One of Pennsylvania’s largest and most controversial shale gas drillers, Chesapeake Energy, has taken steps toward filing for Chapter 11 bankruptcy, according to a Reuters report.
Under the direction of its high-spending, risk-taking CEO, Aubrey McClendon, the Oklahoma-based company led the land rush into northeast and north central Pennsylvania that helped kick off the fracking boom about a decade ago.
“They would come into a community and lease and lease and lease,” said Bill Holland, who covers natural gas for S&P Global Market Intelligence.
By doing so, the company took on debt. And eventually, the fracking boom it helped create led to a glut of natural gas, and prices tanked. At the beginning of Pennsylvania’s shale boom in 2009, the price of Marcellus Shale gas was about $14/million British thermal units, but by 2016 it had dropped to less than $2/MmBtu, and it remains in that range today.
McClendon resigned from Chesapeake in 2013 and started another energy company. He died in March 2016 after his car slammed into an overpass in Oklahoma City a day after he was indicted on federal conspiracy charges.
In Pennsylvania, Chesapeake has faced allegations that it cheats landowners out of royalty money. The company has denied that. However, it’s the target of a number of class-action lawsuits, and in October, the Pennsylvania Supreme Court agreed to take a case launched by the state Attorney General.
In May 2011, the Department of Environmental Protection fined the company about $1 million, at the time the largest fine issued by the DEP. Chesapeake had polluted several drinking wells in Bradford County.
The company holds 3,471 drilling permits in the state but has just 993 active wells, according to the DEP.
Though Chesapeake Energy is on shaky ground, other Pennsylvania shale producers have actually benefited from the current drop in oil prices and the COVID-19 crisis. That’s because drops in oil production in places like Texas are accompanied by drops in natural-gas production as well.
Less supply nationwide, and an increase in natural gas-generated electricity, means prices for Marcellus Shale producers are expected to start creeping back up by the end of this year.
Author: Fracking Industry isn’t as Financially Strong as it Seems
This story is produced in partnership with StateImpact Pennsylvania, a collaboration among The Allegheny Front, WPSU, WITF and WHYY to cover the commonwealth's energy economy.