Chesapeake Energy Corp. and SandRidge Energy Inc. are accused in a $30 million lawsuit of conspiring to "depress the market" to purchase natural gas and oil leaseholds in Kansas.
Sixteen plaintiffs, led by Chisholm Partners LLC, accused the two Oklahoma City-based producers, SandRidge founder and former CEO Tom Ward and 50 "John Does" who helped negotiate the leases of illegally dividing up the Anadarko Basin properties in 2011 and 2012.
The lawsuit also accuses Chesapeake and SandRidge of agreeing to not compete against each other. The plaintiffs were members or successors in interest to Chisholm, which sold their membership stakes to a unit of Chesapeake in late 2011. Ward also co-founded Chesapeake with the late Aubrey McClendon, who was running Chesapeake at the time of the alleged illegal activity.
The lawsuit was filed earlier this month in U.S. District Court for the District of Kansas [Pacific Oil and Gas LLC, et al., v Chesapeake Energy Corp., et al., No. 2:16-cf-02498-JAR-GEB]. The allegations center around three big sales covering around 1,800 acres: $900,000 for leases in Harper and Sumner counties; $2.75 million for 5,500 acres in Sumner County; and $10.66 million for 21,320 acres in Kingman County.
"This action arises out of a conspiracy to depress the market for purchases of oil and natural gas leasehold interests" which began in December 2007 and continued until March 2012, the lawsuit said. "This conduct resulted in a criminal indictment" against McClendon for violating the Sherman Antitrust Act.
The U.S. Department of Justice handed down a single indictment in March against McClendon one day before he died in an automobile accident (see Shale Daily, March 2). The indictment alleged that while he was Chesapeake CEO, McClendon orchestrated a conspiracy between two oil and gas companies, later identified as SandRidge, not to bid against each other to purchases leaseholds. The charge against McClendon was dropped following his death, but the federal case has continued (see Shale Daily, March 4).
According to the lawsuit, Chisholm, beginning in 2010 acquired leases in Kansas and then entered into discussions with several companies, including a unit of Royal Dutch Shell plc, SandRidge and Chesapeake, about selling them.
"As negotiations progressed, the main competitors...became Chesapeake and SandRidge, whose competing bids caused the price to increase," the lawsuit said. "Then, without any forewarning or explanation, SandRidge suddenly ceased communication with Chisholm about its Kansas leasehold interests."
The leases then were sold to Chesapeake. In December 2011, Chesapeake purchased 100% of the Chisholm membership interests and subsequently sold them to SandRidge. The conspiracy "affected not only the interests and properties...purchased, but also the overall market," the plaintiffs claimed.