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Trustees seek tweaks to oil, gas contracts



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April 10, 2013 - Independence Township Board of Trustees took their first crack at an oil and gas contract with Jordan Development at their meeting on April 2, but some trustees wanted changes before signing off on leasing their mineral rights.

"We're trying to get ahead of the curve and put some provisions in here to protect the township," said Supervisor Pat Kittle.

Among provisions wanted by the board were requirements for ground water testing before mineral extraction and compensation for public road repairs based on increases in truck traffic to drilling sites.

Despite regulations in place in the contract, several residents who attended the meeting expressed concern about potential impact of oil and gas exploration on water resources.

"I worry about the oil coming up from the ground," said Terry Shea, a landowner who hasn't made a decision about signing a lease with Jordan Development.

Shea told the board he had water on his land. "A pipe could break, oil comes up, gets in those streams, gets into Greens Lake, then, I'm out a nice piece of property," he said.

"What if we can't drink our water?" Nancy Rowland asked. "If anything goes wrong, all of those lakes and rivers are all connected, and water is much more valuable than oil," she added.

"We do understand the risks, and we are very sensitive to it. I drink the same water you do," Kittle assured the citizens.

"We aren't able to negotiate on your behalf other than for the township owned properties that are collectively ours," Trustee David Lohmeier pointed out to residents. "Talk to an attorney and make the best decision you can. There's a lot of risks here."

The first draft of the three-year agreement offers Independence Township a sixth of any royalties from minerals found beneath 98 acres.

It is a "non-development" lease, meaning no drilling operations, production facilities, or storage will take place on the surface of township-owned property.

Jordan Development must have a minimum of $10,000,000 of liability insurance to cover any pollution, property damages, or injuries from their operations. In addition, high volume hydraulic fracturing (fracking) and any operations with hydrogen sulfide emissions are also prohibited.

The contract requires that Jordan Development abide by State and Federal laws in regards to hazardous materials, pollution, and surface and ground water protection. It also insists on compliance with the township's ordinances related to light and noise regulations.

In addition to water contamination concerns, compulsory pooling was a topic that concerned residents.

Jordan Development can petition to the Department of Environmental Quality (DEQ) for a compulsory pooling hearing and force landowners to lease their mineral rights. Agreements based on a compulsory pooling hearing are non-developmental, so landowners would not see a wellhead on their property.

They would receive an eighth of royalties from minerals produced but would lose the option to receive an upfront bonus.

Before an oil and gas company can request a compulsory pooling hearing, they must show the DEQ that they have put a strong effort into working with landowners to get leases.

Trustee Andrea Schroeder wanted to know the likelihood of compulsory pooling and asked Bickley how many leases Jordan Development still needed to acquire.

"I don't know," answered Chris Bickley, Jordan Development's representative at the meeting.

"So, we don't know what percentage of the leases he has signed already," Schroeder pointed out to those in attendance.

"It all could be moot point. If he had ninety percent of the leases signed right now, your best choice would be to sign your lease and take what control you can, which is largely what we on our board are trying to decide for the township, but we don't know where we sit with that because he can't give us a number," she summed up. "I think a lot of people in the township would like to have that information."

Bickley said he would try to supply the number to the board at a later date.

Supervisor Kittle asked where the wellheads would be located.

"I don't know," Bickley answered.

Ben Brower, the Vice President of Jordan Development, said he doesn't know where drilling will take place because Jordan has yet to conduct further seismic studies.

"Not until we do some more geophysical work will we know where the wells will be located, if any," he said.

"We want to have enough leases to justify going out and doing additional testing and drilling wells," he stated.

Like Bickley, Brower couldn't say how many leases Jordan Development has obtained in Independence Township or how many would be needed.

"It's over 30,000 [leases signed] in our project, but I don't know how many in Independence exactly. I don't calculate it by township," he said.

"We're buying in multiple areas, so we have state leases, and private leases, and all of the above," he pointed out. "We're adding to the list every day."

When The Clarkston News requested a map of the locations Jordan Development hopes to lease, Brower declined to supply the information.

"It's proprietary," he reasoned. "I can't send you where we're interested in leasing."

The township board will meet again on April 16 at 7 p.m. at Township Hall. View their tentative lease agreement on www.twp.independence.mi.us.

Clarkston News reporter
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