Chesapeake, Encana face state criminal antitrust hearing in Michigan

Mon May 5, 2014 6:00am EDT
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By Brian Grow

May 5 (Reuters) - Michigan state prosecutors plan to call a former Encana Corp. executive to testify on behalf of the state, at a multi-day hearing in their criminal antitrust case against oil and gas companies Chesapeake Energy Corp. and Encana Corp. that begins Monday.

Kurt Froistad, a former land acquisition specialist at Canadian energy giant Encana's U.S. unit until August 2011, was involved in decisions about how to lease land in Michigan during a prospective oil and gas boom there in 2010.

He exchanged emails with a counterpart at Chesapeake about dividing up bidding responsibilities between the two companies in nine Michigan counties ahead of an October 2010 state land auction, according to documents previously reported by Reuters.

In March, Michigan's attorney general, Bill Schuette, alleged Oklahoma City-based Chesapeake, the second-largest natural gas producer in the United States, and Encana, based in Calgary, colluded to keep oil and gas lease prices artificially low in Michigan during an oil and gas rush in its Collingwood Shale region in 2010.

The companies were charged with one count each of antitrust violations "relating to a contract or conspiracy in restraint of commerce," and one count each of attempted antitrust violations.

At Monday's probable cause hearing in Michigan district court in Cheboygan, state prosecutors will present evidence supporting the charges. If the court finds sufficient probable cause, the case will move to trial.

Chesapeake and Encana both plead not guilty in March and said they would fight the claims. The boards of both companies previously conducted internal investigations and said they found no collusion. The companies have acknowledged holding talks about forming a joint venture in Michigan during 2010, but said no agreement was ever reached.

Michigan's criminal investigation began in 2012 after a Reuters report found that top executives from Chesapeake and Encana discussed dividing up bidding responsibilities involving nine private landowners and nine counties in the state. Chesapeake and Encana were the biggest leasers of land during Michigan's short-lived leasing boom in 2010.   Continued...