While the industry is developing ways to recycle the “flow-back” from newly fracked wells to cut down on water use, producers generally truck millions of gallons of used fracking fluid — laden with salt, hydrocarbons and chemicals — to any of the state’s 650 regulated injection wells for disposal.
“We’re really trading water for gas,” said LuAnne Kozma, co-founder of the Committee to Ban Fracking In Michigan, a nonprofit group founded in December last year that has begun a petition drive to ban horizontal hydraulic fracturing in the state. “We will be a waste capital here if we don’t stop fracking and generating frack wastes.”
About half of the state’s residents depend on groundwater for their drinking water supply, and more households get their drinking water from private wells here than in any other state. Further, Michigan is surrounded by the largest surface freshwater system on Earth, driving a tourism industry estimated at more than $17 billion annually.
At the same time, the Lower Peninsula produces from its own wells the equivalent of nearly 22 percent of the natural gas that the state’s residents and businesses consume annually. With no energy production in the Upper Peninsula, the mitten is a virtual pincushion of more than 50,000 holes drilled for energy since William Howard Taft was president — among them nearly 15,000 oil wells, more than 13,000 natural gas wells and more than 20,000 dry holes.
Proceeds from state-owned mineral lease rights are deposited into the Michigan Natural Resources Trust Fund and used to buy public land, maintain and improve state and local parks and preserve wildlife habitat, said Mary Uptigrove, acting manager for the minerals management
section of the Michigan Department of Natural Resources.
Over the past century, wells throughout Michigan have pumped more than 1.2 billion barrels of oil and about 6.6 trillion cubic feet of natural gas — a process largely unseen by the average person except for the rhythmic swinging of “nodding donkey” pump jacks in fields here and there. Some of that energy production comes from shale.
“More than 11,000 wells have been drilled in the Antrim Shale since the 1940s, and virtually every one of those wells has been hydraulically fractured,” said Hal Fitch, chief of the Michigan Department of Environmental Quality’s Office of Oil, Gas, and Minerals and a geologist. “There are a few of them that have been drilled horizontally, so horizontal drilling and hydraulic fracturing aren’t anything new.
“The only thing new that we’re seeing is the matter of scale.”
That scale has made Michigan a battleground state over the use of “slick water” hydraulic fracturing and horizontal drilling at greater depths into the Collingwood and A-1 Carbonite formations in northern Michigan.
The combination of technologies has sparked protests from those who worry that the state’s current rules, written to regulate relatively shallow vertical wells, are inadequate.
Michigan is on a learning curve — and for good reason. Even the oil and gas industry is still getting a handle on best practices for the technique.
Devon Energy Co., which is reported to lease more than 240,000 acres in Michigan, used a combination of horizontal drilling and hydraulic fracturing in Pennsylvania in 2003 with spectacular results, prompting experts to strongly increase their estimates of the nation’s gas and oil reserves.
But industry experts say practices used in Pennsylvania may not suit a state like Michigan because of differences in geology — one reason that each state is responsible for its own regulations on drilling instead of relying on a federal standard, Bauss said.
Michigan has only two producing deep shale wells now, but energy companies plan to sink more, state permits indicate. A successful completion in February 2010 of a pilot well in Missaukee County east of Cadillac — drilled by Encana Oil and Gas USA Inc., a subsidiary of Canada’s largest natural gas company — launched a land rush by large oil and gas companies to lock up leases in Michigan.
Encana, Chesapeake Energy Corp. and other energy producers engaged in a slugfest in May 2010 at the state’s biannual auction of oil and gas leases on state-owned property.
The result: Michigan collected $178 million in bonus payments in one day — nearly as much as it got in the previous 81 years of such auctions, state officials said.
In the aftermath, Encana and Chesapeake, the second-largest producer of natural gas in the U.S., have been accused of colluding to bring down the cost of leasing land. The Antitrust Division of U.S. Department of Justice and the Michigan attorney general are investigating whether executives of both companies in the summer of 2010 conspired to coordinate bidding to prevent a repeat of the spring auction.
In September, Encana’s board of directors said it did not find evidence that the company colluded with Chesapeake.
Legal wrangling aside, the expanding use of horizontal drilling and fracking caused the U.S. Energy Information Administration to revise the nation’s estimate of proven natural gas reserves upward by more than 30 percent — and Michigan is a key state in the mix.
The two deep shale wells — State Excelsior 1-25 HD-1 and State Excelsior 1-13 HD-1 in Kalkaska County — have a combined average production of about 1.2 million cubic feet of natural gas a day — about 35 times the average of a vertical well tapping the Antrim Shale formation in northern Michigan, Fitch and state records said.
Oil and gas companies have about 40 active permits and have filed about 15 active applications for high-volume hydraulic fracturing in Michigan, but some of the active permitted wells are pilots or vertical-only wells.
Part of Michigan’s learning curve is determining how much water will be diverted to deep shale fracking and how to dispose of the fracking fluid after it has done its work.
It takes 100 times more water to hydro-fracture the new breed of wells than the shallower wells in the Antrim Shale — more than 5 million gallons per well, Fitch said. In response, the state now requires oil and gas producers filing for high-volume hydraulic fracturing in Michigan to follow the same Water Withdrawal Assessment Tool as any major industrial user.
“If the tool shows the potential adverse impact,” Fitch said, “the operator most likely is going to have to find another source of water.”
Energy production companies generally drill shallow water wells near the sites of deep shale wells, then pump groundwater into holding ponds as staging reservoirs for fracking. Proprietary chemical concentrates provided by companies such as Halliburton Co. are mixed with water in steel tanks, and the resulting fracking fluid is injected by huge hydraulic pumps into wells at pressures that can exceed 10,000 pounds per square inch.
The enormous pressures fracture the shale so it can release natural gas and oil.
Fitch said the water used to frack a well would equate to the amount of water a farmer would use to irrigate 6 to 8 acres of corn in a growing season.
What’s in the soup
But no one asserts that fracking fluid can be released into the waterways like cooling water from an electric power station. On the contrary, Fitch, Bauss and others agree that fracking fluid must be handled with the utmost care.
One sticking point between the pro- and anti-fracking groups is the identity of the fracking fluid to begin with. Oil service companies are exempted under federal law from having to disclose the chemicals in the proprietary fracking concentrates they sell, Kozma said. Bauss said fracking fluid consists of more than 99.5 percent water and sand, with the remainder being chemicals meant to reduce friction in the water and inhibit bacterial growth, mineral deposits building up in the pipe and corrosion.
“All of the ingredients aren’t released to the public because of the competitive issue — it is simply a trade secret,” Bauss said.
But Fitch, Kozma and others think there should be more transparency.
“Frankly, we as an agency would prefer that we knew the exact chemical makeup of the fluids, and the producers would prefer to see that,” Fitch said. “It’s the service companies providing the chemicals to the producers that are protecting their proprietary interests.” But he added that he thinks his agency has enough information to accurately track sources of contamination that may come from fracking.
“I have been a proponent of the industry publishing the chemicals that they used, because many are found beneath your kitchen sink,” said Sid Jansma Jr., president and CEO of Wolverine Gas and Oil Corp. in Grand Rapids
Production companies may be able to pump 30 percent to 60 percent of the fluid injected into a well back out after fracking, Bauss said. The remainder may remain in the formation and travel with the flow of natural gas over a period of years.
Federal lawmakers are looking at closing the loophole in the Safe Drinking Water Act that exempts fracking fluids from disclosure, and oil and gas companies are testing more benign formulas.
The chemical soup resulting from natural gas fracking is often saltier than ocean water and loaded with aromatic hydrocarbons such as benzene and other compounds, Kozma said. The only permitted way to dispose of the used fluid in Michigan is storage in steel tanks after it is pumped from the well, or injection in U.S. Environmental Protection Agency - registered Class 2 disposal wells. Other states such as Pennsylvania are recycling fluid.
Kozma said she is concerned about the possibilities that hazardous mixtures can contaminate water supplies at every step of the industrial operation.
Fitch, Bauss, Jansma and others in the industry said they think Michigan is a national leader, with comprehensive regulations that address safe oil and gas production. But they concede mistakes can occur, just as they can in any industrial operation.
“Businesses that are reckless or incompetent won’t be in business very long, not only due to state regulations but also due to the concerns of the landowners,” Jansma said. “My company has fracked hundreds of wells in the state of Michigan, and I’ve never had any problems.”
It’s possible for an operator to turn a valve the wrong way during a process, but good procedures generally prevent that, he said.
Another point of contention is whether gas and oil wells hold up over time without failure. Fitch said the history of oil and gas production in Michigan shows that more than 12,000 wells have been drilled and fractured during the past 50 years with no consequence to public health.
Kozma said reports and studies from Pennsylvania and other areas of the country where horizontal drilling and deep shale fracking have occurred show that well casings fail with regularity, contaminating the groundwater with methane and other compounds. Research by Anthony Ingraffea, a professor of engineering at Cornell University, interpreted data from the Pennsylvania Department of Environmental Protection that he said shows wells tapping the Marcellus Shale in that state failed at a rate of 6.2 percent in 2011.
Fitch said companies pressure-test casings and “occasionally they will find a leak in a casing and will have to remediate that before they can proceed with drilling. But I cannot recall a casing failure after the initial production of the well.”
With a staff of about 25, Fitch’s department did not find any violations involving drilling or well construction last year. There were 470 violations related to production operations, ranging from housekeeping issues to oil-contaminated soil around the wells and tanks.
Michigan has established a fund to plug abandoned or improperly closed wells of oil, gas or brine disposal in cases where the owner is unknown or insolvent. The Orphan Well Program has targeted for plugging three wells leaking oil. But the problems have not been casing failures, Fitch said.
A cooling-off period
Ironically, hydraulic fracturing appears to have become a victim of its success. Last year, the United States surpassed Russia as the largest producer of natural gas, thanks in good measure to the new technique. But tapping newfound domestic reserves has driven down the price.
With oil selling for more than $80 a barrel, the energy-equivalent amount of natural gas should sell for more than $16 per thousand cubic feet, Jansma said. But natural gas is selling for closer to $3 to $4 per thousand cubic feet, “so people are highly motivated today to use natural gas because it is such a cheap energy source,” he said.
Falling natural gas prices seem to have restrained the frenzy to lease state land. In October, oil and gas companies paid an average of about $17 an acre for leases on state-owned properties, compared with an average of about $1,500 an acre in the May 2010 auction.
As energy exploration companies in Michigan react to the changing costs of oil and gas, Kozma and others have begun a petition drive to amend the state constitution in 2014 to ban horizontal hydraulic fracturing altogether. Other groups in Michigan want tougher regulations and oversight.
“I don’t think that the regulations in the state of Michigan can be fixed to the extent that they would need to be in order to make horizontal hydraulic fracturing acceptable,” Kozma said.
She stressed that her group does not advocate shutting down the oil and gas industry in Michigan, including the fracking of vertical wells in the Antrim Shale.
Bauss said his experience with anti-fracking groups in Michigan leads him to think they are more interested in greatly reducing consumption of hydrocarbon fuels, with fracking serving primarily as “a hook issue.”
“It’s really a straw man or a red herring of sorts that criticizes an industry that has an excellent track record.”