Letter to the Editor: Mineral Rights Auction Should be of Concern

This letter was received by West Bloomfield Patch local editor Tim Rath.

The Michigan Department of Natural Resources will start selling mineral rights for $10 an acre Oct. 24, reduced from $12 an acre in May 2012.  In other states, these rights go for up to $22,000 an acre. Why is Michigan forfeiting billions to subsidize a highly-profitable industry?

The industry supply chain ends with companies like Exxon, Shell, BP — those who can afford to pay the state fairly. (1) Why should this industry supply chain profit from trading? (2) Why isn’t the state smarter about pricing and monetizing these rights? (3)

I was at the May auction for eight hours, only a few parcels had any competitive bidding. We are using an antiques roadshow model to sell rights to rich oilmen, many from out-of-state, with many of the resultant energy resources being exported. There are allegations by Reuters of collusion to suppress lease prices.

The leasing part of the fee is so tiny compared to the other costs, why not make it proportionate to the risk? Why the rush to sell now when gas prices will likely only go up?  Why not wait until the careful EPA study to be complete in 2014? (4)

The state gives billions of gallons of free water to these very-profitable companies. Why do they need our charity? In other states, they have to pay up to $10 a barrel to purchase and truck water. (5) Why are we forfeiting millions and incentivizing companies to come and take the state's water for free and potentially damage our Pure Michigan environment? (6)

There is no incentive to reuse wastewater when freshwater is free.  While I applaud the state for its best-in-breed water assessment tool, the tool is not legally required.  The water use is not systematically audited after the fact. (7)

The current bond requirements for drilling haven’t been updated since 1960 and are woefully inadequate to cover remediation. Why don’t we require higher bonds that are closer to the real cost of repairing damaged roads and providing alternative water supplies. The per well fee should be $60,000 instead of $10,000 — this is widely recommended. (8)

While the state has better transparency and disclosure rules than many states, they are still not adequate. (9) I had mentioned food safe frack fluid, some companies are experimenting with this, why doesn’t the state require it? (10)

Kathy Chiaravalli
West Bloomfield (lived on Cass Lake for 23 years)

Footnotes:

1.  ngsa.org/Assets/docs/top%2040%202011%202nd%20quarter.pdf
2.  bain.com/publications/articles/how-shale-tilts-the-scale.aspx  
3. d-scholarship.pitt.edu/10484/1/PittMarcellusShaleEconomics2011.pdf 
4. epa.gov/hfstudy/questions.html#4
5. danolt.com/pa/costanalysis.html
6. catskillcitizens.org/learnmore/Shonkoff.pdf  
7. watershedcouncil.org/learn/hydraulic-fracturing/files/water%20withdrawal%20analysis%20for%20high%20volume%20hydro-fracturing.pdf

For questions and clarifications, please leave a comment below or contact local editor Tim Rath at tim.rath@patch.com or 248-622-7994.