Subject: Land guy out of Dallas sent this to DOJ. This is the truth
To Whom it May Concern:
As someone who competed against both Chesapeake Energy Inc. and the unnamed 2nd company in the "bidding" and purchasing of oil and gas leasehold in Northwest Oklahoma from 2010-2012, I was astonished to read the frivolous drivel that your office produced and released as an indictment of Aubrey K. McClendon yesterday. As a matter of full disclosure, I have never met Mr. McClendon, worked for Chesapeake or any other entity run by Mr. McClendon, nor have I ever received any direct compensation or revenue from him or such entity. However, I am quite knowledgeable in the subject matter at hand, and do know your accusations to be absurdly false in their nature.
Chesapeake Energy Inc. with Mr. McClendon at the helm was the most notorious company in the industry for doing the exact opposite of what your misinformed indictment claimed. You could have legitimately interviewed any and every employee of an oil and gas company in the lower 48 that dealt with oil and gas leasing between 2007 & 2012 and every one of them would have told you Chesapeake and Mr. McClendon's problem was not price fixing, but over paying mineral owners. It appears you chose to believe the opinions of some politicians rather than the facts, and proceeded with your blinders on throughout the process.
In almost every basin that's ever produced commercial quantities of oil and gas in the lower 48 (and some that hadn't yet), Mr. McClendon led the charge to aggressively acquire leasehold for horizontal development in a manner in which he was more often than not, the sole reason for prices being driven up for mineral and land owners. Indicting this man for artificially depressing prices is akin to claiming the Cookie Monster has been on a diet all along.
Mr. McClendon was solely responsible for his company paying out tens of billions of dollars in windfall bonuses and royalties to mineral owners who historically had been low balled by the handful of incumbent mom and pop conventional vertical drillers that operated in each county, who had grown accustomed to paying between $5-100/acre and 1/8th royalties on 5 year terms for leases since the beginning of our industry. If a rumor started circulating that Chesapeake might be interested in purchasing leasehold in a county, lease prices often surged by 200-300% within weeks. I saw this first hand from speaking and negotiating with mineral owners in four counties in NW Louisiana, two counties in Southeast Colorado, three counties in Northwest Oklahoma and three counties in Southern Kansas over the last 9 years.
The conclusions reached by your ludicrous indictment proves that your entire office either lacks the most elementary understanding of the oil and gas industry and the legal/financial implications of an oil and gas lease, OR lacks the smallest morsel of moral aptitude and conscious. I speculate that it's a heavy dose of both, but I'm sure you were comforted by a nice pat on the back for falling in line and conducting this political witch hunt that was handed down to you by your superiors.
The most pressing issue at hand is that the specific claims in your release defy the reality of why a mineral owner would sign an oil and gas lease. First of all, there's no formal bidding process for acquiring and oil and gas lease from an individual mineral owner and therefore is absolutely never a legally binding timeline in which someone has to make a decision to sign a lease at certain prices or be forced to take the highest offer being bid that day, week, month year or decade. So your claims that somehow Mr. McClendon, who lead Chesapeake through the acquisition of over 14 million acres of leasehold in this time frame, was capable of micromanaging individual lease negotiations across an entire play that consisted of tens of thousands of leases being filed every year is beyond laughable. And to have orchestrated a conspiracy in which Chesapeake and another company (clearly Sandridge) would have been able to shelter these mineral owners from speaking to other companies in order to obtain lease prices for under what some of the other groups in the area were leasing for is borderline insane.
Which leads me to your next far fetched assumption, that over a 3 million acre play that spanned 7 counties in Oklahoma, there were only two companies capable of bidding on and creating a market for oil and gas leases. Maybe someday UNICEF will get into the business of making idiotic claims based off of moronic assumptions, but until then, I think the DOJ is my guy. A quick search of the smallest geographic county in the play in Northwest Oklahoma (Alfalfa), shows that no less than 74 separate entities purchased and filed leases in the county over the time frame that you've alleged (see attached). There were certainly more companies that offered bids to lease certain mineral owners, but who's offer was lower than this "artificially" low price you claim CHK induced on the market and therefore weren't able to purchase anything. I'll offer myself as an example as someone that bid on over 25 leases in Alfalfa but ultimately wasn't able to find anyone to lease to me at the terms I was offering. Their main reasoning? CHK and others had already offered them better terms that they were either going to accept or more commonly, they were going to hold out for better terms.
There are several more blaring examples of mental ineptitude that your office has put on display in this indictment that even a neophyte of our industry could highlight, but I don't have time for here.
You should be utterly ashamed at this sloppy politicized hit job on a creator of tens of thousands of jobs, a pillar of the Oklahoma City community and a thankless philanthropist. To anyone who cared about the facts, his only crime throughout his career was OVERPAYING mineral owners, in the hopes of being able to lead a team of scientists, engineers and land professionals in an effort to innovate new technology to efficiently provide our nations mineral owners (who you certainly have never met with from your offices in Chicago) with steady royalty income streams and the American public with cheap energy.
Your office has blood on your hands after today's horrific news.
Thank you for your time in reading this message if you've made it thus far, but certainly not for the disservice that you've done the justice system and Mr. McClendon's family.