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Governor mistakes business move for price misbehavior

Bob Tippee
Editor

The governor of Connecticut has found yet another way for Americans to think self-destructively about energy.

Republican M. Jodi Rell has asked US congressional leaders to investigate Chesapeake Energy Corp. for "possible manipulation of the price of natural gas."

Earlier this month, with gas prices falling, Chesapeake said it would cut gross production by 200 MMcfd and trim its drilling program by yearend to 140-145 rigs from 155-160 (OGJ, Sept. 17, 2007, p. 100).

"This practice, if true, is an unconscionable fleecing of US citizens by natural gas suppliers who 'elect' to reduce production in order to drive up prices paid by their captive customers," Rell railed in a letter to Senate and House committees.

She should be cheering, not griping. Thanks to several years of active drilling, gas production this year is ahead of last year's level. Working gas in inventory is at the top of the 5-year range as the heating season approaches. Prices have subsided.

So Chesapeake made a business decision to ease an aggressive program. The affected production represents 0.3% of total US gas output, hardly enough to influence prices.

To Rell, it's "an outrage." She sounds like a Democrat.

Commendably, Chesapeake Chairman and Chief Executive Officer Aubrey McClendon called statements in the Rell rant "incorrect and reckless" and asked for an apology.

It's a sound request. Rell's accusations are as serious as they are groundless.

They cast Chesapeake, one of the country's busiest explorers for and producers of natural gas, in a sinister light it doesn't deserve. And they exploit a good-faith disclosure by the company for base political purposes.

In response to McClendon's call for an apology, the best Rell's press office could do was try to make a shin-kick sound like a handshake.

"I think we're going to have to agree to disagree," said spokesman Rich Harris.

At least Rell, who wants to replace 20% of the oil and gas used in Connecticut with alternative energy by 2020, acknowledges the link between production and prices. She should remember it the next time someone proposes federal oil and gas leasing off the East Coast.

(Online Sept. 21, 2007; author's e-mail: bobt@ogjonline.com)


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