Encana implicated in illegal oil and gas cartel

Speaking of bid-rigging and fraud by massive, politically well-connected groups, Calgary’s Encana Corporation has been accused of colluding with Chesapeake Energy to suppress land prices and rip off private land owners in Michigan.

Reuters’ Brian Grow, Joshua Schneyer, and Janet Roberts report that email communication between senior executives at Chesapeake and Encana may provide evidence of anti-trust violations.

In emails between Chesapeake and Encana Corp, Canada’s largest natural gas company, the rivals repeatedly discussed how to avoid bidding against each other in a public land auction in Michigan two years ago and in at least nine prospective deals with private land owners here.

In one email, dated June 16, 2010, [CEO Aubrey] McClendon told a Chesapeake deputy that it was time “to smoke a peace pipe” with Encana “if we are bidding each other up.” The Chesapeake vice president responded that he had contacted Encana “to discuss how they want to handle the entities we are both working to avoid us bidding each other up in the interim.” McClendon replied: “Thanks.”

The reporting team summarizes the wrongdoing:

Private industry cartels are forbidden in the United States, where price-fixing between competitors is illegal under the Sherman Antitrust Act. Violations carry stiff penalties. Companies can be fined up to $100 million and individuals up to $1 million for each offense. Jail sentences – which are rare – can be as long as 10 years, and collusion among competitors can lead to prosecution or fines for mail and wire fraud. Victims of bid-rigging can also seek triple the amount of damages.

Accusations like this make it all the more unconscionable for global governments to subsidize oil and gas firms with public money while shielding them from legal and regulatory accountability. This developing story should be kept in mind as we discuss the future of public support and impunity for oil and gas businesses.

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