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Chesapeake and Former SandRidge CEO Sued for Rigging Leases

Rigs Lined Up

Chesapeake Energy, along with former SandRidge Energy’s ex-CEO Tom Ward are facing a lawsuit from leaseholders claiming that along with the Chesapeake, Ward conspired to rig bids for drilling rights during the shale boom.

The suits have been brought by Chisolm Partners, LLC and its investors, who owned some of the leases in Kansas, allege that the conspiracy began in 2007 and continued until mid-2012. In the complaint filed in federal court on July 13, Chisolm stated that its investors had lost more than $10 million and that Chesapeake and Ward had conspired to depress the market for the leases in question.

Chisolm is seeking $30 million in damages. The lawsuit states in part: “Chesapeake along with the defendants and SandRidge, between them, illegally ‘divided up’ the geographic area covering the Anadarko Basin Region in Kansas, and other states, and agreed not to compete and drive up prices.”

Chisolm claims that Chesapeake and SandRidge agreed not to compete with one another for leases in Kansas’s Anadarko Basin, driving prices for the leases down. Chisolm has stated that in 2010 it purchased oil and gas leases on thousands of acres in the Anadarko Basin, and subsequently began discussions with Shell Oil, SandRidge and Chesapeake. The latter two companies, according to Chisholm were the main competitors, and according to the suit, those companies’ bids caused the prices of the leases to increase.

Chisolm maintains that it entered into an agreement to sell leases to Chesapeake, in 2011. Chisolm alleges that Chesapeake bought 100 percent of the membership interest in the company, and then sold leasehold interests to SandRidge.

At the time the violations are alleged to have taken place, Aubrey McClendon was helming Chesapeake, and Ward was CEO of SandRidge. Four months ago, McClendon was indicted by a federal grand jury for fixing oil shale lease auctions. One day after the indictment was handed down, McClendon perished when his SUV struck a bridge in Oklahoma City.

In June, authorities ruled McClendon’s death and accident. McClendon and Ward founded Chesapeake in 1989, and Ward left for SandRidge in 2006. Both companies had experienced major growth under their respective CEOs.

Lincoln Brown for Oilprice.com

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  • EH on July 20 2016 said:
    Ya lye down with dogs, , ya might as well put your nose in there backside too!

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