And any fines that might result from the investigations could conceivably wipe out Chesapeake's investment in the state.

Chesapeake on Thursday said it is the subject of a Justice Department investigation into possible criminal antitrust violations related to the purchase and lease of land in Michigan. The state has its own investigation.

The company is racing to sell assets to fund its operations. It has said it spent at least $400 million to acquire 450,000 acres of prospective shale acreage located in the northern part of the state. Before the antitrust probe, one analyst had estimated the land could fetch $500 million in a sale.

Now, liability risk -- as well as potentially poor drilling results -- may have slashed the value of the Michigan leases. Some analysts say the leases may be hard to sell at any price.

Investors showed some faith in Chesapeake's plans this week when the company on Monday boosted the minimum amount it said it could receive from asset sales this year from $11.5 billion to $13 billion. This and other factors helped push Chesapeake shares 11 percent higher the day after the announcement.

But for some analysts, serious doubts remain about whether Chesapeake can meet that goal. The shares fell more than 3 percent on Friday.

The legal woes in Michigan are only the latest challenge the company faces trying to plug a cash-flow gap. Depressed natural gas prices have cut cash flow at Chesapeake and many other energy companies, leaving asset sales a good way to raise cash.

Chesapeake had been adding bit by bit to its land position in Michigan through legal settlements with dozens of landowners who sued Chesapeake earlier for voiding their leases in 2010, according to public records and landowners in the state.

Michigan assets, however, are only a small piece of the puzzle. Valuations in the Permian Basin in West Texas and New Mexico, where Chesapeake is selling 1.5 million acres, are still up in the air. Chesapeake has so far been able to sign one buyer for one parcel of the three-part sale. No price was disclosed.

POTENTIAL LIABILITIES

Reuters reported in June that Chesapeake and rival Encana Corp (ECA.TO) plotted to keep land prices low in Michigan's Collingwood shale.

The Attorney General's office in Michigan is also investigating the Chesapeake transactions, Reuters reported earlier. Experts say those investigations could go on for months or potentially years.

On July 25, Encana CEO Randy Eresman, addressing analyst questions about the company's own probe into allegations of collusion with Chesapeake, said Encana would no longer include its Michigan assets in a major asset sale package.

Most oil and gas purchase sale agreements contain indemnification clauses in which the seller indemnifies the buyer for all claims prior to the effective date of the transaction, oil and gas attorneys said.

Thus, any agreement would likely require Chesapeake to guarantee it will pay for any liability related to the alleged collusion, a fact that may give a potential buyer a negotiating edge, said Mark Hanson, analyst at Morningstar.

"Now, someone could come to Chesapeake and say 'I'm going to pay you a lot less than what is on the open market or you are going to have to assume all liability related to the investigations," he said.

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.

If fines are eventually levied against Chesapeake, those penalties could wipe out the Oklahoma City-based company's oil and gas investment in Michigan, Morningstar's Hanson said.

John Freeman, analyst at Raymond James, said in an email that his firm is currently assigning no value to Chesapeake's Michigan acreage. He cited disappointing well results and the lack of industry activity in the basin.

For example, Devon Energy Corp (DVN.N) said on its second-quarter conference call that two wells it drilled in Michigan were disappointing.

DELAYS

Chesapeake has already delayed its sale of the Michigan acreage once, according to Meagher Energy Advisors, the energy-focused asset acquisition and divestiture firm hired to run that sale process. The bid date was pushed back to July 16 from June 29, according to a prospectus on the firm's web site.

Still, Teri Williams, Meagher's chief operating officer, said that to her knowledge the Chesapeake sale process in the state was still ongoing.

"We've got a number of properties for sale," said Chesapeake spokesman Michael Kehs. He declined to comment specifically on the planned Michigan sale.

Mike Breard, analyst at Hodges Capital Management in Dallas, believes that Chesapeake could easily sell its Michigan acreage but its price would likely be low.

"I don't think they'd get much for it," Breard said. "There are a lot of properties on the market right now."

(Additional reporting by Mike Erman in New York and Brian Grow in Atlanta; Editing by Patricia Kranz and Gary Hill)

• A Permanent Economic Emergency