Dear FTC: Energy industry mergers are good for America

OPINION:

Global market realities and Biden administration policies are coming together in a way that’s accelerated the number of attempts by energy companies to merge. In the main, this is a good thing, beneficial to consumers, the environment, and U.S. energy security.

But some people don’t see it that way. Lina Khan, President Biden’s chair of the Federal Trade Commission, is one of them. She thinks that as companies go, big is bad, and bigger is worse. As such, she is generally opposed to corporate mergers and acquisitions.

As regulatory policy goes, her views are a stretch. It’s well established that size alone is not a legitimate reason for regulators to be concerned about a company. The more important, even paramount issue is the effect that company activities have on the welfare of consumers. In her years atop the FTC bureaucracy, Ms. Khan has tried to turn the consumer welfare standard on its ear.

Her efforts to prevent industry consolidation in vital parts of the economy, including but not limited to the energy sector, have been a drag on growth. And she shows no sign of slowing down, even though her actions helped prolong the period of subpar growth as the pandemic has receded, from which the nation is finally starting to emerge.

Among her other targets, Ms. Khan appears to be looking askance at the proposed merger between Exxon Mobil and Pioneer Natural Resources.

Here are the facts regarding this particular deal, which, if consummated, would create the world’s largest privately held energy company. Industry analysts suggest the combined company would be more efficient and have a smaller environmental footprint than the companies do separately. That, they say, could lead to double-digit returns for investors.

It’s a good deal, like the 1999 Exxon Mobil merger that saw the new company increase in size by 85% in its first 12 years. Over the same period, the S&P 500 grew just 1.5%, and the Dow was up 21%.

Wall Street dreams of that kind of strike. So do the investment funds that manage pension plans and the retirees who set up IRAs and 401(k)s to supplement their Social Security in their golden years. And so do the other independent energy producers who hope someday to be acquired by a larger firm. That’s how successful businesses that employ hundreds of thousands of people and add billions to the gross domestic product are born.

It would benefit consumers but cannot proceed unless the U.S. government approves it. Neither can other deals that would also be a boon to consumers, such as Chevron’s proposed acquisition of Hess or Occidental Petroleum’s purchase of CrownRock.

They should all be approved. Quickly. If they’re not, it won’t be on the merits, but because Ms. Khan’s FTC got in the way, depriving the firms involved of what should be an impartial consideration of their impact on consumer welfare, free from political influence.

It’s not clear that Ms. Khan can manage that. She has pushed the commission to break new ground and make new rules, leading to high-profile courtroom losses for the agency.

To date, the FTC has made two requests for merger information from Exxon and Pioneer, possibly prompted by a letter of concern from Senate Majority Leader Charles E. Schumer and 22 of his fellow Democrats. That’s a red flag, signaling energy industry consolidation opponents may be falling back on a political pressure campaign to prevent the deal. Nothing about the deal’s economics provides a reason to block it.

Bureaucratic activism of the type Ms. Khan favors often leads to unjust court actions of no benefit to consumers, investors, and the economy as a whole. It’s a form of political pressure that interferes with the process, just like Mr. Schumer’s letter on Exxon Pioneer. Regulatory approval should be based on economic issues alone, such as consumer and market factors, rather than opposition to the success of capitalism.

Any FTC investigation must be fair and impartial, as the law requires. Decisions should be based on established antitrust law and the well-established consumer welfare standard, supported by decades of Supreme Court decisions. This will ensure the competitiveness of the U.S. energy market and the benefits it provides to consumers.

• Todd Tiahrt is a former congressman and member of the House Appropriations Committee, which oversees the FTC’s funding.