History of the Oil and Natural Gas Industry in Michigan | Clarke Historical Library (2023)

While much of the nation and majority of Michigan residents suffered from the Great Depression of the 1930's, the oil and gas producing areas fared significantly better. Cars still used large amounts of gasoline, while many homes still needed kerosene for lighting. Oil was still making money, and many Michiganns were reaping the benefits of an actively growing oil field. During the Great Depression, oil and natural gas were discovered in twenty-three counties in Michigan's Lower Peninsula.

Michigan produced approximately 160,384,000 barrels of crude oil between 1929 and 1941. With an average well price of $1.04 per barrel, this oil pumped $166,592,000 into the Michigan economy. In addition, natural gas production in Michigan was approximately 80.67 billion cubic feet at an average price of about one nickel per thousand cubic feet (Mcf) to inject an additional $4,306,990 into Michigan's economy. All in all, the well value of oil and natural gas in Michigan during the depression years reached about $170,898,990, or $2.274 billion in 2005. The cumulative effect of wage, income, and property taxes not only on the oil and gas exploration and manufacturing industry but also to oilfield supply and service companies partially offset the staggering economic losses caused by the slump in automobile sales.

Production in the 1930s

In the 1920s, Michigan demonstrated that it had significant oil reserves and could become an oil-producing state. With 65 oil and natural gas field discoveries between 1930 and 1939, Michigan began to recognize this possibility. Norman X. Lyon, longtime editor of theMichigan Oil & Gas NewsThe magazine rightly dubbed the decade "the fabulous 1930s." No wonder the decade was called "fabulous," considering the three key discoveries.

The Porter Field, 1933

Porter Field, southeast of Mt Pleasant Field, was discovered in 1933 and would prove to be the largest discovery of the decade. As early as 1931, wells were being drilled in Porter Township, Midland County. With only modest initial results and several dry holes, the prospects for a major find seemed slim. In 1933, however, the Otway 2 fountain came in as a huge gush. With a capacity of 3,200 barrels per day, everyone in Porter Township suddenly wanted to drill. The field was dominated by Pure Oil Company (later Union Oil Company, now UNOCAL), but with 55 percent of the acreage held by independent companies, there was room for others to join the action. Over 50 million barrels of oil have come out of the field, the second most productive in the state.

Porter Field also played an important role in early experiments to increase oil flow. Because the porosity of oil-bearing rock can vary, oil sometimes flows out of the rock very easily, while sometimes the oil flows out with great difficulty. Oil producers have developed a number of techniques to "stimulate" well production by increasing the porosity of the rock. One way to achieve this is by pumping acid into a well. This technique is particularly successful when used on limestone or similar rock that is easily dissolved by acid. On February 11, 1932, the world's first souring treatment to stimulate well production was performed at Pure Oil Fox #1, Chippewa Township, Isabella County (in the Mt. Pleasant Field). According to legend, the acid was injected with a garden hose borrowed from a workman's house. Dowell, a large firm engaged in oil well stimulation, was born.

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The Crystal Field, 1935

Inspired by the Northwest Edmore and Day fields discovered in 1933, J.W. Leonard, Jr. received approval in the spring of 1935 to drill at Otto and Goldie Durbin #1 on Section 11-10N-5W, Crystal Township, Montcalm County. The hole was drilled by James Leonard (Walter's older brother) of the Leonard Drilling Company. Pure, Gulf and several independent companies reportedly owned acreage in the area and allegedly had whispered interests in the Durbin well site. But everyone seemed to want someone else to take the risk of drilling the first test well.

Four feet in Dundee, at 3,197 feet, drilling was halted to allow testing to be conducted. Estimates go from 20 to 30 barrels of oil per day with some water. Testing lasted about a week, then it was decided to drill deeper. Several experienced oilmen felt the decision was "a waste of time on a well that wouldn't do much". On the morning of March 28, 1935, they were proven wrong.

After drilling just six inches deeper, the well roared and broke loose with a seemingly endless gush of oil. Leonard's Durbin #1 well struck the cable tools drilling the well into the nearly 3,200-foot shaft with such force that the oil saver and control head were shattered. The bubbling fountain was sealed 23 hours later. The well was evaluated at an open flow production rate of 3,594 barrels per day. The entire state was producing 37,000 barrels a day, so the announcement that a well was producing 3,500 barrels a day got people going and sparked one of Michigan's biggest "booms." Within a week, 30 drill sites were planned in the area. By June, Crystal Field production for the month had reached 290,000 barrels of crude oil. In later years Crystal's development expanded to approximately 2,000 acres and there were 195 active wells in the Crystal Dundee and Traverse pools. Together they would produce more than 8 million barrels of crude oil.

The Crystal development was so large that it eventually brought new independent refineries into the state and the first oil pipeline to ship Michigan production out of the state (Sohio-Roosevelt's 8-inch Mt Pleasant to Toledo, Ohio pipeline). Walter McClanahan's Midwest Refinery was one of the Crystal-born refineries that was eventually acquired by and merged with J. Walter Leonard, Jr.'s Leonard Refinery to become TOTAL Refinery, sold to Diamond Shamrock, and finally in the late 1990s years was closed.

Bloomingdale, 1938

The village of Bloomingdale in Van Buren County was established on May 23, 1870 along the Kalamazoo and South Haven Railroad. It was originally a timber center. After the trees were cut down, it became an agricultural community. The city's first sixty-eight years were similar to dozens of small Michigan towns. All that changed in August 1938 when Fisher-McCall, an independent Michigan oil and gas exploration and production company, came to town to drill at the Wiggins farm near Bloomingdale.

Allegan County, north of Bloomingdale, made national headlines in 1938 as drilling increased for oil discoveries in the shallow (1,000 to 1,500 feet) Traverse Formation of southwest Michigan. Amidst all this publicity, Fisher-McCall received their drill permit for the Wiggins Estate #1 well in the last week of July 1938 with little fanfare. However, the project soon made headlines that eclipsed previous newspaper reports. mid-August, theMichigan Oil & Gas Newsannounced in double headlines "BARREL A MINUTE WILDCATS OPEN TWO MORE TRAVERSE LIME FIELDS" and spoke of oil field discoveries near Overisel, Allegan County and the Wiggins Bloomingdale discovery.

As with the Crystal Field, the rush was great, but this time in a small town and not in open country. Leases were signed, drilling permits obtained, rig crews and various other oil people moved in, and life in Bloomingdale moved at a much faster pace than ever before.

The Bloomingdale field would eventually drill 437 wells, 45 of them on 80 acres of town lots within Bloomingdale's village limits, and produce more than ten million barrels of oil. Virtually every space not occupied by people and houses saw an oil rig take root as people signed mineral leases in their backyards and drillers placed rigs as close together as possible. More than 11 percent of all wells ever drilled in Michigan, 5,400 out of more than 50,000 statewide, were drilled in Van Buren County and neighboring Allegan County between 1930 and 1939. Development in this area has been so rapid and reckless that both oil people and state regulators agreed that legislation to rationalize and regularize drilling is needed. The result was the Basic Law, enacted in 1939, which still serves today as the basis for regulating drilling activity in the country.

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As with the crystal field, so much oil led to the construction of refineries. Two refineries were built in Bloomingdale, the Erie Refining Company and the Fort-Dalo Oil and Refining Company, both peaking in throughput in the 1,300 to 1,500 barrel range. The refineries supplied hundreds of thousands of gallons of gasoline per month to Kalamazoo District companies and heating oil to dealers during the rationing period of World War II. They closed in the late 1940s.

Natural gas in the 1930s

Early in the oil industry, finding natural gas was seen as a minor side effect of the actual work of finding oil at best, and a nuisance at worst. However, in the 1930s, major gas finds changed the attitude of the industry.

ThatPioneer of the great rapidsNewspaper, in an editorial dated December 30, 1933, headlined "Natural Gas Field Opened in 1933" and opening with the statement "A meteoric rise from a position of total darkness to the center of attention in Michigan's natural gas development, which revived visions of industrial progress long since its other natural resources (lumber) were abandoned, lends itself to claim the lion's share of attention in Mecosta County's progress story for the year.Pushed in the spotlight by gas strikes in the Austin Township, which has been established as probably the most important field in the state, Big Rapids and Mecosta County have attempted to formulate plans for industrial recovery that will mark 1933 as the beginning of a new and prosperous era such as the community has never seen before has experienced.

The discovery of natural gas in the Michigan Stray Formation in March 1933 by the Taggart Brothers at a depth of 1,380 feet was the basis for thePioneersHeadline. The Taggart discovery happened despite the popular belief that there was nothing to discover under Mecosta County. A number of unsuccessful wells had been drilled in search of oil. According to local reports, many companies and individuals had abandoned their oil and gas leases in Mecosta County "feeling that there were no such resources in the county." Conventional wisdom was wrong and the success of the Taggart Brothers led to a spate of drilling, with the Austin Township Michigan Stray Formation reservoir eventually producing 6.2 billion cubic feet (Bcf) of natural gas from 127 wells on 3,970 acres. Eventually, more than 1,000 wells would be drilled in Mecosta County in search of oil and gas, resulting in 35 oil or gas fields that have collectively produced over 10 million barrels of oil and more than 22 Bcf of natural gas.

The Six Lakes field eventually became a cornerstone of Michigan's rise to become the nation's largest natural gas deposit, with the largest natural gas storage capacity of any state in the Union. In 1941, the vacated site found new life as a 13 billion cubic foot capacity gas storage field. American Natural Resources (ANR), the parent company of Michigan Consolidated Gas, was a pioneer in offshore drilling on the Louisiana Gulf Coast. The company built a huge natural gas pipeline to deliver gas from the Gulf Coast directly to the Six Lakes Field.

In 1935, a reservoir in the Salina-Niagaran Formation of Livingston County was discovered at Howell, Livingston County. The Howell field produced no oil but produced more than 21 billion cubic feet of natural gas before being converted into a natural gas storage field in 1962.

Industrial Collaboration: The Michigan Oil & Gas News and the Michigan Oil and Gas Association

With proposed and ongoing projects throughout Michigan's "oil field," the oil industry needed a way to keep up with the action. Local newspapers filled part of the information gap, but local newspapers were naturally uninterested in the broader, national story. Additionally, local reporters lacked real knowledge of the industry to filter true events from the promoter's hype.

John Murphy, Jim Dunnigan, Lou Aaronson and Danny Miller, with the support of financial partners, published the first edition of theMichigan Oil & Gas Newson June 20, 1933. Along with a number of field stories, the front page of this first issue (in broadsheet newspaper format) contained a message from the owners stating: “We wish to provide you with a service that you require; In return, however, we expect moderate remuneration and your enthusiastic support. An honest life and a sense of having served, and well, are all the rewards we seek.

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Dunnigan, Aaronson, and Miller were college friends at what is now Detroit's Wayne State University. Miller's father encouraged her to start an oil report newspaper. Murphy was a Mt. Pleasant resident whose early thoughts and education were focused on a career in teaching or the priesthood. Lindy Davis joined the publication in the mid-1930s, as did Norman X. Lyon in 1937. Lyon and Davis both came from the local Mt Pleasant newspaper, Davis later worked for theGrand Rapids-Presse. Lyon took the job to "fill in for a while". "A while" turned out to be a very long time. From 1937 to 1972 Lyon was alternate editor of theoil newsand theMt. Pleasant Daily Times News, the local newspaper. After retiring, he worked as a contributor to Oil & Gas News until his death in 1991.

Early in the game, Murphy decided that the future of the oil and gas industry looked good enough to expand the publication. This was followed by founding and selling the warehouse to buy a printing shop. In due course the printing press was purchased and installed in the upstairs rooms, a move Murphy soon came to regret. The equipment shook both the newspaper building and the surrounding area so badly that they were forced to quickly find a ground floor location. In a very short time, land was purchased on North Frankin Street and a building was constructed.

Also involved in the early stages of publication were:

  • Don Carr, covered the shallow traverse booms of Bloomingdale, Salem and Grand Rapids from 1937 to 1942. Carr later edited the publication from 1947-1957 while Lyon took over as editorDaily newspaper news.In 1967, Carr became editor again for a few months while Lyon was recovering from lung cancer surgery.
  • Bob Breed, a graduate geologist who joinedOil and Gas Newsas the Bloomingdale boom took off. Breed and Carr explored southeast Michigan for the publication. Breed later looked into Sohio and Smith Petroleum before getting into consulting.

The Franklin Street site served theOil and Gas Newsfor almost forty years. During this time, Murphy was editor, and Lyon and Carr alternated editors. By 1972, both Murphy and Lyon had reached retirement age. Now, the co-owners of the publication, they tried to sell the newspaper, but without much luck. There was a chance that the newspaper would simply stop appearing.

The Michigan Oil And Gas Association wasn't necessarily interested in being in the publishing business, but it was interested in keeping alive the weekly communications "glue" that the magazine provided. MOGA bought the publishing rights to theOil and Gas Newsin December 1972. For a few months the publication ceased printing, but in March 1973 Jack R. Westbrook was hired as manager and editor. The newspaper resumed publication in April. Dick Bolton, fresh from CMU after serving in the US Air Force, was hired in June of that year to assist Westbrook and edited the publication until 1981 when Bolton left the publication. Bolton works for them nowBergPleasant morning sunas a photographer and columnist. Ironically, in 1982, Scott Bellinger was presentMOGNEditor, left themorning sunto joinOil and Gas News. In 2002, Westbrook retired to become "contributing editor" and Bellinger replaced Westbrook as the publication's senior editor.

Over the past 20 years, the publication has:

  • Conduct educational series of articles on various aspects of the industry to edify other factions in the industry as well as the public.
  • The development and further development of the Michigan Natural Resources Trust Fund is reported in detail and more completely than any other publication.
  • Publish papers and guest articles from industry experts on innovations within or impacting the industry.

In addition, the Michigan Oil & Gas News:

  • Published Michigan geological maps, well maps, and pipeline maps for industry and public education.
  • Published two books on the history of petroleum exploration and production in Michigan
  • Educated the public on the history of petroleum exploration and production in Michigan by having employees speak to civic, educational, and industry groups.

Die Michigan Oil and Gas Association

Before founding what is now the Michigan Oil And Gas Association, a group of petroleum professionals in the Muskegon area formed an organization in 1928 to push for higher crude oil prices. E. J. Bouwsma, an employee of Muskegon Oil Company, was the group's president. However, when the boom in Muskegon subsided and the 1928 Mt. Pleasant Field became the focus of the industry, the Muskegon-based association disappeared.

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However, the troubles plaguing the Muskegon oil producers, particularly overproduction that led to plummeting crude oil prices, soon became a problem in the Central Michigan Fields. To deal with these problems, central Michigan producers, along with those from Muskegon and Saginaw, met in Mt. Pleasant and formed the Oil and Gas Producers Association in 1931. This association was dissolved when its leaders decided to reorganize with a broader membership base and a better dues structure.

This broader, better funded organization was called the Michigan Oil And Gas Association. At a meeting on November 27, 1933, the newly formed MOGA elected Howard D. Atha of Gordon Oil as President.

Government regulation and revenue

Key changes during the Great Depression included the beginning of significant government regulation of oil and gas exploration and the development of new government revenue streams that depended on that regulation. In 1927, the state legislature first passed a law specifically regulating the oil exploration industry. The head of the state Department of Conservation has been appointed Supervisor of Wells. The supervisor had multiple responsibilities related to sinking, drilling, deepening and capping oil wells.

The same law required drillers to obtain state approval before beginning any project. Permit #1 was issued September 27 by the (then) Michigan Conservation Department for a well drilled by the Logan Oil Company in Logan Township, Mason County. A total of 16 drilling permits were issued in 1927. Since 1927, the number of drilling permits issued has become a quick way to measure exploration activity. Boom years were counted when the number of permits issued exceeded 1,000. This happened 14 times, with extensive "streaks" between 1939-1941 and 1981-1983. A record 2,024 drilling permits were issued in 1992. Around 57,000 permits have been issued to date.

In addition to trying to regulate oil drilling, the state turned to exploration as a source of much-needed revenue. Much earlier, the state had passed the Public Domain Act of 1909, which separated surface and mineral rights to state lands and gave the state "mineral, coal, oil or gas" rights to any land sold by the state. The concept of leasing government-owned mineral properties for oil and gas exploration became a serious problem after the discovery of oil at Saginaw in 1925. In 1928 the State Conservation Commission passed a policy requiring those applying for a lease to submit a written application and agree to pay a lease fee of fifty cents per acre per year, which stipulates that except in exceptional circumstances, no lease for less than five acres and that the leases would run for a period of five years. The applicant was also required to demonstrate adequate financial support and operational experience to complete the project both "intelligently and efficiently".

The idea of ​​awarding fixed-price leases soon gave way to the concept of auctioning leases for oil and gas exploration. On December 30, 1929, the first public auction of oil and gas leasehold rights to state minerals was held in Lansing. Rental auctions in the 1930s helped propel the state through the difficult financial times of the Depression. In what is now the 221st auction history of the state lease, offers have ranged from just 46 acres to 583,241 acres. The lowest average total lease auction bid of 3/10ths of a cent per acre was in August 1932, while the highest average total auction bid was in August 1981 of $316 per acre. In all, the State has offered oil and gas leases rights to a total of 13,223,215 acres of State-owned minerals on the public auction block, with some of the land being offered more than once as leases expired or the land was sold without a bid in the first offering. Of this total offering, 8,854,039 acres (66.95 percent of the offering) were successfully leased for a total of $165,291,662. This has resulted in an overall average of $18.67 per acre.

Lease auctions are just the start of cash flow for land and mineral owners when commercial quantities of oil and gas are found. Lease premiums and lease payments are payments to the mineral owner for the right to explore for oil and gas on their mineral property. If none are found, the owner of the minerals becomes richer for leasing them. When recoverable oil and gas is found, the mineral owner's revenue stream for the life of that production begins. In the case of the state, of course, there are tax revenues in addition to this income. Leasing of state minerals has provided a constant source of income for the state and all of its citizens.

After the discovery of Bloomingdale and the drilling craze of 1938, the Michigan Oil and Gas Association (headed by independent petroleum producer/explorer Harold M. McClure, Sr.) of Alma, which represents the oil and gas industry, and the state regulators of Michigan in the interests of energy conservation and safety, helped establish rules and procedures. The most important of these established a minimum well spacing of one well per ten acres and introduced mandatory production proportioning that limited the daily production rate of the wells in order to preserve the reservoir's natural dynamics and extend the reservoir's effective productive life.

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The Michigan legislature incorporated these rules and regulations into law through Michigan Act 61 (Michigan's "Oil and Gas Law") of 1939. The law was considered a classic oil regulation. Act 61 was updated and supplemented by the Natural Resources and Environmental Protection Act (Act No. 451 of the Public Acts of 1994), which continues to serve as the primary regulatory instrument for Michigan's oil and gas exploration and production industry.

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