Chesapeake Energy plans to file for bankruptcy, Reuters reports

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This story originally appeared on StateImpact Pennsylvania.

One of Pennsylvania’s largest and most controversial shale gas drillers, Chesapeake Energy, has taken steps to file for Chapter 11 bankruptcy, according to a Reuters report. Under the leadership of its high-spending, risk-taking CEO, Aubrey McClendon, the Oklahoma-based company led the land rush in northeast and north-central Pennsylvania that helped kick off the hydraulic fracturing boom about a decade ago.

“They would come into a community and rent and rent and rent,” said Bill Holland, who covers natural gas for S&P Global Market Intelligence.

In doing so, the company went into debt. And eventually, the fracking boom he helped create led to a glut of natural gas and a crash in prices. At the start of the Pennsylvania shale boom in 2009, the price of Marcellus shale gas was around $14/million British Thermal Unit, but by 2016 it had fallen to less than $2/MmBtu, and it remains in this fork today.

McClendon resigned from Chesapeake in 2013 and started another energy company. He died in March 2016 after his car slammed into an overpass in Oklahoma City a day after being charged with federal conspiracy.

In Pennsylvania, Chesapeake has faced allegations that it deceives the landowners out of royalty money. The company denied this. However, it is the target of a number of class action lawsuits, and in October the Pennsylvania Supreme Court agreed to take up a case launched by the state’s attorney general.

In May 2011, the Department of Environmental Protection fined the company approximately $1 million, the largest fine ever issued by the DEP. Chesapeake had polluted several drinking water wells in Bradford County.

The company currently holds 3,471 drilling licenses in the state but has only 993 active wells, according to DEP.

Although Chesapeake Energy is on shaky ground, other Pennsylvania shale producers have actually benefited from the current drop in oil prices and the COVID-19 crisis. Indeed, declines in oil production in places like Texas are also accompanied by declines in natural gas production.

Lower nationwide supply and an increase in natural gas-fired electricity means prices for Marcellus Shale producers are expected to start to recover by the end of this year.

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