Blowout

by Rachel Maddow

  “Was there any country in the world whose record of civil rights was so horrible, or whose conduct was so directly a threat to global security or U.S. national security interests, that Exxon wouldn’t do business with it?” Rex was asked during an official U.S. Senate investigation. “The standard that is applied is, first, ‘Is it legal?’ ” he replied. “Does it violate any of the laws of the United States to conduct business with that particular country? Then, beyond that, it goes to the question of the country itself. Do they honor contract sanctity?” Contract sanctity, that’s the top. Below that, it’s all negotiable.

  Even when it wasn’t strictly legal to do business with a particular country or individual—like Igor Sechin, post-sanctions—there was always some wiggle room. There were always going to be lawyers willing to find, or create, an out (thinking of you, Skadden). Tillerson appeared to have an abiding faith that his attorneys could find a legally defensible path around American foreign policy and national security policy in the spring of 2014, because ExxonMobil signed eight separate agreements with Igor Sechin in the month after he hit the U.S. sanctions list. Exxon had decided, after much consultation with attorneys and compliance officers, that the company was barred from engaging with Sechin only where his “personal assets” were involved. And so it just kept doing business with him when it came to Rosneft—to the potential tune of tens and hundreds of billions of dollars. It chose to set aside the well-known fact that Sechin owned a nice little piece of Rosneft and enjoyed an annual compensation from the company of tens of millions of dollars.

  The last of the eight post-sanction agreements ExxonMobil signed with Sechin personally was inked on May 23, 2014, in St. Petersburg, Russia, at the same international economic forum where Rex had received his Order of Friendship medal from Putin a year earlier. Rex wasn’t there in St. Petersburg to sign the new papers with Sechin, but he made a point to send ExxonMobil’s head of exploration in his stead. This was in spite of requests from the Obama administration for businesses to steer clear of Putin’s favorite forum that year. Pretty much every industry complied, even freaking Morgan Stanley. The exception was oil and gas. “Western energy bosses saved the St. Petersburg International Economic Forum from complete failure by effectively standing by Russia,” explained a reporter from Reuters.

  Tillerson’s efforts on behalf of President Putin were not merely secondhand, or sotto voce. At a public forum that spring, Rex insisted rather churlishly that sanctions were rarely effective—because they were, as a rule, poorly implemented. Tillerson was apparently not at all concerned that he might be undermining a critical and very delicate U.S. foreign policy strategy, that threats of economic isolation from the U.S. government would not be quite so worrisome to Putin if the head of the biggest U.S. oil company was simultaneously jumping into his lap. He just kept jumping. Tillerson assured his shareholders at ExxonMobil’s annual meeting that the upcoming drilling campaign in the Russian Arctic was still a go. “There has been no impact on any of our business activities in Russia to this point,” he said. “Nor has there been any discernible impact on the relationship.” He even made a personal trip to Moscow a few weeks later, over the express objections of the U.S. National Security Council, to join Igor Sechin in proselytizing the great glorious goodness of the Exxon-Rosneft partnership.

  The thing was, Rex appeared to be comfortable in Russia. He was among friends who really got him, who understood what he was all about. “I’ve known [Putin] since 1999 and I have a very close relationship with him,” Tillerson said in a talk at his alma mater a few years later. “I don’t agree with everything Putin’s doing….But he understands that I’m a businessman. And I’ve invested a lot of money, our company has invested a lot of money, in Russia, very successfully….And he knows us being there has caused good things to happen for them. We’ve been a positive force.” For Russia.

  March 4, 2014, looked like one of those nights Aubrey McClendon dreamed of when he helped bring the NBA to Oklahoma City. The Thunder had, as per usual, filled every seat in its downtown venue—now known as Chesapeake Energy Arena, thank you very much. Aubrey agreed to pay more than $3 million a year for the naming rights back in 2011, but he figured it was worth the cost. Couldn’t beat it for advertising: “Chesapeake Energy” (with its enviro-friendly blue and green logo), in lights, on the hottest ticket in town. The Thunder’s success in the five years since the move had been beyond all expectations, and not only in attendance figures. The team was the pride of the plains. Oklahoma’s first-ever big-league professional franchise had willed its way into the playoffs in just its second season and had been back every year since. The team advanced all the way to the NBA Finals against King (LeBron) James and his Miami Heat in 2012. Top story on SportsCenter! Every night! The Thunder was back in the championship hunt in 2014, owners of the second-best record in the NBA. And on this particular night, with Kevin Durant on his way to a forty-two-point game and Russell Westbrook on his way to another triple-double, the Thunder held a comfortable sixteen-point halftime lead over the Philadelphia 76ers. Sure to extend this latest win streak. Thunder Up!

  McClendon and his wife were there at the game for the world to see, in their regular courtside seats as always, even though Aubrey’s reputation had taken some pretty serious hits in the past few years. His profligacy and his addiction to huge helpings of debt—which sounded nicer when you called it “leverage”—had finally caught up to him. And in a very public way. Activist shareholders, led by America’s most aggressive and venal corporate raider, Carl Icahn, had torpedoed Chesapeake’s founder and CEO, and it hadn’t been particularly difficult. Aubrey had loaded the tube for them. McClendon wasn’t a nutty, Teodorin Obiang–level spendthrift, but he had a hard time, for instance, explaining to his stockholders all that vacation travel he and his family (and their friends) had taken at Chesapeake’s expense, flying around the globe on the company’s private jets. Investors were not much impressed by the fact that he had paid some of the jet money back. They were also not happy that the company had paid Aubrey $12 million for his personal collection of antique maps. Or that while the price of natural gas hovered between $2 and $4 per BTU—way off that prerecession surge of $14 per BTU, and way off the price Chesapeake needed to turn an actual profit—Aubrey continued to insist that Chesapeake maintain its go-go drilling pace. With Aubrey at the helm, backed by his handpicked enablers on Chesapeake’s board of directors, the company had leaned hard into headwinds that turned out to be more like a monsoon.

  By the middle of 2012, Chesapeake stock had dipped below $15, which was only a quarter of its high-water mark. The company had spent $40 billion cash in two years alone, according to Forbes, and was swimming in red ink. Its bonds were rated junk, and the company had had to pay a massive vig for a multibillion-dollar emergency loan from the sharks at Goldman Sachs. It was starting to seem unavoidable. Aubrey had to go.

  On April Fools’ Day 2013, Aubrey McClendon was ushered off the corporate campus he had built in Oklahoma City. Right past the beautiful new Whole Foods store. He was no longer running Chesapeake Energy; in fact, he wasn’t much welcome anywhere at the company he had founded.

  But by the night of the Thunder’s righteous spanking of the 76ers in March 2014, Aubrey being Aubrey, he was back in the game—big-time. He had reportedly just raised more than $4 billion for a whole new oil and gas venture. This was no mean feat, given that his misdeeds at Chesapeake (real and alleged) still trailed him like unsightly toilet paper stuck to the heel of his tasseled loafer. The Department of Justice’s criminal investigation into McClendon’s alleged price-fixing in a Michigan land play was a poorly kept secret. ProPublica, meanwhile, was about to publish a lengthy investigative piece suggesting that Chesapeake—desperate for cash in Aubrey’s final months at the company—appeared to have started a scheme to chisel landowners in Pennsylvania out of due royalties. All Chesapeake had to do was inflate its supposed expenses, deduct those expenses f
rom the royalties it would otherwise pay to the landowners, and pocket the difference. Well, sure, when ProPublica put it that way, it sounded terrible.

  And on top of all that, that March evening, rolling toward Aubrey along the bright blue Chesapeake Arena baseline like an orange-tinted bowling ball was Harold Hamm, the new brightest star of Oklahoma’s legendary oil and gas firmament. The sixty-eight-year-old Hamm was founder and CEO of the Oklahoma City–based drilling powerhouse Continental Resources. Recently named one of Time magazine’s hundred most influential people in the world (a year before Igor Sechin made that list), Hamm had been the very visible and primary energy adviser to the Republican presidential nominee, Mitt Romney. And even if the 2012 race hadn’t worked out for his man Romney, a year and change after the election Hamm was still the most widely quoted, most widely sought-after, most visible spokesman for American energy. And if that wasn’t annoying enough, Harold Hamm was now definitely Oklahoma’s richest oilman, and by far the wealthiest person in the arena that night. He put Aubrey in the shade. Only twenty-three human beings in all of America topped Harold Hamm in 2014. Only sixty-seven on the entire planet, according to Forbes magazine’s list of the five hundred wealthiest people in the world—just out that week. And, honestly, Forbes might even have lowballed Hamm when it ranked him at just $14.6 billion. He was probably worth more like $17 billion.

  Right at Hamm’s elbow as he cut down the NBA baseline was the ubiquitous Forbes energy industry reporter Christopher Helman, who was working up a lengthy profile of Hamm. Aubrey knew the reporter on sight. He had been writing about Aubrey for years. Helman had recently written about Chesapeake’s improving prospects in the year since Aubrey had been deposed, now that the company was under new, stable, non-Aubrey leadership. And while Helman had lauded Aubrey’s “feverish” effort to “orchestrate a comeback for the ages,” he also took a serious shot at an oil and gas real estate fund Aubrey was going to manage. “As Forbes contributor Richard Finger and I have spelled out in detail,” Helman wrote, “an investor would have to be stupid to buy into his blind pool trust.” Kick a man while he’s down, why dontcha? And even after Helman had accepted Aubrey’s gift of a very pricey bottle of wine from his personal collection.

  But now Aubrey would have to smile and act nice, because there were news photographers milling around the Chesapeake Energy Arena baseline too, ready to memorialize a rare public meeting of Oklahoma City’s two most celebrated oil and gas titans.

  Hamm appeared to be in a buoyant mood as he approached. The $17 billion man had already knocked back two scotch whiskeys, according to Helman, was basking in the Thunder’s dominance of the Sixers, and was warmed by happy news he received earlier in the day: it was beginning to look as if he would only have to hand over a minuscule portion of his company stock in his impending divorce. His personal ownership interest in the oil company he had founded, Continental Resources, would still be up around 70 percent. This could fairly be counted a spectacular and lopsided victory in the financial bloodletting arena of Marital Combat.

  So Hamm had plenty to smile about when he reached the McClendons and offered a firm, roughneck-like hand. “McClendon seems surprised—the two aren’t friends,” Helman wrote of that moment. “When Hamm begins small-talking McClendon’s wife, McClendon himself leans over to a Forbes reporter in a fit of pique. ‘I don’t get it,’ he whispers. ‘You write all this bad stuff about me, while you hold up Harold Hamm as some paragon of virtue.’

  “Paragon of virtue?” Helman’s story continued. “Maybe, maybe not. But what’s clear is that Hamm made money the old-fashioned way: He stuck with what he knew—and innovated. McClendon bet $13 billion in borrowed money that he could buy millions of acres of trendy shale gas fields and flip them at top dollar, but he nearly bankrupted Chesapeake (and soon thereafter lost his job) when prices collapsed from the oversupply he helped create. Hamm plodded along with a buy-and-hold plan for less glamorous oil.”

  So it was Harold Hamm, and not Aubrey McClendon, who graced the cover of Forbes several weeks later, in front of a sky-blue background. The cover line was in red and white, to make sure nobody could miss the patriotic point: “The Man Fueling America’s Future.”

  * * *

  —

  Harold Hamm’s greatest asset, beyond his ginormous stake in Continental Resources and his nose for oil, turned out to be his own story. He wasn’t one of these smooth-talking corporate technocrats like the CEOs at ExxonMobil or Chevron or Shell or BP—the globe-trotting suits who were pulling down tens of millions a year for judiciously husbanding and growing Other People’s Money. And he wasn’t a financial whiz or a debt stuntman like the accounting minor Aubrey. Hamm was an independent, a wildcatter, with his own skin in the game. He knew the actual value of a dollar. “Fifteen hundred or two thousand dollars might not be a lot of money to you, Bubba,” the multibillionaire would say. “That’s a lot of money to me.” If he had a wine cellar like Aubrey McClendon’s—which he did not—he would not have been showboating it. When Hamm dined out, it was a hamburger at Sonic or steak and a double scotch at Applebee’s. He certainly wasn’t flying off to Bermuda in a company jet. His recreation was fishing at the Lake of the Ozarks or hunting pheasant up in North Dakota, where he could also keep close watch on his most crucial oil fields.

  The Legend of Harold Hamm was a tale Oklahomans could be proud of, though Hamm didn’t always see it that way. He’d only started telling people his whole history a few years earlier, when a consultant he’d brought on to help him lobby state and federal governments, Mike Cantrell, helped convince him that he should open up. It took some doing, too, because Hamm was not at ease talking about his past. Not sure he wanted to reveal the fact that he’d grown up the thirteenth child of sharecroppers who sometimes took young Harold out of grade school so he could pitch in picking cotton and tomatoes. “He’d never talked about growing up on a dirt floor,” Cantrell recalled. “He’d never talked about not having a new pair of shoes until his house burned down and the Red Cross bought him a new pair of tennis shoes. He’d never talked about that because he was embarrassed.” But once Hamm did start telling his story, he began to understand its power. It was a hell of a yarn, a spectacular tale of outsized success, a story that revealed the glories of the oil and gas industry—and of Oklahoma, and of America itself.

  Hamm was born in 1945 on a small red clay farm in Lexington, Oklahoma, and spent his childhood in a two-bedroom house with no electricity and no running water. When Harold was a junior in high school, his parents moved the family to Enid, Oklahoma, 130 miles north, and changed the course of his life. “Enid was a company town for Champlin Petroleum, and there was an oil boom going on,” Hamm wrote fifty years later. “The oil people there were different—charismatic, bigger than life.” By the time he graduated from high school, Harold Hamm was set on being an oilman. “It just grabbed my imagination,” he said, “that anybody could find this hidden, ancient wealth and it was yours.”

  He ran his own ad hoc apprenticeship in Enid, driving tank trucks to rig sites and hanging around to get impromptu tutorials from the well servicing pros and drilling foremen. In 1971, after five years of nosing around the business, twenty-five-year-old Hamm had a hunch about an area near a long-abandoned well—and took a flier. Cantrell still remembers the first time he heard Hamm tell the story, at a college up in North Dakota, almost forty years after the event. “One of the students asked him, tell us about how you got started,” Cantrell recalls. “Harold said, ‘Well, I was running a truck in Enid, Oklahoma. Bobtail truck. Cleaning tank bottles, which is the lowest of the lowest jobs, and I finally got myself enough money together to drill two wells. First one was a dry hole.’

  “Harold said, ‘I had enough money to do the second well. Second well came in at thirty barrels an hour.’ And then he said, ‘If I hadn’t a had enough money to drill two wells…’ and this is the key—he said, ‘Nobody woulda ever known my name.
’ ”

  For Harold Hamm, this represented his true origin story, as well as the razor’s edge that separated a shoeless sharecropper’s son from a young man with a shot at fortune. “Think about that,” Cantrell says. “I mean I always knew I was somebody. My parents raised me to feel like I could do anything. I never needed anybody to know my name. But it was important to him to be known as somebody. And by God, he’s done it.”

  From his storefront office in Enid, Hamm rode out the next thirty-five years of boom-bust cycles in the oil business, and always on his own hook. He never sold out to the majors and never ceded controlling interest in his business. He once dug seventeen dry holes in a row—“busted a pick”—but never lost faith in his ability to sniff out oil. “I’m a geologist,” Hamm liked to say, pronouncing it “joll-gest”—or “an explorationist,” which sounded like Indiana Jones with a land map and a divining rod. Hamm’s first big discovery was just twenty miles from his office door in Enid, where he tapped seventeen million barrels of oil in a prehistoric meteor crater nine thousand feet beneath the earth’s surface. That find made him a rich man, but it wasn’t enough for Hamm. Money wasn’t exactly his endgame, those closest to him suspected. What he really seemed to want was to be known as the man who found more oil than anybody else in America, ever. He had plenty of his own money to risk on the venture and made a big move in the first years of the twenty-first century.

  Hamm was convinced hydraulic fracking and horizontal drilling could do for oil what they were doing for gas. He bet the ranch on that conviction, up in the Bakken oil field in Montana and North Dakota, and it paid. Made him fabulously rich. Seventeen billion dollars rich! Rich enough to fork over almost a million dollars to Mitt Romney’s super PAC in 2012. And it made him famous. Glossy business magazine pinup famous! Romney himself held up Harold Hamm as the gold standard of American enterprise during the 2012 campaign. “This is how the founders envisioned America,” Romney said. “They didn’t want to have a country that was dominated by, driven by, guided by a government; instead they wanted to have a country that was driven by free people pursuing their dreams.”