Chief Oil and Gas

Chief Oil and Gas is a Texas-based oil and gas company. It is involved in the controversial practice of fracking for methane gas in the Northeastern U.S. in the Marcellus Shale region. Chief owns more than 580,000 acres in the Appalachia region as of 2011. Though lauded as an environmentally-friendly alternative to coal, fracking for gas has been linked to depleting drinking water resources of local communities and polluting the wells of the people living around drill sites. According to a 2010 article in Vanity Fair, "as use of the technique (fracking) has spread, it has been followed by incidents of water contamination and environmental degradation, and even devastating health problems." And according to data released to the EPA, Halliburton, a major supplier of fracking fluid, admitted using 807,000 gallons of diesel-based chemicals in its fluids, in violation of an agreement drillers had with the EPA.

Executive Summary
Chief Oil and Gas is one of the biggest fracking companies in the Marcellus Shale region of the U.S. since it began drilling there in 2007. Chief started fracking in the Barnett Shale region in Texas and grew to be the second - biggest producer of methane gas by 2005. In 2006, most Texas leases and well sites were sold and emphasis was moved to the Marcellus Shale area. It now has approximately 100 wells in Pennsylvania and West Virginia. It has been reporting annual revenues of between $744 million and $1.32 billion a year over the past five years and its CEO is one of the wealthiest people in the U.S., with a net worth of $1.5 billion. Chief Oil and Gas is involved with health and environmental violations in the Marcellus Shale region. Its executives have also been very active in making partisan political donations, predominantly in favor of Republicans. This company, headquartered in Indiana, Pennsylvania, has invested significant funds in elections in Pennsylvania, a state with large shale deposits, and its CEO was the biggest spender in the election of the new governor of Pennsylvania, Tom Corbett.

Sale of Chief Oil and Gas Marcellus Assets
"EXCO Resources Inc., a Texas-based oil and gas company with its Marcellus Shale headquarters in Marshall, announced a $459.4 million purchase of Marcellus assets from Chief Oil & Gas LLC in December 2010." The deal includes 15 producing wells and 11 that are awaiting completion. EXCO is also gaining over 50,000 Marcellus acres in Pennsylvania. "Chief’s management, which said the company would still own 287,000 net acres in the shale play, said its staff in southwestern Pennsylvania will see no changes as a result of the deal. Chief employees and Chief offices in Wexford and Williamsport, Pennsylvania will not be affected by the sale. Chief’s midstream subsidiary, Chief Gathering, will also not be affected and will continue to develop its planned pipeline infrastructure in Pennsylvania. The proceeds from this sale will allow Chief to expand its development efforts in northeast and southwest Pennsylvania, West Virginia and Maryland."

Partisan Political Activity
Although Chief Oil and Gas has donated to campaigns on both sides of the aisle since it became a major player in methane gas drilling in 2005, the majority of its political donations has gone to pro-fracking Republicans. 2010 was the biggest year in gas and oil political contributions by corporations hoping to encourage lawmakers to continue with the lax restrictions surrounding methane gas drilling. Nowhere is this seen more than in Pennsylvania, where the majority of the Macellus Shale area lies.

According to MarcellusMoney.org, a project of Common Cause PA and Conservation Voters of Pennsylvania, during the 2010 campaign cycle, Chief Oil and Gas gave $66,850 to PA candidates, with $41,000 of that going to Governor Tom Corbett.

The Pennsylvania Political ContributionWeb site shows Chief CEO personally gave $100,000 to Corbett's campaign.

Corporate Political Action Committee
Rees-Jones Holdings LLC and its numerous subsidiaries, including Chief Oil and Gas, don't appear to have an official PAC. Trevor Rees-Jones has given the bulk of any company contributions.

In 2010, Open Secrets shows that Chief Oil & Gas gave $1,000,000 to American Crossroads, a right-wing organization advised by Karl Rove and former RNC chairman Ed Gillespie to support Republican candidates, formed in 2009. Chief was second on the list of biggest contributors to American Crossroads, after Public Storage Inc.

The Dallas Daily News reported a different number, saying Rees-Jones and his wife have given $3.5 million in the current election cycle to federal and state causes - all on the Republican side. "And that campaign-finance watchdogs say Rees-Jones wasn't on their radar before he donated $2 million this year (2010) to American Crossroads."

Searches done on Pennsylvania's Political Contribution site and West Virginia's Public Records site (the two Marcellus states Chief operates in), show Rees-Jones is using his Billionaire status to the fullest. In Pennsylvania, Rees-Jones gave $100,000. In West Virginia, Rees-Jones gave $188,811.

In 2008, he gave $10,000 to the Texas GOP and $28,500 to John McCain’s presidential campaign, after initially contributing to McCain's rival Mitt Romney. And since 2003, he has given $1,160,500 in campaign contributions.

Political Donations by Company Execs
Not much information is found on other executives other than Rees-Jones. The only other executive who showed up in searches was Terry Bossert, Vice President of Government Affairs. He gave $1,000 to Pennsylvania Republican Joseph Scarnati.

When doing political contribution searches for Chief, two variations of the name were used: "Chief Oil & Gas" and "Chief Oil and Gas LLC".

Lobbying
Lobbyist Pam Witmer with Bravo Group, represents Chief Oil and Gas and Chief Gathering LLC

Rees-Jones has given to numerous front groups and PACs who's objectives are to further the lenient laws surrounding fracking. American Crossroads and the Republican National Committee, as well as the Republican Congressional Campaign Committee, are the biggest benefactors of Chief and Rees-Jones.

Front Groups
Chief Oil and Gas is assumed to be a supporter of several special interest groups that push for expanded drilling rights and limited or no regulation of fracking. It is a member of the Marcellus Shale Coalition (Kristi Gittins, Vice President of Public Affairsis on the Executive Committee),

Health and Safety Violations Alleged
The State of Maryland recenlty declined to issue permits to Chief Oil & Gas and Samson Resources to drill in Garrett County, opting to wait for improved drilling technology to protect the environment, even though, according to a spokesman for the Maryland energy department.

2011: The Pennsylvania DEP fined Chief Gathering LLC, - a subsidiary of Chief Oil and Gas - $34,000 fine for illegally discharging hydrostatic testing water at a pipeline project in Penn Township, Lycoming County, in August. "DEP inspectors determined that 21,000 gallons of hydrostatic testing water remained in storage on-site, but that an additional 25,200 gallons had already been discharged to the Big Run watershed. None of the discharged water reached any nearby surface streams. The investigation revealed numerous other violations, including: Failure to minimize the flow rate from the discharge point and allowing; the formation of a 150-foot erosion channel; Failure to submit accurate, detailed Notice of Intent project information; Discharging hydrostatic test water with a total chlorine residual greater than 0.05 parts per million; Allowing an unknown industrial waste to co-mingle in five storage tanks with the hydrostatic test water, which was subsequently discharged; and A failure to monitor the discharge for the specified effluent parameters at the minimum frequency required."

2010: In June, an explosion at a Chief gas well in Marshall County, West Virginia sent seven injured workers to the hospital. Chief owned the well and AB Resources PA, LLC operated it. "Subsequent to the explosion, West Virginia DEP ordered AB Resources PA, LLC to stop all operations in the state and issued two notices of violations to the driller for improper casing of the well. WV DEP’s preliminary investigation into the incident indicated that conditions that led to the explosion may have been caused by the operator’s failure to follow the plan outlined in the permit. AB Resources was cited for failing to set casing at the permitted depth and for inaccurately reporting the coal seam depth in the permit."

2008: In September, Chief was reported to have paid a fine to the Susquehanna River Basin Commission of $250,000 for failing to comply with limits on water withdrawals used for drilling gas wells in the Basin.

A Search on the Pennsylvania DEP Web site showed no violations by Chief Oil & Gas from 2008-2011. Chief had 16 violations in 2011 as of February; 174 violations in 2010; 13 in 2009; 11 in 2008. Most of the violations were health and safety and environmental. The language used for the majority of the violations was: "Inadequate, insufficient and/or improperly installed cement"; "Failure to properly store, transport, process or dispose of a residual waste"; "Discharge of pollutional material to waters of the Commonwealth"; "Failure to minimize accelerated erosion, implementation of E & S plan and maintain E & S plan". The majority of the violations were in Lycoming, Bradford and Susquhenna Counties.

Lawsuits
2008: In October,135 local property owners asked a federal judge to declare leases for oil and methane gas rights on their properties "invalid and void" for allegedly not complying with the commonwealth's minimum royalty law. The lawsuit was filed in U.S. Middle District Court and lists plaintiffs with addresses spread all over Pennsylvania, from Forksville to Jersey Shore and Cogan Station to Bloomsburg. "The defendants are divided into two categories, identified as "leeses" and as 'overriding royalty interest holders.' The "leeses" list includes Kentucky-based Keaton Group and the Texas-based Chief Oil and Gas, Radler 2000 Limited Partnership, MK Resource Partners and eCORP Resource Partners." "The complaint also claims the leases violate the law by including deductions suggesting property owners "are not guaranteed at least a one-eighth royalty." No information has been found after 2008 about this case.

Revenue and Profits
Chief Oil and Gas is not a publicly-traded company. There is no financial information on its Web site, nor on Forbes, MarketWatch or Bloomberg BusinessWeek.

Although there are no public annual financial records, the various acquisitions of fracking holdings to competing energy companies gives a good idea of the success of Chief Oil and Gas. "A portion of Barnett Shale (Texas) assets were sold to Devon Energy and Crosstex Energy in 2006 for $2.6 billion cash. Rees-Jones reinvested in the Barnett, drilling on Ross Perot's land, and sold another chunk in 2008 to Quicksilver Resources for $1.3 billion (personally pocketed $400 million). He has reinvested cash in Pennsylvania's Marcellus shale, assembling 650,000 acres. In 2010, he sold the majority of the company's Marcellus Shale acres to EXCO for $459.4 million."

Executives and Annual Compensation

 * CEO and Founder Trevor Rees-Jones: Rees-Jones is said to have a net worth of over $3 billion.
 * Salaries of the executives of Rees-Jones' various subsidiaries, including Chief Oil and Gas, cannot be found.

Senior Executives

 * Trevor D. Rees-Jones: President and CEO - After practicing oil and gas reorganization law with Thompson & Knight, Rees-Jones entered the oil and gas business as an independent. From 1984-1993, Rees-Jones drilled as operator or participated as non-operator in the drilling of over 400 wells, mostly in Southwest and Central Texas. In 1994, he founded Chief Oil & Gas. He is the former President of The Dallas Petroleum Club and on the Board of Trustees at Dartmouth and Texas Christian University.
 * Antone V. (Tony) Carvalho III: Senior Vice President of Geology - Carvalho began consulting for Chief in 1999. Prior to joining Chief, he held various positions including Manager of Geology-Offshore, for the Production Division of Sun Oil Company where he was responsible for all geologic input to reserve development activity in the Gulf of Mexico, Offshore California, Alaska and the U.S. East Coast. He is a certified member of the American Association of Petroleum Geologists.
 * Glynne Mildren: Senior Vice President of Land - Mildren joined Chief in 2007, after eleven years as the principal at Mildren Energy Services, a full-service land brokerage firm. Mildren also held various land positions for Enserch Exploration, and was the Land Manager for Brigham Oil & Gas.
 * Lonnie T. Samford: Senior Vice President and CFO - Samford joined Chief in 2003. Prior to joining Chief, he was CFO of CII Carbon, LLC, a processor and marketer of petroleum coke, where he was responsible for energy sales as well as his financial and administrative responsibilities. Samford has worked for both private and public companies during his career. Samford is also an officer at Corpus Christi Hydrocarbons Company and at Pg&E Resources Company.
 * David Hundley: Senior Vice President of General Counsel - Prior to joining Chief in 2003, Hundley spent ten years in private practice and was a founding partner of the law firm of Haworth & Hundley. While in private practice, he concentrated on transactional and oil and gas related matters, representing primarily independent oil and gas operators, including Chief since its formation. Prior to practicing law, Hundley worked for Amoco Production Company and also for TXO Production Corporation.
 * James A. Scott: Senior Vice President of Midstream - Scott joined Chief in 2008. Most recently, Scott served as SVP of Gas Supply and Business Development with Regency Energy Partners and VP of Corporate Development with Crosstex Energy Services.
 * Kristi Gittins: Vice President of Industry and Public Affairs - Prior to joining Chief in 2008, Gittins spent eight years as a founding partner at Gittins & Granado, a public affairs and communications firm with a specialty in oil & gas. She spent the first 16 years of her career with JP Morgan Chase as Vice President of Communications and Brand Management.
 * Terry Bossert: Vice President of Government Affairs - Bossert joined Chief in 2010. Previously, he was at the law firm of Post & Schell where he was the chair of the Environmental Regulation and Litigation Group in the firm’s Harrisburg, PA office. He is a member of the Pennsylvania Climate Change Advisory Committee, having been appointed to that position by the Majority Leader of the Pennsylvania Senate.
 * Thornton Hardie III: President of Rees-Jones Holdings LLC - Hardie joined Chief in January 2007. He serves as president of Rees-Jones Holdings LLC, a holding company that owns the management companies of the Rees–Jones family business organizations. Prior to joining Chief, Hardie was a 30-year tax partner with Thompson & Knight LLP.

=Contact Information=

Corporate Headquarters 5956 Sherry Lane Suite 1500 Dallas, TX 75225 214.265.9590

Appalachia Regional Office 6051 Wallace Road Ext. Suite 300 Wexford, PA 15090 724.933.5511

Harrisburg Office 200 North 3rd St. Suite 4B Harrisburg, PA 17101 717.230.8121

Williamsport Field Office 700 Fairfield Road Montoursville, PA 17754 570.368.4490

Utah Regional Office 7730 S. Union Park Ave. Suite 210 Midvale, Utah 84047 801.676.8870

[http://www.chiefog.com/ Chief Oil and Gas Homepage

External Resources

 * Open Secrets
 * Campaign Money.com
 * Marcellus Shale.us
 * Common Cause
 * Propublica
 * West Virginia State Donor Lookup
 * Pennsylvania State Donor Lookup

Related SourceWatch Articles
Source Watch has a special clearinghouse on fracking, Fracking for Gas