Did FTC Over-Reach In Prohibiting Scott Sheffield From ExxonMobil’s Board

The Federal Trade Commission (FTC) has taken an unprecedented step as part of the biggest shale oil and gas merger ever: ExxonMobil buying Pioneer Natural Resources
Pioneer Natural Resources
for the hefty sum of $60 billion. But, as part of the deal, FTC announced on May 3, 2024, the chairman of Pioneer, Scott Sheffield, was prohibited from joining the board at ExxonMobil
ExxonMobil
or retaining any advisory capacity. It was alleged by FTC that to cut oil production and raise oil prices, he had tried to influence stakeholders: OPEC+ members, first, and U.S. oil and gas companies, second.

The message was delivered together with the FTC proposed merger consent in early May. ExxonMobil accepted the deal on May 3. Sheffield didn’t resist the deal at the time, which might have delayed the benefits of the merger as well as Pioneer’s investors, employees, and the larger oil and gas community. Instead, he published a 23-page complaint against the FTC on May 28. Its worth taking a deeper look at this story, remarkable in so many ways.

Scott Sheffield’s History

Sheffield has worked in oil and gas for 40 years, and is recognized as a thought leader. He was deeply engaged in the shale revolution, and was involved in lifting the U.S. crude oil export ban in 2015. He headed Parker & Parsley when it merged with Mesa to form Pioneer Natural Resources in 1997. Sheffield was CEO of Pioneer until he stepped down in 2016, only to return in 2019.

Pioneer eventually became the largest oil producer in the Permian. In 2022, Pioneer was mentioned by EDF as one of the leaders in addressing greenhouse gas (GHG) emissions in the U.S. Sheffield was honored as a Hall of Fame Inductee in January 2013 by the Permian Basin Petroleum Museum. He also won a Distinguished Service Award in 2014 by the Texas Oil and Gas Association.

Sheffield was acknowledged by U.S. and international business as a “straight-shooter unafraid of the limelight” by Hart Energy.

What are FTC’s responsibilities?

This comes straight from the FTC website:

“The FTC enforces federal consumer protection laws that prevent fraud, deception and unfair business practices. The Commission also enforces federal antitrust laws that prohibit anticompetitive mergers and other business practices that could lead to higher prices, fewer choices, or less innovation.”

In short, in the free market FTC’s job is to promote competition and protect consumers from unfair business practices.

A common role for FTC is the antitrust law, which seeks to limit one company’s market power or monopoly—to encourage competition. Mergers and Acquisitions (M&As) are often examined in this respect, particularly large mergers.

The FTC Order Against Scott Sheffield

The FTC issued a consent order as part of the merger approval for ExxonMobil and Pioneer. Taken from the FTC website, here are the main points of the order:

· The action resolved antitrust concerns surrounding the merger.

· It prevented Scott Sheffield from a seat on the new company’s board of directors, or serving in any advisory capacity.

· The purpose is to stop Sheffield attempts to collude with OPEC or OPEC+ to reduce oil and gas production, which would mean higher prices at gas pumps, and boost his own company profits.

· “While at Pioneer, Sheffield sought to align oil production across the Permian Basin in West Texas and New Mexico with OPEC+ via public statements, text messages, in-person meetings, and WhatsApp conversations.”

· Through hundreds of text messages exchanged with representatives and officials of OPEC, Sheffield discussed “crude oil market dynamics, pricing and output.”

It’s noteworthy that the FTC voted 3-2 to accept the order and to put it on the record for public comment. With the vote this close, if any misinterpretation of Sheffield’s actions were revealed, it might have reversed the result of the vote (see discussion below).

Scott Sheffield hits back

Sheffield remained silent when the consent order from FTC came down on May 3, 2024. But on May 28, the straight-shooter defended himself against his accusers in a 23-page filing to FTC. Here are the main points of the letter, as described in a detailed article by Politico:

· The FTC case “is built on a false narrative,” Sheffield said, and the FTC had unjustly smeared him.

· The allegations of collusion were false. The FTC misrepresented Sheffield’s communications with competitors, and gave him no chance to defend himself.

· The FTC went beyond its mandate and smeared Sheffield unjustly.

· The FTC argument is based on a false narrative, and “a…