Energy giant faces criminal trial on bid-rigging in Michigan lease sale

Jul 14, 2014

Credit World Resources Institute

You might recall that earlier this year Michigan’s attorney general filed charges against two energy giants.

Encana Oil and Gas USA and Chesapeake Energy were accused of colluding to lower the price of land leases for oil and gas exploration.

Last Friday, a Michigan Cheboygan County District Court judge ruled that Chesapeake Energy Corp must face a criminal trial, citing evidence of a conspiracy between the companies.

Reuters quoted Judge Maria Barton of Michigan’s Cheboygan County District Court:

"The direct and circumstantial evidence established that the parties did in fact strike an agreement to bid-rig the State sale." 

Part of that evidence could have come from Encana Oil. That company struck a plea deal with the State of Michigan in exchange for its help in Michigan's anti-trust case Chesapeake Energy. Encana also agreed to pay a $5 million fine.

This past May, MPRN's Rick Pluta reported:

 If Encana lives up to its end of the bargain, the state will drop other criminal charges at a sentencing hearing in 11 months.

Chesapeake Energy is the nation’s second-largest producer of natural gas.

Back in March, Lindsey Smith of Michigan Radio reported how the alleged conspiracy happened, citing a story that Reuters broke a couple of years ago:

Reuters says the emails show executives at the gas companies may have decided to play nice, “smoke the peace pipe” and split up which areas they wanted to lease ahead of the next public auction in Michigan. That way they wouldn’t go into that bidding frenzy and drive up the prices to that crazy high level again.

Smith's report said in another public auction just five months after the “bidding frenzy” where Chesapeake and Encana were the biggest leasers, the average price per acre went down by 95%.

If found guilty of bid-rigging, Chesapeake could face a fine up to $1 million, according to Reuters. No trial date has been set.

Michigan’s attorney general Bill Schuette also filed charges against the two companies over conspiracy and antitrust violations against private landowners in Michigan, but those charges were dismissed.

Schuette said he planned to appeal that decision.