FTC Grants in Part, Denies in Part EnCap, Verdun, XCL Petition to Modify Order

The Federal Trade Commission has approved in part and denied in part a petition to modify a final consent order involving the acquisition of EP Energy LLC (EP Energy) by a subsidiary of EnCap Capital Fund XI, L.P. and EnCap Investments L.P. (together, EnCap).

The 2022 consent order settled charges that the acquisition would harm competition for the sale of Uinta Basin waxy crude oil to Salt Lake City area refiners. The consent order required the divestiture of EP Energy’s entire business and assets in Utah, and required EnCap and its subsidiaries Verdun Oil Company II LLC (Verdun) and XCL Resources Holdings, LLC (XCL) to obtain prior approval from the FTC before engaging in certain acquisitions in the seven Utah counties comprising the Uinta Basin.

EnCap, Verdun, and XCL filed a petition with the FTC earlier this year that sought to remove the prior-approval requirement. To support their request, the parties noted in the petition that XCL sold all its interests in the Uinta Basin and currently none of the parties compete in the market at issue in the complaint.

In reviewing the petition to reopen and modify the order, the Commission determined that the 2022 order warranted some modification. The FTC’s order modifying the petition removes the prior-approval requirement for any reentry into the market by EnCap, Verdun, or XCL, as requested by the parties, and replaces the prior-approval requirement with a prior-notice requirement for any subsequent transaction involving oil- or gas-producing assets in the Uinta Basin area.

Under the prior-notice requirement, EnCap, Verdun, and XCL will be required to notify the FTC of subsequent acquisitions involving oil- or gas-producing assets in the Uinta Basin area after they reenter the market, similar to existing reporting provisions under the Hart-Scott-Rodino Act.

Requiring prior notice instead of prior approval helps alleviate the concerns underlying the petition relating to delays and uncertainty of prior approval while balancing the FTC’s mission to maintain competitive markets.

The Commission vote approving the petition in part and denying it in part was 2-0-1, with Commissioner Melissa Holyoak recused.