Energy giants charged with colluding on land prices in Mich. fracking boom

Oil and gas giants Chesapeake Energy and Encana Corp. were charged on Wednesday with colluding to keep oil and gas lease prices artificially low in the state of Michigan, state Attorney General Bill Schuette said.

The announcement follows a lengthy investigation by Schuette's office into whether the firms — the biggest land leasers during a speculative oil and gas leasing boom in Michigan's Collingwood Shale region during 2010 — colluded to avoid prices from rising as they acquired leases from landowners.

Michigan began looking into the companies' activities in 2012 after a Reuters investigation found that executives from the two firms discussed proposals to divide bidding responsibilities in the state for nine private landowners and counties in Michigan.

"I will aggressively prosecute any company who conspires to break the law," Schuette said in a statement.

The companies were charged with one count each of antitrust violations "relating to a contract or conspiracy in restraint of commerce" and one count each of attempted antitrust violations.

The boards of Chesapeake and Encana previously conducted internal investigations and said they found no collusion. In earlier statements, the companies acknowledged holding talks about forming a joint venture in Michigan during 2010, but said no agreement was ever reached.

The charges are misdemeanors carrying penalties that can include prison terms and fines for individuals, and up to a $1 million fine for a corporation.

In emails reviewed by Reuters in its investigation, then–Chesapeake CEO Aubrey McClendon and other high-ranking Chesapeake and Encana executives discussed in 2010 how to keep lease prices on both state and private lands from rising by avoiding "bidding each other up."

The discussions occurred after a land lease frenzy pushed Michigan prices as high as $3,000 per acre in mid-2010. Lease prices in the state fell sharply later that year.

Market allocation agreements between competitors are illegal under the federal Sherman Antitrust Act and state laws.

Encana and Chesapeake executives had been hoping for a civil resolution of the matter.

As recently as Feb. 14, an attorney representing Encana told a judge in a civil antitrust-related case in Michigan that both Encana and Chesapeake were working toward a settlement with the state attorney general that could end his office's criminal investigation into the firms.

Encana and Chesapeake still face a separate federal investigation.

The U.S. Department of Justice has been looking into the possibility of anticompetitive practices in the purchase and lease of oil and gas properties in Michigan and elsewhere.

McClendon left Chesapeake last April and now runs a new company, American Energy Partners.

Chesapeake and Encana are expected to be arraigned on March 19 in a Michigan state court in Cheboygan County, the attorney general's office said.

Reuters