Two companies bought all oil, gas rights at auction

Two companies out of Traverse City — Jordan Development and Pteradon Energy — leased all the land offered in Oakland County at the recent state oil and gas lease auction earlier this month, according to the tentative auction results summary posted on the state Department of Natural Resources (DNR) website.

The results are tentative pending approval by the director of the DNR at the state Natural Resources Commission (NRC) meeting scheduled for next month.

The DNR offered state-owned oil and gas lease rights associated with 108,164 acres in 23 counties at an auction held on May 8. It was the first such auction where oil and gas rights associated with state-owned land adjacent to southeast Michigan lakes were offered for lease.

State oil and gas auctions for five-year leases routinely occur twice a year, once in the spring and once in the fall.

According to DNR Spokesperson Ed Golder, the mineral and gas rights associated with 91,000 acres of state land were leased at the auction, bringing in a total of $4.125 million. The average bid per acre was $39.90.

According to Golder, most of the auction proceeds go to the state’s Natural Resources Trust Fund (NRTF), which under a constitutional provision can only be used to purchase and develop land for public recreational use. However, if the NRTF is at its cap of $500 million, then the auction proceeds go into the Parks Endowment Fund, which contains money used for park maintenance. A small amount also goes to the care of the state fishery and wildlife habitat.

According to Julie Manson with the state Department of Environmental Quality (DEQ), typically bidders are representatives of firms in the oil and gas industry.

In Oakland County, the mineral and gas rights associated with all 18,347 acres up for auction were leased. Go to http://tinyurl.com/72dshnc to view a map of the parcels that were available for leasing at the auction.

The proceeds gained from Oakland County tallied up to $616,514, with the average bid per acre at $33.60.

Pteradon leased 664 acres, while Jordan leased the rest — over 17,600 acres.

According to Golder, all the land leased in Oakland County is classified as “non-developmental.”

“This means the surface of the land cannot be disturbed,” he said. “There can be no drill head or apparatuses on that land.”

However, that doesn’t mean that the oil or gas resources underneath the surface can’t be accessed by drilling horizontally or directionally with the drill head entering the ground at another location.

“People could buy the property next door to the acreage leased and go in horizontally,” Golder said. “They could also use the (non-development) land to put together a drilling unit. They need at least an acre of land to create a drilling unit. And while the unit cannot be on the non-development land, that land could be included to make a space large enough to satisfy the 1-acre requirement.”

However, leasing the mineral rights of a specific parcel doesn’t by itself grant permission to drill a well. According to the DNR, if a lessee chooses to pursue development of the oil and gas rights, separate written permissions — including a drilling permit issued by the DEQ — must be obtained prior to drilling.

Furthermore, when oil and gas rights are leased, that doesn’t automatically mean a well will be drilled. The drilling of a well doesn’t always tap into commercial amounts of oil or gas.

The DEQ’s Office of Oil, Gas and Minerals regulates the drilling and completion of oil and gas wells, according to Golder. He said the department enforces regulations designed to protect Michigan’s resources from potential negative impacts from drilling.

These potential negative impacts have caused concern in some quarters.

The protesters aren’t the only ones with concerns. Some in West Bloomfield Township have also expressed reservations about the idea of mineral rights being leased in their area, according to Clerk Cathy Shaughnessy, who drafted a resolution the township Board of Trustees approved last week in order to try to prevent any drilling for oil or gas in the township, where about 37 parcels leased through the auction are located.

West Bloomfield resident Kathy Chiaravalli initially brought the issue to the attention of the township board. She said she’s concerned the state is not making enough money compared to the potential environmental risks of drilling.

“Oil companies make a fortune, yet they don’t clean up that well,” she said. “I’m just concerned about the water I drink and the water my kids swim in. I don’t like the idea of them fracking near my lakes. If they are going to frack, let’s develop clean frack water. Once one lake is contaminated, all the lakes are interconnected through the watersheds. Oakland County is one big wetland.”

Chiaravalli, who attended the May 8 auction, said she was pleased by the solidarity shown by township officials.

“It’s a rare moment when all the township officials are in agreement, and they are about this,” she said.

While Shaughnessy said township officials discussed drafting an ordinance prohibiting drilling in West Bloomfield, they were told by the township attorney that was not possible.

“We can’t override the state on oil and gas drilling,” she said. “However, we are looking at including stronger language in environmental ordinances to deter oil and gas drilling.”