Chesapeake, Encana shares fall on report of land price plot (Reuters) - Shares of Chesapeake Energy Corp (CHK.N) and Encana Corp (ECA.TO) tumbled Monday after a Reuters investigation showed that top executives of the two rivals plotted in 2010 to avoid bidding against each other in a state auction and in at least nine prospective deals with private land owners. Following the report, the state of Michigan pledged to determine whether the two energy giants acted two years ago to suppress land prices there. Top company officials discussed ways to divide counties in Michigan so that neither company would bid against the other for what they then considered prime oil- and gas-acreage, emails show. Some of the emails were between now-embattled Chesapeake CEO Aubrey McClendon and Encana USA president Jeff Wojahn. Ed Golder, a spokesman for the Michigan Department of Natural Resources, which oversees state land auctions, said officials were "reviewing the allegations" in the Reuters report and had asked for assistance from the Michigan attorney general. "Our commitment is to ensure the integrity of the auction process, and to receiving fair market value for public land," Golder said. A spokesman for the attorney general's office declined to comment. Encana's chairman also pledged quick action. "In accordance with Encana's policies, an investigation of this matter was immediately initiated," David O'Brien, chairman of Encana's board of directors, said in a statement. Encana therefore will not provide any further information at this time. Both Chesapeake and Encana acknowledged they had discussed forming a joint venture in Michigan in 2010 but said they ultimately decided against it. Chesapeake declined further comment on Monday. News of the discussions to suppress land prices helped push Chesapeake shares down 8.5 percent to close at $17.03 on the New York Stock Exchange, making the company the worst performer in the Standard & Poor's 500 on Monday. Encana's stock closed down 3.7 percent, to C$19.61 in Toronto. Analysts said inquiries by Michigan authorities could hamper efforts by both companies to sell or develop their holdings in the state. Encana is looking for a joint venture partner to help develop its oil and gas acreage in Michigan's Collingwood shale formation. Chesapeake aims to sell about 450,000 acres of its holdings in northern Michigan as it works to raise money to meet an expected $9 billion to $10 billion cash shortfall this year, according to a prospectus released by one of its advisers earlier this month. About 80 percent of Chesapeake's Michigan acreage is located on land it leased from the state. "I assume the state of Michigan will be fairly aggressive in investigating the alleged improprieties raised in the article, and similarly private landowners also appear to have some basis for seeking damages" if the companies conspired to keep land prices low, said Mark Hanson, an oil analyst with Morningstar in Chicago Encana controls 430,000 acres of land in Michigan's Collingwood and Utica shale regions. It moved into the state in 2008, assembling its initial 250,000 acre position there for an average price of $250 per acre. Its initial wells in the state were prolific, with one producing an impressive 6.5 million cubic feet of gas per day in its first month of production. Chesapeake's Michigan prospectus was posted on the website of Meagher Energy Advisors, an energy-focused asset acquisition and divestiture firm that has sold assets for Chesapeake in the past. Bids for the Michigan assets are due on June 29; a decision is expected in late July, Meagher said. But that timing may no longer be realistic. In the short term at least, (the antitrust allegations) could cloud the assets. Nobody is going to want to buy these assets until they understand the potential liability," said Logan Robinson, a law professor at University of Detroit Mercy and a former general counsel for automotive-parts supplier Delphi Automotive. Reporting by Joshua Schneyer in New York, Anna Driver in Houston, Brian Grow in Atlanta, Scott Haggett in Calgary; editing by Blake Morrison, Martin Howell