Encana leaving Michigan by Peter Payette, September 23, 2014, IPR
A leading producer of natural gas in Michigan is pulling out. … Encana has drilled most of the wells in Michigan using the method known in the industry as horizontal hydraulic fracturing. … These wells are expensive–millions of dollars per well, rather than hundreds of thousands for conventional wells–use huge volumes of water and tap into natural gas deposits at depths that were not explored here until 2010. …
An Encana spokesman says the company recently sold its mineral rights in Michigan to Marathon Oil and will focus on more profitable operations elsewhere.
So far this year, no company has drilled a deep shale gas well in Michigan using unconventional methods. State records show the last one drilled was in May of 2013 by Encana. The company also has more than a dozen permits to drill more wells in Kalkaska County. [Emphasis added]
Fracking Michigan — here we go again by Lee Smith, October 13, 2014, ourmidland.com
Once again several hundred thousand acres of northern Michigan are in play for fracking in an area 25 to 70 miles south and east of Traverse City. Michigan Department of Environmental Quality is reviewing transfer requests for 19 well permits for high-volume hydrofractured (fracked) wells in Kalkaska, Missaukee and Roscommon counties. These 19 wells are permitted to drill and hydraulically fracture the rock strata known as the Collingwood. Based on wells presently producing from the Collingwood, these new wells would produce natural gas, natural gas liquids (ethane, propane and butane) and small amounts of oil. This transfer, when approved by the DEQ, would move the well permits from Encana Oil and Gas USA to Marathon Oil Co. Marathon Oil Co. is part of Marathon Oil Corp., a $27 billion oil and gas exploration and production company headquartered in Houston.
Encana says that they have divested all of their Michigan leases to Marathon. Thus Marathon has acquired more than 100,000 acres of Michigan oil and gas leases plus a large number of oil and gas leases from private landowners.
A Sept. 5 article in the Michigan Oil & Gas News reported that as of June 2014, nine Encana Collingwood wells in Michigan had produced more than 9,600 barrels of oil, 300,000 barrels of natural gas liquids and 4.4 billion cubic feet of gas.
In addition to the transfer of permits to drill wells, Encana has requested the DNR to transfer to Marathon all but two of Encana’s nine wells listed in the September production summary. Although listed in this production summary, these two wells may not actually be capable of producing hydrocarbons in paying quantities. It is also possible they are not on the list for transfer because they are going to be plugged.
The fact that these two Encana Collingwood wells were not successful producers is not surprising. The reservoirs where modern fracking has been successful in Texas, Pennsylvania and North Dakota have all required a trial and error period when a series of wells were drilled in order to discover the best combination of techniques to extract hydrocarbons from each particular stratum.
Encana’s experience in Michigan duplicates the general experience with modern fracking. With each new set of Collingwood wells Encana drilled, they varied the details of the fracking and got improved flows of hydrocarbons, but in the end Encana decided to go elsewhere.
Encana has noted that with the divestiture of its Michigan leases it will focus its capital allocation on six key growth plays that provide them higher profitability. In other words, Encana decided that they could not develop the necessary techniques to drill and complete Collingwood wells in Michigan to obtain a favorable rate of return from the costs necessary to drill and complete Collingwood wells.
Can Marathon take to the next level the improvement in drilling and fracturing technology Encana initiated to recover hydrocarbons from the Collingwood? Costs to drill, frack and equip a Collingwood well are proprietary but based on public information the cost is probably in excess of $7 million per well.
Like all modern fracked wells, the Beaver Creek well has experienced a rapid decline in production, but it does give an indication of what the revenue potential could be from fracking the Collingwood in hundreds of Michigan wells.
New high-volume fracking in Michigan will renew the arguments against fracking operations. The Beaver Creek well that provided more than $800,000 during its first eight months of production to the State of Michigan also used 15.8 million gallons of Michigan clean water, required 18.7 million pounds of sand to be transported over Michigan roads and produced more than 3.4 million gallons of flow back and formation water that had to be disposed of in Michigan’s disposal wells.
The DEQ is completing their latest round of regulations that address the unique aspects of high-volume fracking (modern fracking is not your father’s frack). On May 16, the DEQ quashed a court injunction preventing drilling new Collingwood wells by ruling that land owners and residents adjacent to areas where the DEQ had granted Collingwood well permits had no standing to contest the DEQ’s granting of the permits.
Work DEQ has not accomplished is the development of a standard set of regulations for the spacing of Collingwood wells that would apply Collingwood-specific data to determine which lease holders should share in the production from Collingwood wells, prevent the gerrymandering of leases that share in production from Collingwood wells and require the timely development of Collingwood oil and gas leases. [Emphasis added]
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In fact, an early offer by Encana to test Gary’s well—on their dime—before the fracking operation was construed as conformation that water contamination was a possibility. They never did perform the test, however, and flat out refused to do so once they labeled Gary an “extreme environmental terrorist” for asking questions and taking photos at the Beaver Creek well site. Gary didn’t stop inquiring or questioning, though.
A misty cloud of chemical-laced water spray hung overhead and the noise was unlike anything Gary had ever experienced. “For four weeks it was ten times worse than any assembly line shop noise I’ve ever heard,” Gary says. “It was endless. It was a 24/7 operation.”
“July 2013 consisted of Encana, flares, pipelines, removal of magnificent red pines, destruction of my personal trees, public road destruction and road blockage, and almost having a major heart attack after seeing what Encana, the logging company and major pipeline has done to my once beautiful up north property,” he says. Gary has found selling the home all but impossible—in fact even an attempt to give it away fell flat. “Five people were interested in purchasing it but they all walked away after the environmental disclosure which is required by law,”
The judge also ruled that legal arguments by the ERCB that portrayed Ernst as a terrorist to be without merit.
“I agree with Ernst that the ERCB cannot rely on its argument on the Wiebo eco-terrorism claim, in the total absence of evidence. There is none.”
With all the crafty calculation of an O.J. Simpson defense lawyer, EnCana’s “geology consultant” found all kinds of other explanations for the degradation of the groundwater the Meeks and Locker families used to rely on. On contract to the developer, Anthony Gorody pointed his finger at the families’ neighbors––and the families themselves. [Emphasis added]