SUMMITVILLE, Ohio -- Dave Johnson’s family business is one of the many vendors nationwide that sells Chesapeake Energy water for its fracking operations, one of the many Columbiana County landowners suing Chesapeake over its rights to claim mineral leases and possibly the only vendor and lawsuit plaintiff who has also served lunch to Chesapeake’s CEO and board of directors.
“They were an interesting bunch of people, very optimistic about what’s going to happen here,” says Johnson, the president and CEO of Summitville Tiles Inc. and the chairman of the Columbiana County Republican Party.
On Friday, Johnson and his brother, Bruce, greeted Aubrey McClendon, Chesapeake’s CEO, and the company’s board of directors when the four helicopters carrying them landed at the family’s Summitcrest Farms in Summitville.
Accompanied by security, the company’s leadership climbed into vehicles Chesapeake had waiting to transport them to the Johnsons’ landmark Spread Eagle Tavern in Hanoverton.
McClendon -- “a very outgoing, personable guy,” -- climbed into the Johnson’s car for the short ride to the family restaurant. “We talked a little bit about what all this activity is going to mean for the area,” Johnson tells The Business Journal. “They came here after a board meeting in West Virginia,” touring by helicopter Chesapeake drilling sites in West Virginia, Pennsylvania and Ohio.
“Aubrey said he’s intending to invest $3 billion per year in the Utica shale in Eastern Ohio, and that it may well be the largest Utica shale find in the country.
“He indicated they’re making an enormous investment here, they’re very optimistic from all the geological work they’ve done, the early drilling, that there is an enormous find here and it could go on for decades,” Johnson says.
“It’s not a flash in the pan.”
Johnson says he briefly mentioned the Summitcrest Inc. lawsuit against Chesapeake, but declined to offer details of that conversation. Chesapeake secured a drilling permit for 3,500 acres at the family farm, cancelled the permit in January then filed another application for the permit in February withthe Ohio Department of Natural Resources.
The lawsuit, Summitcrest Inc. vs. Eric Petroleum Corp., Chesapeake Exploration LLC and Ohio Buckeye Energy LLC is tentatively set for an October bench trial in Columbiana County Common Pleas Court. In the meantime, mediation is to begin, according to the court docket.
On Feb. 21, Chesapeake and its Ohio Buckeye Energy affiliate filed a motion for a partial summary judgment that would remove the related entities from the legal proceedings. Acreage at the Johnson farm in Franklin Township was leased in April 2004 to Burlington Inc. for oil and gas drilling; the mineral rights were flipped to Eric Petroleum, then to Chesapeake and its Buckeye Energy affiliate. The lawsuit claims the lease expired years ago when wells were not drilled and rent was not paid.
The luncheon at the Spread Eagle Tavern was arranged two weeks ago, Johnson says, and he agreed to keep the visit confidential. In response to a query from The Business Journal, a spokesman for the company said he could not provide any information about the top executives' visit.
The tavern was closed to the public for the luncheon, which featured a special menu to welcome the VIPs. Sixteen Chesapeake executives and directors were seated at one large table, Johnson says; the helicopter pilots and security guards were seated in a separate room.
Among the Chesapeake directors present were a former governor of Oklahoma, Frank Keating, and a former U.S. senator from Oklahoma (where the company is based), Don L. Nickles. Keating is now the president and CEO of the American Bankers Association in Washington, D.C.; Nickles operates a consulting firm in the nation’s capital.
The Spread Eagle Tavern is off U.S. Route 30, a few miles west of Chesapeake’s Ayerview Acres site in West Township, where the company is in the process of drilling its third well.
Chesapeake says it has paid more than $2 billion in leasing bonuses across eastern Ohio. The company operates 164 drilling rigs in the country, just eight of them in the Ohio’s Utica shale – so far, where it controls the rights to drill 1.35 million acres. By the end of the year, Chesapeake plans to have 20 rigs operating in Ohio, 30 by the end of 2014, officials say.
Unlike other shale plays, where natural gas is prevalent and drilling has been greatly scaled back in the wake of plummeting natural gas prices, in this part of Ohio it’s the wet gases that are so valuable. In Columbiana Carroll and Harrison counties, the big money is in oil “that’s worth eight times the value of natural gas,” Johnson says as he paraphrases remarks to him by McClendon.
Property owned by the Johnson family’s Summitville Tiles Co. includes a 65 million gallon lake drilled 60 years ago, which “is becoming one of Chesapeake’s primary sources of fracking water to frack these wells,” he notes. “We’re under contract not to reveal numbers but it’s millions of gallons of water. On some days there’s a steady stream of trucks 24/7 pulling water from our lake and taking it as far as Steubenville.”
Johnson, past president of the Ohio Manufacturers Association, says he briefly discussed with McClendon the closing of Ohio’s coal-fired electricity plants, which could increase his tile company’s energy bills by 120%. He says the Chesapeake CEO responded by assuring him that after a transition period, there will be enough “cleaner natural gas developed in this country to bring utility costs down for all manufacturers.”
Copyright 2012 The Business Journal, Youngstown, Ohio.