Michigan Foia law protects secrecy of permits for gas-oil wells disguised as mineral wells

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by Ellis Boal

On March 16 the Michigan court of appeals rejected an appeal of a FOIA information case brought by landowner Gary Cooley and Ban Michigan Fracking about a supposed “mineral well” in Crawford County. Though not questioning their standing, the court held plaintiffs had not stated a proper claim of right to information.

D4-11, October 6, 2016. Photo: LuAnne Kozma.

Plaintiffs had sought the environmental impact assessment (EIA) and other information about this well drilled in the state forest a mile from Cooley’s property in Beaver Creek Township.

In 2015 Cooley, who opposes gas-oil development in the state forest, refused an offer to lease the gas, oil, and minerals under him. The offer included a signing bonus and a royalty interest.

Typically the requested documents are voluminous, sometimes running to over 100 pages. In particular the EIA has information about water wells, wetlands, surface waters, endangered species, pad facilities, soil erosion, and disposal of fluids and brines at or near the wellhead. These are items of interest to any nearby landowner.

“D4-11″

The applicant for the well was Marathon Oil, which owns nearly 1000 square miles of leases in Michigan under state land. The name of the well is “Beaver Creek D4-11,” or just “D4-11.” In June 2015 Marathon applied for a permit under “part 625,” the state’s law for mineral wells.

The only evidence D4-11 would actually be a mineral well and not a gas-oil well was a non-notarized “x” in a box on page 1 of Marathon’s application form. (This page is the one document which Marathon had to make public.) According to the instructions for that form, the application was supposed to have described in detail the well’s “purpose.”

According to the same page 1, D4-11 was to be a non-exploratory vertical mineral “test well,” and the drill rig would target the “Amherstburg” formation at 4700 feet. (DEQ provides for the possibility of horizontal wellbores and fracking on a different form for mineral wells.)

DEQ granted the permit on an unknown date.

The drill rig had seen service in oil-gas exploration in North Dakota a thousand miles away before coming to D4-11. The nearly-200-foot-tall rig must have cost Marathon millions to transport and operate. Marathon Oil is in the oil-gas business. In September a worker on the rig told a visitor, me, the company hoped to find gas or oil. A blowout preventer was left in place after the rig departed D4-11, a practice required only by the gas-oil rules, not the mineral well rules.

An official DEQ brochure states there are no minerals anywhere in Crawford County.

These and other facts indicated that D4-11 would be a gas-oil well, not a mineral well. Part 625 does not define “mineral.” But in ordinary English minerals are understood to be hard, crystalline, and inorganic, which gas and oil are not. Minerals are extracted by mining but gas and oil are extracted by drilling. And the idea of testing a mineral in a 4700-foot hole is ridiculous.

I published a video and the story of the investigation here.

DEQ rules for gas-oil wells prohibit nuisance noises, but the rules for mineral wells do not.

And unlike for gas-oil wells, FOIA has a confidentiality period lasting 10 years for mineral well data including the permit and EIA. But legally it is the DEQ which has the burden of proof to show the exemption applies.

DEQ answered the FOIA request by denying all information. Relying on the 10-year mineral exemption it refused to say even whether it had actually issued a permit.

Marathon itself was similarly close-mouthed, except by email it did admit there was a permit.

Plaintiffs sued in February 2016. In its responsive motion in May, DEQ finally admitted there was a permit. But it did not provide the date or a copy.

The practice of gas-oil companies which claim mineral well treatment

Later that month I chanced on an article about the work of William Harrison of Western Michigan University, an author of 35 technical papers on Michigan geology. I decided to email him, outlining the theory of the FOIA case, and the evidence showing D4-11 is probably a gas-oil exploratory well not a mineral well. I invited him to view our video of the drill rig, said I would drop the case if D4-11 proved to be a legitimate mineral well, and asked him to respond.

He did, the next day, very helpfully:

Wildcat exploratory wells for oil and gas have often been drilled under the State “Mineral well act” so that a company can gain information about the geologic deposits in that area with out releasing the information to the public and hence their competitors.

I do not have any specific knowledge about the Marathon well you mentioned, but the area in Beaver Creek Township is a well-known oil and gas region with an old very large oil field there called the Beaver Creek Field. The Amherstberg formation is a known oil and gas producing zone in other parts of the state and is very likely the target zone they were evaluating.

The naming of the well “Beaver Creek D4-11″ is also a very common naming style for oil and gas wells. As far as I know other mineral wells that are looking for solid minerals do not use this type of naming convention.

The Amherstberg is not a formation that contains Salt, Potash or any other type of solid minerals that could be produced commercially, so I am reasonably confident that this was an exploratory well for oil and gas that was drilled under the Mineral Well Act

(underlining added)

There was one statement in Harrison’s response, a legal point, that I knew to be wrong:

In fact, oil and gas are considered “minerals” under the definition of that type of well.

He was wrong because, unlike at the Department of Natural Resources, at DEQ there is a strict separation between mineral wells regulated under part 625, and gas-oil wells. The latter are regulated under part 615.

As plaintiffs explained to the court later — in addition to highlighting the DEQ brochure which says there were no minerals in Crawford County — gas and oil are not considered “minerals” at the DEQ. Part 625 excludes gas and oil because gas and oil come under part 615. Even if the purpose of a well is only partially to explore for gas or oil, there must be a 615 permit.

Neither the DEQ’s court brief nor the court’s opinion disputed our contention that gas and oil do not qualify as “minerals.”

I responded to Harrison the same day with documents including Marathon’s page 1, and noted his error about the DEQ definition of “mineral.”

I asked if he would write me a separate letter affirming the opinion just expressed, that the Amherstburg is not a formation that contains solid minerals that could be produced commercially, and therefore he was “reasonably confident” that D4-11 was an exploratory well for oil and gas that was drilled as a mineral well to “maintain confidentiality.” I said this would likely suffice to win the case. I gave information about myself, and offered to pay his regular rates.

He responded the same day:

I am not interested in any consulting work for you or your client.

Rather, he said he provides “basic general information” to the public and is “not involved in any of the regulatory decisions.”

Translated: His practice is not to testify as an expert witness, not for anyone including the industry. I believe him but was surprised he wouldn’t repeat something in court that he had just told me, a stranger, for free.

Later I realized how tied in he is to DEQ and the industry. Last June he joined DEQ’s industry-dominated oil and gas advisory committee. The committee, composed of the “stakeholders,” is supported by several DEQ staff. Last month the Michigan Oil & Gas News pictured him with his wife as “silver medal sponsors” of the annual petroleum conference of the Michigan Oil & Gas Association (MOGA) and Northern Michigan American Petroleum Institute.

Surely everyone else on the DEQ advisory committee knows what he knows, that exploratory wells for gas and oil have “often” been drilled as mineral wells to get geologic information and then kept secret. Surely the rest of them know what he does not, that oil and gas are not DEQ-defined minerals and the oft-repeated claims of mineral well applicants — that their “purpose” is just to test “minerals” but not explore for gas and oil — are false.

Proceedings of the FOIA suit

Harrison’s encouraging emails were not confidential. I would have been free without his permission to quote them and his credentials to the court. But I decided to respect his desire to stay out of it.

The suit made two claims for opening the DEQ files, one of which we dropped when we filed at the court of appeals. (That one had contended that even if D4-11 actually were a mineral well, under a literal reading of the statute, except as to “logs” the confidentiality period applied only “during” the period after the well was “completed,” and D4-11 hadn’t yet been completed on the date of the FOIA request.)

As to the claim that D4-11 was not actually a mineral well, and therefore mineral well confidentiality should not apply, plaintiffs pointed out that the DEQ website links to the dozens of forms which it uses to question applicants for mineral wells. None of the forms asks the applicant whether the well will actually test a mineral. None of the forms asks the applicant to name the mineral it proposes to test.

Stated otherwise, as plaintiffs’ brief did (without citing Harrison’s insightful words):

Plaintiffs have no facts to contend that DEQ and Marathon arranged a sweetheart deal to keep this particular well secret. Rather it appears from the 64 DEQ forms that it never asks any operator who is testing minerals known to be present –- as opposed to exploring to see whether they are present –- to demonstrate the point. If so, DEQ invites a train of abuse from industry operators desiring to maintain secrecy by falsely stating their objectives while not under oath.

The DEQ brief responded:

In other words, even if Mr. Cooley’s allegations of deception on the part of Marathon were factually meritorious … this alleged “deception” would not be illegal.

In reply plaintiffs stated:

to qualify as a mineral well the operator’s intent at the start can only be to explore for or test minerals. In this case the operator’s stated intent was not to explore for a mineral, but to test one…. But … the Marathon safety man’s expression of hope that the company would find gas or oil at D4-11 means in the most literal commonsense sense that the company was “exploring” for gas or oil.

The court ruled on March 16. The unpublished opinion recited none of the facts indicating that D4-11 was actually a gas-oil well except it did acknowledge the claim that Marathon hoped D4-11 would find oil. The court also acknowledged that a plaintiff’s well-pleaded factual allegations have to be accepted as true at this stage, and DEQ had the burden to prove that any exemption for mineral wells under part 625 applied.

At oral argument plaintiffs had noted Marathon’s hope that D4-11 would find oil was not a fact critical to the case, and based on all the other facts, the case would be just as valid had the rig worker not made that admission.

The complaint and exhibits had shown that D4-11 would be a test well not an exploratory well, no minerals exist in Crawford County to even be tested, DEQ excludes gas and oil from its definition of “minerals,” DEQ relied solely on Marathon’s checkbox and did no independent investigation of minerals at D4-11, and the Amherstburg is a formation where Michigan oil prospectors have frequently looked. These facts showed “a good circumstantial case,” the brief said.

But even if these facts were all true, the court held, the exemptions of part 625 still applied. The case ended.

The decision amounts to a ruling that even if DEQ rightly should have processed D4-11 as a gas-oil well under part 615, the fact that it did process it as a mineral well under part 625 controls, and the exemptions to FOIA apply.

What should a landowner do?

Anyone can sit in on the quarterly meetings of the mentioned DEQ advisory committee, and minutes of past meetings are available on request.

Just one of its eight members is from an environmental organization, and that one (Michigan United Conservation Club) has long accommodated the gas-oil industry. Its director recently left there to become director of MOGA.

Since joining the committee Harrison has not brought to its attention the frequent industry practice of filing for a mineral well in cases where his expert opinion is that the operator’s purpose is really to explore for oil.

Landowner Cooley’s court complaint only sought information. It did not seek to invalidate the permit. So in the future suppose some landowner notices an ugly new several-acre gash in the forest nearby and a big noisy drill rig going up. Suppose too the rig gives every indication it is exploring for gas or oil, but DEQ claims it is really a mineral well.

Is there a remedy? Yes.

One tack would be to just assert that a permit was issued and then sue to invalidate it. A Michigan statute allows such a suit in the court of claims. The gas-oil applicant would have to be named as a co-defendant. The statute has no requirement to exhaust administrative remedies before suing, and indeed how could a landowner try to exhaust given that all information was refused? The statute of limitations is a very short 21 days, but would not be a problem if DEQ refused the permit date.

Circumstantial evidence can prove any case. Expert testimony such as what Harrison refused for D4-11 would likely be necessary, because unlike in a FOIA case the plaintiff would have the burden of proof. The burden would be satisfied simply by showing the “purpose” of the well, at least in part, is more likely than not to explore for gas or oil.

DEQ could hardly defend in light its practice of not investigating the real purpose of a mineral well. The defense, if any, could come only from the gas-oil applicant. But in the face of the plaintiff’s evidence, it would have to provide facts including the name of the supposed mineral. It would lose if it merely answered “it is a mineral well because we say so.”

Litigation isn’t the only way. Instead the landowner could find someone knowledgeable in the academic world, and then publicize the well. Surely experts are there who would be willing to shame a practice which sacrifices landowners and the environment to profit-driven competitive gas-oil interests. Surely someone would be willing to speak up.

Marathon’s well near Grayling: a ‘test’ or a ‘nightmare’?

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by Ellis Boal

Chance discovery

One day in August I drove to Crawford County to take a look at Marathon Oil’s recent activities along King Road in Beaver Creek Township, which is near Grayling.

State Beaver Creek 1-23 HD1, a horizontal frack well in the state forest, has been producing on a pad there, tapping the nearly-two-mile-deep Utica-Collingwood shale for some time.

State Beaver Creek 1-23 HD1, on August 15. Photo: Ellis Boal

In late July Marathon applied for a second horizontal frack well on the same pad, named State Beaver Creek 1-14 HD1, which would explore into the Detroit River formation, about a mile shallower than the Utica-Collingwood.

This is the first high-volume frack well to explore in this formation in Michigan.

Not much was happening that day on the pad. But previously I had noticed an unusual feature on the plat accompanying the application for the new well, a half-mile away. It was labeled “State Beaver Creek D4-11″. The nomenclature is not typical for Michigan wells and no operator name was given. I thought it might be a processing facility of some kind.

D4-11

D4-11, still a forest on August 15. Photo: Ellis Boal. Click for close-up.

I didn’t see a direct two-track through the forest between the wellpad and D4-11, so I drove around and found an old one leading to the spot where it was supposed to be. There was nothing but trees, and a few scattered stakes and flags. No permit was posted. Nothing indicated that something big was about to happen.

A week later, in a quick turnaround time DEQ issued the permit for State Beaver Creek 1-14 HD1.

In September I inquired of DEQ what was going on with D4-11. On September 18 DEQ tech Kelley Nelson wrote that it is a well, not a processing facility. It was regulated under part 625 of the Michigan environmental law. Therefore, she said, it was a totally confidential operation. I asked if that meant the permit number, and even the fact whether the well was permitted, were unavailable. She answered:

You are correct. Nothing is available for any part 625 test well. It is confidential for 10 years.

Well, “nothing” was not really the whole truth. Part 625 regulations required Marathon to send the first page of its application to Beaver Creek Township, “post the permit in a conspicuous place” at the surface location until drilling is completed, and post a “conspicuous” sign near the wellhead showing the permit number.

D4-11, a/k/a the “science well,” under construction on August 26. Photo: Gary Cooley.

Obtained publicly from the township, the first page of the application tells us: Marathon posted a conformance bond of $33,000, the well is vertical, sour gas is expected, the intended total depth is 4700 feet, and the target formation is the Amherstburg. This is a fossil-bearing non-shale formation in the Detroit River group, the same formation being explored by State Beaver Creek 1-14 HD1. Vertically, D4-11 is just 300 feet deeper.

Marathon refers to D4-11 informally as a “science well.”

I visited again on September 20. This time there was a nearly-200-foot drill rig there, operating with a loud hum. The rig name, Ensign 161, was prominent on the side.

I was wearing my letsbanfracking t-shirt. Three workers came out. I identified myself and we chatted. They were from out of state. I asked who was the supervisor. They didn’t know, they said.

Later toward midnight I drove by again, this time staying on King Road. Through 100+ yards of trees I could hear the hum. Over the tree line I could see lights on the rig.

D4-11, operating on September 22. Photo: Gary Cooley

Two days later Gary Cooley, who has a home a little over a mile from D4-11, visited and took pictures of the rig in operation.

FOIA request

On September 22, I sent DEQ a formal FOIA request asking for all its documents on the facility. DEQ denied it on October 1, citing section 8 and section 9 of part 625.

But section 9 only says that the application and permit are “confidential in the same manner as provided for logs and reports on these wells.” Section 8 says “Logs on brine and test wells shall be held confidential for 10 years after completion.” It adds that “logs” — but not “reports” — can be held confidential even longer, forever.

Marathon’s application, permit, and pre-drilling correspondence with DEQ are not “logs.” So according to these sections, they were not confidential until the well was “completed.” And according to part 625 rules, completion was not until the well reached its “permitted depth or the [DEQ] has determined drilling has ceased.” Obviously, D4-11 was not complete on September 20 or 22. Ensign 161 was still there, and working.

So DEQ should have produced the application, permit, and all records other than logs.

Exploring for gas and oil

On October 2 I visited again. A different worker came out to say hello. He said his name was “Trace” and he was the Marathon safety man. Asked how long the rig would be there, he didn’t know and said they were hoping to find gas or oil. He gave the card of his boss in Houston, in case there were further questions.

A brief internet search showed that earlier this year Ensign 161 was active at Marathon wells in three different counties of western North Dakota. Fracking for oil there is big business.

Trace’s information, Ensign 161’s design and history in frack country, and D4-11’s exploration in the Detroit River group all mean there is a second reason the well information is not confidential. By its title, part 625 only regulates “mineral” wells. Mineral wells include so-called “test wells.” A test well determines the presence of a “mineral, mineral resource, ore, or rock unit,” or obtains data related to “mineral exploration or extraction.” Exploratory test wells look for “an orebody or mineable mineral resource.”

Oil and gas are not “minerals”

Part 625 does not define “mineral.” But in ordinary English minerals are understood to be hard, crystalline, and inorganic. They are extracted by mining.

Gas and oil are extracted by drilling. They are not in DEQ’s list of Michigan minerals. There are no minerals of any kind in Crawford County, according to the list. Anyway, the idea of looking for a mineral in a 4700-foot hole is ridiculous.

Cooley’s nightmare. Photo: LuAnne Kozma. Click for close-up.

Rules under part 625 say if a mineral well encounters oil or gas of any value, the operator has to stop and apply for a separate permit under part 615. This is the part of the law that covers exploration for gas and oil. Part 615 part makes no mention of targeting minerals. It specifically does not apply to “mine and quarry drill and blast holes.”

Part 615, not part 625, was the part under which DEQ granted the “exploratory” permit given for State Beaver Creek 1-14 HD1. As an exploration well for gas and oil, D4-11 should have been permitted if at all under part 615, not part 625.

Whats’ the difference? A big one is that confidentiality under part 615 is quite limited. Logs and other data are confidential only for 90 days after completion and then only if the operator requests confidentiality. All other documents, including applications, permits, and pre-drilling correspondence, are routinely made public to me or anyone else at any time. The same is true of logging and production data after the 90 days has passed, or even before 90 days if the operator did not request confidentiality.

Another difference is that part 625 has no rules prohibiting nuisance noise. Part 615 does.

What will D4-11 do to the countryside?

Part 625 rules allow for horizontal mineral wells, though fortunately this well is vertical. The rules also allow for acidizing, perforating, and fracturing.

As mentioned, so far only the first page of Marathon’s application for D4-11 has been made public. Applications typically run to 50 or 100 pages. The full application had to include an environmental impact assessment.

DEQ’s form for that required Marathon to identify distances to nearby water wells and other human-made features, and wetlands, surface waters, and endangered species. Marathon should have stated if high-volume fracking will be done in which case it should have specified the water volumes and a water assessment, and identified at least some of the chemicals. It should have explained how muds, cuttings, pit fluids, and brines would be disposed. It should have given details about any flowline or other facilities on the pad, and explained how it would deal with soil erosion and sedimentation.

Cooley and Ban Michigan Fracking are appealing DEQ’s refusal of D4-11 information except for the logs. Ninety days after completion the logs will be requested too. A monster operation like this is a matter of public concern. People birding, hunting, or snowmobiling in the forest are entitled to know what DEQ knows, including the environmental effects and everything else.

Separately, On October 8 I wrote the Marathon boss asking him to confirm Trace’s statement that D4-11 was looking for gas and oil, and provide a copy of the “application [and] permit.” A week later a PR flack wrote back confirming a permit was issued but refusing to send any documents.

D4-11, October 16. Photo: LuAnne Kozma.

Lighting the heavens

LuAnne Kozma (the director of Ban Michigan Fracking and the Committee to Ban Fracking in Michigan) and I visited the site again on October 6, at twilight. Ensign 161 was lit up. She recorded the sounds and pictures in the video above.

On October 16 we visited the last time. Drilling was complete. The pad was quiet and empty, a gash in the forest with a blowout preventer at the center. No sign displayed the permit number, “conspicuously” or at all.

Ensign 161 had moved a half-mile to the pad of 1-14. It was drilling there in the same Detroit River formation.

The rig is expected back at D4-11 soon, after Marathon runs the numbers. It cost millions to cut the trees, excavate the pad, and bring in the rig. The company won’t want to walk away empty-handed. And next time the bore would not just be vertical. It could be aimed right at Cooley, his nightmare.