Judge rules Michigan bid-rigging case against Chesapeake Energy - Beckley, Bluefield & Lewisburg News, Weather, Sports

Judge rules Michigan bid-rigging case against Chesapeake Energy can go to trial

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A Michigan judge has ruled bid-rigging allegations against Oklahoma-based Chesapeake Energy Corp. can proceed to trial.

Michigan Attorney General Bill Schuette in March charged Chesapeake with violating antitrust laws, alleging the company conspired with another energy producer, Encana, to rig bids for oil and gas leases on Michigan’s public lands in 2010.

According to the complaint, the two companies divvied up the northern counties so they could avoid a bidding war in Michigan's twice-yearly public auctions as well as private negotiations for oil and gas leases, causing lease prices to plummet drastically over a five-month period in 2010. The alleged violations, revealed in a series of emails discussing an agreement to split up Michigan counties so each company would be an exclusive bidder for both public and private leases in specific areas, was uncovered by the Reuters news agency in 2012.

The state maintains the alleged conspiracy may have been a key driver behind the state-held lease price in Michigan going from $1,510 per acre in May 2010 to less than $40 an acre at the October 2010 auction.

Encana previously pleaded no contest to one count of criminal attempted antitrust violations, a misdemeanor, and agreed to pay a $5 million penalty, half of it applied to funds managed by the Department of Natural Resources that were affected by the bid-rigging and the remainder to be used to fund antitrust enforcement activities in Michigan.

“Bid-rigging will not be tolerated in the Great Lakes State,” Schuette said after Cheboygan District Court Judge Maria Barton’s ruling was released. “We are confident in our case, and will be prepared for trial.”

But Schuette plans to appeal rulings dismissing a second antitrust charge related to allegations the company conspired to bid-rigging individual landowners, as well as an alternative charge of attempted bid-rigging that would have come into play if the other charge was dismissed.

Chesapeake spokesman Gordon Pennoyer said only that the company "appreciates that the Court carefully reviewed the evidence and dismissed two of the three counts."

"We will continue to contest the remaining count which we also believe has no merit," he said.

A trial date in Cheboygan Circuit Court has not yet been set for Chesapeake to face the antitrust charge, which carries a maximum penalty of $1 million.

Chesapeake, meanwhile, was also charged with racketeering and fraud, both felonies, for allegedly victimizing private landowners across Northern Michigan, claiming the company directed its agents to encourage the property owners to lease their land to Chesapeake, preventing them from doing business with other companies only to terminate their contracts on a technicality once prices dropped.

Schuette said that once competition stopped, Chesapeake, through its leasing agents, allegedly canceled nearly all the leases, using mortgages as the purported basis for the cancellation, Schuette said.