The Environment Report for Tuesday, October 28, 2014 - Decline in oil and gas drilling in Michigan
News of a decline might sound surprising since there has been so much excitement and controversy over horizontal hydraulic fracturing, or "fracking," in recent years.
But not many high-volume, horizontal wells were actually drilled since 2010, and the company that led the recentfrackingboom has left the state.
That leaves the industry and its watchdogs wondering where new action will come from.
The oil and gas business has been around in Michigan for almost 100 years.
Drilling activity peaked in the late1980sand early1990s, when oil and gas companies went after natural gas in a layer of the earth called theAntrimShale.
Bill Harrison runs the Michigan Geological Repository for Research and Education at Western Michigan University.
"Twenty years ago, when theAntrimshale was at its peak, the state of Michigan was drilling 1,000 wells a year and this past year there was probably around 100 drilled," he said.
Irish Hills: An oil exploration success story
The big discoveries in last decade have been made mostly in southern Michigan, mainly by a Traverse City company called West Bay Exploration.
Patrick Gibson, the vice president of the company, says his company is willing to look for oil in places other companies avoid, particularly around water, like the Irish Hills area near Jackson.
"Their motto in the Irish Hills is '50 lakes in 15 minutes,' and so it was another area where other companies had been unwilling even to go do seismic testing because of the possible issues in putting together a large number of very small landowners into drilling units."
It turned out there was a lot of oil underneath the Irish Hills, and West Bay turned Jackson County into the oil producing capitol of Michigan.
But the industry needs more discoveries like this to really thrive.
Gibson says the people West Bay hires to drill wells and service them are going elsewhere for work, even people who wish they could find work here.
"I hear a lot of stories about service companies that are taking their equipment either to North Dakota or Pennsylvania, and conversely I get a lot of resumes every week from guys in Pennsylvania or North Dakota that want to come back to Michigan."
New fracking method promised boom, but has yet to deliver
Those states have seen lots of drilling using a newer method called horizontal hydraulic fracturing. And around 2010, two companies that do this kind of drilling showed up in Michigan and spent hundreds of millions of dollars.
It looked like a new boom in natural gas production was underway. Now they are both gone.
The one that stayed the longest wasEncana, a Canadian company who recently sold their mineral rights to Marathon Oil. Encana said the sale was necessary in order tofocus on operations elsewhere that are more profitable.
In an e-mail, an Encana spokesman wrote:
"Encana has divested of its Michigan acreage as of the end of last month (August 2014) in a transaction with Marathon Oil Company. As announced late last year, Encana has focused its capital allocation on six key growth plays that provide the highest profitability. This transaction is consistent with that strategy and allows us to continue to focus our efforts on the growth areas in our portfolio."
Industry's future in Michigan unpredictable
Paul Brady lives in Kalkaska County, near where Encana drilled many of its wells.
"The bottom line is the reason Encana sold is because the wells just simply didn’t produce," he said.
Brady keeps a close eye on the industry and has concerns about how much water is needed for these newer drilling methods. He even sued Encana. Brady was surprised Marathon Oil bought Encana’s assets in Michigan.
Marathon declined to comment on its plans, but Brady is skeptical that Marathon will find somethingEncanamissed.
"Is it feasible to think that Marathon can do something that Encana couldn’t?" he asked. "I mean, Encana’s drilled and completed a lot of wells, a lot of successful plays with thousands of wells [around the nation]."
Geologist Bill Harrison sees it differently. He says Michigan will never be a Pennsylvania or North Dakota.
But Harrison saysEncanashowed you can get fossil fuel out of the Utica-Collingwood formation, a reservoir previously untouched in Michigan.
"You’ve got to have somebody as a pioneer to come in and drill that and prove it up," he said. "And usually it takes several wells to really prove that a reservoir is going to be commercial."
The question now is how much Marathon will invest trying to expand natural gas production in Michigan.
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