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Encana to pay Michigan $5 million to end oil and gas lease probe

ANDREW HARRIS

CALGARY, Alberta (Bloomberg) -- Encana agreed to pay Michigan $5 mn and not to contest a charge it attempted to collude with Chesapeake Energy to rig a 2010 oil and gas lease auction.

Michigan Attorney General Bill Schuette filed criminal charges against the companies in March, accusing them of violating state antitrust laws. Chesapeake is contesting the allegations at a hearing that started on May 5, 2014, in Cheboygan, on the northern edge of Michigan’s lower peninsula.

Encana and Chesapeake were accused by Schuette of divvying up the counties in which each would seek resource exploration rights before a May 2010 auction, driving bid prices down from $1,510 per acre for that auction to $40 in October, Schuette said in stating the charges.

Both companies initially disputed the state’s claims they attempted to restrain trade and conspired to do so, the latter crime punishable by a fine of as much as $1 mn. Encana agreed to plead no contest to the attempt allegation, Schuette said.

Its $5 mn payment resolves a civil lawsuit by Schuette’s office unveiled on May 5.

The U.S. Justice Department previous week said it was closing its investigation into the possibility of anticompetitive practices by Chesapeake and Encana involving the purchase or leasing of oil and gas development rights in Michigan.

“Allegations of bid-rigging are taken seriously, and today’s settlement with Encana is a good result for taxpayers,” the attorney general said in a statement reporting the accord.

Michigan agreed to an 11-month delay in punishing Encana for the market manipulation attempt, the attorney general said. It will be dropped then if the company pays the civil settlement and comports with other terms of its agreements with the state.

The more serious conspiracy charge has been dismissed, according to the attorney general.

“This changes nothing for Chesapeake,” Chesapeake Energy said in a separate statement on May 5. “The Michigan state action has no merit and we are vigorously contesting it.”

Chesapeake, maintains it had no agreement with Encana regarding Michigan oil and gas lease bidding.

While Chesapeake has withdrawn from the state, Encana said on May 5 it has invested more than $230 mn there. The accord avoids “the need for costly and protracted litigation,” it said in a statement.

05/06/2014

 

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