Chesapeake Energy is one of the largest natural gas drillers operating in Pennsylvania. It owns about 200 producing wells here, but has also been fined more than $1 million for various violations.
In 2012, Chesapeake faced scrutiny for a controversial loan program allowing its CEO to borrow money against the company’s wells, and use that same funding to purchase additional stakes in those holdings.
Chesapeake is based in Oklahoma City, Oklahoma. On its website, the company boasts its “the second-largest producer of natural gas” and “most active driller of new wells” in the country. CEO Aubrey McClendon founded Chesapeake in 1989. Both McClendon and Chesapeake’s political action committee have financially supported Governor Tom Corbett. The PAC gave the Republican $12,000 during the 2010 gubernatorial campaign. McClendon donated $5,000 that year, and also provided Corbett with an indirect $450,000 contribution during his 2004 campaign for attorney general.
The company has had its share of problems. In May 2011, it was on the receiving end of the largest fine in Department of Environmental Protection history, for a February 2011 Washington County tank fire, and contaminating several drinking wells in Bradford County. Chesapeake voluntarily suspended hydraulic fracturing operations for three weeks in April and May 2011, after a Bradford County well spilled hundreds of thousands of gallons of fracking fluid. Pennsylvania Public Radio has reported Governor Corbett asked a Chesapeake executive to step down from his Marcellus Shale Advisory Commission, due to the company’s high-profile accidents.
Chesapeake has faced scrutiny for controversial loan programs. As StateImpact Pennsylvania reported in a post about the financial problems:
In March, the Pittsburgh Post-Gazette reported that Aubrey McClendon was taking out loans against the company’s West Virginia holdings. This month, Reuters expanded the story by reporting that this was happening in multiple states: McClendon has taken out more than $1 billion in loans, using Chesapeake’s land holdings as collateral. And as Reuters documented, he is using that money to expand his holdings in those very same wells. The circular loans — and the fact they weren’t disclosed to shareholders — raised questions about whether McClendon’s mixing of his personal and business dealings constitute a conflict of interest.
McClendon was able to purchase personal stakes in Chesapeake’s wells through an initiative called the “Founder Well Participation Program.” Chesapeake shut the program downshortly after it became public.