27.23-17 - Mineral Value Plan
(Issued:  07/11/2005)

Supersedes

Approval Signature

K. L. Cool, Director, Department of Natural Resources

Policy

It shall be the policy of the Natural Resources Commission (NRC) to manage State-owned minerals in a manner that protects and enhances the public trust.  Surface and mineral ownership may be consolidated when it is in the best interests of the State.  Minerals shall be developed in an orderly manner to optimize revenue consistent with other public interest and natural resource values.

Background

Pursuant to Part 610 of 1994 PA 451 as amended by Public Act 117 of 1998, the Department of Natural Resources (DNR) was directed to implement procedures that allow the Department to divest itself of State-owned severed mineral rights and reunite the severed mineral rights with the surface when determined to be in the public interest and appropriate by NRC Policy and DNR Procedures.  On March 11, 1999 the NRC approved the Minerals Policy cited above and the Director approved Department Procedures providing direction to staff regarding minerals management.

The statute also directed the DNR to “develop a plan for attaching a monetary value to those rights based upon current market conditions”.  A committee was formed to make a recommendation to the Department.  The group included DNR, Department of Environmental Quality (DEQ) and Public Service Commission (PSC) staff, along with representatives from Michigan Oil and Gas Association (MOGA) and Michigan United Conservation Clubs (MUCC). 

Geologic Value:

1. No known value - no past or present production within one mile and no mineral development potential.  Minimum value of $25.00 per acre for all mineral rights.

2. Moderate potential value - within one mile of historical hydrocarbon production, within one mile of existing stripper production (15 BOPD, 60MCFPD) or potential metallic or nonmetallic production.  $25.00 + ($25.00*1/4)=$31.25 per acre for oil and gas rights, metallic and non-metallic values will be evaluated by Department Geologists.

3. Known value - production of hydrocarbons within one mile in volumes exceeding stripper production or potential production within an active trend/play as determined by DNR or known metallic or nonmetallic production or potential.  Value would be determined for individual parcels by a mineral appraisal.

Leasing Activity Value:

1. No known value - no known leasing activity within one mile in 10 years.

2. Moderate potential value - within one mile of leasing activity in the previous 10 years, minimum value + 1/4 of minimum value per acre ($25.00*1/4=$6.25).

3. Known value - leasing activity within active lease play in the past 12 months or in area determined to be likely to experience active lease play based on DNR determination of geologic potential.  Value would be based on an evaluation of bonus payments, royalty rates, and options in area to determine parcel specific value of the leasing activity.

Transaction Costs:

• $300.00 per deed, with an additional $20.00 per parcel if more than five parcels.  This fee will be applied to all sales conducted pursuant to PA 117 including transactions for parcels of five acres or less and parcels transferred to local units of government.

•  Actual costs for parcel specific appraisals including staff time and contracted expenses such as mineral appraisal fees.

Summary of Costs:

Parcels over five acres				Parcels under five acres
	No Known	Moderate	Known
Hydrocarbon Value	$25.00/acre	$31.25/acre	Parcel Specific Determination	$0
Metallic Mineral Value	$0/acre	Parcel Specific Determination	Parcel Specific Determination	$0
Nonmetallic Mineral Value	$0/acre	Parcel Specific Determination	Parcel Specific Determination	$0
Lease Activity Value	$0/acre	$6.25/acre	Parcel Specific Determination	$0
Transaction Costs	$300.00	$300.00	Actual Costs	$300.00

Process Recommendations:

• Oil and gas evaluations are conducted on a township basis.

• Evaluate other mineral potential on a countywide basis to determine if the DNR should retain all minerals.

• Prices are set for one year with only a minimal reevaluation after the first 90 days.

• Base values should be evaluated as needed by Director action with public notice/participation through NRC meetings.

DNR should adjust for inflation at year four and annually thereafter.

Implementation Recommendations:

• Present draft Plan to NRC Policy Committee on Real Estate Issues May 12, 1999 for comment.

• Prepare final Plan.

• Provide public notice through June NRC agenda and DNR calendar.

• Present Plan to NRC at June meeting and seek Director approval.

Upon approval, prepare procedures for implementing the Plan.

Prepared by: Land and Mineral Services Division
Dated: May 12, 1999