By Joshua Schneyer, Brian Grow and Anna Driver
March 5 (Reuters) - Oil and gas giants Chesapeake Energy and Encana Corp were charged on Wednesday with colluding to keep oil and gas lease prices artificially low in Michigan, state Attorney General Bill Schuette said.
The criminal charges follow a lengthy investigation by Schuette's office into whether the firms -- the biggest land leasers during a speculative oil and gas leasing boom in Michigan's Collingwood Shale region during 2010 -- colluded to keep prices from rising as they acquired land leases from landowners.
Michigan began looking into the companies' activities in 2012 after a Reuters investigation found that executives from the two firms discussed proposals to divide bidding responsibilities in the state for nine private landowners and counties in Michigan.
"I will aggressively prosecute any company who conspires to break the law," Schuette said in a statement.
The companies are being charged with one count each of antitrust violations "relating to a contract or conspiracy in restraint of commerce," and one count each of attempted antitrust violations.
Under Michigan law, an antitrust violation is considered a misdemeanor, which carries penalties that can include fines and prison terms of up to two years for individuals, and up to a $1 million fine for a corporation.
Encana and Chesapeake still face a separate, federal antitrust investigation by the Department of Justice.
"This action has no merit and we will vigorously contest it," said Chesapeake spokesman Gordon Pennoyer.
Encana denies the charges and will "vigorously defend" them, company spokesman Jay Averill said in a statement.
The boards of both Chesapeake and Encana previously conducted internal investigations and said they found no collusion. The companies have acknowledged holding talks about forming a joint venture in Michigan during 2010, but said no agreement was ever reached.
"No agreement was reached and no violation of antitrust law occurred," Averill added.
In emails reviewed by Reuters in its investigation, then Chesapeake CEO Aubrey McClendon and other high-ranking Chesapeake and Encana executives discussed in 2010 how to keep lease prices on both state and private lands from rising by avoiding "bidding each other up."(r.reuters.com/deg27v)
The discussions occurred after a land lease frenzy pushed Michigan prices on private lands as high as $3,000 per acre in mid-2010. Lease prices subsequently fell sharply in the state later that year.
After prices rose sharply amid intense bidding at a Michigan state land auction in May 2010, "Chesapeake and Encana agreed not to bid against each other in future lease auctions," the Michigan Attorney General alleges in its complaint, reviewed by Reuters. A subsequent state auction in October 2010 "raised just $10 million on the lease of 273,000 acres, or less than $40 per acre -- over $1,000 per acre less than the May 2010 prices," the complaint says.