Chesapeake to Pay $25 Million to Settle Michigan Charges

By Erin Ailworth 

Chesapeake Energy Corp. has agreed to pay $25 million to settle antitrust allegations made by Michigan's attorney general, as well as complaints that it misled hundreds of landowners to obtain leases in the state.

Michigan Attorney General Bill Schuette filed criminal charges against the company last year. He accused Chesapeake of colluding with Encana Corp., another oil and gas producer, to keep the price of natural gas leases in the state artificially low. In a separate case, Mr. Schuette's office also filed racketeering and false pretenses charges against Chesapeake, saying the company had defrauded lease owners.

Chesapeake has previously called the cases meritless. On Friday a spokesman said the Oklahoma City-based company was happy to have settled the matter.

"We are pleased to have reached a mutually acceptable agreement with the Michigan Attorney General and to move past these legacy issues inherited from past management," said Gordon Pennoyer, a spokesman for Chesapeake. The allegations date back to business done in 2010 under then-Chief Executive Aubrey McClendon, who was forced out of leadership in 2013.

Terms of the settlement call for Chesapeake to pay $25 million into a fund to compensate landowners. Mr. Schuette's office alleged the value of oil and gas assessments were held down when Chesapeake and Encana agreed not to bid against each other, which would have driven prices higher. After claims are paid from that fund, $5 million will be doled out to the state--half to Michigan's Department of Natural Resources, and the rest to fund antitrust enforcement activities.

Chesapeake pleaded no contest to one count of criminal attempted antitrust violations and one count of false pretenses, both misdemeanors. Michigan has agreed to drop its criminal complaints against Chesapeake if it fulfills the terms of the settlement.

"This is a victory for Michigan taxpayers and a victory for all the Michigan landowners who took deep hits to their pocketbooks," Mr. Schuette said.

Write to Erin Ailworth at [e-mail]

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