Natural gas producers Chesapeake Energy Corp. (NYSE: CHK) and Encana Corp. (NYSE: ECA) are currently being investigated by the US Justice Department as a result of a report last month from Reuters that the two companies had agreed to try to keep lease prices down in several Michigan counties where Chesapeake and Encana were seeking exploration leases from landowners.

Reuters reports exclusively today that it has now uncovered e-mails between top executives of the two companies showing that Encana revealed that it planned to cut back on its leasing efforts in the Collingwood shale play, and the Chesapeake CEO Aubrey McClendon “ordered Chesapeake to renegotiate or delay closing on at least 10 deals that his company was negotiating with major land lease holders.”

If the report is true, then the information exchange between the companies, though not in itself illegal, may be found to be anti-competitive. A former anti-trust lawyer with the DoJ told Reuters:

Asking your competitor whether they are going to stop leasing in, or exit, the Michigan market is an offer to collude.

Here’s an email exchange included in the Reuters story:

In an email to [Encana’s US president Jeff] Wojahn on July 16, McClendon attached comments from [an] online forum that claimed Encana may be stopping its leasing efforts in the Collingwood shale. McClendon wrote: “Jeff: does this mean no more drilling and no more interest in joining forces down the road?”

Three days later, Wojahn replied to McClendon. “Aubrey, we have decided to discontinue further leasing at this time,” Wojahn wrote. “We will reassess our position after the summer.”

McClendon responded quickly: “Are you wanting to exit the play entirely? Have 5 minutes to discuss today?”

Wojahn emailed a few hours later: “We are not exiting the play but rather we are stopping further leasing. At this time we are happy with our current position. We will reassess this fall as we evaluate the October state sale.”

Following this exchange, McClendon allegedly ordered Chesapeake staff to slow down lease signings, knowing that he now had no competition.

Will Chesapeake’s newly constituted board of directors take any action based on this report? Don’t count on it. At most, the board is likely to say the company is cooperating with the DoJ and promises to take appropriate action at the appropriate time. Wonderful.

Paul Ausick

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