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Michigan Lawmakers Want to Boost Gas, Oil Development

A bipartisan group of Michigan House lawmakers is urging its colleagues to consider ways to expand the use of natural gas, offer tax breaks to some producers, get regular reports on the state's infrastructure and capabilities for natural gas, and put more land with state-owned mineral rights up for oil and natural gas leasing.

A 25-page report released by the House Subcommittee on Natural Gas recommended that the legislature pass a "lease or lose" law, which would set a deadline to compel the Michigan Department of Natural Resources (DNR) to auction 5.3 million acres for leasing. If the deadline isn't met, any state-owned mineral rights would automatically revert to the current surface owners. The DNR currently administers about 6,200 oil and natural gas leases on 714,821 acres.

"We need to look at expanding leases," subcommittee Chairman Aric Nesbitt (R-Lawton) told Michigan radio station WMUK. "We need to reevaluate the state's holding of [private property owners'] mineral interests. I'd like to figure out ways to reunite both the owner of the surface property with those mineral rights."

The subcommittee also has recommended that the legislature provide a 50% discount on the state's 6% severance tax for operators that use carbon dioxide (CO2) injection as an enhanced oil recovery method, a discount similar to those offered in Arkansas, Mississippi and Texas.

Other recommendations include having the DNR create a lease database for older, active oil and gas leases -- those entered into before July 1995 and on parcels larger than 160 acres -- to see if the parcels are being effectively managed. In addition, it wants to require the Michigan Public Service Commission (PSC) to work with gas utilities on outlining the state's gas infrastructure capabilities and where expansion may be needed in terms of storage and transmission.

In addition, lawmakers want regulators to analyze ways to streamline permitting and construction processes; ask PSC to develop a way for utilities to allocate and share the cost to extend gas mains and distribution services; and enact a sunset clause on the state's 2008 energy optimization program.

The House subcommittee members already have indicated that they were concerned about involvement by the U.S. Environmental Protection Agency (EPA) in hydraulic fracturing (fracking) of unconventional wells, asserting their belief that regulation is the dominion of states (see NGI, April 23).

Meanwhile, six Democratic members of the state House introduced a bill (HB 5565) to require operators to fully disclose the chemicals they use in fracking operations -- something similar to other states. Under the current version of the bill applicants for a well permit would be required to submit a list all of the ingredients used in their fracking fluids, and submit a master list of the chemicals every subsequent year as well. Items deemed a "trade secret" would be exempt, but anyone could challenge that designation. The bill, referred to the House Committee on Energy and Technology, also calls for operators to submit an evaluation as to whether there are any alternative treatments that could be used if they provide less potential risk to the public. A 60-day public notice period would precede any drilling.

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