US Justice Department Investigating Chesapeake Energy

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OKLAHOMA CITY (AP) — The U.S. Department of Justice has opened an investigation into possible antitrust violations by Chesapeake Energy Corp.

The agency has subpoenaed documents related to how the driller pays royalty owners and accounts for oil and gas reserves, the Journal Record reported ( ). Chesapeake disclosed the subpoena on Thursday in a regulatory filing with the U.S. Securities and Exchange Commission.

The Justice Department and other agencies asked Chesapeake for documents, testimony and information related to the company’s oil and gas leases and purchases as part of its antitrust investigation, according to the driller’s filing.

Investigators with the Justice Department also are seeking information on how the company acquires and classifies its oil and gas properties. Chesapeake also received subpoenas from the U.S. Postal Service and state agencies for information on its royalty payment practices.

Chesapeake alluded to those investigations in its 2015 annual report, filed with the SEC on Feb. 25, 2016. The company is in discussions with the Justice Department, the Postal Service and state agencies and continues to respond to subpoenas and demands, according to the annual filing.

The company was named in several lawsuits alleging underpayment of royalties and defended cases in Arkansas, Louisiana, Ohio, Oklahoma, Pennsylvania and Texas.

University of Central Oklahoma economics professor Jeremy Oller, an expert witness on antitrust legal matters, said the Justice Department is likely examining other oil and gas companies as part of the investigation.

Oller said there are two possible sections of antitrust law the Justice Department could use.

One antitrust claim is a monopoly allegation, in which a company engages in exclusionary or anti-competitive behavior in an attempt to monopolize the market, he said. The monopoly claim type, known as Section 2, can also be applied if a company has a geographic stranglehold on the market and has a dangerous probability of achieving monopoly power, Oller said.

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