WSJ Opinion -- FTC smears Scott Sheffield, former CEO of Pioneer Natural Resources ...............................
WSJ
OPINION
REVIEW & OUTLOOK
May 9, 2024
The FTC Smears Scott Sheffield
Lina Khan’s agency trashes an oil executive on dubious evidence.
By The Editorial Board
Americans rightly prize due process under the law, but today’s federal government often wields power in arbitrary and ugly ways. Consider the case of the Federal Trade Commission and Scott Sheffield, the former CEO of Pioneer Natural Resources Co.
The Democratic majority on the FTC last week issued an eight-page complaint accusing Mr. Sheffield of attempting to collude with the Organization of the Petroleum Exporting Countries (OPEC) to increase oil prices. They also approved a consent decree barring Mr. Sheffield from serving on Exxon Mobil’s board following its acquisition of Pioneer.
According to the complaint, Exxon’s acquisition would violate antitrust laws “by giving Mr. Sheffield a larger platform from which to pursue his anticompetitive schemes.” The FTC more or less ordered Exxon to cashier Mr. Sheffield as a condition of merger approval.
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We’ve never heard of such a demand in government merger reviews, and it’s especially troubling given the thin evidence on which the FTC bases its allegations. FTC Chair Lina Khan is smearing Mr. Sheffield, a shale-fracking pioneer, and denying him due process.
The complaint says Mr. Sheffield tried to coordinate output and prices with OPEC and U.S. producers. Private correspondence between Mr. Sheffield and OPEC representatives is redacted from the complaint, but the public statements the FTC cites don’t support its case.
Take the claim that Mr. Sheffield “threatened” other oil producers by telling the Financial Times in autumn 2021 that “everybody’s going to be disciplined, regardless of whether it’s $75 Brent, $80 Brent, or $100 Brent” and “all the shareholders that I’ve talked to said that if anybody goes back to growth, they will punish those companies.”
This wasn’t a threat. Mr. Sheffield was analyzing the oil market, as executives are often asked to do. He has a First Amendment right to express his opinion, and in any case he lacked the power to punish competitors. The context of his remarks is also notable.
At the time, President Biden was demanding that OPEC ramp up production to contain rising gasoline prices. Mr. Sheffield in the same interview criticized Biden officials for trying “to slow down US drilling in any way they can,” including with a moratorium on leasing on federal lands and said that they would “rather import crude oil from OPEC.” All true.
The FTC omitted these remarks, no doubt because they contradict its collusion conceit. Mr. Sheffield wasn’t trying to suppress U.S. oil production. President Biden was, even as his Administration threatened antitrust action if oil and gas companies didn’t lower prices at the pump. Is Ms. Khan retaliating against Mr. Sheffield for criticizing the Administration’s policies?
According to the FTC, Mr. Sheffield also showed “publicly-stated alignment” with OPEC by saying in 2023 that “I’ve followed OPEC closer than almost any CEO in the history of our industry.” So tracking competitors is now collusion?
It’s true that Mr. Sheffield and others lobbied the Railroad Commission of Texas when oil prices plunged early in the pandemic to impose output restrictions on producers in the Permian basin. We criticized that idea at the time in part because it might have propped up weaker producers, ironically at the expense of more efficient ones like Pioneer.
But the quotas were never adopted and wouldn’t have affected global oil prices when Russia and the Saudis were flooding the market. Note, too, that Mr. Sheffield’s misbegotten efforts were intended to bolster the U.S. shale industry so frackers could survive to produce another day -- a goal not shared by progressives who were cheering their demise.
The FTC also ignores that Pioneer's daily production more than doubled between 2019 and 2023, so the company obviously wasn’t colluding with OPEC to cut output. The real collusion against U.S. production is by progressive investors and the climate lobby, which have been abetted by Biden regulators.
Recall the 2021 campaign by progressive hedge fund Engine No. 1 to oust Exxon board members, an effort supported by public pension funds and proxy advisory firms. Progressives have also pushed shareholder resolutions to force oil and gas companies to reduce production, which have been allowed by the Securities and Exchange Commission.
On the publicly available evidence, the FTC’s accusations against Mr. Sheffield lack merit, which may be why Ms. Khan didn’t file a complaint against him. Instead, she maligned him in a consent decree with Exxon, giving him no recourse to contest the charges. Someone also leaked to the press that the FTC plans to refer Mr. Sheffield to the Justice Department for a potential criminal investigation, despite no evidence of illegality.
This case is a nasty smear, and it’s a new low for the Khan FTC. But unchecked regulatory power -- amplified and celebrated by a compliant media -- inevitably becomes abusive.
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