Natural Gas Companies May Have Colluded to Keep Land Prices Low in Michigan

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A Reuters investigation has found that Chesapeake Energy and Canadian natural gas giant Encana plotted to keep prices for fracking leases low in Michigan, in 2010.

Whether the emails examined by Reuters are enough evidence to prove criminal collusion under antitrust laws remains to be seen, but a former antitrust lawyer for the Justice Department characterizes the emails as not a smoking gun but "a smoking H-bomb."

Please read the thorough overview of the situation as the link above, but here's the gist of it:

Area-of-mutual interest agreements are common in the oil industry. They allow drillers to share in the risks and rewards of developing an energy play. But they aren't meant to allow the discussion of strategies to divide territory or avoid competitive bidding, say oil and gas industry attorneys.

In subsequent months, the emails show, top officials discussed ways to prevent land prices from escalating. The solution they proposed: dividing up Michigan counties and private landowners between them.

From June 6 to June 15, 2010, the two companies swapped proposals. In many of the emails, officials refer to the companies by their three-letter stock abbreviations: CHK for Chesapeake and ECA for Encana.

On June 6, Chesapeake vice president Jacobson sent an email with the subject line "CHK/ECA - MI" to Encana vice president John Schopp. It was copied to McClendon and to Jeff Wojahn, Encana's U.S. president. "Our proposal is pretty simple, but hopefully should be effective for us both," Jacobson wrote.

He outlined a strategy that included swapping land already leased in Michigan and dividing up counties and private landowners where new leases might be secured.

Read more: Special Report: Chesapeake and rival plotted to suppress land prices

Tags: Fracking | Natural Gas