Can local governments regulate oil and gas development?

Michigan communities are considering their roles in regulating oil and gas development through zoning. Just what Michigan’s laws permit local governments to regulate is complicated.

Currently, a lot of attention is being paid to oil and gas development in Michigan. Rising oil prices are leading to increased drilling activity in some parts of the state, especially Lenawee and Jackson counties. Controversy surrounding hydraulic fracturing (fracking) technology is causing local officials in many areas of the state to consider their role in regulating the industry.

So what powers do cities, villages, townships and counties have to regulate oil and gas development through zoning? The answer is that while local governments cannot regulate oil and gas development there are exceptions.

First, it is important to separate two types of activities: (1) exploration, drilling and development that occurs at the well site; and (2) processing, refining and transportation that happens at other locations. In the first type, townships and counties are pre-empted by Michigan’s Zoning Enabling Act from regulating the drilling, completion, operation, abandonment and location of oil and gas wells and other wells associated with oil and gas exploration. Regulatory authority for oil and gas wells is within the Michigan Department of Environmental Quality Office (DEQ) of Oil, Gas and Minerals. Although DEQ informs municipal clerks of drilling activity, the township and county have no direct regulatory role. Also, exclusive regulatory authority is assigned to the DEQ in the oil and gas part of the Michigan Natural Resources and Environmental Protection Act – leading some to question if village and city regulation is also pre-empted.

At some point the above activities end, usually after the product leaves the drilling site and before it flows into a Michigan Public Service Commission regulated pipeline. At that point, townships, villages, cities, and counties can regulate the processing, refining, and transport of oil and gas. Just exactly where activities that are pre-empted from local control end and those subject to zoning begin is debatable and must be handled on a case-by-case basis. One rule of thumb is that the drilling, completion and operation ends at the point the meter is placed that measures how much gas and oil comes out of the well for purposes of paying royalties to the mineral owner.

So where does this leave local government? How do they handle citizen concerns about oil and gas development impacts in their community?

Some communities are fairly aggressive, using zoning district and special use standards to limit oil and gas processing. Others take a relatively hands-off approach, or actively plan and zone areas for oil and gas industry support services. Just as with other land use issues, determining which regulatory methods make most sense should follow careful planning. Industry expansion projections, proximity of prime oil and gas processing locations to sensitive natural resources, residential areas, and transportation networks are important considerations. Another limiting factor is that drilling, processing and transportation infrastructure for oil and gas must be placed near where the resource is found. Where oil and gas is found may not always adhere to the plan and zoning map desires for a community.

Communities should always consult their municipal attorney before considering zoning approaches to oil and gas development regulation. For more information about oil and gas development in Michigan, see www.msue.msu.edu/oilandgas.

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