Law
7:58 am
Thu April 3, 2014

New state law lowers taxes for companies trying to get more oil out of existing wells

Credit Randy Knauf / Creative Commons

A new state law encourages oil companies to go back to oil wells that are considered tapped out and extract more oil.

So-called “enhanced recovery projects” are relatively new in Michigan. In fact, there’s only one company that’s using the technique.

The process recycles carbon dioxide that would otherwise be vented into the atmosphere and pumps it down into existing oil wells. The pressure forces more oil to the surface. Proponents say the process makes better use of existing oil wells because the oil couldn’t be recovered without the technique.

“What we’re trying to do is make it economically more feasible to go back and get more production out of those wells so that we can increase domestic oil production and do so in an environmentally friendly way,” Lieutenant Gov. Brian Calley said after signing the bill into law this week.

There are some environmental advantages to the process, but some environmental groups oppose the law.

Mike Berkowitz is the legislative and political director for the Sierra Club’s Michigan chapter, one of the groups that opposes the new law.

“Ultimately it’s not making the planet a healthier place,” Berkowitz said. “It ultimately is leading to more greenhouse gas emissions, more drilling, so it’s not a net benefit.”

The new laws also allow oil and gas companies to construct carbon dioxide pipelines and expand their authority to build them on private property. Berkowitz says that’s another reason the Sierra Club opposed the bills.

Only one company in Michigan, Core Energy LLC, currently uses the process. 

Rick Pardini, vice president and engineering manager of Traverse City-based Core Energy LLC, says it can recover between 10% and 25% of the oil typically left behind in wells. Pardini says the law will probably bring more competition into the field and gives his company incentive to invest in more enhanced recovery projects.