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[Federal Register Volume 90, Number 12 (Tuesday, January 21, 2025)]
[Notices]
[Pages 7159-7171]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-01252]

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DEPARTMENT OF JUSTICE

Antitrust Division

United States of America v. XCL Resources Holdings, LLC, Verdun 
Oil Company II, LLC, and EP Energy LLC; Proposed Final Judgment and 
Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, 
Stipulation, and Competitive Impact Statement have been filed with the 
United States District Court for the District of

[[Page 7160]]

Columbia in United States of America v. XCL Resources Holdings, LLC, 
Verdun Oil Company II, LLC, and EP Energy LLC, Civil Action No. 1:25-
cv-00041. On January 7, 2025, the United States filed a Complaint 
alleging that XCL Resources Holdings, LLC (``XCL''), Verdun Oil Company 
II, LLC (``Verdun''), and EP Energy LLC (``EP Energy'') (together 
``Defendants'') violated the notice and waiting period requirements of 
section 7A of the Clayton Act, 15 U.S.C. 18a, commonly known as the 
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (``HSR Act'' or 
``Act'') by transferring beneficial ownership of EP Energy to XCL and 
Verdun during the waiting period, which constitutes gun jumping.
    The Proposed Final Judgment, filed at the same time as the 
Complaint, requires: (i) XCL and Verdun jointly and severally to pay a 
civil penalty in the amount of $2,842,188.50, and EP Energy to pay a 
civil penalty in the amount of $2,842,188.50 within 30 days of entry of 
the Final Judgment; (ii) Defendants to refrain from certain conduct as 
laid out in the Final Judgment; and (iii) Defendants to design, 
maintain, and operate a compliance program to ensure compliance with 
the Final Judgment and the Antitrust Laws, and certify observance of 
these compliance provisions to the United States within 60 days of 
entry of the Final Judgment.
    Copies of the Complaint, proposed Final Judgment, and Competitive 
Impact Statement are available for inspection on the Antitrust 
Division's website at http://www.justice.gov/atr and at the Office of 
the Clerk of the United States District Court for the District of 
Columbia. Copies of these materials may be obtained from the Antitrust 
Division upon request and payment of the copying fee set by Department 
of Justice regulations.
    Public comment is invited within 60 days of the date of this 
notice. Such comments, including the name of the submitter, and 
responses thereto, will be posted on the Antitrust Division's website, 
filed with the Court, and, under certain circumstances, published in 
the Federal Register. Comments in English should be directed to 
Maribeth Petrizzi, Special Attorney, United States, c/o Federal Trade 
Commission, 600 Pennsylvania Avenue NW, CC-8416, Washington, DC 20580 
or by email to [email protected].

Suzanne Morris,
Deputy Director of Civil Enforcement Operations.

United States District Court for the District of Columbia

    United States of America, c/o Department of Justice, Washington, 
DC 20530 Plaintiff, v. XCL RESOURCES HOLDINGS, LLC, 600 N. Shepherd 
Drive, Suite 390, Houston, TX 77007; VERDUN OIL COMPANY II LLC, 945 
Bunker Hill Road, Suite 1300, Houston, TX 77024 and EP ENERGY LLC, 
945 Bunker Hill Road, Suite 100, Houston, TX 77024 Defendants. Civil 
Action No. 1:25-cv-00041.

Complaint for Civil Penalties and Equitable Relief for Violations of 
the Hart-Scott-Rodino Act

    The United States of America, acting under the direction of the 
Attorney General of the United States, brings this civil antitrust 
action for equitable and monetary relief in the form of civil penalties 
against the Defendants XCL Resources Holdings, LLC (``XCL''),Verdun Oil 
Company II, LLC (``Verdun''), and EP Energy LLC (``EP''), and alleges:

Nature of the Action

    1. This case involves violations of federal antitrust obligations 
under Section 7A of the Clayton Act, 15 U.S.C. 18A, commonly known as 
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (``HSR Act''). 
Under the HSR Act, both parties must make a pre-merger notification 
filing to the federal antitrust agencies and observe the corresponding 
waiting-period obligations before transferring any ownership or control 
of the to-be-acquired business to the acquirer. This waiting period 
ensures that the parties to a proposed transaction remain as separate, 
independent entities during the pendency of the antitrust review. This 
suspensory waiting period allows the enforcement agencies the 
opportunity to investigate the transaction and, where applicable, 
pursue an enforcement action, before consolidation of the businesses 
and assets occurs.
    2. In this matter, Verdun and EP entered a proposed transaction 
that was subject to the HSR Act's notification and waiting-period 
requirements, and each Defendant made the required pre-merger 
notification filing with the antitrust agencies. The Defendants failed, 
however, to satisfy their waiting-period obligations. Instead, upon 
executing the transaction agreement, EP allowed Verdun and its sister 
company, XCL, to assume operational and decision-making control over 
significant aspects of EP's day-to-day business operations. This was no 
mere technical violation; the Defendants' conduct effectively allowed 
one competitor to acquire beneficial ownership, including control over 
key competitive decisions of the other, before the transaction closed, 
which is precisely what the HSR Act prohibits.
    3. Pursuant to a Membership Interest Purchase Agreement dated July 
26, 2021 (``Purchase Agreement''), Verdun agreed to acquire EP, a 
company engaged in crude oil production in the Uinta Basin area of Utah 
and in the Eagle Ford area of Texas. Verdun is under common management 
with XCL, and both companies are engaged in crude oil production: 
Verdun in the Eagle Ford area and XCL in the Uinta Basin. The purchase 
price for the proposed transaction was approximately $1.4 billion. As 
part of the transaction, EP's operations in the Uinta Basin were to be 
transferred to XCL, and XCL would pay the portion of the purchase price 
attributed to the Uinta Basin assets.
    4. The proposed transaction triggered a filing obligation under the 
HSR Act. As such, the Defendants were required to make premerger 
notification filings with the Federal Trade Commission (``FTC'') and 
Department of Justice and to observe the prescribed waiting periods 
before transferring ownership of EP to XCL and Verdun. The Defendants' 
parent entities made premerger notification filings for the Defendants' 
proposed transaction as required by the HSR Act. After receiving the 
premerger notification filings, the FTC investigated the proposed 
transaction and ultimately obtained a consent agreement addressing the 
FTC's concerns about the impact of the transaction on competition in 
the market for the development, production, and sale of waxy crude oil 
in the Uinta Basin area of Utah. The consent agreement was entered on 
March 25, 2022, and required the Defendants to divest all of EP's Utah 
operations to a qualified third-party operator, Crescent Energy, to 
remedy the potential lessening of competition in the alleged crude oil 
market.
    5. The HSR Act's waiting-period obligation for this transaction 
went into effect on July 26, 2021, the date the Defendants executed the 
Purchase Agreement, and continued through March 25, 2022, the date the 
FTC accepted the consent agreement and granted termination of the 
waiting period.
    6. For a portion of this waiting period, however, the Defendants 
disregarded their obligations under the HSR Act and

[[Page 7161]]

transferred significant operational control over EP's ordinary-course 
business to XCL and Verdun. This conduct violates the HSR Act and is 
often referred to as ``gun jumping'' or a ``gun-jumping violation.''
    7. Specifically, the Purchase Agreement provided for the immediate 
transfer of control over key aspects of EP's business to XCL and 
Verdun, including granting XCL and Verdun approval rights over EP's 
ongoing and planned crude oil development and production activities and 
many of EP's ordinary-course expenditures. Once the Purchase Agreement 
was signed, by virtue of these approval rights, XCL and Verdun quickly 
began gun jumping by exercising operating control over significant 
aspects of EP's business. Indeed, XCL put an immediate halt to EP's new 
well-drilling activities, so that XCL--not EP--could control the 
development and production plans for EP's drilling assets moving 
forward. XCL halted EP's new oil-drilling activities for several weeks, 
from approximately July 26, 2021, to approximately August 16, 2021. On 
approximately August 17, 2021, after the Defendants realized that the 
FTC would investigate the transaction, XCL and Verdun allowed EP to 
resume its own well-drilling and planning activities.
    8. The Defendants' unlawful gun jumping allowed competitors to 
coordinate their activities. Among other things, XCL's temporary 
halting of EP's development activities contributed to EP having crude 
oil supply shortages in September and October 2021 at a time when the 
United States was experiencing significant supply shortages and spiking 
crude oil prices due to sudden demand increases as COVID-19 
restrictions eased. The Defendants anticipated EP's potential supply 
shortages while negotiating the Purchase Agreement, which specifically 
provided that XCL and Verdun--not EP--would bear all costs associated 
with EP's supply shortages. XCL and EP--direct competitors in the 
marketplace--then worked in concert to supply EP's customers in 
satisfaction of EP's customer supply commitments. During this period, 
EP employees effectively reported to their XCL counterparts and 
provided XCL employees with details on customer contracts, supply 
volumes, and pricing terms. XCL employees also coordinated directly 
with EP's customers to discuss EP's supply shortage and to arrange for 
alternative delivery to the customer, which XCL made either from its 
own supplies or from purchases it made on the spot market, to fulfill 
EP's contractual commitments to the customers. EP's customers began 
contacting XCL directly--sometimes excluding EP altogether--to discuss 
EP's supply and delivery commitments to each customer under the 
relevant EP supply contract.
    9. The Purchase Agreement also required EP to submit all 
expenditures above $250,000 for XCL's or Verdun's review and approval. 
These approval requirements applied to many of EP's ordinary-course 
expenditures, and effectively transferred control over a significant 
portion of EP's day-to-day operations to XCL and Verdun. Further, XCL 
and Verdun received and approved expenditure requests from EP falling 
well below the $250,000 threshold outlined in the Purchase Agreement.
    10. XCL also required changes to certain of EP's ordinary-course 
business operations, such as EP's well-drilling designs and its leasing 
and renewal activities. EP also gave XCL almost-unfettered access to 
EP's competitively sensitive business information--including EP's site 
design plans, customer contract and pricing information, and daily 
supply and production reports--in the months after the parties signed 
the Purchase Agreement.
    11. Verdun also coordinated with EP on EP's contract negotiations 
with certain customers in the Eagle Ford production area. Specifically, 
Verdun observed that certain EP contracts included below-market prices 
and directed EP to raise them in the next contracting period. EP 
complied.
    12. The illegal conduct detailed above lasted through October 27, 
2021, when the Defendants executed an amendment to the Purchase 
Agreement, which allowed EP to operate independently once again and in 
the ordinary course of business, without XCL's or Verdun's control over 
its day-to-day operations. Around this time, XCL and Verdun and EP also 
stopped coordinating on customer supply and pricing and ceased 
exchanging competitively sensitive information.
    13. The Defendants' transfer of operational control over key 
aspects of EP's business to XCL and Verdun during the HSR waiting 
period was a transfer of beneficial ownership that constitutes a gun-
jumping violation of the HSR Act. The Defendants were in violation of 
the HSR Act from when the Purchase Agreement was signed, on July 26, 
2021, until the Purchase Agreement was amended, on October 27, 2021, a 
period of 94 days.

Jurisdiction, Venue, and Interstate Commerce

    14. The United States brings this action under Section 7A of the 
Clayton Act, 15 U.S.C. 18a, to recover civil penalties for the 
violation of the HSR Act.
    15. This Court has jurisdiction over the subject matter of this 
action under Section 7A(g) of the Clayton Act, 15 U.S.C. 18a(g), and 
under 28 U.S.C. 1331, 1337(a), 1345, and 1355.
    16. The Defendants are engaged in--and their activities described 
herein substantially affected--interstate commerce.
    17. The Defendants have consented to the personal jurisdiction and 
venue in the District of Columbia for purposes of this action.

The Defendants

    18. Defendant XCL Resources Holdings, LLC is a limited liability 
company organized, existing, and doing business under, and by virtue 
of, the laws of the State of Delaware, with its office and principal 
place of business at 600 N. Shephard Drive, Suite 390 in Houston, 
Texas.
    19. Defendant Verdun Oil Company II, LLC is a limited liability 
company organized, existing, and doing business under, and by virtue 
of, the laws of the State of Texas, with its office and principal place 
of business at 945 Bunker Hill Road, Suite 1300 in Houston, Texas.
    20. Defendant EP Energy LLC is a limited liability company 
organized, existing, and doing business under, and by virtue of, the 
laws of the State of Delaware, with its office and principal place of 
business at 945 Bunker Hill Road, Suite 100 in Houston, Texas.
    21. All Defendants are engaged, among other things, in the 
development, production, and sale of crude oil in the United States.

The HSR Act and Rules

    22. The HSR Act requires certain acquiring persons, and certain 
persons whose voting securities or assets are acquired, to file 
notifications with the Department of Justice and the FTC (collectively, 
the ``federal antitrust agencies'') and to observe a waiting period 
before consummating certain acquisitions of voting securities or 
assets. 15 U.S.C. 18a(a) and (b). Of relevance here, the notice and 
waiting requirements apply if, as a result of the acquisition, the 
acquiring person will ``hold'' assets or voting securities above the 
HSR Act's size of transaction threshold (which was $368.0 million at 
all times relevant to this complaint).

[[Page 7162]]

    23. Under the HSR Act, the FTC promulgated rules defining relevant 
terms and specifying what information must be included in the required 
notification. 16 CFR 801-803. The rules define ``hold'' to mean 
``beneficial ownership, whether direct, or indirect through 
fiduciaries, agents, controlled entities or other means.'' 16 CFR 
801.1(c). While the existence of beneficial ownership will depend on 
the facts in a particular case, practical indicia include controlling 
ordinary-course business decisions, assuming or rejecting contractual 
obligations, obtaining competitively sensitive information, and 
partaking in financial gains and losses.
    24. Through the HSR Act, Congress intended to provide the federal 
antitrust agencies prior notice of, and information about, proposed 
transactions. The HSR Act created a process for premerger notification 
and investigation that does not require assessing beforehand whether 
the proposed transaction is anticompetitive or illegal under the 
antitrust laws. Congress created a suspensory waiting period to provide 
the federal antitrust agencies with the opportunity to investigate a 
proposed transaction and to determine whether to seek an injunction to 
prevent its consummation if the investigation shows that the proposed 
transaction may violate the antitrust laws. Gun-jumping violations 
deprive the enforcement agencies of this opportunity to investigate a 
transaction and seek an injunction before a transaction is completed, 
after which it may be difficult to completely restore competition and 
the acquired company to their pre-transaction states.

The Purchase Agreement

    25. Pursuant to the Purchase Agreement, XCL and Verdun agreed to 
acquire EP for $1.445 billion, with possible adjustments for specified 
conditions. XCL and Verdun each contributed more than $368 million of 
the purchase price, triggering notice and waiting requirements under 
the HSR Act for both companies.
    26. XCL and Verdun's bid to acquire EP's business was contingent on 
XCL and Verdun securing immediate approval rights over EP's ordinary-
course development activities; the Defendants memorialized these rights 
in the Purchase Agreement they signed. As XCL executives noted during 
the Purchase Agreement negotiations, ``[XCL's parent] is providing a 
deposit that more than offsets potential damages from 60 days of 
delayed production and initial operation planning, we moved materially 
on price and included this term in our initial offer sheet, we are 
unable to move off this point.'' (emphasis in original).
    27. The Purchase Agreement restricted EP's discretion to conduct 
its ordinary-course business activities during the period between the 
signing of the Purchase Agreement and the closing of the transaction, a 
period that included the full duration of the HSR Act's applicable 
waiting period.
    28. For example, EP committed ``not to propose, agree to, or 
commence any individual operation on the Assets anticipated to cost in 
excess of Two Hundred Fifty Thousand ($250,000),'' unless XCL or Verdun 
first expressly approved the activity, without any exception for 
ordinary-course transactions.
    29. Further, for the numerous crude oil wells EP was developing, EP 
would ``not conduct any operation in connection with'' those plans 
``unless such operations are expressly permitted pursuant to'' the 
Purchase Agreement ``or are otherwise approved by Purchaser.''
    30. The Purchase Agreement thus prevented EP from continuing with 
its crude oil well-development activities without XCL's or Verdun's 
approval, giving XCL and Verdun control to stop or delay EP from moving 
forward with its production plans in the normal course of its business.
    31. XCL or Verdun had ``sole discretion'' whether to approve any 
actions that were otherwise prohibited by the Purchase Agreement, and 
the Purchase Agreement set forth procedures for granting XCL's or 
Verdun's approval.
    32. In short, these contractual provisions allowed one competitor 
to control the other's ordinary-course business activities relating to 
crude oil production before the transaction closed--a paradigmatic case 
of gun jumping through transfer of beneficial ownership. All this 
occurred during a time when the U.S. market as a whole was facing 
significant supply shortages and multi-year highs in oil prices, 
resulting in Americans paying skyrocketing prices at the pump.
    33. The parties also agreed to shift to XCL and Verdun the 
financial risk for certain EP business activity, which constitutes 
further evidence of gun jumping. The Defendants anticipated that the 
Purchase Agreement restrictions on EP's activities would result in 
crude supply shortages for EP and its customers in the ensuing months 
and could cause EP to breach existing obligations. The Purchase 
Agreement therefore required XCL and Verdun to bear all financial risk 
and liabilities associated with these provisions and shifted to XCL and 
Verdun the financial ramifications of these changes and delays to EP's 
development activities. The Purchase Agreement provided that ``failure 
of Purchaser to approve such matters shall obligate Purchaser to bear 
all risk and liability for any breach or non-compliance under the 
Assets as a result of Purchaser's acts or omissions with respect to 
such failure to approve.''
    34. The Purchase Agreement was eventually amended on October 27, 
2021. Among other things, the amendment effectively allowed EP to 
resume its well-development activities in the ordinary course of 
business without requiring XCL's or Verdun's consent.

The Defendants' Unlawful Conduct Following the Merger Agreement

    35. This matter presents a straightforward example of unlawful gun 
jumping where two companies agree to coordinate their activities before 
a transaction is permitted to close under the HSR Act. The Purchase 
Agreement created the contractual obligation for EP to transfer 
operating control over key portions of its crude oil production 
business to XCL and Verdun, and the Defendants' actions in the weeks 
and months after they executed the Purchase Agreement demonstrated that 
such a transfer of control from EP to XCL and Verdun did indeed take 
place. XCL and Verdun thus gained beneficial ownership of EP's assets 
in direct violation of the HSR Act's waiting period requirements.
XCL Required Ep To Suspend its Well-Completion Activities
    36. The Defendants' actions abruptly halted EP's crude oil 
development activities. Indeed, upon signing the Purchase Agreement, 
XCL immediately stopped EP's ordinary-course well-drilling design and 
planning activities in Utah. XCL did this so that it--not EP--could 
take over the management of EP's development plans and designs moving 
forward.
    37. An email sent the afternoon the Purchase Agreement was signed 
on July 26, 2021, from an EP executive to his counterparts at XCL, 
illustrates the Defendants' intentions to transfer operational control 
of EP to XCL and Verdun: ``Congratulations on getting the Purchase 
Agreement signed and deposit sent! Now we can move forward with your 
requested changes. Please confirm that you approve the following: Shut 
down all currently planned fracs until after the close. Per the 
attached spreadsheet, by shutting down these fracs we have sold more 
oil than we will

[[Page 7163]]

be able to deliver and XCL accepts the contractual and reputational 
ramifications of not delivering these barrels.''
    38. XCL responded in the affirmative. ``XCL Confirmations of EP 
Operational Changes . . . . We confirm the request to suspend any 
operations related to completions between sign to close.'' (emphasis in 
original).
    39. In the days after the Defendants signed the Purchase Agreement, 
XCL employees began actively supervising EP's well-design and planning 
activities, including by requiring changes to EP's site design plans 
and vendor-selection process. XCL employed a ``boots on the ground'' 
approach to taking over EP's operations and design planning, with EP 
employees effectively reporting to their XCL counterparts.
    40. For instance, in an August 2, 2021, email from an XCL Vice-
President to EP's Chief Operating Officer, the XCL executive states: 
``Thanks for taking my call today, and working through operational 
planning with us. As discussed, we would like to complete the Moose 
Hollow and Bluebell wells as a combined team, where XCL leads on frac 
design and vendor selection, and EP teams with XCL to execute the 
operations.''
    41. The Defendants understood that XCL's halting of EP's ordinary-
course well-development projects would lead to, or contribute to, 
production shortfalls for EP and its customers in following months, 
given the delay in EP's ability to drill the new wells. In exchange, 
XCL agreed to assume the contractual and reputational ramifications of 
these shortfalls.
    42. The stoppages to EP's ordinary-course well-drilling activities 
lasted for several weeks--until approximately August 17, 2021--and 
ended only after the Defendants realized that the FTC would conduct a 
full investigation into the competitive effects of their transaction. 
At that point, XCL allowed EP to resume its well-drilling activities--
though EP would continue to seek XCL's review and approval for its 
plans and related expenditures, as required by the Purchase Agreement.
XCL Coordinated With EP on EP's Customer Contracts, Customer 
Relationships, and Customer Deliveries
    43. The Defendants' unlawful gun jumping delayed introduction of 
increased supply in the market. EP faced supply shortages in the Uinta 
Basin in the months of September and October 2021 due to XCL halting 
EP's well-completion activities in the weeks following the Purchase 
Agreement signing. XCL and EP discussed the shortages and XCL's 
resulting financial obligation during the subsequent months. For 
instance, in an October 2021, email exchange between EP and XCL, an EP 
employee wrote, ``However, as XCL has been directing EP Energy's 
completions and has agreed to fulfill EP Energy's contractual 
commitments between sign and close any shortfall [in EP's ability to 
fulfil its supply commitments] would be due to XCL's decisions.''
    44. To this end, XCL began conferring and coordinating with EP 
about EP's production volumes, customer contracts, and supply 
obligations.
    45. XCL requested and received from EP detailed information about 
EP's actual and projected production volumes, delivery capabilities, 
and customer supply obligations--including details about the customers' 
contracted volumes and pricing terms.
    46. XCL then proceeded to coordinate with EP to manage and direct 
EP's fulfillment of its contractual obligations to its customers, with 
XCL covering the volume shortages under EP's customer agreements.
    47. XCL also engaged directly with EP's customers about EP's supply 
and delivery obligations, providing EP's customers with detailed 
information about EP's volume projections, supply shortages, and 
ability to meet its supply obligations in current and future periods.
    48. XCL held itself out to EP's customers, in words or substance, 
as coordinating EP's supply and deliveries in the Uinta Basin, and EP's 
customers began contacting XCL directly about their EP contracts, EP's 
volume projections, and the delivery schedules pursuant to the 
contracts.
    49. For example, in an email exchange between an EP customer and 
XCL from September 2021, the EP customer asks XCL to confirm EP's 
supply forecast: ``It was good catching up with you this week. Below is 
the forecast from EP Energy. Let me know if you think they'll actually 
have these contracted volumes for October or if we'll need to do 
another spot deal similar to September.'' The XCL employee responded, 
``I do not have an updated EP forecast for October yet but am told it 
will come in the next day or two. Once that's in hand we'll be able to 
build a plan for October.''
    50. Another example, from August 2021, shows an exchange between 
XCL and a different EP customer, where the EP customer asks XCL to 
provide EP's volume forecast for the following month: ``Just wondering 
if you have a feel yet for what Sept will look like (EP volume)? Also, 
just to confirm, we're good with the contract volumes for Q4, 
correct?'' The XCL employee responds, ``I do have a feel for sept, we 
have a planning meeting in the AM to finalize, but directionally 
looking better than planned. Potentially no cuts, probably more likely 
in the 500bpd range, but will definitely get you a communication on 
that tomorrow once I get confirmation. As for Q4, that too is still a 
little up in the air as we finalize the development plan and I'll share 
more as soon as I can. We are planning on moving things forward to fill 
commitments in full, just again needing to confirm all of that.''
    51. XCL coordinated with EP and EP's customers regarding EP's 
supply and delivery volumes from approximately August 2021 through 
approximately October 2021. This coordination ended by November 2021, 
when XCL began informing EP's customers that XCL and EP needed to 
operate as independent companies for the remainder of the pre-merger 
period and that, as a result, XCL would no longer be covering EP's 
volume shortfalls.
XCL's and Verdun's Approvals Were Required for EP To Conduct Ordinary-
Course Business Activities and To Make Ordinary-Course Expenditures; 
XCL and Verdun Required EP To Make Changes to its Operations
    52. In addition to exercising their approval rights over EP's well-
drilling activities, XCL and Verdun exercised their rights under the 
Purchase Agreement to review and approve other of EP's ordinary-course 
expenditures and business activities.
    53. Under the Purchase Agreement, EP needed to secure XCL's or 
Verdun's approval before making expenditures above $250,000, which is a 
relatively low threshold in the crude development and production 
business. As a result, XCL or Verdun approval was required before EP 
could perform a range of ordinary-course activities needed to conduct 
its business, including, e.g., purchasing supplies for its drilling 
operations and entering or extending contracts for drilling rigs.
    54. In practice, EP sought and received approval for ordinary-
course expenditures below the low levels established through the 
Purchase Agreement. These included approvals to purchase gauges and 
other pre-drilling expenses.
    55. On top of submitting its expenditures for approval, under the 
Purchase Agreement, EP also needed to secure XCL's or Verdun's approval 
for other basic activities, such as hiring field-level employees and 
contractors necessary to conduct its drilling and production operations 
in the ordinary

[[Page 7164]]

course of business. Pursuant to these requirements, EP submitted its 
ordinary-course hiring proposals to XCL and Verdun for approval.
    56. XCL and Verdun also required EP to make changes to aspects of 
its business plans and day-to-day operations. These included changes to 
EP's well-drilling and site design plans, modifications to the areas in 
Utah and Texas where EP could pursue leasing and renewal activities, 
changes regarding EP's selection of vendors, and instructions not to 
pursue development opportunities that EP had been exploring in the 
ordinary course of business.
Verdun and EP Coordinated Regarding Prices for EP's Customers in the 
Eagle Ford Region of Texas
    57. The Defendants' gun-jumping activity also included coordination 
of prices. In the Eagle Ford region of Texas, employees from Verdun and 
EP coordinated on pricing terms that EP would offer to its customers. 
EP shared its competitively sensitive information on customer pricing 
and supply volumes with Verdun, and then sought Verdun's approval of 
the prices it negotiated with the customers.
    58. On July 28, 2021, shortly after the Purchase Agreement was 
signed, a Verdun employee with responsibility for sales and marketing 
contacted his EP counterpart to discuss EP's customer pricing and 
contract terms. The Verdun employee used information he had obtained 
from the virtual data room set up by EP as part of the sale process to 
suggest changes to EP's customer pricing. An EP employee responded and 
continued to consult with the Verdun employee as she was negotiating 
with the customers. Ultimately, the EP employee sought and obtained the 
approval of the Verdun employee for the new contracts with EP's 
customers.
EP Exchanged Competitively Sensitive Information With XCL and Verdun 
Without Adequate Safeguards To Limit Access Or Prevent Misuse
    59. The Defendants' gun jumping also facilitated the exchange of 
confidential and granular business information far beyond anything 
necessary for transaction due diligence. Upon signing the Purchase 
Agreement, XCL and Verdun asked for, and received, competitively 
sensitive information about EP's business operations and customers in 
Utah and Texas. This information included details on EP's customer 
contracts, customer pricing, production volumes, customer dispatches, 
business plans, site designs, vendor relationships and contracts, 
permitting and surveying information, and other competitively 
sensitive, nonpublic information. EP provided some of this information 
to XCL and Verdun on a daily or weekly basis.
    60. EP took no meaningful steps to resist these requests from XCL 
and Verdun. Instead, EP agreed to provide XCL and Verdun employees with 
access to its competitively sensitive information in the pre-merger 
period, even though EP competed directly with both XCL and Verdun and 
the information exchange lacked any legitimate business purposes. 
Further, EP made no effort--and XCL and Verdun offered no protections 
on its own--to limit the access to, or use of, EP's competitively 
sensitive information by XCL's and Verdun's employees.
    61. In the days following execution of the Purchase Agreement, XCL 
and Verdun requested and received access to EP daily operating reports, 
including reports on EP's crude production, dispatches by customers, 
and oil sales and loads by counterparty. These materials were provided 
to several XCL and Verdun businesspeople responsible for sales, 
marketing, and operations.
    62. These daily reports provided the employees of XCL and Verdun 
with virtually real-time information about EP's operations, output, and 
sales. To illustrate, in an August 4, 2021, email from EP's Chief 
Operating Officer to a number of XCL and Verdun employees--including 
the CEO and head of operations for both XCL and Verdun--the EP 
executive writes, ``You will start receiving the attached Operations 
Report daily. This report covers drilling, completions, workovers and 
production.''
    63. XCL also requested and received weekly updates on EP's permits 
and sundries, spacing orders, and ongoing regulatory work, as well as 
access to EP's site survey logs, geologic reports, geosteering reports, 
software communication systems, and various other datasets.
    64. Beyond regular reports and updates, XCL and Verdun employees 
requested and received information on an ad hoc basis on EP's 
development plans, contracts, customers, projections, deliveries, and 
seemingly any other aspect of EP's business or operations of interest 
to XCL and Verdun business employees.
    65. The Defendants had no legitimate business purposes for 
exchanging and disseminating EP's competitively sensitive business 
information in the pre-merger period and failed to place limits as to 
who at XCL and Verdun could access the information or how that 
information could be used.
    66. Even information provided by EP to XCL and Verdun through the 
virtual data room--ostensibly for the legitimate purpose of conducting 
due diligence on the proposed transaction--lacked appropriate 
safeguards on access and use.
    67. Some of EP's confidential information from the due diligence 
data room was used by Verdun's operations and sales employees to inform 
pricing and contract terms in the pre-merger period when Verdun and EP 
were still competitors in the marketplace. As noted in Paragraph 58 of 
this complaint, a Verdun employee used information from the virtual 
data room to discuss with his counterpart at EP prices for EP's 
customers.
    68. The information flow from EP to XCL and Verdun continued in 
full force through approximately October 2021.

Cause of Action Violation of Section 7A of the Clayton Act

    69. Plaintiff alleges and incorporates paragraphs 1 through 68 as 
if set forth fully herein.
    70. XCL and Verdun's acquisition of EP was subject to Section 7A 
premerger notification and waiting-period requirements.
    71. XCL and Verdun substituted their business interests and 
judgment for those of EP and exercised operational control over key 
aspects of EP's business before expiration of the waiting period in 
violation of Section 7A.
    72. By controlling EP's business operations after having agreed to 
acquire EP, XCL and Verdun acquired beneficial ownership of EP's assets 
and thus acquired and held those assets within the meaning of Section 
7A.
    73. The Defendants were continuously in violation of the 
requirements of the HSR Act each day beginning on July 26, 2021, until 
XCL and Verdun ceased exercising operational control over relevant 
aspects of EP's business and the Purchase Agreement was amended on 
October 27, 2021.

Request for Relief

Wherefore, the United States requests:
    (a) that the Court adjudge and decree that each Defendant violated 
the HSR Act and was in violation during the period beginning on July 
26, 2021, and ending on October 27, 2021, a total of 94 days;
    (b) that the Court order the Defendants pay to the United States an 
appropriate civil penalty as provided under Section 7A(g)(1) of the 
Clayton Act, 15 U.S.C. 18a(g)(1), and 16 CFR 1.98(a);

[[Page 7165]]

    (c) that the Defendants, their officers, directors, agents, 
employees, subsidiaries, and successors, and all other persons acting 
or claiming to act on their behalf, be enjoined, restrained, and 
prohibited for a period of ten years from, in any manner, directly or 
indirectly, engaging in any other agreement, combination, or conspiracy 
that has the same effect as the alleged violation;
    (d) that the Court order such other and further relief as it may 
deem just and proper; and
    (e) that the Court award the United States its costs of this suit.
Date: 2025

FOR THE PLAINTIFF UNITED STATES OF AMERICA:

Doha Mekki,
Acting Assistant Attorney General, Department of Justice, Antitrust 
Division, Washington, DC 20530

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Maribeth Petrizzi, DC Bar No. 435204, Special Attorney

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Jamie R. Towey, DC Bar No. 475969, Special Attorney

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Kenneth A. Libby, Special Attorney

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Paul Frangie, Special Attorney, Federal Trade Commission, 
Washington, DC 20580, (202) 326-2564

United States District Court for the District of Columbia

    United States of America, Plaintiff, v. XCL RESOURCES HOLDINGS, 
LLC, VERDUN OIL COMPANY II LLC, and EP ENERGY LLC, Defendants.
Civil Action No. 1:25-cv-00041.

[Proposed] Final Judgment

    WHEREAS the United States of America filed its Complaint on January 
7, 2025, alleging that Defendants XCL Resources Holdings, LLC, Verdun 
Oil Company II LLC, and EP Energy LLC violated Section 7A of the 
Clayton Act, 15 U.S.C. 18a, commonly known as the Hart-Scott-Rodino 
Antitrust Improvements Act of 1976 (the ``Hart-Scott-Rodino Act''), and 
the United States and Defendants XCL Resources Holdings, LLC, Verdun 
Oil Company II LLC, and EP Energy LLC, by their respective attorneys, 
have consented to the entry of this Final Judgment without trial or 
adjudication of any issue of fact or law, and without this Final 
Judgment constituting any evidence against or an admission by any party 
regarding any issue of fact or law;
    And Whereas Defendants agree to be bound by the provisions of this 
Final Judgment pending its approval by the Court;
    Now, Therefore, before any testimony is taken, without trial or 
adjudication of any issue of fact or law, and upon the consent of the 
parties hereto, it is Ordered, Adjudged, And Decreed:

I. Jurisdiction

    The Court has jurisdiction over the subject matter of this action. 
The Defendants consent solely for the purpose of this action and the 
entry of this Final Judgment that this Court has jurisdiction over each 
of the parties to this action. The Complaint states a claim upon which 
relief may be granted against the Defendants under Section 7A of the 
Clayton Act, 15 U.S.C. 18a.

II. Definitions

    A. ``XCL'' means XCL Resources Holdings, LLC, a limited liability 
company organized, existing, and doing business under the laws of the 
state of Delaware, with its executive offices and principal place of 
business located at 600 N. Shepherd Drive, Suite 390, Houston, Texas 
77007, including its successors and assigns, and its subsidiaries and 
divisions.
    B. ``Verdun'' means Verdun Oil Company II LLC, a limited liability 
company organized, existing, and doing business under the laws of the 
state of Texas, with its executive offices and principal place of 
business located at 945 Bunker Hill Road, Suite 1300, Houston, Texas 
77024, including its successors and assigns, and its subsidiaries and 
divisions.
    C. ``EP Energy'' means EP Energy LLC, a limited liability company 
organized, existing, and doing business under the laws of the state of 
Delaware, with its executive offices and principal place of business 
located at 945 Bunker Hill Road, Suite 100, Houston, Texas 77024, 
including its successors and assigns, and its subsidiaries and 
divisions.
    D. ``Agreement'' means any agreement, contract, or mutual 
understanding, whether formal or informal, written, or unwritten.
    E. ``Antitrust Laws'' means the Federal Trade Commission Act, as 
amended, 15 U.S.C. 41 et seq., the Sherman Act, 15 U.S.C. 1 et seq., 
the Clayton Act, 15 U.S.C. 12 et seq., and the Hart-Scott-Rodino Act, 
15 U.S.C. 18a.
    F. ``Competing Product'' means any product, service, or technology 
included in a Reportable Transaction that is offered for sale, license, 
or distribution to customers in the same state, or produced in the same 
state or geological basin, by a Defendant and any other party to the 
Reportable Transaction.
    G. ``Farm-in agreement'' or ``Farm-out agreement'' means an 
agreement in which the owner or lessee of mineral rights assigns an 
interest in such mineral rights to another party, in exchange for such 
other party providing specified exploration and/or development 
activities, funding for such exploration and/or development activities, 
or contributing or swapping mineral acreage, regardless of whether the 
owner or lessee retains working interests, overriding royalty 
interests, or other types of economic interests. The agreement is 
termed a ``Farm-in agreement'' from the viewpoint of the party 
acquiring such interest, and a ``Farm-out agreement'' from the 
viewpoint of the owner or lessee of the mineral rights assigning such 
interest.
    H. ``Non-Public Information'' means any information related to the 
assets and businesses included in a Reportable Transaction known by the 
Defendant or another party to the Reportable Transaction, excluding any 
information that was or becomes available to the public through means 
other than disclosure by the receiving party.
    I. ``Pre-consummation Period'' means the period between the signing 
of an agreement or letter of intent for a Reportable Transaction, and 
the earlier of the expiration or termination of the applicable waiting 
period, and the abandonment of the Reportable Transaction.
    J. ``Regulations'' means any rule, regulation, statement, or 
interpretation relating to the Hart-Scott-Rodino Act that has binding 
legal effect with respect to the implementation or application of the 
Hart-Scott-Rodino Act or any section or subsection within 16 CFR 801-
803.
    K. ``Reportable Transaction'' means a transaction to which a 
Defendant is a party that is reportable under Section 7A the Clayton 
Act, 15 U.S.C. 18a, including the rules, regulations and formal 
interpretations implementing the section.

III. Applicability

    This Final Judgment applies to XCL, Verdun, and EP Energy, as 
defined above, and all other persons in active concert or participation 
with any of them who receive actual notice of this Final Judgment by 
personal service or otherwise.

IV. Civil Penalty

    A. Judgment is hereby entered in this matter in favor of Plaintiff 
and against Defendants, and, pursuant to Section 7A(g)(1) of the 
Clayton Act, 15 U.S.C. 18a(g)(1), the Debt Collection Improvement Act 
of 1996, Public Law 104134 Sec.  31001(s) (amending the Federal Civil 
Penalties Inflation Adjustment Act of 1990, 28 U.S.C.

[[Page 7166]]

2461), the Federal Civil Penalties Inflation Adjustment Act 
Improvements Act of 2015, Public Law 114-74 Sec.  701 (further amending 
the Federal Civil Penalties Inflation Adjustment Act of 1990), and 
Federal Trade Commission Rule 1.98, 16 CFR 1.98, 89 FR 9764 (February 
12, 2024), XCL and Verdun jointly and severally are hereby ordered to 
pay a civil penalty in the amount of $2,842,188.50, and EP Energy is 
hereby ordered to pay a civil penalty in the amount of $2,842,188.50, 
for a total among all Defendants of $5,684,377.00. Payment of the civil 
penalty ordered hereby shall be made by wire transfer of funds or 
cashier's check. If the payment is to be made by wire transfer, prior 
to making the transfer, Defendant will contact the Budget and Fiscal 
Section of the Antitrust Division's Executive Office at [email protected] for instructions. If the payment is made by 
cashier's check, the check must be made payable to the United States 
Department of Justice--Antitrust Division and delivered to: Chief, 
Budget & Fiscal Section, Executive Office, Antitrust Division, United 
States Department of Justice, Liberty Square Building, 450 5th Street 
NW, Room 3016, Washington, DC 20530.
    B. Defendants shall pay the full amount of the civil penalty within 
thirty (30) days of entry of this Final Judgment. In the event of a 
default or delay in payment, interest at the rate of eighteen (18) 
percent per annum shall accrue thereon from the date of the default or 
delay to the date of payment.

V. Prohibited Conduct

    A. During the Pre-consummation Period for any Reportable 
Transaction, the Defendant shall not enter into any Agreement with any 
other party to the transaction to:
    1. combine, merge, or transfer (in whole or in part) any 
operational or decision-making control over any aspect of the business, 
assets, or interests that are part of the Reportable Transaction 
including (a) the production, marketing, or distribution of any to-be-
acquired product; or (b) any sales, service, or procurement terms for 
such products;
    2. require one party to the Reportable Transaction to obtain 
approval from another party to the Reportable Transaction for any 
ordinary-course business activities or expenses, including planned 
capital expenditures;
    3. delay or suspend ordinary-course sales or development efforts; 
or
    4. disclose or seek the disclosure of the following information for 
any Competing Product:
    a. current or future prices or contract offers; or
    b. Non-Public Information relating to customers, current or future 
drilling and completions, production, sales, or shipments to customers.
    Provided, however, that nothing in this Final Judgment prohibits 
Defendants from disclosing or seeking information relating to a 
Competing Product (i) that is publicly available at the time disclosure 
occurs, or (ii) that is necessary to conduct reasonable and customary 
due diligence of or integration planning for the proposed transaction, 
provided such activity by Defendants are supervised by antitrust 
counsel and occurs pursuant to a non-disclosure agreement that (a) 
limits use of the information to conducting due diligence or 
integration planning (including limiting dissemination of the 
information to individuals involved in or supervising due diligence or 
integration planning), (b) prohibits disclosure of the information to 
any employee of the receiving entity who is directly responsible for 
the marketing, pricing, or sales of a Competing Product, and (c) 
requires the recipient to delete or destroy the information if the 
Reportable Transaction does not close.

VI. Permitted Conduct

    Nothing in this Final Judgment prohibits Defendants from:
    A. Agreeing that a party to a transaction shall continue to operate 
in the ordinary course of business during the Pre-consummation Period;
    B. Agreeing that a party to a transaction forgo conduct that would 
cause a material adverse change in the value of to-be-acquired assets 
during the Pre-consummation Period;
    C. Negotiating, agreeing to, or participating in joint operating, 
joint development, Farm-in, or Farm-out agreements,
    Provided, however, that the joint operating, joint development, 
Farm-in, or Farm-out agreements do not relate to assets included as 
part of any Reportable Transaction during the Pre-consummation Period; 
or
    D. Disclosing Non-public Information related to Competing Products 
in the context of litigation or settlement discussions if the 
disclosure is subject to a protective order.

VII. Compliance

    A. Defendants shall design, maintain, and operate an antitrust 
compliance program to ensure compliance with this Final Judgment and 
the Antitrust Laws, and as part of such program shall:
    1. within 30 days of entry of this Final Judgment, appoint or 
retain a qualified antitrust compliance officer (``Antitrust Compliance 
Officer'') to supervise the design, maintenance, and operation of the 
program, and shall authorize the Antitrust Compliance Officer to 
perform all tasks necessary to fulfill these obligations. Defendants 
may replace the Antitrust Compliance Officer with another qualified 
person at any time;
    2. within 45 days of entry of this Final Judgment, distribute a 
copy of this Final Judgment to each current officer and director, and 
each employee, agent, or other person who has responsibility or 
authority over sales, marketing, strategic planning, exploration and 
development, or mergers and acquisitions;
    3. distribute a copy of this Final Judgment to any person who takes 
a position described in Paragraph VII(A)(2) within 30 days of the date 
the person takes such position;
    4. provide in-person or online training concerning Defendants' 
obligations under this Final Judgment and the Antitrust Laws as they 
apply to Defendants' activities, to each person designated in 
Paragraphs VII(A)(2) or (3):
    a. no later than 45 days after this Final Judgment is entered;
    b. no later than 30 days after a person first takes a position 
described in Paragraph VII(A)(2); and
    c. at least annually.
    Provided, however, that as to any person on extended leave (e.g., 
parental, family, or disability leave), the training for such person 
under the above schedule shall be completed within 30 days of the date 
the person returns to work;
    5. obtain within 60 days from the entry of this Final Judgment, and 
annually thereafter, and retain for the duration of this Final 
Judgment, a written certification from each person designated in 
Paragraphs VII(A)(2) & (3) that the person: (a) has received, read, 
understands, and agrees to abide by the terms of this Final Judgment; 
(b) understands that failure to comply with this Final Judgment may 
result in conviction for criminal contempt of court; and (c) is not 
aware of any violation of the Final Judgment; and
    6. provide a copy of this Final Judgment (or a hyperlink to a copy 
of this Final Judgment) to each party to a Reportable Transaction no 
later than signing of the definitive agreement.
    B. Within 60 days of entry of this Final Judgment, Defendants shall 
certify to Plaintiff that they have (1) designed, established, and are 
maintaining an antitrust compliance program; (2) designated an 
Antitrust Compliance Officer, specifying their name, business address, 
and telephone number; (3) distributed this Final Judgment as required 
in Paragraph VII(A)(2); and (4)

[[Page 7167]]

provided training as required in Paragraph VII(A)(4).
    C. For the term of this Final Judgment, on or before its 
anniversary date, Defendants shall file with Plaintiff an annual 
statement verifying that they are complying with the requirements of 
this Final Judgment and describing in detail the manner of their 
compliance with the provisions of Sections V and VII.
    D. If any of Defendants' directors or officers, or the Antitrust 
Compliance Officer, learns of any violation of this Final Judgment, 
Defendants shall within three (3) business days take appropriate action 
to assure continued compliance with this Final Judgment, and shall 
notify the Plaintiff in writing of the violation within 10 business 
days of learning of the violation.

VIII. Compliance Inspection

    A. For the purposes of determining or securing compliance with this 
Final Judgment, or of determining whether the Final Judgment should be 
modified or vacated, and subject to any legally-recognized privilege, 
from time to time authorized representatives of the United States, 
including agents and consultants retained by the United States, shall, 
upon written request of an authorized representative of the Assistant 
Attorney General in charge of the Antitrust Division, and on reasonable 
notice to Defendants, be permitted:
    (1) access during Defendants' office hours to inspect and copy, or 
at the option of the United States, to require Defendants to provide 
electronic copies of all books, ledgers, accounts, records, data, and 
documents in the possession, custody, or control of Defendants, 
relating to any matters contained in this Final Judgment; and
    (2) to interview, either informally or on the record, Defendants' 
officers, employees, or agents, who may have their individual counsel 
present, regarding such matters. The interviews shall be subject to the 
reasonable convenience of the interviewee and without restraint or 
interference by Defendants.
    B. Upon the written request of an authorized representative of the 
Assistant Attorney General in charge of the Antitrust Division, 
Defendants shall submit written reports or response to written 
interrogatories, under oath if requested, relating to any of the 
matters contained in this Final Judgment as may be requested.
    C. No information or documents obtained pursuant to any provision 
of this Final Judgment may be divulged by the United States to any 
person other than an authorized representative of the executive branch 
of the United States, except in the course of legal proceedings to 
which the United States is a party, including grand jury proceedings, 
for the purpose of securing compliance with this Final Judgment, or as 
otherwise required by law.
    D. In the event of a request by a third party, pursuant to the 
Freedom of Information Act, 5 U.S.C. 552, for disclosure of information 
obtained pursuant to any provision of this Final Judgment, the 
Antitrust Division will act in accordance with that statute, and the 
Department of Justice regulations at 28 CFR part 16, including the 
provision on confidential commercial information, at 28 CFR 16.7. 
Designations of confidentiality expire 10 years after submission, 
``unless the submitter requests and provides justification for a longer 
designation period.'' See 28 CFR 16.7(b).
    E. If at the time that Defendants furnish information or documents 
to the United States pursuant to any provision of this Final Judgment, 
Defendants represent and identify in writing information or documents 
for which a claim of protection may be asserted under Rule 26(c)(1)(G) 
of the Federal Rules of Civil Procedure, and Defendants mark each 
pertinent page of such material, ``Subject to claim of protection under 
Rule 26(c)(1)(G) of the Federal Rules of Civil Procedure,'' the United 
States must give Defendants 10 calendar days' notice before divulging 
the material in any legal proceeding (other than a grand jury 
proceeding).

IX. Retention of Jurisdiction

    This Court retains jurisdiction to enable any of the parties to 
this Final Judgment to apply to this Court at any time for further 
orders and directions as may be necessary or appropriate to carry out 
or construe this Final Judgment, to modify or terminate any of its 
provisions, to enforce compliance, and to punish violations of its 
provisions.

X. Enforcement of Final Judgment

    A. The United States retains and reserves all rights to enforce the 
provisions of this Final Judgment, including the right to seek an order 
of contempt from the Court. Defendants agree that in any civil contempt 
action, any motion to show cause, or any similar action brought by the 
United States regarding an alleged violation of this Final Judgment, 
the United States may establish a violation of this Final Judgment and 
the appropriateness of any remedy therefor by a preponderance of the 
evidence, and Defendants waive any argument that a different standard 
of proof should apply.
    B. The Final Judgment should be interpreted to give full effect to 
the procompetitive purposes of the antitrust laws, including Section 7A 
of the Clayton Act and Regulations promulgated thereunder. Defendants 
agree that they may be held in contempt of, and that the Court may 
enforce, any provision of this Final Judgment that, as interpreted by 
the Court in light of these procompetitive principles and applying 
ordinary tools of interpretation, is stated specifically and in 
reasonable detail, whether or not it is clear and unambiguous on its 
face. In any such interpretation, the terms of this Final Judgment 
should not be construed against either party as the drafter.
    C. In any enforcement proceeding in which the Court finds that a 
Defendant has violated this Final Judgment, the United States may apply 
to the Court for a one-time extension of this Final Judgment for that 
Defendant, together with such other relief as may be appropriate. In 
connection with any successful effort by the United States to enforce 
this Final Judgment against a Defendant, whether litigated or resolved 
prior to litigation, each Defendant agrees to reimburse the United 
States for the fees and expenses of its attorneys, as well as any other 
costs including experts' fees, incurred in connection with that 
enforcement effort, including in the investigation of the potential 
violation.
    D. For a period of four (4) years after the expiration of this 
Final Judgment pursuant to Section XI, if the United States has 
evidence that a Defendant violated this Final Judgment before it 
expired, the United States may file an action against that Defendant in 
this Court requesting that the Court order (1) Defendant to comply with 
the terms of this Final Judgment for an additional term of at least 
four years following the filing of the enforcement action under this 
Section, (2) any appropriate contempt remedies, (3) any additional 
relief needed to ensure the Defendant complies with the terms of the 
Final Judgment, and (4) fees or expenses as called for in Paragraph 
X(C).

XI. Expiration of Final Judgment

    Unless this Court grants an extension, this Final Judgment shall 
expire ten (10) years from the date of its entry if each Defendant has 
paid the civil penalty in full.

XII. Costs

    Each party shall bear its own costs of this action.

[[Page 7168]]

XIII. Public Interest Determination

    Entry of this Final Judgment is in the public interest. The parties 
have complied with the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16, including making copies available to the 
public of this Final Judgment, the Competitive Impact Statement, and 
any comments thereon and the United States' responses to comments. 
Based upon the record before the Court, which includes the Competitive 
Impact Statement and any comments and responses to comments filed with 
the Court, entry of this Final Judgment is in the public interest.

Dated:
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United States District Judge

United States District Court for the District of Columbia

    United States of America, Plaintiff, v. XCL RESOURCES HOLDINGS, 
LLC, VERDUN OIL COMPANY II LLC, and EP ENERGY LLC Defendants. Civil 
Action No. 1:25-cv-00041.

Competitive Impact Statement

    In accordance with the Antitrust Procedures and Penalties Act, 15 
U.S.C. 16(b)-(h) (the ``APPA'' or ``Tunney Act''), the United States of 
America files this Competitive Impact Statement related to the proposed 
Final Judgment filed in this civil antitrust proceeding.

I. Nature and Purpose of Proceedings

    On January 7, 2025, the United States filed a Complaint against 
Defendants XCL Resources Holdings, LLC (``XCL''), Verdun Oil Company II 
LLC (``Verdun''), and EP Energy LLC (``EP'') (together, 
``Defendants''), related to XCL and Verdun's acquisition of EP. The 
Complaint alleges that Defendants violated Section 7A of the Clayton 
Act, 15 U.S.C. 18a, commonly known as the Hart-Scott-Rodino Antitrust 
Improvements Act of 1976 (the ``HSR Act'').
    The Complaint alleges that XCL and Verdun acquired EP, through a 
transaction in excess of the then-applicable statutory thresholds, 
without observing the required HSR Act waiting period. The HSR Act 
provides that ``no person shall acquire, directly or indirectly, any 
voting securities of any person'' exceeding certain thresholds until 
that person has filed pre-acquisition notification and report forms 
with the Department of Justice and the Federal Trade Commission 
(collectively, the ``federal antitrust agencies'' or ``agencies'') and 
the post-filing waiting period has expired. 15 U.S.C. 18a(a). A key 
purpose of the notification and waiting period is to protect consumers 
and competition from potentially anticompetitive transactions by 
providing the agencies an opportunity to conduct an antitrust review of 
proposed transactions before they are consummated.
    At the same time the Complaint was filed, the United States also 
filed a Stipulation and proposed Final Judgment. Under the proposed 
Final Judgment, which is explained more fully below, Defendants are 
prohibited from engaging in specified conduct during the term of the 
order and are required to pay a civil penalty to the United States in 
the amount of $5,684,377. The proposed Final Judgment is designed to 
deter HSR Act violations by XCL, Verdun, and similarly situated 
acquirers.
    The United States and Defendants have stipulated that the proposed 
Final Judgment may be entered after compliance with the APPA. Entry of 
the proposed Final Judgment will terminate this action, except that the 
Court will retain jurisdiction to construe, modify, or enforce the 
provisions of the proposed Final Judgment and punish violations 
thereof.

II. Description of the Events

A. XCL and Verdun's acquisition of EP
    On July 26, 2021, XCL and Verdun agreed to acquire EP for 
approximately $1.4 billion. Defendants are engaged, among other things, 
in the development, production, and sale of crude oil in the United 
States. XCL operates in the Uinta Basin of Utah. Verdun operates in the 
Eagle Ford area of Texas. EP operates in both the Uinta Basis and the 
Eagle Ford area. Shortly thereafter, Defendants' parent entities filed 
the pre-acquisition Notification and Report forms required by Section 
7A of the Clayton Act. After reviewing the parties' filings, the 
Federal Trade Commission (``FTC'') opened an investigation into the 
competitive effects of the proposed transaction. XCL and EP were two of 
four significant oil and gas development and production companies in 
northeast Utah's Uinta Basin. The FTC alleged in its complaint that, 
after the acquisition of EP, if XCL reduced the volume of crude oil 
that it supplied to Salt Lake City, Salt Lake City area refiners would 
be forced to pay more for Uinta Basin waxy crude oil. Ultimately, the 
FTC obtained a consent agreement resolving its concerns about the 
impact of the transaction on competition in the market for the 
development, production, and sale of waxy crude oil in the Uinta Basin 
area of Utah. The consent agreement required Defendants to divest all 
of EP's Utah operations to a qualified third-party operator, Crescent 
Energy. Entry of the consent agreement terminated the HSR Act waiting 
period on March 25, 2022. XCL and Verdun consummated the transaction on 
March 30, 2022, and EP is now a wholly owned subsidiary of Verdun.
B. Defendants' alleged violation of Section 7A
    The HSR Act requirements apply to a transaction if, as a result of 
the transaction, the acquirer will ``hold'' assets or voting securities 
valued above the thresholds. Under HSR Rule 801.1(c), to ``hold'' 
assets or voting securities means ``beneficial ownership, whether 
direct, or indirect through fiduciaries, agents, controlled entities or 
other means.'' 16 CFR 801.1(c). Thus, under the Act, parties must make 
an HSR Act filing and observe a waiting period before transferring 
beneficial ownership of the assets or voting securities to be acquired. 
The Statement of Basis and Purpose accompanying the Rules explains that 
beneficial ownership is determined on a case-by-case basis, based on 
the indicia of beneficial ownership which include, among others, the 
right to obtain the benefit of any increase in value or dividends and 
the risk of loss of value. 43 FR 33,449 (July 31, 1978). A firm may 
also gain beneficial ownership by obtaining ``operational control'' of 
an asset.
    The combination of XCL and Verdun's agreement to purchase EP and 
their assumption of key ordinary-course functions transferred 
beneficial ownership of EP's business to XCL and Verdun before they had 
fulfilled their obligations under the HSR Act. Specifically, the July 
26, 2021 Purchase Agreement provided for the immediate transfer of 
control over key aspects of EP's business to XCL and Verdun, including 
granting XCL and Verdun approval rights over EP's ongoing and planned 
crude oil development and production activities and many of EP's 
ordinary-course expenditures. XCL put an immediate halt to EP's new 
well-drilling activities, so that XCL--not EP--could control the 
development and production plans for EP's drilling assets moving 
forward. Even though XCL and Verdun allowed EP to resume its own well-
drilling and planning activities after Defendants realized that the FTC 
would investigate the transaction, the temporary halts resulted in EP 
having crude oil supply shortages in the following months. Defendants 
predicted these shortages and specifically provided in the Purchase 
Agreement that XCL and Verdun--not EP--would

[[Page 7169]]

bear all costs associated with EP's supply shortages.
    XCL and Verdun also exercised operational control over EP by, inter 
alia, working directly with EP's customers on EP's behalf; requiring EP 
to provide competitively sensitive information to XCL and Verdun 
businesspeople; requiring approval of ordinary-course expenditures; and 
coordinating with EP on EP's contract negotiations with certain 
customers in the Eagle Ford production area. The illegal conduct lasted 
through October 27, 2021, when the Defendants executed an amendment to 
the Purchase Agreement which allowed EP to operate independently once 
again and in the ordinary course of business, without XCL's or Verdun's 
control over its day-to-day operations. The Defendants were in 
violation of the HSR Act for a period of 94 days, from when the 
Purchase Agreement was signed, on July 26, 2021, until the Purchase 
Agreement was amended, on October 27, 2021. Among other things, XCL's 
temporary halting of EP's development activities contributed to EP 
having crude oil supply shortages in September and October 2021 at a 
time when the United States was experiencing significant supply 
shortages and spiking crude oil prices due to sudden demand increases 
as COVID-19 restrictions eased. XCL and EP--direct competitors in the 
marketplace--then worked in concert to supply EP's customers to satisfy 
EP's customer supply commitments. Verdun also coordinated with EP on 
EP's contract negotiations with certain customers in the Eagle Ford 
production area. Specifically, Verdun observed that certain EP 
contracts included below-market prices and directed EP to raise them in 
the next contracting period. EP complied.
    Agreements that transfer some indicia of beneficial ownership, even 
if common in an industry, may violate Section 7A if entered into while 
the buyer intends to acquire the asset. Entering into such agreements 
before the HSR Act waiting period expires defeats the purpose of the 
HSR Act by enabling the acquiring person to direct the acquired 
person's business to bring about the effects of an acquisition prior to 
completion of the agencies' antitrust review.

III. Explanation of the Proposed Final Judgment

    The relief required by the proposed Final Judgment will prevent 
future violations of Section 7A of the Clayton Act of the type 
Defendants committed and secures a monetary civil penalty for XCL's, 
Verdun's, and EP's violation of Section 7A. The proposed Final Judgment 
sets forth prohibited and permitted conduct, a compliance program the 
Defendants must follow, and procedures available to the United States 
to determine and ensure compliance with the Final Judgment. Section XI 
provides that these conditions will expire ten years after the entry of 
the Final Judgment.
A. Prohibited Conduct
    Section V of the proposed Final Judgment is designed to prevent 
future HSR Act violations of the sort alleged in the Complaint. During 
the ``pre-consummation period'' of any future HSR-reportable 
transaction--after executing an agreement or letter of intent for a 
transaction subject to the reporting requirements of the HSR Act and 
until the expiration of the statutory waiting period or abandonment of 
the transaction--the Defendants are prohibited from entering into any 
agreement with the other contracting party or parties to combine, 
merge, or transfer, in whole or in part, any operational or decision-
making control over businesses, assets, or interests to be acquired. 
This injunction applies to all transactions subject to the reporting 
requirements of the HSR Act, regardless of the particular products 
involved or whether any other party to the transaction competes with 
the Defendants. The injunction also prevents an acquirer from obtaining 
approval rights or authority over ordinary-course decisions of the to-
be-acquired entity or unrestricted access to certain categories of non-
public information. To be clear, the injunction is not intended to 
cover all means of transferring beneficial ownership--which is assessed 
on a case-by-case basis depending on a variety of factors--but to 
broadly cover the Defendants' conduct in this matter and prevent 
recurrence.
B. Permitted Conduct
    Section VI of the proposed Final Judgment identifies certain 
agreements and conduct that are permitted by the Judgment. Paragraphs 
VI(A) and VI(B) ensure that the decree will not be interpreted to 
forbid specified ``conduct of business'' covenants that are typically 
found in merger agreements. These are customary provisions found in 
most merger agreements and are intended to protect the value of the 
transaction and prevent a to-be-acquired person from wasting assets. 
Paragraph VI(C) ensures that the decree does not prevent certain 
ordinary-course agreements in the oil and gas industry. Paragraph VI(D) 
recognizes narrow exceptions to the restrictions on access to non-
public information in Paragraph V(A)(4) for certain activities, such as 
participating in litigation.
C. Compliance
    Sections VII and VIII of the proposed Final Judgment set forth 
various compliance procedures. Section VII sets up an affirmative 
compliance program directed toward ensuring compliance with the 
limitations imposed by the proposed Final Judgment and with the federal 
antitrust laws. The compliance program includes the designation of a 
qualified antitrust compliance officer who is required to ensure that 
the relevant Defendant distributes a copy of the Final Judgment to each 
current and succeeding director, office, employee, agent, or other 
person with the responsibility over sales, marketing, strategic 
planning, exploration and development, or mergers and acquisitions; 
briefs each such person regarding compliance with the Final Judgment 
and the antitrust laws as they apply to Defendants' activities; and 
obtains certification annually from each such person that he or she 
understands his or her obligations under the Final Judgment and agrees 
to abide by its terms. In addition, Defendants must provide a copy of 
the Final Judgment to certain parties entering a merger or acquisition 
with a Defendant prior to signing the definitive agreement. Section VII 
of the proposed Final Judgment further requires the compliance officer 
to certify to the United States that Defendant is in compliance and to 
report any violations of the Final Judgment.
    To facilitate monitoring of Defendants' compliance with the Final 
Judgment, Section VIII grants DOJ access, upon reasonable notice, to 
Defendants' records and documents relating to matters contained in the 
Final Judgment. Defendants must also make its personnel available for 
interviews or depositions regarding such matters. In addition, 
Defendants must, upon request, prepare written reports relating to 
matter contained in the Final Judgment.
D. Civil Penalties
    The proposed Final Judgment imposes a $5,684,377 civil penalty for 
Defendants' violation of the HSR Act. The United States adjusted the 
penalty downward from the maximum permitted under the HSR Act in part 
because the Defendants were willing to resolve the matter by consent 
decree and avoid a prolonged investigation and litigation. The relief 
will have a beneficial effect on competition because

[[Page 7170]]

it will deter future instances in which parties seek to immediately 
acquire control of an independent competitive presence before filing 
the required pre-acquisition notifications with the agencies and 
observing the required waiting period. At the same time, the penalty 
will not have any adverse effect on competition.

IV. Remedies Available to Potential Private Litigants

    There is no private antitrust action for HSR Act violations; 
therefore, entry of the proposed Final Judgment will neither impair nor 
assist the bringing of any private antitrust action.

V. Procedures Available for Modification of the Proposed Final Judgment

    The United States and the Defendants have stipulated that the 
proposed Final Judgment may be entered by this Court after compliance 
with the provisions of the APPA, provided that the United States has 
not withdrawn its consent. The APPA conditions entry of the decree upon 
this Court's determination that the proposed Final Judgment is in the 
public interest.
    The APPA provides a period of at least sixty (60) days preceding 
the effective date of the proposed Final Judgment within which any 
person may submit to the United States written comments regarding the 
proposed Final Judgment. Any person who wishes to comment should do so 
within sixty (60) days of the date of publication of this Competitive 
Impact Statement in the Federal Register, or within sixty (60) days of 
the first date of publication in a newspaper of the summary of this 
Competitive Impact Statement, whichever is later. All comments received 
during this period will be considered by the United States Department 
of Justice, which remains free to withdraw its consent to the proposed 
Final Judgment at any time prior to the Court's entry of judgment. The 
comments and the response of the United States will be filed with this 
Court. In addition, comments will be posted on the U.S. Department of 
Justice, Antitrust Division's internet website and, under certain 
circumstances, published in the Federal Register. Written comments 
should be submitted to: Maribeth Petrizzi, Special Attorney, United 
States, c/o Federal Trade Commission, 600 Pennsylvania Avenue NW, CC-
8416, Washington, DC 20580, Email: [email protected].
    The proposed Final Judgment provides that this Court retains 
jurisdiction over this action, and the parties may apply to this Court 
for any order necessary or appropriate for the modification, 
interpretation, or enforcement of the Final Judgment.

VI. Alternatives to the Proposed Final Judgment

    As an alternative to the proposed Final Judgment, the United States 
considered a full trial on the merits against the Defendants. The 
United States is satisfied, however, that the relief required by the 
proposed Final Judgment will remedy the violation alleged in the 
Complaint and deter violations by similarly situated entities in the 
future. Thus, the proposed Final Judgment achieves all or substantially 
all of the relief the United States would have obtained through 
litigation but avoids the time, expense, and uncertainty of a full 
trial on the merits.

VII. Standard of Review Under the Appa for the Proposed Final Judgment

    Under the Clayton Act and APPA, proposed Final Judgments, or 
``consent decrees,'' in antitrust cases brought by the United States 
are subject to a sixty (60) day comment period, after which the court 
shall determine whether entry of the proposed Final Judgment is ``in 
the public interest.'' 15 U.S.C. 16(e)(1). In making that 
determination, the court, in accordance with the statute as amended in 
2004, is required to consider:

    (A) the competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration of relief sought, anticipated effects of 
alternative remedies actually considered, whether its terms are 
ambiguous, and any other competitive considerations bearing upon the 
adequacy of such judgment that the court deems necessary to a 
determination of whether the consent judgment is in the public 
interest; and
    (B) the impact of entry of such judgment upon competition in the 
relevant market or markets, upon the public generally and 
individuals alleging specific injury from the violations set forth 
in the complaint including consideration of the public benefit, if 
any, to be derived from a determination of the issues at trial.

Id. Sec.  16(e)(1)(A) & (B). In considering these statutory factors, 
the court's inquiry is necessarily a limited one, as the government is 
entitled to ``broad discretion to settle with the defendant within the 
reaches of the public interest.'' United States v. Microsoft Corp., 56 
F.3d 1448, 1461 (D.C. Cir. 1995); United States v, U.S. Airways Group, 
Inc., 38 F. Supp. 3d 69, 75 (D.D.C. 2014) (noting the government has 
broad discretion of the adequacy of the relief at issue); United States 
v. InBev N.V./S.A., No. 08-1965 (JR), 2009-2 Trade Cas. (CCH) ] 76,736, 
2009 U.S. Dist. LEXIS 84787, at *3, (D.D.C. Aug. 11, 2009) (noting that 
the court's review of a consent judgment is limited and only inquires 
``into whether the government's determination that the proposed 
remedies will cure the antitrust violations alleged in the complaint 
was reasonable, and whether the mechanism to enforce the final judgment 
are clear and manageable.'').
    As the United States Court of Appeals for the District of Columbia 
Circuit has held, under the APPA a court considers, among other things, 
the relationship between the remedy secured and the specific 
allegations in the government's Complaint, whether the proposed Final 
Judgment is sufficiently clear, whether its enforcement mechanisms are 
sufficient, and whether it may positively harm third parties. See 
Microsoft, 56 F.3d at 1458-62. With respect to the adequacy of the 
relief secured by the proposed Final Judgment, a court may not ``make 
de novo determination of facts and issues.'' United States v. W. Elec. 
Co., 993 F.2d 1572, 1577 (D.C. Cir. 1993) (quotation marks omitted);; 
see also Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc., 
152 F. Supp. 2d 37, 40 (D.D.C. 2001); United States v. Enova Corp., 107 
F. Supp. 2d 10, 16 (D.D.C. 2000); InBev, 2009 U.S. Dist. LEXIS 84787, 
at *3.
    Instead, ``[t]he balancing of competing social and political 
interests affected by a proposed antitrust decree must be left, in the 
first instance, to the discretion of the Attorney General.'' W. Elec. 
Co., 993 F.2d at 1577 (quotation marks omitted). ``The court should 
also bear in mind the flexibility of the public interest inquiry: the 
court's function is not to determine whether the resulting array of 
rights and liabilities is the one that will best serve society, but 
only to confirm that the resulting settlement is within the reaches of 
the public interest.'' Microsoft, 56 F.3d at 1460 (quotation marks 
omitted); see also United States v. Deutsche Telekom AG, No. 19-2232 
(TJK), 2020 WL 1873555, at *7 (D.D.C. Apr. 14, 2020). More demanding 
requirements would ``have enormous practical consequences for the 
government's ability to negotiate future settlements,'' contrary to 
congressional intent. Microsoft, 56 F.3d at 1456. ``The Tunney Act was 
not intended to create a disincentive to the use of the consent 
decree.'' Id.
    The United States' predictions about the efficacy of the remedy are 
to be afforded deference by the Court. See, e.g., Microsoft, 56 F.3d at 
1461 (recognizing courts should give ``due respect to the Justice 
Department's . . . view of the nature of its case''); United

[[Page 7171]]

States v. Iron Mountain, Inc., 217 F. Supp. 3d 146, 152-53 (D.D.C. 
2016) (``In evaluating objections to settlement agreements under the 
Tunney Act, a court must be mindful that [t]he government need not 
prove that the settlements will perfectly remedy the alleged antitrust 
harms[;] it need only provide a factual basis for concluding that the 
settlements are reasonably adequate remedies for the alleged harms.'' 
(internal citations omitted)); United States v. Republic Servs., Inc., 
723 F. Supp. 2d 157, 160 (D.D.C. 2010) (noting ``the deferential review 
to which the government's proposed remedy is accorded''); United States 
v. Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (``A 
district court must accord due respect to the government's prediction 
as to the effect of proposed remedies, its perception of the market 
structure, and its view of the nature of the case.''). The ultimate 
question is whether ``the remedies [obtained by the Final Judgment are] 
so inconsonant with the allegations charged as to fall outside of the 
`reaches of the public interest.''' Microsoft, 56 F.3d at 1461 (quoting 
W. Elec. Co., 900 F.2d at 309).
    Moreover, the court's role under the APPA is limited to reviewing 
the remedy in relationship to the violations that the United States has 
alleged in its Complaint and does not authorize the court to 
``construct [its] own hypothetical case and then evaluate the decree 
against that case.'' Microsoft, 56 F.3d at 1459; see also U.S. Airways, 
38 F. Supp. 3d at 75 (noting that the court must simply determine 
whether there is a factual foundation for the government's decisions 
such that its conclusions regarding the proposed settlements are 
reasonable); InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (concluding 
that ``the `public interest' is not to be measured by comparing the 
violations alleged in the complaint against those the court believes 
could have, or even should have, been alleged''). Because the ``court's 
authority to review the decree depends entirely on the government's 
exercising its prosecutorial discretion by bringing a case in the first 
place,'' it follows that ``the court is only authorized to review the 
decree itself,'' and not to ``effectively redraft the complaint'' to 
inquire into other matters that the United States did not pursue. 
Microsoft, 56 F.3d at 1459-60. As this Court confirmed in SBC 
Communications, courts ``cannot look beyond the complaint in making the 
public interest determination unless the complaint is drafted so 
narrowly as to make a mockery of judicial power.'' 489 F. Supp. 2d at 
15.
    In its 2004 amendments to the APPA, Congress made clear its intent 
to preserve the practical benefits of using judgments proposed by the 
United States in antitrust enforcement, adding the unambiguous 
instruction that ``[n]othing in this section shall be construed to 
require the court to conduct an evidentiary hearing or to require the 
court to permit anyone to intervene.'' 15 U.S.C. 16(e)(2); see also 
U.S. Airways, 38 F. Supp. 3d at 76 (indicating that a court is not 
required to hold an evidentiary hearing or to permit intervenors as 
part of its review under the Tunney Act). This language explicitly 
wrote into the statute what Congress intended when it enacted the 
Tunney Act in 1974. As Senator Tunney explained: ``The court is nowhere 
compelled to go to trial or to engage in extended proceedings which 
might have the effect of vitiating the benefits of prompt and less 
costly settlement through the consent decree process.'' 119 Cong. Rec. 
24,598 (1973) (statement of Sen. Tunney). ``A court can make its public 
interest determination based on the competitive impact statement and 
response to public comments alone.'' U.S. Airways, 38 F. Supp. 3d at 76 
(citing Enova Corp., 107 F. Supp. 2d at 17).

VIII. Determinative Documents

    There are no determinative materials or documents within the 
meaning of the APPA that were considered by the United States in 
formulating the proposed Final Judgment.

Date: January 7, 2025
Respectfully Submitted,

-----------------------------------------------------------------------
Kenneth A. Libby, Special Attorney, U.S. Department of Justice, 
Antitrust Division, c/o Federal Trade Commission, 600 Pennsylvania 
Avenue NW, Washington, DC 20580, Phone: (202) 326-2694, Email: 
[email protected].
[FR Doc. 2025-01252 Filed 1-17-25; 8:45 am]
BILLING CODE 4410-11-P
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