At Chesapeake, McClendon operated more like a land speculator than an oilman. “Our approach is to go in early, quietly and big,” says Henry Hood, who directs Chesapeake’s land purchases. “We like to get our deals signed before anybody knows what we’re up to and tries to run up prices.” But buying up such huge swaths of land requires huge chunks of cash – and the money often comes not from gas production, but from selling off land or going into debt. After Chesapeake drills a few wells in a region and “proves up” the reserves, it hawks the leases to big oil and gas companies looking to get into the shale-gas game. In 2010, it pocketed $2.2 billion by selling land it bought in Texas for $2,000 an acre to one of China’s largest oil companies for $11,000 an acre. “That’s a five-to-one return on investment,” says Jeff Mobley, Chesapeake’s senior vice president for investor relations.
Of course, this is something West Virginians know a lot about. And this isn’t the first time the subject of a Marcellus gas bubble has been talked about. Last year, the New York Times had an article discussing the work of Deborah Rodgers, a member of the advisory committee of the Federal Reserve Bank of Dallas and one of the first people to question the ‘gas rush.’
On another topic, an Atlantic article and working paper by Richard Florida looks at wage and income inequality in American cities. West Virginia metros appear to be in the middle of the distribution. Rather interesting, Florida finds “that when it comes to the incidence and variation in income inequality across metros, factors like race, poverty and the decline of unions play a much larger role” than “skill-biased technical change and in the structural economic transformation of our economy.” Of course, these findings are nothing new. We have been illustrating this point in several of our reports, and it is a point that has been made repeatably by the fine folks at EPI and CEPR for years.
As always, Krugman writes on Mondays and Fridays. Here is his latest on the “States of Depressions” (thank God WV weathered the recession better than most states).
Lastly, the Pittsburgh Post Gazette started an informative and thought provoking series of articles entitled, “Poverty: Who is talking about it?” According yesterday’s article, one reason we do not talk about poverty is that ‘poor people don’t vote.’