What's (Not) Happening Is Erie

Canada Producing; U.S. Isn't

The reality of significant natural gas potential found in the Great Lakes region of North America continues to emerge, and states bordering the lakes are becoming yet another battleground for the U.S. energy debate.

The "not in my backyard mantra" can be heard from Michigan to New York -- and in Ohio the debate has boiled over and state legislators are lining up to ensure their state's public lands in Lake Erie remain untouched by the drill bit.

But there's a twist to the Great Lakes story that makes it in some ways unique: Canada has been producing natural gas successfully from Lake Erie for years, and many in the United States question why "they" do and "we" can't.

AAPG member Larry Wickstrom, a geologist and supervisor with the Ohio Department of Natural Resources' Division of Geological Survey, made a presentation at the Ohio Oil & Gas Association (OOGA) earlier this year titled "A Fresh Look at Exploration & Production in Lake Erie." That report simply looked at the successful operations in Ontario and estimated the reserves for Ohio's portion of the lake. The report was initiated when the ODNR director requested updated information.

His presentation, however, touched off a media and political firestorm that has overwhelmed a rational energy debate.

"Lake Erie brings to an eastern producing state the intrinsic energy debate that is going on in this country," said Tom Stewart, executive director of OOGA. "This is Ohio's little ANWR, it's the Rocky Mountains and the OCS right here in Ohio -- which happens to be the seventh largest natural gas consuming state in the country.

"But Ohio's governor and legislators are saying we don't even want to discuss what's in our own backyard," Stewart continued. "These public policymakers look to the Gulf Coast and Rocky Mountain states and essentially say 'Our resources are too precious, so you solve your problems and get us natural gas, and by the way we want it cheap.'

"It's absolute arrogance and it displays the problems of discussing energy policy in this country."

Stewart said public perceptions of energy issues are not based on facts but emotionalism.

"For instance," he said, "opponents of drilling in Lake Erie constantly cry 'We don't want our lake covered in oil!' This, despite the 40-year history of Canadian production in which no oil has ever floated down to the shores of Cleveland from the international border.

"We also hear 'We don't want to see derricks on our lake!'" he said, then pointed out that "wellheads are located on the lake floor and nothing is seen above the water.

"The rhetoric is designed to incite hysteria and thwart any reasonable public debate."

The Political Waters

In response to the renewed interest, the Ohio legislature has introduced two bills that would permanently ban drilling in the state's portion of Lake Erie. In the near term Ohio's Governor Robert Taft has no plans to allow any leases or permits, which effectively closes the door on any potential activity in the lake.

"Our organization is simply approaching these bills as an interested party," Stewart said. "Nobody in OOGA has lobbied or tried to persuade any legislator or anybody in the administration to take any action to cause the state of Ohio to grant lease concessions or drilling permits to access oil and gas reserves under Lake Erie. No members are calling for OOGA to conduct a government affairs campaign to gain access to Lake Erie. I know no OOGA member whose current and ongoing business will be damaged or benefited by passage of these bills.

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The reality of significant natural gas potential found in the Great Lakes region of North America continues to emerge, and states bordering the lakes are becoming yet another battleground for the U.S. energy debate.

The "not in my backyard mantra" can be heard from Michigan to New York -- and in Ohio the debate has boiled over and state legislators are lining up to ensure their state's public lands in Lake Erie remain untouched by the drill bit.

But there's a twist to the Great Lakes story that makes it in some ways unique: Canada has been producing natural gas successfully from Lake Erie for years, and many in the United States question why "they" do and "we" can't.

AAPG member Larry Wickstrom, a geologist and supervisor with the Ohio Department of Natural Resources' Division of Geological Survey, made a presentation at the Ohio Oil & Gas Association (OOGA) earlier this year titled "A Fresh Look at Exploration & Production in Lake Erie." That report simply looked at the successful operations in Ontario and estimated the reserves for Ohio's portion of the lake. The report was initiated when the ODNR director requested updated information.

His presentation, however, touched off a media and political firestorm that has overwhelmed a rational energy debate.

"Lake Erie brings to an eastern producing state the intrinsic energy debate that is going on in this country," said Tom Stewart, executive director of OOGA. "This is Ohio's little ANWR, it's the Rocky Mountains and the OCS right here in Ohio -- which happens to be the seventh largest natural gas consuming state in the country.

"But Ohio's governor and legislators are saying we don't even want to discuss what's in our own backyard," Stewart continued. "These public policymakers look to the Gulf Coast and Rocky Mountain states and essentially say 'Our resources are too precious, so you solve your problems and get us natural gas, and by the way we want it cheap.'

"It's absolute arrogance and it displays the problems of discussing energy policy in this country."

Stewart said public perceptions of energy issues are not based on facts but emotionalism.

"For instance," he said, "opponents of drilling in Lake Erie constantly cry 'We don't want our lake covered in oil!' This, despite the 40-year history of Canadian production in which no oil has ever floated down to the shores of Cleveland from the international border.

"We also hear 'We don't want to see derricks on our lake!'" he said, then pointed out that "wellheads are located on the lake floor and nothing is seen above the water.

"The rhetoric is designed to incite hysteria and thwart any reasonable public debate."

The Political Waters

In response to the renewed interest, the Ohio legislature has introduced two bills that would permanently ban drilling in the state's portion of Lake Erie. In the near term Ohio's Governor Robert Taft has no plans to allow any leases or permits, which effectively closes the door on any potential activity in the lake.

"Our organization is simply approaching these bills as an interested party," Stewart said. "Nobody in OOGA has lobbied or tried to persuade any legislator or anybody in the administration to take any action to cause the state of Ohio to grant lease concessions or drilling permits to access oil and gas reserves under Lake Erie. No members are calling for OOGA to conduct a government affairs campaign to gain access to Lake Erie. I know no OOGA member whose current and ongoing business will be damaged or benefited by passage of these bills.

"Even so," he continued, "we don't believe these bills are in the best interest of Ohio."

Stewart cited one oil company that he said will benefit from the enactment of these bills: the Canadian producer currently extracting gas from the lake.

"These bills would give them exclusive extraction rights and deny Ohioans 50 percent of their natural gas reserve base and by far the largest publicly owned resource," Stewart said. "We fail to see how that's wise public policy."

The Historical Perspective

Lake Erie's first offshore gas well was drilled in 1913, and several early wells were drilled using cable tool rigs pushed out onto the ice during the winter. Modern commercial offshore production began in the 1960s and approximately 2,000 wells have been drilled in the lake's Canadian waters.

Currently about 550 gas wells are producing at a total rate of 30 million cubic feet a day. Production goes into a 2,500-kilometer pipeline network that reaches land at five points along the lake's north shore, according to Simon Brame and Keith Gordon with Talisman Energy, the operator in Ontario's portion of Lake Erie.

Gas is piped directly into local transmission or distribution lines and marketed in Ontario and the United States.

Production from Lake Erie, which is in the northwestern part of the Appalachian Basin, accounted for 67.7 percent of Ontario's total gas output in 1999. Annual gas production of 9.9 billion cubic feet of gas in 1999 was valued at $40.2 million, and Ontario received royalties totaling $4 million, according to the Ontario Ministry of Natural Resources.

Talisman acquired the Lake Erie properties in October 1997 following the purchase of Pembina Exploration, which included a 65 percent working interest in production, landholdings, seismic data and infrastructure on and around the lake.

Talisman and partner North American Life have been busy drilling and recompleting wells since the acquisition -- including the start of a successful horizontal drilling program in the lake. Talisman's land holdings currently are about 1.1 million acres in the lake -- a substantial portion of the almost three million acres that make up Ontario's portion -- and the firm has over 5,000 miles of 2-D seismic lines of vintage ranging from the 1960s to today.

Other Challenges

While drilling in Lake Erie has been very profitable for Talisman, the operations are not without their headaches -- there are numerous meteorological, technical and environmental limitations to overcome.

  • Drilling and completion work on the lake is only allowed between the months of May and October due to ice buildups, strong winds and associated large waves in the winter months that significantly hinder operations.
  • Summer storms can account for up to 30 percent of time spent waiting on weather.
  • Oil production is strictly prohibited by provincial policy.

If there is any oil production associated with a gas well, the well must be plugged and abandoned and the license surrendered. Shallow or deeper license rights for gas may be retained and oil rights in the form of a first right of refusal for any future oil leasing rights can be maintained with an annual fee.

"This is particularly frustrating when gas wells with flow rates over one million cubic feet of gas a day are discovered and must be abandoned because of small amounts of oil production," Brame and Gordon said.

Offshore oil, however, can be accessed from land-based deviated or horizontal wells, Wickstrom said. Much of the near-shore Crown land along the shoreline of Lake Erie and Lake St. Clair has been licensed as a result of horizontal well potential.

To date, seven horizontal wells have been drilled under the bed of Lake Erie, and Ontario anticipates that additional horizontal wells soon will be drilled under offshore lands to test oil potential.

Roots of Controversy

The recent controversy is not the first time that potential drilling in Ohio's portion of Lake Erie has been addressed. In 1955 the Ohio Division of Shore Erosion received inquiries requesting information on leasing about four square miles of Lake Erie off Lakewood in Cuyahoga County.

That same year the general assembly passed a bill that amended the Shore Erosion Act to provide for extraction of oil and gas from under the lake, and the Ohio DNR developed an operating procedure for leasing areas and producing oil and gas in Lake Erie, Wickstrom said.

By 1957, however, opposition to offshore drilling swelled and nothing more was done until 1968, when the rules and regulations governing Lake Erie drilling were filed with the secretary of state -- but a large volume of correspondence to the DNR and governor in opposition to lake drilling stopped the program. For several years the Ohio general assembly banned drilling in the lake.

In 1982 the Corps of Engineers' Environmental Impact Statement was released, and the findings indicated, "development of U.S. Lake Erie natural gas resources could be accomplished in an acceptable manner."

That same year the DNR released a policy statement on natural gas drilling in the lake that acknowledged the EIS and accepted it in principle, but stated it wasn't appropriate to drill in Lake Erie at that time. It said: "At such time as gas supplies are obviously in decline and on-land drilling targets have ceased to be viable sources, this position will be open to reconsideration."

In 1985 the eight Great Lakes governors signed a "Statement of Principle Against Oil Drilling in Lake Erie."

How Much Gas Is There?

So just how much gas is likely to be discovered under Ohio's portion of Lake Erie?

Wickstrom's study addressed reserve estimates.

"This estimate of natural gas reserves underlying Ohio's part of Lake Erie's central basin is conservative," he said. "Reserve estimates are based on a total area of the central basin of 1,267,000 acres, 300-acre well spacing, assumed average success ratios and areas and average estimated ultimate recoveries per well for each producing unit."

Wickstrom looked at statewide success ratios for specific reservoir targets and applied that ratio to the acreage under Lake Erie. His study showed:

  • The Devonian Oriskany sandstone has possible reserves of 25 billion cubic feet of gas in the Ohio portion of Lake Erie.
  • The Silurian Lockport has possible reserves of 150 billion cubic feet.
  • The Silurian Clinton/Medina sandstones have probable reserves of 686 billion cubic feet.
  • The Cambro-Ordovician Knox/Black River/Trenton carbonates have possible reserves of 160 billion cubic feet.
  • The Cambrian Pre-Knox clastics and carbonates have possible reserves of 80 billion cubic feet.

That's a total of 1.1 trillion cubic feet of gas -- and that's nearly equal to the 1.18 trillion cubic feet reserve base the U.S. Department of Energy recently said was contained in onshore Ohio.

Probable reserves are those where geologic and reservoir conditions of surrounding areas can reasonably be extrapolated into the subject area. Possible reserves are those where geologic units have produced hydrocarbons in surrounding areas, but geologic and reservoir conditions cannot be extrapolated into the subject areas.

The Ohio portion of Lake Erie's central basin could produce about 20 billion cubic feet of gas a day, Wickstrom said, which is about 20 percent of the gas currently produced by Ohio's onshore fields and about 2 percent of the state's annual consumption.

The real question mark in terms of potential is the deeper formations such as the Trenton-Black River, in which several major discoveries have been made recently throughout the Appalachian Basin, and the Knox Group, which has been very prolific onshore in Ohio.

"If we were to find significant trends of those units within the lake," Wickstrom said, "then the reserves could balloon significantly from the conservative estimates we have calculated."

There are certainly indications that the Trenton-Black River could be productive under the lake. Ontario had some of the earliest production from the Trenton-Black River on the lake's north shore, and CGAS recently made a new field discovery on the lake's banks in Ashtabula County, Ohio, that is producing gas from the Trenton-Black River.

Pete McKenzie with CGAS said the field is producing from nine wells and the firm conservatively estimates reserves for the field at eight billion cubic feet of gas.

"It's just a matter of connecting the dots," McKenzie said. "There's Trenton-Black River production on the north shore and the south shore, so naturally the potential under the lake is substantial."

Meanwhile, In Another State ...

Of course, Ohio isn't the only Great Lakes state studying the potential underlying the lakes. Michigan is the more progressive state in terms of moving toward possible drilling under the Great Lakes.

While state law prohibits any offshore drilling, Michigan has allowed directional drilling from onshore.

Between 1979 and 1997, 13 oil and gas wells were directionally drilled beneath the Great Lakes in Michigan. Seven of the wells are currently producing and have a safe operating record with little opposition to the wells.

But in 1997, when a company proposed to drill three new wells, public opposition rose. Critics claimed that directional drilling posed an unacceptable pollution risk to the lakes and interfered with the shoreline esthetics, according to a briefing by Harold R. Fitch, chief of the geological survey division of the Michigan Department of Environmental Quality.

The Michigan Environmental Science Board quickly reviewed the issue of directional drilling at the governor's request and reported that the risk of a direct release of oil or other contaminant to the waters of the Great Lakes was negligible and did not recommend a ban on drilling under the lakes.

The Michigan Department of Environmental Quality and the Department of Natural Resources immediately implemented the board's recommendations, which included a 1,500-foot setback from the shoreline, prohibits wells in sensitive coastal environments and sets other special restrictions. The DNR currently is reviewing its leasing procedures.

Revenues from leasing and royalties for wells beneath the Great Lakes have contributed more than $13 million to Michigan's Natural Resources Trust Fund.

Directional drilling would certainly be a viable alternative in Ohio as well, but even drilling beneath the lake from onshore locations is meeting with severe opposition.

Wickstrom estimated recoverable natural gas reserves that could be tapped by land-based directional drilling under the Ohio portion of Lake Erie's central basin. His "conservative reserve estimates" encompass 126,700 acres beneath the lake accessible via directional drilling with 160-acre well spacing.

Under these conditions the total reserve potential is 187 billion cubic feet of gas.

"Directional drilling has been an important technology for Ohio producers in recent years, primarily due to urbanization," said OOGA's Stewart. "Companies have even drilled under man-made lakes owned by the Army Corps of Engineer, and these wells certainly demonstrate the safe technology and methodology of directional drilling.

"Despite the overwhelming evidence of these safe drilling practices," Stewart continued, "policymakers refuse to even discuss the possibility of accessing a large part of Ohio's resources."

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