|
 Encana is hopeful that a settlement will be finalized within a few
weeks, said Gregory Curtner, a lawyer representing Encana in a
separate civil antitrust lawsuit, during a February 14 court
hearing.
"I can fill you in on the status of the Michigan Attorney General
investigation because I'm handling that," Curtner told Michigan
Western District Magistrate Judge Joseph Scoville.
"We are at a stage, as is Chesapeake, of hopefully reaching a civil
resolution which will close the criminal investigation," he said,
according to a transcript of the hearing. The comments had not been
previously reported.
Encana and Chesapeake have been the subject of state and U.S.
Department of Justice antitrust probes since 2012, when Reuters
published an investigation showing the companies' executives
exchanged emails to discuss how they could cooperate to suppress
lease prices in the state. (http://r.reuters.com/deg27v)
Encana and Chesapeake have denied any collusion.
The potential terms of the settlements remain unclear. Encana and
Chesapeake declined to comment. Curtner, a Michigan-based partner at
law firm Schiff Hardin, did not respond to requests for comment.
Legal experts said the oil and gas companies may be required to pay
fines to settle the probe, though the size of any monetary penalties
remain unclear.
One potential benchmark: in April 2013, a federal judge approved a
Justice Department settlement which levied $550,000 in fines against
two drilling companies - Gunnison Energy and SG Interests - related
to a 2005 agreement not to bid against each other for natural gas
leases on federal land in Colorado. The companies paid another
$451,000 in fines to settle violations of the federal False Claims
Act.
"There could be a civil fine," said Harry First, an antitrust expert
and law professor at New York University. Depending on the terms, a
deal that ends Michigan's criminal probe might be considered a
victory for the companies, he said.
"If the defendants have reason to believe the state may have a
strong criminal case soon, they would be inclined to come to a
settlement to avoid that," said First, a former antitrust chief at
the Office of New York's Attorney General.
Joy Yearout, a spokeswoman for Michigan Attorney General Bill
Schuette, said the investigation is ongoing and declined to offer
more details.
Calgary-based Encana and Oklahoma City-based Chesapeake were the top
lease-buyers in Michigan's Collingwood Shale during a speculative
land boom in 2010.
After a land lease frenzy pushed Michigan prices as high as $3,000
per acre in mid-2010, the executives discussed proposals to divide
bidding responsibilities for nine private landowners and counties in
Michigan, according to emails reviewed by Reuters.
In emails, then Chesapeake CEO Aubrey McClendon and other
high-ranking Chesapeake and Encana executives discussed how to keep
lease prices from rising by avoiding "bidding each other up."
Michigan land lease prices fell sharply following the email
exchanges, Reuters found.
The boards of both Chesapeake and Encana have conducted internal
investigations and said they found no wrongdoing. In earlier
statements, the companies have acknowledged holding talks about
forming a joint venture in Michigan during 2010, but said no
agreement was ever reached.
LOOMING DEADLINE
Michigan's Attorney General wants to resolve the matter before a
four-year criminal statute of limitations deadline expires this
spring or summer, Curtner said at the February 14 hearing.
[to top of second column] |
"I think we are close to a deal, but we don't have a deal yet,"
Curtner told Scoville. He said he was negotiating the terms with an
Assistant Attorney General in Michigan.
At least two large Michigan landowners are suing Encana, alleging
that its collusion with Chesapeake led them to lose money in their
attempts in 2010 to lease land to the companies. Curtner's briefing
to Judge Scoville came during a hearing in one of the civil cases.
In that case, McClendon and three other Chesapeake and Encana
executives asserted their Fifth Amendment right against
self-incrimination during depositions, citing Michigan's ongoing
criminal investigations, according to court documents and sources
familiar with the matter.
Encana and Chesapeake may still face risks from a federal
investigation into their land leasing activities.
"The Antitrust Division's investigation into the possibility of
anticompetitive practices in the purchase and lease of oil and gas
properties is still open," Washington-based Department of Justice
spokeswoman Gina Talamona said last Friday.
Michigan began its antitrust probe in 2012. Last November,
Chesapeake said in a regulatory filing that it had received a new
subpoena from Michigan, which is also investigating whether the
company violated the state's criminal solicitation law.
Market allocation agreements between competitors are illegal under
the Federal Sherman Antitrust Act and state laws. In criminal
solicitation, a person engages another to commit a crime. A
conviction can occur even if the crime never took place if the
intent was demonstrated.
Four years ago, Northern Michigan became a hot energy prospect after
new drilling suggested its Collingwood Shale held big oil and gas
reserves, prompting Encana and Chesapeake to snap up acreage.
In one email from June 2010, reviewed by Reuters, McClendon wrote to
a Chesapeake Vice President that it was time to "smoke a peace pipe"
with Encana "if we are bidding each other up." The Chesapeake VP
responded that he had contacted Encana "to discuss how they want to
handle the entities we are both working to avoid us bidding each
other up in the interim." McClendon replied: "Thanks."
In other emails later that year, the companies' executives discussed
a proposal for each to bid for leases in separate Michigan counties
at an upcoming state land auction.
McClendon, who departed Chesapeake last April and now runs a new
company, American Energy Partners, declined requests for comment.
(Reporting by Joshua Schneyer in New
York and Anna Driver in Houston; Editing by Terry Wade and Tiffany
Wu)
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