A natural gas drilling rig stands on a Chesapeake Energy Corp. drill site in Bradford County, Pennsylvania.
It’s not only toxic – it’s driven by a right-wing billionaire who profits more from flipping land than drilling for gas.
Aubrey McClendon, America's second-largest producer of natural gas,
has never been afraid of a fight. He has become a billionaire by
directing his company, Chesapeake Energy, to blast apart gas-soaked
rocks a mile underground and pump the fuel to the surface. "We're the
biggest frackers in the world," he declares proudly over a $400 bottle
of French Bordeaux at a restaurant he co-owns in his hometown of
Oklahoma City. "We frack all the time. What's the big deal?"
McClendon dominates America's supply of natural gas the same way the
Tea Party-financing Koch brothers control the nation's pipelines and
refineries. Like them, McClendon is an influential right-wing power
broker – he helped fund the Swift Boat attacks against John Kerry in
2004, donated $250,000 to the presidential campaign of Rick Perry, and
contributed more than $500,000 to stop gay marriage. But unlike his
fellow energy czars, McClendon knows how to tone down his politics and
present a friendlier, less ideological face to the public. He secretly
gave $26 million to the Sierra Club to fight Big Coal, and built a
Google-like campus for Chesapeake's 4,600 employees in Oklahoma City,
complete with a 63,000-square-foot day care center, a luxurious gym and
four cafes manned by cook-to-order chefs. He even voted for Barack Obama
because he thought the country needed "an inspirational figure."
At 52, McClendon still looks like the whip-smart accountant he once
aspired to be – crisp white shirt, polished shoes, a toss of white hair.
To hear him tell it, the cleaner-than-coal fuel he produces will revive
our faltering economy, free us from the tyranny of foreign oil and save
the planet from global warming. "I have a fossil fuel that makes other
fossil fuels obsolete," he boasts. By McClendon's estimate, the industry
has drilled more than 1.2 million wells nationwide, yet so far there
have been only a few confirmed cases where things have gone wrong –
despite dire warnings from scientists and environmentalists that
fracking pollutes rivers and streams, contaminates drinking water and
turns large swaths of farmland into industrial moonscapes. "Where is the
mushroom cloud?" McClendon asks. "Where are the dogs with one leg?
Where are the people that have been maimed or hurt?"
He sips his Bordeaux; his own private wine cellar once boasted more
than 10,000 bottles. It's a good riff, with some truth to it. But what
McClendon leaves out is the real nature of the business he's in.
Fracking, it turns out, is about producing cheap energy the same way the
mortgage crisis was about helping realize the dreams of middle-class
homeowners. For Chesapeake, the primary profit in fracking comes not
from selling the gas itself, but from buying and flipping the land that
contains the gas. The company is now the largest leaseholder in the
United States, owning the drilling rights to some 15 million acres – an
area more than twice the size of Maryland. McClendon has financed this
land grab with junk bonds and complex partnerships and future production
deals, creating a highly leveraged, deeply indebted company that has
more in common with Enron than ExxonMobil. As McClendon put it in a
conference call with Wall Street analysts a few years ago, "I can assure
you that buying leases for x and selling them for 5x or 10x is a lot
more profitable than trying to produce gas at $5 or $6 per million cubic
feet."
According to Arthur Berman, a respected energy consultant in Texas
who has spent years studying the industry, Chesapeake and its lesser
competitors resemble a Ponzi scheme, overhyping the promise of shale gas
in an effort to recoup their huge investments in leases and drilling.
When the wells don't pay off, the firms wind up scrambling to mask their
financial troubles with convoluted off-book accounting methods. "This
is an industry that is caught in the grip of magical thinking," Berman
says. "In fact, when you look at the level of debt some of these
companies are carrying, and the questionable value of their gas
reserves, there is a lot in common with the subprime mortgage market
just before it melted down." 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.
This a very well researched article. It is 4 pages long. Read the rest @Rollingstone.com
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