Chesapeake takes parting shot
by admin on 27/02/09 at 1:46 pm
Charleston Daily Mail
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. He praised Gov. Joe Manchin and others for the support they have provided. 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.
By all accounts, McClendon and Manchin hit it off when McClendon came to Charleston in November 2005 for the big announcement about Chesapeake’s acquisition. Their friendship apparently blossomed the following month when Manchin visited McClendon in Oklahoma City.
Both men share an entrepreneurial spirit. McClendon and co-founder Tom Ward established Chesapeake in 1989 with 11 employees and $50,000. Manchin rose from a family-owned business in Farmington to become one of the most popular governors in state history.
McClendon said he liked Manchin’s “Open for Business” attitude. Manchin was thrilled by Chesapeake’s record of creating high-paying jobs and being involved in the Oklahoma communities where it has a presence.
The McClendon-Manchin relationship underwent its first stress test in March 2007 when Chesapeake financed a “Coal Is Filthy” advertising campaign in Texas. The campaign was designed to persuade Texas officials to favor natural gas over coal in their public policy decisions. The ads provoked criticism in the West Virginia coalfields, where mining is the lifeblood of the economy. Chesapeake repeatedly said the Texas ads were never aimed at West Virginia.
Manchin expressed disappointment that Chesapeake helped fund the campaign. The governor cited his effort to promote U.S. energy independence, which embraces both natural gas and coal as energy sources. “Pitting one against the other when the security of this nation is at risk, is wrong,” Manchin said. “I’m sorry that they feel that they have to do that.”
Manchin later revealed that after the campaign started, he phoned McClendon. “I called him and said, ‘Come on, we can’t have one kind of energy fighting another. We need every ounce of energy we can muster to defend ourselves.’ ”
McClendon dropped Chesapeake’s support of the “Coal is Filthy” campaign soon after Manchin’s call.
All still seemed well in August 2007, when Chesapeake broke ground at NorthGate Business Park for a $40 million, futuristic eastern regional headquarters.
“We’ve had a few bumps in the road,” McClendon acknowledged during the ceremony. “But our commitment to our employees and the governor’s commitment far outweigh any reservations. Charleston is exactly the right place for us.”
Earlier that week, Manchin had tried to calm McClendon’s worries by introducing industry-backed bill legislation to rewrite the state’s royalty law. The bill had failed to pass in a special legislative session but Manchin vowed to try again. “Businesses want continuity, they want to be treated fairly,” he said. “We’re going to put balance in this. It needs balanced out.”
Manchin said a grateful state was thankful to Chesapeake for its commitment to West Virginia. “I guarantee we won’t let you down,” he said.
CHARLESTON, W.Va. — 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. He praised Gov. Joe Manchin and others for the support they have provided. 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.
By all accounts, McClendon and Manchin hit it off when McClendon came to Charleston in November 2005 for the big announcement about Chesapeake’s acquisition. Their friendship apparently blossomed the following month when Manchin visited McClendon in Oklahoma City.
Both men share an entrepreneurial spirit. McClendon and co-founder Tom Ward established Chesapeake in 1989 with 11 employees and $50,000. Manchin rose from a family-owned business in Farmington to become one of the most popular governors in state history.
McClendon said he liked Manchin’s “Open for Business” attitude. Manchin was thrilled by Chesapeake’s record of creating high-paying jobs and being involved in the Oklahoma communities where it has a presence.
The McClendon-Manchin relationship underwent its first stress test in March 2007 when Chesapeake financed a “Coal Is Filthy” advertising campaign in Texas. The campaign was designed to persuade Texas officials to favor natural gas over coal in their public policy decisions. The ads provoked criticism in the West Virginia coalfields, where mining is the lifeblood of the economy. Chesapeake repeatedly said the Texas ads were never aimed at West Virginia.
Manchin expressed disappointment that Chesapeake helped fund the campaign. The governor cited his effort to promote U.S. energy independence, which embraces both natural gas and coal as energy sources. “Pitting one against the other when the security of this nation is at risk, is wrong,” Manchin said. “I’m sorry that they feel that they have to do that.”
Manchin later revealed that after the campaign started, he phoned McClendon. “I called him and said, ‘Come on, we can’t have one kind of energy fighting another. We need every ounce of energy we can muster to defend ourselves.’ ”
McClendon dropped Chesapeake’s support of the “Coal is Filthy” campaign soon after Manchin’s call.
All still seemed well in August 2007, when Chesapeake broke ground at NorthGate Business Park for a $40 million, futuristic eastern regional headquarters.
“We’ve had a few bumps in the road,” McClendon acknowledged during the ceremony. “But our commitment to our employees and the governor’s commitment far outweigh any reservations. Charleston is exactly the right place for us.”
Earlier that week, Manchin had tried to calm McClendon’s worries by introducing industry-backed bill legislation to rewrite the state’s royalty law. The bill had failed to pass in a special legislative session but Manchin vowed to try again. “Businesses want continuity, they want to be treated fairly,” he said. “We’re going to put balance in this. It needs balanced out.”
Manchin said a grateful state was thankful to Chesapeake for its commitment to West Virginia. “I guarantee we won’t let you down,” he said.
Manchin said he became governor to create change and he intended to do so. “How can we change the perception people have of us?” he asked. “We can’t unless we change our attitude.”
And then he spoke directly to McClendon.
“I’ve often said that whether or not you like it, every business has a partner – government,” Manchin said. “I contend West Virginia’s going to be the best partner you’ve ever had. That’s our goal, our commitment. That’s what I mean by ‘Open for Business.’
“Chesapeake has put the ball in our court,” he said. “We’ll make sure we work hard and give you an opportunity to make a market return on your investment.”
Manchin’s speech impressed McClendon. “I feel like I’ve just been at a revival,” McClendon said. “I don’t know your intent after your public service but it could be, ‘Preacher Joe.’ ”
McClendon apparently lost his faith in May 2008 when the West Virginia Supreme Court, 5-0, refused to hear Chesapeake’s appeal of the Roane County verdict. The company cited the decision when it announced it was scrapping its plans to build a regional headquarters.
In November Chesapeake and NiSource settled the Tawney case for $380 million. Of that amount, landowners will receive just over $253 million and lawyers will get more than $126 million.
In the statement issued Thursday, McClendon said, “The reduction in our employee base in West Virginia became inevitable when we decided last year not to build our $40 million regional headquarters office complex in Charleston following the West Virginia Supreme Court’s refusal to consider our appeal in the Tawney case.
“At that time, we realized that until West Virginia’s judicial system provides fair and unbiased access to its courts for everyone, a prudent company must be very cautious in committing further resources in the state. Even though the state Supreme Court’s decision was not the primary reason for the reorganization, it did play a significant role in our decision.”
Manchin’s prepared statement about Chesapeake’s downsizing did not mention the state Supreme Court’s decision. But others were quick to seize upon McClendon’s words.
West Virginia Citizens Against Lawsuit Abuse, a non-profit organization that advocates for tort reform, called Chesapeake’s announcement “a loud and clear reminder of the need to fix the state’s broken legal system.”
Steve Cohen, the group’s executive director, said in a prepared statement, “Many people in West Virginia have tried to dismiss the fact that our legal system serves as a deterrent to job growth in the state. Perhaps this unfortunate announcement will open their eyes and light that light bulb above their heads with the realization that a lawsuit-based economy is a sick economy that helps only a few greedy individuals. It’s time for meaningful legal reforms in our state.”
There is no intermediate appeals court in West Virginia. The state is one of only two that do not provide an automatic right of appeal. State Supreme Court justices alone decide whether to hear appeals.
Court Watch, the West Virginia Chamber of Commerce’s annual report card on business-related decisions by the state Supreme Court, last August blasted the court for refusing to hear appeals in the Tawney case.
Contact writer George Hohmann at busin…@dailymail.com or 304-348-4836.
