Exxon-Xto Deal Forces Congress to Reconsider Natural Gas

David Wethe and Zachary R. Mider. Marching Band, Quail Hunt Helped Exxon’s Tillerson to XTO Deal. 15 Dec 2009. Bloomberg.

See also: Jean-Michel Basquiat. Beef Ribs Longhorn.

Editor’s Note. 24 Oct 2023. Bloomberg and Times UK content is only for paid subscribers. Public access is possible through the New York Public Library, onsite only at the Thomas Yoseloff Business Center. Find an academic library near you.

“The story of Exxon Mobil Corp.’s acquisition of XTO Energy Inc, which culminated in a $31 billion takeover agreement, can be traced to the University of Texas Longhorns marching band and a quail hunt.

Rex Tillerson was a drummer for the band in the 1970s. On the trumpet was Jack Randall, a fellow engineering major. Three decades later on the advice of Randall, an oil and gas investment banker and a member of XTO’s board of directors, Tillerson, Exxon’s chief executive officer, invited XTO Chairman Bob Simpson to hunt quail on Exxon Mobil’s ranch in South Texas, said a person with knowledge of the events.”

David Wethe and Zachary R. Mider. Marching Band, Quail Hunt Helped Exxon’s Tillerson to XTO Deal. 15 Dec 2009. Bloomberg.

See also: Ben Hoyle, Marc Bennetts, Marcus Leroux, Catherine Philp. How a modest boy scout became a top Trump. 17 Dec 2016. The Times UK.

“When Rex Tillerson, the chairman and chief executive of ExxonMobil, arrived at university he struck his peers as a likeable, hardworking but unremarkable small-town boy who did nothing to stand out from the crowd.

Then one night a group of senior boys tried to throw him in the fountain at the University of Texas campus in Austin and discovered that there was more to the first-year civil engineering student than met the eye.”

Ben Hoyle, Marc Bennetts, Marcus Leroux, Catherine Philp. How a modest boy scout became a top Trump. 17 Dec 2016. The Times UK.

(Editor’s Note 25 Oct 2023: What happened to Rex Tillerson)

See also: Amanda Luhavalja. ‘How not to do M&A’: A look back at Exxon’s deal for XTO 10 years later. 16 Dec 2019. S & P Global Intelligence.

“[W]hat they did not foresee was that the success of fracking ultimately would lead to an oversupply that made the purchase price [for XTO] seem high looking backward,” Price Futures Group analyst Phil Flynn said in an email.

Calling the XTO acquisition “the AOL-Time Warner merger of the energy sector,” Robert W. Baird & Co. analyst Ethan Bellamy said the XTO deal was timed poorly.

“In 2015, Tillerson argued that the timing was off by a year or two. Make that a decade or two. One cliché in the investing world is ‘never wrong, just early.’ I think you could say that Exxon was just wrong. Natural gas supply has done nothing but rise since that deal,” Bellamy said.

Amanda Luhavalja. ‘How not to do M&A’: A look back at Exxon’s deal for XTO 10 years later. 16 Dec 2019. S & P Global Intelligence.

Tillerson became Secretary of State on February 1, 2017. An unconventional choice for the role, Tillerson’s tenure was characterized by a lack of visibility in comparison to his predecessors in the traditionally high-profile position of Secretary of State.^[10][11][12] During Tillerson’s tenure, new applications to work for the Foreign Service fell by 50 percent, and four of the six career ambassadors as well as 14 of the 33 career ministers, equivalent to military four- and three-star generals, departed.^[13][14]

…In 2013, Tillerson was awarded the Order of Friendship by Putin for his contribution to developing cooperation in the energy sector.^[53][54][55]

… In June 2017, Tillerson said Trump had asked him to “stabilize the relationship (with Russia) and build trust”.^[56]

… In December 2018, President Trump called Tillerson “dumb as a rock” and “lazy as hell” after Tillerson held a speech where he described Trump as “pretty undisciplined”. Trump made similar remarks again in May 2019 after Tillerson reportedly said Trump had been outmaneuvered in a meeting with Vladimir Putin.^[149] Trump had previously lauded Tillerson, describing him as “one of the truly great business leaders of the world” and a “world class player and dealmaker”.^[150][151]

…In September 2023, The Wall Street Journal reviewed previously unreported internal ExxonMobil documents that showed that after the company issued its first press statement acknowledging that burning fossil fuels contributes to climate change in 2006, Tillerson and other company executives sought to diminish public concern about climate change by casting doubt on the severity of climate change impacts. (See Exxon Knew below)

https://en.m.wikipedia.org/wiki/Rex_Tillerson

See also: Joel Kirkland. Exxon-Xto Deal Forces Congress to Reconsider Natural Gas. 25 Jan 2010. New York Times.

… Exxon’s decision in December to purchase Fort Worth, Texas-based XTO Energy, one of the nation’s largest gas producers, could mark a dramatic shift in the way Washington understands domestic energy supply.

… Congress has long been undecided about where natural gas should fit into the energy-supply pie. Coal has dominated as a fuel source for electricity generators. More than 100 nuclear plants supply about 20 percent of U.S. power, and natural gas supplies about 20 percent.

… Gas prices skyrocketed after Hurricane Katrina hit in 2005, and since then prices have been a roller coaster for producers and consumers.

Deal could give Exxon new clout on climate policy

If the merger becomes real, Exxon will be the largest natural gas producer in the country, controlling large chunks of acreage in the most promising onshore gas fields in the United States. Texas, Louisiana, Oklahoma, Arkansas and the Appalachian regions of Pennsylvania and New York are the epicenter of shale gas, coalbed methane and tight-sand gas formations.

…Ceres has pressed Exxon to reveal more to shareholders about the long-term financial risks it faces due to climate change and government policies aimed at targeting oil consumption. Logan said investor activists have filed those resolutions again, hoping Exxon’s board will heed their concerns and open up the dialogue.

…Exxon has been more outspoken about climate change under CEO Rex Tillerson, who has been less willing than his predecessor, Lee Raymond, to completely dismiss it as a policy challenge.

…”Exxon has minimal investments in non-fossil fuel energy, and it has played a negative role historically in the climate debate,” said Ceres’ Logan. “There’s real concern about the company’s strategy.”

Exxon is expanding its gas drilling, Logan said, but doubling down in the Canadian oil sands, where a significant percentage of Exxon’s new oil reserves are located. Environmental groups have criticized Exxon and the parade of oil companies developing Alberta’s fields for bankrolling a massively dirty, greenhouse gas-heavy and water-intensive oil project.

… Tillerson and XTO Energy CEO Bob Simpson told the congressional panel they could support a federal requirement that producers disclose those chemicals. But they said additional U.S. EPA regulation — or an outright ban on the process to protect drinking water — would bring a quick and certain end to unconventional gas development in the United States. Gas producers that use the technique the industry refers to as “fracking” and use horizontal drilling to extend the reach of gas rigs maintain the process is safe and poses no threat to nearby water tables.

Questions have been raised by environmental and local groups.

Joel Kirkland. Exxon-Xto Deal Forces Congress to Reconsider Natural Gas. 25 Jan 2010. New York Times.

See also: Hart Energy. Deal of the Year: Making the Elephant Dance: ExxonMobil’s acquisition of XTO-the M&A Deal of the Year-validates natural gas as a long-term energy source and crowns U.S. unconventional resource plays. 1 Aug 2010. Hart Energy.

Origin of a Deal

The seeds for the deal started some 40 years ago when ExxonMobil CEO Tillerson and Jefferies & Co.’s Jack Randall, co-founder of the asset advisory firm Randall & Dewey, were classmates at the University of Texas. Both were in the civil engineering program and in the marching band, Tillerson on drums and Randall on trumpet. They knew each other well and remained in touch through the years.

…Globally, ExxonMobil has vast swaths of mostly raw acreage prospective for shale gas, some 7 million acres spread throughout Poland, Hungary, Germany and Argentina. In Canada, the company is the largest Horn River Basin leaseholder. Most of its gas holdings in the U.S., however, were conventional. Its unconventional positions included 145,000 acres in the Marcellus, and 50,000 each in the Haynes­ville and Eagle Ford shales.

Hart Energy. Deal of the Year: Making the Elephant Dance: ExxonMobil’s acquisition of XTO-the M&A Deal of the Year-validates natural gas as a long-term energy source and crowns U.S. unconventional resource plays. 1 Aug 2010. Hart Energy.

Regulatory Issues

In July 2013, XTO agreed with the U.S. Environmental Protection Agency to pay a $100,000 fine for a November 2010 water spill at a Pennsylvania water recycling operation.^[37] In September 2013, the Pennsylvania Attorney General filed criminal charges against XTO, stemming from this incident.^[38]

In October 2013, the federal Office of Natural Resources Revenue issued a $648,000 civil penalty against XTO for not providing data regarding a federal lease in Kansas.^[39] XTO has stated that it did provide the required records, but that the process was time-consuming.^[39] As of 2013, XTO Energy had requested a hearing on the matter.^[39]

In April 2015, a study published by researchers at Southern Methodist University (SMU) in Dallas allegedly connected two XTO-operated wastewater disposal wells with a series of earthquakes in Azle, Texas, occurring in 2013.^[40] In August 2015, preliminary findings by investigators with the Texas Railroad Commission found a disposal well operated near Azle by XTO Energy was unlikely to have caused the seismic activity, which contradicted the SMU study.^[41] In November 2015, the final decision by the Texas Railroad Commission unanimously agreed with hearing examiners that there was not enough evidence to support findings that the wells contributed to seismic activity and that XTO should be able to maintain its permit for the wells.^[42][43][44]

https://en.m.wikipedia.org/wiki/XTO_Energy

Exxon Knew

“What we found is that between 1977 and 2003, excellent scientists within Exxon modeled and predicted global warming with, frankly, shocking skill and accuracy only for the company to then spend the next couple of decades denying that very climate science.”

“I think this new study is the smoking gun, the proof, because it shows the degree of understanding … this really deep, really sophisticated, really skillful understanding that was obscured by what came next,” said Harvard Professor Naomi Oreskes.

Alice McCarthy. Exxon disputed climate findings for years. Its scientists knew better. 12 Jan 2023. The Harvard Gazette.

See: Exxon Mobil Corporation

See: Gasland Debate

See: Exxon Confronts Nuns, Calpers Over Global Warming Plans, Boskin

See: U.S. Speaker Nancy Pelosi: The Gavel: Draining The Swamp

See: Ceres Principles – Corporate Environmental Conduct

See: The top five stories of the year [2010] for climate hawks

See: BP chief hails American breakthrough in gas supplies from shale rocks

See: Fueling Washington

See: The Next Drilling Disaster?

See: This Website is a Crash Course In Fracking

See: Affirming Gasland

See: EPA Findings on Hydraulic Fracturing Deemed “Unsupportable”

See: Coalbed Methane Development: The Costs and Benefits of an Emerging Energy Resource

See: Natural gas: the commodity world’s ugly duckling

See: Energy & Commerce Committee Investigates Potential Impacts of Hydraulic Fracturing

See: Hydraulic Fracturing: History of an Enduring Technology

See: Economic Implications of Marcellus Shale Natural Gas Development: Potential Impacts on Tourism, Agriculture, and Housing

See: Catskill Citizens | More Damning Evidence About Fracking