CHESAPEAKE SLASHING WV JOBS - McClendon Blaming Roane Verdict, Calling State "Judicial Hellhole"

(02/27/2009)

Chesapeake Energy Corp. announced yesterday it is eliminating 215 jobs in Charleston, blaming in part last year's $404 million jury verdict against the company in a Roane County royalties' case.

Chesapeake Energy Chief Executive Officer Aubrey McClendon has said that West Virginia deserved its reputation as a "judicial hellhole," a hostile place to do business.

Chesapeake lost the class-action suit after holders sued the company because the outfits deducted their production costs from royalty payments.

Chesapeake, the largest producer of natural gas in the US, is also suffering from a sharp decline in natural gas prices.

Its' financial problems are obviously linked to the nation's economic collapse, causing the company to slash spending and reduce its capital budget for 2009.

Some Chesapeake employees are moving to the company's corporate headquarters in Oklahoma City.

About 40 Chesapeake workers in the corporate development and human resource divisions will stay in Charleston for now.

"It's a broken promise to the people of West Virginia," said Kanawha County Commission President Kent Carper. "We need to start making those who make a fortune off our natural resources pay for it and stay here."

Martha Burger, Chesapeake's vice president of human resources, said the company will continue to employ about 400 workers in West Virginia after the transfers and layoffs.

She said field operations and drilling will not be affected by the reorganization.

Corporate executives have been outspoken about last year's multimillion-dollar jury verdict against Chesapeake and the state Supreme Court's refusal to hear the company's appeal.

After those decisions, Chesapeake stopped plans to build a $40 million regional headquarters in Charleston.

Chesapeake executive Scott Rotuck said "Had the Supreme Court heard our appeal, we probably would have built the building...and we'd likely still be here. You wouldn't walk away from a $40 million building."

In 2008, the WV Supreme Court voted 5-0 to deny a request for an appeal from Chesapeake and NiSource, upholding a Roane County jury verdict that required the gas companies to pay $404 million in royalties and punitive damages to landowners who were allegedly cheated.

More recently, Chesapeake and NiSource agreed to pay $380 million to the landowners and drop their appeals as part of the settlement.

Yesterday, McClendon continued to vent his anger with the state Supreme Court and Roane County Tawney case.

Chesapeake's stock has plunged from a high of $74 last summer to a five-year low of $9.84 in early December.

The company's stock was at $16.32 yesterday.

Gov. Joe Manchin called Chesapeake's decision "heartbreaking for those who will lose their jobs and for our entire state."