Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Chesapeake Energy ordered to proceed to trial on big rigging charge in Michigan, (Jul 14, 2014)

By Linda O’Brien, J.D., LL.M.

Michigan Attorney General Bill Schuette announced on July 10 that a Cheboygan District Court judge has ordered Oklahoma-based Chesapeake Energy Corporation to proceed to trial on one count of violating Michigan antitrust law for its alleged role in bid-rigging at the state oil and gas lease auction. The antitrust case carries a maximum fine of $1 million for the corporation.

Schuette plans to appeal the judge’s ruling on two additional charges in Cheboygan County District Court. In her ruling, the court dismissed a second antitrust charge related to allegations the company conspired to bid-rig regarding individual landowners. The court also dismissed an alternative attempt charge regarding rigging bids to the private landowners. A trial date in Cheboygan District Court has not yet been set for Chesapeake to face the antitrust violation charges.

Public auctions of state-held oil and gas leases are held twice yearly, once in May and once in October, by the Michigan Department of Natural Resources (DNR). During the DNR's May 2010 auction, both Chesapeake and Encana purchased natural gas leases in Michigan. In 2012, a news agency uncovered a possible conspiracy between the two companies' executives who discussed an agreement following the May 2010 auction to allocate Michigan counties where each company would be an exclusive bidder for both public and private leases.

In the five month period following the state's May 2010 auction, this alleged conspiracy may have been a key driver behind the state-held land lease price in Michigan going from $1,510 per acre in May 2010 to less than $40 an acre at the October 2010 auction and for private leasing to cease.

Schuette’s Corporate Oversight Division filed charges against Chesapeake Energy Corporation and Encana Oil and Gas USA on March 5, 2014 for their alleged collaboration in 2010 to avoid bidding against each other in Michigan public auctions and private negotiations for oil and gas leases that caused prices to drop dramatically. The charges included one count of an antitrust violation and one count of an attempted antitrust violation.

In June 2014, Schuette charged a separate criminal case against Chesapeake, including felony charges of racketeering and fraud for allegedly victimizing private landowners across Northern Michigan. Schuette alleged that Chesapeake obtained uncompensated land options from these landowners by false pretenses and prevented competitors from leasing the land.

“Bid-rigging will not be tolerated in the Great Lakes State,” said Attorney General Schuette. “We are confident in our case, and will be prepared for trial.”

Companies: Chesapeake Energy Corp.; Encana Oil and Gas USA

News: Antitrust MichiganNews