WHEELING - Chesapeake Energy CEO Aubrey McClendon said his company sees so much potential in West Virginia's Marcellus Shale natural gas reserves that it plans to spend as much as $50 billion in the state.
However, McClendon cited the Mountain State's court system and the lack of qualified workers as challenges that his Oklahoma City-based company faces as it expands its leasing, drilling and hydraulic fracturing operations.
McClendon spoke this week during the Independent Oil and Gas Association of West Virginia's winter meeting in Charleston. His company is rapidly growing its business in the Northern Panhandle but has also been questioned by both the U.S. Environmental Protection Agency and West Virginia Department of Environmental Protection regarding environmental concerns in Marshall and Wetzel counties.
In terms of Chesapeake's investment in West Virginia, McClendon said his company has spent $600 million on capital improvements throughout the state since 2008. Chesapeake plans to invest another $40 billion to $50 billion in the state over the next few decades, he noted.
The company has been drilling in Marshall and Wetzel counties for quite some time and is now grinding into Ohio County ground. Chesapeake has plans to drill in Brooke County, while leasing is ongoing in Hancock County.
Highlighted by the possible creation of 22,928 new West Virginia jobs this year, University of Wyoming professor Timothy J. Considine's report, "The Economic Impacts of the Marcellus Shale: Implications for New York, Pennsylvania and West Virginia," shows Marcellus activity boosted the Mountain State's economy by $1.3 billion in 2009. The research indicates drillers such as Chesapeake will pay as much as $221 million in state and local taxes this year, as well.
"The Marcellus (Shale) is going to be the key to our future in this basin," McClendon said.
However, McClendon noted the company is having a hard time finding skilled employees to work at its West Virginia operations. When one visits a Chesapeake drilling site in the local area, vehicle registerations from Texas, Oklahoma and Louisiana are at least as common as those from the Mountain State.
When asked about hiring a local work force, Chesapeake Director of Corporate Development Stacey Brodak last year said the company would hire local workers - once they receive proper training.
During his talk in Charleston this week, McClendon said about 30 percent of those applying for jobs with Chesapeake fail the firm's drug test.
McClendon also spoke on hydraulic fracturing, or fracking, - which calls for drillers to pump 5 million to 6 million gallons of water, sand and chemicals down into the wells at a pressure up to 10,000 pounds per square inch to release the natural gas.
Opponents claim fracking could lead to water contamination because of this procedure. Moreover, Tracy Bank, assistant professor of geology at the University of Buffalo, recently said, "Uranium is being mobilized by the fracking process."
However, industry leaders, such as members of the Marcellus Shale Coalition, say fracking is proven safe and poses no threat to drinking water sources. They believe this because of strong well casings used in the industry, as well as the fact that the fluid is pumped more than 1 mile under the ground.
"If you're against fracking," McClendon said, "you're against natural gas."
McClendon also criticized West Virginia's legal system, as he said, "There was a day I loved West Virginia - before I had an encounter with your court system."
In 2008, the state Supreme Court of Appeals refused to review a $404 million verdict in Roane County awarded to landowners in a royalties dispute. Chesapeake and co-defendant NiSource Inc. later settled the case by agreeing to pay $380 million to landowners.
In another legal matter, Chesapeake has an ongoing dispute with the EPA, as this federal organization can fine Chesapeake as much as $200,000 per day for allegedly unauthorized roadwork. This included the alleged removal of a waterfall to create a gravel road in the stream channel of Blake Fork, about 2.4 miles north of the intersection of W.Va. 89, near Proctor.
Each of the four orders in the case notes at the end that fines of up to $50,000 per day may be imposed if Chesapeake does not follow the instructions, hence the possibility of $200,000 in fines each day. The compliance orders compel Chesapeake to remove the fill and restore the streams and wetlands to "pre-disturbance conditions."