• 

MINUTES OF SPECIAL MEETING 
of the 
MSD BOARD OF TRUSTEES 
March 13, 1981 

9781 

]Public 
I Comments 

[Grantxng or a 
[Drilling Lease 
| on the Lake 
| City Experiment 
I Station 
\ 
IProperty, 
defered 

Vice President Breslin called the meeting to order in 103 A & B, Kellogg Center, at 
7:16 p.m., March 13, 1981. 

Present: 

Trustees Bruff, Fletcher, Howe, Lick, Martin and Sawyer; Vice Presidents 
Breslin, Cantlon, Stewart and Thompson; Associate Vice President Wilkinson, 
General Counsel Carr, and Assistant Vice President Keesler. 

Absent: 

Trustees Krolikowski and Reed. 

1.  Approval of Proposed Agenda 

Trustee Fletcher moved approval of the proposed agenda, seconded by Trustee Lick. 
Approved by a vote of 6 to 0. 

2.  Purpose of the Meeting 

Trustee Bruff stated that the purpose of the meeting was to consider the granting 
of a drilling lease on the Lake City Experiment Station Property in Reeder 
Township, Missaukee County. 

3.  Public Comments 

There were no public comments. 

4.  Action Item:  Granting of a Drilling Lease on the Lake City Experiment Station 

Property in Reeder Township, Missaukee County 

At the request of Chairperson Bruff, Vice President Breslin gave a background 
briefing on the proposal which was before the Board and referenced that at the 
last Land and Physical Facilities Committee meeting, the Trustees had requested 
special counsel to advise in the development of a lease agreement and other 
matters relating to the execution of this agreement.  Vice President Breslin 
then introduced Mr. George Loomis and Mr. James Neal, the attorneys who were 
engaged to advise the Board on this matter.  At the request of Chairperson 
Bruff, Mr. Loomis summarized their experience in the gas, oil and energy 
industry, giving a history which began in 1953 to date.  In response to 
questions asked by several Trustees, Mr. Loomis indicated that they had never 
been engaged by the Dart Oil and Gas Corporation, the firm whose proposal is 
being considered, and they are of the opinion that they are not in conflict 
with any other firm or agency in advising the Board on this matter. 

Mr. Loomis then presented a written report (copy on file in the Secretary's 
Office) which summarized their review. 

Mr. Loomis stated that it was important that there be an agreed upon philosophy 
in entering into this type of agreement.  Chairperson Bruff and other Trustees 
stated that they concurred with this opinion but would rely on Mr. Loomis for 
drafting the final terms of a lease agreement. 

In response to several questions raised by the Trustees, Mr. Loomis summarized 
the procedures used by the State of Michigan in entering into this type of 
agreement and the procedures currently being reviewed by the State. 

The Board then discussed environmental and ecological concerns and the concerns 
for minimizing disruption to the ongoing research project on this site.  It was 
understood that the final lease agreement would incorporate the intent of the 
Board on these concerns. 

In response to a question from Trustee Fletcher on insurance protection, Mr. 
Loomis stated that this particular clause must be worked on for incorporation 
into the final agreement. 

Trustee Howe expressed concern about the assignment of lease rights.  Mr. Loomis 
responded that this was a standard practice in the industry, but that the lease 
agreement could be drafted to protect the Board's interest in precluding the 
assignment of rights without the formal approval of the Board of Trustees. 

This was followed by a discussion on procedures for competitive bidding and 
public action.  In response to several questions, Mr. Loomis indicated that 
it is difficult to tell if a public auction or competitive bid would result 
in an increase in the offer since the current wildcatting had created a 
"fever" in oil and gas exploration at this time. 

9782 

I Minutes of the special meeting, cont< 

March 13, 1981 

Granting of a 
Drilling Lease 
on the Lake 
City Experiment 
Station 
Property, cont. 

| 

\ 

Property in Reeder Township, Missaukee County, cont. 

(^•  Action Item:  Granting of a Drilling Lease on the Lake City Experiment Station 
I 
1 
\ 

In response to a question by Trustee Fletcher concerning their recommendation, 
Mr. Loomis stated that they did not have a firm recommendation at this time, 
that he would be inclined to accept the offer, if he were a Trustee, but 
recognized the Board's public responsibility in this area.  A similar question 
was asked of Vice President Breslin, and he stated that he would recommend to 
the Board that it enter into the proposed lease agreement with the Dart Oil 
and Gas Corporation. 

Following further discussion, Chairperson Bruff summarized the various alter 
natives before the Board that evening.  He stated that the Board could approve 
entering into a lease agreement.with the Dart Oil and Gas Corporation or defer 
action and request that Mr. Loomis explore the possibility of holding a public 
auction or receiving sealed bids.  Chairperson Bruff stated that the Board 
could then consider the matter at a special meeting, possibly on March 20, and 
this would permit time for Mr. Loomis to complete the proposed lease agreement 
with Dart as well as develop background information concerning the questions 
raised by the Board.  Trustee Sawyer inquired as to what a week's delay would 
do as far as risks, and Mr. Loomis responded that he felt there was no reasonable 
risk since a chill factor on the nfeverT! would not occur in this area in the next 
few weeks. 

;On motion by Trustee Martin, and supported by Trustee Fletcher, it was moved to 
jdefer action and to consider the matter further at a special meeting to be 
|scheduled.  Approved by a vote of 6 to 0. 

(Adjourned at 9:07 p.m. 

C^^^i^r^>^?^ 

Acting Secretary