Chesapeake Energy and Aubrey McClendon, masters of the power play

By Gary Jacobson

July 9, 2008 at 8:42am

Chesapeake Energy CEO Aubrey McClendon has a former Oklahoma governor (Frank Keating) and U.S. senator (Don Nickles) on his Oklahoma City-based company’s board of directors. That seems only fitting. McClendon’s great uncle, Robert S. Kerr, co-founded Kerr-McGee and served as Oklahoma governor and senator.

These are boom times for Chesapeake, founded by McClendon - whose middle name is Kerr - and Tom Ward in 1989 with an initial investment of $50,000. The company went public in 1993. After some rough going, its stock price has increased fiftyfold since.

Chesapeake is currently the nation’s third largest producer of natural gas, but McClendon predicts it will be No. 1 by the end of the year. He told shareholders at the company’s annual meeting last month that the Haynesville Shale field in Louisiana and Northeast Texas could be the company’s most significant field ever.

“We are really off to the races in that play,” he said.

Last week, the company announced a $3.3 billion joint venture with Plains Exploration & Production Co. that values Chesapeake’s holdings in the Haynesville region at $30,000 an acre, more than six times what it paid.

The company is also the biggest player in the Barnett Shale region around Fort Worth, where it has employed actor Tommy Lee Jones to tout the benefits of natural gas in radio, TV, newspaper and billboard advertising.

“The Barnett Shale is a national treasure that will benefit all Texans for generations,” the actor says in a TV spot.

Not all residents agree.

Star-Telegram columnist Mitch Schnurman points out that McClendon has a “history of funding aggressive public-opinion campaigns.” He supported the Swift Boat campaign against John Kerry, defended the Duke (his alma mater) lacrosse team against rape accusations and fought the construction of coal power plants in Texas.

Coal is a cheaper fuel to use to generate electricity but natural gas is cleaner.

Chesapeake’s main business strategy is to “grow through the drillbit,” meaning exactly what it says. The company claims to have the most active drilling program in the United States.

Like Fort Worth-based XTO Energy, Cheasapeake also actively hedges its future production to provide some price certainty.

As of May 1, according to Chesapeake’s Web site, the company had hedged more than 70% of its natural gas and oil production for the rest of this year, as well as 80% of gas production and 92% of oil production for 2009.

McClendon also hedges his political bets. He has made campaign contributions to many presidential candidates this year, including Barack Obama and John McCain.

At the annual meeting, McClendon said his company will continue to try to convince the U.S. Congress that Chesapeake is one of the energy good guys.

“We are trying to produce more clean-burning, American-produced natural gas,” he said.

Monday, Chesapeake said that Oklahoma State University President Burns Hargis would join the company’s board on Sept. 15. Tuesday, the company said it would issue 25 million additional shares of common stock.

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  • #1.   Stephen Willis 07.28.2008

    Aubrey K. McClendon and Mark Fischer, CEO of Chaparral Energy are partners in Pointe Vista Development, LLC, which is in the process of acquiring all of Lake Texoma State Park in southern Oklahoma between Durant and Kingston. In December, 2006, when they assumed ownership of this former Corp of Engineers land, they shut down the old Lake Texoma State Park lodge. This past spring, they shut down the only profitable state owned public golf course adjacent to the old lodge, and now they plan to displace the entire state park to some other location, to make way for high-end homes, condominiums, a 5-star hotel and convention center. The park is barely half-full on weekends, and virtually empty during the week, although Pointe Vista has no immediate plans to shut it down completely.

    Former Gov. Frank Keating laid the goundwork for this park privatization (theft) in 1999 and Sen. James Inhofe carried legislation in the US Senate.

    Call Senator Barbara Boxer, Chair of Sen. Environment & Public Works Committe to stop the sell-off of our federal Corp of Engrs park lands. These lands were taken in the 1930’s by eminent domain to make way for the Denison Dam for flood control.

    These politicians are engaged in some serious self-dealing and need to be stopped before McClendon and Fischer take over the park for good and shut it down completely. Help us stop these corporate shysters, or they will be coming for a park near you next!

  • #2.   Stephen Willis 07.28.2008

    Please share this with your US Senator and ask them to remedy the takings:

    The Privatization of Lake Texoma State Park & Corp of Engineers Wildlands

    Lake Texoma State Park is in the process of being taken by a powerful group of Oklahoma businessmen, including Chesapeake Energy’s CEO, Aubrey K. McClendon, and Chaparral Energy’s CEO, Mark Fischer,(co-owners of Pointe Vista Development), with the bipartisan assistance of former Governor Frank Keating, U.S. Senator James Inhofe, State Senator Jay Paul Gumm, and Oklahoma Governor Brad Henry.

    This taking involves the gross abuse of eminent domain after a decade of successful bipartisan efforts to “break” both federal and state laws. The original purpose of those statutes has been carefully undone, thereby ultimately serving the private corporate interests of Pointe Vista Development, at the expense of the Oklahoma School Land Trust, as well as Corp of Engineers’ lakeshore property, a part of our commonwealth.

    EMINENT DOMAIN: Indian Lands - Taken by the Federal Government

    Following tribal removal from Mississippi along the Trail of Tears in the 1830’s, the U.S. Government transferred these Oklahoma lands, which were then part of Indian Territory, to the Choctaw and Chickasaw tribes to be theirs in perpetuity.

    One hundred years later, after years of resistance by local Chickasaw and Choctaw farmers and ranchers, U.S House Speaker Sam Rayburn of Texas succeeded in passing the Flood Control Act of 1938, to construct the dam at Denison, Texas.
    By August, 1941, the federal government had purchased 9,187 acres from Texas, and 23, 289 acres from Oklahoma. The average price paid for Oklahoma lands was $23.12 per acre, and for Texas lands, $36.85 per acre. In October of 1942, they owned 60,490 acres in Oklahoma and 22,881 acres in Texas, for which they had paid $2,209,444.78.

    PRIVATIZATION: Federal Lands – Taken by OK Politicians and Their Cronies

    In 1996, Lake Texoma State Park was Oklahoma’s most popular & profitable state park.

    In 1999, Governor Keating’s massive budget cuts laid the groundwork for selling off ten golf courses and four state parks operated by the Tourism & Recreation Department.

    The federal Water Resources and Development Act (WRDA) of 1999 authorized the Corp to sell valuable lakefront land at both Lake Texoma State Park and at Hugo Lake, Oklahoma. The questionable Hugo Lake land sales are under investigation by the FBI
    The state and federal lands comprising Lake Texoma State Park have also been quietly undervalued and hastily sold to Pointe Vista Development by members of the Oklahoma School Lands Trust - Commissioners of the Land Office, working in collaboration with the Oklahoma Tourism & Recreation Department (OTRD) Director Hardy Watkins.

    These land sales are not complete! There is still time to save Lake Texoma State Park.

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