Chesapeake Energy's Snowballing PR Disaster

Chesapeake Energy Corp., the nation’s second-largest natural gas company after Exxon Mobil, has been caught up in controversy after controversy since 2009. Now the company is under fire again, this time because of a series of email exchanges between Chesapeake executives (including CEO Aubrey McClendon) and officials at EnCana Corp., Canada’s largest natural gas company, that indicate they attempted to suppress the price of land leases in Michigan. According to Pro Publica, the Justice Department is investigating whether any laws against price fixing have been violated. Should the Justice Department find cause to prosecute, this could prove much more serious than a PR issue. Under the Sherman Antitrust Act, price fixing is a felony and is punishable by fines of up to $100 million for companies, and $1 million for company officials. Neither McClendon nor Chesapeake itself are strangers to well-deserved bad press and legal issues. Last May, Pro Publica reported that it was issued the largest fine to an oil and gas company in the history of the state of Pennsylvania -- more than $1 million -- for contaminating water supplies in Bradford County. Additionally, this past April, McClendon was ousted as company chairman after it came to light that he had borrowed as much as $1.1 billion over the last three years by using his stake in Chesapeake's oil and natural gas wells as collateral, which put his interests at odds with those of the company’s shareholders. And if contaminated ground water, potential price fixing, and disgruntled shareholders weren't bad enough, these revelations about McClendon's personal financing have also triggered an SEC probe. It is also worth noting, while on the topic of the company's financial situation, that Chesapeake's stock has lost almost half its value over the past year. And just in case there was anyone left out there who didn't have less than warm-and-fuzzy feelings toward Chesapeake for any number of things, Bloomberg reported earlier this month that over its 23-year history, the company has paid a miniscule $53 million in income taxes on $5.5 billion in pretax profits, a rate of about one percent. Though this is perfectly legal because of a rule that allows U.S. oil and gas producers to postpone payments to offset the costs of well drilling, it's not going to help them shed their quickly-snowballing image as a greedy, dishonest corporation. While much of how this will play out has yet to be seen, a company would need a PR strategy of mythic proportions and representatives capable of Olympian-worthy gymnastics to even attempt to build a decent reputation in the face of such incessant controversy. And, at least recently, public responses and comments on recent events have fallen short. But the company can start by simply cutting the shenanigans and raising the level of transparency. To learn more about current and past issues regarding Chesapeake, click here.

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Chesapeake Energy's Snowballing PR Disaster

Elizabeth S. Mitchell

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Elizabeth S. Mitchell