Exclusive: Ousted Chesapeake Energy CEO Aubrey McClendon Launching Ohio Land Grab

picture-7018-1583982147.png
on

Aubrey McClendon’s penchant for โ€œland grabโ€ 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 (โ€œfrackingโ€) company in Ohio’s Utica Shale basin. It’s a formation he once hailed as the โ€œbiggest thing to hit Ohio since the plow.โ€

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

Since then, he launched three new start-ups: McClendon Energy Partners,ย American Energy Partnersย 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 circleย have left Chesapeake and joined him (or reportedly intend to join him) at his newย ventures.**

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

In other words, the scandal-ridden AKM Operations has shape-shifted intoย 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 storiesย indicate that McClendon’s Ohio โ€œland grabโ€ has now begun inย earnest.

โ€œDeja Vu All Over Againโ€ forย McClendon

When McClendon left Chesapeake, he didn’t fly off solo, by anyย means.

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

Four other members of Chesapeake’s upper-level management are also โ€œleaving as part of a reorganization of the U.S. oil and gas company’s leadership,โ€ according to an August 12ย memo written by current CEO Doug Lawler and first reported byย Reuters. Further, Chesapeake mysteriously firedย 28 Ohio-based community outreach employees two days later on August 14, according toย Crain‘s.

Two days later,ย Upstreamย dropped the bombshell:ย โ€Aubrey McClendon back on callโ€ –ย McClendon’s American Energy Partners had raised $1 billion in capital andย purchased over 72,000 acres in five Ohio counties.

With โ€œland grabโ€ as a central tenet of McClendon’s Chesapeake business model, and Ohio’s Utica shale basin the prizeย McClendon was most excited about prior to his Chesapeake departure, it appears it’llย be a case of what Yogi Berra called โ€œdeja vu all over againโ€ for McClendon and the victims of the โ€œland grab.โ€

โ€œLand Grabโ€ Wellย Underway

Demonstrating the seriousness of McClendon’s new ventures, Upstreamย explained that American Energy Partners โ€œis already deploying his signature army of landmen leasing under the names of shell companies to hide theirย tracks.โ€

โ€œOffset 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,โ€ย Upstreamย wrote.ย 

22,500 of the over 70,000ย 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 –ย to buy extensive Utica acreage, Upstream revealed.ย 

โ€œOrange representatives involved in Great River would only say the company was backed by deep-ยญpocketed investors that requested confidentiality,โ€ย according to Upstream.

Sharing some of the same management of the law firm Beckmen, Cherkassky, Dean & Associatesย and launched in October 2010, Orange has a lease acquisition programย and is โ€œexperienced at coordinating and facilitating large, multiple leasing signing meetings with hundreds of mineral and property owners present,โ€ according to itsย website.ย 

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 andย months.ย 

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

โ€œPipeline Directly From Your Wallet intoย Hisโ€

Forbes energy writer Christopher Helman excitedly offered context about the high stakes nature of these developments, portending a potentially immense โ€œland grabโ€ to come forย McClendon.

โ€œAubrey McClendon is back with a vengeance and prowling Ohioโ€™s Utica shaleโ€ฆAt Chesapeake, McClendonโ€™s army of land men assembled a position of more than 1.2 million acres in the Utica,โ€ heย wrote.

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

โ€œLike 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 intoย his.โ€ย 

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 โ€˜return onโ€™ 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 โ€œemployees at Chesapeake did not help run any internal hedge fund.โ€ 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.ย 

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

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

Image Credit: Energy Actionย Coalition

picture-7018-1583982147.png
Steve Horn is the owner of the consultancy Horn Communications & Research Services, which provides public relations, content writing, and investigative research work products to a wide range of nonprofit and for-profit clients across the world. He is an investigative reporter on the climate beat for over a decade and former Research Fellow for DeSmog.

Related Posts

on

The worldโ€™s largest advertising and public relations firms continue to get the majority of their work from major polluters, a new report has found. Known as the โ€œBig Six,โ€ WPP, Omnicom, Interpu...
on

Unique collaboration convenes leaders from the global climate and trauma healing movements to explore the neglected inner dimensions of the crisis.

Unique collaboration convenes leaders from the global climate and trauma healing movements to explore the neglected inner dimensions of the crisis.
Analysis
on

The new Labour government is pledging billions to support projects based on climate-heating natural gas.

The new Labour government is pledging billions to support projects based on climate-heating natural gas.
Analysis
on

Alongside other European powers, the UK is helping to supercharge Saudi Arabiaโ€™s attempt to hijack the global sustainability agenda.

Alongside other European powers, the UK is helping to supercharge Saudi Arabiaโ€™s attempt to hijack the global sustainability agenda.