Great Lakes Drilling: Environmental Threat or Phantom Menace?

This derrick, located near the shore of Lake Michigan in Muskegon, safely extracts oil from beneath the lake through a directional pipeline that runs under a multimillion-dollar residential development.

Last month, the Michigan Senate followed the lead of the Michigan House and voted to ban the extraction of oil and natural gas from beneath the Great Lakes.  Fear of a spill or other potential contamination largely drove the debate.  But sound policy demands facts, and while there may be aesthetic reasons to support a prohibition against onshore drilling, insurance data confirm that the actual environmental risks are negligible.  The Legislature's treatment of this issue is, sadly, an example of how "junk science" often trumps sound science in politically charged election years.

The ban would apply to so-called directional drilling, which enables oil and gas deposits beneath the lakes to be tapped from a distance. As currently regulated, a rig is located 1,500 feet or more inland from the shore, where a vertical bore is drilled to a depth of some 1,000 feet. The hole is then deviated at an angle toward the bedrock underlying the lake until it reaches oil or gas deposits some 4,900 feet beneath the water's surface.

It does not serve the worthy cause of environmental protection for lawmakers and regulators, however well intentioned, to miscalculate risk.  Focusing attention on mostly imaginary threats diverts attention from the real source of actual dangers.  Nor is legislative accountability possible if we allow political motives to substitute for science.  It should be noted that Gov. Engler was right to insist from the start that directional drilling is not a hazard.

Insurance data provide a dependable assessment of the risks associated with directional drilling.  Those risks are reflected in the cost of coverage.  Premium rates essentially transmit information about hazards and safety.  In this instance, underwriters are willing to insure slant drilling operations at an affordable cost—proof positive that such excavation methods are not fraught with environmental peril.

Indeed, according to insurance industry data, only 12 claims nationwide involving drilling to depths of 5,000 feet have been recorded between 1981 and 2000, and none of those were in Michigan. (The Mackinac Center for Public Policy was granted access to these data by Marsh, Inc., a global insurance firm.) 

In fact, control-of-well insurance, which covers environmental damages, is available in Michigan for as little as $33 per well per year, depending on the number of wells being covered.  This low cost reflects the fact that more than 3,800 directional well bores have been drilled in Michigan without incident, including 13 beneath the Great Lakes. Moreover, Canadian firms have safely drilled 2,200 wells under Lake Erie since 1913, and two pipelines have carried oil and natural gas across the straits near the Mackinac Bridge for more than three decades.

The Michigan Environmental Science Board likewise concluded in 1997 that "there is little to no risk of contamination to the Great Lakes bottom or waters through releases directly above the bottom hole portion of directionally drilled wells . . . ."  The one "small" risk identified by the board was contamination at the wellhead, far from the water's edge.

Often overlooked is the fact that commercial drilling can generate income for environmental protection.  For example, it creates revenue for the Michigan Department of Natural Resources (DNR) Trust through the leasing of rights to drill for oil and gas under the bottomlands of the Great Lakes.  According to the DNR, these lease arrangements have provided more than $416 million to government agencies to purchase and protect areas deemed "environmentally sensitive." 

A much more genuine threat to environmental quality comes from oil tankers crisscrossing the oceans to deliver foreign oil to American shores.  To the extent the United States develops domestic sources of fossil fuels, such risks may be diminished.  In addition, experts largely agree that the gravest environmental threat to the Great Lakes is biological in nature, not industrial.  The invasion of non-native "exotic" species such as the zebra mussel is disrupting the lakes' ecological balance.

Lawmakers' desire to protect the Great Lakes is certainly understandable.  But policy is only as good as the facts upon which it is based.  In reality, directional drilling represents only a remote risk to the environment, and the Legislature would do better to devote its time and taxpayers' hard-earned dollars to rectifying real problems instead of chasing phantom menaces.

(Michael LaFaive is research project manager with the Mackinac Center for Public Policy.  Permission to reprint in whole or in part is hereby granted, provided the author and his affiliation are cited.)