Michigan DNR puts oil and gas drilling rights on the auction block

May 8, 2012

Starting at 9am this morning, the Michigan Department of Natural Resources will hold an auction to lease state-owned drilling rights for oil and natural gas. 

The state is offering drilling rights on more than 108,000 acres in 23 counties.  These auctions are usually held twice a year.  The minimum bid is $12 dollars an acre.

Mary Uptigrove is the acting manager of the DNR’s Minerals Management Section.  She says acquiring drilling rights is the first step in exploring for oil and gas.

“The lease is just a proprietary right that’s administered by our department. It does not give them the right to actually start drilling a well.  They have to seek other approvals from the Department of Environmental Quality for the drilling permit.”

The leases last five years, and the companies have the option to extend them.

Uptigrove says industry groups usually nominate parcels for the auction.  The state gets 1/6 of the royalties of any oil or gas that comes out of the ground.  That money is used to maintain state and local parks and to buy land.

Maryann Lesert lives near the Yankee Springs Recreation Area in Barry County. 

She’s worried the auction will lead to drilling under the park land... especially a kind of drilling for natural gas called horizontal hydraulic fracturing, or fracking. (To learn more, check out this recent article by Michigan Radio's Lester Graham about the benefits and risks of fracking)

“It’s beautiful land, it has beautiful bodies of water and the environmental and water impact threats from fracking are of great concern.”

If drillers decide to go after oil and gas in this area, they won’t be able to set up their drills on the surface.  They’d have to drill from land nearby.

If they use horizontal fracking, they’d pump a mixture of water, sand and chemicals into a well under high pressure to force open rock and extract the gas.

Horizontal fracking can use millions of gallons of water per well.  After it’s used, that water is usually disposed of in deep injection wells. 

Maryann Lesert is bothered by that idea.

“Those millions of gallons of water per well are never going to return to the area water table, to the area watersheds, to the Great Lakes basin. That’s water that’s gone forever.”

Before any of this can happen... companies first have to pay for the rights to drill and get state approval for their drilling operations.

The state is barred from auctioning drilling rights for some places, including Great Lakes bottomlands and critical sand dunes.

This story was informed by the Public Insight Network.