Oil and Gas

The DNR has been leasing state-owned oil and gas rights through the public auction process since 1929. The oil and gas lease auctions are currently held online twice per year - once in the spring and once in the fall.  A catalog of the lease rights being offered will be published on this webpage approximately a month before each auction. Any qualified party interested in leasing state-owned oil and gas rights has the opportunity to "nominate" state-owned oil and gas rights (by parcel) prior to each auction.

A state of Michigan oil and gas lease is not a transfer of ownership and will expire after its five-year primary term if the lease is not included in a producing unit at that time. The lease within itself is not an authorization to drill.  Separate application(s) and approval(s) by the Department of Environment, Great Lakes, and Energy (EGLE) are required prior to drilling activity.  EGLE’s regulatory rules are continually updated to ensure protection of the natural resources while balancing the development of both private and public minerals.

Leasing of the state-owned oil and gas rights for exploration and development offered in a public auction generates revenue in three ways:

• Lessees pay a “bonus” to acquire the lease rights.
• Lessees pay rent on acreage leased.
• Lessees pay royalties if production occurs from the leased property.  Royalty payments are a percentage of the gross sales value of the oil or gas produced and are determined at the time the product is sold.

Any qualified party may also apply for a direct lease under certain circumstances.