Big 3 Accused of Price-Fixing for Fracking

HOUSTON (CN) - Halliburton, Schlumberger and Baker Hughes used their 60 percent share of U.S. fracking services to fix and raise prices, a petroleum company claims in a federal antitrust class action.

Cherry Canyon Resources accuses the three companies of jacking up the price for their fracking pressure pumping services, which involves injecting water, sand and chemicals into a well to break apart rock and release oil and gas.

Cherry Canyon claims the Justice Department said on July 25 that it "is investigating the possibility of anticompetitive practices involving pressure-pumping services performed on oil and gas wells."

Halliburton and Baker Hughes acknowledged they are targets of the DOJ investigation even before the Justice Department announced it, according to the complaint.

"Schlumberger, the second largest provider of Fracking Pressure Pumping Services in the United States, on the other hand, gave no public comment on the investigation," the complaint states.

The three defendants, all based in Houston, are known as the "Majors" in the industry because they dominate the U.S. market, and are the only companies that provide full-service fracking services throughout the United States, the complaint states.

Halliburton is the largest provider of fracking pressure pumping services in the United States with a 26 percent market share; Schlumberger and Baker Hughes are the second and third largest providers with 19 and 13 percent market shares, according to the complaint.

Cherry Canyon claims a spike in demand for fracking services in 2011 brought new "independent" companies into the field, and there are now about 100 of them.

"While the new entrants could not offer the breadth of services or geographic reach to compete with the Majors, the new entrants in the market, the independents, caused a temporary oversupply of Fracking Pressure Pumping Services," the complaint states. "This temporary 'disruption' of the market (from defendants' perspective) led to a modest decrease in prices and a modest decrease in defendants' market share." (Parentheses in complaint.)

In response, the Majors successfully "colluded to restrict and manipulate supply in order to increase prices and market share," Cherry Canyon claims.

Cherry Canyon says it paid artificially high prices for the Majors' fracking services due to the conspiracy.

It seeks treble damages for the class for antitrust violations under the Sherman Act and Clayton Act, and an injunction to stop the price fixing.

It is represented by Robert Hilliard with Hilliard Munoz Gonzales of Corpus Christi.

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