Oil, gas lease bid collusion case settled

Two energy companies have agreed to pay a total of $1,001,250 to settle alleged collusion in acquiring federal oil and gas leases in Gunnison and Delta counties after a federal judge had rejected a settlement under which they would have paid a little more than half that amount.

U.S. District Court Senior Judge Richard Matsch on Monday accepted a revised settlement under which SG Interests and Gunnison Energy each will pay $275,000 to settle a civil antitrust action in the case. In addition, the companies earlier this year paid $206,250 and $245,000, respectively, to settle alleged violations of the False Claims Act in connection with the same leases.

In December, Matsch had rejected an initial settlement with the Department of Justice in which the companies would have paid $275,000 to settle all the allegations in the case. At the time, Matsch cited the “unrepentant arrogance” of Gunnison Energy and said that for the companies to settle the case “for nothing more than the nuisance value of this litigation is not in the public interest.” He also ruled that the false claims action must be addressed separately from the antitrust one.

The finalized settlement resolve allegations involving four leases covering 3,568 acres in the Ragged Mountain area. Neither company admits wrongdoing in the case, the Department of Justice’s first-ever challenge of an anticompetitive bidding agreement for mineral rights leases.

“The department is pleased with this result. The settlement provides meaningful relief,” department spokeswoman Gina Talamona said in a news release Tuesday.

According to a Justice Department court filing, the total settlement money paid in the two cases will total more than 12 times the companies’ original costs of acquiring the two parcels.

As part of the settlement, for the next five years each company must provide notice to the government of any joint bidding activity, and related information upon request.

The agency said in the filing that joint bidding at Bureau of Land Management lease auctions “is both common and appropriate” in cases in which “pro-competitive efficiencies arise.” But it said the companies’ agreement involving the four leases deviated from common industry practice and “was merely a naked restraint that allowed Defendants to avoid a bidding war.”

The companies agreed to have only SG bid on the leases, and it then assigned an interest in them to Gunnison Energy.

Gunnison Energy has said the arrangement was legal, and had said in a court filing regarding the initial settlement agreement that it cost far less than litigation, but it “stands ready to defend itself if the settlement is not approved.”

In its recent filing, the Justice Department said that while the company’s comments “contain more than the usual bluster,” settling defendants often say “that they are settling not because of any wrong-doing but to avoid the distractions and costs of litigation.”

Numerous public commenters also had opposed the original settlement. In an e-mail blast Tuesday, attorney Peter Hart of the Carbondale-based Wilderness Workshop criticized the revised settlement for falling short of the damages allowed by law in such cases, and for involving no criminal penalties. The Justice Department said that had it prevailed in court, it still wouldn’t have likely recovered damages exceeding its litigation costs.



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