Chesapeake Energy, a company that is no stranger to financial scandals, has found itself on the front page of the financial papers again. This time, the subject is taxes. Or how Chesapeake barely pays them.  

Over its 23-year history, Chesapeake Energy, the second largest producer of natural gas in the U.S., and the company described by its founder and CEO Aubrey McClendon as “the biggest frackers in the world,” has earned roughly $5.5 billion in pre-tax profits. To date, the company has paid $53 million in taxes. That’s an effective tax rate of under 1 percent - a massive taxpayer subsidy.

The corporate income tax rate in the U.S. is 35 percent. 

The Bloomberg article that exposed these stunning figures is quick to note that this is far less than the 12 percent rate that GE paid in 2010 that caused such public outrage, and even a tiny percentage of the 18 percent effective rate that Google had to answer for.

So how does Chesapeake pull this off? Mostly, it’s due to a rule written in 1916 that allows oil and gas producers to, according to Bloomberg, “postpone income taxes in recognition of the inherent risk of drilling wells that may turn out to be dry.

The break may be outdated for companies such as Chesapeake, which, thanks to advances in technology, struck oil or gas in 99.6 percent of its wells last year.“ When the policy was written, drillers struck “dry wells” roughly 80 percent of the time.

The rule allows for drilling costs to count as expenses against taxable income for the year the drilling takes place (and not defrayed over the life of the well). In effect, as long as Chesapeake keeps drilling new wells, it can keep deferring its income taxes indefinitely.

At the end of 2011, the company had a deferred tax liability of $3.4 billion, which would, in theory, come due if the company stopped spending money on new drilling.

Of course, as Brendan DeMelle reported earlier this year, Chesapeake routinely operates at what investors call “cash flow negative,” spending more than it earns, but beefing up revenue numbers with land sales and other financial manipulations. So don’t expect them to start paying their share of these massive earnings anytime soon. 

And they're not alone. As Bloomberg points out, other players in the fracking world enjoy similarly tiny tax responsibility: 

While Oklahoma City-based Chesapeake is the biggest U.S. oil and gas producer with such low tax payments, it’s far from alone, according to the data that calculated several companies’ so-called long-run cash effective tax rates. Range Resources Corp. paid income taxes of about 0.4 percent of pretax income over the past decade, the data show. Southwestern Energy Co. paid 2.1 percent and EQT Corp. paid 5.3 percent, the data show.

How long will U.S. taxpayers put up with this unfair advantage enjoyed by the oil and gas sector? With a growing number of people already recognizing the fiscally responsible need to eliminate fossil fuel subsidies, this news that Chesapeake and other frackers are fleecing the public in one of the few areas where they are supposed to pay their share is not likely to sit well. 

This month, the Pennsylvania Department of Environmental Protection released its bi-annual report on how much natural gas has been produced in the Marcellus Shale, a rock formation which stretches underneath much of Appalachia. Investors were shocked because the production numbers seemed far lower than expected.  Watched closely by market and energy analysts, the report sparked a heated debate about the oil and gas industry's excited rhetoric about fracked shale gas as the cure-all to many of America's energy and jobs needs.

But the story quickly got complicated. The report was released despite lacking data from the state’s second largest driller, Chesapeake Energy, and state regulators never flagged the omission. The amount of gas flowing out of Pennsylvania had actually climbed dramatically.

It was a major flaw, and suddenly the searing spotlight of the media honed in on questions about whether regulators were keeping accurate track of how much gas the wells in their state really produce. How could they overlook such a massive error? Can the public be sure that the updated tally gives an accurate picture of how these wells are performing?

If regulators make mistakes in tracking energy production in their state, how reliable is the companion to that report, which tracks the toxic waste produced by these same companies?

Those are all valid questions that need honest answers. But the most important questions raised in the controversy were largely overlooked.

The amount of natural gas produced from all the fracking going on in Pennsylvania matters not just for the state's residents, its land-use regulations, its waste disposal capacity, and its water use limits. Unconventional gas production data from the Marcellus Shale matters for the nation as a whole because national energy policy is being crafted based on certain long-term assumptions about shale drilling and the price of natural gas.

The oil and gas industry has propagated a vision that fracking unleashes vast amounts of gas which then flows relatively steadily for decades. But a growing mountain of evidence suggests that nothing could be further from the truth. Shale gas wells dry up, sometimes long before they have produced enough gas to cover the costs of drilling and fracking them.

In the oldest shale formation, Texas’s Barnett shale, many aging wells have had to be re-fracked multiple times to keep them from running dry. Re-fracking costs millions of dollars and requires millions of gallons of water.

A review last year by The New York Times found that less than ten percent of 9,000 Texas shale wells had recouped their estimated production costs within their first seven years.

This is the dirty little secret that the oil and gas industry rarely will acknowledge. Oil and gas companies don't want to discuss it because high volume slickwater horizontal fracking is so new that there is paltry data to show how wells generally perform over the long run (read: twenty to fifty years).

Over the past year, the total amount of Marcellus gas produced has indeed risen dramatically. But this gas only matters if drillers can pull it out of the ground at a profit. It also only matters if drillers can discern how much money they will have to throw at a well to keep that gas flowing via fracking.

This is why the production data from places like Pennsylvania is so fundamentally important. Not to judge whether more gas is coming out of the Marcellus now -- the current drilling boom means that new wells are constantly drilled across the state, adding an enormous burst of gas each time a well is brought online. But because data about individual wells, tracked over time, can show how quickly each well runs low.

The answer to that question is about far more than whether oil and gas companies can make a profit on the gas or whether investors will lose out. It's ultimately a far higher-stakes issue: whether renewables will not only be far cleaner, but also cheaper than shale gas over the long run. Can today’s low natural gas prices last, or are we on the verge of a gas price spike?

If the accuracy of the production data is questionable, then policymakers in Washington, investors on Wall Street and the public at large will have a tough time getting an accurate picture of how these wells perform over the long run.

Relying on industry rhetoric for answers to these questions is perilous. Consider, for example, Chesapeake Energy, the company behind this summer's confusion over production data.

In 2009, Chesapeake was telling investors that its average Marcellus well would produce 4.2 billion cubic feet of gas equivalent (bcfe) of natural gas over its lifetime.  By 2010, it had hiked its estimate to 5.2 bcfe per well.

But according to a new USGS report, the industry-wide average for wells drilled in the interior Marcellus region (the best performing area) in 2011 will actually be 1.2 billion cubic feet – roughly one fifth of the amount that Chesapeake has told investors and the public its wells in the region can produce.

Do these federal estimates mean that Chesapeake was lying to investors? No. Every company’s acreage is different – there are sweet spots in the shale, and every driller leases the land it thinks will be most profitable and productive.

Chesapeake also includes natural gas liquids in its estimates (the "e" in bcfe indicates that they're including liquids like propane and ethane along with methane gas), but USGS does not, which could account for a small portion of the difference. And both the company and its federal regulators at USGS are making projections into the future with limited history to guide them -- after all, the fracking boom is just over a decade old.

But it does show a wide gulf between the numbers that drillers brag about, and the conclusions reached by independent analysts.

Federal regulators have struggled for some time to get the numbers right when it comes to fracking. When the Energy Information Administration first released estimates for the total amount of gas trapped in the Marcellus, their numbers were stunning. But within less than a year, the agency was forced to drop their projections by roughly 80 percent, as more data showed that early guesses were unreliable.

The new USGS report also shows clearly that individual shale gas wells can be fickle. Some wells are monster wells, able to produce jaw-dropping amounts of gas and making the people who leased their land millionaires overnight. But many other wells in the same region produce very little gas.

For example, the USGS report projects that in the Haynesville shale along the Gulf Coast, the best wells can be expected to produce 20 bcf of gas over their lifetimes. But the worst wells drilled in 2011 can only be expected to generate 0.02 bcf – a thousand-fold difference. The average well in the region will produce 2.6 bcf, the USGS says.

Given that some investment analysts expected far more, and some investors have calculated that Haynesville wells need to produce 5.5 bcf to cover the costs of drilling and fracking, this could spell big trouble for drillers – and potentially a big price spike for consumers.

Companies' hyping of shale gas production and profitability has already had consequences. In the past year or so many of the biggest companies have had to drastically writedown their reserves, partly because the cost of extracting the gas is higher than the price drillers can sell it for. Even though it promised investors untold riches from these shale plays, Chesapeake Energy has gone on a selling spree to try to deal with staggering debt.

All this deeply undercuts the industry's rhetoric and the refrain that will most assuredly get mobilized once again during the upcoming presidential debates about there being a 100-year supply of gas (this myth is unpacked and debunked here).

So, what does any of this have to do with the flap between Pennsylvania and Chesapeake Energy about the well performance data?

It goes to show, yet again, that the uncertainty surrounding our current shale gas bet is as broad and deep as the shale itself.

In Pennsylvania, these problems are especially pronounced. Unlike other energy producing states, Pennsylvania does not have a severance tax on the gas produced in the state, meaning it has less incentive to accurately tally the history of each well. It is also unique in that it only reports its data every six months – all other states release figures monthly.

This all makes it especially difficult for independent analysts who might not have access to the statistics used by the USGS to make their own predictions, to see whether the industry’s claims can be corroborated -- or not.

Image Credit: Marcellus Protest

Global grassroots activism is heating up alongside a scarily ever-warming climate.

Since the beginning of 2012, we've seen the Arab Spring, the Wisconsin Uprising, the Tar Sands Action, and the ongoing Keystone XL Blockade. In the climate justice movement, some have referred to the recently passed summer as the Climate Summer of Solidarity (SOS).

The SOS closed with an action organized by Protecting Our Waters called Shale Gas Outrage, which took place in the heart of the global fracking boom, Philadelphia, PA, home of the Marcellus Shale basin. Outrage was warranted, given that this year's Shale Gas Insight unfolded in the City of Brotherly Love. Insight was sponsored by Chesapeake Energy, Chevron, Range Resources, EOG Resources, Aqua America (who stands to profit off of water as a scarce resource via fracking), and many others.

Speakers at the pre-march rally included the likes of "Gasland" Producer and Director Josh Fox, author and ecologist Sandra Steingraber, environmental journalist and activist Bill McKibben and Food and Water Watch Executive Director Wenonah Hauter; former Pittsburgh City Council member and writer of the ordinance that banned fracking in the city, Doug Shields, as well as members of the Pennsylvania community whose livelihoods have been deeply affected at the hands of the shale gas fracking industry. 

Upon the rally's completion, activists zig-zagged up and down Philly's streets, making stops at the Obama for President campaign headquarters and Governor Tom Corbett's campaign headquaters.   

"Since coming into office, President Obama has permitted every drop of water used to frack in northeast and central Pennsylvania with his vote on the Susquehanna River Basin Commission," the Shale Gas Outrage webpage explains. "The Global Shale Gas Initiative was established in his State Department and he has traveled to countries like India, Poland, and China to sign agreements that the US will assist them in drilling for shale gas."

Of Corbett, Outrage explained the reasons behind its march pit stop to his office this way:

Corbett maintains that Pennsylvania should not tax the natural gas industry. In February 2011, Corbett repealed a four month old policy regulating natural gas drilling in park land, deeming it “unnecessary and redundant”. In February 2012, Corbett signed Act 13, overriding all local zoning laws for the gas industry, and putting a gag order on doctors.

Photos from the march are now up on the Protecting Our Waters Facebook page.

Capetown, South Africa

Global Frackdown

The first day of fall began where the SOS left off: with an action called the Global Frackdown, led in the forefront by Food and Water Watch.

Actions unfolded on five continents and as EcoWatch wrote, "united activists on five continents at more than 150 events calling for a ban on fracking in their communities and to advocate for the development of clean, sustainable energy solutions."

EcoWatchwent on to depict the truly worldwide nature of the protests:

Major actions overseas included a rally on the steps of the European Parliament; demonstrations in front of Parliament buildings in South Africa, Bulgaria and the Czech republic; marches in Argentina; grassroots activities in Paris and the south of France, and screenings of the film Gasland in Spain.

Photos from rallies around the world can be seen on the Food and Water Watch Facebook page.

Philadelphia Shale Gas Outrage

A Frackivism Fall? It All Comes Back to Egypt

Egypt was one of the first hubs of the Arab Spring. Now, shale gas industry wildcatters see the country as a new possible home for fracking, as covered in a Sept. 19 blog post published by the Egyptian Initiative on Personal Rights (EIPR). Royal Dutch Shell and Apache have expressed interest in extracting Egypt's shale deposits.

“Fracking threatens Egypt's drinking water, but Shell and Apache's drilling is mired in secrecy. Egyptians have a right to know how their resources are managed and how that impacts their environment and life,"said Reem Labib, Environmental Justice Researcher at EIPR.

A year and a half after the Arab Spring, are we about to bear witness to a "Fracktivist Fall"? Well that's not likely.

Then again, neither was the Arab Spring.

Photo Credit: Protecting Our Waters

A storm is brewing in Buffalo and it's not the record snow storm typically associated with upstate New York. Rather, it's taking place in the ivory tower of academia and revolves around hydraulic fracturing, or "fracking," for unconventional gas in the Marcellus Shale basin. 

Public funding has been cut to the tune of over $1.4 billion over the past five years in the State University of New York (SUNY) public university system under the watch of current Democratic Party governor and 2016 presidential hopeful Andrew Cuomo and his predecessor, David Paterson.

These cuts have created new opportunities for the shale gas industry to fill a funding vacuum, with the SUNY system's coffers hollowed out and starved for cash. 

“It’s a growing problem across academia,” Mark Partridge, a professor of rural-urban policy at the Ohio State University, said in an interview with Bloomberg. “Universities are so short of money, professors are under a lot of pressure to raise research funding in any manner possible.”

The oil industry's eagerness to fill the void for its personal gain can be seen through the case study of what we at DeSmog have coined the ongoing "Shill Gas" study scandal at the State University at Buffalo (SUNY Buffalo).

Among other findings, a DeSmog investigation reveals that one of the lesser-known offshoots of the Scaife family foundations, key bankrollers of the climate change denial machine, may potentially soothe SUNY Buffalo's budget woes with funding for the university-connected Shale Resources and Society Institute.

The Prelude to the Storm

A prelude for what's now transpiring occurred in Spring 2011, when SUNY Buffalo played host to the Marcellus Shale Lecture Series. Throughout the eight-part series, not a single speaker was a university-based scholar and all speakers but one were employed by some element of the oil and gas industry. The Shale Resources and Society Institute (SRSI) arose out of the series, as Daniel Robison of WBFO in Buffalo wrote in a recent article:

The decision to greenlight SRSI came after SUNY Buffalo hosted the Marcellus Shale Lecture Series in mid-2011...Last fall, enthusiasm stemming from the lecture series grew into informal discussions among the speakers, natural gas industry representatives and members of SUNY Buffalo’s geology department.

On Friday, SUNY Buffalo's President's Office released a lengthy and long-awaited 162-page report upon request of the SUNY System Board of Trustees that delved into the substantive facts surrounding the creation of its increasingly controversial Shale Resources and Society Institute (SRSI). The report was published in response to concern among journalists, advocacy groups, "fracktivists," and SUNY Buffalo professors and faculty that the university is transforming itself from a center of academia to a center for "frackademia."

In the spirit of "best practices" of politicially-astute public relations professionals, the report came out late on a Friday afternoon, when few people pay close attention to news and reporters have left the office for the weekend. This tactic is known as the "document dump" or "Take Out the Trash Day," in reference to a title of an episode of The West Wing.

Buck Quigley of ArtVoicenoticed the report is actually dated Sept. 27, meaning SUNY Buffalo's been sitting on it for roughly two weeks, giving the public relations office plenty of time to craft a response narrative to offer to the press.

In actuality, the report is only 13 pages. The rest is Appendices. 

The Meat and Potatoes of the Report

Writing with regards to SUNY Buffalo's Academic Freedom and Conflict of Interest Policy, the President's Office stated,

To ensure transparency and adherence to rigorous standards of academic integrity, we focus on identifying and managing potential conflicts of interest. If the conflicts are determined to be unmanageable, UB will not accept the funding.

As with all research at UB, regardless of the source of the funding, it is [not] the role...of the funding source to dictate the conclusions drawn by faculty investigators. This core principle is critical to the preservation of academic freedom. UB recognizes that conflicts - both actual and perceived - can arise between sources of research funding and expectations of independence when reporting research results.

The report fails to discuss the Institute's long history of courting oil and gas industry funding. As we recently reported, the gas industry explicitly acknowledged that it targets universities as a key front for legitimacy in the eyes of the public in the ongoing shale gas PR battle within the Marcellus Shale basin. This was revealed at the same conference in which the industry acknowledged it was utilizing psychological warfare tactics on citizens.

Later in the report, the President's Office stated that it has "every expectation that the faculty will conduct their public and policy-related activities as professionals, basing their conclusions on rigourous evidence and methodology." Yet, the President's Office has little ground to stand on here, given the flawed methodology of the Institute's first report, ruthlessly picked apart in May by the Public Accountability Initiative (PAI).

Responding to PAI's report, the President's Office said, "No concerns were raised by the relevant scientific community about the data used in developing the report's conclusion." Given that the scientific community generally doesn't do rapid-fire responses to reports, it's not surprising that this is the case. 

On the flip side of the coin, given that four of the five peer reviewers for that report were on the payroll of the oil and gas industry, it's also obvious SRSI had its conclusions made before the "study" was ever conducted to begin with. In other words, it was an exercise in propaganda for the oil and gas industry, rather than science.  

In page seven of the report, the President's Office offers a revelatory nugget: SRSI has been in the works since 2007, predating what was then the looming rapid ascendancy of the North American shale gas boom. The Office wrote,

Beginning in late 2007, the first departmental discussions related to the potential for a research center focused on energy resources took place. This dialogue, which would continue over the course of the next four years, involved conversations of faculty members and experts in the field, in consultation with the department's alumni advisory board and the offices of the dean and department chair.

Importantly, the report also says industry insider and SRSI Director John Martin - owner of the consulting firm JP Martin Energy Strategy LLC - will serve in this capacity only until a tenured, full-time faculty member is chosen to direct the Institute and take his place. "This remains the ultimate intention of the Dean,"explains the report. "[T]oward this end, the Dean is engaged in a process to identify and appoint a full-time UB faculty member as the Institute's lead director."

The obvious questions arise: Why wasn't this person chosen from the beginning, given a five-year head start to locate him/her? Why was there ever a need to bring in a non-faculty member and oil and gas industry insider like John Martin to run SRSI to begin with?

President's Office, Like Provost Charles "Chip" Zukoski, Says "No Industry Funding" for SRSI

The biggest whopper is located on page nine of the report, in which the President's Office stated, "To date, the University at Buffalo has received no industry funding for the [SRSI]. Its expenses, including the salary of its part-time director and co-director, have been paid entirely by the university's College of Arts and Sciences through discretionary funds."

This is, at best, a half-truth and pure technicality. Though, to date, SRSI - in its infancy - hasn't received oil and gas industry largesse, that doesn't mean it isn't seeking this funding and won't obtain this funding in the near future, as we explained in our latest report with regards to Provost Charles "Chip" Zukoski's parallel "no industry funding" statement:

Two key details raise serious immediate red flags about Zukoski's claims of recieving "no industry funding."

The first: in its initial call out for funding, the SRSI stated it was seeking three-year $1.14 million corporate memberships "to create a dynamic and impactful program." Corporate members also are given a spot on the SRSI's Advisory Board, "ensuring focused alignment of purpose and deliverables," according to the funding request form. Put another way, three-year corporate memberships would yield some sort of deliverable goods for oil and gas corporations - a quid pro quo, if you will.

Confirming this but leaving out all of the substantive details of how this will take place and from whom the funding will come from, the Chacellor's Office wrote that "SRSI will generate research support through competitive grants, philanthropy, and from the private sector.""Private sector," in English, means the oil and gas industry.

The second: on Sept. 13, Buffalo's ArtVoice released the fruits of a Freedom of Information Law (FOIL) request. One of the documents, dated Aug. 7, 2011, read that a "funding plan for alumni and large corporations has been in the works for two years. A pitch to alumni and corporate interests in Houston is planned for October, following on two earlier meetings there in Spring, 2011." Houston serves as the headquarters for numerous oil and gas corporations, and is a great place to go in search of funding for "frackademics."

That same document also showed that the SRSI, as of Aug. 7, 2011, had already received money from IOGA of NY. It also states that SRSI has "good contacts with National Fuel, their wholly owned subsidiary Seneca Resources, and other resource companies involved in the [Marcellus Shale]." Beyond merely offering to fund the SRSI, IOGA of NY has also provided "organizational help,"according to the document.

IOGA's Board of Directors has representatives from Shell, Chesapeake Energy, and many other players in the unconventional gas sphere. National Fuel/Seneca "operates approximately 2,500 wells located in western New York and northwestern Pennsylvania...[and currently] owns approximately 730,000 acres of fee minerals, 260,000 acres of leased minerals and 100,000 acres of surface and timber rights throughout the region,"according to its website.

Despite this set of circumstances, it appears SUNY Buffalo's leadership will defend SRSI to the death.

Stay tuned for DeSmog's continuing coverage of the SUNY Buffalo SRSI affair and a forthcoming investigation digging into, of all things, SRSI's connection to the forthcoming fracking boom in the state of California.

Photo Credit: Suzanne Tucker | Shutterstock.com

The oil and gas industry is waging an 11th hour astroturf campaign in Mansfield, OH in an attempt to defeat the "Community Bill of Rights" referendum. 

A "yes" vote would, in effect, prohibit hydraulic fracturing ("fracking") injection wells in Mansfield, a city of 48,000 located in the heart of the Utica Shale basin between Cleveland and Columbus. 

In March 2012, the Ohio Department of Natural Resources (ODNR) conducted a study linking the 12 earthquakes that have occurred in Youngstown, OH to injection wells located in the city. Further, recent investigative reports by ProPublica show that these new dumping grounds - with a staggering 150,000 injection wells in 33 states and 10 trillion gallons of toxic fluid underground - are a public health hazard in the making.

And yet, for the most part, hardly anyone is talking about it.

Preferred Fluids Management LLC is the upstart business that received two well injection permits from the ODNR in the spring of 2011 that motivated the "Bill of Rights" initiative. Industry front groups ranging from Energy in Depth (EID), Energy Citizens, Ohio Energy Resource Alliance and "Mansfielders for Jobs" are leading the charge in the astroturf campaign to defeat it.

Why, though, has the fracking industry put so much time and effort into the placement of a measly two injection wells in Mansfield for this relatively unheard of LLC? Michael Chadsey of EID Ohio explained the importance of the waste dumping grounds at a forum on Jan. 30, 2012, stating,

If for some reason they just said, you know, we're going to stop this process, eventually the tanks that are on-site are going to get filled up. And then all the drilling pads are going to have to shut down and all of the truck drivers will have to stop.

So...this is the part of the process that is the end part of the process. When you shut down the end, you can't even start or continue because you have to have all the pieces of the puzzle to make this thing move. Everything is interconnected.

There's that and then there's the fact that Preferred Fluids Management LLC isn't merely a "new kid on the block."Owned and founded by Steven Mobley, the business has a story of its own worthy of sharing, as it's closely connected to gas industry powerhouse, Chesapeake Energy.

Preferred Fluids Management LLC: A Quick Primer 

According to documents on the Ohio Secretary of State's Division of Corporations website, Preferred Fluids Management was originally incorporated in February 2010. Since then, fracking waste injection wells have been in the eye of the backlash storm from grassroots activists, environmental NGOs, lawyers, and both federal- and state-level regulators nationwide. 

In Ohio, this ongoing backlash motivated Preferred Fluids to withdraw its Mansfield well permits on June 26, 2012.

"While this withdrawal appears to be a city victory over a company that sought to injection toxic poison into our soil, the city must remain vigilant against other companies," Mansfield Mayor Tim Theaker and Law Director John Spon declared.

Roughly three weeks later, Preferred Fluids responded by filing a federal lawsuit in the Northern District Court of Ohio, stating that Mansfield "has no right under Ohio law to regulate the injection wells,"according to the Cleveland Plain Dealer. In response to the lawsuit, on Sept. 9 the Mansfield City Council voted to put the "Community Bill of Rights" referendum on the ballot for the Nov. 6 election.

The crazy set of twists and turns continued, when on Oct. 19, perhaps seeing that it'd been one-upped by the citizens of Mansfield, Preferred Fluids decided to drop its federal lawsuit. 

"The need to adopt the charter amendment is even greater because it's very possible that this industry is just regrouping to commence another assault," Mansfield Law Director John Spon told the Mansfield News Journal, foreshadowing the astroturf battle citizens and grassroots activists are facing in Mansfield.

On Oct 5, 2011 Preferred Fluids Management owner Steven Mobley also incorporated a new company, Buckeye Brine LLC, according to the Ohio Department of State's Division of Corporations. "It seeks to be a positive force in the communities in which it operates, buying and hiring locally whenever possible, with a strong commitment to local community causes," according to Buckeye Brine's website.

The Coshocton Tribune explained that, like Mobley's Preferred Fluids Management proposal in Mansfield, the plan is to place two injection wells in Coshocton, a city of just over 11,000 southeast of Mansfield.

Buckeye Brine says it will only bring five jobs to Coshocton and has the capacity to process 4,000 to 5,000 barrels of waste fluids a day, according to the Tribune.

Mobley Family Connection to Chesapeake, Injection Wells, Earthquakes

The unanswered question remains on the table: who is Steven Mobley?

Steven Mobley's brother is David Mobley, who currently serve as Chief Adminstrative Officer and formerly served as Land Manager of Chesapeake Operating Inc., a subsidiary of Chesapeake Energy.

Steven and David were both formerly partial co-owners of their family business, Mobley Environmental Services, according to Securities and Exchange Commission (SEC) forms. Businessweek's profile for Mobley Environmental Services reads,

In May 1997, Mobley Environmental Services, Inc. sold its only operating division, waste management services, to United States Filter Corporation...It also provided oilfield services, including transporting, marketing, storing, and disposing of various liquid materials used or produced as waste throughout the lifecycle of oil and gas wells.

In 1999, Vivendi Environnement aquired United States Filter Corporation for $6.2 billion. Vivendi Environnement is now known as Veolia Environnement and remains in the oil and gas industry wastewater treatment sector. Facing hard financial times in 2004, Veolia sold US Filter for $1 billion to the German corporation, Siemens, which is also in the oil and gas industry wastewater treatment business.

The frightening and growing nexus between the water privatization industry, the shale gas industry, and the wastewater treatment industry has been pointed out in reports authored by both the Colorado Independent and Food and Water Watch. 

Like Mobley Environmental Services and its predecessors - and like Preferred Fluids Management and Buckeye Brine - Chesapeake Operating is also in the fracking wastewater injection business, notorious for its activity in Arkansas.

Paralleling Ohio, Arkansas, home of the Fayetteville Shale basin, has seen over 1,200 waste injection well-related earthquakes, leading the Arkansas Oil and Gas Commission to place a ban on injection wells in July 2011 in the area where the earthquakes were most prevalent, though there are still wells in other areas across the state. A February 2011 magnitude 4.7 earthquake near Greenbrier, "was the most powerful to hit the state in 35 years," according to the Associated Press.

AP further explained that Chesapeake Energy was one of the main well injection operating culprits: 

The two injection wells are used to dispose of wastewater from natural-gas production. One is owned by Chesapeake Energy, and the other by Clarita Operating. They agreed March 4 to temporarily cease injection operations at the request of the Arkansas Oil and Gas Commission.

The barrage of earthquakes served as a motivation for an ongoing class action lawsuit filed by Emerson Poynter LLP in May 2011 at the federal-level Faulkner County Circuit Court in Conway, AR against Chesapeake Operating, as well as BHP Billiton, Petroleum Americas Inc., and Clarita Operating LLC. 

In a press release, Emerson Poynter explained it is suing for"millions of dollars in damages for property damage, loss of fair market value in real estate, emotional distress, and damages related to the purchase of earthquake insurance."

Since the closure of the two injection wells, the number of earthquakes occuring in the area has fallen dramatically, according to the Arkansas Geological Survey.

Chesapeake is closely tethered to or is a member of all of the front groups waging the gas industry's astroturf campaign in Mansfield, except for the shadowy "Mansfielders for Jobs," including Energy in Depth, American Petroleum Institute, the Buckeye Energy Forum (API front group), and the Ohio Energy Resource Alliance (OERA).

OERA is an API front group led by the former head of the Koch-funded Americans for Prosperity Ohio, Rebecca Heimlich, who now also serves as Campaign Manager for API Ohio. OERA's members includeEID Ohio, API, the Ohio Oil & Gas Association (OOGA), and America’s Natural Gas Alliance, among others. Chesapeake is also a member of OOGA and ANGA.

Big Picture: Chesapeake's Big Plans in the Utica Shale

Cheseapeake, a company currently in deep financial straits, sees the Utica Shale basin as a potential saving grace, with Forbes saying that the Utica is "crucial for Cheseapeake's future" in a July article. 

In a recent call with investors, controversial CEO Aubrey McClendon said he's "thrilled" with its potential. He also said that Chesapeake is particularly focused on production in Columbiana, Carroll and Harrison counties. 

These countiesareallwithin50-100 miles of Richland and Coshocton counties, the two counties where Preferred Fluid Management LLC's and Buckeye Brine LLC's operations are both set to be located, respectively. That makes Richland and Coshocton easily accessible dumping grounds for Chesapeake's toxic waste.

The fracking waste injection business is a burgeoning and lucrative one, but with it comes huge costs that go above and beyond earthquakes alone. 

"In 10 to 100 years we are going to find out that most of our groundwater is polluted," Mario Salazar, an engineer who worked for 25 years at the EPA's underground injection program told ProPublica. "A lot of people are going to get sick, and a lot of people may die."

Grassroots activists have pledged to fight this one tooth and nail as the high stakes battle goes down to the wire. 

"The battle lines are being drawn between the greed of the oil and gas industry and the rights of individuals at the local level, Bill Baker, an organizer for Frack Free Ohio told DeSmogBlog in an interview. "Powerful organizations with no vested interest in the Mansfield community, other than to turn it into a toxic waste dump, are spending millions in advertising to convince citizens to vote 'no' on the Bill of Rights."

Photo Credit: bumihills | ShutterStock

Food and Water Watch (FWW) released a report today titled "U.S. Energy Security: Why Fracking for Oil and Natural Gas Is a False Solution." 

It shows, contrary to industry claims, there aren't 100 years of unconventional oil and gas sitting below our feet, even if President Barack Obama said so in his 2012 State of the Union Address. Far from it, in fact.

The report begs the disconcerting question: is the shale gas bubble on its way to bursting?

FWW crunched the numbers, estimating that there are, at most, half of the industry line, some 50 years of natural gas and much less of shale gas. This assumes the industry will be allowed to perform fracking in every desired crevice of the country. These are the same basins that advocates of hydraulic fracturing ("fracking") claim would make the U.S. the "next Saudi Arabia." 

"The popular claim of a 100-year supply of natural gas is based on the oil and gas industry’s dream of unrestricted access to drill and frack, and it presumes that highly uncertain resource estimates prove accurate,"wrote FWW. "Further, the claim of a century’s worth of natural gas ignores plans to export large amounts of it overseas and plans for more domestic use of natural gas to fuel transportation and generate electricity."

The race is on for the gas industry to export unconventional gas on the global market, implement a gas-powered utilities sector, and create a gas-powered vehicle market. Due to these races, FWW says that the resource is being depleted at a rate far more quickly than the industry would like to admit to the mass public, writing,

The oil and gas industry’s plans to export shale gas, America’s supposed ticket to energy security, reveal that the only thing the industry seeks to secure is its bottom line. But the oil and gas industry’s push to increase U.S. dependence on natural gas in the transportation and electricity sectors is perhaps even more insidious.

The United States consumed about 18.8 million barrels of oil per day in 2011, yet it produced only an estimated 0.55 million barrels of tight oil per day. The EIA does project that tight oil production will increase, but to only about 1.2 million barrels per day between now and 2020, peaking at 1.33 million barrels per day in 2029 before starting to decline. This peak would amount to only about 7 percent of the 18.8 million barrels per day consumed in the United States in 2011.

 

On November 13, Clean Energy Fuels (CEF) signed a deal with General Electric (GE) to purchase its natural gas vehicle fueling assets in an effort to expand what it describes as "America’s Natural Gas Highway."

CEF is owned on a 20.8 percent basis by T. Boone Pickens, energy magnate and owner of the hedge fund, BP Capital. Andrew Littlefair, President and CEO of CEF, described the deal as one of the "most significant milestones in Clean Energy’s history."

The deal, "will enable trucks to operate [on natural gas] coast to coast and border to border."

Forbesdug into the nuts-and-bolts of the deal:

In particular, Clean Energy has agreed to buy two MicroLNG plants from GE Oil and Gas (with up to $200 million in GE financing), to be operational by 2015. These modular units can quickly liquefy natural gas off of any pipeline, producing up to 250,000 gallons per day – enough to fuel 28,000 trucks – while minimizing the associated physical footprint.

In summer 2011, CEF signed another big deal with Chesapeake Energy it coined the "Declaration of Energy Independence," with Chesapeake giving $150 million in capital to CEF to bolster its natural gas vehicle infrastructure. 

Natural gas vehicles are an underexamined side of the battle brewing over the future of hydraulic fracturing ("fracking") in the North America, but a key niche market controlled by the likes of CEF and Chesapeake Energy. 

Locking in Demand for Shale Gas, Fracking the Future

According to a recent report published by Food and Water Watch, only 1-percent of vehicles currently on the road in the United States are fueled by natural gas. Though 1-percent may seem trivial, Food and Water Watch believes it's a key mechanism to ensure the "shale gas bubble" doesn't pop, writing,

Locking-in future increases in demand for U.S. natural gas — through increased consumption in the transportation and electricity sectors and through increased exports to foreign markets — appears to be part of the industry’s long-term strategy for ensuring that natural gas prices are high enough to make shale gas development profitable. 

CEF has big plans for natural gas vehicles and says it hopes to have 150 filling stations by the end of 2013. Shell Oil also has its sights on building 100 stations as well, according to Forbes.

"America's Natural Gas Highway," given the climate and ecosystem impacts of fracking the future, looks much more like what the legendary band AC/DC would describe as a "Highway to Hell." 

Photo Credit: Shutterstock | Albert H. Teich

Food and Water Watch recently demonstrated that the dominant narrative, "100 years" of unconventional oil and gas in the United States, is false. At most, some 50 years of this dirty energy resource may exist beneath our feet.

Bill Powers, editor of Powers Energy Investor, has a new book set for publication in May 2013 titled, "Cold, Hungry and in the Dark: Exploding the Natural Gas Supply Myth."

My thesis is that the importance of shale gas has been grossly overstated; the U.S. has nowhere close to a 100-year supply. This myth has been perpetuated by self-interested industry, media and politicians...In the book, I take a very hard look at the facts. And I conclude that the U.S. has between a five- to seven-year supply of shale gas, and not 100 years.

Put simply: There is production decline in the Haynesville and Barnett shales. Output is declining in the Woodford Shale in Oklahoma. Some of the older shale plays, such as the Fayetteville Shale, are starting to roll over. As these shale plays reverse direction and the Marcellus Shale slows down its production growth, overall U.S. production will fall.

Art Berman Also Sounds the "Shale Gas Bubble" Alarm 

Who Will Be Left "Cold, Dark and Hungry" and Living in the "Dark Ages"?

Last year, a hydraulic fracturing ("fracking") chemical fluid disclosure "model bill" was passed by both the Council of State Governments (CSG) and the American Legislative Exchange Council (ALEC). It proceeded to pass in multiple states across the country soon thereafter, but as Bloomberg recently reported, the bill has been an abject failure with regards to "disclosure."

That was by design, thanks to the bill's chief author, ExxonMobil. 

Originating as a Texas bill with disclosure standards drawn up under the auspices of the Obama Administration's Department of Energy Fracking Subcommittee rife with oil and gas industry insiders, the model is now codified as law in Colorado, Pennsylvania, and Illinois.

Bloomberg reported that the public is being kept "clueless" as to what chemicals are injected into the ground during the fracking process by the oil and gas industry.

"Truck-Sized" Loopholes: Fracking Chemical Fluid Non-Disclosure by Design 

"Drilling companies in Texas, the biggest oil-and-natural gas producing state, claimed similar exemptions about 19,000 times this year through August,"explained Bloomberg. "Trade-secret exemptions block information on more than five ingredients for every well in Texas, undermining the statute’s purpose of informing people about chemicals that are hauled through their communities and injected thousands of feet beneath their homes and farms."

For close observers of this issue, it's no surprise that the model bills contain "truck-sized" loopholes. 

"A close reading of the bill...reveals loopholes that would allow energy companies to withhold the names of certain fluid contents, for reasons including that they have been deemed trade secrets," The New York Timesexplained back in April.

Disclosure Goes Through FracFocus, PR Front For Oil and Gas Industry

The model bill that's passed in four states so far mandates that fracking chemical fluid disclosure be conducted by FracFocus, which recently celebrated its one-year anniversary, claiming it has produced chemical data on over 15,000 fracked wells in a promotional video. 

The revolving door spins with rapidity in Washington following election season, and Tom Hassenboehler serves as an Exhibit A.

Hassenboehler served for the past two years as a lobbyist for America's Natural Gas Alliance, the most powerful lobbying force for the unconventional oil and gas industry. Hassenboehler recently accepted a new position working for the U.S. House Energy and Commerce Committee's Energy and Power Subcommittee, and will serve as Senior Counsel under the tutelage of U.S. Rep. Fred Upton (R-MI), the head of the Subcommittee.

Upton is the cousin of Katie Upton, the wife of controversial Chesapeake Energy CEO Aubrey McClendon. McClendon, in turn, was one of the founders of ANGA. Given these ties that bind, one can safely hypothesize that Hassenboehler will continue his promotion of fracking as a "public servant."

Prior to working for ANGA, Hassenboehler served as a Congressional staffer for climate change denier, U.S. Sen. James Inhofe (R-OK).

Greenpeace USA's "PolluterWatch" profile for Tom Hassenboehler shows that he has worked for years as a hired gun in concert with the oil and gas industry and is also a climate change denier. Highlights:

Hassenboehler played a major role in working to derail efforts by Sen. Joe Lieberman (I-Conn.) and former Sen. John Warner (R-Va.) to pass a cap-and-trade bill in 2008. “He joined just before Lieberman-Warner cap-and-trade bill hit the floor and was instrumental in working to defeat it,” Matt Dempsey, Inhofe’s spokesman, said.

As a counsel on the House Energy and Commerce Commitee for Rep. Joe Barton, Hassenboehler made several trips funded by the natural gas interests he now represents as a lobbyist.

Hassenboehler wrote a letter to the EPA opposing the Waxman-Markey climate legislation and questioning the existence and science behind global warming.

With a track record like this, "Dollarocracy" - not representative democracy - appears more likely to ensue in the Energy and Power Subcommittee during the 113th session of the U.S. Congress. And given a climate crisis worsening with each passing day, this is much more than a matter of money's clout in politics.

Photo Credit: ShutterStock | prodakszyn

The American Legislative Exchange Council (ALEC) - known by its critics as a "corporate bill mill" - has hit the ground running in 2013, pushing "models bills" mandating the teaching of climate change denial in public school systems. 

January hasn't even ended, yet ALEC has already planted its "Environmental Literacy Improvement Act" - which mandates a "balanced" teaching of climate science in K-12 classrooms - in the state legislatures of Oklahoma, Colorado, and Arizona so far this year. 

In the past five years since 2008, among the hottest years in U.S. history, ALEC has introduced its "Environmental Literacy Improvement Act" in 11 states, or over one-fifth of the statehouses nationwide. The bill has passed in four states, an undeniable form of "big government" this "free market" organization decries in its own literature.

ALEC's "model bills" are written by and for corporate lobbyists alongside conservative legislators at its annual meetings. ALEC raises much of its corporate funding from the fossil fuel industry, which in turn utilizes ALEC as a key - though far from the only - vehicle to ram through its legislative agenda through in the states. 

A Frankenstein Co-Created with Heartland Institute

A DeSmogBlog investigation last year found that the Environmental Literacy Improvement Act's orgins date back to 2000.

The Act's creation is directly connected to the ongoing efforts of another corporate-funded group, the Heartland Institute - of "Heartland Institute Exposed" fame - a group well plugged into the climate change denial machine. 

ALEC's Natural Resources Task Force, now known as its Energy, Environment and Agriculture Task Force, adopted this model at a time when the Task Force was headed by Sandy Liddy Bourne. Bourne, who served in this capacity from 1999-2004, would eventually ascend to the role of Director of Legislation and Policy for ALEC in 2004. 

Upon leaving ALEC in 2006, Bourne become Heartland's Vice President for Policy Strategy. Today she serves as Executive Director of the American Energy Freedom Center, an outfit she co-heads with Arthur G. Randol. Randol is a longtime lobbyist and PR flack for ExxonMobil, a corporation which endowed the climate change denial machine for years.

Heartland's website still lists Bourne as one of its "experts," stating that "Under her leadership, 20 percent of ALEC model bills were enacted by one state or more, up from 11 percent." 

Importantly, Heartland is still a member of ALEC's Energy, Environment and Agriculture Task Force that originally passed the Environmental Literacy Improvement Act.

According to internal documents leaked to and published by DeSmogBlog in Feb. 2012, Heartland obtained funding for a "Global Warming Curriculum for K-12 Classrooms" project beginning in 2012. This cirruculum aims to teach that there "is a major controversy over whether or not humans are changing the weather."

If this sounds similar to ALEC's model bill, it should, given the fact that the two outfits share funding from the same honey pot. In fact, Heartland actively promotes the ALEC model on its website. 

Model Bill Introduced in OK, CO, and AZ

Oklahoma and Colorado came first and within just over a week, Arizona followed suit in proposing the ALEC climate science "mis-education" bill.

Oklahoma: Sooner Rather than Later

On Jan. 18, the Sooner State's legislature took the lead for 2013 in pushing the ALEC climate change education model in the form of HB 1674, the "Scientific Education and Academic Freedom Act." 

HB 1674 calls for the teaching of "scientific strengths and scientific weaknesses of existing scientific theories," including of global warming, saying it's a theory steeped in "controversy" - not that the actual scientific record thinks so.

This is necessary, the bill states, "to help students develop critical thinking skills they need in order to become intelligent, productive, and scientifically informed citizens," going on to explain that it's important to explore "differences of opinion on scientific issues." 

The ALEC model similarly calls for the teaching of "critical thinking so that students will be able to fairly and objectively evaluate scientific...controversies." The model also mandates creation of "an atmosphere of respect for different opinions and open-mindedness to new ideas" in the scientific sphere. 

The OK bill is sponsored by Rep. Gus Blackwell (R-61), unsurprisngly a dues-paying member of ALEC. According to a Dec. 2012 report published by the Center for Media and Democracy (CMD) titled, "Buying Influence," Blackwell has paid for his attendance at least one ALEC meeting with taxpayer money.

National Institute on Money in State Politics' data demonstrates that Blackwell's largest pool of campaign funding for his 2012 electoral victory came from the oil and gas industry, which gave him $28,800. This includes taking $7,500 from shale gas industry giant Chesapeake Energy, $2,350 from ConocoPhillips, and $1,000 each from Koch Industries and coal industry giant Duke Energy, among others. All of these corporations also fund ALEC.

Colorado's Same Day Affair

One sure sign of a coordinated, ALEC-lead effort is the fact that Colorado's state legislature introduced the ALEC model on the same day as did Oklahoma's. The two states, it's worth noting, share a border on Oklahoma's panhandle. 

On Jan. 18, 2013, eight representatives and four senators introduced HB 13-1089, coining the bills the "Academic Freedom Acts."

Paralleling the language in the ALEC model and the Oklahoma bill, the HB 13-1089 aims to"Inform students about scientific evidence and to help students develop critical thinking skills," also recognizing that the teaching of the concept global warming "can cause controversy."

One of the senators co-sponsoring the bill, Rep. Scott Renfroe (R-13) is an ALEC dues-paying member. He's also attended at least one ALEC meeting paid for by Colorado taxpayers, according to the CMD's "Buying Influence" report. 

Of the $91,000 dollars he raised for the 2012 election, over $5,000 of it came from the oil, gas and electric utilities industry, according to the National Institute on Money in State Politics. This includes taking money from Chesapeake Energy, Anadarko Petroleum, Williams Companies, and the Colorado Oil and Gas Association.

The Arizona (Sun) Devils are in the Details 

Eight days later, ALEC's model bill made its way to Arizona, a state sharing a "corner border" with Colorado. 

Arizona's SB 1213 was introduced on Jan. 26, 2013 by six senators that, as it turns out, are all dues-paying ALEC members. Five of the six have attended conferences totally on the taxpayer dime, according to CMD's report.

SB 1213 incorporates the "critical thinking skills" operative language, the "scientific controversies" operative language and the  "teaching...global warming" can "cause controversy" operative language.

In short, SB 1213 is the same exact copycat ALEC model bill that's been proposed in both Oklahoma and Colorado.  

ALEC Celebrates Groundhog Day 2013

Groundhog Day is on Feb. 2 and fittingly, ALEC and its corporate patrons continue to sing the same tune, simultaneously promoting fracking, blockading a transition to renewable energy and pushing bills mandating teaching climate change denial on par with actual science.

"It's the same old schtick every year, the guy comes out with a big old stick, raps on the door,"actor Bill Murray said in the classic film "Groundhog Day.""They pull the little rat out, they talk to him, the rat talks back, then they tell us what's gonna happen."

Replace "guy" with "corporate lobbyist" and "legislators" with "rats" and that's ALEC in a nutshell, serving as a mere microcosm of the current American political system at-large.

Photo Credit: ShutterStock | Yory Frenklakh

A breaking investigation by EnergyWire appears to connect the dots between shadowy lobbying efforts by shale gas fracking company Range Resources, and the Obama EPA's decision to shut down its high-profile lawsuit against Range for allegedly contaminating groundwater in Weatherford, TX.

At the center of the scandal sits former Pennsylvania Gov. Ed Rendell, the former Chairman of the Democratic National Committee and the National Governors' Association.

Just weeks ago, the Associated Press (AP) broke news that the U.S. Environmental Protection Agency (EPA) shut down the high-profile Texas lawsuit and buried an accompanying scientific report obtained during the lawsuit's discovery phase in March 2012.

That confidential report, contracted out to hydrogeologist Geoffrey Thyne by the Obama EPA, concluded that methane found in the drinking water of a nearby resident could have originated from Range Resources' nearby shale gas fracking operation. 

Range Resources - which admitted at an industry conference that it utilizes psychological warfare (PSYOPs) tactics on U.S. citizens - launched an aggressive defense against the EPA's allegations that the company might be responsible for contaminating resident Steve Lipsky's groundwater.

AP explained in its investigation that resident Steve Lipsky, who has a wife and three young children, had "reported his family's drinking water had begun 'bubbling' like champagne" and that his "well...contains so much methane that the...water [is] pouring out of a garden hose [that] can be ignited."

In response, the Obama EPA ordered Range to halt fracking. Range was non-cooperative every step of the way, refusing to comply with the legal dictates of the discovery phase and not complying with the censored water sample study implicating the company with groundwater contamination.

The new twist exposed by EnergyWire's Mike Soraghan is that Ed Rendell, acting "as a spokesman for Range" Resources, "proposed certain terms" to EPA Administrator Lisa Jackson. Exactly what was said remains unclear, but the EPA ultimately dropped its case against Range.  

Over a thousand pages of emails obtained by EnergyWire"offer behind-the-scenes insights in a case that has come to be seen as a major retreat by the agency amid aggressive industry push-back and support for natural gas drilling by President Obama."

Rendell: Range's Chosen One or Rogue Lobbyist? 

The emails obtained by EnergyWire reveal that Rendell intervened directly with Administrator Jackson at some point in 2011, presumably after his term as Pennsylvania's governor came to a close on Jan 18, 2011. An EPA attorney's email indicated that Rendell said he was there "as a spokesman for Range." 

According to the National Institute on Money in State Politics, Rendell took almost $200,000 from the oil and gas industry in the run-up to his 2006 electoral victory and while governor, he described himself as the industry's "best ally." 

Upon completion of his gubernatorial stint, Rendell immediately fled to the private sector. He currently works both as an Operating Partner at Element Partners and as a Senior Advisor at Greenhill & Co., Inc. He is also listed as Special Counsel at the law firm Ballard Spahr LLP.

Element Partners describes itself as a firm that, among other things, provides "services to the energy, industrial, and environmental markets" and "capital for growth, acquisitions, shareholder liquidity, recapitalizations, and buyouts." It provides investment capital for numerous oil and gas industry clients. 

Greenhill is a similar firm, describing itself as a "leading independent investment bank focused on providing financial advice on significant mergers, acquisitions, restructurings, financings and capital raisings to corporations, partnerships, institutions and governments." Like Element, Greenhall also provides investment capital for numerous oil and gas corporations.

Prior to the completion of Rendell's final term as governor, three of his former aides abruptly left their jobs to work as shale gas industry lobbyists. Their names: Kenneth Scott Roy, Barbara Sexton, and Sarah Battisti. 

Sexton, Rendell's former Executive Deputy Secretary of the PA Department Environmental Protection (DEP), transitioned into a gig working as a lobbyist for industry giant Chesapeake Energy. Battisti, another of Rendell's cadre of Deputy Chiefs-of-Staff, became a lobbyist for BG (British Gas) Group. 

The third, K. Scott Roy, wound up as a lobbyist for Range Resources as Vice President for Government Relations and Regulatory Affairs.

Is Scott Roy the Bridge Between Ridge, Rendell, Range and MSC?

In his Range Resources bio, K. Scott Roy describes his former position as Ed Rendell's "top advisor." His official title was Executive Deputy Chief of Staff in the Office of the Governor. Roy also serves on the Executive Board of the Marcellus Shale Coalition, the gas industry's aggressive lobbying arm in statehouses located within the Marcellus Shale basin. Prior to serving in the Rendell administration, Roy worked in the office of former PA Governor Tom Ridge, who went on to serve as "strategic advisor" to the Marcellus Shale Coalition in 2012.  

It is as yet unclear what role Scott Roy played as one of Range's hired guns to fend off the EPA lawsuit. Might he have contacted his old boss Ed Rendell for help pressuring the Obama administration to lay off Range? It seems a reasonable question to ask. 

Range Denies Rendell Worked on its Behalf

Range Resources spokesman Matt Pitzarella (of PSYOPs revelation notoriety) denied any connection between the company and Rendell.

"I don't know the extent of the governor's involvement in energy-related matters, but he never functioned as a spokesperson of Range,"Pitzarella told EnergyWire.

Given the ties that bind Rendell to Range, though, the words "plausible deniability" come to mind.

Coming full circle, it's important to remember the human side of this story. Lipsky's family now pays $1,000 per month for water deliveries, with life for them changed forever. 

"This has been total hell,"Lipsky told the AP. "It's been taking a huge toll on my family and on our life." 

Determining the truth of what happened with the EPA's failed investigation and lawsuit against Range Resources won't change the Lipskys' predicament, but it would go a long way towards identifying the grasp of the oil industry's tentacles on Washington.

Photo Credit: Wikimedia Commons | MavsFan28

Illinois is the next state on the American Legislative Exchange Council (ALEC)'s target list for putting the oil industry's interests ahead of the public interest.

98 percent funded by multinational corporations, ALEC is described by its critics as a "corporate bill mill" and a lobbyist-legislator dating service. It brings together corporate lobbyists and right wing politicians to vote up or down on "model bills" written by lobbyists in service to their corporate clientele behind closed doors at its annual meetings.

These "models" snake their way into statehouses nationwide as proposed legislation and quite often become the law of the land. 

Illinois, nicknamed the "Land of Lincoln," has transformed into the "Land of ALEC" when it comes to a hydraulic fracturing ("fracking") regulation bill - HB 2615, the Hydraulic Fracturing Regulation Act - currently under consideration by its House of Representatives. "Fracking" is the toxic horizontal drilling process via which unconventional gas and oil is obtained from shale rock basins across the country and the world.

HB 2615 - proposed on Feb. 21 with 26 co-sponsors - has an ALEC model bill roped within this lengthy piece of legislation: the loophole-ridden Disclosure of Hydraulic Fracturing Fluid Composition Act.

As covered here on DeSmogBlog, this model bill has been proposed and passed in numerous statehouses to date. If the bill passes, Illinois' portion of the New Albany Shale basin will be opened up for unfettered fracking, costumed by its industry proponents as the "most comprehensive fracking legislation in the nation." 

"If At First You Don't Succeed, Dust Yourself Off and Try Again"

This isn't ALEC's first fracking-related crack at getting a model bill passed in Illinois. In 2012, the Disclosure of Hydraulic Fracturing Fluid Composition Act - introduced as SB 3280 - passed unanimously by the Illinois Senate but never passed the House. 

SB 3280 isn't merely an ALEC model, but is a Council of State Government's (CSG) model, too, as covered here on DeSmog.

The "disclosure" standards' origins lay in the Obama Department of Energy's (DOE) industry-stacked fracking subcomittee, formed in May 2011"to study the practice of hydraulic fracturing (fracking), and determine if there are ways, or even a necessity, to make it safer for the environment and public health." 

As exposed by The New York Times in April 2012, these "disclosure" standards were originally written by ExxonMobil, first passed in Texas in June 2011, and now serve as both an ALEC and CSG model bill for the states. I say "disclosure" - as opposed to disclosure - because the bill includes loopholes for "trade secrets," ala the "Halliburton Loophole" written into the industry-friendly federal Energy Policy Act of 2005. 

Section 77 of HB 2615, titled "Chemical disclosure; trade secret protection," also includes the same trade secrets exemption from the ALEC/CSG ExxonMobil-written model bill. 

Ever persistent, ALEC has taken the late pop diva Aaliyah's words to heart with regards to chemical fluids "disclosure," at first not succeeding and dusting itself off and trying again. 

The FracFocus Façade

The oil and gas industry has chosen FracFocus as the entity to oversee the chemical disclosure process. An August investigation by Bloomberg News revealed that FracFocus offers the façade of disclosure while the industry tramples roughshod over communities nationwide.  

"Energy companies failed to list more than two out of every five fracked wells in eight U.S. states from April 11, 2011, when FracFocus began operating, through the end of last year,"wrote Bloomberg. "The gaps reveal shortcomings in the voluntary approach to transparency on the site, which has received funding from oil and gas trade groups and $1.5 million from the U.S. Department of Energy."

In reality, FracFocus is a public relations front for the oil and gas industry, as we reported here in Dec. 2012, explaining, 

FracFocus'domain is registered by Brothers & Company, a public relations firm whose clients include America’s Natural Gas Alliance, Chesapeake Energy, and American Clean Skies Foundation - a front group for Chesapeake Energy.

Another Nov. 2012 Bloomberg investigation revealed that oil and gas corporations "claimed trade secrets or otherwise failed to identify the chemicals they used about 22 percent of the time," according to its analysis of FracFocus data for 18 states.

Cosponsors Tied to ALEC, CSG

Five of the 26 Illinois House cosponsors are ALEC members: Reps. David Reis (R-119), Mike Fortner (R-95), Jil Tracy (R-93), Dennis Reboletti (R-97), and Patricia Bellock (R-94). 

Further, three more cosponsors have ties to CSG. Rep. Ann Williams (D-11) and Rep. Pam Roth (R-75) both attended CSG Midwest's 2012 Bowhay Institute for Legislative Leadership Development (BILLD). Two of the sponsors of BILLD in 2012 included BP America and Enbridge Energy. Another, Rep. Naomi Jakobsson (D-97), is a 2005 CSG Midwest BILLD alumni.

The bipartisan "group of 26" took a total of $53,060 before the Nov. 2012 election, data collected from the National Institute on Money in State Politics shows.      

How Will IL Regulate Fracking with 12 Inspectors?

Democratic Gov. Pat Quinn's 2012 budget included Department of Natural Resources (DNR) cuts to the tune of 13.5-percent for fiscal year 2013. The DNR is the regulatory body tasked to referee the fracking process under HB 2615, an agency which in the past decade has lost over half of its budget. 

"Our agency has essentially been cut in half over the last decade. There are a lot of ramifications...You're going to see a noticeable difference in the maintenance. It won't be the fault of the people that work for us," DNR Director Marc Miller said at a Feb. 2012 public forum in a foreshadowing manner. "It will be because we don't have the resources."

There are 12 inspectors in IL to oversee fracking regulation enforcement, among myriad other regulatory duties, down from 28 in 2005, as revealed in a recent Freedom of Information Act conducted by ProPublica.

"What we are looking for is a sustainable solution," Miller said at the public forum. "We want to get to the point of having revenue we can count on to plan and to be able to do the programs we're supposed to do for the public."

Yet Miller believes more DNR cuts from Quinn are in the works in forthcoming budgets.

Earthworks pointed out in a Sept. 2011 report titled, "Breaking All the Rules: the Crisis in Oil & Gas Regulatory Enforcement" that numerous states - akin to Illinois - are vastly understaffed, underfunded and unable to do their jobs to protect the public. Predictably, this has led to under-enforcement, lending the oil and gas industry a free pass to contaminate without accountability.

And even with enforcement, Earthworks pointed out that because the penalties for breaking the law are so minimal, the industry simply passes this off as a tiny "cost of doing business."

Bill Endorsed by Sierra Club/NRDC 

Despite this reality, two major green NGOs - the Sierra Club and the Natural Resources Defense Council (NRDC) - have come out in cautious support of the bill. 

"NRDC is working to transition as quickly as possible to a clean energy future based on energy efficiency and renewable energy, but as long as we have to have dirty fossil fuels, our communities need the strongest rules in place," NRDC's Henry Henderson wrote in blog post, offering the important caveat that "Those rules are only as good as their enforcement, which needs to be robust and strict. And that is another issue that we will be following if this bill moves forward."

No concerns are raised about Section 25 of the bill dealing with setbacks and prohibitions.

This section lends the industry the ability to conduct fracking operations within 1,500 feet of groundwater sources and 500 feet of schools, houses, hospitals, nursing homes, and places of worship. It also enables the industry to frack within 300 feet of rivers, lakes, ponds and reservoirs.   

These regulations do not take into account the fact that the horizontal drilling portion of the fracking process extends between 5,000 and 10,000 feet. The sobering reality: none of these things would be protected under this bill's current language. 

Sierra Club, which came under fire last year for taking $26 million from gas giant Chesapeake Energy to fight against coal, sang a similar tune.

"We may not be able to decide whether fracking comes to Illinois, but we absolutely must decide to make sure we are as protected as we can be," Sierra Club's Jack Darin concluded on The Huffington Post, despite the fact that fracking has yet to begin in the state. 

Other Groups Call for a Moratorium, Support Alternative Bill 

Other groups are fighting for a different recently-introduced moratorium bill, SB 1418, which has one sponsor so far, Sen. Mattie Hunte (D-94).

That effort is being led by the Illinois Coalition For A Moratorium on Fracking, whose members include Southern Illinoisans Against Fracturing Our Environment (SAFE), MoveOn.org Illinois, Progressive Demcrats of America (PDA) Chicago and Illinois, Stop the Frack Attack on IL, Rising Tide, and Rainforest Action Network (RAN) Chicago. 

"The moratorium will allow two years for a science-based investigative task force to look at current and ongoing studies on fracking," the Coaliton's press release in support of SB 1418 reads. "As new research continues to uncover more harmful effects of high-volume fracturing, both in the surrounding area and to the climate, ICMF, SAFE, and many other environmental organizations are committed to supporting studies on the procedure."

SAFE, one of the Coalition members, will play host to a one-day summit called "The Fracking Truth" on Mar. 1 to rally people in support of the moratorium bill.

Photo Credit: ShutterStock | Tom Grundy  

Virtually anyone who has followed the onshore drilling bonanza knows the name Aubrey McClendon and the company he co-founded, Chesapeake Energy.

McClendon was the hard-driving CEO and chairman of one of America’s most aggressive drilling companies, but he was brought down earlier this year after a string of financial scandals and potential conflicts of interest came to light. It turned out that at the heart of the natural gas industry’s poster child lay financial practices that drew the ire of investors, the attention of SEC investigators and the fixation of the news media.

But in the past several months there have been a series of largely under-reported events that demonstrate that Mr. McClendon's problems are by no means distinct.

Might the drilling industry have broader financial issues?

First, take a look at what happened earlier this month with SandRidge Energy. The company announced that it will shake up leadership among executives and the board of directors, and may replace CEO Tom Ward. The announcement came after news broke of scandals similar to those at Chesapeake.

Then a few days later, energy reporters shifted attention to Hess which was selling off much of the acreage the company has in the Eagle Ford shale play, located in Texas. Turns out that Hess sold off much of the acreage for $265 million – far less than the $820 million that some prominent Wall Street analysts had predicted.

This may sound like dry, even banal, business news. But it's worth connecting the dots because there is so much more than money at stake where the energy industry is concerned.

"Some of these companies have had performance issues. Some of them have had conflict issues. Some of them have had performance issues combined with some dominating families," Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware, told Reuters, referring to allegations that SandRidge CEO Tom Ward may have allowed a company run by his son to improperly benefit from SandRidge's activities.

Taken together, these disparate events start looking like a pattern. In fact, what was for a long time a fringe perspective, starts looking like a fairly mainstream observation.

For several years now, a brave few financial analysts and reporters have questioned whether there may be something rotten in how many drilling companies report their earnings, how their executives compensate themselves, how they calculate the amount of gas or other fossil fuels they can pull from the ground.

At root, these skeptics have said that there seemed to be a deliberate attempt by some of these companies to mislead investors, lawmakers and the public about the economics of drilling and the financial prospects of their companies. When these skeptics have spoken up, they usually have been shouted down by the energy industry’s massive PR machine.

Let's recount, briefly, a couple highlights from the history of this skepticism.  

Back in 2010, John Dizard at the Financial Times labeled shale gas a “fairytale,” explaining that shale extraction was a financial loser. “The basic truth about shale is that it is much harder to extract the gas from those rocks than it is from the sandstones that are the source of most ‘conventional’ gas,” Mr. Dizard wrote.

Oil analyst Arthur Berman has been arguing for years that companies miscalculated the potential of shale gas wells, and then found themselves in a bind, having leased acreage at exorbitant prices.

In June 2011, doubts among industry insiders and federal energy analysts made the front page of The New York Times. The Times also highlighted an obscure SEC rule change that allowed companies to aggressively book shale gas reserves.

There have been others among these ranks. Deborah Rogers, Bill Powers, Jeff Goodell and more have all spoken out about potential shadiness in the onshore drilling boom.

Chesapeake Energy has, so far, borne the brunt of the scrutiny, in large part because the company and its founder, Mr. McClendon, have at times seemed larger than life. Their financial woes are well known at this point.

“Chesapeake was a shell game, or maybe I should say a shale game,” Charles Goodyear, former head of mining giant BHP Billiton, told attendees at a recent Yale energy conference.. “I’m not sure it created any economic value at all.”

But recent events strongly suggest Chesapeake is far from alone.

Earlier this month, SandRidge, under pressure from one of its largest investors, announced that they were revamping both their board of directors and the executives who run the company.

CEO Tom Ward, under fire not only for business deals involving family members but also for some of the nearly identical compesation issues to the ones that brought Mr. McClendon down, may be on his way out entirely, and the company’s chief operating officer also announced his resignation.

Mr. Ward co-founded Chesapeake with Mr. McClendon, but departed to run his own company.

Hess Corporation, which is looking to transform itself from a company known for its roadside gas stations into an oil and gas exploration and production company, stunned some investors when it announced the selling price for some of its acreage in one of the hottest shale plays currently, the Eagle Ford. The price was less than a third of what investors expected, sending a signal that the shale may not be as productive as it was hyped up to be.

To frame the problem in its most basic terms, the troubles across the domestic drilling industry largely stem from a lack of transparency. We do not know key information about how the industry operates and makes its predictions. We don't know how they calculate reserves, what chemicals they inject in the ground, or how much in financial liability they have faced from causing environmental harms.

The oil and gas industry is unparalleled in attacking those who want answers. The industry is also distinct in the bevy of loopholes it has enjoyed from federal laws that force other industries to provide the public with this sort of basic information.

Some of this lack of transparency is catching up with the industry. With growing scrutiny of these company's books, executives are having their bluffs called and their poor planning revealed.

Look, for example, at how much shale companies have had to lower the estimates they previously offered for the amount of available gas they can economically pull from the ground. In 2012, company after company was forced to lower these estimates as the price of natural gas plummeted, acknowledging that the gas could not be profitably drilled in current market conditions.

In the fall of 2012 just four companies – Total, BG Group Plc, Encana, and BHP Billiton Ltd. – saw nearly $6 billion in assets disappear from their books due to these write-downs. And Chesapeake Energy’s write-down of 4.6 trillion cubic feet of gas last August was valued at between $4 and $5 billion. BHP Billiton’s admission that $2.84 billion worth of gas in its Fayetteville shale holdings could not be profitably drilled was especially striking, given that the company had purchased that acreage for $4.75 billion only 18 months earlier.

This excellent article from the Fort Worth Weekly describes in plain language exactly how companies got themselves into trouble, pointing out that it’s not just low prices that have wreaked havoc for drillers, but also unjustified expectations about how much oil and gas shale wells can actually produce over the long run.

Currently, SEC rules do not require companies to disclose to their investors many details about precisely how reserves estimates are calculated, leaving investors and energy policymakers alike somewhat in the dark as to what went wrong when reserves are written down.

Some forces are finally pushing the industry to become more transparent.

One of the industry’s most insidious tactics has been to insist on non-disclosure agreements when landowners whose water has been polluted settle contamination lawsuits. These agreements mean that neighbors cannot discuss the cause of their tainted drinking water with anyone – not their neighbors and not the press.

Even EPA researchers looking for proof that fracking has contamined groundwater have repeatedly run into brick walls because of these non-disclosure agreements. Investors also may not be told how much companies have paid to settle lawsuits over contamination.

But these agreements are beginning to draw closer scrutiny. Last week, a Pennsylvania judge ruled in favor of two regional newspapers, finding that the new organizations had the right to information about the case, which had drawn considerable attention before the settlement agreement was inked.

"Whether a right of privacy for businesses exists within the penumbral rights of Pennsylvania's constitution is a matter of first impression," the judge wrote. "It does not."

The ruling is a first step towards transparency and access to information about the oil and gas industry.

The question remains how much longer domestic drillers will be allowed to keep other vital information – needed by policymakers, investors, and community members alike – out of the public eye.

Image credit: Shutterstock | Phatic-Photography

On May 16, the Obama Interior Department announced its long-awaited rules governing hydraulic fracturing ("fracking") on federal lands.

As part of its 171-page document of rules, the U.S. Bureau of Land Management (BLM), part of the U.S. Dept. of Interior (DOI), revealed it will adopt the American Legislative Exchange Council (ALEC) model bill written by ExxonMobil for fracking chemical fluid disclosure on U.S. public lands.

ALEC is a 98-percent corporate-funded bill mill and "dating service" that brings predominantly Republican state legislators and corporate lobbyists together at meetings to craft and vote on "model bills" behind closed doors. Many of these bills end up snaking their way into statehouses and become law in what Bill Moyers referred to as "The United States of ALEC."

BLM will utilize an iteration of ALEC's "Disclosure of Hydraulic Fracturing Fluid Composition Act" - a bill The New York Times revealed was written by ExxonMobil - for chemical fluid disclosure of fracking on public lands and will do so by utilizing FracFocus.org's voluntary online chemical disclosure database.

In a way, it's all come full circle. As we covered here on DeSmogBlog, the original chemical disclosure standards and the decision to utilize FracFocus' database came from the Obama Dept. of Energy's (DOE) industry-stacked Fracking Subcommittee formed in May 2011. DOE gave a $1.5 million grant to FracFocus. 

The Texas state legislature soon thereafter adopted the first bill making FracFocus the fracking chemical disclosure database at the state level in June 2011. Since then, it's been off to the races, with the Council of State Governments adopting the TX bill as model bill in Aug. 2011, ALEC adopting it as a model bill in Oct. 2011, and the bill becoming state law in Colorado, Pennsylvania and other states.

Both the Illinois and Florida state legislatures have also tried to push through this model, but it died dead in its tracks.

FracFocus has been an anemic and failed effort by the Obama Admin. to alter the George W. Bush Admin. "Halliburton Loophole" standards for fracking chemical disclosure, which allowed the recipe of fracking chemicals to remain a "trade secret." It's amounted to nothing more than the same game by a different name, with a Harvard study recently giving FracFocus a "failing grade."    

The FracFocus Façade: "Truck-Sized" Disclosure Loopholes

Almost two years after FracFocus' debut, it is important to scrutinize its disastrous performance. 

"Drilling companies in Texas, the biggest oil-and-natural gas producing state, claimed similar exemptions about 19,000 times this year through August,"explained Bloomberg in a Dec. 2012 investigation. "Trade-secret exemptions block information on more than five ingredients for every well in Texas, undermining the statute’s purpose of informing people about chemicals that are hauled through their communities and injected thousands of feet beneath their homes and farms."

One representative from Texas - the original FracFocus state - said it allows "truck-sized" loopholes in chemical disclosure. An earlier investigative effort by Bloomberg explained just how big these 18-wheelers are. 

"Energy companies failed to list more than two out of every five fracked wells in eight U.S. states from April 11, 2011, when FracFocus began operating, through the end of last year,"wrote Bloomberg. "The gaps reveal shortcomings in the voluntary approach to transparency on the site, which has received funding from oil and gas trade groups and $1.5 million from the U.S. Department of Energy." 

This moved U.S. Rep. Diane DeGette, author of the FRAC Act - which would mandate actual fracking chemical disclosure, although it's never garnered more than a handful of co-sponsors - to say FracFocus offers nothing more than the mirage of transparency. 

"FracFocus is just a fig leaf for the industry to be able to say they’re doing something in terms of disclosure,"she said.

"Fig leaf" is a generous way of putting it. After all, FracFocus is merely a PR front for the oil and gas industry. 

FracFocus' domain is registered by Brothers & Company, a public relations firm whose clients include industry lobbying tour de force America’s Natural Gas Alliance (ANGA), Chesapeake Energy, and American Clean Skies Foundation - a front group for Chesapeake Energy.

ALEC Model Bill Gone U.S. Public Lands in BLM Rules 

BLM's rules are a mirror image of the ALEC/ExxonMobil "model bill" for fracking chemical disclosure.  

"The rule would require that disclosure of the chemicals used in the fracturing process be provided to the BLM after the fracturing operation is completed,"BLM explains. "This information may be submitted to the BLM through an existing Web site known as FracFocus.org, already used by some states for reporting mandatory chemical disclosure of hydraulic fracturing chemicals."

Paralleling the BLM rules but less specific in what the online registry would be (it ended up becoming FracFocus), the ALEC/ExxonMobil model is a BLM rules clone. 

"The {insert relevant state agency} by rule shall require an operator of a well on which a hydraulic fracturing treatment is performed to complete the form posted on the hydraulic fracturing chemical registry Internet website,"the model bill reads.

This shall include both "the total volume of water used in the hydraulic fracturing treatment" and "the total volume of water used in the hydraulic fracturing treatment...as provided by a service company or chemical supplier or by the operator, if the operator provides its own chemical ingredients." 

Obama Admin. "Huddled" with Industry Before Rules Released 

On April 12, EnergyWire's Mike Soraghan revealed that the Obama Admin. "huddled" with Big Oil before releasing BLM's final rules, watering them down to suit the industry's taste. 

Heather Zichal, deputy assistant to the president for energy and climate change, "met more than 20 times in 2012 with industry groups and company executives lobbying on the proposed rule,"according to Soraghan's review of White House visitor records. "Among them were the American Petroleum Institute (API) and the Independent Petroleum Association of America (IPAA), along with BP America Inc., Devon Energy Corp. and Exxon Mobil Corp."

"The rule really reflects who has had the most access and who is being listened to,"Fran Hunt of the Sierra Club's "Beyond Gas" campaign told EnergyWire. "They've been following the road signs put up by industry."

Michael Brune, Executive Director of the Sierra Club, echoed these concerns. 

"After reviewing the draft rules, we believe the administration is putting the American public’s health and well-being at risk, while continuing to give polluters a free ride,"Brune stated of BLM's new fracking rules. "This proposal does not require drillers to disclose all chemicals being used for fracking and continues to allow trade-secret exemptions for the oil and gas industry."

Image Credit: ShutterStock | Aquir

Aubrey McClendon's penchant for "land grab"as a business model made the recently-ousted Chesapeake Energy CEO infamous - and he's at it again for his new start-up hydraulic fracturing ("fracking") company in Ohio's Utica Shale basin. It's a formation he once hailed as the "biggest thing to hit Ohio since the plow."

Under Securities and Exchange Commission investigation for sketchy business practices, McClendon departed Chesapeake with a severance package including $35 million, access to the company's private jets through 2016 and a 2.5% *return on ownership stake in* every well Chesapeake fracks through June 2014.

Since then, he launched three new start-ups: McClendon Energy Partners, American Energy Partners and Arcadia Capital LLC.

American Energy Partners' headquarters are just half a mile down the road from Chesapeake's, the number two U.S. producer of shale gas behind ExxonMobil. Some of those in McClendon's Chesapeake inner circle have left Chesapeake and joined him (or reportedly intend to join him) at his new ventures.**

Though former Chesapeake employees are barred from working for McClendon, this excludes "any employee assigned to Mr. McClendon as an assistant,""any employee who has been terminated by the Company,""any employee who elects (or has elected) to accept any voluntary severance or retirement program offered by the Company," or "any employee for whom the Company consents in advance to the soliciting and hiring by Mr. McClendon." 

In other words, the scandal-ridden AKM Operations has shape-shifted into McClendon Energy Partners, American Energy Partners and Arcadia Capital LLC.

McClendon's playing the same business plan game using a different company name, with Ohio serving as the first pit stop. Although his business plans were held close to the chest since his Chesapeake departure, recent stories indicate that McClendon's Ohio "land grab" has now begun in earnest.

"Deja Vu All Over Again" for McClendon

When McClendon left Chesapeake, he didn't fly off solo, by any means.

Those who also left Chesapeake*** include former head of corporate development and top lobbyist Tom Price, private equity consultant Scott Mueller****, and Henry Hood, Chesapeake's former senior vice president of land.

Four other members of Chesapeake's upper-level management are also "leaving as part of a reorganization of the U.S. oil and gas company's leadership," according to an August 12 memo written by current CEO Doug Lawler and first reported by Reuters. Further, Chesapeake mysteriously fired 28 Ohio-based community outreach employees two days later on August 14, according to Crain's.

Two days later, Upstream dropped the bombshell: "Aubrey McClendon back on call" - McClendon's American Energy Partners had raised $1 billion in capital and purchased over 72,000 acres in five Ohio counties.

With "land grab" as a central tenet of McClendon's Chesapeake business model, and Ohio's Utica shale basin the prize McClendon was most excited about prior to his Chesapeake departure, it appears it'll be a case of what Yogi Berra called "deja vu all over again" for McClendon and the victims of the "land grab."'

"Land Grab" Well Underway

Demonstrating the seriousness of McClendon's new ventures, Upstream explained that American Energy Partners"is already deploying his signature army of landmen leasing under the names of shell companies to hide their tracks."

"Offset and legacy operators, landowners, leasing agents and industry sources painted a picture of McClendon lodging high bids for major parcels to put together a strong position in counties such as Guernsey, Belmont, Harrison and Noble," Upstream wrote. 

22,500 of the over 70,000 Utica acres acquired by McClendon for $280 million were formerly owned by Chesapeake's joint venture private equity partner EnerVest.

American Energy Partners has also teamed up with the Fort Worth-based leasing firm Orange Energy Consultants - creating a new limited liability corporation named Great River Energy - to buy extensive Utica acreage, Upstream revealed. 

"Orange representatives involved in Great River would only say the company was backed by deep-­pocketed investors that requested confidentiality," according to Upstream.

Sharing some of the same management of the law firm Beckmen, Cherkassky, Dean & Associates and launched in October 2010, Orange has a lease acquisition program and is "experienced at coordinating and facilitating large, multiple leasing signing meetings with hundreds of mineral and property owners present," according to its website. 

Orange has a field office in Canton, Ohio, the state in which American Energy Partners will focus all of its time and energy, so the Orange office will likely be busy over the coming weeks and months. 

Landmen.net - the central job board for landmen seeking industry employment - has already posted two blurbs recruiting prospective landmen to work in eastern Ohio, where American Energy Partners has purchased tens of thousands of acres.

"Pipeline Directly From Your Wallet into His"

Forbes energy writer Christopher Helman excitedly offered context about the high stakes nature of these developments, portending a potentially immense "land grab" to come for McClendon.

"Aubrey McClendon is back with a vengeance and prowling Ohio’s Utica shale...At Chesapeake, McClendon’s army of land men assembled a position of more than 1.2 million acres in the Utica," he wrote.

In his groundbreaking McClendon story, Rolling Stone's Jeff Goodell summed it up well. 

"Like generations of energy kingpins before him, it would seem, McClendon's primary goal is not to solve America's energy problems, but to build a pipeline directly from your wallet into his." 

Update: This post has been updated in the following ways to reflect concerns raised by Mr. McClendon's legal counsel subsequent to publication of the original story:

*Correction to reflect the fact that Mr. McClendon has an ownership stake in every well, rather than a ‘return on’ every well Chesapeake develops through June 2014.

** Correction to remove reference to a 'potentially illegal internal hedge fund named AKM Operations'. Mr. McClendon's lawyers state in a letter to DeSmogBlog that "employees at Chesapeake did not help run any internal hedge fund."Reuters has covered the issue in some depth, noting that a hedge fund called Heritage Management Company, which shared its mailing address with Chesapeake headquarters, was started by McClendon and Chesapeake's co-founder Tom Ward. 

*** Clarification to note that these individuals have left Chesapeake Energy since McClendon's departure. 

****Clarification to remove a parenthetical note about Mr. Mueller's prior role with a hedge fund at Sandridge Energy.

Image Credit: Energy Action Coalition

When a representative from Chesapeake Energy knocked on Phyllis Allen's door in 2003 and offered $300 for her mineral rights and an invitation to a lease-signing pizza party, she turned them down.  

Allen’s home is in the United Riverside neighborhood, predominately poor and working class African American, the place where fracking first took hold in the city. She'd like to say she didn't sign because of her concerns for environmental issues but, at the time, she hadn’t heard of fracking.

She didn't sign because of the advice her father gave her: "Never sign anything you don't understand."

Since then, Phyllis Allen, a retired Yellow Pages sales representative, has educated herself about fracking. During her daily walks along the Trinity River she takes note of environmental problems. In 2011, she saw a white chemical cloud rising over a compressor center and workers in hazmat suits going in to shut it down.

In another instance, Allen witnessed fluid being pumped into the Trinity River during the peak of the drought. She contacted Streams and Valleys, the organization responsible for the trails along Trinity, but never found out exactly what was going on. And she's noticed that migratory birds don't come back to the riverbank anymore.

Phyllis Allen in front of a compressor station near her home in Fort Worth. ©2013 Julie Dermansky

Fort Worth, which sits on top of the vast Barnett Shale, is the first major city in America to allow extensive fracking within the city limits.  

The city has approximately 2,000 gas wells and more are being drilled. Though there is an ordinance to keep fracking 600 feet from residences, exceptions are made. In some locations fracking happens 300 feet from homes and businesses.

As far as Allen knows, none of her neighbors resisted signing the leases.

"The poor and working class don’t have fracking on their radar. They are worried about making house and car payments and don't have time to follow environmental issues in their community," she says.

"White people fight back when they see something wrong being done in their neighborhoods because they believe the system is just. Black people already know that the system is stacked against them so they are less likely to get involved. That’s why the frackers started here. It is not correct to simply say the African American community is apathetic about fracking. You need to consider there is a growing group of people who have less and less, with little chance of standing up to the 1 percent, so they don't protest."
 

Fracking site in residential neighborhood in Fort Worth. ©2013 Julie Dermansky

Don Young, a stained glass artisan in Fort Worth’s predominantly middle class West Meadowbrook neighborhood got a knock on his door from the representative of a fracking company a few years after Allen did. Young also started researching fracking and has become one of the industry's largest adversaries in the area, founding Fort Worth Citizens Against Neighborhood Drilling Ordinance.

Despite small victories, including stopping the Tandy Hills Natural Area from being fracked, Young recently put his house on the market.

"Fort Worth has been fracked to capacity," according to Young. "There is no turning back. Some days the air is so bad you can't see downtown."

Don Young at his father's burial site in Handley Cemetery in Fort Worth, where frackers have obtained drilling rights. ©2013 Julie Dermansky

When a well is first fracked industry recovers what is known as the mother lode. The bulk of the natural gas or oil is harnessed from the drill site during the first year.

The yield greatly decreases after that, so companies cap wells and drill new ones. They then move to sites previously leased, ensuring they get to tap into all the leased properties before any of the leases expire.

Once a well is drilled they can come back to re-frack. When gas prices go up, re-fracking existing wells will become a profitable venture even with a much smaller rate of return.

When that happens, Young says, "Fort Worth will be a horrible place to live."

Fracking in Fort Worth knows no boundaries. Wells are drilled next to schools, parks and cemeteries. Despite the risks — health hazards from increased air and water contamination; water shortages exacerbated by the industry's need for millions of gallons of water; the imminent danger of ruptured gas pipelines and earthquakes— few are fighting back.

The fracking companies have spread a lot of money around to cultural centers and church groups to curry favor and reassure residents.

In the Fort Worth Museum of Science and History, they have interactive fracking displays, including a game with joysticks for directional drilling. These public relations moves help keep would-be opposition factions at bay.

"While we have grown complacent, the fracking industry has chipped away at our quality of life big time," Young says.
 

Watch me test out the joystick operated horizontal drilling game in the Fort Worth Museum of Science and History:


If only it were that straight-forward in reality.

Stay tuned for Part 2 tomorrow: How Arlington, Texas fell to the frackers.

Fort Worth was the first major city in America to allow extensive fracking within the city limits— but it wasn’t the last. Arlington, Texas, fell to the frackers next— only this time, the frackers were required to make their installations less of an eyesore.

Berms were built up around fracking sites and compressor centers to hide them from view, and active drill sites have temporary walls built up around them to keep the noise down. But walls don't stop chemical seepage.

Fracking site in Arlington, Texas, a suburb of Dallas. ©2013 Julie Dermansky

Kim Feil, an educator, blogger and environmental activist, is no stranger to chemical exposure. She moved from New Sarpy, Louisiana, part of an area known as Cancer Alley due to its many refineries and high incidence of cancer, to Arlington, before the fracking began.

Feil monitors new industrial developments and does what she can to stop them by attending city-zoning meetings. Her blog keeps neighbors informed about what is coming next and which fracking installations are having problems. Other concerned citizens share heartbreaking stories with her about sicknesses they believe are connected to fracking.

Since the fracking began, Feil's husband has been diagnosed with cancer, she started experiencing migraines and her son has a biomarker for an adrenal tumor.

Though it is difficult to directly link illness to industrial pollution with the present limited scientific data, she has no doubt that the new and troubling health problems around her are connected to fracking.

Earthworks released video footage that documents chemicals escaping into the air at frack sites, captured with an infrared camera. Though the naked eye can’t see chemicals escaping from water storage holding tanks and frack sites, infrared cameras can. Cancer-causing chemicals associated with fracking include hydrogen sulfide, sulfur dioxide and methane.

 
Kim Feil on her front porch in Arlington with dummy 'Ben Zene," a prop she brings with her when protesting fracking. ©2013 Julie Dermansky

Ranjana Bhandari and her family live in an upscale area of Arlington. She turned down an $18,000 per acre bonus for her mineral rights, only to find that the Texas Railroad Commission could strip those rights from her by applying Rule 37.

A law originally meant to protect property owners, Rule 37 has been interpreted by frackers in a way that enables them to seize the drilling rights when a landowner refuses to sign a lease after most of their neighbors have consented.  

Bhandari's challenge to Chesapeake Energy resulted in a hearing before the Texas Railroad Commission. The commission ruled in Chesapeake's favor.

According to Reuters, Texas Railroad Commission spokesperson Ramona Nye said the agency believes there is no evidence that fracking is unsafe. Evaluating the fairness of Rule 37 exceptions is not part of the commission's mandate, she said.

Ranjana Bhandari in front of solar panels on her home in Arlington, Texas. ©2013 Julie Dermansky

Bhandari doesn't have the means to hire a lawyer and take the case further. Although she couldn't stop her land from being fracked, she is glad she never consented.

At a meeting on October 10^th, at the Preston Royal Library in Dallas, FracDallas director Marc W. McCord gave a talk on fracking's impact on the water supply. McCord went over the staggering figures: two to six million gallons of water are used for each well, threatening to further deplete an already dangerously low water supply. According to Mr. McCord's presentation, "in the Barnett Shale the range is about 1.5 to 9 million gallons with an average of about 5 million gallons per well. In the Eagle Ford the average is about 9 million gallons with a high of about 13 million gallons."

Although industry representatives point out fracking uses only one percent of Texas water, that statistic is misleading since water use is not the same in all areas.

In areas such as Arlington, Fort Worth and south of San Antonio, which are facing worsening drought conditions, taking any portion of water out of public use threatens to leave cities entirely dry.

McCord also dispelled the talking point that natural gas burns cleaner than coal. "The energy used to retrieve fracked gas and oil is more carbon intensive than burning coal,” he says. "The problem isn't using the gas, but getting it."

Marc W. McCord, Director of FracDallas, speaks at the Preston Royal Library. ©2013 Julie Dermansky

Although the long-term effects of fracking are still being debated, some of the risks involved in harvesting this unconventional energy source are already clear.

Millions of gallons of water are removed from public use — water that cannot be recycled due to contamination and must be removed from the water supply for good. The hydrogen sulfide released from fracking sites can be lethal. Gas pipelines can explode. And recent studies show fracking is causing earthquakes.

Fueling the debate are oil and gas corporations that have compromised scientific studies by underwriting them and are starting to run “native advertisements” that blur the line between news and advertising.

To frack in densely populated cities increases the potential risk to life and property exponentially. Whatever financial boon fracking can bring, it can also lower property values if the water and air become contaminated.

Dallas has safeguarded the city with zoning restrictions, which make fracking within city limits unattractive. Residents of Dallas who keep an eye on Arlington and Fort Worth have seen enough of fracking's downsides to spur them to keep fracking outside the city limits — for now.

[Update: On December 11th, the Dallas City Council passed an ordinance that restricts drilling within 1500 feet of residences and other protected sites including schools and churches.]

Watch an animated display about fracking at the Forth Worth Museum of Science and History: 

Former Chesapeake Energy CEO and Founder Aubrey McClendon is back in the hydraulic fracturing ("fracking") game in Ohio's Utica Shale in a big way, receiving a permit to frack five wells from the Ohio Department of Natural Resources on November 26. 

"The Ohio Department of Natural Resources awarded McClendon's new company, American Energy Utica LLC, five horizontal well permits Nov. 26 that allows oil and gas exploration on the Jones property in Nottingham Township, Harrison County," a December 6 article appearing in The Business Journal explained. "In October, American Energy Utica announced it has raised $1.7 billion in capital to secure new leases in the Utica shale play."

McClendon is the former CEO of fracking giant Chesapeake Energy and now the owner of American Energy Partners, whose office is located less than a mile away from Chesapeake's corporate headquarters.

The $1.7 billion McClendon has received in capital investments for the purchase of 110,000 acres worth of Utica Shale land came from the Energy & Minerals Group, First Reserve Corporation, BlackRock Inc. and Magnetar Capital.

McClendon — a central figure in Gregory Zuckerman's recent book "The Frackers" — is currently under investigation by the U.S. Securities and Exchange Commission. He left Chesapeake in January 2013 following a shareholder revolt over his controversial business practices.

In departing, he was given a $35 million severance package, access to the company's private jets through 2016 and a 2.5% stake in every well Chesapeake fracks through June 2014 as part of the Founder's Well Participation Program.

Little discussed beyond the business press, McClendon has teamed up with a prominent business partner for his new start-up: former ExxonMobil CEO Lee Raymond.

Power Mapping McClendon's New Venture

"[Lee] Raymond has emerged as a director alongside Mr. McClendon in American Energy Ohio Holdings LLC... according to [an SEC] regulatory filing," The Wall Street Journal reported in October. 

The former Exxon CEO's son John Raymond is the Managing Partner, Chief Financial Officer, and Chief Executive Officer of Minerals & Energy Group, currently the largest capital investor in McClendon's start-up venture. He is also a partner McClendon's new venture. Ryan Turner, Chesapeake's Stock Plan Manager has also joined the team as a partner.

"Jefferies Group LLC gave financial advice to American Energy" for the deal, according to Bloomberg — and is listed as such on American Energy Ohio Holdings LLC's SEC Form D.

Ralph Eads III— McClendon's fraternity brother at Duke University — serves as Global Head of Energy Investment Banking at Jefferies Group, Inc.

Photo Credit: YouTube Screenshot

"Mr. Eads...is a prince of this world,"the New York Times reported in October 2012. "His financial innovations helped feed the gas drilling boom, and he has participated in $159 billion worth of oil and gas deals since 2007."

Eads maintained tight financial ties with McClendon when he was at the helm of Chesapeake Energy. The flow chart below depicts the financial and career ties binding Eads and McClendon.

Flowchart Credit: Dory Hippauf, Raging Chicken Press

High Stakes Game

In teaming up with Lee Raymond, the former CEO of ExxonMobil — notorious for its role in funding climate change denial — and his brother John, McClendon has shown he is back in Ohio ready to play ball.

But a recent Environmental Integrity Project report indicates the life-cycle climate change impacts of fracking are more severe than previously thought.

With the U.S. Navy predicting an ice-free Arctic summer by 2016 due to climate change, it's a ball game with undeniably high stakes.  

Photo Credit: Cleveland Museum of Natural History