Last thoughts: Aubrey McClendon Through the Eyes of this Royalty Owner

By Keith Mauck

I remember the 2008 conference call quite well. My wife and her three siblings have 320 acres of Louisiana farm land that they hold dear, and they were curious what this Haynesville Shale might possibly mean for their farm, their Louisiana kin and the region in general — and all we needed was for Aubrey McClendon to tell us the good news. He didn’t fail them.

In stark contrast to the good news delivered that day came the news on March 2nd that Mr. McClendon was killed in a car accident outside of Oklahoma City. Speed likely was a factor in his death. Police say it appears that his 2013 Chevy Tahoe drove “straight into a wall” and burst into flames. McClendon likely died instantly. The crash occurred less than 24 hours after a federal grand jury indicted McClendon for allegedly rigging oil and natural gas leases. He denied the antitrust charges, saying “Anyone who knows me, my business record and the industry in which I have worked for 35 years, knows that I could not be guilty.” He added, “All my life I have worked to create jobs in Oklahoma, grow its economy, and to provide abundant and affordable energy to all Americans.”

I met McClendon several years ago during a Marcellus Shale event in Pittsburgh. I found him to be charismatic and hard-driving, an uber-entrepreneur who saw the potential of the advanced technologies transforming the energy industry. Coming from the mineral owner community, I wasn’t sure how I’d be received, but upon introducing myself, he exclaimed enthusiastically, “You’re that dude!” As I walked away from the friendly exchange, my joy for the recognition gave way to a slight uneasiness that CEO McClendon knew about “a dude” who had a website. Then, that gave way to wonderment that he had the capability and desire to see the industry from bottom to top.

At age 56, McClendon was a titan in the oil and gas industry. In 1989, he and his friend Tom Ward started Chesapeake Energy in Oklahoma City with $50,000, and turned it into a multi-billion dollar powerhouse. Brash and aggressive, he was a visionary who recognized the promise of hydraulic fracturing and moved quickly to buy up mineral rights leases in shale formations.

 Under his leadership as CEO, Chesapeake became one of the largest independent natural gas producers in the country. But McClendon also took risks. At one point he invested some of his personal wealth in Chesapeake wells and used them as collateral for $1.1 billion in loans for drilling.

The move was questionable, but McClendon’s impact on U.S. energy supplies was nothing short of remarkable. Chesapeake and a small number of similar companies turned America’s energy deficit into an abundance of oil and natural gas. Today the United States is the largest oil and gas producer on the planet.

McClendon, and other wildcatters like him, are responsible for America’s energy bounty, along with all of the mineral owners who signed leases to allow drilling. Millions of royalty owners, as they are called, are benefitting from the “shale gale” by receiving payments for the oil and gas being produced on their private lands. They have told me — the publisher of GoMarcellusShale.com and GoHaynesvilleShale.com — the stipends have helped them pay their bills, pay off college loans, and grow their families.

With that said, in the community where I come from, the mineral owner community, opinions of McClendon remain mixed at best—many feel taken advantage of by business practices that began under his leadership at Chesapeake. As the price of natural gas and oil dropped, royalty check deductions became burdensome despite the fact that many landowners had contract clauses prohibiting the practice. Royalty owners of all sizes have filed suit against Chesapeake alleging this practice violates their contracts. To this day, Chesapeake continues to fight these allegations and related lawsuits. My hope remains that Chesapeake corrects its practices and makes decisions that will make royalty owners financially whole. The verdict is still out on whether this will happen.

Professionally speaking, I was saddened by McClendon’s growing absence from the public energy debate. He was a tremendous communicator and salesman for shale and it’s potential — the heir apparent to T. Boone Pickens. But, as the controversies mounted and the clouds darkened, he moved away from the spotlight to take on less visible roles.

It’s still unclear just how history will remember Aubrey McClendon but one thing is clear. He was a savvy entrepreneur who helped America transition from energy dependence toward energy independence. For that, we are grateful. My prayers and condolences go out to his family and friends.

Keith Mauck, J.D., is Publisher of GoMarcellusShale.com, GoHaynesvilleShale.com and Co-Founder of ShaleCast.com.

This article was originally published in the Daily Caller.

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Permalink Reply by Jim Litwinowicz on March 8, 2016 at 8:01am

Well written Keith.  Like most people Mr McClendon was a mix of good and bad. He was the spark of this energy revolution and had a tremendous impact on every American and even the world. Driving down the cost of energy will help every human on the planet.  And since natgas burns so clean it will also help clean the environment and possibly forestall AGW.  Even most landowners benefited as CHK often paid the highest lease payments. The boom created over a million well paying jobs and increased tax revenue for the government. And freeing us of ME oil is critical, not to mention cutting money to Russia and Iran.

But he also had some questionable business practices that harmed many, especially when CHK was in dire financial straits. Taking deductions when they shouldn't, possible bid rigging for leases, the 'creative' financial shenanigans in the Access pipeline deal, his secretive personal interest in wells and other actions earned him a bad reputation with many.

Much of the fracking revolution would have occurred without him but he greatly accelerated the process. We and the world definitely are better off because of him.

I never met him or any of his family but I feel for their loss and also express my condolences.

Permalink Reply by Keith Mauck (Site Publisher) on March 8, 2016 at 8:09am

Great thoughts Jim...

Permalink Reply by INVICTUS on March 8, 2016 at 10:37am

The modern day equivalent

of a 19th century day Railroad Baron. No question of the value to the nation -  but clearly at the expense of "Collateral damage": In the railroad's case as today - the landowner and the farmer. Same tactics as well. We can read the stories of how the railroads set up complex financing arrangements for expansion and nefarious rate schemes to pad their pockets. Oh, by the way, they needed right of ways (Rows) to do their business. History does repeat itself.

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on March 9, 2016 at 3:45am

INVICTUS,

      I know you have suffered at the hands of Chesapeake.

Have faith that legal actions will soon right this wrong against you, and the Citizens of Ohio as well as PA & WV.

Ohio landowners are now paying Chesapeake due to an error within CEMI Chesapeake's own marketing company. This may be the straw that breaks the camel's back. Having only 2.5 acres under production, allows me recognize the theft in an objective way and express myself without the anger that others feel over a huge loss.

I would ask all who have been victimized by Chesapeake to let the Authorities act on the truth that Chesapeake has never paid a fair royalty and is in violation of Ohio's RICO Statute, as well as laws of PA and WV.

Any Citizen that acts outside the law will become a criminal. Lets use the laws of our states to file indictments on those who have defrauded Citizens and Landowners of each shale play state of the Bright Futures that were promised, in hopes of righting these wrongs and putting us on tract for a bright future.

We all know who the perpetrators are so I won't bother to list them.

Permalink Reply by Bluflame on March 9, 2016 at 12:16am
We are leased with CHK, and I had a number of encounters with Aubrey. I established an e-mail dialogue with him that I originally thought was handled through an assistant. Later, several events occurred that convinced me he was the communicator.
I had a high regard for him despite his transgressions. On one occasion, I passed along praise for a land department employee well down the CHK food chain. The employee told me the following day he'd had a phone call from both Aubrey and their COO praising his work. I was impressed. That sort of personal touch is rare in big companies like CHK.
Aubrey was a larger-than-life character, without whom we might still be sitting on our shale assets.
BluFlame
Permalink Reply by Barry D on March 8, 2016 at 5:08pm

Keith,

Another great piece.

After reading of his death the question I was left with was this - will the truth ever come out about Aubrey McClendon.

I hope so. He certainly changed the face of oil and gas development in this nation. The Utica and Marcellus development would not be the same without him. I'd like it all to be sorted out, the rumors sifted from the facts. An actual accounting of his life, good and bad.

Because there is no doubt that without him we might not even be having this discussion.

Permalink Reply by JWE on March 14, 2016 at 4:58am

Good Article....well written. As a risk taker, AMc  no doubt accumulated some baggage.  But he is a legend in his own time.

Permalink Reply by Ken Barton on March 14, 2016 at 5:20am

A excellent piece, Keith.  For all of the alleged transgressions of Mr. McClendon, his was the first company leasing in West Virginia to pay anything other than $50 per acre leasing bonuses in recent memory.  His efforts spurred the interest of a host of other companies, and that increased competition brought increased bonuses, royalties and other considerations.  Despite the crying and wringing of hands of the all of the detractors of Chesapeake, they would have nothing without his vision and courage in exploring the Marcellus.  My heart also goes out to his family and the our nation as a whole.  He, like countless others, made a bet that energy prices, especially natural gas, would steadily increase.  No one could have foreseen the veritable wreck of an economy that we now have in the U.S., or that competing oil-producing foreign nations would be allowed to manipulate prices.  He could not have foreseen that rogue criminals, such as ISIS, would seize oil fields and sell the product for pennies to finance their reign of terror.  He was an optimist, who could never believe that our country would allow the ruin of an entire industry.  He underestimate Barack Obama and the Democrats who oversaw this demolition.  The joke is on them, however, because soon you will see the big Democrat donor banks, fail miserably due to the loans made to oil and gas companies, who were expected to pay those loans with $100 a barrel oil and $10.00 mcf natural gas.  For the complainers and whiners, I can't wait to hear you yell when the next round of bailouts for the banks occurs, as you and I will again have to pay the bill, or push it down the road to our children, or their children..

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on March 14, 2016 at 11:25am

The whiners are the landowners who don't already have big money and influence. They like myself are now being paid nothing or in my case 50 cents an acre.

Chesapeake pretends to take care of those already rich, as those who live near the big landowners will attest to.

I'm betting those big land owners who have buddied up with Chesapeake are taking it on the chin right now and realize they are being stolen from but are afraid to speak out.

Take a look at Total E&P USA in Oklahoma, who is partnered with Chesapeake owning 25% of some of our wells. I sent them the Spreadsheet of theft from the Revenue department and told them I didn't know exactly how Chesapeake was stealing from them, but I was sure the evidence was in the spreadsheet.

It turns out Chesapeake was stealing the money paid to landowners by Total E&P, all of it. I have to wonder how Total E&P responded to that. Hopefully they took the evidence up with the US Department of Justice. 

With Chesapeake out of the way Total E&P takes over the wells, if the write up I saw was accurate. They will pay a fair royalty to landowners. They may be unaware of how domestic oil and gas companies have been treating landowners from the beginning of the first oil well drilled.

Did Al Capone get this much respect when he met his end? I bet he didn't.

I wouldn't be surprised if Aubrey ends up on the cover of the Enquirer or National Lampoon Magazine with an umbrella in his drink sitting on the beach, Down Under somewhere. He was in Australia you know. Another reason for Chesapeake Executives to be sweating their current actions against Ohio landowners. Someone may be "spilling the beans".

Permalink Reply by bo boboski on March 14, 2016 at 3:04pm

Maybe he IS on  beach! Cars can be remotely operated. Rigged to explode.Dental records can be fudged. Medical examiners can be bought,Billionairs rarely kill themselves. jussayin

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