Michigan Firm Sues Chesapeake, Encana for Bid-Rigging

Drilling rigNatural gas producers Chesapeake Energy Corp. (NYSE: CHK) and Encana Corp. (NYSE: ECA) are the targets of a federal civil suit by Northstar Energy, a Michigan oil and gas field developer, for colluding to keep the price of leases low in the Utica-Collingwood shale play. Chesapeake and Encana have admitted to considering forming a joint venture in Michigan, but no deal was ever struck.

The alleged bid-rigging came to light last year following an investigation by Reuters. The news agency said today that Northstar is seeking triple damages from Chesapeake and Encana.

Emails between soon-to-be former Chesapeake CEO Aubrey McClendon and Encana executives made public by Reuters and Northstar are pretty damning. In one exchange, Chesapeake and Encana suggest that only one of the two companies bid in an auction against Northstar with the intent of keeping the lease prices down. Because Chesapeake was the only bidder in that auction, the lease acreage it acquired from Northstar cost it about 25% less than what Northstar claims was the market rate.

Reuters spoke to a former U.S. Justice Department antitrust attorney who said:

There is one world where you do not want to be an antitrust defendant. That is where there are really damning documents suggesting you engaged in restraint of trade. This is the world that Chesapeake and Encana find themselves in right now.

Encana's CEO retired unexpectedly in January, shortly before McClendon was shown the door at Chesapeake. Both companies say the departures are not related to the antitrust investigations.


Filed under: 24/7 Wall St. Wire, Commodities, Law, Oil & Gas Tagged: CHK, ECA
Read Full Story

Markets

DJIA 21,674.51 -76.22 -0.35%
NASDAQ 6,216.53 -5.39 -0.09%
S&P 500 2,425.55 -4.46 -0.18%
NIKKEI 225 19,393.13 -77.28 -0.40%
HANG SENG 27,154.68 107.11 0.40%
DAX 12,126.20 -38.99 -0.32%
USD (per EUR) 1.17 0.00 -0.08%
USD (per CHF) 0.97 0.00 0.15%
JPY (per USD) 109.09 -0.23 -0.21%
GBP (per USD) 1.29 0.00 0.00%

Can't get enough business news?

Sign up for Finance Report by AOL and get everything from retailer news to the latest IPOs delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.