Drilling permits in Michigan at 89-year low

Dec 13, 2016

The past decade has been slow for oil and gas development in Michigan, but 2016 has seen the industry come to a near halt.

So far this year, 40 permits have been granted; less than every year in history, except for 1927, which was the first year that Michigan began issuing permits.

A lot of factors are at play, including less oil being found within the state and growing markets for alternative energy, but experts say the decline can be mainly attributed to an over-saturated global market. Nearly all major oil producing nations, including the United States, have been pumping at record levels, and despite high demand, the markets still haven’t found equilibrium.

“Because of the crash in prices, companies just don’t have any cash flow, or much cash flow to drill wells, so that’s been a negative for the local oil and gas industry,” says geologist Lee Jones.

A barrel of oil has consistently been less than $50 dollars on the global market since July of 2015, and with prices so low, local energy producers in states like Michigan have been forced to scale back.

And it’s not only permits that have fallen.

Of the 40 permits issued in Michigan, only 10 have spawned any drilling activity, and half of the wells drilled have been dry.

Right now, OPEC nations are in the midst of negotiating how they’ll approach oil production in the coming years, and there’s already been some regression, with projects being canceled or temporarily put on hold. Once OPEC concludes its talks, world markets are expected to find new stability.

Jones, who’s had over 40 years working in the Michigan oil industry, thinks that once this happens, state-wide production will start to increase once again.

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Correction: The article previously stated that a barrel of crude oil had not risen above $50 since on the global market July of 2015.