"Chesapeake took full advantage of this," he writes. "In a series of deals, it sold off the network of local pipelines it had built in Pennsylvania, Ohio, Louisiana, Texas and the Midwest to a newly formed company that had evolved out of Chesapeake itself, raising $4.76 billion in cash. In exchange, Chesapeake promised the new company, Access Midstream, that it would send much of the gas it discovered for at least the next decade through those pipes. Chesapeake pledged to pay Access enough in fees to repay the $5 billion plus a 15 percent return on its pipelines."
"That much profit was possible only if Access charged Chesapeake significantly more for its services," Lustgarten writes. "And that’s exactly what appears to have happened: While the precise details of Access’ pricing remains private, immediately after the transactions Access reported to the Securities and Exchange Commission that it collected more money to move each unit of gas, while Chesapeake reported that it also paid more to have that gas moved. Access said that gathering fees are its predominant source of income, and that Chesapeake accounts for 84 percent of the company’s business." (Read more)