ANTIQUES SHOPS

* Water scarcity likely to become more common (Adds UK government reaction, detail on UK flooding)

By Nina Chestney

LONDON, July 11 (Reuters) - The risk of flooding for many English homes and businesses could increase fourfold by 2035 if more action to deal with the impact of climate change is not taken, government advisers said on Wednesday.

As severe floods continue to batter parts of Britain after the wettest June since records began, around one in seven homes and businesses face some kind of flood risk, the climate advisers said.

Around 160,000 properties would be at risk by 2035 if better planning and more investment was made in flood defences, compared with 610,000 at risk if no action was taken, they said.

The cost of protecting more than half a million homes at risk of flooding will double to 1 billion pounds a year by 2035, according to estimates by the UK's Environment Agency in 2010.

The devastating floods of 2007 caused damage to homes and businesses, infrastructure and services, and resulted in lost work and school days, which cost the UK economy 3.2 billion pounds.

"We must take adaptation more seriously if we are to manage the growing risks of floods and droughts," said John Krebs, the chairman of the climate change advisory panel.

"This can be done by investing more in flood defences, faster rollout of water meters and giving serious consideration to where and how we build our housing and infrastructure," he said in a statement.

"Without action by households and businesses to prepare for these inevitable weather extremes the country faces rising costs, unnecessary damage and future disruption."

Scientists believe extreme weather like heatwaves, floods and droughts are linked to climate change and likely to become more frequent in the future.

Flooding will be the biggest climate risk to Britain this century with damage set to cost as much as 12 billion pounds ($18.63 billion) a year by the 2080s if nothing is done to adapt to extreme weather, a government-funded study said in January.

Since the start of May this year, over 3,000 properties have been flooded, 55,000 have received flood warnings and 31,000 were protected by flood defences, according to the UK's Environment Agency.

FUNDING

The government's advisers said in a report that property development in flood plains - or areas along streams or rivers that are likely to experience repeated flooding - has increased by 12 percent over the past 10 years compared with a 7 percent rise in other parts of England.

Public and private funding for flood defences is falling and is 12 percent lower for the current government spending period compared with the previous one, after inflation.

However, the UK's Environment Agency estimates that funding needs to increase by 20 million pounds a year on top of inflation to keep pace with climate change.

"We are spending more than 2.17 billion pounds over four years to protect people from flooding and our successful partnership funding model will draw in around an additional 72 million pounds," said a spokesman from the Department of Environment, Food and Rural Affairs in response to the report.

"The money for flood defences is being spent more effectively than ever before and we now expect to exceed our target to better protect another 145,000 homes by 2015."

Apart from increased flooding risks, water scarcity is also likely to become more common in parts of the country due to climate change and population growth, the panel said.

Water scarcity is likely to be made worse by household consumption levels which are among the highest in north-west Europe.

Encouraging households to save water could cut total consumption by 700 million litres a day, which is two thirds more than is currently saved under initiatives by water companies, according to the report.

The government should take further steps to increase water efficiency through water metering and pricing, it added. ($1 = 0.6442 British pounds) (Editing by David Cowell and Alison Birrane)

By Brian Grow and Joshua Schneyer

July 11 (Reuters) - As Chesapeake Energy Corp and Encana Corp face antitrust investigations, emails reviewed by Reuters indicate that top executives of the two rivals shared sensitive information that gave Chesapeake the upper hand in deals with Michigan land owners.

The emails show the competitors traded information about whether Encana was halting new land leasing in Michigan in 2010, and the information prompted Chesapeake to dramatically change its leasing strategy in subsequent weeks and helped send Michigan land prices tumbling from record highs.

In the days after learning that Encana was paring back, Chesapeake CEO Aubrey McClendon ordered Chesapeake to renegotiate or delay closing on at least 10 deals that his company was negotiating with major land lease holders in Michigan, documents reviewed by Reuters show.

Antitrust experts said such discussions could add fodder to probes by the Justice Department and Michigan authorities, who are exploring whether the two companies violated state or federal laws by discussing how to suppress land prices in the state.

They said the emails raise collusion concerns, given that two direct competitors appear to have exchanged critical data. “Information exchange” is not explicitly illegal under U.S. antitrust law, unlike bid-rigging and price-fixing. But it has been found by courts to be anti-competitive when the sharing is done privately, doesn’t promote efficiency and involves information of value to customers – in this case, Michigan land owners.

“It’s highly suspect,” said Maurice Stucke, a former antitrust attorney with the Department of Justice. Said Harry First, another former Justice Department antitrust attorney: “Asking your competitor whether they are going to stop leasing in, or exit, the Michigan market is an offer to collude.”

Another antitrust expert, however, played down the significance of McClendon's overture. McClendon's approach to Encana simply may have been an effort at gathering market intelligence, which would be “competitively benign,” said Daniel Crane, a professor of antitrust law at the University of Michigan.

Chesapeake is America’s second-largest natural gas producer. Encana is Canada’s largest natural gas company. The two were fierce rivals in early 2010 in Michigan, where the Collingwood shale formation was once considered one of America’s most promising oil and gas plays.

The Justice Department launched an investigation earlier this month after a Reuters report showed the competitors talked in emails about dividing up nine Michigan land owners and counties in an effort to prevent “acreage prices from continuing to push up,” and establishing “bidding responsibilities” ahead of an October 2010 Michigan state land auction.

By June 2010, the price to lease prime land surpassed $2,000 an acre in parts of Northern Michigan. In the months after Chesapeake and Encana began talking about splitting up Michigan territory, prices fell as much as 90 percent. In the same period, the price of natural gas futures fell some 20 percent.

Price-fixing, bid-rigging and market allocations by competitors are illegal in the United States under the Sherman Antitrust Act, and companies can be fined up to $100 million for each offense.

Encana said it held talks with Chesapeake without reaching an agreement on a joint venture. It has begun an internal inquiry led by the chairman of its board of directors. Chesapeake also acknowledged it held talks with Encana but said the two companies never consummated any agreement and never bid jointly.

The antitrust investigation is the latest blow to Chesapeake's McClendon, one of the industry’s most dynamic executives.

Reuters reported in May that McClendon arranged $1.55 billion in financing from a major financier of Chesapeake and others by mortgaging his stakes in company wells. The news agency later disclosed that McClendon operated a private $200 million hedge fund from Chesapeake offices.

In the wake of those reports, Chesapeake’s board stripped him of his chairmanship, and the Internal Revenue Service and the U.S. Securities and Exchange Commission opened inquiries.

A half dozen additional emails reviewed by Reuters indicate that avoiding a bidding battle with Encana wasn’t McClendon’s only goal. The Chesapeake CEO also sought to learn whether – and why - Encana was easing up its effort to acquire land in Michigan. Such information appears to have helped shape how Chesapeake dealt with land owners.

In one case, a July 20, 2010 email shows, McClendon told one of his land leasing agents his rationale for slashing prices offered to Michigan land owners. “Very sorry about this, am sure some conversations will not be pleasant, but with ECA gone, we have the ability to do this and I can assure you we have the need to do it,” he wrote. ECA is the stock abbreviation for Encana, based in Calgary.

The conversations about Encana’s strategy in Michigan appear to have begun in mid July 2010, when McClendon reached out to Encana’s U.S. president, Jeff Wojahn, to ask whether anonymous rumors on an internet chat room were true.

In an email to Wojahn on July 16, McClendon attached comments from the online forum that claimed Encana may be stopping its leasing efforts in the Collingwood shale. McClendon wrote: “Jeff: does this mean no more drilling and no more interest in joining forces down the road?”

Three days later, Wojahn replied to McClendon. “Aubrey, we have decided to discontinue further leasing at this time,” Wojahn wrote. “We will reassess our position after the summer.”

McClendon responded quickly: “Are you wanting to exit the play entirely? Have 5 minutes to discuss today?”

Wojahn emailed a few hours later: “We are not exiting the play but rather we are stopping further leasing. At this time we are happy with our current position. We will reassess this fall as we evaluate the October state sale.”

Whether the two spoke by phone is unclear. But Wojahn’s written confirmation prompted orders from McClendon, emails show.

That same day, July 19, McClendon told top deputies and agents in Michigan: “With Encana pulling away we should be able to be very aggressive in extending some extension dates and not risk losing the deals, agree?” By that, he apparently meant Chesapeake would delay lease-signings even further into the future than they already had been pushed. McClendon now had reason to believe that his top competitor for land in Michigan – Encana – wouldn’t swoop in to make the deals in the meantime.

Chesapeake declined to comment on the discussions with Encana, but the emails do indicate that McClendon had been contemplating cutting back leasing land in Michigan days before the confirmation from Wojahn.

Land-lease prices in Michigan soon began to fall after the email exchange, according to the review of Chesapeake emails and interviews with land owners. The discussion came amid more specific talks by the rivals about forming what they called a joint venture.

In those talks, the companies discussed how to avoid bidding against each other in public and private land deals. In one email, McClendon directed a subordinate that it was time “to smoke a peace pipe” with Encana “if we are bidding each other up.”

(Reporting By Brian Grow and Joshua Schneyer; editing by Blake Morrison and Michael Williams)

((blake.morrison@thomsonreuters.com)) Keywords: CHESAPEAKE ENCANA/LAND

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