Tuesday, August 28, 2012

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

This is Part 1 of a series about Chesapeake Energy
Chesapeake Energy has made the headlines this week.  Not because of a gas well explosion or because CEO Aubrey McClendon has more fiduciary responsibility problems, but rather because of
failing to file production reports with the Pennsylvania Department of Environmental Protection (DEP).
Chesapeake Energy stated they did file the reports.  DEP says they didn’t receive them.     Both of the assertions are true.   Chesapeake did file the reports, and DEP didn’t receive them because the Chesapeake’s electronic filing of the reports was so error filled, the DEP database rejected them.Per Bloomberg Businessweek article:  Pa.: Okla. energy firm's data filled with errors, By Kevin Begos on August 21, 2012
DEP spokesman Kevin Sunday said on Tuesday a previous statement by Oklahoma City-based Chesapeake Energy Corp. that suggested state databases were the problem wasn't entirely accurate and omitted important points.
"DEP's production database functioned exactly as designed by rejecting reports that contain obvious data entry errors," Sunday said. For example, Chesapeake attempted to report production information on wells where the drilling start date wasn't listed; attempted to report more producing days than the number of days in the reporting period; and attempted to report drilled wells as wells that were not drilled, Sunday said.
Chesapeake also waited until the end of a 45-day grace period to submit data, Sunday said.”Rory Sweeny, a Chesapeake spokesperson, stated Chesapeake is working cooperatively with DEP to avoid future submission problems.

Perhaps an Intro to Form Completion 101 course is needed?

Proper completion of Production reports aren’t the only paperwork the Natural Gas corporations finds problematic.    Seems many of the natural gas corporations have paperwork problems.
According to Energy-in Depth(EID):
“But most violations are actually administrative in nature and relate to the mountain of paperwork that must be filled out before, during, and after a well is drilled.”

Thanks to EID for confirming the natural gas industry inability to fill out a simple form, and manage proper record keeping procedures.  

Meanwhile Fracktracker.org cautions us about brushing aside problems with “paperwork”: Administrative Violations Should not be Dismissed – by Matt Kelso, February 16, 2012: (Emphasis added)
“…about 58 percent of the total number of violations are indeed categorized as administrative, which is a significant majority of all the Marcellus Shale violations in Pennsylvania (1).  And yet, this is merely an observation, not an effective counterpoint to the argument that there sure are a lot of violations associated with this industry.  This is doubly true when trying to address the fact that some operators have a better culture of compliance than others.  If we were to take the leap that many have that administrative violations amount to paperwork, shouldn’t they be easy to avoid?  If a drilling operator in this multi-billion dollar industry wanted to convey respect for Pennsylvania’s laws, wouldn’t adequate paperwork be a good place to start?”

Wonder what Chesapeake’s own Paperwork looks like…..
In May 2012, the Securities and Exchange Commission (SEC) launched an inquiry into McClendon’s Founders Well Participation Plan (FWPP).  The FWPP allows McClendon (as Chesapeake’s co-founder) to buy a 2.5% stake in each of Chesapeake’s wells.

The Fort Worth SEC regional office asked Chesapeake and McClendon to preserve certain documents related to the inquiry.     If these documents were prepared with the same care exhibited with the production reports the SEC will be pulling out their hair.

Per Reuters:
Chesapeake Energy in U.S. antitrust investigation, By Brian Grow, ATLANTA, Thu Aug 9, 2012
Excerpt (Emphasis added) : Chesapeake has received a subpoena from the antitrust division of the Justice Department's Midwest field office, requiring the company to produce documents before a grand jury in the Western District of Michigan, according to a filing with U.S. regulators on Thursday. 
In June, Reuters reported that Chesapeake plotted with its top competitor, Canada's Encana Corp, to suppress land prices in the Collingwood shale in Northern Michigan.
Emails between Chesapeake and Encana showed the two companies repeatedly discussed how to avoid bidding against each other in a public land auction in Michigan two years ago and in at least nine prospective deals with private land owners.
Excerpt (Emphasis added) : The Reuters report showed Chesapeake and Encana executives, including Chesapeake Chief Executive Aubrey McClendon, exchanged emails about dividing up the nine Michigan counties and landowners in an effort to prevent "acreage prices from continuing to push up," and establishing "bidding responsibilities" ahead of an October 2010 Michigan state land auction.

Ohhhh, that pesky paperwork again….

Part 2: Chesapeake Energy – Behind the Curtain

No comments:

Post a Comment