DNR to offer lease rights at Oct. 24 auction

The Department of Natural Resources will offer state-owned oil and gas lease rights to more than 195,000 acres in 22 Michigan counties at an Oct. 24 auction in Lansing.

Oil and gas lease auctions, which have been held in Michigan since the 1920s, occur twice a year – once in the spring and once in the fall. Oral bids may be submitted by individuals 18 years old or older, or by a partnership, a corporation or other legal entity qualified to do business in Michigan. In order to accommodate anticipated large crowds, the DNR has changed the auction venue to the Lansing Center, 333 E. Michigan Ave., Lansing. Registration of bidders will begin at 8 a.m. on Wednesday, Oct. 24, and continue throughout the auction.

Mary Uptigrove, acting manager for the DNR’s Minerals Management Section (MMS), said the oil and gas lease auctions are a critical part of Michigan’s natural resources-based economy.

“Proceeds from state-owned mineral lease rights are used to purchase public land for public use; the maintenance and upgrade of state and local parks; and the care and preservation of wildlife habitat,” Uptigrove said. “All Michigan residents have an increased opportunity to use public lands for many recreational pursuits because of the leasing of these rights.”

The DNR said prospective bidders will be required to submit a valid government-issued photo identification card during the registration process. Additionally, if a person is not on the “authorized bidder” list, he or she will be required to submit a security deposit in order to register. The security deposit must be a cashier’s check or money order in the amount of $5,000 made payable to “State of Michigan.” The security deposits and identification will be returned to registered bidders when their bidder cards are returned and all successful bids are paid in full.

To be added to the authorized bidder list, interested parties must contact Kim Venne, DNR property analyst, at 517-335-3242 or vennek@michigan.gov before close of business on Tuesday, Oct. 23, to confirm they have been a successful bidder at a previous state of Michigan oil and gas lease auction; have no outstanding balance owed; and are not on the DNR’s “hold action” list.

The total bonus for all lease rights that receive successful bids must be paid at the time of check-out. Lessees pay “bonus bids” at the time of the auction to win the lease rights. Prospective bidders who do not have an established credit rating through prior leasing of state-owned minerals must pay at least one-half of the total bonus bid by cash, certified check, cashier’s check or money order. A credit rating may be established by filing three letters of reference – one from a bank – with the MMS.

Bidders are legally and financially responsible for any successful bids, regardless of whether they represent themselves or are acting for another party. Failure to pay for a successful bid is considered intent to defraud and the bidder may be subject to prosecution.

The DNR stresses that while a lessee might win lease rights at the auction, it does not mean they will be allowed to drill a well on the leased parcel.

“While leasing mineral rights is the first step an individual or company takes in exploring for oil and gas, we want to make it very clear that it doesn’t automatically give the lessees the right to drill a well,” Uptigrove said. “If a lessee does choose to pursue development of oil and gas rights, separate written permissions – including a drilling permit from the Department of Environmental Quality – have to be obtained.”

The Department of Environmental Quality’s (DEQ) Office of Oil, Gas and Minerals regulates the drilling and operation of oil and gas wells. The DEQ enforces a comprehensive set of regulations designed to protect Michigan’s resources from potential negative impacts from drilling and operating wells.

Detailed information regarding location of the nominated parcels available for lease can be found by visiting www.michigan.gov/minerals and clicking on Oil & Gas Lease Auction Information or by calling 517-373-7663.