Auction of oil and gas leases to aid recreation projects

By ELIZABETH DANEFF
Capital News Service
LANSNG — In June, about 37,000 acres of state land in Michigan’s Lower Peninsula will be auctioned off for oil and gas leasing, the Department of Natural Resources announced.
The semiannual auction helps generate revenue for the Michigan Natural Resources Trust Fund, which was established in 1976. The fund provides financial assistance to local governments and the DNR to purchase and protect land for outdoor recreation.
Near Leelanau County, North Fox Island was part of a $2 million trust fund acquisition. The island is located almost 25 miles from Leland and Charlevoix, with more than 835 acres and 5.2 miles of shoreline. Although the county does not have land available for oil and gas leases, neighboring Grand Traverse County is among the top natural-gas producing counties in Michigan.
According to Lynne Boyd, manager of the DNR’s mineral and land management section, the state takes in between $35 million and $38 million annually from the sale of oil and gas on state land. Last year, when the price of natural gas surged, $66 million was allocated to the fund.
“Nearly 25 years ago, the citizens of this state, being more progressive than any other state, reserved all the royalty revenues from the sale of oil and gas found on state land,” said DNR Director K.L. Cool.
As of January 2001, more than $537 million in trust fund appropriations had been made for more than 1,200 state and local recreation projects.
Other counties with land available for auction include Alcona, Alpena, Antrim, Arenac, Clare, Crawford, Gladwin, Grand Traverse, Iosco, Kalkaska, Lake, Livingston, Manistee, Mason, Mecosta, Missaukee, Montcalm, Montmorency, Newaygo, Oceana, Osceola, Oscoda, Otsego, Presque Isle and St. Clair.
State geologists and oil and gas companies across Michigan may nominate land they think has potential for mineral production. Nominated land approved by the state will be auctioned off in June. The state receives one-sixth of the sale of oil and gas produced from the land, while the company developing the site receives the rest.
Cool said the DNR is increasing its own nominations for oil and gas development on state land. This occurs when geologists determine a private company is draining minerals from nearby state land. He said the department has a constitutional responsibility to obtain the maximum amount of minerals and return the revenue to the trust fund.
Top crude-oil producing counties in Michigan include Hillsdale, Manistee, Otsego and Midland. Counties with the most natural-gas production include Otsego, Grand Traverse, Manistee and Kalkaska.
While some people disagree with the state’s leasing policy, Cool said now is the time to capture the state’s mineral resources. He said if oil companies think they are earning only a marginal profit from state oil and gas reserves, they would likely consider moving operations to South America or the Middle East. Once those companies leave, they will not come back to Michigan, he said.
© 2002, Capital News Service, Michigan State University School of Journalism