Michigan AG reaches $5 million civil settlement with energy company

By Bryan Cohen | May 8, 2014


LANSING, Mich. (Legal Newsline) - Michigan Attorney General Bill Schuette announced a $5 million settlement on Monday with a Delaware-based energy company to resolve allegations it conspired with another company to avoid bidding wars in Michigan auctions and negotiations.

Encana Oil & Gas USA allegedly conspired with the Oklahoma-based Chesapeake Energy Corporation to avoid bidding wars against each other in Michigan private negotiations and public auctions for oil and gas leases. The alleged actions caused lease prices to drop.

Two years after Encana and Chesapeake purchased natural gas leases in Michigan in 2010, the Reuters news agency uncovered an alleged conspiracy between the two companies related to the leases. The alleged conspiracy may have been a key factor in the state-held lease price in Michigan dropping from $1,510 per acre in May 2010 to less than $40 an acre at the October 2010 auction.

Encana and Chesapeake were each criminally charged with one count of antitrust violations relating to a contract or conspiracy in restraint of commerce, a high court misdemeanor, and one count each of attempted antitrust violations, a misdemeanor.

Encana entered a no contest plea to the misdemeanor. The state agreed to an 11-month delayed sentence on the misdemeanor, while dismissing the high court misdemeanor charge. If Encana abides by the terms of the plea agreement, the criminal case will be dismissed after 11 months.

Under the terms of a civil settlement, Encana will pay $5 million to the state, $2.5 million of which will go to funds managed by the Michigan Department of Natural Resources. The rest will go to fund the state's antitrust enforcement activities.

"Allegations of bid-rigging are taken seriously, and today's settlement with Encana is a good result for taxpayers," Schuette said.

Encana also agreed to enter a four-year corporate integrity agreement with the state as part of a consent judgment. As part of the agreement, the company will provide increased transparency of future oil and gas lease bidding activity.

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