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

BILL ANALYSIS

BILL NUMBER: House Bill No. 5651, as Introduced

TOPIC: Natural resources; gas and oil; exchange of severed oil and gas rights; allow in certain cases.

SPONSOR: Representative Matthew Gillard

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

COMMITTEE: House Committee on Conservation and Outdoor Recreation

Analysis Done: April 7, 2004

POSITION

The Department of Natural Resources (Department) supports the bill and has already initiated discussions with the Federal government to initiate mineral exchanges.

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 5651 amends 1994 PA 451, the Natural Resources and Environmental Protection Act, by adding section 61005. This bill directs the Department to immediately begin discussions with the Federal government to attempt to exchange subsurface mineral rights, resulting in consolidated ownership in the Mason Tract, Sand Lakes Quiet Area, Pigeon River County, 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

Exchanges will require Federal legislation or mineral appraisals which, in many cases, would be more costly than the value of the minerals.

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, a geologist, title searches and mapping resources.

(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

None.

ADMINISTRATIVE RULES IMPACT

Rules would not be needed to provide for the administration of the Act.

____________________________

Rebecca A. Humphries

Director

_______________________________

Date

FMFM