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'Fracking' Mixes Natural Gas, Water, and Money

Northern Michigan test hints at deep reserves, potent controversy

August 9, 2010 | By Keith Schneider
Great Lakes Bulletin News Service

Circle of Blue
  The Pioneer well, near Lake City, Mich., used 5.5 million gallons of highly pressurized water and chemicals to fracture and tap a mother lode of natural gas 10,000 feet underground.

The aptly named Pioneer natural gas well, near Lake City, in Missaukee County’s Pioneer Township, is a stack of gauges and metal piping that rises about seven feet from a bed of crushed stone.

It sits at the center of a five-acre clearing surrounded by Michigan hardwoods; the only sound is of songbirds hidden in the trees. And the sole scents from the straight-as-a-gun-barrel well—drilled and tested last year—are of money and, potentially, of trouble.

The source of both is buried far below in what geologists call the Collingwood Shale. Thanks to new techniques incorporated into a relatively old drilling technology, Collingwood could be the source of Michigan’s third major hydrocarbon development era of the last 40 years. And the Calgary-based Encana Corporation, which drilled the well, seems determined to lead the way.

The company, Canada’s largest natural gas producer, spent an estimated $7 million to $9 million on the project, making it among the most expensive ever developed in the state. It bored a hole nearly 10,000 feet deep into the Earth, one of the deepest ever drilled in Michigan.

“It’s too early to know the economic potential of this new Collingwood Shale play, but we plan to drill additional exploration wells this year that will help determine the play’s ultimate potential,” said Randy Eresman, Encana’s president and chief executive in a statement.

So far, that potential looks strong: Earlier this year, Encana announced that during Pioneer’s first 30 days, the well produced an average of 2.5 million cubic feet of gas a day, making it for a time the most prolific single source of natural gas in Michigan.

Production has since dropped by more than half, to 800,000 cubic feet per day, said state officials. But that’s still a prodigious amount for a Michigan gas well. That is why other gas developers are not only paying close attention, they are, according to one state official, making extraordinarily large investments in hopes of getting their piece of what could be a major new natural gas reserve.

“The industry’s response to the first well drilled to test this formation has been overwhelming,” said Tom Wellman, Manager of the Mineral and Land Management Section of the Michigan Department of Natural Resources and Environment.

A Gas Frenzy
How overwhelming? In early May the natural gas industry saluted Encana’s Pioneer production numbers by spending $178 million at a lease sale of nearly 120,000 acres of state-owned mineral rights in 22 Michigan counties that straddle the Collingwood. That was more than seven times the previous record for a state lease sale. It was nearly equal to the $190 million Michigan has earned, in total, since it began auctioning oil and gas leases in 1929.

The action is likely just beginning, too. In October, Michigan is poised to auction mineral leases on up to 500,000 more acres, and executives say that the natural gas industry may be ready to spend a lot of money again.

Michigan’s unprecedented leasing frenzy, touched off by the promising results from a single Missaukee County well, is part of a much bigger picture: a global rush to tap the Earth’s deep gas-bearing shales for a fuel that burns much cleaner than coal or oil. Spurred by advancing technology, developers now penetrate geologic layers miles beneath the surface, pump water and chemicals into the space at extremely high pressure, fracture the rocks, and release the gas. The industry calls the process “hydrofracking.”

The push to reach deep shale gas reserves grew from a combination of factors: the pressure for domestic gas production, increasing the supply of gas to help keep its price down, 3-D seismic technology, and the development of more advanced forms of hydraulic fracturing drilling techniques.

Hydraulic fracturing has been used in Michigan since the 1990s. However, the massive hydraulic fracturing and horizontal drilling now being used to reach and extract the deep shale gas reserves is significantly different. Instead of the old approach—drilling to depths of 1,000 to 2,500 feet and using relatively small volumes of water to fracture an area close to the well bore—deep shale uses horizontal drilling to fracture a larger area, at depths of up to 10,000 feet.

Natural gas production in the United States is climbing as producers use fracking to develop the deep shales in the Northeast, Texas, the Rocky Mountain states, and now in Michigan. A two-year study by the Massachusetts Institute of Technology estimated that shale gas reserves in the United States could provide 92 years of energy, based on current natural gas consumption rates in the country.

Water Worries
But these new production practices, particularly the use of millions of gallons of water and thousands of pounds of chemicals, are stirring concerns about not only water supply, but also water contamination.

Those concerns include questions about Encana Corporation, which signed mineral leases for 250,000 acres in Michigan. In 2006 the Colorado Oil and Gas Conservation Commission fined the firm $370,000 for flawed drilling practices. Residents said the drilling contaminated Divide Creek with methane and benzene.

Alan Boras, Encana’s spokesman, said in an interview that the leak was “a rare circumstance” caused by flaws in the cement that holds the well casing in place.

“Within less than a week of being alerted, the problem was rectified,” Mr. Boras said.

Colorado is not alone in experiencing at least a few problems with fracking. Communities in Wyoming and Pennsylvania have reported incidents of water contamination and methane mixing with drinking water in regions where shale gas development is occurring.

Those and other incidents have alerted some states and the federal government to the potential problem. Earlier this week, the New York State Senate approved a one-year  moratorium on shale gas development. If the State Assembly also approves the bill and New York Governor David Patterson signs it, state authorities will be required to formally assess the technique’s risks to water resources and public health before it is allowed anywhere in the state.

Meanwhile, the U.S. Environmental Protection Agency is completing its own study of fracking’s risks.

This is the second time EPA has looked at fracking. Two years ago, in a study that some say was unduly influenced by the energy industry, the EPA called the fracking process safe, and exempted drillers from water quality standards under the Safe Drinking Water Act.

Authorities in Michigan say they are aware of the reports of problems with hydrofracking deep shales. They maintain that the state is well prepared to deal with the Collingwood development and the potential effects it could have on the land, public health, and Michigan’s fresh water reserves.

Hal Fitch, the director of the Geological Survey Office, a unit of the state Department of Natural Resources and Environment, explained in an interview that Michigan has some of the toughest regulations in the country for overseeing oil and gas development, and that his office is well staffed to enforce them.

Michigan Prepares
Mr. Fitch said that the state would soon issue new permit conditions for fracking that will space projects like the Pioneerwell at least a mile apart, which will reduce the number of well pads cut into the forest. But he acknowledged that each of the well pads will encompass five acres or more—five times larger than the typical natural gas and oil well pad.

He also acknowledged that, because completing each of the Collingwood wells involves using millions of gallons of water to fracture the shale and open spaces for the gas to flow, the state might need to better understand the risks.

“There is a concern about the volume of water used,” Mr. Fitch said. “While drilling and use of water is a one-time deal for each site, it requires a lot of water. DNRE looks at the effect of water withdrawal on immediate surroundings if it’s near a wetland or lake or adjacent public water supplies. ”

Mr. Fitch explained that the state would make sure that the activity is not depleting the aquifer at that site. But he also admitted that officials do not look at cumulative effects of water withdrawals—in other words, the effect of a number of withdrawals in different parts of the same watershed.

In the case of the Pioneer well, the one-time use of 5.5 million gallons of water for fracking, which came from both a freshwater aquifer at the site and from water-hauling trucks—exceeded the water extraction limits of the Michigan Great Lakes Preservation Act. The company obtained a waiver, something that is available for certain types of gas and oil drilling. Mr. Fitch said that these provisions would be reviewed on a case-by-case basis if it looks like the scale of hydraulic fracturing is extensive enough to cause concern.

He also explained that the contaminated water that fracking produces is deposited in deep injection wells, typically many thousands of feet below aquifers that might supply drinking water at some future date.

Big Play State
If Michigan becomes a state where fracking is common, it would mark yet another of the state’s big plays in oil and gas development.

In the 1970s, energy producers drilled thousands of wells into the Niagaran Shale formation, lodged 5,000 feet below ground, along a narrow band stretching from Manistee County, along the coast of Lake Michigan, and inland through Montmorency County. When drilling began there, it was the largest oil and gas drilling zone on the continent—at least until the development of Alaska’s North Slope.

Then, in the 1990s, developers drilled thousands of additional wells, this time in the Antrim Shale formation, which marbles northwest Lower Michigan. Those wells were about 1,000 to 1,200 feet deep, and required a truly huge infrastructure: 9,700 well pads, thousands of miles of pipeline and roads, hundreds of compressing stations, and a number of big processing plants.

The activity produced considerable damage to streams and forests, but also yielded billions of dollars worth of natural gas. Regulatory reforms championed by, among others, the Michigan Land Use Institute in the late 1990s curbed further damage, increased environmental protections, led to better-paying mineral rights contracts for landowners, and significantly boosted gas companies’ royalty payments to Michigan’s public land acquisition fund.

Keith Schneider, who founded the Michigan Land Use Institute in 1995, is senior editor and producer at Circle of Blue, where this article was first published. Molly Ramsey is a Circle of Blue reporter. Reach them at keith@circleofblue.org and http://www.circleofblue.org/waternews/2010/world/michigans-new-natural-gas-rush-energy-and-water-in-play/mollyr@circleofblue.org. Read more about hydrofracking on the Circle of Blue Web site.

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