Oil and gas collusion court case settled for $1 million

Companies maintain no wrongdoing occurred

Back in 2005 Gunnison Energy Corporation and SG Interests Ltd. allegedly violated antitrust laws by illegally cooperating with each other during an oil and gas lease sale.

Today, the companies are paying for their purported indiscretions to the tune of just more than $1 million.
At the time of the sale the two companies signed a memorandum of understanding concerning their agreement, which stated that SG Interests would bid on the leases, of which there were four, and would then give 50 percent of the interest in the leases to GEC after the sale. According to the Department of Justice, in doing so the companies violated the Sherman Act by conspiring to limit competition and the False Claims Act by lying to the government about Gunnison Energy’s intention not to bid on the leases.
The situation garnered a legal complaint to the Antitrust Division of the Department of Justice in February 2012, and rather than go to court the energy companies attempted to pay a cash settlement.
In December 2012 U.S. District Court Senior Judge Richard Matsch denied them that option, saying in his decision, “It is not in the public interest to approve a final judgment that permits a defendant to leave its civil action in such a smirking, self-righteous attitude.”
The ruling forced the reconsideration and renegotiation of the case, and three weeks ago Matsch accepted a revised settlement under which the companies will each pay $275,000 to settle the civil antitrust action in the case, on top of an additional $451,250 paid earlier this year to settle the related alleged violations of the False Claims Act.
According to the court ruling, the total sum to be paid by the companies—$1,001,250—is more than 12 times the amount they paid to acquire the leases, which cover 3,568 acres in the Ragged Mountain area.
“The department is pleased with this result,” wrote Department of Justice spokesperson Gina Talamona in a news release after the decision was released late last month. “The settlement provides meaningful relief.”
The companies disagree, however, maintaining that there was no wrongdoing.
This was the Department of Justice’s first-ever challenge of an anti-competitive bidding agreement for mineral rights leases, but according to the National Law Review, “it is just one of the recent cases in which joint bidding activities have become the focus of antitrust scrutiny.”
As part of the settlement, for the next five years both companies will be required to provide the government with notice of any joint bidding, upon request.
In somewhat related news, SG Interests recently announced it will be forgoing development and allowing one of its 2,500-acre oil and gas leases in the Thompson Divide area to expire at the end of the month. The parcel is just one of more than 20,000 acres of leases the company owns in the area known as the Lake Ridge drilling unit.