Michigan may reap gas fortune

They call it "the shale gale": a welcome storm that blew full force into Michigan last week when bidders paid $178 million for state land leases. In Michigan, that's a Texas-sized oil and gas sale, reaping in one day nearly what the state collected in total over the previous 81 years.

Even as the state invests millions in alternative energy, Michigan already may be sitting pretty, poised on the cutting edge of another energy revolution.

It looks as if Michigan is loaded in a ready-to-go energy resource -- natural gas locked deep in a shelf of shale almost two miles down. Daniel Yergin, a Pulitzer Prize-winning author and energy expert, calls new technology to extract natural gas "the biggest energy innovation of the decade."

In the Michigan oil and gas world, the buzz centers on a single well in Missaukee County -- a county just 8 miles east of Cadillac -- drilled by the Canadian oil giant Encana last fall. With no history in Michigan, the company moved in quietly in 2008, acquired 250,000 acres, and then chose a spot in Pioneer Township on the so-called Collingwood Shale.

Encana drilled down 9,500 feet, then 5,000 feet horizontally, a technique that enables the driller to tap into a deep reservoir and then capture gas in an almost mile-long swathe.

On the strength of that single well, which produced 2.5 million cubic feet of gas a day, natural gas fever hit the state.

Oil and gas lawyers began getting calls, from out-of-state interests and from rural property owners hoping to become the next Jed Clampett -- "from the J.R. Ewings to the Beverly Hillbillies," as one lawyer puts it.

"For the land owner, it's a lottery ticket that could have real legs to it, but you don't know until the drill bit hits," says Lawrence Elkus, a Farmington Hills lawyer who specializes in oil and gas.

Encana isn't the only company betting on Michigan. One bidder, David McGuire, paid $140 million for leases at last week's state sale, at prices up to $1,500 an acre -- 10 times what Encana says they paid for land.

"It's unlikely that this is just a flash in the pan," says Dan Yohe, chairman of the Michigan Oil and Gas Association.

Environmentalists warn that crushing the shale layer --"fragging" is the term of art -- can potentially contaminate the water table. "There are concerns that need to be explored," says Hugh McDiarmid Jr., spokesman for the Michigan Environmental Council.

But the state is already $178 million richer than it was before May 4 (most of the money is targeted by law for the state's natural resource trust fund).

"It blows my mind," says Yohe, who says about 10,000 people are employed in the Michigan oil and gas industry. "A lot of us were thinking about leaving because we had just about run out of gas and oil here."

He foresees up to 10 new wells being dug this year -- each at a cost of about $5 million and more. He ticks off jobs in hotels, welding, pipefitting and feeding the crews on the rigs.

Natural gas production isn't as sexy as creating new hydrogen battery technology, and it's not as clean as wind or solar power. But if Encana's investment bears out, it likely means new jobs right here, right now.

Laura Berman writes in Metro on Tuesday and Thursday. Reach her at lberman@detnews.com">lberman@detnews.com or call (313) 222-2032