New Michigan Laws Could Revive Dormant Oil and Natural Gas Wells. But Is This Safe?
By Keith Matheny
New state laws enacted Tuesday could give old, no-longer-productive oil and natural gas wells in Michigan a new life -- injecting carbon dioxide gas into them to force up more product.
But that could lead to an all-new network of pipelines in Michigan transporting carbon dioxide to the wells. And that causes landowners like Livingston County resident Beth Duman to cringe.
Duman and her husband, Bob, had, in her words, "a foreign army in our backyard for a year" at their home on Sue Drive in Oceola Township, as Canadian oil transport giant Enbridge replaced a large natural gas transmission line across the Lower Peninsula.
"Basically, we did not have use of our property for a whole year," she said. "Part of that time, we couldn't access our barn to get firewood. One day I had to abandon my car and walk my dogs home across a little metal plank. It was so invasive."
It's a scenario that could play out again in other parts of the state because the new law gives developers the right to use condemnation to site their pipelines over the objection of landowners. Another contentious issue is the new law's tax break to oil and gas developers that many Democratic lawmakers characterize as a giveaway to a profitable industry at the expense of middle-class families and core functions such as education.
"It's baffling to me that while we struggle to fund the most basic services in this state -- fixing Michigan's crumbling, pothole-ridden roads, funding education and investing in our cities -- the Republican majority insists on giving away our precious tax dollars to wealthy oil and gas exploration companies," said state Sen. Coleman Young II, D-Detroit.
Supporters of carbon dioxide-enhanced oil recovery say it will provide hundreds of millions more barrels of oil and gas through existing wells, while depositing deep underground carbon dioxide, a greenhouse gas, that would otherwise go into the atmosphere.
"It's a win for the environment, a win for domestic energy production and a win for the state economy and jobs," said state Rep. Aric Nesbitt, R-Lawton, a co-sponsor of the bills.
But even environmental groups, who largely are focused on weaning America and the world off fossil fuels to combat climate change, are split on the new law. One side sees value in sequestering carbon underground, while others see it as promoting a polluting industry.
"There's a chance to put CO2 underground and store it there forever, that otherwise would be emitted into the atmosphere," said George Peridas, a scientist with the nonprofit Natural Resources Defense Council, which supports carbon dioxide-enhanced oil recovery.
The Michigan Sierra Club opposes the new laws.
"This law hurts taxpayers, landowners and threatens water supplies while giving taxpayer handouts to the oil and gas industry," said Mike Berkowitz, legislative director for the club's Michigan chapter. "Giving tax breaks to the oil industry that is putting our water at risk while they make record profits is just plain wrong."
One of the bills signed into law by Lt. Gov. Brian Calley on Tuesday gives developers placing carbon dioxide pipelines the same rights available for oil and gas pipelines to use eminent domain and condemnation to attempt to compel landowners to allow pipelines on their land.
"You run into some situations where a person is not agreeable, you can't negotiate with them," said Harold Fitch, who directs the Michigan Department of Environmental Quality's Office of Oil, Gas and Minerals.
Oil and gas developers "need a mechanism to say, 'This is for the public good' and get a court order for an agreement," he said. "I understand people's concerns about having a pipeline through their property or their vicinity. There's risks to everything we do that way. But CO2pipelines are less of a risk because it's nonflammable and non-explosive."
The procedures already allowed for oil and gas pipeline siting weren't much help to Duman and her neighbors, she said.
"The MPSC did nothing to stand up for us; nothing at all," she said, referring to the Michigan Public Service Commission, the state's utility regulator and the initial stop for pipeline right-of-way consideration.
Those of Duman's neighbors who chose to contest the Enbridge natural gas pipeline were still tied up in court nearly two years later, she said.
"We tried our hardest to use the system to protect ourselves," she said. "But we found there was no protection. They did what they wanted to do, when they wanted to do it. We were just blips along the way."
Push out more oil
Carbon dioxide-enhanced oil recovery has been done in west Texas and a few other parts of the U.S. for decades. It uses pressurized carbon dioxide gas injection into existing wells that are no longer productive by primary drilling methods, Nesbitt said.
"If you shake up a pop can and crack open the can, 25% to 30% of the pop will come out -- that's the traditional method for oil and natural gas extraction," he said.
"By flooding these formations with carbon dioxide, you're able to push another 15% to 20% out of these wells."
It could mean recovering an additional 150 million barrels of oil in Michigan through existing wells, Nesbitt said. The practice could also capture and store underground carbon dioxide -- a greenhouse gas -- from coal-fired and natural gas power plants, cement companies and other sources that would otherwise go into the atmosphere, he said. Michigan could even become a CO2 dealer for industries that need it, he said.
Michigan's severance tax is typically 5% of the gross cash market value of total production of gas in the proceeding month, or 6.6% of the gross cash market value of oil. One bill passed by the Legislature puts the severance tax at 4% for oil and gas developers using carbon dioxide-enhanced oil recovery, a rate similar to the one set for marginal wells that don't produce much, Nesbitt said. "It's more capital intensive, it costs more and it takes more time," he said. "This puts us in a more competitive place in attracting development and exploration here in Michigan."
Democratic state Rep. Thomas Stallworth III of Detroit joined Republicans in sponsoring a bill in the package.
"I was interested in this because it seems to me there was a strategic opportunity to get out in front of an emerging economy and for Michigan to be a leader," he said, adding that carbon dioxide injection "is a more environmentally friendly process than fracking, where we are injecting liquids into the ground that can end up in our water and groundwater systems."
An analysis by the nonpartisan Senate Fiscal Agency said the measure's impact on state revenue is unknown. If it causes oil and gas production that wouldn't have otherwise occurred, revenue will increase; if that production would have occurred without the tax break, state revenue will drop, the analysis stated.
Revenue from the oil and gas severance tax, which goes into the state General Fund, totaled $59.5 million in fiscal year 2012-2013, and was estimated at $62 million for this fiscal year.
Reefs dried up
Traverse City-based Core Energy has seven active fields in Otsego County where it's using carbon dioxide-enhanced oil recovery on the Niagaran reefs, geologic formations about a mile underground.
"These reefs were mostly discovered in the 1970s and have given up all they are going to give up through primary well production methods," said Core Energy CEO Bob Mannes.
The company is using carbon dioxide occurring naturally in other natural gas wells -- gas that needs to be removed in order to use the natural gas for businesses and homes.
"Rather than it being vented to the atmosphere as it used to be, we're capturing CO2 and putting it back in the ground," Mannes said.
The severance tax break makes Michigan more competitive with other states also exploring CO2 injection, though Mannes said it's not likely to change the hiring outlook of his company, which has 14 workers.
Though carbon dioxide is nonflammable, it can cause asphyxiation if concentrated in an area. Mississippi last year levied one of its largest fines ever to an oil and gas exploration company, Denbury Resources, after a large, uncontrolled carbon dioxide blowout occurred on one of its wells, with the gas reaching the surface. A farm in Saskatchewan, Canada, situated near where oil and gas companies had injected more than 13 million tons of carbon dioxide found dead animals and groundwater bubbling to the surface in 2011. "What's missing here is the set of regulations that will ensure when you put CO2 in an oilfield, it will actually stay down there," Peridas said.
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