometimes you could see a battle going on in the near-distance, the flashes of cannon fire, the smoke and all the rest, yet never hear a sound. Other times, even with a whole mountain blocking the view, the sounds of battle were so loud that you’d swear it was being fought only a few hundred yards away! There seems to be something similar going on here.

The second compressing station affecting me was in an altogether different league from the first. With escalating Antrim gas production and a multitude of compressing stations along the southern and eastern sides of the Pigeon River Country, it took some sleuthing to locate this particular source of noise. By driving around the area, taking compass readings, and talking to neighbors, I finally located the culprit, which must hold the long-distance noise record among compressors, because it is located approximately five miles southwest of my place as the crow flies!

Situated on a slope, with its open cooling vents facing the whole upper Black River watershed, it broadcasts noise almost as efficiently as an outdoor band-shell. Last summer, a plywood baffle was erected to direct the noise upward, but when the wind is from the southwest it still can be heard.

The third compressor to go on line within my hearing range is some three miles directly south, though it is generally inaudible within a quarter of a mile or even less. It is enclosed in a fully insulated and fully baffled steel building that is designed to prevent sound waves from escaping in any straight line except straight up—except when workmen have failed to close the doors. Once, on the Fourth of July when that happened, I drove down to the place after calling an emergency number to complain about the noise, and also found the brine tank spilling over to boot.

The fourth installation to open up near me is only a half mile away. It consists of a single medium size three-stage compressor enclosed in an unbaffled, but insulated, steel building surrounded by a low earthen berm. It makes about as much noise as our original unimproved little compressor did on the Niagaran well. A lot depends on which way the wind is blowing, on the atmospheric pressure, and even on the humidity. Despite a wooden fence erected to deflect the sound, noise from this whole installation reverberates quite noticeably at various points along the riverside.

The lesson is clear. Gas compressing stations are a "point source" type of noise pollution. You can locate the noise coming from one spot and the only logical solution is to reduce it at that point. The state has proposed limiting the noise to 45 decibels at a quarter mile. Merely taking decibel readings at various distances on a single day, though, seems to establish very little data that can be relied on year-round. Nevertheless, with clear standards and proper design, practically noiseless compressor operations are feasible and should generate few complaints if operated correctly, whichever way the wind blows.

Richard W. Kropf, a writer and theologian, is president of the Pigeon River Country Association and a member of the Upper Black River Watershed Restoration Committee.

These are expenses associated with operating pipelines, compressing stations, filtering stations, dehydration units, safety systems, and CO2 removal stations. Under a privately negotiated agreement, the state allowed Antrim gas drillers to deduct the costs of building, maintaining and operating these systems before paying state royalties.

Royalties from state-owned oil and gas leases are calculated based on "the value" at the wellhead. The problem is that there is no real value for natural gas from the Antrim Shale formation at the wellhead.

Before Antrim gas is sold, it must be directed through pipelines to processing stations that separate the water from the gas, compress the gas, and remove CO2.

The market value of natural gas is at the point of sale, after these processes have occurred. The industry defines the water separation, compression, and CO2 removal processes as post production costs. The industry argues that these costs should be deducted from the market price in order to determine the "wellhead value."

In the early 1970s, a handful of major oil companies were active in Michigan extracting oil and gas from the Niagaran formation. In 1973 Shell Oil Co., Amoco Production Co., and a few other oil companies gained approval from the Michigan Treasury Department to deduct some post production costs before paying the state severance tax.

The DNR authorized Shell and Amoco to make similar deductions from state royalties. The gas extracted from the Niagaran formation does not need very much processing in order to make it salable, so these deductions were relatively small and well defined compared to the current Antrim deductions.

Following the 1973 and 1974 agreements, other companies started deducting post production costs without approval from the DNR or the Treasury. As the natural gas development in Michigan became more focused on the Antrim formation in the late 1980s, the monetary value and the significance of these deductions rose.

According to the DNR, some companies were deducting excessively and others were deducting more modestly. In 1993, the DNR and the Michigan Oil and Gas Association began discussions to determine what would be considered acceptable deductions. On November 10, 1993, the DNR issued a letter to the Michigan Oil and Gas Association outlining official guidelines for post production cost deductions.

The list of allowable deductions includes the labor, materials, depreciation, and services for installation and operation of every processing step after the gas leaves the wellhead, including payments to third parties. (See listing).

A DNR audit revealed that the deductions cost taxpayers more than $4 million annually, and $10 million since the agreement was approved in 1993.

Faulty lease — The crux of this issue is the state lease language, which specifies that royalties should be calculated at the wellhead. The current lease should be changed to calculate royalties based on the market price.

Stealth policy making — MCLUC objects to the quiet manner in which the November 1993 agreement was made between the DNR and the oil and gas industry. The industry essentially wrote its own deal, without the knowledge of the Legislature, the public, the director of the DNR, the Natural Resources Commission, or the Natural Resources Trust Fund.

Overly generous — Our review of available documents indicates other states are not nearly as generous as Michigan. Texas, for instance, does not allow most of these deductions, and still receives a one-fourth royalty, compared to Michigan’s one-sixth royalty.

Diversion of funds — The royalties collected from state minerals go directly to the Natural Resources Trust Fund. The fund was established in 1984 to buy land for state wildlife and public recreation areas. The people of Michigan have twice stood behind the allocation of state money to preserve public lands, by approving Proposal B in 1984, and Proposal P in 1994.

A bad precedent — The DNR warned the oil and gas industry that the November 1993 agreement was to apply to state leases only. However, many companies used the state policy as a precedent, and deducted the costs against the will of the mineral owners and without any contractual authority. Mineral owners who thought they would get rich from natural gas actually found their royalty payments were negligible due to high post production cost deductions. In some cases, the royalty checks were negative—mineral owners actually owed money.

One piece of a bigger pie — The hands-off attitude of the DNR has allowed oil and gas development to cause unnecessary harm to the environment and communities. With lax regulations and state-mandated exemptions from many aspects of local ordinances, thousands of acres of State Forest land have been industrialized, causing significant ecological damage and harming communities and local economies.

Terra Energy Cancels Plan to Drill in Jordan Valley Commitment made to DEQ

As we were preparing to mail this issue of the MCLUC Reporter, the Department of Environmental Quality announced it has received a commitment from Terra Energy to withdraw its permit applications to drill within the Jordan River State Forest.

According to the DEQ, Terra cited the low productivity of wells in the area as the reason the applications will be withdrawn.

Hal Fitch, regional geologist at the DEQ Geological Survey Division, said the decision was made because, "test results show some of the wells in that area are not that productive."

The withdrawal came only two weeks after a spokesman for CMS Energy, Terra’s parent company, told MCLUC that Terra was committed to drilling the wells. Friends of the Jordan River Watershed, MCLUC, and the other partners in the Michigan Energy Reform Coalition began a campaign to stop the drilling.

When asked if the opposition to the wells raised by the Michigan Energy Reform Coalition and the DNR was a factor, Mr. Fitch said, "Terra is aware of the resistance." Mr. Fitch said Martin Lagina, a senior executive with Terra Energy, made a verbal commitment to withdraw the permit applications in a phone conversation with R. Thomas Segall, chief of the Geological Survey Division.

MERC sent a detailed letter to the Department of Natural Resources, the DEQ, and Terra Energy urging a withdrawal from the Jordan Valley. Terra and the DEQ also knew that the MCLUC Reporter was preparing a thorough article and an editorial about Terra’s drilling plan.

Fran Rauth photocopies, folds, labels, clips, organizes, advises, writes letters, answers the telephone, helps with the mailing list, puts together information packages, and we couldn’t get along without her. Pat Gidcumb has typed diligently at the word processor. Marty Jablonski installed our telephones to keep our lines of communication open. Keith Breuker has brought his engineering expertise, advising us on the compressing station noise survey, and consulting with us about avoiding eye, back, and wrist strain at our computer work stations.

Thanks to Gerard Grabowski for his valuable guidance and for helping us to raise funds, and to Carol Misseldine for assistance with grant writing. We are indebted to the talented attorneys Jim Olson and John Noonan, who have given their intellectual zeal and boundless energy to our campaign.

Many gifted writers have brought their insight, humor and wisdom to the pages of the MCLUC Reporter. Bravo to Margaret Perry for her luminous, literary, and moving essays. Kitty Myers has written vivid and compelling open letters from the center of the gas development. Readers will notice that with this issue, we are welcoming more voices from throughout the state.

We also are grateful for the illustrations donated by generous artists. Robert Fitzke’s evocative logo continues to inspire us, and Jamey Barnard has graced the newsletter with his wonderful seasonal woodcuts and drawings since

the first issue was published nearly two years ago. To all the members of MCLUC, the Michigan Energy Reform Coalition, and the Michigan Land Use Institute, who have supported us with financial contributions, enthusiasm, and guidance, thank you. You are contributing to what is fast becoming one of the most influential grass roots environmental and economic campaigns in Michigan.

The Northern Michigan Land and Mineral Owners Association awarded $2,135 for the campaign’s ongoing work. The group is headed by Roy Howes, a member of the Manistee County Board of Commissioners.

We are grateful for this support, which advances our efforts to strengthen oversight of oil and gas development, reduce environmental damage, and increase economic returns for communities and property owners.