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Federal regulators alleged Thursday that Scott Sheffield, the founder and longtime CEO of a major U.S. oil producer, conspired with the Organization of the Petroleum Exporting Countries (OPEC) and its allies to inflate prices.
According to the FTC, Sheffield, who was then CEO of Pioneer Natural Resources, exchanged hundreds of text messages with officials from the Organization of the Petroleum Exporting Countries (OPEC), the Saudi Arabia-led oil cartel, discussing prices, production and oil market trends.
Regulators allege Sheffield used WhatsApp conversations, in-person meetings and public statements to “seek to align” oil production in Texas' Permian Basin with production by OPEC and OPEC+, the broader grouping that includes Russia.
“Sheffield's statements were designed to advance Pioneer's interests, and the interests of OPEC and OPEC+ oil companies, at the expense of American families and businesses,” the FTC's complaint said.
Unlike According to OPEC countries, U.S. oil production should be determined by the free market, not by coordination among major countries.
Sheffield will step down as CEO of Pioneer in December 2023. The company he founded is the largest producer in the Permian Basin, the prolific oil field that has made the United States the world's largest oil and gas producer.
The FTC on Thursday approved Pioneer's $60 billion sale to Exxon Mobil, but the terms of the deal included a ban on Sheffield from serving on Exxon's board of directors or serving as an adviser.
“Mr. Sheffield's past conduct makes it clear he should not be anywhere near Exxon's board of directors,” Kyle Mack, deputy director of the FTC's Bureau of Competition, said in a statement. “American consumers should not be paying unfair prices at the pump just to line the pockets of company executives.”
The FTC alleges that Sheffield “engaged in a campaign to orchestrate anti-competitive coordinated production cuts” between U.S. oil producers and OPEC and OPEC+.
Asked about reports that the FTC was considering recommending criminal charges against Sheffield, FTC spokesman Douglas Farrar told CNN, “The FTC has a responsibility to prosecute potentially criminal conduct, and we take that duty very seriously.”
Regulators acknowledged that Sheffield had not hidden his efforts to “match” U.S. production with OPEC's, pointing to public comments in which he urged U.S. rivals to be “disciplined” on production.
“But beyond publicly signaling to his U.S. counterparts, Sheffield met privately on multiple occasions with senior OPEC officials to provide assurances that Pioneer and its Permian Basin rivals were working hard to keep oil production artificially low,” the FTC said.
According to the FTC, Sheffield lobbied the Railroad Commission of Texas to impose production limits on Permian oil production early in the 2020 COVID-19 pandemic, and the cuts caused crude oil prices to rise above market levels.
The FTC also said that as Sheffield was discussing efforts to adjust production with other Texas producers, Pioneer's CEO said, “If Texas led the way, maybe we could get OPEC to cut production. Maybe Saudi Arabia and Russia would follow. That was our plan.”
“I was trying to use OPEC+ tactics to get a bigger OPEC+,” Sheffield added, according to the regulator.
Global oil prices fell by about 50% in early 2020 as pandemic lockdowns crashed demand for gas and aviation fuel. OPEC+ responded by drastically cutting production.
Pioneer issued a statement defending Sheffield, arguing that “it was not the intent or effect of his communications to circumvent the laws and principles that protect market competition.”
“We disagree with and are surprised by the FTC's complaint,” Pioneer said in a statement. “Mr. Sheffield and Pioneer believe the FTC's complaint reflects a fundamental misunderstanding of U.S. and global oil markets and misreads the nature and intent of Mr. Sheffield's actions.”
But Pioneer and Sheffield indicated they did not intend to contest the FTC's findings and said they had “not taken any steps to block the completion of the merger.”
Exxon said in a statement that it learned of the allegations from the FTC.
“They are completely inconsistent with our business practices,” Exxon said, noting that after the company turned over more than 1.1 million documents in response to the FTC's request, the agency “raised no concerns about our business practices.”
Exxon announced it would not add Sheffield to its board of directors in response to the FTC's concerns. The company said the Pioneer deal was expected to close on Friday.
This story has been updated with additional information.
