Local government roles in oil and gas regulation: Part 1

Michigan communities are considering their role in regulating oil and gas development. State legislation limits this authority.

Despite lower oil prices, there is a lot of current attention being paid to oil and gas development in Michigan. Concerns about hydraulic fracturing (fracking) technology and proximity of drilling operations to residential areas are causing local officials in some areas of the state to consider their role in regulating this industry.

In recent years, some communities have enacted moratoriums, zoning regulations and other requirements, but what powers do cities, villages, townships and counties have to regulate oil and gas development? It is a challenging question. Although state legislation grants local governments authority to protect health, safety and welfare, there are also issues such as oil and gas development, where legislation restricts local authority in order to establish a statewide policy and uniform regulations.

Three statues, in particular, substantially limit local government authority related to regulate this industry and hydraulic fracturing:

  • Part 615 of the Natural Resources and Environmental Protection Act (NREPA) (MCL 324.61501 et seq.) grants exclusive authority over “all matters” regarding oil and gas waste prevention and conservation. Under this authority, the Supervisor of Wells regulates and issues all permits related to most drilling activities.
  • Section 205 of the Zoning Enabling Act (MCL 125.3205(2)) prohibits counties and townships from regulating the drilling, completion, operation, abandonment and location of oil and gas wells and other wells associated with oil and gas exploration. Note that cities and villages are not mentioned in this restriction, although still subject to NREPA Part 615.
  • Part 327 of NREPA (MCL 324.32701 et seq.) prohibits, in most circumstances, a local government from enacting any ordinance that regulates large quantity water withdrawals - more than an average of 100,000 gallons of water per day in any consecutive 30-day period. As defined, this includes the volumes required for the type or hydraulic fracturing causing concern in Michigan. Unlike the Zoning Enabling Act restrictions, NREPA applies to all jurisdictions.

Taken together, these laws preempt most local government authority to regulate oil and gas development, but the prohibition is not absolute.

A 1990 Michigan Supreme Court opinion and subsequent state agency policies effectively separate oil and gas activities into two categories, at least as related to zoning: 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, the restrictions listed above in Part 615 and Section 205 apply. The second type, usually after the product leaves the drilling site and before it flows into a Michigan Public Service Commission regulated pipeline, can be regulated, at least to some degree, by local government. These can include some pipelines, processing facilities and pumping stations.

In addition to zoning, communities enact all sorts of regulations under their general ordinance authority – noise ordinances are an example. Local governments may be able to restrict some aspects of oil and gas development through non-zoning general ordinances, so long as the subject matter is not regulated by Part 615 and Part 327.

Other state statues may further restrict local government action while allowing some exceptions. Townships, for instance, generally do not have jurisdiction over county roads and state highways, but do have authority to limit or prohibit trucks or other commercial vehicles on certain highways and streets (MCL 257.726).

Just exactly where activities that are preempted from local control end and those subject to zoning or other regulation begin must be handled on a case-by-case basis. One rule of thumb is that the drilling, completion and operation ends at the meter that measures gas and oil volume for purposes of paying royalties to the mineral owner.

Where this leaves local government and approaches some communities are using are the topics of part 2 of this series. For more information about oil and gas development in Michigan, see the Michigan State University Extension Oil and Gas page.

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