Billionaire Aubrey K. McClendon, the exuberant ex-chief executive of Chesapeake Energy, has been charged by the U.S. Justice Department with conspiracy to suppress prices paid for oil and natural gas leases. The alleged collusion is said to have taken place in northwestern Oklahoma from late 2007 to early 2012 and to have involved another company – named only as “company B” – which agreed not to compete with Chesapeake head-to-head for a set of leases in return for a share of these leases.
This is the first case resulting from a continuing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the oil and natural gas industry, although it does follow an earlier case of alleged collusion over leases in Michigan between Chesapeake and Calgary based Encana. The earlier investigation did not result in charges against the two companies who, however, did agree to a settlement with the state worth $5m in 2014 for Encana and $25m in 2015 for Chesapeake.
The current indictment may result in a maximum penalty of a $1m fine and up to 10 years in prison for the unrepentant billionaire, who denies all charges.
“McClendon instructed his subordinates to execute the conspiratorial agreement, which included, among other things, withdrawing bids for certain leases and agreeing on the allocation of interests in the leases between the conspiring companies,” the department said in a statement.
“His actions put company profits ahead of the interests of leaseholders entitled to competitive bids for oil and gas rights on their land,” William J. Baer, assistant attorney general for the antitrust division told The New York Times. “Executives who abuse their positions as leaders of major corporations to organize criminal activity must be held accountable for their actions.”
In reply to the accusations, McClendon issued a statement, pointing to his 35-year track record in creating jobs in Oklahoma, benefiting the state’s economy, and in providing energy to the country.
“The charge that has been filed against me today is wrong and unprecedented,” McClendon said. “I have been singled out as the only person in the oil and gas industry in over 110 years since the Sherman Act became law to have been accused of this crime in relation to joint bidding on leasehold.”
Chesapeake said in a statement on Tuesday that it had been “actively co-operating for some time with a criminal antitrust investigation” by the department regarding its past leasing practices. It also added that it had “taken significant steps to address legacy issues”, strengthening legal and regulatory compliance.
Aubrey K MacClendon was forced to step down as chief executive in April 2013 after allegations that he mixed his private finances with those of the company. He subsequently formed American Energy Partners – a company which has been actively investing in exploration in the U.S. and abroad – most recently in Australia and Argentina.
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