LANSING - Michigan Attorney General Bill Schuette today announced that he has reached a $5 million civil settlement with Delaware-based energy company, Encana Oil & Gas USA, to resolve allegations the company conspired with Oklahoma-based Chesapeake Energy Corporation to avoid bidding wars against each other in Michigan public auctions and private negotiations for oil and gas leases that caused lease prices to plummet.
In addition to agreeing to the civil settlement, representatives for Encana today entered a no contest plea for the company before Judge Maria Barton in Cheboygan District Court to one count of criminal attempted antitrust violations, a misdemeanor.
"Allegations of bid-rigging are taken seriously, and today's settlement with Encana is a good result for taxpayers," said Schuette.
Criminal charges filed against Encana and the civil settlement announced today are the result of the Attorney General's investigation into questionable business practices surrounding Michigan oil and gas lease auctions.
Terms of Civil Settlement with Encana
The civil settlement with Encana filed today with Ingham County Circuit Court includes the following key terms:
No Contest Plea and Delayed Sentence
Today the company pleaded no contest to one count of attempted antitrust violations, a misdemeanor. The State agreed to an 11 month delayed sentence on the attempt charge, and the dismissal of the high court misdemeanor charge of antitrust violations relating to a contract or conspiracy. If Encana abides by the terms of the plea agreement, the criminal case will be dismissed after 11 months.
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, the Reuters news agency uncovered a possible conspiracy between the two companies' executives discussing an agreement following the May 2010 auction to split up 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 lease price in Michigan going from $1,510 per acre in May 2010 to less than $40 an acre at the October 2010 auction.
In light of the findings of the investigation, Encana and Chesapeake were each criminally charged for their alleged bid-rigging collaboration on March 5, 2014 in Cheboygan District Court with:
A criminal charge is merely an accusation, and the defendants are presumed innocent unless proven guilty.
Case Against Chesapeake Energy Remains Ongoing
Schuette's antitrust case against Chesapeake Energy remains ongoing in Cheboygan District Court. A preliminary examination began today and is expected to run through Thursday, May 8, 2014. Following the exam, Judge Maria Barton will determine whether there is enough evidence to proceed to trial. "Chesapeake Energy is entitled to a trial, and we are moving forward with our case in Cheboygan District Court," said Schuette.