Tag Archives: shale gas

University At Buffalo Closes Its Shale Gas Research Institute Amid Accusations Of Undisclosed Industry Ties

From Huffington Post

AP  |  By Posted: 11/20/2012 10:17 am EST

BUFFALO, N.Y. (AP) — The University at Buffalo on Monday closed its seven-month-old shale gas research institute, which was under investigation by the State University Board of Trustees after a group of professors accused it of having undisclosed ties to industry.

UB President Satish Tripathi acknowledged that the university’s policies governing disclosure of financial interests had been “inconsistently applied” and the appearance of independence and integrity of the institute’s research impacted.

“Research of such considerable societal importance and impact cannot be effectively conducted with a cloud of uncertainty over its work,” Tripathi said in a letter to the university community announcing the closure. He said the decision followed an internal assessment of the institute. Continue reading

Chesapeake – We’re Looking Forward To You Going Bankrupt

‘World’s Biggest Fracker’ Pockets $1 Billion in Shady Deal

POSTED: April 18, 8:55 PM ET | By Jeff Goodell in Rolling Stone Magazine

aubrey mcclendon
Aubrey McClendon walks through New Orleans during the Howard Weil Annual Energy Conference.
REUTERS /SEAN GARDNER /LANDOV

In March, I wrote a long article about the fracking boom for Rolling Stone, focusing on Chesapeake Energy, whose CEO, Aubrey McClendon proudly boasted to me, “We’re the biggest frackers in the world.” The story raised questions about the financial underpinnings of the company and suggested that today’s natural gas boom is likely to be a short-lived euphoria driven by new drilling technology and corporate greed.

Well, this morning Reuters hit with an important story revealing that the financial shenanigans at Chesapeake are even more complicated than anyone knew. And, as always, McClendon is right in the middle of it.

Reuters reports:

McClendon has borrowed as much as $1.1 billion in the last three years by pledging his stake in the company’s oil and natural gas wells as collateral, documents reviewed by Reuters show.

The loans were made through three companies controlled by McClendon that list Chesapeake’s headquarters as their address. The money is being used to help finance what could be a lucrative perk of his job – the opportunity to buy into the very same well stakes that he is using as collateral for the borrowings.

The story caused Chesapeake’s stock to tank as much as 10 percent during the day and made it one of the most actively traded stocks on Wall Street.  Let me unpack this a little and explain why this is a big deal.

The first thing you need to know is that McClendon has a long history of financial recklessness.  In October of 2008, McClendon had to liquidate nearly his entire holding of Chesapeake stock – worth some $552 million — to meet a margin call on personal investments.  The move caused Chesapeake’s stock to tank, losing 39% of its value virtually overnight.

The second thing you need to know is that McClendon has long treated Chesapeake as his own personal piggy bank.  One example: in 1993, the company’s board (who are all McClendon’s buddies) set up an unusual perk for the CEO, known as the Founder Well Participation Program, which essentially gives him the right to buy a 2.5% share in every well that Chesapeake drills.  McClendon has to pay proportionate part of the well’s operating expenses, but when – if – the well starts producing, he gets 2.5% of the revenue.  This is sweet deal, one that essentially allows him to siphon money out of the ground (McClendon claims it aligns his interests with the interests of the company)  “I don’t know any other gas or oil company that gives the CEO as share of production,” Phil Weiss, an oil analyst at Argus Research told me.  “If it works so well for stockholders, why don’t other companies do it?”

Today, Reuters revealed that during the last three years McClendon has borrowed more than a billion dollars in order to pay the operating expenses of the wells that he participates in.  For collateral, he has used his ownership in the wells – that is, the future production of the gas and oil.  So he is essentially using the promise of buried gas and oil to finance the drilling of the wells, for which he will receive future royalties.

O.K., that’s unorthodox enough. But a billion dollars in loans to cover operating expenses for his tiny share of Chesapeake’s wells?  If the company’s wells are performing so well, why does McClendon need to borrow a billion dollars to cover operating expenses?   Maybe he’s broke.  Or maybe, as some analysts have suggested, the wells aren’t performing as well as the company would like you to think they are.

But it gets worse.  McClendon arranged the financing of some of these loans through EIG Global Energy Partners, a global equity firm that also finances deals for Chesapeake.  The potential for conflict of interest is obvious; you can imagine a quiet quid pro quo where McClendon gets cheap terms on his personal loan and EIG gets a piece of one of Chesapeake’s billion-dollar financing deals.  I’m not suggesting McClendon or EIG made such an arrangement.  I’m suggesting that it’s possible to imagine it happening.

And then there is the issue of disclosure.  You would think that when the CEO of a publicly-traded company takes out a billion dollars worth of loans against company assets, it would be disclosed in the company’s Securities and Exchange Commission filing. Henry Hood, the general counsel for Chesapeake (who also happens to be an old college buddy of McClendon’s) told Reuters that indeed it is, buried deep down in the fine print, and that the company’s disclosures are “fully compliant all legal and regulatory requirements.” But if that’s true, it was news to the shareholders Reuters interviewed.

In the coming days, financial journalists are going to have a lot of fun following up on this story.  Among the questions worth asking:

1. If Chesapeake plays this fast and loose with disclosure on McClendon’s loans, why should we not assume they are also playing fast and loose with disclosure about chemicals that are injected underground during fracking operations or the disposal of polluted flow-back water?

2. Where is the Securities and Exchange Commission on this?  How is that the CEO of a publicly traded company can take a billion dollars in loans, use the wells as collateral, and not disclose it in any significant way to shareholders?  Does the name Bernie Ebbers mean anything to anyone these days?

3. How long are Chesapeake’s stockholders going to tolerate a CEO whose first priority is to pocket billions for himself, rather than maximize profits for shareholders?  As Frances McKenna, who writes about the accounting industry for Forbes put it, the company’s response to questions about McClendon’s secret billion dollar loans “is not only disingenuous, it’s borderline delusional.”  One Wall Street analyst I talked to today was even more blunt: “Long term, it is in the best interests of shareholders for someone else to be running the company.”

4. How close to bankruptcy is Chesapeake?  The company already projects a $10 billion revenue shortfall this year, thanks in part to rock-bottom natural gas prices (caused, in part, by over-drilling in the rush to cash in on the fracking boom).  But the company’s complex accounting methods make it almost impossible for analysts and stockholders to determine what the risks really are.  The fact that the CEO is taking out billion-dollar loans and not openly disclosing them only furthers the perception that everything is not as it appears at Chesapeake – that the company is Enron with drilling rigs.  I mean, Enron might have been a bunch of crooks, but when they went down, at least they didn’t leave a legacy of toxic drinking water and industrial wastelands

Breaking News: Bill legalizing fracking in NC will be taken up in May session

Three energy bills will reach the General Assembly next month

By Craig Jarvis
cjarvis@newsobserver.com

RALEIGH A state Senate committee on energy policy on Wednesday approved a proposal to legalize fracking in North Carolina in a little more than two years, and during that period establish a new regulations to ensure the environmentally sensitive process of natural gas extraction is done safely.

The unanimous vote by the five-member committee advanced a package of three bills dealing with fracking, criticizing federal energy policy while urging opening exploration off the coast in the Atlantic Ocean, and establishing a pilot program to grow fuel-producing grasses. The bills will be introduced in the General Assembly’s short session in May.

Fracking is slang for hydraulic fracturing, which extracts natural gas from deep underground by drilling down and then horizontally and shooting pressurized water, sand and chemicals into shale formations.

Committee chairman Sen. Bob Rucho, a Republican from Mecklenburg County, said the comprehensive legislation is an important step for the future economy of North Carolina. He said it would ensure that energy exploration and production is developed in an environmentally responsible manner.

But environmental groups were critical of the proposed fracking legislation. They favor the approach recommended last month by a bipartisan trio of House members who called for delaying fracking until more is known about the risks, at least several years down the road.

“It’s like driving a car 90 mph down the freeway with no brakes, no safety belts and a cliff looming ahead,” said Molly Diggins, executive director of the state’s Sierra Club chapter.

Diggins said she’s concerned that the proposal would invalidate local ordinances, prohibit public disclosure of industry records for two years, ease restrictions on groundwater contamination, weaken the regulatory powers of the state Department of Natural Resources and the state Environmental Management Commission, and create a new regulatory board that includes industry representatives.

Elizabeth Ouzts, state director of Environment North Carolina, said the emphasis on energy development should be on wind and solar resources. “It’s a shame and shows Sen. Rucho and his committee are out of touch with the rest of North Carolina.”

The Clean Energy and Economic Security Act would establish four new government entities: an energy jobs council, an interagency task force to develop compressed natural gas fueling facilities, a joint legislative commission to oversee energy policy, and – most importantly – an oil and gas board that would regulate the industry.

Rucho said he met with Gov. Bev Perdue on Tuesday and gave her an overview, and that others would be sitting down with her to discuss the package in more detail. Perdue has come out in favor of fracking, but vetoed an energy bill last year because it ordered her to enter into a compact with Virginia and South Carolina about offshore exploration and revenue sharing. This bill would soften that requirement: Instead of a compact, the governor would have to develop a “strategy” with those neighboring governors, and report back to the General Assembly by the end of this year on how to develop a regional compact. The governor would also be “strongly encouraged” to join a coalition of coastal state governors that has called for a coordinated effort on energy issues.

A spokesman for the governor said Perdue continues to believe that fracking must be done in a way that protects health and safety.

Rucho said he and others have also been meeting with Rep. Mitch Gillespie, a Republican who called for the go-slow approach, and House Speaker Thom Tillis in hopes of getting similar legislation through the House. Rep. Mike Hager, a Republican from Rutherfordton and a fracking proponent, said after the meeting he thinks it stands a good chance in the House. He said he thinks the proposal allows plenty of time to ensure fracking is safe and regulated.

“We think two years is pretty slow,” Hager said. “If I’m not mistaken, this is a process that has been in existence since the late 1940s or early 1950s. How much longer do we need to take?”

Rucho praised the report DENR issued earlier this year concluding that fracking could be done safely as long as the proper regulations were in place. He said the legislation will continue to be revised and will likely end up with even more safeguards than DENR recommended.

The package of proposed laws came out of four meetings by the Legislative Research Commission’s Committee on Energy Policy Issues, and its work is now done. Besides Rucho, its members were Sen. Harris Blake, a Republican from Moore County; Sen. Thom Goolsby, a Republican from New Hanover; Sen. Bill Rabon, a Republican from Brunswick, and Sen. Michael Walters, a Democrat from Robeson.

Read more here: http://www.charlotteobserver.com/2012/04/18/3182433/bill-legalizing-fracking-in-nc.html#storylink=cpy

Protest DENR Report on Fracking Tuesday March 27th

Join Croatan Earth First! in Protesting the DENR Report!
Tuesday March 27th:  Meet outside East Chapel Hill High School by 5:15 p.m. at 500 Weaver Dairy Rd.  It’s important to show up on time to sign up to speak before the hordes of pro-gas people take up all the public statement time like in last week’s hearing in Sanford.  After signing up,  join us outside for a demonstration.  We’ll supply the banners, chants, signs, and snacks.  No signs are allowed inside the meeting, so we recommend decorating or spray-painting a t-shirt to wear with anti-fracking slogans on it.  The hearing will begin inside at 6:30 p.m. and last until 9:30 p.m.  Talking points in response to their study can be found here.  We found it particularly disturbing that DENR had no plan for what to do with the millions of gallons toxic, “produced” water created in the process.  There are no safe options.  Deep well injection is illegal in NC, and the other option is shipping it out of state to ruin the water in other communities or sending it to water treatment facilities that admit they are not equipped to filter out these salts, chemicals, and radioactive materials.

Help us spread the word, link to this page on your facebook!

DENR Shale Gas Report Released

Contrary to the industry’s history and all common sense, DENR has concluded that fracking “can be done safely in NC,” …  “as long as the right protections are in place.” We disagree!  Every fracking operation around the country has shown the opposite to be true: spills, blow-outs, toxic chemicals in the aquifers and rivers, city water supplies contaminated, cattle deaths, drinking water wells contaminated, strange neurological diseases and cancers developing in affected communities…  We are unwilling to accept these risks for a small economic boom that will bust in the following 40 years.  That’s not even one lifetime, and the people and animals living in the Piedmont will the experiencing the consequences many years into the future.  Natural Gas energy is an unacceptable trade-off.  Links to the documents are below for your perusal.  After this report, it’s important for every person who doesn’t want their land and water to be fracked to show up for these meetings and speak their mind.  Join our demonstrations outside and go inside with a prepared speech.  The land, water, animals, communities, and future generations in North Carolina are depending on you to speak out! Continue reading

Fracking Moratorium Urged

This is re-posted from Jan. 9 (Bloomberg Business) — The U.S. should declare a moratorium on hydraulic fracturing for natural gas in populated areas until the health effects are better understood, doctors said at a conference on the drilling process.

Gas producers should set up a foundation to finance studies on fracking and independent research is also needed, said Jerome Paulson, a pediatrician at George Washington University School of Medicine in Washington. Top independent producers include Chesapeake Energy Corp. and Devon Energy Corp., both of Oklahoma City, and Encana Corp. of Calgary, according to Bloomberg Industries.

“We’ve got to push the pause button, and maybe we’ve got to push the stop button” on fracking, said Adam Law, an endocrinologist at Weill Cornell Medical College in New York, in an interview at a conference in Arlington, Virginia that’s the first to examine criteria for studying the process.

Fracking injects water, sand and chemicals into deep shale formations to free trapped natural gas. A boom in production with the method helped increase supplies, cutting prices 32 percent last year. The industry, though, hasn’t disclosed enough information on chemicals used, Paulson said, raising concerns about tainted drinking water supplies and a call for peer- reviewed studies on the effects. The EPA is weighing nationwide regulation.

Longstanding Process

“We need to understand fully all of the chemicals that are shot into the ground, that could impact the water that children drink,” Representative Ed Markey of Massachusetts, a senior Democrat on the House Energy and Commerce Committee, said in a phone interview. The industry is trying “to block that information from being public,” he said.

The gas industry has used hydraulic fracturing for 65 years in 30 states with a “demonstrable history of safe operations,” said Chris Tucker, a spokesman for Energy In Depth, a Washington-based research and advocacy group financed by oil and gas interests, in an e-mail. Drilling in shale deposits in the eastern U.S. began in 2004.

Gas drillers have to report to the U.S., state and local authorities any chemicals used in fracking that are “considered hazardous in high concentrations” in case of spills or other emergencies, Tucker said. Those reports don’t include amounts or concentrations, he said.

The industry created a public website last April for companies to voluntarily report lists of chemicals used in individual wells, including concentrations. Colorado and Wyoming have passed laws requiring drillers to file reports to the website, Tucker said.

Hazards Unknown

Despite those disclosures, U.S. officials say they don’t know all of the hazards associated with fracking chemicals.

“We don’t know the chemicals that are involved, really; we sort of generally know,” Vikas Kapil, chief medical officer at National Center for Environmental Health, part of the U.S. Centers for Disease Control and Prevention, said at the conference. “We don’t have a great handle on the toxicology of fracking chemicals.”

The government has found anecdotal evidence that drilling can contaminate water supplies. In December, the EPA reported that underground aquifers and drinking wells in Pavillion, Wyoming, contained compounds that probably came from gas drilling, including glycols, alcohols, benzene and methane. The CDC has detected “explosive levels of methane” in two wells near gas sites in Medina, Ohio, Kapil said.

He said he wasn’t authorized to take reporters’ questions after his presentation.

Chemicals Used

Fluids used in hydraulic fracturing contain “potentially hazardous chemical classes,” Kapil’s boss, Christopher Portier, director of The National Center for Environmental Health, said last week. The compounds include petroleum distillates, volatile organic compounds and glycol ethers, he said. Wastewater from the wells can contain salts and radiation, Portier said.

U.S. natural gas production rose to a record 2.5 trillion cubic feet in October, a 15 percent increase from October 2008.

A moratorium on fracking pending more health research “would be reasonable,” said Paulson, who heads the Mid- Atlantic Center for Children’s Health and the Environment in Washington, in an interview. His group is funded in part by the CDC and Environmental Protection Agency, he said, and helped sponsor the conference with Law’s organization, Physicians Scientists and Engineers for Healthy Energy.

Tucker called the CDC’s participation in the conference “disappointing,” saying the conference is “a closed-door pep- rally against oil and natural gas development.”

Representatives of Chevron Corp., Exxon Mobil Corp. and the American Petroleum Institute, a trade group, registered to attend the conference.

–With assistance from Katarzyna Klimasinska in Washington. Editors: Adriel Bettelheim, Reg Gale

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2012/01/09/bloomberg_articlesLXJW7C0YHQ0X.DTL#ixzz1j13gAv00