Michigan's Sudden Bonanza

By Christopher Byron

Hunting for natural gas in Hemingway country

When it comes to oil gushers and drill rigs, thoughts of Michigan do not spring readily to mind. But perhaps they should. Like many other long-neglected sites in the U.S., Michigan has suddenly become a hot new oil and gas prospect in the current, highly heated search for additional sources of oil and gas.

Michigan is only one of many regions around the U.S. where geologists and petroleum engineers are on the prowl for fuel. In Arizona and Appalachia, in New York and North Carolina, wildcatters and exploration teams are in breakneck competition to cash in on the energy bonanza brought on by the ever escalating prices of both oil and natural gas. Last year domestic drilling surged by 22%. In March alone, 6,404 wells were dug in the U.S., 650 more than during the same month of the year before.

Just as economists have long predicted would happen, the decontrol of energy prices not only has made consumers more cautious about wasting precious fuel but has also spurred industry to search much harder for new supplies. At more than $4.30 per thousand cubic feet (as compared with $1.42 in 1974), natural gas prices have reached a level at which wildcatters can dig wells deeper than ever before and yet still turn a profit if a well proves productive.

Michigan, of course, is hardly another Saudi Arabia. A recent Government study pegs the state's overall oil and gas reserves at no more than about 2% of total U.S. reserves. Yet, as long as the U.S. continues to import more than one-third of its total oil needs, every bit of domestically drilled fuel counts. Says Sherwood Frezon, an official with the U.S. Geological Survey: "The country couldn't survive on the oil supplies of Michigan, but because there are places like Michigan, we can live a lot better."

Oil and gas exploration is hardly new to Michigan. In the late 19th century, drillers flocked to the state from the crowded oilfields of Pennsylvania and Ohio, only to be lured away by far more promising discoveries in Oklahoma and Texas a few years later. But the discovery last September by Dart Energy Corp. and PPG Industries Inc. of a natural gas deposit near Falmouth that energy experts estimate will produce more than 12 million cu. ft. of gas a day has brought wildcatters streaming back.

Much of the action is concentrated in the low-lying forests and farm land that stretch out south of Cheboygan. Ernest Hemingway set some of the action for his Nick Adams stories in this area. Noted until now for little more than its austere beauty and fine lake fishing, the region these days features increasingly frequent sightings of Texas and Oklahoma oilmen in boots and cowboy hats, and New York and Dallas bankers in Brooks Brothers suits. "I don't think anyone is being too optimistic," says the state's Lieutenant Governor, James Brickley. "I find oil people generally to be cautious. But there is definitely an optimism here."

The artifacts of power and prestige in the Oil Game are also beginning to turn up. Three weeks ago, 230 oil-and gasmen, Detroit business executives, out-of-state bankers and local farmers gathered at the

Holiday Inn in Houghton Lake to celebrate, with a Southern-style pig roast, the start of drilling in a gas well that may go as deep as 20,000 ft., or almost twice the depth of any other well sunk so far in the state. Meanwhile, the corporate jets that brought them to Houghton Lake waited wingtip to wingtip at nearby Grayling McNamara Airport to whisk them back out again at nightfall.

Modest amounts of oil and gas have been produced in Michigan since 1925, but oil experts are reluctant to speculate about how much production is likely to increase in the years ahead. Nonetheless, big multinational oil companies, such as Shell and Standard Oil of Indiana, which have virtually carpeted the more than 80,000-acre Pigeon River Country State

Forest with exploration and drilling leases, are competing furiously for mineral rights throughout the region. Recently, the Hunt Energy Corp. of Dallas announced plans to spend $75 million for exploration work in the state as well. Meanwhile, Wall Street analysts are now beginning to keep an eye on the growth prospects of other and smaller oil and gas firms that are starting to position themselves in the region.

So far, the prime beneficiaries of the energy boom are the area's farmers. Neil Doornbos, 85, and his wife Alice, 81, retired from farming in 1954. Their land, though, is only a mile north of the site of last September's gas discovery, so a 17-story rig is now pushing a drilling bit deep into a cornfield 150 yds. beyond their back door. If the drillers strike it rich, so will Neil and Alice; the couple will get a one-sixteenth share of the production. --By Christopher Byron.

Reported by David S. Jackson/Houghton Lake and Gary Lee/Washington

With reporting by David S. Jackson, Gary Lee

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