[OKC] FW: CHK's response to 6.26.11 NYT article on shale gas

[Shauna Struby]

From: ok-sus-bounces at lists.oksustainability.org
[mailto:ok-sus-bounces at lists.oksustainability.org] On Behalf Of Tom McLain
Sent: Wednesday, June 29, 2011 4:53 PM
To: Sustainability in Oklahoma Issues
Subject: -- SPAM --[ok-sus] Fwd: CHK's response to 6.26.11 NYT article on
shale gas

 

FYI: in case you haven't seen this yet.

 

 

Tom McLain

 

www.cc-ok.org

 

405-823-7801

 

 







From: Aubrey McClendon
Sent: Sunday, June 26, 2011 8:37 PM
To: All Employees
Subject: FW: CHK's response to 6.26.11 NYT article on shale gas

Dear CHK Employees:  By now many of you may have read or heard about a story
in today's New York Times (NYT) that questioned the productive capacity and
economic quality of U.S. natural gas shale reserves, as well as energy
reserve accounting practices used by E&P companies, including Chesapeake.
The story is misleading, at best, and is the latest in a series of articles
produced by this publication that obviously have an anti-industry bias.  We
know for a fact that today's NYT story is the handiwork of the same group of
environmental activists who have been the driving force behind the NYT's
ongoing series of negative articles about the use of fracking and its
importance to the US natural gas supply growth revolution - which is
changing the future of our nation for the better in multiple areas.  It is
not clear to me exactly what these environmental activists are seeking to
offer as their alternative energy plan, but most that I have talked to
continue to naively presume that our great country need only rely on wind
and solar energy to meet our current and future energy needs. They always
seem to forget that wind and solar produce less than 2% of America
electricity today and are completely non-economic without ongoing government
and ratepayer subsidies.

During the past seven years, Chesapeake has helped create an extremely
disruptive and valuable technology in the form of shale gas, and now shale
oil is on the way, and hopefully it too will be as disruptive, and will lead
to lower oil prices, a stronger economy and fewer foreign military
entanglements.  Since the shale gas revolution and resulting confirmation of
enormous domestic gas reserves, there has been a relatively small group of
analysts and geologists who have doubted the future of shale gas.  Their
doubts have become very convenient to the environmental activists I
mentioned earlier. This particular NYT reporter has apparently sought out a
few of the doubters to fashion together a negative view of the U.S. natural
gas industry. We also believe certain media outlets, especially the once
venerable NYT, are being manipulated by those whose environmental or
economic interests are being threatened by abundant natural gas supplies. We
have seen for example today an email from a leader of a group called the
Environmental Working Group who claimed today's articles as this NYT
reporter's "second great story" (the first one declaring that produced water
disposal from shale gas wells was unsafe) and that "we've been working with
him for over 8 months. Much more to come. . ." 

But I wanted you to know that this reporter's claim of impending scarcity of
natural gas supply contradicts the facts and the scientific extrapolation of
those facts by the most sophisticated reservoir engineers and geoscientists
in the world. Not just at Chesapeake, but by experts at many of the world's
leading energy companies that have made multi-billion-dollar, long-term
investments in U.S. shale gas plays, with us and many other companies.
Notable examples of these companies, besides the leading independents such
as Chesapeake, Devon, Anadarko, EOG, EnCana, Talisman and others, include
these leading global energy giants:  Exxon, Shell, BP, Chevron, Conoco,
Statoil, BHP, Total, CNOOC, Marathon, BG, KNOC, Reliance, PetroChina,
Mitsui, Mitsubishi and ENI, among others.  Is it really possible that all of
these companies, with a combined market cap of almost $2 trillion, know less
about shale gas than a NYT reporter, a few environmental activists and a
handful of shale gas doubters? I seriously doubt it and I expect you do as
well. 

It is also ludicrous to allege that shale gas wells are underperforming as
we sit awash in natural gas, with natural gas prices less than half of what
they averaged in 2008.  I also note that CHK and other shale gas producers
are routinely beating our production forecasts - how can shale wells be
underperforming if shale gas companies are beating their production
forecasts and as US nat gas production has recently surged to new record
highs (in fact, in 2009, thanks to shale gas, the US passed Russia as the
largest natural gas producer in the world). Also, isn't it completely
illogical when this reporter argues that shale gas wells are
underperforming, yet acknowledges that gas prices are less than half the
price they were three years ago.  Today gas shale production represents 25%
of US natural gas production, if it were underperforming, how come gas
prices are so low when US gas demand is at a record high?

This reality of generations' worth of natural gas abundance is also
supported by virtually every credible third-party expert, such as the U.S.
Energy Information Administration, the Colorado School of Mines' Potential
Gas Committee, the Massachusetts Institute of Technology, Navigant
Consulting and others. You also need to know that all these facts and others
were provided to the newspaper by our media team well in advance of
publication and the NYT predictably choose to ignore them. 

By analyzing actual Chesapeake well performance, we know that the initial
productivity associated with a majority of our shale gas wells have been
steadily improving over the years in all of our gas shale plays, both in
initial production rates and the expected ultimate recoveries of natural
gas. We fully expect that the majority of these wells will be productive for
30-50 years, or even longer. In fact, the industry has vertical Devonian
Shale wells in Appalachia that have been producing natural gas for more than
100 years, and I believe it is quite likely many of our horizontal shale
wells will produce for a similar length of time. Further, there is no reason
to believe that shale gas wells will have shorter lives than our
conventional wells - some 8,000 of which are 30 years old or older. 

As far as accounting practices, we follow full-cost accounting rules to the
letter and routinely have our filings reviewed by the U.S. Securities and
Exchange Commission, as is typical for any public company of our size. The
same holds true for the rest of our industry - our reserve accounting
techniques are strong and have stood the test of time for decades.  In  2008
in fact, the SEC recognized that the prior rules regarding direct offset
wells were too restrictive, especially in shale plays where producing
horizontal wells typically prove up larger areas for development.  Once a
shale gas play becomes well-defined by drilling results, exploration can be
more accurately described as a manufacturing process because well outcomes
become very predictable, substantially reducing risk.  We believe that the
new modernized SEC rules very reasonably reflect the advancements in our
industry's ability to predictably produce oil and natural gas resources from
unconventional formations. 

In summary, you work for a great company and a great industry that is
changing our country (and someday our world), much for the better. We have
detractors out there, as any successful company or person has, but there are
other, more prestigious and less biased, publications that really do
understand the big picture as you can read today on myCHK.com and through
the links I have provided below.  Again, thank you for all your hard work in
building our company and in delivering to all Americans a brighter future
through more affordable energy, more American energy, more clean energy and
more job and wealth creation.  Sure, it's become a little noisier in the
media since we started moving some folks' cheese, but we will remain
committed to state of the industry performance in all that we do and we will
now re-double our efforts to educate as many people as possible so that they
may know the truth from us rather than distortions and dishonesty from
others. 

We hope that every Chesapeake employee can be part of our public education
outreach.  At more than 11,000 strong, we are an army of "factivists" -
people who have knowledge of the facts and the personal knowledge and
ability to spread them.  You can do this by talking to your families,
friends and others in your spheres of influence (schools, churches, civic
organizations, etc) about the kind of company you work for and the integrity
of what we do every day for our shareholders, our communities, our states,
our nation, our economy and our environment. You don't have to be an expert
to stand up and tell folks that Chesapeake is committed to doing what's
right - and that commitment is expressed every day by you and your
colleagues across the company. 

You can also get involved by joining Chesapeake Fed PAC, our political
action committee.  Our opponents are extremely well funded and organized. We
need to make sure our voice is heard in Washington, DC and with elected
officials who are making decisions that affect our industry, our company and
our ability to operate in the many states in which shale gas and oil have
been discovered. The Chesapeake Fed PAC is an important way to reach the
decision makers who can impact our business for better or worse.  Please
look out for more information on this effort soon inviting you to support
this important effort with a contribution. Thanks to each of you for making
Chesapeake a leader in all we do.    Aubrey

PS:  please see the links below for further information:

http://johnhanger.blogspot.com/2011/06/statement-about-todays-nyt-front-page
.html?spref=tw

http://finance.yahoo.com/news/Gushers-highlight-potential-apf-3807643486.htm
l?x=0

http://www.nohotair.co.uk/component/content/article/139-shale-gas/2020-new-y
ork-times-no-wiki-leaks-of-shale.html

http://online.wsj.com/article_email/SB10001424052702303936704576398462932810
874-lMyQjAxMTAxMDIwNjEyNDYyWj.html

PSS:  never forget a few other important facts:

1)     The US natural gas industry is providing a direct daily economic
stimulus to the economy of $250 million through lower gas prices from 2008.
The indirect economic effects are likely many times this amount.

2)     The US natural gas industry has created more than 500,000 jobs in the
past 7 years of the gas shale revolution and created tens of billions of $
in economic value at the same time, plus reduced the amount of coal and oil
burned in the US - I ask you, what value has the NYT or environmental
activists created during these same past seven years?  You either create
value in this world or you consume/destroy it - we are value creators,
please never forget that and know that you are on the right side of history,
they are not, so always stand tall and proud for CHK and our industry. 

PSSS:  feel free to email this message to whomever outside the company you
wish to read it. 

Aubrey K. McClendon
Chesapeake Energy Corporation
6100 North Western Avenue, 73118
Post Office Box 18496, 73154-0496
Oklahoma City, Oklahoma
Office: (405) 879-9226 <tel:%28405%29%20879-9226> 
E-mail:  aubrey.mcclendon at chk.com
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