Oil and gas industry at a crawl in Michigan

Aug 19, 2015

Credit Bob Allen

Drilling for oil and gas in Michigan is down to levels not seen since the Great Depression.  And there is no reason to expect the industry will get a boost anytime soon.

Mark Snow handles permits for new oil and gas wells at the Michigan Department of Environmental Quality and says they are on track to issue about 120 permits this year. That would be the lowest number since 1931 when 111 were issued. As recently as 2008, more than 900 permits were issued.

Snow says the fuel markets are glutted with oil and natural gas so the prices are down which discourages new drilling.

“If things aren’t economic, based on the prices out there, companies just won’t be looking to drill,” says Snow.

Even if the economics were better, it is not clear there would be much new drilling in Michigan.

Companies spent hundreds of millions of dollars in 2010 to drill deep shale wells using new methods of hydraulic fracturing or “fracking.” This has generated plenty of controversy, and petition drives to ban the practice here, but Snow says only five of those types of wells are still in production.

The company that did the most of that type of drilling, Encana, sold to Marathon Oil last year.  So far, Marathon has submitted one permit application to the state, but that is to drill for conventional oil in the Richfield formation, a pool of oil long known to the industry and exploited.

Bill Harrison, director of the Michigan Geological Repository for Research and Education, says Marathon plans to use new horizontal drilling techniques in the Richfield where vertical wells have already been drilled.

“That will access parts of the reservoir that the vertical wells didn’t drain,” he says.

Harrison says there are no new discoveries on the horizon for Michigan’s oil and gas developers but history would suggest one is imminent.

“Historically something new has always come along about once every 20 or 30 years,” Harrison says. “So I wouldn’t be surprised if a new discovery occurs somewhere in Michigan, but there’s nothing really yet that’s definitive.”

Harrison says there is a lot of oil left in the ground in formations that have been drilled. That can be recovered by methods like pumping water into those wells to lift the oil. These so-called secondary recovery methods can be expensive and he says they are not attractive with oil and gas prices at their current levels.