June 5, 2012 / 7:07 PM / 5 years ago

US ethics group urges probe of natgas output cuts

* CREW asks Justice Dept to look at possible price fixing

* Energy firms cut production as prices dipped

NEW YORK, June 5 (Reuters) - A Washington-based non-profit ethics watchdog has asked the U.S. Department of Justice to investigate whether energy firms engaged in natural gas price fixing by cutting production this year.

Citizens for Responsibility and Ethics in Washington (CREW) said simultaneous production cuts by companies including Chesapeake Energy and ConocoPhillips in the face of decade-low prices may amount to collusion and violate competition law.

"These companies are conspiring to restrict the nation's supply of natural gas in order to raise its price," CREW executive director and former federal prosecutor, Melanie Sloan, said in a letter to the DOJ on Tuesday.

CREW is funded by foundations such as George Soros's Open Society, and the Carnegie Foundation, as well as private donors, Sloan said.

Chesapeake declined to comment, while Conoco and the DOJ were not immediately available to respond.

Record increases in U.S. natural gas production over the past year have lead to a supply glut which has swelled inventories and pushed prices to ten-year lows in January and again in April.

Natural gas prices are now about 30 percent off the April lows in part due to the belief that production has fallen off.

The prolific development of shale deposits across the country has transformed the supply outlook but has crimped company profits and made natural gas drilling largely uneconomical.

Many producers cut output and slowed new drilling in the first few months of the year, which helped bump prices higher. Chesapeake reduced production by 1 billion cubic feet per day (bcfd) in a two-phase cut in January and February, while Conoco said it had cut 0.1 bcfd in January. Canada's Encana Corp also cut production by 0.25 bcfd in February.

CREW has no proof that collusion has actually taken place, although an investigation is warranted, Sloan told Reuters. "Clearly we can't prove it, which is why we asked for a Justice Department investigation. It would be all about the communications between the firms," she said.

Founded in 2003, CREW regularly makes accusations against lawmakers and government officials for alleged ethical or legal transgressions. (Reporting By Edward McAllister in New York and Emily Stephenson in Washington; Editing by Tim Dobbyn)

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