Michigan Ponders Its Energy Producing Future

Michigan Ponders Its Energy Producing Future
September 4, 2010

Bonner R. Cohen

Bonner R. Cohen is a senior fellow with the National Center for Public Policy Research, a position... (read full bio)

Michigan, a state whose economy was driven for more than a century by its once-mighty automobile industry, now has chance to reinvent itself and become one of the nation’s leading suppliers of energy. Whether that happens will depend on decisions by Michigan lawmakers regarding the state’s abundant shale oil and gas deposits.

Increasing the state’s natural resource production could help cut the state’s unemployment rate, which is currently at 13.1 percent.

Substantial Shale Reserves
Although Michigan is rarely thought of as a significant producer of fossil fuels, the state’s 85-year-old oil and gas industry currently produce revenues of about $1.2 billion a year. Michigan ranks 12th nationally in natural gas production and 15th in crude oil production. The industry employs about 10,000 Michiganders.

All these figures, however, may rise significantly if Michigan is able to make use of the substantial reserves of shale oil and gas that geologists now know exist in the state.  Michigan sold $178 million in leasing fees at a single auction in May, which, as the Detroit News pointed out, “equaled the total amount of money the state has collected in leasing fees since the 1920s, a telltale sign that interest in shale drilling is heating up.”

Another auction is planned for October 26 in Lansing.

Environmental Activists Object
However, two recent oil spills—one by Calgary-based Enbridge Energy in the Kalamazoo River, and the other by BP in the Gulf of Mexico—have given environmentalists an opening to attack oil and gas drilling in Michigan. Groups such as the National Wildlife Federation, Michigan Land Use Institute, and the Michigan Environmental Council have cited the accidents as examples of the perils of drilling.

Michigan State Rep. Rebekah Warren (D-Ann Arbor) is advocating legislation that would allow voters to amend the state’s constitution to ban oil and natural gas production in state waters. Oil and natural gas production is already banned in Michigan’s portion of the Great Lakes, but Warren warns that the legislature can change its mind and authorize production at any time.

An Economic Blessing
Russ Harding, director of the Property Rights Network at the Midland-based Mackinac Center, says this hostility toward development is wrongheaded. Michigan’s natural resources can provide a way for the state’s residents to escape the economic doldrums that have befallen it in recent years, he said.

“There are extensive natural gas resources in Northern Michigan,” Harding said. “State officials should be encouraging the development of these resources, which would create jobs and provide a much-needed boost to the economy, rather than putting these resources off limits.”

Harding, who was director of Michigan’s Department of Environmental Quality from 1995 to 2002, noted, “Michigan has some of the toughest standards in the country regulating oil and gas development. Yet historically, natural gas wells in Michigan have been developed without causing environmental damage.”

Bonner R. Cohen, Ph. D. (bcohen@nationalcenter.org) is a senior fellow at the National Center for Public Policy Research.

Bonner R. Cohen

Bonner R. Cohen is a senior fellow with the National Center for Public Policy Research, a position... (read full bio)