Introduction to Connecting the Dots

 

Introduction to Connecting the Dots of the Marcellus Shale Players

USGS: Pressure from higher-ups at USGS forced our hand

A report from a group called the Radioactive Waste Management Associates (RWMA), which is researching the risk of increased radon pollution in the Marcellus Shale belt.

They found the U.S. Geological Survey appeared to be underreporting radon levels, and there’s evidence that the industry is controlling the location and other details of the test wells.

Why were the USGS measurements so low and at variance with other EPA and USGS studies? Here the story takes an interesting turn. A call to one of the USGS researchers revealed the following:

In response to a request for the well logs, to examine whether the wells reached the Marcellus shale formation, the USGS researcher said they had none.

RWMA: Then, can you give us the location of the Pennsylvania wells? With the location, we could find the well logs in Pennsylvania State files.

USGS : Well, no, that would break the trust with the gas companies that allowed us access.

RWMA:  Okay, then how do you know you reached the Marcellus shale formation?

USGS : Because we were told so.

RWMA:  Who selected the wells?

USGS : The US Department of Energy in collaboration with the gas companies.

RWMA:  Did you feel comfortable publishing what are essentially screening results?

USGS : No, but pressure from higher-ups at USGS forced our hand .

To summarize:  The oil and gas industry chose specific wells, in which USGS researchers unsurprisingly measured low radon concentrations and were then pressured by the oil and gas industry to publish these preliminary findings, under the USGS imprimatur.  It appears the USGS has been corrupted by the oil and gas industry.

 

What have We Done?

Below is an essay by Carol French, October 11, 2012.

 These are her words describing her experiences and observations of living in Bradford County. 

 What have We Done?

Nearly 30% of the rural farm land located in Bradford County, Pennsylvania was already leased prior 2006. We and 50% of the county decided to lease our land for an average $5- $85/per acre. It would take two more years before the gas companies would convince another 10% to lease their land at $2,500 or more/per acre. During this leasing process, you could feel the excitement. It was the talk of the town. There were suggestions made that if a gas well was drilled on your property you would become the next “shaleionaires.” Everyone was to prosper, new roads, jobs, additional money from leasing and royalties. It was too good to be true!

By the spring of 2009 there was uneasiness among the farmers that had had a gas well drilled on their property. The local newspaper was reporting contamination found in water wells, death occurring on a gas pad and the farmer was facing the fact that he could lose his farm due to a lawsuit based on the gas companies operation. For myself, I was thinking that our lucky neighbor was going to become the next Millionaire, because they had the gas well drilled on them. Soon my mind changed. Those farmers were facing penalties lodged against them, due to their land becoming industrial use instead of agricultural use. Landowners found themselves seeking legal advice, only to find that the attorneys were not experienced in Oil & Gas law, and had a conflict of interest. Example: If the landowner could not afford the attorneys fee, the attorney would simply attach his name to the royalty interest for payment.

My neighbor (Carolyn) and I attended a presentation by a professor from Penn State University. He made a statement, saying that we must sacrifice; it was our patriotic duty to assure our Country would be independent from foreign oil. I could not wrap my mind around what he was saying. Was there legislation insuring that our natural resources would stay in this country? What did he mean we would have to sacrifice?

In December, 2010 – January 2011, three gas wells were drilled near our farm. Farm land was getting ripped up like old material for a patch work quilt. In the middle of 2011, five more gas wells were drilled, surrounding our farm. Two of the gas wells were less than 4,000 feet away.

My water changed March 15, 2011. Our water appeared pearly white. Then it had a layer of green moss settling on top of a 1/4 inch of sand as the water would become gelatin like. By October 2011, my daughter became ill. She had a high fever, diarrhea, weight loss of 10 pounds in 7 days, and severe pains in her abdomen. At the hospital they found her liver, spleen and her right ovary was extremely enlarged. Our neighbor living north of us had the same health issues after her water changed in March of that year, except her spleen burst three days after she went to the hospital. We knew our daughter would have to leave Pennsylvania in order to have a chance of a healthy, normal life. She moved to Tennessee. We don’t drink the water or the milk from our cows. We still have to bathe in it. Our state agency (Department of Environmental Protection) refuses to test our water; therefore the gas company will not provide water for our cows and my family.

I now believe I understand what he met by “we are to sacrifice”

It is October 3, 2012, Many that quit their previous job to work for the gas related companies are now unemployed. We have become “prudent partners” with the gas company, by signing a lease, now are finding ourselves responsible for their debts (Mechanics Leans). There are for sale signs in the yard of a contaminated farm. The farm lost 80%-90% of its value, possibly losing his milk market, and who will buy his cows? Many living in Bradford County have “changed” water, depending on the gas companies to provide water for their families and farms. This has become a huge, expensive burden to the gas companies. Some of the gas companies operating in Bradford County have chosen not to pay for the water bill, resulting in no more water deliveries to the effected families. Other residents have been given water filtration systems, resulting in additional cost to the resident.

We were given a chance to dream, not knowing the true value of what lie so far beneath our land. Not aware of the type of operations that would be conducted on our land. We believed in the false promises made by the gas industry.  Now I wonder, will these private gas companies produce natural gas for this country or produce natural gas for sales overseas, selling to the highest bidder. This would crush the theory of “sacrifice for our country allowing independence from foreign oil”.

 I keep asking myself, what have we done?

 

The Neutering of the DCNR

How would you go about rendering a governmental department useless or make it more amiable to your policies while still preserving the façade of operating in the public interests?

1.       Appoint a Director or Secretary who is in agreement with your policies, or will follow those policies regardless of personal views.

2.       Cut the budget for that department which will result in loss of staff and resources needed for optimal management and operations.

3.       Create a work environment which will force out those in opposition to the policies.  If they do not leave in protest – fire them.

4.        Public Relation events to maintain the façade and distract the public from what is really being done.

This is what is happening at the Pennsylvania Department of Conservation and Natural Resources (DCNR).

1.       Richard J Allen was appointed as DCNR Secretary in March 2011, and confirmed by the PA Senate in June 2011.

2.       2011-2012: DCNR’s budget fell from $82 million to $55 million, a reduction of 33%. The bulk of these decreases are in state park and state forest operations.   However, DCNR could make up the budget reduction by leasing our state parks for gas drilling.

Mr. Allan, a Luzerne County native, is at the helm of an agency set to receive $69 million from the separate Oil and Gas Lease Fund in fiscal 2012-13 to help support operation of state parks and forests and other administrative functions. This fund collects rents and royalties paid by oil and gas firms drilling on state forest land. The fund has been tapped for decades to pay for a wide range of conservation and recreation projects under terms of a 1955 law, but since 2009 a significant chunk of fund revenue has gone to prop up DCNR's budget.

A total of 152 wells are producing gas in state forests while another 442 wells have been drilled, said Mr. Allan. About half of the 1.5 million acres of state forest land in the Marcellus Shale formation has been leased to drillers.           

3.       Dr. Paulette Viola, a professor of ecology at Slippery Rock University, resigned as a member of Conservation and Natural Resources Advisory Council (CNRAC) in September 2012.  She cited public input and advice from council members were no longer valued and CNARC being unable to work effectively with DCNR Secretary as reasons for her resignation.

Per Viola’s resignation letter: 

As you well know the degradation of council is a result of multiple actions. They include the:

1) loss of council’s independence as an advisory body,

2) removal of the executive director’s position,

3) reassignment of council’s secretary,

4) extremely disproportionate budget reduction,

5) low response time for requested information,

6) quality of information that is eventually shared and

7) displayed hostile atmosphere created by the administration for public input during a council meeting

Viola’s resignation was soon followed by the October 2012 “resignation” of State Parks Director John Norbeck.  Technically, Norbeck did resign after being given a termination notice or the choice of resigning.          

In a phone interview from his home Sunday, Mr. Norbeck, 56, said he received a termination letter from the state's human resources office on Oct. 1, informing him that his last day of work would be Friday, Oct. 5, but "if he wanted to tender his resignation it would be considered."

On Wednesday he agreed to resign and asked for, and was granted, a two-week extension, through Oct. 19, to prepare a transition document for a new parks director.

Mr. Norbeck said he wasn't told why the administration wanted him out. The closest anyone came, he said, was when Adam Gingrich, an executive assistant to DCNR Secretary Richard J. Allan, said the "administration has decided to go in a different direction."

Although Mr. Norbeck said he didn't know of any one issue that caused the administration to sour on him, he cited several on which he differed with it.

Norbeck is known to be an opponent of drilling in state parks.

Prior to Viola and Norbeck’s resignations:
The head of a citizens advisory panel for the state’s parks and forests has been canned, purportedly to cut down on costs. But one member and Natural Resources committee says that’s baloney, reports the Associated Press:

Eric Martin, one of two remaining original council members, accused the administration of trying to pre-empt public oversight of gas drilling on forest land.

"Aside from what we the council feel was an illegal firing, this is a clear message from the executive suite regarding citizen paper in an e-mail. “Funny that one of our hot topics is Marcellus Shale."

4.       PA Gov. Corbett takes a Kayak Trip and promotes nature.

"Here in the Pocono Mountains, there is a long tradition of defending the Delaware," Corbett said. "Because of that awareness, there is also a tradition of enjoying the waters, mountains, lakes and trails.

"We want clean rivers, lakes, skies and forests to leave to our children and grandchildren," Corbett said. "Each of us has a role to play in that cause. And if we all do, this region and this river will bring us not only prosperity, but joy."

Meanwhile, behind closed doors, the DCNR is in “discussions” with Anadarko Petroleum Corporations of Woodlands TX, to “develop” the Loyalsock State Forest and at the same time Anadarko is staking out drilling locations along the Old Loggers Path.  

"DCNR has given us permission to perform preliminary survey studies, which includes staking the area to show where development locations could be and guide our environmental assessment of the area," Mary B. Wolf, an Anadarko spokeswoman, said in an e-mail.

The Old Loggers Path is a 27-mile loop which the DCNR describes as having “stunning vistas and clear, cold cascading streams.”  The area also includes Rock Run stream which the DCNR has touted as being “exceptional”.  

"Few streams in Pennsylvania can match Rock Run's rich tapestry of deep, crystal-clear pools, cascading waterfalls and massive, weathered rock formations," an agency official said in a 2008 DCNR news release.

Say good-bye to the stunning vistas, crystal-clear pools, cascading waterfalls and massive rock formations, they will soon be replaced by bare dirt, cement pads, frackwater pools, drilling spills and massive drill rigs.

See DCNR webpage on Natural Gas Drilling.   They are tearing down a forest to put up an industrial zone.

Appeals by public groups for information on the drilling plans and requests for hearings have been ignored.

DCNR says the issue is not open to discussion.  Neutering complete.

UPDATE: Wednesday, October 10, 2012
Legislative Hearing Sought Into State Parks Director’s Resignation

Rep. Camille George (D-Clearfield), Minority Chair of the House Environmental Resources and Energy Committee, Tuesday called for a hearing into the resignation of John Norbeck as director of the Bureau of State Parks within the state Department of Conservation and Natural Resources.

‎”If smoke indicates fire, this has turned into an inferno,” Rep. George said. “We need to get to the bottom of this, and quickly.”Rep. George noted that the House Environmental Resources & Energy Committee has not held a voting meeting in more than four months.“Many important environmental and energy issues are begging for attention, including the need for stronger oversight over deep injection wells for Marcellus waste water and bolstering pre-drilling water quality surveys near proposed Marcellus shale gas wells,” Rep. George said. “The days are getting shorter, but that doesn’t mean our attention span to critical issues should wane.”

© 2012 by Dory Hippauf

Encana: Hens are Safe

In July 2012, Reuters reported Chesapeake Energy and Encana worked together in regards to land bidding in Michigan. 

Encana tipped off Chesapeake to land plans in Michigan - Emails

Reuters | By Brian Grow and Joshua Schneyer | Wed Jul 11, 2012

Excerpt (Emphasis added):   As Chesapeake Energy Corp and Encana Corp face antitrust investigations, emails reviewed by Reuters indicate that top executives of the two rivals shared sensitive information that gave Chesapeake the upper hand in deals with Michigan land owners.

The emails show the competitors traded information about whether Encana was halting new land leasing in Michigan in 2010, and the information prompted Chesapeake to dramatically change its leasing strategy in subsequent weeks and helped send Michigan land prices tumbling from record highs.

Excerpt (Emphasis added) : Encana said it held talks with Chesapeake without reaching an agreement on a joint venture. It has begun an internal inquiry led by the chairman of its board of directors. Chesapeake also acknowledged it held talks with Encana but said the two companies never consummated any agreement and never bid jointly.

 Today, Encana announced, following an internal investigation, the hens are safe.

Encana clears itself of collusion in Michigan | Reuters | By Brian Grow and Scott Haggett | ATLANTA/CALGARY, Alberta | Wed Sep 5, 2012

 Excerpt (Emphasis added): Encana Corp said on Wednesday an internal investigation has determined that it did not collude with Chesapeake Energy Corp to lower the price of land acquisitions in Michigan two years ago.

The company's board of directors, which led the investigation launched on June 25 with the assistance of outside attorneys, did not provide a report on the scope of the inquiry, nor explain how it reached its conclusion.

"We can't offer more detail than what we've released as the issue is still under investigation by the Antitrust Division of the Department of Justice and the Michigan Attorney General," Encana spokesman Jay Averill said in an email.

Encana has been served with subpeonas from Antitrust Division of the U.S. Department of Justice and a civil investigatory demand from the Michigan Attorney General.  Encana said it will cooperate with the two agencies.

Chesapeake Energy has confirmed a federal grand jury is looking into the company's acquisition of land and leases in Michigan.

Chesapeake Energy confirms federal inquiry of Michigan land deals

NewsOK | By Paul Monies | August 9, 2012

Excerpt (Emphasis added) : In regulatory filings, Chesapeake said it received a subpoena from a field office of the U.S. Department of Justice's antitrust division. Federal prosecutors in the Western District of Michigan have opened a federal grand jury inquiry into the purchase and lease of oil and gas rights.

Chesapeake also said several state government agencies have asked for documents in connection with oil and gas leases. It did not provide additional details.

“Chesapeake intends to provide information in response to these investigations, and its board of directors is conducting an internal review of the matter,” Chesapeake said in the filing.

Nothing to worry about.  The hens are safe and the foxes are teaching the hens how to make omelets.

…………………………

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Chip Northrup to NY - No Rush to Frack

NY is under pressure to frack by the Natural Gas Industry.  Rushing head long into industrializing its rural communities without a real hard look at the risks and impact it will have is fool hardy.   New York only has to look across the border to Pennsylvania to see the harm and devestation fracking has caused.

Chip Northrup explains in The Inevitable Slow Path to New York Shale Gas

15 Seconds of Fame....

Have to brag....

New Yorkers Rally to Urge Gov. Cuomo to Reject Fracking

by Sara Jerving — August 29, 2012 - 8:00am

......As documented by blogger Dory Hippauf, EID consists of several interrelated fronts in several states, with ties to various PR firms, gas companies, and political lobbyists. The group has worked extensively to try discredit those who express concerns about fracking, targeting the New York Times and the Oscar-nominated documentary film “Gasland," and its director Josh Fox.

Chesapeake Energy: A Problem like Aubrey – Part 3

Shareholders of Chesapeake Energy received an unwelcomed wake-up call on Wednesday, April 17, 2012.

Reuter's headline screamed "Exclusive: Chesapeake CEO took out $1.1 billion in unreported loans" - By Anna Driver and Brian Grow

 Aubrey McClendon, the CEO of Chesapeake Energy Corp, has borrowed as much as $1.1 billion over the last three years against his stake in thousands of company wells - a move that analysts, academics and attorneys who reviewed loan documents say raises the potential for conflicts of interest.

The loans, which haven't been previously detailed to shareholders, are used to fund McClendon's operating costs for an unusual corporate perk that offers him a chance to invest in a 2.5 percent interest in every well the company drills. McClendon in turn is using the 2.5 percent stakes as collateral on those same loans, documents filed in five states show.

The size and nature of the loans raise questions about whether McClendon's personal financial deals could compromise his fiduciary duty to Chesapeake investors, experts who reviewed the documents told Reuters.

Why do I suddenly hear a chorus of nuns?

Over the next few days as more information emerged and Chesapeake Energy attempted damage control, the market saw Chesapeake (CHK) shares hit a new 52-week low of $16.78  

The damage control from Chesapeake has been, well, a bit peculiar, and weak.  While the actual loan transactions and failure to disclose to the shareholders may be “legal”, it does bring up the issue of conflict of interest and makes one wonder what else is going on with McClendon.  

As Reuters dropped more shoes regarding Chesapeake Energy and Aubrey McClendon over the next few weeks, I kept hearing a chorus of nuns singing “How do you solve a problem like McClendon?”   Unlike Maria von Trapp, Aubrey doesn’t have a Mother Superior looking out for him, but he does have the Securities Exchange Commission (SEC) looking AT him.

Recent History of Chesapeake Energy

The day before the Reuters story made shareholder’s spine shudder Chesapeake Energy announced a public offering of its Oil Field Services.
The Wall Street Journal reports: (emphasis added)

Chesapeake Oilfield Services Inc. hopes to raise up to $862.5 million in an initial public offering of stock, according to a filing Monday with the Securities and Exchange Commission. The oilfield services company—which owns more than 100 drilling rigs, a hydraulic fracturing subsidiary, an oil field tool rental business and a fleet of trucks that ferry drilling rigs and other heavy equipment—will continue to primarily serve Chesapeake Energy, the filing said. Both companies are based in Oklahoma City, Okla.

Chesapeake Energy is the second largest natural gas producer in the U.S. and spent about $13.3 billion last year to drill and complete 1,662 wells, according to the filing. At year's end, Chesapeake Energy employed more than 130 drilling rigs, more than twice as many as its nearest competitor, Exxon Mobil Corp.

The filing didn't say how many shares Chesapeake Oilfield planned to sell in its IPO or in what range the company hoped to price them. It did say that underwriters Goldman Sachs Group Inc. G and Bank of America Merrill Lynch would have the option of selling up to $112.5 million worth of additional shares if demand warranted.

Chesapeake Energy has been attempting to raise cash and make its balance sheet more appealing by selling or spinning off assets. 

The previous week, Chesapeake Energy announced three oil and gas asset monetization transactions for proceeds of $2.6 Billion.

Marketwatch reports:   (emphasis added)

Chesapeake has completed the sale of preferred shares of a newly formed unrestricted, non-guarantor consolidated subsidiary, CHK Cleveland Tonkawa, L.L.C. (CHK C-T), and a 3.75% overriding royalty interest in the first 1,000 new net wells to be drilled on CHK C-T leasehold and certain wells contributed at closing for proceeds of $1.25 billion. The purchasing investment group was led by GSO Capital Partners LP, an affiliate of the Blackstone Group , and included TPG Capital, Magnetar Capital and EIG Global Energy Partners. CHK C-T owns approximately 245,000 net leasehold acres in the Cleveland and Tonkawa unconventional liquids-rich tight sand plays in Roger Mills and Ellis counties, Oklahoma. Chesapeake has retained all the common equity interests in CHK C-T.

In a risky play, Chesapeake Energy has gone “naked”:

"....removed most of its 2012 derivatives positions, leaving the company naked to big dips in natural-gas futures prices just as they were headed for a ten-year low.

Late last year, the company removed most of its gas and oil hedges for 2012 and 2013, according to documents and people familiar with the matter, believing that prices were at or near a bottom. " ~ CNBC, April 9, 2012

Definition of 'Naked Option':  A trading position where the seller of an option contract does not own any, or enough, of the underlying security to act as protection against adverse price movements. If the price of the underlying security moves against the trader, who does not already own the underlying security, he or she would be required to purchase the shares regardless of how high the price is. The potential for losses, then, can be unlimited, and as a result, brokers typically have specific rules regarding naked trading. Inexperienced traders, for example, would not be allowed to place this type of order.

In December 2011, Chesapeake Energy sold its Marcellus Shale gas gathering assets to Chesapeake Midstream Partners, LP, for $865 million.

Thick Skin?

The Two Sides of Aubrey, by Christopher Helman, a Forbes article in October 2011 describes McClendon as:

He's a hero: Chesapeake Energy may earn $2 billion this year and could solve our energy problems. He's a risk junkie: His aggressiveness could (and almost did kill) the company.

At a steak dinner with McClendon, Helmen remarked further:

"He co-owns the restaurant and had already picked the wine, which was decanted two hours ahead of time. Only the royal stuff: a 1989 Petrus, a 1989 Haut Brion and, conspicuously, a 1982 Lafite Rothschild. Easily ten grand worth of tipple."

Helman confesses to being critical of McClendon, "…called him everything from dangerous to overpaid and suggested that the company he built would fare better without him."

McClendon maintains "a key to success in any walk of life is having a short memory and a thick skin…"

His response to a March 2012 Rolling Stones article left me with the feeling his skin isn’t all that thick.  The day after the Rolling Stones article appeared on the internet, Chesapeake Energy released a 2,872 word rebuttal.  
Rolling Stone rebutted the rebuttal.   Chesapeake did not rebut the rebutted rebuttal.

Shell Games

Another story which should have sent red flares through the Chesapeake Energy shareholders morning newspaper was a December 2011 Reuters story By Joshua Schneyer and Brian Grow entitled Special Report: Energy giant hid behind shells in "land grab".  

The company issuing the rejections wasn't much of a business at all. It was a shell company - a paper-only firm with no real operations - called Northern Michigan Exploration LLC. 

(Emphasis added)  One jilted land owner, Eric Boyer-Lashuay, called to complain to the broker who had handled his lease. Northern, he recalls saying, is "a shell company ... a blank door with no one behind it."

Today, he puts it this way: "It was all a fake, all a scam."

Northern has voided hundreds of land deals, and was indeed a facade - a shell company created so that one of America's largest energy companies could conceal its role in the leasing spree, a Reuters investigation has found. Oklahoma-based Chesapeake Energy Corp., the nation's second-largest gas driller, was behind the entire operation.

Chesapeake had created one shell company that set up another, Northern Michigan Exploration. Next, Northern hired brokers who signed leases with residents such as Boyer-Lashuay. And those brokers were under strict orders not to divulge Chesapeake's role, records reviewed by Reuters show.

In fact, the effort in Michigan was directed from the very top - by Chesapeake's CEO, Aubrey McClendon. In corporate filings that Chesapeake made public earlier this year - nine months after McClendon's agents began signing Michigan land leases - McClendon is named as the chief executive officer of Northern, the shell company that voided hundreds of those leases.

How many other shell companies does Chesapeake have? 

On the last pages of Chesapeake Energy - POSASR-20110208, Exhibit-4 document, Jennifer M. Grigsby is listed as "Senior Vice President, Treasurer and Corporate Secretary of the Company and of the Subsidiaries listed below".

Northern Michigan Exploration LLC is on the list, as well as companies with exotic names such as Winter Moon Energy Company, L.L.C., Gothic Production, L.L.C. and Empress, L.L.C.   An internet search turned up no websites for these 4 companies.

Overseeing audits of Chesapeake is PricewaterhouseCoopers (PWC).  They received a little less than $3million to look at the books.  PWC were also auditors for Enron and American International Group, Inc. (AIG).  We know how well that worked out.

PWC's splash graphic on their website boasts "..Rethinking risk management for new market realities...".    Seems right up Chesapeake's alley.

Damage ControlChesapeake Energy tried to ease concerns by citing similar situation concerning Martha Stewart:

“Chesapeake says it didn’t have to say more and cites as legal justification a court ruling involving Martha Stewart.”

It wasn't long before ENRON and Chesapeake Energy would be spoken in the same breath.

Here's What The Analyst Who Uncovered Enron Thinks About Chesapeake

Forbes | Christopher Helman | June 4, 2012

Secret hedge funds, off-balance-sheet financings, big perks for directors, sweetheart drilling deals and giant non-recourse loans for Chief Executive Aubrey McClendon — it all means that “crony capitalism has been alive and well,” says John Olson. “History seems to be repeating itself in just another way.”

Olson ought to know. He uncovered Enron. Back in the 1990s Olson, a veteran energy industry analyst, was a lonely voice in the wilderness; he was skeptical about Enron for a decade before its collapse. He became a target of Enron‘s Ken Lay, and lost his job at Merrill Lynch because he refused to go bullish on the company. He subsequently worked at Sander Morris Harris, ran a hedge fund, and now, at 69, handles investments for friends and family.

So what’s his take on Chesapeake? Olson quotes philosopher Fredrich Hegel, “The only thing we learn from history is that we don’t learn from history.”

Chesapeake Energy quickly circled the wagons and fired up the spin machine by retaining George Sard, the CEO of Sard Verbinnen.    Sard was described as a "spinmeister of the apocalypse" by Portfolio magazine in April 2009, because he has worked as a PR consultant for so many high-profile clients in moments of utter, humiliating public collapse."

Sard's clients have included the Madoff brothers (Ponzi scheme), Eliot Spitzer (prostitution), Martha Stewart (insider trading), former Lehman Brothers CEO Dick Fuld (Ponzi scheme), and AIG (Ponzi scheme). His firm was also on the scene during the Enron collapse -- JPMorgan hired him to beat back accusations that the bank was complicit in the Enron fraud (it eventually paid $135 million to settle SEC charges).

----Gee, those worked out really well, didn't they? 
Sard describes itself as:  (Emphasis added)
Sard Verbinnen & Co (SVC) is a leading strategic corporate and financial communications firm. We provide communications counsel and services to clients including multinational corporations, smaller public and private companies, investment firms, financial and professional service firms, and high-profile individuals.

The firm’s highly experienced senior professionals provide sound, objective advice and execution support to clients across a broad spectrum of industries. Our work encompasses corporate positioning, media relations and investor relations, transaction communications, litigation support, crisis communications, and other special situations.

We are regularly cited as one of the top M&A and crisis communications advisors in North America.

Who’s Sorry Now?

McClendon told investors he's "deeply sorry" that his personal finances have come under scrutiny as shares fell the most in three years.

"I'm deeply sorry for all of the distractions of the past two weeks," McClendon, co-founder of Oklahoma City-based Chesapeake, said on a conference call to discuss first-quarter results today. McClendon said the company may have to sell more assets than planned to cover a gap between cash flow and revenue if natural-gas prices remain depressed. These sales won't interfere with debt-reduction targets or plans to boost oil production, he said.

Chesapeake Energy – Behind the Curtain – Part 2

Part 1: Chesapeake Energy – Job not finished until paperwork is done.

Goodwin said there are limited ways to punish a corporation. "It is not a life. It is not a being. It can't go to jail," he said. "The only thing that it can do is help make sure something like this doesn't happen again." - U.S. Attorney Booth Goodwin speaking about West Virginia Mine Settlement, December 6, 2011

“Corporations are people, my friend,” Former Governor Mitt Romney at Iowa State Fair.  August 2011

"I'll believe corporations are people when Texas executes one." – Unknown

In September of 2011, Aubrey McClendon, CEO of Chesapeake Energy, stood before an audience of industry regulars at a conference in Philadelphia. 

 "What a glorious vision of the future: It's cold, it's dark and we're all hungry," said McClendon, who co-founded Oklahoma City-based Chesapeake, the most active gas driller in the Marcellus Shale and nationwide. "I have no interest in turning the clock back to the dark ages like our opponents do."

Many families across the Marcellus Shale play feel like they are in the dark ages.  They may not be cold, they may not be hungry, but they are thirsty since their water wells turned bad, or very sick from drinking the bad water.  

According to the DEP, in Pennsylvania, nearly 9-million households depend on private water wells.  Pennsylvania has more fresh water wells in private use than any other state in the US. 

Water Authority President Norman Wright of Plainview, Tx, said “Without water we have no future.", upon signing a deal with T. Boone Pickens’ company Mesa Water, for the transfer of water rights on 211,000 acres of land.

The Curtain:  American Clean Skies Foundation

American Clean Skies Foundation (ACSF) is a 501(c)(3) nonprofit organization devoted to research and debate on clean energy. ACSF's mission is to promote understanding and discussion of issues related to energy--to expand America's energy options.  It was founded in 2007.

The “ACTIVITES” section of ACSF states:

The Foundation has an active energy policy and research program.

We also provide funding for energyNOW!, an editorially independent TV news magazine on America’s major energy and environmental challenges. The program is distributed nationally by Bloomberg TV and by the ABC affiliate in Washington DC

The Board of Directors for ACSF

Aubrey K. McClendon: Chairman of the Board; and Chairman of the Board and Chief Executive Officer, Chesapeake Energy Corporation

Andrew J. Littlefair: President and Chief Executive Officer, Clean Energy

Ralph Eads III: Chairman, Energy Investment Banking Group of Jeffries & Company Inc.

Robert A. Hefner III: Founder and owner of GHK Exploration; Author

Thomas S. Price, Jr.: Senior Vice President, Corporate Development, Chesapeake Energy Corporation

Gregory C. Staple: Chief Executive Officer, ACSF

Connecting the dots is not always a straight line from Point A to Point B.  More often than not there are many connections from Point A to other points.  We’ll follow two of those connections now.

Andrew J. Littlefair :  CEO and President of Clean Energy Fuels and
Vice President of the T. Boone Pickens Foundation.  

Clean Energy Fuels is a “GOLD MEMBER” of Kentucky Clean Fuels Coalition.

Littlefair is Chairman of the Natural Gas Vehicle America (ngvamerica.org) and has been a Board Member and Officer for 10 years.  Littlefair was an officer at Mesa Inc. (a T.Boone Pickens venture), and served in various capacities for 10 years.  Littlefair served in the Reagan White House from 1983–1987.

(Chesapeake Energy is also a member of NGVAmerica, as are several other natural gas drilling corporations.)

T. Boone Pickens, Founder and Director of Clean Energy Fuels.

Mesa Petroleum, Founder: On the verge of bankruptcy in 1996, Mesa Petroleum was acquired by private equity firm Rainwater, Inc., which renamed the company Pioneer Natural Resources.

Mesa Power Group, Founder: Mesa Power Group founded the American Wind Alliance in 2009.

Mesa Water, Founder:  Sold to The Canadian River Municipal Water Authority (CRMWA) for approximately $103 million.

BP Capital LP, Chairman and Chief Executive Officer: NOTE BP does not stand for BRITISH PETROLEUM, presumably the “BP” denotes BOONE PICKENS initals.

Exco Resources Inc, Director

The Pickens Plan is an energy policy proposal announced July 8, 2008 by American businessman T. Boone Pickens. Pickens wants to reduce American dependence on imported oil by investing approximately $US1 trillion in new wind turbine farms for power generation, which he believes would allow the natural gas currently used for power generation to be shifted to fuel CNG trucks and other heavy vehicles. Pickens thinks that his plan could reduce by $300 billion (43%) the amount the country spends annually on foreign oil.

McClendon donated $250,000 to Picken’s Swift Boat Veterans for Truth in 2004. 

“Dallas billionaire financier and hedge fund manager T. Boone Pickens was a benefactor for the Swift Boat Veterans for Truth’s political activities and media blitzkrieg. A prominent Bush supporter, Pickens had a history of large donations to Republican and conservative causes and candidates. Pickens contributed $2 million to swift boating Sen. Kerry.”

In May 2012, T. Boone Pickens sold his shares in Chesapeake Energy. 

Ralph Eads IIIAubrey McClendon, CEO of Chesapeake Energy and Ralph Eads III, the Chairman of Jefferies Energy Investment Banking Group go way back in their association.

McClendon and Eads were Sigma Alpha Epsilon fraternity brothers at Duke University.
Prior to joining Jefferies, Eads was Co-President of Jefferies Randall & Dewey.   In February 2005, Jefferies acquired Randall & Dewey, which became Jefferies' Energy Investment Banking Group.  Eads was President of Randall & Dewey.

His career includes being the Executive Vice President of El Paso Corporation, where he was responsible for El Paso’s unregulated businesses. Previously, he was Managing Director and head of the Energy Group at Donaldson, Lufkin & Jenrette. He has held investment banking positions at S.G. Warburg, Lehman Brothers, and Merrill Lynch.

Eads is the Board of Trustees for Duke University.  

Also on the Duke Trustee board is Xiqing Gao, the Vice Chairman, President and Chief Investment Officer of the China Investment Corporation (CIC), China's sovereign investment fund.  CIC has minority interest in Chesapeake Energy's CHK-Utica in Ohio.

McClendon and Eads are partners in Clos Dubreuil, a winery in Bordeaux, France.

 

Jefferies Energy Investment Banking Group, acting as financial advisor, has assisted Chesapeake Energy with many of its ventures which include CNOOC Ltd of China, Hopu Investment Management Co. Ltd. of China, Statoil of Norway, and Total SA of France.  (See America For S(h)ale)

By May 2012, Chesapeake Energy shares had taken a beating.   A series of articles by Reuters revealed many problems both with how Chesapeake Energy conducted business and how McClendon’s personal interests may have some conflicts.

McClendon was removed as Chairman of the Board, and in June 2012 Chesapeake appointed new board members.

The "Aubrey problem" has contributed to the lack of enthusiasm from various market analysts and the May 2012 S&P downgrade of Chesapeake to BB- rating hasn't helped.

Around the same time as the S&P downgrade other market analysts were downgrading Chesapeake from "Buy" to "Hold", or "Hold" to "Sell". 

However,  the analysts at Jefferies defend  the "BUY" rating for Chesapeake. 

Jefferies said that the sale of some of the company’s assets in the Marcellus Shale should help bridge the 2012 funding gap. Commenting, the analyst noted that “Progress along this front should result in the stock reflecting more of the upside embedded in CHK’s asset base. An update on the Utica JV should be imminent.”

Regarding the recent $4-billion dollar loan to Chesapeake, a May 18, 2012 Bloomberg article described it as:

McClendon is depending now on his Jefferies confidant at an even more crucial moment. Falling gas prices, combined with the buying binge, is forcing Chesapeake to unload assets to keep the company afloat. Along with Goldman Sachs Group Inc. (GS), Jefferies bankers are seeking buyers for oil-rich prospects and lending Chesapeake $4 billion in the meantime.

“Without Wall Street, Chesapeake wouldn’t be able to do what it has done,” said Phil Weiss, an analyst at Argus Research in New York who rates the shares “sell.”

Eads and New York-based Jefferies declined to comment.

“Ralph Eads and Jefferies have unmatched expertise in the E&P business and have added enormous value to Chesapeake’s business and its shareholders over many years,” Chesapeake said in a statement, referring to the exploration and production industry. “We deeply value our long-term relationship.” 

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