Moving the Goalposts in Michigan

Earlier this month, a group calling itself the Committee to Ban Fracking in Michigan announced its intention to do whatever it can to prevent Michigan from leveraging the development of the state’s oil and natural gas resources into jobs, tax revenue and millions of dollars in annual cost-savings for consumers.

To achieve that end, the Committee says it intends to collect hundreds of thousands of signatures, all with an eye on securing space for an anti-shale referendum on the ballot in 2014. More on that later. For now, let’s focus on the stuff on which the Committee wants Michigan to lose out under a scenario in which technology that’s been used in the state since Soapy Williams was governor is all of a sudden taken off the table.

Some 33 states produced natural gas in 2010. Michigan ranked 15th, producing 151,886 million cubic feet with a value of over $883 million.  Our state’s oil and gas industry has an annual in-state payroll of nearly $78 million, employs almost 1,200 individuals and supports nearly 2,300 non-employer businesses, according to the last Census.  It generates just shy of $100 million of business for those non-employers.  Those are serious contributions to Michigan’s economy.

Additionally, Michigan has more natural gas reserves than any other Great Lakes state, with an estimated 2,763 billion cubic feet in dry gas, roughly 18 years of production at current rates. The Antrim formation, found in the northern Lower Peninsula, is among the largest in the nation according to the Energy Information Administration. According to the agency: “The state has the most underground natural gas storage capacity of any state in the nation (roughly 10 percent of total U.S. capacity) and supplies natural gas to neighboring states during high-demand winter months.” Around 78 percent of Michigan homeowners used natural gas (compared to a U.S. average of 50 percent) in 2010, and the state has the resources and infrastructure to deliver much of that gas to itself — making it a double win.

Not for nothing, but natural gas users in Michigan are also saving a pile of money today, as are businesses and residents using electricity now generated by burning natural gas produced in the state.  Consumers Energy, for example, lowered its prices by 13 percent in April of this year due to lower gas prices in the pipeline.  This one company alone passed along savings of $130 million that will accrue to homeowners over the next year.

The value to consumers of these savings suggests the benefits of natural gas development in the state are huge and cannot be ignored.  Just take a look at the graph below to see what’s happened with prices of natural gas used for electric power in Michigan compared to the amount of natural gas used for that purpose.  The former has dropped by more than half while the latter has increased by roughly half.  This translates in mega-savings for Michigan electric consumers.

For its part, the Committee to Ban Fracking in Michigan refuses to see those benefits.  Instead, it’s focused on stopping hydraulic fracturing – regardless of lost economic opportunities to its fellow Michigan residents, and irrespective of the quotes, comments and testimonials from independent scientists and federal officials confirming it’s safe.

The Committee had wanted to put a referendum on the ballot for the 2012 election to ban hydraulic fracturing, but was unable to secure the necessary signatures.  According to Michigan code, the group needed 320,600+ signatures to earn a spot on the ballot. Unfortunately, when it came time to tally up the numbers, it fell just a bit short – securing only 21,000 signatures, or about seven percent of what was required.

So what do you do when your ballot initiative comes up almost 300,000 signers short? Simple: You tell folks that getting a place on the ballot in 2012 was never really the goal. The goal, you stress, is to get on the 2014 ballot. And, so it is with the Committee to Ban Fracking in Michigan, which has now moved the goalposts once again in a desperate attempt to become relevant.

The press release issued by the Committee earlier this month includes more canards than a French duck hunt. It starts with the notion that something called “horizontal hydraulic fracturing” is a dangerous, new technology – and then goes even further off the rails from there. The petition being advocated says the following:

“To insure the health, safety, and general welfare of the people, no person, corporation, or other entity shall use horizontal hydraulic fracturing in the State. … No person, corporation, or other entity shall accept, dispose of, store, or process, anywhere in the State, any flowback, residual fluids, or drill cuttings used or produced in horizontal hydraulic fracturing.”

Of course, deep shale formations such as the Utica/Collingswood — which some believe could end up being one of the most prolific oil and gas plays in the country — will typically demand both horizontal wells and hydraulic fracturing for those resources to be recovered.  Indeed, 20 out of 28 Utica/Collingswood permits issued or pending as of June 12, 2012 involved horizontal wells. Vertical wells are often used to assess production potential during the early stages of developing a formation but are less common later, so we can expect the number of horizontal to vertical to increase.  Horizontal wells produce 3.2 times as much as vertical wells, while the cost ratio of horizontal versus vertical wells is only 2 to 1, so there are very compelling reasons for both consumers and producers to prefer horizontal wells.

The Committee’s mock amendment, if enacted, could easily rule out most new natural gas development in Michigan – whether from “shale” or not — given that 90 percent all oil and gas wells today are hydraulically fractured.  State producers now generate some 20 percent of gas used by Michigan and 78 percent of its homes are heated with natural gas.  Do Michigan residents really want to preemptively deny themselves access to one of the least expensive and cleanest sources of energy there is?

Undeterred by the dearth of support for its initiative, the Committee gamely attempts to lay out a rationale for pulling back and focusing its efforts on placing a referendum on the ballot two election cycles from now:

 “Continuing the signature-gathering campaign into November in the new 180-day time frame will keep the ban fracking issue before voters and candidates into this year’s campaign season.”

It’s an interesting position – made even more interesting by the fact that Michigan law states that signatures older than 180 days are presumed “stale and void” and amendment petitions must be filed 120 days prior to the election.  This means the petitions for the 2014 election would need to be collected between 300 and 120 days before the election in which the referendum is included.

Do the math: If this is to take place in 2014, the earliest signatures could be collected is sometime in 2013, yet the Committee indicates it will continuing collecting them now through November as part of its program.  Apparently, the group intends to ask folks to sign a petition they know is invalid.

Unfortunately, it gets even worse from there. In its release, the Committee favorably compares its efforts to impose a ban on development in Michigan to those pursued by legislators in Vermont, never mind that Vermont doesn’t have any oil or natural gas to develop.  The cost to Vermont of making that decision was less than a load of pumpkins. Compare that to the hundreds of millions of dollars of costs to Michigan.

Lisa Jackson, the current EPA Administrator (and certainly no shill for oil and gas), said this past April that “in no case have we made a definitive determination that the fracking process has caused chemicals to enter groundwater.” She then followed it up a month later with this, “I’m not aware of any proven case where the fracking process itself has affected water.”

If it’s good enough for the Obama administration, shouldn’t it be good enough for the Committee? Ignoring the long and successful history of oil and gas development in Michigan, which extends back more than 100 years, and the economic promise of natural gas for all Michiganders is not an option, whatever the Committee to Ban Fracking in Michigan may think.


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