Two Questions on the Legacy of Aubrey McClendon
The death last week of Oklahoma oilman Aubrey McClendon in a high-speed car crash only one day after his federal indictment on anti-trust charges seemed like the plot points of a television series trying to wrap up a season. But the indictment and the death were only the most talked about, flabbergasting two days in the life of a man whom the oil and gas industry could not stop talking about since his first big splash with Chesapeake Energy in the mid-1990s and his first large bust in 1999. As I write about in The Green and the Black, some refer to Aubrey as the Steve Jobs of the American shale revolution, the visionary who brought it all together. Some think of him as its P. T. Barnum, the character who started the circus. But everyone knows that he was the Beyoncé of the business, the only person whom everyone referred to by his first name — even people like me who never met him.
And as Aubrey’s family, community, friends, and colleagues mourn the loss of the man, observers discuss the legacy of a force of personality and will. Aubrey was considered a colorful but not central oilman in the early 2000s until his belief in the coming scarcity of natural gas led Chesapeake, the company he co-founded and led, to aggressively buy natural gas properties. That buying spree included gas reserves in shale rock then in the early days of being exploited using horizontal drilling and hydraulic fracturing — fracking — techniques. With head-spinning speed, Aubrey’s Chesapeake became the most aggressive pioneer in one shale gas basin after the next and the second largest producer of gas nationwide. And just as Aubrey’s and Chesapeake’s fortunes rose with the increased volume of shale gas, they fell because gas, as it turns out, wasn’t scarce at all: it was so abundant and cheap to extract from shale reservoirs that its price fell by two-thirds.
Aubrey’s legacy will not be measured by the corporate fate of Chesapeake or the companies he founded after he was forced out of Chesapeake in 2013. His legacy will not center on his charismatic deal-making, the ethical accusations against him, his many contributions to Oklahoma City, his financial innovations in attracting debt and foreign capital to the U.S. industry, or even the billions won and lost. His legacy will rest on the answer to two questions. Was Aubrey’s manic appetite, to seemingly want to lease all the best gas-bearing rock in the country, the determinative accelerant that turned fracking from a local application of old oilfield techniques into the most transformational event in the American oil and gas business — and maybe global oil and gas business — in forty years? And was Aubrey’s alliance with environmentalists to advocate for the use of natural gas at the expense of coal a crucial factor in allowing the United States to lead the world in absolute carbon emissions reduction — and be in a position to negotiate for similar reductions from other countries in the Paris Climate Accords. As reported n Russell Gold’s The Boom, from 2007 to 2011, Aubrey was the largest (if secret) donor to the Sierra Club.
The first question, like any Great Man Theory of Business, is difficult to answer. Yet it is clear that the hyperactive Aubrey clearly created hyperactivity around him. From 2004 to 2008, he was the lead bull in a stampede that turned shale development from a local phenomenon of small improvements in one North Texas play to a technological force that, as has long happened in other industries, used steady productivity improvements to drive monthly increases in volume and monthly decreases in costs.
The wildly cheaper and abundant natural gas that resulted bolstered Aubrey’s case against coal. In 2015, the United States consumed 28 percent less coal than a decade before. Former Sierra Club President Carl Pope told Gold, “I think Aubrey McClendon will undoubtedly turn out to be one of the major contributors to giving the world a shot at protecting the climate.”
Opponents of fracking will point to the all-too-neat symbolism of Aubrey’s fatal crash, in a speeding SUV in which he wasn’t wearing a seat belt. Aubrey, they will argue, was all too typical of an industry recklessly fracking before the local impacts are known, producing more oil and gas than the markets can absorb, producing more cheap oil and gas — and carbon emissions — than the world can afford.
I’m not surprised by a desire to find meaning in his death. But his final financial challenges, however they played into his death, however much they were self-inflicted, did not come about because an opera needs an ending. His financial struggles — and to the industry, they were the news rather than the indictment — resulted from mundane laws of economics. Technology can cause leaps in productivity. Supply can outstrip demand. Oversupply can crash prices. And good assets can lose value when better assets come to market.
Aubrey was the most glamorous figure of the contemporary American oil business: loved, questioned, but all the time noticed. America’s new bounty of gas and oil — for good and ill — cannot be separated from his life, however unquantifiable his legacy. For how do you measure how much he taught the once stagnant American onshore oil industry to believe again in technology, in limitlessness, in American possibility? How do you remember the man who may have fallen victim to too much of it all?