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September 4, 2013

Rochester could be next target for oil, gas exploration

By Mary Beth Almond
C & G Staff Writer

ROCHESTER — Rochester could see oil and gas development in its future.

Representatives from Jordan Development Co. and West Bay Exploration Co., both of Traverse City, recently approached the city in the hopes of leasing the oil and gas rights on city-owned properties, including parks, trails, parking lots and other land.

Because the agreement would be a non-development lease, Ben Brower of Jordan Development Co. said no activity of any kind could occur on the surface of any city property. Instead, he said, crews would get approval from private property owners up to two miles away from the target to drill down 3,000-4,000 feet and then drill horizontally over a mile or two to get to the source. He stressed that hydraulic fracturing, otherwise known as “fracking” — a process in which fractures in rocks below the earth’s surface are opened and widened by injecting chemicals and liquids at high pressure to extract natural gas or oil — would not be used. Environmentalists link fracking to the contamination of groundwater and risks to air quality.

“Hydraulic fracturing, even though we don’t believe it’s something bad to do, we don’t need to do here, so we will have no problem putting in our lease that we’re not going to be doing hydraulic fracturing,” Brower said.

Under the terms of the lease, the city would be paid $150 per acre to lease the rights to the roughly 100 acres targeted by the companies, which have five years to find oil or gas. If they are successful in doing so, the lease becomes indefinite and the city would be paid a one-sixth royalty — the same amount given to the state and that Rochester Hills agreed to in the spring — until the well is plugged. Property owners would receive a royalty of around one-eighth until the well is plugged.

“We can make 200 barrels of oil per day and about 200,000 cubic feet of gas per day. That’s the maximum the state will allow us,” said Brower.

Before the location — or locations — of the drilling operation and subsequent pump used for extraction is identified, seismic testing must be done.

“Using seismic technology, our company is able to identify reservoirs where we think that there is a potential for oil or gas,” said Pat Gibson of West Bay Exploration. “We can’t tell, with today’s technology, if there is actually oil in the ground until we drill … so the beginning phase is running these seismic tests, coming and leasing interested land owners, and then we move forward into possibly more seismic testing or possibly a drilling phase.”

Two years ago, the companies started leasing land in Oakland County, which Brower said has plenty of gas and oil potential.

“Since about 1960, when the first well was drilled in Oakland County, there has been about 7 million barrels of oil produced here and 50 billion cubic feet of natural gas,” he said.

In fact, a 2003 gas well drilled on a 40-acre site near Crooks and Square Lake roads has generated nearly $10 million in royalties, Brower explained. 

“We have about 35,000 acres leased so far in the county. We actually drilled a couple of wells in the county, as well — we drilled two wells over on the Indian Springs metro parks just recently, and we’re testing those wells as we speak,” he said. “We have permits in for a couple more wells, and hope to continue drilling here with some success.”

Following a presentation from Brower and Gibson Aug. 26, the Rochester City Council agreed by consensus for administrators to continue talks with the companies regarding the lease, which City Manager Jaymes Vettraino said the council would likely consider during its Sept. 9 meeting.

You can reach C & G Staff Writer Mary Beth Almond at malmond@candgnews.com or at (586)498-1060.