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Chesapeake Energy founder Aubrey McClendon’s legacy of fracking has left the world worse off

US Outlook

Andrew Dewson
Saturday 05 March 2016 03:08 GMT
Aubrey McClendon: Chief Executive Officer, Chairman, and Co-founder of Chesapeake Energy Corporation
Aubrey McClendon: Chief Executive Officer, Chairman, and Co-founder of Chesapeake Energy Corporation (Reuters)

The car crash that killed the fossil fuels executive Aubrey McClendon on Wednesday is already providing America’s army of conspiracy theorists with plenty to sink their rotten teeth into. A vehicle belonging to Mr McClendon, the former chief executive of Chesapeake Energy, slammed into a highway bridge in Oklahoma City and burst into flames just hours after he was indicted by federal authorities for bid-fixing alleged to have taken place between 2007 and 2012.

According to the charges, Mr McClendon conspired with another executive on bids for drilling rights, deciding ahead of auctions who would win and then agreeing to sell the loser an interest. Reports suggest that the other executive involved is Tom Ward, formerly of SandRidge, who happens to be a co-founder of Chesapeake.

While turning Chesapeake Energy into a $37bn (£26bn) corporation, Mr McClendon was among the first oil exploration executives to use horizontal drilling, therefore turning fracking (a method that has been around since the 1930s) into an economically viable technique. So the accolades flooded in: a pioneer and a revolutionary, they said, which is probably not unfair. By most accounts, he was good to work for and was generous with his millions when it came to the private causes he supported.

Of course, there is a downside to fracking, just as there is a downside to most revolutions. Pumping billions of gallons of contaminated water into the Earth’s bedrock doesn’t appear to be harmless, and the exponential growth in fracking has also coincided with exponential growth in earthquakes.

The tinfoil hat-wearing crowd will doubtless link Mr McClendon’s death with the federal indictment, but the truth is that his career had been in freefall for years. Since he was ousted by Chesapeake in 2012, the company has suffered more than most from the sharp decline in the oil price and is rumoured to be on the verge of bankruptcy: its market capitalisation is less than $3bn.

The collapse in the price of oil threatens not only Chesapeake’s existence but the entire economic viability of the shale gas industry on which Mr McClendon built his career, rendering his subsequent foray into private equity equally non-viable. Reports surfaced on Thursday that his main financial backer, John Raymond of the private equity firm the Energy and Minerals Group, was preparing to sever ties with Mr McClendon by the end of this month.

For all of the money he donated to universities (he was a big donor to the already mega-wealthy Duke University in North Carolina) and the civic investment he made in his home town, Oklahoma City, Aubrey McClendon’s legacy is nothing if not complicated. It is hard to argue that the US isn’t better off having more energy independence, but it is also hard to argue that it (and the rest of the world) isn’t worse off for the environmental disaster that fracking undoubtedly is.

Having built an industry on the back of triple-digit per barrel oil, Mr McClendon had seen it and his career collapse almost overnight. The conspiracy theorists will not have to ponder his death for long to come to the only reasonable conclusion.

Let’s hope Nascar boss comes to regret backing Trump

Nascar motor racing doesn’t get on the sports radar much in Europe, for good reason. It’s very much the redneck Formula One and, for once, European snobbery is about right. Watching cars drive around in circles for hours on end is the US television equivalent of watching paint dry, even if it is a lot more fun to go and watch live than it is to watch on television.

You might have thought that an organisation like Nascar, one that is bankrolled almost entirely by corporate sponsorship, might consider it wise to leave political endorsements to, you know, politicians. And you would be correct. But Nascar isn’t like most sports organisations.

Firstly, its main audience isn’t the broad spectrum of American life that most sports attract. Even golf, the most patrician of mainstream sports, garners fans from across the economic spectrum. But watching racing cars go around in circles remains pretty much the reserve of poor country folk. Secondly, it is the only major American sport where Confederate flags are just as welcome as the Stars and Stripes.

Even taking that into consideration, the Nascar chief executive Brian France’s endorsement of Donald Trump for President is risky at best, crass at worst. And it is a piece of business, whether his claim of it being “personal” is the truth or not. Nascar is big business, just like the NFL or the Premier League.

One of Nascar’s biggest sponsors is Camping World, a business that is paying $35m for the pleasure of having its name splashed across events until 2022. Camping World’s chief executive, Lebanon-born Marcus Lemonis, is no fan of Mr Trump – in fact, he wrote an open letter to Nascar in June warning that he would not attend any Nascar events held at Mr Trump’s properties. If he has any guts, he will end his company’s association with Nascar now, as would the telecoms giant Sprint.

Sprint is a much bigger deal for Nascar, even if its sponsorship is due to end next year. Mr France’s decision to go public with his support of a presidential candidate who is openly hostile to Hispanics might be popular with Nascar fans, but it is hardly likely to endear him to Sprint’s current chief executive Marcelo Claure, born in Bolivia and raised partly in Guatemala.

Nascar is actively seeking a new main sponsor, and although some business leaders probably agree that Trump will make a fine President, going public with their support is a risk most are sensible enough not to take. The business lesson is that if you’re looking for a new sponsor, going public with your politics (whatever they are) probably isn’t the best way of finding one.

If there is any justice, Mr France’s decision will backfire spectacularly. Why would any business give Nascar the $1bn it is reported to be asking for in main sponsorship? Even if Trump wins, and he most definitely could, it might be too late for Nascar. And good riddance too.

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