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Tuesday, April 26, 2011

Experts Explore Possibilities of Drilling in NW Ohio Again

Tuesday, April 26, 2011
The Blade, Toledo, Ohio
by Tom Henry

Today's high gas prices have rekindled thoughts of extracting tons of oil left underneath northwest Ohio in the 1930s when the nation's drilling frenzy moved southwest to Texas and Oklahoma.

But for now, that's just wishful thinking.

Experts believe it remains impractical to extract that local crude, even with gas prices approaching $4 a gallon and news commentators abuzz with last week's speculation that $6.50-a-gallon prices could be on the horizon. Economist Richard Hastings of Global Hunter Securities in Charlotte got TV anchormen and Internet bloggers busy when he told CNBC the latter easily could happen if demand stays strong, the value of the dollar continues to drop, turmoil in the Middle East continues, and production is interrupted by hurricanes or other major storms.

Yet even industry stalwarts, such as Tom Stewart, executive vice president of the Ohio Oil & Gas Association, see little hope in an eventual revival of northwest Ohio's dormant oil wells.

"Yes, there's probably a lot of oil left. But there's no energy to move it through the rock now," he said.

But Larry Wickstrom, chief of the Ohio Department of Natural Resources' geology division, hasn't ruled it out. He said advantages of modern horizontal drilling techniques, as opposed to traditional vertical drilling, offer some hope.

"I think we'll see some activity back up there again if the prices stay like this," Mr. Wickstrom said.

The last attempt to extract northwest Ohio oil on a commercial scale ended in failure in the fall of 1995, a little more than a year after it began.

Meridian Oil, a subsidiary of the former Burlington Resources of Houston, made its case for a controversial permit to inject water into the bedrock of its 620-acre drilling site in Allen County's Perry Township, near Lima, on June 10, 1994. The water helped push oil deposits upward. That technique is controversial because of the inherent risk of having introduced water contaminate groundwater after making contact with oil.

The natural resources department's mineral-resource management chief issued a permit in July, 1994, a month after the hearing. The operation drilled to 1,300 feet below the surface, according to the department. Meridian ceased the drilling in August, 1995.

Jonathan Airey, a lawyer in the Columbus-based Vorys, Sater, Seymour, and Pease LLP law firm which represented Meridian, said the technique worked fine, but the 22 wells at the test site didn't produce enough to justify the company's $5 million commitment to the pilot program.

"It was a legal and regulatory success, but production was not as great as they had anticipated," Mr. Airey said. "They simply didn't have enough oil to make it worthwhile."

The chosen well was supposed to be representative of what Meridian could expect if it went ahead with large operations, he said.

"They picked the one they thought was representative [of the region] from test drilling," Mr. Airey said. "It moved fluid. But it ended up not being economical."

That attempt was the first time since 1956 that anyone had tried to extract large quantities of oil from northwest Ohio. Meridian at the time was the nation's largest independent oil and gas producer.

Between the regulatory hurdles and the difficulty in extracting oil, Mr. Airey said he is "skeptical" anyone will try again. "You need a high-enough upside to make it worth the risk," he said. "I'm skeptical anyone would find that [area] attractive."

Most of northwest Ohio's oil is in a geological area known as the Lima-Indiana Field, characterized by Trenton limestone. It forms a broad, 185-mile arc across Lucas, Wood, Hancock, Allen, and Van Wert counties in Ohio, and extends into northeastern Indiana. The first major field discovered in North America, it runs from almost Toledo to Indianapolis.

Few people today may realize Ohio was America's leading oil-producing state from 1895 to 1903.

John D. Rockefeller, the wealthiest man in the world in 1895, got his start in the Cleveland area with Standard Oil Co. in 1870. Ohio moved past its neighbor Pennsylvania, where Col. Edwin L. Drake drilled the world's first commercially successful oil well, at Titusville, on Aug. 27, 1859.

"We really were the Saudi Arabia of the world at one point," Mr. Wickstrom said. "In the 1890s, we were producing more oil than any place in the world."

It wasn't just oil that has caused boom times in northwest Ohio, either -- to some degree, so did the discovery of all of the natural gas that accompanied it.

Findlay especially was rich in both oil and natural gas reserves. Marathon Oil got its start in Findlay. And natural gas was so plentiful, it was flared off in downtown street lamps and torches at one time, as illustrated in an 1885 photo published by Harper's Weekly magazine.

The abundance of oil and natural gas helped Findlay grow from 5,553 people in 1880 to 25,000 in 1990.

Many people thought at the time there was an inexhaustible supply of natural gas; Findlay even allowed unrestricted use of that which came from one of its largest wells.

A lot of it was just lost or flared off as if it were a nuisance by-product of oil. People didn't know the value of natural gas, Mr. Stewart said.

According to historical archives, about 1.5 billion cubic feet of natural gas were wasted from Findlay's Karg well alone.

A New York engineer once reported that Findlay had, through torches and other devices, used enough natural gas in a day to serve New York City for a year.

"It was really just an appalling waste of natural resources," Mr. Wickstrom agreed.

But natural gas ultimately played a key role in the industrialization of Toledo, wooing Edward Drummond Libbey from Massachusetts.

The Libbey company's now-famous glass legacy here began when he signed a contract on Feb. 6, 1888, to move his New England Glass Works from Boston to Toledo to take advantage of cheap natural gas he needed to fuel his glass furnaces.

Mr. Libbey was drawn to Toledo by its vast supplies of natural gas, sand, soda ash, and labor.

His plant northeast of downtown opened on Aug. 17, 1888, after more than 50 train carloads of equipment and workers were delivered from the East Coast to Toledo. They were greeted with a parade. He and a superintendent Mr. Libbey later hired for his factory, a mechanical genius by the name of Michael J. Owens, gave Toledo its nickname of "The Glass City."

But many questions existed about natural gas back then.

David Ross Locke, who was The Blade's editor from 1865 until his death in 1888, first campaigned for a municipally owned natural gas plant in Toledo, then reversed himself after coming to the conclusion the project would not be worth its enormous cost in the long run. The fear was that the region's natural gas supplies would be exhausted before the city got its money out of the plant.

Mr. Locke stated in an editorial back then that "perhaps the hardest fight The Blade ever undertook was that in opposition to the natural gas project."

Northwest Ohio's oil boom is generally seen as a 50-year phenomenon, from the 1880s to the 1930s.

Another famous Toledoan, former Mayor Samuel M. "Golden Rule" Jones benefitted from it.

Mr. Jones, a millionaire businessman whom some experts have ranked as one of the greatest mayors in U.S. history, owned Acme Sucker Rod Co., which produced devices for extracting crude oil from the ground.

A onetime Republican who fell out of favor with the GOP, Mr. Jones became Toledo's 28th mayor in 1897 and was re-elected three times as an Independent. He died in office in 1904, the city's first mayor to do so.

Known for his populism, municipal reforms, and fairness, he was credited with having a major role in the creation of the national Independent political movement.

Mr. Jones won praise for shortening the work week, hosting employee picnics, and for changing the way Americans looked at labor in Toledo. He got his nickname from his belief that workers should be treated the way their bosses would want to be treated. He was one of the first to offer revenue-sharing, health insurance, and subsidized hot meals for his employees, all radical ideas at the time.

A pair of catastrophic events changed Mr. Jones' life.

His 2-year-old daughter, Eva Belle, died in 1881. Four years later, he lost his beloved first wife, Alma.

Mr. Jones emerged from a year-long funk by moving to newly opened oil fields near Lima, Ohio, with his two sons in 1886. There, Mr. Jones drilled the state's first large well and helped found the Ohio Oil Co., which later was bought by Mr. Rockefeller's Standard Oil Co.

In 1894, he secured a patent for an iron pumping rod, known as a sucker rod, for deep-well drilling.

Mr. Jones opened a plant in East Toledo and later moved it to Segur Avenue near Field Avenue.

The Lima-Indiana Field in northwest Ohio was the nation's most active in the 1890s, with production peaking in 1896, when it produced more than 23 million barrels of oil.

Tiny Cygnet in Wood County was a booming oil town with 13 saloons and so many workers that hotel owners rented "hot beds" -- beds used for no more than 12 hours at a time, rotated between workers on day and night shifts.

Historians have noted a high rate of illegitimate births in the Cygnet area during that era. Some women sought refuge in the Findlay Home for Friendless Women and Children, the forerunner to Blanchard Valley Hospital in Findlay.

In all, the Lima-Indiana Field produced more than 380 million barrels of oil while in commercial-scale operation from the 1880s to 1930s, when 76,000 wells drilled, according to the natural resources department. It's not known how much oil remains. Over the last 20 years, state officials have estimated from several million to 4.5 billion barrels exist beneath northwest Ohio.

The Lima-Indiana Field was abandoned as oil began to be harder to extract, prices dropped, and the vast oil fields of Texas and Oklahoma were discovered.

Oil can be hard to extract because it is trapped between rocks. With rare exception, it does not -- as many people believe -- pool up and form underground lakes.

That's an important point, Mr. Stewart said, because extracting oil is not as simple as plunging pipes downward and having them act as straws.

"Oil is between the porous spaces of rock," he said. "It's not like you're drilling into a huge pool or cavern of oil."

Mr. Stewart said oil needs underground pressure, known as "energy drive," to push it upward.

Northwest Ohio lost most of its underground pressure during its 1880s-to-1930s oil boom because too many wells were drilled. And, being a fledgling industry, rudimentary drilling techniques were used. Drilling produced gushers, now seen as a highly inefficient way of extracting oil. If done today, pressure would be moderated and controlled to extract as much oil as possible, Mr. Stewart said.

"They wasted a large amount of the energy drive. Even though they got a lot of oil out, they could have gotten a lot more if they understood modern drilling techniques, which they obviously did not," Mr. Stewart said. "They were just trying to get that oil out of there as fast as they could."

Water was used to push out oil in Meridian's 1995 effort because there wasn't enough pressure left beneath the ground to push oil upward.

The cost and logistics of repressurizing the region with underground gas would be prohibitive, Mr. Stewart said.

Mr. Wickstrom said northwest Ohio still may have a chance at a comeback, though, if the natural geology of the Lima-Indiana Field is in separate compartments.

It's unclear now if it is, he said.

But if there are compartments within the field where underground pressure has not been exhausted, a portion of what's left may someday be extracted, Mr. Wickstrom said.

"With the prices what they are and technology being available, I think we'll start seeing that being proposed at some point," he said. "There's a possibility we could find some virgin compartments that wouldn't need to be repressurized."

Northwest Ohio's drilling legacy isn't the only one in this part of the country that's steeped in some folklore.

On Jan. 7, 1957, the famed Albion-Scipio range in southern Michigan -- one of the Wolverine state's most productive oil fields -- was discovered after a fortune teller had a vision of oil on a Hillsdale County farm called "Rattlesnake Gulch" that was owned by a friend of hers.

Zulah "Ma" Larkin, a Coldwater, Mich., spiritualist, told her friend Rattlesnake Gulch owner Ferne Bradford she would get oil on her property at precisely 4 p.m. on the birthday of someone known to Ms. Bradford. She even showed Ms. Bradford the exact spot on her land where the good fortune would come.

A local driller named Clifford Perry was enlisted to help. He had drilled 31 dry holes in the area. He didn't expect to find any oil on Ms. Bradford's farm, but drilled after Ms. Bradford had sold shares in the project. On the birthday of Mr. Perry's son -- at 4 p.m. -- oil squirted out of a well on Ms. Bradford's property called Houseknecht No. 1. For a while, that well produced 100,000 barrels a day, more than any other in Michigan.

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