A grand jury in the Department of Justice's Western District of Michigan is "conducting an investigation into possible violations of antitrust laws in connection with the purchase and lease of oil and gas rights," according to a regulatory filing by Chesapeake Energy Corp. The filing Thursday indicated that Chesapeake received a subpoena in late June from the Midwest Field Office antitrust division.
"The subpoena requires the company to produce certain documents before a grand jury in the Western District of Michigan, which is conducting an investigation into possible violations of antitrust laws in connection with the purchase and lease of oil and gas rights," the Securities and Exchange Form 10-Q filing indicated. "The company has also received demands for documents and information from state governmental agencies in connection with other investigations relating to the company's purchase and lease of oil and gas rights.
"Chesapeake intends to provide information in response to these investigations, and its board of directors is conducting an internal review of the matter."
According to the Reuters news service, Chesapeake worked with Encana Corp. to suppress land prices two years ago in some Michigan lease auctions (see Daily GPI, June 26).
The story prompted the Michigan Department of Natural Resources (DNR) to begin working with the state's Attorney General's Office to review the allegations. Encana Chairman David O'Brien at the time also said the Calgary company had launched an internal investigation.
Reuters, which obtained emails between Chesapeake officials, including CEO Aubrey McClendon, and Encana management, said executives discussed how to avoid bidding against each other in a 2010 auction held by the DNR.
An auction in May 2010 netted Michigan $178 million in bonus payments, which at the time exceeded projections and broke a record for previous auctions (see Daily GPI, May 10, 2010). According to the DNR, Chesapeake spent about $138 million at the auction through an intermediary, while Encana spent about $27 million -- together nearly $165 million of the $178 million bid -- for a total of 84,000 net acres of land.
Encana spokesman Jay Averill on Friday told NGI that the company had "no further comment other than what has previously been released in our June news release on the matter and what we indicated in our 2Q2012 conference call, which was that we have no update from the board nor have we been given a timeline for their investigation."
During the conference call in July to discuss 2Q2012 performance (see Daily GPI, July 26), Encana CEO Randy Eresman briefly addressed the "allegations of collusion between Encana and one of its peers in the acquisition of some of our Michigan land base." Because the internal investigation was ongoing, he said the company couldn't comment on the charges nor could he provide any additional news. "Encana takes compliance with the law very seriously, and we are committed to ethical conduct in all that we do," said Eresman at the time.
Encana today is one of the biggest players in the Collingwood/Utica Shale in Michigan with a leasehold of more than 250,000 net acres. The Collingwood is around 600 miles west-southwest of Quebec's St. Lawrence Lowlands and 400 miles west of Utica and Trenton-Black River exploration in the Finger Lakes region of the Appalachian basin around Elmira, NY.
Encana subsidiary Petoskey Exploration LLC of Denver first acquired lands in Michigan in 2008 and added to its position in subsequent state land sales, according to Michigan regulators. As of two years ago Petoskey, acting on behalf of Encana, had acquired seven-year leases in seven counties in the Lower Peninsula of Michigan, mostly in the counties of Cheboygan, Kalkaska and Missaukee.
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