Research and development, combined with legislative incentives, have demonstrated that increased development of Michigan's energy resources can provide valuable economic benefit to the state. The Michigan Geological Repository for Research and Education, located in southwestern Michigan, and associated with Western Michigan University, provides technology transfer to help encourage development and efficient management of Michigan's valuable energy resources.
Introduction to Oil and Gas Activity in Michigan
The oil and gas industry in Michigan plays a very important role in the state's energy resources, natural environment and economy. Cumulative Michigan oil production approached 1.34 billion barrels by 2015 and total gas production now exceeds 8.0 trillion cubic feet. This places Michigan as the 19th oil and gas producing state in the nation.
With a few exceptions, Michigan's oil and gas operators have done a good job in developing our state's energy resources while maintaining the integrity of the natural environment. In many cases, the oil and gas industry has been the leader in developing technologies to protect the environment and enhance oil and gas recovery at the least environmental risk. Development of the resources in the Pigeon River State Forest is a typical example. The economic benefit of these resources to the state cannot be denied; average wellhead value of the oil and gas produced during the 30 year period from 1980 to 2010 is estimated to be slightly over $1.01 billion per year. Private royalty owners typically receive 12.5 percent, and the state of Michigan typically receives 16.7 percent of the net wellhead value. Over $68 million in taxes and fees were paid to the state of Michigan in 2010.
Michigan’s oil and gas production has been declining during the past several decades. Oil production reached a high of 34.7 million barrels in 1979 and declined to just over 6.1 million barrels in 2007. This 82.4 percent decline in 35 years was due largely to diminishing reserves and fewer new plays. New play concepts and the application of current technologies reversed that decline somewhat in the next six years, and annual oil production increased to just over 8 million barrels in 2013. New reserves were also developed in natural gas, resulting in an increase in gas production from 141 billion cubic feet in 1986, to 305 billion cubic feet in 1997.
Throughout the long history of energy production in Michigan, research, combined with creative approaches by industry members, has resulted in the sustained development of Michigan's energy resources, yielding enormous economic benefits to the state. MGRRE’s role in research and industry outreach has promoted new ideas and current technology applications that support responsible exploration, development and efficient management of Michigan's valuable energy resources. However, recent precipitous drops in the commodity price of oil and natural gas have curtailed production and development for both oil and gas since mid 2014. In 2014, oil production dropped to 6.9 million barrels and gas production was just over 113 billion cubic feet.
More information about the economic impact of Michigan oil and gas operations is available from the Michigan Oil and Gas Producers Education Foundation.