Basic Information

industry Oil
bio

Chesapeake Energy is an oil and gas exploration company based out of Oklahoma City and operating in...

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polluter #276

Chesapeake Energy

bio

Chesapeake Energy is an oil and gas exploration company based out of Oklahoma City and operating in numerous states across the country. The company was founded in 1989 by current CEO Aubrey McClendon and former president Tom L. Ward. From the beginning, the company has focused its energies on using new techniques like horizontal drilling and hydraulic fracturing to extract unconventional sources of natural gas.

The company manages operations in four shale formations, where they use fracking to access oil and gas. The largest of these is the Marcellus Shale, located predominately in Pennsylvania, New York, and West Virginia.  

According to the company’s website, Chesapeake is “the second-largest producer of natural gas, a Top 15 producer of oil and natural gas liquids and the most active driller of new wells in the U.S.” Chesapeake is also the largest leasehold owner in the U.S. with approximately 14 million net acres under lease.

Chesapeake hopes to gain 50% of their revenue from oil production by 2013.

In June 2012, a Reuter’s article exposed Aubrey McClendon for using millions of corporate dollars and resources for personal expenses. As a result, the Board of Directors decided to strip McClendon of his title as chairman but he remains the CEO. After the decision was made, the Board of Directors altered the company’s bylaws, allowing McClendon to retain his executive powers as chairman. Archie Dunham, former Chairman of ConocoPhillips, was appointed as the Non-Executive Chairman.

Evidence

Gas fracking is known to have negative impacts on both air and water quality in surrounding communities. According to the EPA, fracking wastewater contains radioactive materials, metals, total dissolved solids, as well as whatever toxic additives have been used in the fracking fluid. There are currently no national standards that regulate proper disposal of fracking wastewater. 

Air pollutants from the fracking process include methane, volatile organic compounds (VOCs), and other substances classified by the EPA as Hazardous Air Pollutants. Because methane is such a potent greenhouse gas, studies have shown that natural gas recovered from shale formations has a larger greenhouse gas footprint than coal. 

Chesapeake has been involved with numerous allegations of health and safety violations relating to their gas fracking operations. During 2011 Chesapeake was accused of 141 violations in Pennsylvania alone.  One of the most significant events occurred in August 2011, when a well blowout in Bradford County, Pennsylvania released large quantities of fracking fluid into nearby farmland and waterways.  The fracking fluid contained numerous toxic chemicals that contaminated nearby waterways.  Despite this and other similar events, Chesapeake claims that, “Examples of our environmental sensitivity abound.”

As a result of such environmental violations, Chesapeake has been fined several times by the state of Pennsylvania.  In February 2012, Chesapeake was fined $565,000 for previous violations that resulted in contamination of local waterways. In May of 2011, Chesapeake was fined $1.09 million. 

The company is also under a criminal investigation by the US Department of Justice, following numerous alleged violations of the Clean Water Act in West Virginia. 

Chesapeake Energy is involved in a number of lawsuits throughout the country, relating to various financial and environmental issues. Allegations include insider trading, underpayment of royalties, and property damages, to name a few.  One of the largest lawsuits began in 2009, when a putative class action suit was brought against Chesapeake in a New York US District Court. Plaintiffs have claimed damages from misinformation regarding the company’s July 2008 common stock offering, and the case has since been relocated to Oklahoma.  

In 2008, Chesapeake CEO Aubrey McClendon’s compensation package totaled $112.5 million, making him the year’s highest paid CEO in the country.  That same year, company profits fell 50% and stock value declined by 60%.  This situation prompted shareholders to bring the company to court.  Chesapeake’s financial troubles have extended into the present – as of February 2012 the company projected that low natural gas prices would lead revenue to fall billions of dollars below expenses. 

Since 2008, Chesapeake Energy has spent more than $8.6 million on federal lobbying, concentrating their efforts on energy and environmental issues. Chesapeake’s Political Action Committee has spent over $3.4 million on federal political candidates and committees.

Chesapeake Energy also funds the American Legislative Exchange Council (ALEC), an organization known for influencing American politics and supporting right-wing legislators. Other funders of ALEC include corporations such as Chevron, ExxonMobil, BP, Shell, and Koch Industries. 

In Chesapeake’s 10-K report, filed to the SEC, the company acknowledges the inherent dangers of their work, stating that, “the natural gas and oil business involves a variety of operating risks, including the risk of fire, explosions, blow-outs, pipe failure, abnormally pressured formations and environmental hazards such as oil spills, natural gas leaks, ruptures or discharges of toxic gases.”

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