The 1930s Production, Cooperation, and Regulation

While much of the nation and the majority of Michigan's residents suffered through the Great Depression of the 1930s, areas of oil and gas production faired considerably better. Automobiles still consumed great quantities of gasoline while many homes still need kerosene for lighting. Oil still made money, and many Michiganians enjoyed the benefits of an actively growing oilpatch. During the Depression years, oil and natural gas were discovered in twenty-three of Michigan's Lower Peninsula counties.

Michigan produced approximately 160,384,000 barrels of crude oil between 1929 and1941. With an average wellhead price of $1.04 per barrel this oil pumped $166,592,000 into the Michigan economy. Additionally, natural gas production in Michigan amounted to about 80.67 billion cubic feet at an average price of about a nickel per thousand cubic feet (Mcf) to put another $4,306,990 into the Michigan economy. All told, the wellhead value of Michigan oil and natural gas during the Depression years reached about $170,898,990, or $2.274 billion in 2005 dollars. The cumulative effect of payroll, income, and property taxes for not only the oil and gas exploration and production industry but also oilfield supplies and service companies partially compensated for the staggering economic losses created by the collapse in automobile sales.


Production in the 1930s

In the 1920s Michigan demonstrated that it had substantial reservoirs of oil and could become an oil producing state. With 65 oil and natural gas field discoveries between 1930 and 1939 Michigan began to realize that possibility. Norman X. Lyon, longtime editor of the Michigan Oil & Gas News magazine rightly called the decade, "the fabulous 1930s." Little wonder the decade was described as "fabulous" when the three most important discoveries are recalled.


The Porter Field, 1933

The Porter Field southeast of the Mt. Pleasant Field was discovered in 1933. It would prove to be the largest of the decade's discoveries. As early as 1931 wells were being drilled in Midland County's Porter Township. With only modest initial results and several dry holes, prospects of a major find seemed dim. However in 1933 the Otway 2 well came in as a huge gusher. Rated at 3,200 barrels a day, suddenly everyone wanted to drill in Porter Township. The field was dominated by Pure Oil Company (later to become Union Oil Company, now UNOCAL) but with 55 percent of the acreage held by independents, there was room for others to get into the action. Over 50 million barrels of oil have come from the field, the second most productive in the state.

The Porter Field also played an important role in early experimentation to increase oil flow. Because the porosity of oil bearing rock can vary, oil sometimes flows very easily out of the stone while other times the oil flows 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 accomplish this is to pump acid into a well. This technique is particularly successful when it is used on limestone or similar rock that is easily dissolved by acid. On February 11, 1932 the world's first acidizing treatment to stimulate well production was accomplished on the Pure Oil Fox #1, Chippewa Township, Isabella County (in the Mt. Pleasant Field) . Legend has it that the acid was injected with a garden hose borrowed from a worker's home. Dowell, a major firm involved in oil well stimulation, was born.


The Crystal Field, 1935

Inspired by the 1933-discovered Edmore and Day Fields to the northwest, in the spring of 1935 J. W. Leonard, Jr. received the permit to drill the Otto and Goldie Durbin #1 in section 11-10N-5W, Crystal Township, Montcalm County. The hole was drilled by Leonard Drilling Company's James Leonard (Walter's older brother.) Pure, Gulf and several independents reportedly had acreage in the area and supposedly had whispering interests in the Durbin well site. But everyone seemed to want someone else to take the risk involved in drilling the first test well.

Four feet into the Dundee, at 3,197 feet, drilling stopped to allow tests to be made. Estimates placed the flow at 20 to 30 barrels of oil per day with some water. Testing went on for about a week, then the decision was made to drill deeper. Several experienced oilmen thought the decision was a "waste of time for a well that wasn't going to amount to much." On the morning of March 28, 1935, they were proved wrong.

After drilling a mere six inches deeper the well roared and cut loose with a seemingly unending gush of oil. Leonard's Durbin #1 well shot the cable tools drilling the well up the nearly 3,200 foot shaft with such force that it smashed the oil saver and control head. The gushing well was capped 23 hours later. The well was rated at an open flow production rate of 3,594 barrels per day. The entire state was producing 37,000 barrels per day, so the announcement that one well was producing 3,500 barrel a day brought folks arunnin' and launched one of Michigan's biggest "booms". Within a week 30 drilling locations were planned in the area. By June, the Crystal Field production had reached 290,000 barrels of crude oil for the month. In later years saw the Crystal development expanded to about 2,000 acres and saw 195 active wells in the Crystal Dundee and Traverse pools. Collectively they would produce more than 8 million barrels of crude oil.

The Crystal development was of such size that it ultimately brought new independent refineries to the state and the first oil pipeline to deliver Michigan production out of state (Sohio-Roosevelts 8-inch pipeline from Mt. Pleasant to Toledo, Ohio). Walter McClanahan's Midwest Refinery was one of the Crystal-born refineries, which would eventually be acquired by and merged with J. Walter Leonard, Jr.'s Leonard Refinery, to become TOTAL Refinery, sold to Diamond Shamrock and ultimately closed in the late 1990s.


Bloomingdale, 1938

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

Allegan County, just to the north of Bloomingdale, was drawing nationwide headlines in 1938 as drilling proliferated for Southwestern Michigan's shallow (1,000 to 1,500 feet) Traverse geological formation oil discoveries. In the midst of all this publicity, Fisher-McCall received their drilling permit for the Wiggins Estate #1 well the last week of July, 1938, with little fanfare. The project, however, soon made banner headlines that dwarfed past newspaper accounts. In the middle of August, the Michigan Oil & Gas News announced, in double headlines "BARREL A MINUTE WILDCATS OPEN TWO MORE TRAVERSE LIME FIELDS" speaking of oil field discoveries near Overisel ( Allegan County) and the Wiggins Bloomingdale discovery.

As had happened at the Crystal Field, the rush was on, but this time in a small town rather than open land. Leases were signed, drilling permits were obtained, ­drilling rig crews and sundry other oil folk moved in and life in Bloomingdale moved at a much faster pace then ever before.

The Bloomingdale field would ultimately see 437 wells drilled, 45 of them on 80 acres of town lots within the ­village limits of Bloomingdale, and would produce more than ten million barrels of oil. Practically any space not taken up by people and houses saw a drilling rig put down roots as people signed leases for mineral rights in their back yard and drillers put rigs as close as possible to each other. More than 11 percent of all wells ever drilled in Michigan, 5,400 wells out of a cumulative total of more than 50,000 statewide were drilled in Van Buren County and neighboring Allegan County between 1930 and 1939. Development was so rapid and ruthless in this field that both oilfolk and state regulators agreed on the need for legislation to rationalize and regularize drilling. The result was the fundamental legislation enacted in 1939 that still serves as the basis for the regulation of drilling activity in the state.

As with the Crystal Field, so much oil led to refineries being built. Two refineries were built at Bloomingdale, the Erie Refining Company and the Fort-Dalo Oil and Refining Company, both of which reached throughput levels in the 1,300-1,500 barrel range in their output peak. The refineries provided hundreds of thousands of gallons of gasoline per month to Kalamazoo district companies and fuel oil to distributors 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 considered at best a small side benefit to the real job of finding oil and at worst, something of a nuisance. In the 1930s however, major finds of gas changed industry attitudes.

The Big Rapids Pioneer newspaper, in a December 30, 1933 editorial headlined "Natural Gas Field Opened in 1933" and opened with the statement "A meteoritic rise from a position of total obscurity to the center of attention in Michigan's natural gas development, reviving visions of industrial advancement long since abandoned with the passing of the other natural resources (lumber), bids fair to claim the lions share of attention in Mecosta County story of progress for the year. Thrust into the spotlight by strikes of gas in Austin Township, established as probably the most important field in the state, Big Rapids and Mecosta County has sought to formulate plans for industrial recovery which will establish 1933 as the beginning of a new and prosperous era unlike any the community has hitherto experienced."

The March, 1933 discovery of natural gas in the Michigan Stray formation at 1,380 feet by the Taggart Brothers was the basis for the Pioneer's headline. The Taggart discovery occurred despite conventional wisdom that there was nothing worth discovering underneath Mecosta County. A number of unsuccessful holes had been drilled in the search for oil. According to local accounts, many companies and individuals had given up their Mecosta County oil and gas leases "feeling there was no such resource in the county." The conventional wisdom was wrong and the Taggart Brothers success led to a flurry of drilling, with the Austin Township Michigan Stray formation reservoir ultimately producing 6.2 billion cubic feet (Bcf) of natural gas from 127 wells across 3,970 acres. Eventually, Mecosta County would see more than 1,000 holes drilled in the search for oil and gas, resulting in 35 oil or gas fields, which collectively have 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 emerging as the nation's largest natural gas storehouse, boasting the most natural gas storage capacity of any state in the Union. In 1941 the played out site found new lease in life as a 13 Bcf capacity gas storage field . American Natural Resources (ANR), parent company of Michigan Consolidated Gas, was among the vanguard in Louisiana Gulf Coast offshore drilling. The firm built a huge natural gas pipeline to deliver gas from the Gulf Coast directly to the Six Lakes Field.

In 1935, at Howell in Livingston County a reservoir was discovered in the Salina-Niagaran Formation at Livingston County. The Howell Field would produce no oil but more than 21 billion cubic feet of natural gas before conversion to a natural gas storage field in 1962.


Industrial Cooperation: The Michigan Oil & Gas News and the Michigan Oil And Gas Association

With projects proposed and underway throughout the Michigan "oilpatch," oilfolk needed a way to keep up with the action. Local newspaper filled some of the information gap but local papers were, by their nature, not interested in the broader, statewide story. Moreover local reporters lacked real knowledge of the industry to help filter true happenings from the promoter's hype.

John Murphy, Jim Dunnigan, Lou Aaronson and Danny Miller, with the backing of financial associates, published the first issue of the Michigan Oil & Gas News on June 20, 1933. Besides a number of field stories, the front page of that first issue (in a broadsheet newspaper format) carried a message from the owners saying "We want to give you a service that you need; in return we expect but moderate compensation and your enthusiastic support. An honest living and the feeling we have served, and well, are all the rewards we seek,"

Dunnigan, Aaronson, and Miller had been college buddies at what is today Detroit's Wayne State University. Miller's father encouraged them to start an oil reporting paper. Murphy was a Mt. Pleasant local whose early thoughts and training were about a career teaching or in 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 went to work for the Grand Rapids Press. Lyon took the job to "fill in for awhile." "Awhile" turned out to be a very long time. From 1937 until 1972, Lyon would alternately be Editor of the Oil News and the Mt. Pleasant Daily Times News, the local newspaper. After retirement, he continued as a contributor to the Oil & Gas News until his 1991 death.

Early in the game Murphy decided the future of the oil and gas industry looked good enough to expand the publication. Incorporation and stock sales followed in order to purchase a printing plant. In due course the printing press was purchased and installed in upstairs quarters, a move Murphy soon regretted. The equipment shook both the newspaper building and those near it so much they were forced to quickly find a ground floor location. In very short order a North Frankin Street lot was purchased and a building built.

Also involved in the early days of the publication were:

  • Don Carr, covered the Bloomingdale, Salem and Grand Rapids shallow Traverse booms from 1937-42. Later Carr edited the publication from 1947-1957 while Lyon went over to edit the Daily Times News. For a few months in 1967, Carr again became editor when Lyon was recovering from lung cancer surgery.
  • Bob Breed, a degreed geologist who joined the Oil & Gas News as the Bloomingdale boom took off. Breed and Carr scouted Southeastern Michigan for the publication. Later Breed scouted for Sohio and Smith Petroleum before going into consulting.

The Franklin Street location served the Oil & Gas News for almost forty years. Through that time Murphy was Publisher and Lyon and Carr alternated as Editor. In 1972, both Murphy and Lyon had reached retirement age. Now the joint owners of the publication, they were looking to sell the paper but without much luck. There was a chance the paper might simply cease publication.

The Michigan Oil And Gas Association was not necessarily interested in being in the publication business but it was interested in keeping alive the weekly communications "glue" the magazine provided. MOGA bought the publication rights to the Oil & Gas News in December, 1972. For a few months the publication ceased printing, but in March 1973 Jack R. Westbrook was hired as manager and editor. The paper resumed publication in April. Dick Bolton, fresh from CMU following U.S. Air Force service, was hired in June of that year to assist Westbrook and edited the publication until 1981 when Bolton left the publication. Bolton now works for the Mt. Pleasant Morning Sun as a photographer and columnist. Ironically, in 1982 Scott Bellinger, present MOGN Editor, left the Morning Sun to join the Oil & Gas News. In 2002 Westbrook retired to become "contributing editor" and Bellinger replaced Westbrook as managing editor of the publication.

In the past 20 years, the publication has:

  • Run educational series of articles on various aspects of the industry for the edification of other factions of the industry, as well as the public.
  • Reported extensively and more completely than any other publication about the evolution and continued development of the Michigan Natural Resources Trust Fund.
  • Run papers and guest articles by industry experts about innovations within the industry or impacting the industry.

In addition the Michigan Oil & Gas News has:

  • Published geological charts, drilling maps, and pipeline maps of Michigan for industry and public education.
  • Published two books about Michigan's petroleum exploration and production history
  • Educated the public about Michigan petroleum exploration and production history by having personnel make speeches to civic, educational and industry groups.

The Michigan Oil And Gas Association

Prior to the founding of the present Michigan Oil And Gas Association, a group of petroleum folk in the Muskegon area formed an organization in 1928 to establish higher crude oil prices. E. J. Bouwsma, a Muskegon Oil Company employee, was the group's president. However, as the boom at Muskegon subsided and the 1928 Mt. Pleasant Field became the industry's focus, the Muskegon-based association faded away.

However the problems that bedeviled Muskegon oil producers, particularly overproduction causing slumping crude oil prices soon became a problem in the Central Michigan Fields. To deal with these problems producers in Central Michigan, along with those from Muskegon and Saginaw met in Mt. Pleasant and formed the Oil and Gas Producers Association in 1931. Newly arrived oil attorney Haswell Grant became the group's President. That association was phased out when its leaders decided to reorganize with a broader member base and a better dues structure.

This broader, better financed organization was named the Michigan Oil And Gas Association. At a November 27, 1933 meeting, the newly formed MOGA elected Gordon Oil's Howard D. Atha President.


State Regulation and Revenue

Among the most important changes that occurred during the Great Depression was the beginning of significant state regulation of oil and gas exploration as well as the development of new sources of state revenue that depended upon that regulation. In 1927 the state legislature first passed a law specifically regulating the oil exploration industry. The head of the state's Department of Conservation was named "Supervisor of Wells." The supervisor had several responsibilities regarding the sinking, drilling, deepening, and capping of oil wells.

The same law required that drillers receive a permit from the state before beginning any project. Permit No. 1 was issued by the (then) Michigan ­Conservation Department on September 27 for a well drilled by 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 issues has become a quick way to measure exploration activity. Boom years were tallied when the number of permits issues exceeded 1,000. This has occurred 14 times, with extended "streaks" between 1939 and 1941, and 1981-1983. In 1992 a record 2,024 drilling permits were issued. Approximately 57,000 permits have been issued to date.

The state sought not only to regulate oil drilling but also turned to exploration activity as a source of badly needed revenue. Much earlier the state had passed the Public Domain Act of 1909 that separated surface and mineral rights to state land and reserved for the state "mineral, coal, oil, or gas" rights to any land the state sold. The concept of leasing state-owned mineral properties for oil and gas exploration purposes became a serious concern after the 1925 discovery of oil in Saginaw. In 1928 the State Conservation Commission adopted a policy requiring those requesting a lease to make written application, agree to pay a rental fee of fifty cents per acre per year, established that except in extraordinary circumstances no lease would be granted for less than a five acre parcel, and that leases would run for a five year period. The applicant also was required to document adequate financial support and operating experience to both complete the project and do so in an "intelligent and efficient" manner.

The idea of granting leases at a fixed price 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 lease rights to state-owned minerals was conducted in Lansing. Lease auctions in the 1930s helped buoy the state through the tough financial times of the Depression. In the now 221 auction history of state leasing, offerings have ranged from just 46 acres to as many as 583,241 acres. The lowest overall lease auction event average bid of 3/10 of a cent per acre was realized in August 1932 while the highest overall auction average bid of $316 per acre was made in August 1981. All told, the state has offered oil and gas lease rights to a total of 13,223,215 acres of state-owned minerals on the public auction block with some of the acreage offered more than once as leases expired or acreage went without a bid at first offering. Of that total offering, 8,854,039 acres (66.95 percent of acreage offered) has been successfully leased for a total of $165,291,662. This has resulted in an ­overall per acre average of $18.67.

Lease auctions are just the beginning of the cash flow stream to land and mineral owners if commercial quantities of oil and gas are found. Lease bonuses and rentals are payment to the mineral owner for the right to look for oil and gas on their mineral property. If none is found, the mineral owner is left the richer for having leased. If producible oil and gas are found, the mineral owner's revenue stream begins for the life of that production. In the state's case, of course, there are in addition to those revenues, funds collected in taxes. Leasing state minerals has produced a constant revenue stream for the state and all its citizens.

In the aftermath of the 1938 Bloomingdale discovery and drilling frenzy, the Michigan Oil And Gas Association (under the leadership of Alma independent petroleum producer/explorer Harold M. McClure, Sr.), representing the oil and gas ­industry, and Michigan government ­regulators, in the interests of energy conservation and safety, cooperated in the crafting of rules and procedures. The most important of these established a minimum well spacing of one well per ten acres and introduced mandatory production proration, limiting the daily output of wells to preserve the natural dynamics of the reservoir and prolong the effective productive life of the reservoir.

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 classic oil regulation. Act 61 was upgraded and incorporated into by the Natural Resources and Environmental Protection Act (Act No. 451 of the Public Acts of 1994), which continues to serve as primary regulatory instrument for the Michigan oil and gas exploration and production industry.