According to a report issued by the Oklahoma City Police Department on Monday, Aubrey McClendon, the fracking magnate and right-wing power broker, hit speeds of 89 miles per hour just before fatally crashing his SUV into a concrete bridge earlier this month.
McClendon, who once claimed that “I have a fossil fuel that makes other fossil fuels obsolete,” wasn’t wearing a seat belt, police said, and his Chevy Tahoe crossed the centerline more than 60 yards before the crash. Oklahoma City Police Chief Bill Citty said McClendon tapped his brakes several times but did not appear to have made an attempt to stop, hitting the bridge at about 78 mph.
The day before, McClendon had been indicted on federal antitrust charges, accused of conspiring to rig bids in drilling-lease auctions with a competitor while still working as CEO of Chesapeake Energy, the oil-and-gas giant he co-founded. He was forced out of Chesapeake in 2012 after Reuters published a series of articles on “The lavish and leveraged life of Aubrey McClendon,” exposing his decadent lifestyle and unsavory business practices.
“No individual is without flaws, but his impact on American energy will be long-lasting,” T. Boone Pickens, chairman of BP Capital, told Bloomberg Businessweek. “He was a major player in leading the stunning energy renaissance in America. He was charismatic and a true American entrepreneur.” Unlike Pickens, who is actually a self-made man (so far as anyone is), McClendon came from an Oil Family: His great uncle was Robert Kerr, the Oklahoma governor and senator who in 1929 co-founded the energy giant Kerr-McGee, which was eventually sold for $16 billion.
But it wasn’t just McClendon’s personal life that was leveraged: “To be able to borrow money for 10 years and ride out boom-and-bust cycles was almost as important an insight as horizontal drilling,” he said in 2012. “If something didn’t work for a little bit of time, we could regroup and find something that did work.” In fact, some have disputed that fracking was McClendon’s real business at all. From Rolling Stone:
Fracking, it turns out, is about producing cheap energy the same way the mortgage crisis was about helping realize the dreams of middle-class homeowners. For Chesapeake, the primary profit in fracking comes not from selling the gas itself, but from buying and flipping the land that contains the gas. The company is now the largest leaseholder in the United States, owning the drilling rights to some 15 million acres – an area more than twice the size of Maryland. McClendon has financed this land grab with junk bonds and complex partnerships and future production deals, creating a highly leveraged, deeply indebted company that has more in common with Enron than ExxonMobil. As McClendon put it in a conference call with Wall Street analysts a few years ago, “I can assure you that buying leases for x and selling them for 5x or 10x is a lot more profitable than trying to produce gas at $5 or $6 per million cubic feet.”
According to Arthur Berman, a respected energy consultant in Texas who has spent years studying the industry, Chesapeake and its lesser competitors resemble a Ponzi scheme, overhyping the promise of shale gas in an effort to recoup their huge investments in leases and drilling. When the wells don’t pay off, the firms wind up scrambling to mask their financial troubles with convoluted off-book accounting methods. “This is an industry that is caught in the grip of magical thinking,” Berman says. “In fact, when you look at the level of debt some of these companies are carrying, and the questionable value of their gas reserves, there is a lot in common with the subprime mortgage market just before it melted down.” Like generations of energy kingpins before him, it would seem, McClendon’s primary goal is not to solve America’s energy problems, but to build a pipeline directly from your wallet into his.
“He was a risk taker beyond most people’s comfort level,” former Chesapeake executive Mike Stice recently told Reuters. (“He loved navigating back roads,” his son, Will McClendon, said at the funeral. “He was definitely not a Google Maps kind of guy.”) But McClendon—who reportedly made a habit of driving around back roads in rural Oklahoma well over the speed limit, without wearing a seatbelt, and multitasking—did not really consider himself a risk taker.
“If I wanted to always do the most popular thing, then I’d be a follower,” he told Bloomberg Markets in 2012. “The funny thing is that I don’t consider myself a gambler at all. A gambler is somebody who just closes their eyes and rolls the dice. We don’t do that.” Still, by the time the federal indictment came down, his lavish life was in tatters. As Reuters reported on Sunday:
- McClendon no longer controlled the bulk of his most bankable venture, the one that helped make him a billionaire while he was CEO of Chesapeake: his stake in thousands of company oil and gas wells awarded to him during his tenure. Records show he was in the process of transferring the last of these interests to a company controlled by a close friend, Clayton Bennett of Dorchester Capital.
- His largest investor was halting all new business with him. The backer, Energy & Minerals Group of Houston, informed its investors just before his death that McClendon no longer held any leadership roles in related firms.
- McClendon had recently reached an undisclosed, tentative agreement to pay at least $3 million to Chesapeake to settle a legal dispute in which his former company had accused him of taking confidential data with him when he left in 2013 to set up his new company.
- By fighting the U.S. criminal indictment, he faced a potential public airing of his business tactics. McClendon’s own emails were expected to represent the bulk of the government’s evidence against him, say two people familiar with the matter.
The morning that McClendon died, the $17 billion Houston investment group, EMG, sent a letter to its investors informing them that the Oklahoma City executive had been cut off, effectively depriving McClendon of the resources he needed to do what he did—buy and sell land. “These are serious allegations that have been made against McClendon (and could have equally serious implications across the industry) and EMG takes this matter very seriously,” managing partner John Raymond wrote.
According to Reuters, however, it’s not clear whether McClendon had read the letter or was aware of its contents at the time of his death. For his part, Oklahoma Police Chief Citty would not speculate about whether McClendon committed suicide. “You don’t know, one, what was going on in his mind at that point in time. You don’t know what was going on in the cabin of the vehicle,” he said. “Anything is possible. You don’t rule it out, but we can’t say it is, either.”