May 5, 2014 / 6:23 PM / 4 years ago

REFILE-UPDATE 1-Encana settles Michigan antitrust case, Chesapeake fights on

(Fixes typo in second paragraph)

Cheboygan, Michigan, May 5 (Reuters) - Natural gas giant Encana Corp has agreed to pay Michigan $5 million in a settlement that could clear the company of criminal antitrust charges stemming from its role in a 2010 land leasing spree.

Chesapeake Energy Corp vowed at a Monday hearing to fight its own criminal antitrust charges. Michigan’s attorney general alleges that Chesapeake conspired with Encana to keep land lease prices artificially low in the state.

At a probable cause hearing in a state court in Cheboygan, Encana pleaded no contest to a state charge it attempted to commit antitrust violations during a land leasing spree in 2010 in which it and Chesapeake were the biggest lease buyers. Both companies faced criminal charges of antitrust violations and attempted antitrust violations.

The court took Encana’s plea under advisement and agreed it would dismiss charges against the driller if it fulfilled terms of a civil settlement over the next 11 months, Encana spokesman Jay Averill said in an emailed statement.

As part of Encana’s settlement, the company also agreed to cooperate with prosecutors in Michigan who are still pursuing a criminal case against Oklahoma-based Chesapeake, which they allege was Encana’s co-conspirator during the leasing spree.

During opening remarks, Heather Tewksbury, an attorney representing Chesapeake, described Michigan Attorney General Bill Schuette’s allegations of antitrust violations against her client as “smoke. Smoke with no fire.” Tewksbury, a former U.S. Department of Justice antitrust lawyer, added, “there was no agreement in this case.”

Encana’s civil settlement with Michigan, and Chesapeake’s pledge to defend the charges, came after both companies conducted internal investigations they said showed no collusion between the firms.

A series of emails and communications between executives of the companies that were competing for land leases in Michigan’s Collingwood Shale area during the speculative boom in 2010 showed they had discussed bidding strategies to acquire leases, Reuters reported in 2012.

The companies said earlier they discussed forming a joint venture in Michigan in 2010, but never reached any agreement.

Both Chesapeake and Encana recently received letters from the Justice Department, informing them a separate U.S. probe into whether they violated antitrust laws in Michigan had concluded.

The DOJ was still pursuing an investigation into potentially anti-competitive behavior in oil and gas leasing in other states.

A “substantial portion” of Encana’s $5 million payment to Michigan will go to the Department of Natural Resources State Park Endowment Fund, Encana said in a statement. The payment comes “in exchange for a release of the state’s civil claims,” Averill said.

Michigan has alleged Encana and Chesapeake colluded to avoid bidding against each other at an October, 2010 state land lease auction run by the Department of Natural Resources, as well as during leasing of private property in the state. (Reporting by Brian Grow in Cheboygan; Writing by Joshua Schneyer in New York; Editing by Jeffrey Benkoe)

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