What’s happening with Michigan oil and gas exploration?

Gas and oil production may be down in Michigan, but there are still opportunities for landowners to earn income from mineral leases.

There was much excitement during 2011 about new oil and natural gas exploration in the United States, and with it the prospect of lower long-term reliance on foreign sources of energy.  Pennsylvania, the center of dramatic natural gas drilling increases, saw a double-digit percentage rise.

Here in Michigan, 2011 was much more sedate.  According to the Michigan Oil and Gas News, the state actually experienced a 16 percent decline in drilling activity compared to the previous year.  Production, too, was down during the first half of the year (the most recent statistics available), with oil and natural gas declining five to six percent.  There were bright spots in the state, especially in Jackson and Lenawee counties due to new oil discoveries in those areas.

Also in 2011, seven wells were dug into the Utica-Collingwood, the geologic formation that caused all the excitement (and concerns) during 2010.  Those wells were or are planned to be developed using horizontal drilling and the controversial method of hydraulic fracturing (fracking).  One well in Kalkaska County extended vertically approximately 8,500 feet and horizontally 8,200 feet.  That horizontal leg was fracked in, reportedly, up to 30 stages. Initial test results are not public, but the Oil and Gas News reported that the Kalkaska County wells tested at “potentially commercial rates.”

So what does this mean for Michigan landowners?  On the one hand, drilling and production is down in Michigan.  On the other, national momentum toward increased domestic oil and gas production is strong.  There are still very active landmen in the state purchasing oil and gas leases on private property and the potential exists for increasing drilling activity, even if not on the scale seen in Pennsylvania and other states.  In many areas of the Lower Peninsula, landowners who own unleased mineral rights could be approached by oil and gas company representatives. 

It is still very important for landowners to learn as much as they can before entering into oil and gas lease negotiation and to seek professional advice from an oil and gas attorney before signing a lease.

Additional oil and gas information is available at www.msue.msu.edu/oilandgas.

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