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The Detroit News

Michigan oil firms face tougher regulations

By Jaclyn Trop / The Detroit News


Two recent high-profile oil spills, one in the Gulf of Mexico and a second that despoiled the Kalamazoo River, could result in tighter restrictions on Michigan's $1.2 billion oil and gas industry.

State Sen. Glenn Anderson, D-Westland, has proposed amending Michigan's constitution to hold oil companies and other businesses accountable by allowing residents to sue for damages from corporate pollution, and eliminating taxpayer subsidies that help polluters clean up spills.

Anderson also wants to make it more difficult to change the state and federal ban against offshore and slant drilling beneath the U.S. portions of the Great Lakes by putting the ban in the state constitution.

The lawmaker hopes to get the measures on the November ballot.

Increasing oil industry regulation received more attention with the rupture last month of an Enbridge Energy Co. Inc. pipeline that released more than 840,000 gallons of oil into the Kalamazoo River.

"What has happened now highlights the need to make it a permanent ban," Anderson said. "We need to protect the value of what we have in our Great Lakes."

The proposed constitutional changes pit environmentalists who want more rules to protect the state's natural resources and landscape against the oil industry and its supporters, which argue the risk of spills is relatively low for a business sector that promises to increase Michigan's economy and energy independence from the Middle East.

Clean Water Action and Progress Michigan rallied at the Capitol last week, imploring legislators to vote to put the question of a permanent ban on the ballot before a Sept. 2 deadline.

"The clock is ticking on their taking action," said Clean Water Action state director Cyndi Roper. "We're still in a holding pattern."

Oil firms point to jobs

Oil and gas company officials and supporters note that the industry employs 10,000 people in Michigan and that figure could grow with recent discoveries of shale oil deposits.

"Everyone talks about oil independence" from the Middle East, said Tom Cunnington, chief executive officer of Ward Williston Oil Co. in Birmingham. "We can really get very close to that."

Drilling is a "win-win-win situation" for oil companies, the state and landowners sitting atop oil reserves, he said."There are farmers barely eking out a living and then oil is discovered on their farm and they may make $1 million a month in royalties," Cunnington said.

Anderson wants to amend the state constitution through a legislative initiative, a difficult process. Two-thirds of the House and Senate must vote to put the issue on the ballot, and then voters must approve it.

Of 68 constitutional amendment proposals that have gone to voters since the 1963 constitution, 31 have been approved.
There isn't enough time for independent groups to gather enough signatures to put the proposals on the ballot.
Political analysts said the Democratic-led House of Representatives would likely pass the legislation, but the Republican-led Senate is a question mark. Senate Majority Leader Mike Bishop is in talks about the initiatives and has no definitive timeframe for taking action, press secretary Matt Marsden said Tuesday.

If Bishop and enough Republicans back the measure, it would likely go on the ballot and be approved by voters, said Steve Mitchell of Mitchell Research and Communications, a political consulting and polling firm in East Lansing.

Momentum building

Lansing-based pollster Bernie Porn agrees that the momentum is with proponents of tighter regulation of the oil industry.
The recent focus on environmental damage from BP and Calgary-based Enbridge has made "people greatly upset about what's happened, and they think oil companies should be taken to task," Porn said.

Public support for tighter regulations is usually strong during environmental disasters but wanes during periods of energy crisis and sky-high gasoline prices, Porn said.

Prior to $4-a-gallon prices drivers saw at the pump in 2008, "there had always been overwhelming opposition to drilling in the Great Lakes," he said, "but before the presidential election, there was stronger support for drilling."

The BP spill and the Enbridge pipeline burst changed the political dynamic. The National Wildlife Federation recently released a report showing Michigan ranked ninth for oil spills and accidents nationwide, with 61 incidents since 2000.

"We're bearing the brunt of an economy based on dirty fuels," said Jordan Lubetkin of the federation's Ann Arbor office, "and Michigan can do better than that."

Even though drilling accidents are rare, the political, environmental, economic and emotional aspects of the debate make it "a fairly easy issue to demagogue," said Russ Harding, senior environmental policy analyst for the free-market Mackinac Center and a former state director of environmental quality.

Although Harding supports directional drilling under the lakes, he admitted that, after the BP incident, "I do think people will want more accountability."

Environmental impact cited

Hans Voss, executive director of the Michigan Land Use Institute, which formed in 1995 around the issue of drilling, said that the tens of thousands of wells drilled across Michigan over the past 90 years have left a significant mark on forest land and natural resources, such as pipelines lying across trout ponds.

"But the economics are there to motivate and incentivize the industry to find new ways of development," Voss said.
Proponents of tapping the Great Lakes' oil and gas reserves argue that slant and directional drilling, which place the rig onshore and reach the lake bed on a diagonal slope, remains safe and that the industry is an important part of Michigan's economy. They say that drilling will increase tax revenues, create jobs and bolster domestic energy production.

"Michigan still has a lot of oil to be recovered," Cunnington said. "There is a great deal of oil under the Great Lakes."
Though 13 wells were drilled beneath the lakes without incident before the ban took effect, opponents cite potential environmental and public health hazards, arguing that drilling could lead to oil spills, gas leaks and pollution.

Furthermore, said Hal Fitch of the Department of Natural Resources and Environment, the resources underlying the Great Lakes would only meet Michigan's needs for a few years.

Drilling in the Great Lakes is legal in Canada, where there hasn't been an accident in decades.
Anderson hopes Canada would follow Michigan's lead.

"Our destinies are certainly linked," he said.

Though offshore drilling in the Great Lakes presents too many environmental hazards, geological studies show that slant and directional drilling is safe and could yield between $3 billion and $4 billion for the state, the Mackinac Center's Harding said.

Still, it's unlikely that slant drilling will gain public approval in our lifetimes, he said.

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