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Wolverine Gas & Oil Corp. has trouble with 2nd Utah oil find

SALT LAKE CITY — A small oil company that made a big discovery near the central Utah town of Sigurd is running into trouble with a second set of wells 22 miles away.

Wolverine Gas & Oil Corp. obtained approval Thursday to flare excess gas into the atmosphere for months longer as it determines the viability of its second Utah oil field.

The first set of wells from a wildcat discovery are paying off handsomely for the company based in Grand Rapids, Mich. According to Utah production records, Wolverine has pulled 10 million barrels of sweet crude out of the ground since 2004 from the Covenant field just outside Sigurd.

Ten million barrels is worth about $800 million at today's prices, but Wolverine chief Sid Jansma Jr. said the profit his company was clearing has fluctuated wildly since 2004, from a high of $147 a barrel to a low of $17.

The benchmark price for crude on the New York Mercantile Exchange was just over $80 a barrel Thursday.

Jansma said his company's second set of wells could produce 10 million barrels, but pumping it out of the ground is proving difficult because the oil won't flow easily and comes with a lot of gases that have to be vented first.

Those estimates are for the two wells in a field the company dubs Providence, but they don't count the potential of a larger reservoir more than 8,000 feet deep. For proprietary reasons, Wolverine is keeping larger estimates under wraps.

Jansma told The Associated Press he planned to pump for months longer to determine how much "we can get out" from the larger underground reservoir.

For that reason, Utah officials on Thursday issued a permit for Wolverine to vent up to 360 million cubic of gases from both test wells over six months.

In Utah, well operators are limited to venting 1.8 million cubic feet of gas after the first month of production. They must ask for permission to exceed that limit, and Wolverine obtained the approval last week from the Utah Board of Oil, Gas and Mining.

No objections were raised on environmental grounds, but air pollution didn't figure into the state board's decision. It was concerned only that Wolverine might be wasting energy-rich gases that produce a royalty for the state.

The company countered that it wasn't economical to sell the gases because the nearest natural-gas pipeline is miles away.

Besides, only one well is producing significant amounts of methane, the principal ingredient of natural gas, along with impurities. The other well is releasing inert carbon dioxide almost exclusively, company geologist Emily Hartwick said.

Wolverine made an unlikely find at its first location six years ago. The Covenant field was called the largest onshore discovery in 30 years, located in a region long abandoned for exploration by major oil companies. Drilling had started 50 years earlier without success, as the complex geology of central Utah produced only dry wells.

But in 1999, Wolverine bought Chevron Corp.'s leases and seismic data and started poking around. It hit "pay" in late 2003, and the company started producing a few months later. For a year before the secret got out, it snapped up rights to a half-million acres in the region at bargain prices.

The discovery prompted a frenzy among other drillers who have since grabbed another 1 million acres of leases in the region at higher prices. No other significant finds have been reported.