A federal judge on Monday approved the Justice Department’s revised settlement agreement with two local natural gas companies, Gunnison Energy and SG Interests, implicated in a 2005 bid-rigging scheme to buy gas leases near McClure Pass on the cheap.
At a hearing in Denver, U.S. District Senior Judge Richard P. Matsch granted the Justice Department’s request to approve the revised settlement deal with the two companies, according to court documents.
The deal requires Gunnison Energy and SG Interests to pay a total of $1,001,250 in damages connected to case, which federal authorities have described as first-of-its-kind antitrust action. The deal also requires the two companies to submit to a kind of probation, according to public records.
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.
In December, Matsch rejected an earlier version of the Justice Department’s proposed settlement in the case, saying the deal was not in the public interest. That deal would have required the two companies to pay damages totaling $550,000.
Matsch’s orders of Monday did not include any of the cutting language of his December order, in which he rebuked Gunnison Energy in particular for its “unrepentant arrogance.” Instead, Matsch’s latest orders were “standard boiler plate,” according to one independent antitrust expert familiar with the case.
Brad Robinson, president of Gunnison Energy, and Robbie Guinn, a vice president of SG Interests who is in charge of the companies’ Colorado operations, did not reply to messages seeking comment on the finalized settlement deal.
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 imposing no criminal penalties.
The Justice Department defended its actions.
“The department is pleased with this result,” Justice Department spokesperson Gina Talamona said in a statement. “The settlement provides meaningful relief.”
According to public records in the case, Gunnison Energy and SG Interests formed a secret pact in early 2005 so that they might avoid a “bidding war” against one another for four gas leases near McClure Pass at two Bureau of Land Management auctions.
The pact preceded a broader joint venture agreement between the two companies in which they agreed to work together in developing the gas play area. The Justice Department has characterized that joint venture agreement as a legitimate “efficiency-enhancing collaboration,” according to public records in the case.
“If this matter were to proceed to trial,” the Justice Department said in case filings, “the defendants may have contended that the [2005 pact] was somehow ancillary to” — or, part of — “the agreements that they later reached in June 2005.”
“The United States determined that this purported ancillary defense amounted to little more than a contention that by successfully colluding under the [pact] at the February and May 2005 auctions, the defendants eventually learned to overcome their mutual distrust,” court documents read.
“However, the mere hope that parties might someday come to an understanding on terms of a legitimate venture does not justify their agreeing to a naked restraint of trade in the interim.”
The finalized settlement does not appear to have any implications on future natural gas operations in the greater Thompson Divide area, where Gunnison Energy and SG Interests independently and jointly control tens and thousands of federal drilling rights and the zone’s only natural gas transmission pipelines.
Per the terms of the settlement, neither Gunnison Energy nor SG Interests admit any guilt in the case.
According to the Justice Department, the settlement amount in the case totals more than 12 times the companies’ original costs of acquiring the four leases.
Tim Mutrie is a freelance journalist working on the Thompson Divide Reporting Project, an independent investigation of the players, places and processes at thompsondivide.com. Contact him at firstname.lastname@example.org.