Judge rejects settlement in Colorado oil and gas bid-rigging case

A federal judge has rejected a $550,000 settlement in a western Colorado oil and gas antitrust case, saying that the penalties were insufficient to serve as a deterrent.

The judge criticized one of the defendants ? Gunnison Energy Corp. ? for its "unrepentant arrogance."

"It is not in the public interest to approve a final judgment that permits a defendant to leave its civil action with such a smirking, self-satisfied attitude," wrote U.S. District Judge Richard Matsch.

The ruling tosses the case back to the Department of Justice, which had made the settlement agreement with the Gunnison Energy Corp. and SG Interests Ltd.

"We are reviewing the court's opinion and considering our options," said Gina Talamona, a Justice Department spokeswoman.

Denver-based Gunnison Energy is owned by William Koch, the billionaire building a large ranch in the North Fork Valley.

Gunnision Energy and Houston-based SGI each began developing natural gas fields in the Ragged Mountains in Gunnison County in 2003, according to court documents.

In 2005, the two companies agreed only SGI would bid on federal leases and then the acreage would be split between the companies. SGI bid on 22 leases at a federal Bureau of Land Management auction, paying as little as $2 an acre.

The Justice Department sued the companies in civil court in the first anti-competitive bidding case on mineral rights in the country.

In February, federal authorities and the two companies agreed to a settlement ? each company would pay $275,000, without admitting liability. The companies also got to keep the 22 leases.

The settlement was challenged by community and environmental groups and local governments.

"We were concerned that the settlement did little to dissuade these questionable business practices," said Jon Peacock, manager of Pitkin County.

The settlement was calculated as the difference between what SGI paid for the leases and what they would have fetched at a true auction.

Under the Sherman Antitrust Act such collusion can be subject to triple damages.

"There is no basis for saying the approval of these settlements will act as a deterrent," he wrote.

A spokesman for SGI declined comment saying "this is on-going litigation."

In filings to the court, Gunnison Energy said it agreed to settle not because it has done anything wrong but because settling was cheaper than defending itself. It called the government's case "meritless" and "minor."

Brad Robinson, chief executive officer of Gunnison Energy, said the company is "very sorry" the judge read its position as being arrogant.

"There was no disrespect for the process," Robinson said. "We will work with the DOJ."

Mark Jaffe: 303-954-1912, mjaffe@denverpost.com or twitter.com/bymarkjaffe

Source: http://www.denverpost.com/business/ci_22211529/judge-rejects-settlement-colorado-oil-and-gas-bid?source=rss

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