Michigan oil and gas development: A mid-year update

Michigan oil and gas drilling activity is down from a year ago, but there’s still significant potential that landowners should be aware of.

Oil and natural gas development is still very much in the news nationally and in Michigan. Dramatically increased domestic production is driving low natural gas prices. There is continuing debate concerning potential impact from hydraulic fracturing (fracking), the controversial extraction method that is credited with the rapid oil and gas production rise.

Despite all the news attention, drilling in Michigan was significantly lower in the first half of 2012. Oil and gas drilling activity was down by more than 22 percent during the first half of the year, compared to the same period in 2011, according to an estimate by the Michigan Oil and Gas News. A total of 66 wells were drilled between January 1 and June 30. A similar reduction was noted in the number of drilling permits issued by the Michigan Department of Environmental Quality (DEQ).

Continuing the trend from last year, Jackson and Lenawee Counties were the focus of activity, with 19 well completions.

A lot of excitement was generated a couple of years ago regarding the potential of the Utica-Collingwood geological formation (and fracking concerns). That play is still considered “emerging,” yet no new wells were drilled into that layer this year so far, although 14 applications were pending as of July 25, 2012. Just two wells of the 28 permitted to-date are classified by the DEQ as “producing.” Most of the permitting drilling activity for this formation is in Kalkaska and Cheboygan Counties.

Concerns about fracking are still widely discussed in Michigan. The DEQ recently published a new question and answer fact sheet on this topic. Materials Safety Data Sheets for the hazardous components of fracking fluids are also posted on the DEQ site.

So, what does this all mean? Is the oil and natural gas boom over in Michigan? Drilling and permitting activity is indeed down, but landmen are still actively seeking leases on private land in many parts of the state. Strong leasing activity is a good indication of Michigan oil and gas production potential. It is still very important that landowners learn as much as they can and seek advice from an oil and gas attorney prior to signing a lease.

Michigan State University (MSU) Extension and partner organizations continue to sponsor oil and gas leasing and industry update meetings around the state. Workshop dates and additional oil and gas information is available on the MSU Extension Oil and Gas information website.

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