That’s fancy talk for drilling more wells than ever across the thousands of acres of prime Marcellus Shale real estate that Chesapeake already has under lease. The epicenter, McClendon told Wall Street, would be the southwestern corner of Pennsylvania as well as adjacent regions in Ohio and West Virginia, where wells tend to pull up liquid gases like ethane that are now fetching a higher price.
And McClendon’s Hail Mary pass got an indirect boost this week from Gov. Corbett — whose career-making 2004 election as attorney general came after the energy tycoon wrote checks for $450,000 that were funneled into the Pennsylvanian’s campaign.
Corbett aides have been quietly pushing for a 5-cent-a-gallon tax credit for Pennsylvania manufacturers that use ethane. Although pitched as an incentive to ensure that Royal Dutch Shell builds a massive ethane-cracking plant in Beaver County — a $1.7 billion corporate giveaway that Corbett defended Tuesday — the program could also drive up demand for the liquid gas at the core of new business strategy of the governor’s former benefactor.
Environmentalists in the Keystone State — who’ve been arguing that the natural-gas drilling boom is linked to polluted wells, troubling odors and even people lighting their tap water on fire — want to know more specifics about Chesapeake’s drilling plans, but they are wary.
"Now we have some 4,000 to 6,000 wells in Pennsylvania, and they’re saying we could have as many as 50,000, so we’re in the infancy stage," said David Masur, the director of the Philadelphia-based PennEnvironment. "There’s already growing concern about air pollution, explosions, blowouts, livestock quarantines and people saying their health is negatively impacted — that is the track record. If Chesapeake is saying they’re going to do more, then assume more of the same."
The worst nightmare would be more incidents like a liquid-gas explosion in February 2011 at a Chesapeake site in Avella, Pa., south of Pittsburgh, that blew out five storage tanks, injured three workers and set a hillside on fire — causing residents to say that accident looked like a C-130 cargo plane crashing. State regulators fined Chesapeake $188,000.
Right now, environmental fines are the least of Chesapeake’s woes. Its bigger problems are twofold. For one thing, McClendon bet large on the future of natural gas. He heavily leveraged the firm with $13 billion in debt mainly to lease more land in the Marcellus Shale and other gas-producing regions — only to see prices collapse, in part because of so much fracking activity.
Then there is the matter of McClendon’s complicated personal financial entanglements with the firm; one analyst who helped uncover Enron’s shady dealings in the early 2000s told Forbes that it reminds him of that Texas-size scandal.
The complex conflict-of-interest accusations against Chesapeake’s founder and CEO — acquiring personal stakes in Chesapeake wells and then taking $1 billion in loans against those investments, and running an oil-and-gas hedge fund at the same time he’s also guiding a huge gas company — are the subject of an inquiry by the U.S. Securities and Exchange Commission. And now the firm’s sharply depressed stock price is aiding raider Icahn’s bid to seize control from McClendon.
Tuesday night, Chesapeake spokesman Matt Sheppard declined by email to comment beyond the firm’s earlier statements about liquid gas.
For Pennsylvanians, what matters most is how one billionaire’s financial meltdown might impact the state’s fragile environment.
Even before the announcement of the new push for liquid gases — which would include propane as well as ethane — state records showed that Chesapeake was the most active drilling company in Pennsylvania in 2011, well ahead of No. 2. Still, the company’s strategy before this year had been tilted heavily toward leasing large tracts of land, and now the focus will be even more on drilling.
John Hangar, the state Department of Environmental Protection commissioner during the Rendell administration, said Chesapeake’s plan could be a mixed blessing for Pennsylvania. He noted that parts of rural northeastern Pennsylvania, where the company has been drilling for conventional "dry" natural gas, could see less activity as the firm moves rigs to the southwest.
George Jugovic Jr., president and CEO of the environmental group PennFuture, said production and shipping of liquid gases tends to leave what he called "a larger footprint" of activities that pose environmental risks. He said he’s hopeful that Chesapeake has learned from its mistakes that caused the 2011 Avella fire and will use state-of-the-art techniques to capture air pollution from the new wells.
But PennEnvironment’s Masur is less optimistic — citing the industry’s legacy of violations since the fracking boom began here. And like many others, he’s dubious that McClendon’s latest big gamble will even work. "It’s hard to imagine him getting out of it," he said, "by drilling in Pennsylvania."
Contact Will Bunch at 215-854-2957 or email@example.com or follow on Twitter: @Will_Bunch. Read his blog, Attytood.com.