Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Energy producer Chesapeake engaged in leasehold interest bid rigging conspiracy, suit says, (Apr 14, 2016)

By Linda O’Brien, J.D., LL.M.

Oil and natural gas producer Chesapeake Energy and competitor SandRidge Energy, Corporation conspired to rig bids and unlawfully depress the prices for the sale of mineral leasehold interests in order to ensure large profits for the companies, according to a complaint filed by a royalty owner in the federal district court in Oklahoma City (White v. Chesapeake Energy Corporation, April 12, 2016).

Chesapeake Energy Corporation and SandRidge Energy, Corp. are oil and natural gas exploration and production companies. Michelle White, a landowner in Woods County, Oklahoma, entered into a mineral lease with Chesapeake.

The complaint alleges that an oil or natural gas lease is an agreement between a property owner and an energy producer, under which the lessor landowner receives royalty payments in exchange for the lessee’s access to the minerals on the property. A leasehold interest in an oil and gas lease grants the lessee the right to develop the mineral interest to explore for and extract oil and natural gas for a specified time period. Producing properties are land with existing wells that are actively producing oil and natural gas.

Chesapeake and SandRidge were competitors for the acquisition of leasehold interests and producing properties in Anadarko Basin in northwest Oklahoma, north Texas, southeast Colorado, and Kansas. On March 1, 2016, a grand jury in Oklahoma City indicted Aubrey K. McClendon, former chairman and chief executive officer of Chesapeake, on charges of conspiring to rig bids for oil and natural gas leases in northwest Oklahoma. According to the indictment, McClendon and the former chief executive officer of SandRidge engaged in communications regarding certain leasehold interests and producing properties, agreed not to compete against one another for those interests, submitted bids to owners of those interests in accordance with the agreement, and acquired those interests at noncompetitive prices. The conspiracy allegedly began in December 2007 and continued until April 2013.

According to the complaint, Chesapeake publicly announced that the company was cooperating with a criminal antitrust investigation regarding its land leasing practices and received conditional leniency from the U.S. Department of Justice’s Antitrust Division.

The defendants agreed to, and did in fact, restrain trade by bid rigging and depressing the prices for leasehold interests and producing properties below competitive levels, the complaint alleges. The plaintiffs also assert that they had no actual or constructive knowledge of the conspiracy and could not have discovered its existence until March 1, 2016, when the indictment of McClendon became public.

The plaintiff asserts claims for conspiracy to rig bids and unlawfully depress prices in violation of Section 1 of the Sherman Act. The action seeks declaratory relief, treble damages, pre- and post-judgment interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 5:16-cv-00351-F.

Attorneys: Tara Tabatabaie (Sill Law Group, PLLC) and Eric Gibbs (Girard Gibbs LLP) for Michelle White.

Companies: Chesapeake Energy Corporation; Chesapeake Exploration, L.L.C.; SandRidge Energy, Corp.

News: Antitrust OklahomaNews