Regulators sign off on $64.5 billion Exxon-Pioneer merger

WASHINGTON (CN) — Federal regulators signed off Thursday on Exxon Mobil Corp.’s $64.5 billion acquisition of Pioneer Natural Resources but barred Pioneer’s founder from serving on Exxon’s board of directors.

The Federal Trade Commission issued a consent order resolving its antitrust complaint regarding the merger, which will create a massive fracking operator in Texas.

The deal expands Exxon’s operations in the Permian Basin, a large oilfield between Texas and New Mexico that accounted for 18% of all U.S. natural gas production in 2022.

Pioneer operates roughly 850,000 net acres in the area of west Texas, which will be combined with Exxon’s 570,000 net acres. The merger will create contiguous fields that will allow Exxon to cut costs.

Regulators’ main change to the deal was to block Pioneer CEO Scott Sheffield from getting on Exxon’s board of directors or serving in any advisory capacity after the merger.

The FTC, in an administrative complaint, said Sheffield had attempted to collude with the Organization of Petroleum Exporting Countries to reduce output of oil and gas, thus raising gas prices for consumers and inflating profits. 

“Mr. Sheffield’s past conduct makes it crystal clear that he should be nowhere near Exxon’s boardroom. American consumers shouldn’t pay unfair prices at the pump simply to pad a corporate executive’s pocketbook,” Kyle Mach, deputy director of the FTC’s Bureau of Competition, said in a statement. “The FTC will remain vigilant in its enforcement efforts to protect competition in these vital markets.”

The FTC’s decision to move forward with a consent order was split 3-2. Both sides agreed Sheffield’s behavior was a problem for the industry and should be investigated further. 

The majority believed Sheffield’s actions were a critical component to weighing the effects of the merger on competition.

“This complaint and consent decree reflect what I have long believed to be true: the management and business intentions of merging parties should matter to our assessment of the likely effects of a merger on competition,” Commissioner Rebecca Slaughter said in a statement. “When a company agrees, as a condition of a merger, to elevate one of the industry’s notorious public and private advocates of output coordination to its board, we can and should take that seriously as a competitive effect of the merger.”

The dissent argued that the consent order should not consider Sheffield’s behavior because it regards his work at Pioneer and the commission should have focused more on Exxon’s incentive to try the same tactics. 

“[W]e are especially concerned with the Complaint’s focus on Sheffield’s past conduct at Pioneer as an indicator of Exxon’s future actions, without any discussion of whether Exxon has incentives to engage in the same behavior,” Commissioners Melissa Holyoak and Andrew Ferguson said in a joint statement. “Focusing on individuals’ conduct divorced from a firm’s incentives could have troubling ramifications for future enforcement actions.”

Tyson Slocum, director of the energy program for progressive think tank Public Citizen, called on Congress to investigate attempts to drive profits and hurt consumers in the oil industry.

“The accusations that will reportedly be included in the FTC’s consent decree are explosive, pointing to efforts that would undermine the proper functioning of the global market for oil, raising prices for American consumers,” he said in a statement. “Big Oil must be held accountable for any conspiracy by or among American oil companies and OPEC members.”

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