What is the future for Michigan oil and gas development?

Oil and gas development is grabbing headlines in Michigan, but major short-term expansion is unlikely, according to a new University of Michigan report.

The national oil and gas boom, and controversy surrounding the practice of hydraulic fracturing, also called fracking, have certainly made headlines around the country and in Michigan. Apart from all the media attention, what are the oil and gas development trends in Michigan? What can we expect in the future?

A new report from the University of Michigan Graham Sustainability Institute provides insight on those questions. This document, “The Application of Hydraulic Fracturing Technologies to Michigan Oil and Gas Recovery” is part of a series of eight technical reports developed as part of a project to identify key strategies and policy options for managing hydraulic fracturing in Michigan.

The report highlights that Michigan has been an oil and gas producing state since 1925. Oil production in the state peaked in the early 80s and declined to about one-half of peak production by the late 2000s. There have been no significant new oil reserves discovered since the 1930s. Even though the general trend is downward, oil production has actually increased since 2007, due to finds in Calhoun, Jackson, Lenawee and Washtenaw Counties.

Natural gas production also declined from 1996 peak to about one-half of that level in 2012.

There was a lot of excitement in 2010 when a new deep well drilled into the Collingwood-Utica formation was, at least initially, very productive. This well was developed using horizontal drilling and high-volume hydraulic fracturing technology. (Lower volume hydraulic fracturing has been used in Michigan for many years.) That event set off a high level of private and public lease activity, with lease bonus payments reaching record levels.

Companies seeking oil and gas leases with landowners are still active, but not at 2010 levels. Despite the optimism about the Collingwood-Utica and adjacent formations, and broader application of horizontal drilling and high-volume hydraulic fracturing, there is little commercial success to date.

The University of Michigan report concludes that a combination of low natural gas prices, few new oil discoveries and the expense of drilling new deep natural gas wells make it unlikely that the Michigan industry will grow significantly, at least in the near future. These trends could change with technology improvements or a significant rise in natural gas prices.

This report and the others in the new series include excellent information about current drilling technologies, geology, policies, public attitudes, and potential hazards associated with hydraulic fracturing. The final project reports will be published in mid-2014. Michigan State University Extension has additional information about this and other topics on the oil and gas information page.

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