Two of North America’s biggest natural gas corporations, Encana and Chesapeake Energy, are under scrutiny today after the Reuters news agency intercepted at least a dozen emails from 2010 between the competing companies that might show evidence of price-fixing in Michigan’s oil and gas lease market.
Reuters alleges that the emails suggest top company officials discussed a plan to divide up counties in Michigan auctioning "prime oil- and gas-acreage" in order to avoid a costly bidding competition.
Both companies deny the allegation, though they admit to discussing the possibility of entering into a joint venture in Michigan.
Yesterday, Reuters reported:
Shares of Chesapeake Energy Corp and Encana Corp tumbled Monday after a Reuters investigation showed that top executives of the two rivals plotted in 2010 to avoid bidding against each other in a state auction and in at least nine prospective deals with private land owners.
Following the report, the state of Michigan pledged to determine whether the two energy giants acted two years ago to suppress land prices there.
In Michigan, private land owners can sell the drilling rights on their properties, and the state’s Department of Natural Resources holds auctions to sell state-owned rights called "oil and gas leases" biannually.
Around 2008, this market gained national attention when the Utica and Collingwood Shale oil and natural gas fields drew interest as potential natural gas mother lodes in northeast Michigan. Companies looking to access the reserves thousands of feet underground through a new process called horizontal hydraulic fracturing, or fracking, started purchasing these rights. Bids for the drilling rights per acre soared to record highs in the May 2010 auction.