The Marcellus shale natural gas extraction business has made the news in West Virginia lately. One company has decided not to build a regional corporate headquarters here after all, while local and state government are moving toward regulation of hydrofracture extraction's use of water resources.Chesapeake takes parting shot by George Hohmann Charleston Daily Mail Business Editor
Chesapeake Energy Corp. on Thursday not only announced it will downsize its Charleston office, it sent the state a stinging message: West Virginia's legal system hurts business. The company said the jobs of 215 of its Charleston-based employees will either be moved to Oklahoma City or eliminated in the reorganization.
Chesapeake co-founder and CEO Aubrey McClendon said in a prepared statement that downsizing the Charleston office from a regional corporate headquarters to a regional field office follows an operational model Chesapeake has used successfully elsewhere....Then he took a parting shot at West Virginia's legal system.
It was just four years ago that Chesapeake made its presence known in the Mountain State in a huge way. In 2005, it bought Columbia Natural Resources for $2.2 billion cash. The deal instantly made Oklahoma-based Chesapeake the largest natural gas exploration and production company in West Virginia.
Little noticed at the time was the fact that Chesapeake inherited a role as defendant in a class-action lawsuit known as the Tawney case. The lawsuit charged Columbia Natural Resources and NiSource Inc. with cheating landowners. In early 2007 a Roane County jury said the companies should pay $134.3 million in allegedly unpaid gas royalties to landowners plus $270 million in punitive damages....
In October, McClendon was forced to sell 33.4 million shares of Chesapeake - essentially all his stock in the company - to meet a margin call in a $570 million fire sale.
Chesapeake's Appalachian Basin operations stretch from the Finger Lakes region of western New York to central Alabama. Chesapeake is one of several oil and gas companies drilling in West Virginia's underground Marcellus Shale reserves.
Chesapeake's stock plunged from a high of $74 last summer to a five-year low of $9.84 in early December. The company's shares were trading at $16.32 Thursday....
Last week, a New York law firm filed a class-action lawsuit against Chesapeake, alleging that company officials violated federal securities laws by issuing false and misleading statements about Chesapeake's business activities and finances.
This cancellation of regional corporate headquarters does not mean that Chesapeake will give up its existing natural gas extraction sites, or quit buying ad developing leases in West Virginia, as some people around here have speculated. Their operation in Jane Lew, along Interstate 79, is hiring now. Here are a couple more analyses of the court verdict, the unsuccessful appeal, and its putative effect on the natural gas industry in West Virginia:
- Chesapeake slashes 215 jobs--Company blames natural gas slump, court decision
- Hoppy's Commentary on Chesapeake by Talkline Host Hoppy Kercheval
A "Marcellus Shale water pollution control" bill was introduced last week: West Viginia Legislature House Daily Journal for March 5, 2009:
H. B. 2960 - "A Bill to amend and reenact Â§22-11-4 of the Code of West Virginia, 1931, as amended, relating to water pollution control; and requiring the West Virginia Department of Environmental Protection to develop specific standards to control levels of total dissolved solids in the state's rivers and streams"; to the Committee on Government Organization then the Judiciary.
By Delegates Fleischauer, Manypenny, Marshall, Mahan, Doyle, Martin, Beach, Shook, Lawrence, Longstreth and Hatfield
Last month saw some local government action, described in this article: Morgantown City Council Passes Marcellus Shale Resolution by John Christensen, WVEC Lobbyist.
In order to express major concern over the possible hazards to water supplies due to drilling for natural gas in the Marcellus shale, the Morgantown City Council adopted a comprehensive resolution calling for the Legislature to adopt stricter standards and "emergency measures" to prevent water contamination resulting from that activity. The resolution also asks for the Legislature "to petition Congressional leaders to amend the (2004) federal Safe Drinking Water Act" which "exempts hazardous chemicals used in hydraulic fracturing--even diesel fuel--from limitation."
...The three page resolution addressed the hazards of the 300-odd chemical compounds used in the fracturing process developed by the Halliburton Corporation in which a pressurized brine solution is injected along with one to six million gallons of water for each well to explain their heightened response for safety....
WVEC Green Legislative Update tracks West Virginia state legislation on environmental and energy issues.