Chesapeake Energy Corp. representatives on Friday asked a Michigan judge to dismiss charges against the company, saying the state “has not shown this court any evidence whatsoever to support a finding of probable cause.”
The Oklahoma City-based oil and natural gas producer is facing state charges in Michigan that it conspired with Canadian oil company Encana Corp. to hold down lease prices in the state. Both companies have denied wrongdoing after clearing themselves in internal investigations.
“The state has not presented any evidence of an agreement or mutual understanding — whether implicit, explicit, in writing or orally,” Chesapeake said in Friday’s court filing. “No witnesses testified that an agreement existed. The only evidence that the state can point to is a select group of documents in the case, but the documents taken as a whole make abundantly clear that no agreement was reached.”
Chesapeake and Encana were charged March 4 with two misdemeanor counts of antitrust violations. The more serious charge carries up to a $1 million fine for corporations.
Chesapeake has said it and Encana had considered a joint venture, but decided against it. Chesapeake also has argued that lease prices and competition for leases dropped because it became clear the Michigan geology was not as good as the companies had hoped.
Prosecutors claim executives from the two companies conspired in a series of emails to divide up oil and gas leases in Michigan, according to the charges. The emails, made public in 2012 by Reuters, included discussions between the companies’ executives about an arrangement to split up Michigan counties so that each company would be an exclusive bidder for public and private leases.
Chesapeake said Friday in a filing made as part of a pretrial hearing that the full email conversations in context make it clear there was no collusion.
In one email chain, Chesapeake’s then-CEO Aubrey McClendon suggested the company “smoke a peace pipe” with Encana. Later in the email chain, McClendon said Chesapeake should “compete and win” the leases in question.
Chesapeake also included an email in which McClendon told his broker to be cautious about leasing “until the time we feel more confident about the geology.”
Former Encana employee Kurt Froistad testified that no agreement was reached between Chesapeake and Encana on the October auction, and that he had difficulty getting anyone from Chesapeake to return his phone calls. He testified that he “never heard back from Chesapeake until they said there was no contract.”
Chesapeake said that the later emails show the companies chose not to pursue a joint venture and instead continued their competition.
“In addition to this clear set of events, the state ignores the further evidence showing direct and aggressive competition throughout June and July 2010. And it offers no explanation why this aggressive competition continued if an agreement of understanding had been achieved,” Chesapeake stated in the filing.
Encana last month agreed to pay a $5 million civil fine as part of a settlement with Michigan prosecutors. The U.S. Justice Department and Securities and Exchange Commission last month ended their probe into the the companies’ activities without filing any charges.