Feds set precedent in mineral rights case

Michael P. Tremoglie Feb. 17, 2012, 8:41am

WASHINGTON (Legal Newsline) - The Department of Justice says three companies will pay a total of $550,000 for antitrust and False Claims Act violations in bidding for four natural gas leases.

The leases were sold at auction by the U.S. Department of Interior's Bureau of Land Management. The DOJ said that this is the first time they challenged an anticompetitive bidding agreement for mineral rights leases.

The DOJ filed both a civil antitrust complaint in U.S. District Court for the District of Colorado and a proposed settlement that would resolve the lawsuit. The settlement is pending court approval. The complaint alleges that the agreement between Gunnison Energy Corporation, SG Interests I Ltd. and SG Interests VII Ltd. violated Section 1 of the Sherman Act.

"Today's unprecedented antitrust enforcement action involving illegal bidding at Bureau of Land Management auctions, demonstrates the U.S. government's resolve to ensure there is vigorous competition for federal oil and gas rights," said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice's Antitrust Division.

"At a time of budgetary constraint, it is crucial that the federal government receive the most competitive prices for these important leases, which ultimately benefits American taxpayers."

According to the complaint, GEC and SGI were separately developing natural gas resources in Western Colorado. However, in 2005 the companies entered into a written agreement in which they arranged that only SGI would bid at the auctions and then assign an interest in the acquired leases to GEC.

"BLM relies on competition among bidders at onshore oil and gas auctions to ensure that the United States receives a fair and competitive price for its leases," BLM Director Bob Abbey said. "We are hopeful that the outcome of this case will deter anticompetitive and fraudulent conduct at BLM auctions."

The investigation was generated by a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act. This allows private parties to sue on behalf of the federal government. The whistleblower receives a percentage of any money recovered.

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