Business Week: Could Shale Gas Reignite the U.S. Economy?

In late 1998, Chesapeake Energy (CHK), an independent natural gas producer based in Oklahoma City, exemplified an industry in decline. The company’s stock price had fallen over two years from above $34 a share to 75¢. Its market value tumbled 93 percent, to $72 million. “They’re running up a down escalator,” Michael Spohn, an analyst at Petroleum Research Group, told Bloomberg News.

When Aubrey K. McClendon, Chesapeake’s chief executive officer and co-founder, announced he might sell the company, there was little interest. Falling gas prices had reduced the value of Chesapeake’s reserves from $2.1 billion to $661 million. “We’d had higher highs than others in the industry; then we had lower lows,” McClendon says with characteristic insouciance. “In this business, it’s good to have a short memory and thick skin.”

Good thing he didn’t sell. Thirteen years later, Chesapeake’s market value exceeds $18 billion. Its shares sell for about $28, up 8 percent this year. The company’s 120-acre neo-Georgian corporate campus bustles with construction crews building new office space. Its workforce has grown 30 percent in a year, to 12,200, and its recruiters have 700 jobs to fill. “The United States,” McClendon boasts, “has the capacity to become the Saudi Arabia of natural gas.”...

....On the economic potential of the nascent shale revolution, even some career environmentalists sound impressed, if cautious. “This thing is a potential game-changer,” says Fred Krupp, president of the New York-based Environmental Defense Fund (EDF). Shale production in the U.S. has increased from practically nothing in 2000 to more than 13 billion cubic feet per day, or about 30 percent of the country’s natural gas supply. That proportion is heading toward 50 percent in coming years. The U.S. passed Russia in 2009 to become the world’s largest producer of natural gas. An Energy Dept. advisory panel on which Krupp sits estimated in August that more than 200,000 jobs, both direct and indirect, “have been created over the last several years by the development of domestic production of shale gas.” At a moment of 9.1 percent unemployment nationally, additional decently paid work is just one potential benefit. “Natural gas burns cleaner than coal, emits less in the way of greenhouse gases, and avoids mercury and other pollutants from coal,” Krupp points out. “So this could be win-win, if—and this is a big ‘if’—we do it the right way.”...

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