State of Michigan
JENNIFER M. GRANHOLM governor	DEPARTMENT OF NATURAL RESOURCES Lansing	K. L. COOL director

BILL ANALYSIS

BILL NUMBER: House Bill No. 5650, as Introduced

TOPIC: Natural resources; gas and oil; severed oil and gas rights on land currently owned by the State and Federal government; require to report to legislature.

Tie-barred with House Bill No. 5651.

SPONSOR: Representative Matthew Gillard

CO-SPONSORS: Representatives Accavitti, Byrum, R. Brown, Tobocman, Bieda, Lipsey, Hood, Vagnozzi, Meisner, McConico, Hopgood, V. Smith, Condino, Law, Rivet, Dennis, Kolb, Farrah, Plakas, Woodward, Adamini, and Gleason

COMMITTEE: House Committee on Conservation and Outdoor Recreation

Analysis Done: April 7, 2004

POSITION

The Department of Natural Resources (Department) supports the concept of mineral exchanges with the Federal government. However, the Department cannot support House Bill 5650, as written.

PROBLEM/BACKGROUND

The State of Michigan and the Federal government own subsurface minerals under their respective surface ownership. The split or severed ownership impacts the surface owner’s ability to manage the surface if the mineral rights are leased by the agency owning the mineral rights.

The State has made numerous attempts to initiate such exchanges, but has not been successful in completing the exchanges due to Federal barriers, such as Federal staff priorities, Federal requirements for mineral appraisals outweighing the value of the minerals to be exchanged, and uncertain title.

DESCRIPTION OF BILL

House Bill 5650 amends 1994 PA 451, the Natural Resources and Environmental Protection Act, by adding section 61006. This bill attempts to mandate a process, and reporting system, for mineral exchanges between the Department and the Federal government, resulting in consolidated ownership in the Mason Tract, Sand Lakes Quiet Area, Pigeon River Country, and Jordan River Valley management areas.

SUMMARY OF ARGUMENTS

Pro

If efforts were to result in desired exchanges, both agencies would have greater control over properties in respective management areas by having control over both surface and mineral rights.

Con

The Department cannot require the Federal government to inventory Federal lands.

State records do not reflect either Federal surface or Federal mineral rights. Therefore, the Department will not be able to comply with the inventory required in this bill.

Exchanges will require Federal legislation.

In many cases, conducting mineral appraisals or a valuation analysis would be more costly than the value of the minerals. Exchanges should be done on an acre-to-acre basis, after an evaluation of the mineral potential.

FISCAL/ECONOMIC IMPACT

Revenue or budgetary implications to:

(a) Department

Budgetary:

$90,000 annually, until exchanges are completed.

Revenue:

None.

Comments:

Will require staff resources, including a property manager, geologist and mapping resources, and contract title searches.

(b) State

Budgetary:

Unknown.

Revenue:

None.

Comments:

The Department of Attorney General must review all exchanges of rights in land, which will impact available staff resources.

(c) Local Government

Comments:

No direct effect on local government.

OTHER STATE DEPARTMENTS

The Department of Attorney General will have a role in approving any exchanges that may result from this legislation.

ANY OTHER PERTINENT INFORMATION

House Bill 5650 is tie-barred with House Bill 5651, and would not take effect if House Bill 5651 is not enacted.

ADMINISTRATIVE RULES IMPACT

Rules not necessary to administer this Act.

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Rebecca A. Humphries

Director

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Date

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