United States: US Antitrust Considerations In Oil And Gas Joint Bidding And Area Of Mutual Interest Arrangements

Every oil and gas exploration and production (E&P) company acquires oil and gas properties either directly from landowners or from other lessees. These transactions come in many forms and sizes but occur daily in good times and bad times.

At the same time, E&P companies typically do not act alone in developing their oil and gas properties and often enter into agreements of various kinds with other companies to jointly explore, develop and produce oil and gas properties. Many such relationships do not raise any legal issues concerning anti-competitive conduct, but some recent high-profile cases have emphasized the need to observe some basic concepts.

The late Aubrey K. McClendon, the former CEO of an active E&P company, was recently indicted for alleged violations of antitrust laws in bidding to acquire oil and gas leases during a period from 2007 to 2012.1 While this particular case involved criminal charges, improper conduct also raises the possibility of civil charges by the government and private actions by injured parties.

According to the Indictment, McClendon "and his coconspirators knowingly entered into and engaged in a combination and conspiracy to suppress and eliminate competition by rigging bids for certain leasehold interests and producing properties. The combination and conspiracy engaged in by the defendant, Aubrey K. McClendon, and his co-conspirators was in unreasonable restraint of interstate commerce in violation of Section 1 of the Sherman Act (15 U.S.C. § 1)." According to the press release2 issued by the US Department of Justice:

[t]he indictment alleges that McClendon orchestrated a conspiracy between two large oil and gas companies to not bid against each other for the purchase of certain oil and natural gas leases in northwest Oklahoma. During this conspiracy, which ran from December 2007 to March 2012, the conspirators would decide ahead of time who would win the leases. The winning bidder would then allocate an interest in the leases to the other company. McClendon instructed his subordinates to execute the conspiratorial agreement, which included, among other things, withdrawing bids for certain leases and agreeing on the allocation of interests in the leases between the conspiring companies.

The indictment contains few details, but, apparently, executives from two companies agreed that only one of them would bid to acquire leases and producing properties, and, if successful in that bid, would share the properties with the other company at cost. The arrangements were kept secret and the selling party was not informed of the arrangement.

While the criminal indictment against a well-known CEO is certainly newsworthy, another civil case from a few years ago holds more practical lessons for E&P companies. In a 2012 Colorado federal court case called United States vs. SG Interests I, Ltd., et al.,3 the government considered antitrust issues in arrangements for the joint bidding to acquire federal oil and gas leases. This was the first time that the United States challenged under antitrust laws a joint bidding arrangement for mineral rights leases administered by the US Bureau of Land Management (BLM). In that case, one set of bids made pursuant to a memorandum of understanding among several companies were found to violate antitrust laws, but another set of bids that were "ancillary to a broader joint development and production collaboration" were found to be permissible and not contrary to the antitrust laws.

Bid-rigging agreements generally are among the types of restraints on competition that courts have condemned as per se unlawful. The government has the discretion to decide whether to bring criminal or civil charges when dealing with per se antitrust offenses. In the SG Interests case, the government stated that it chose to pursue a civil action because the joint bidding agreement was performed under a written memorandum of understanding (MOU) drafted by attorneys.

The government entered into a settlement agreement with the SG Interests defendants that called for a monetary payment (the government alleged that it suffered damages given that BLM allegedly received less money for the lease interests because of the unlawful agreement). In its "Response of Plaintiff United States to Public Comments on the Proposed Final Judgment,"4 explaining its recommendation for the proposed final judgment and remedy in the case, the government articulated the application of an exception to the per se rule:

Applying this analysis to an auction setting, a naked agreement between competitors not to bid against each other is properly treated as per se unlawful. On the other hand, a joint bidding agreement that is ancillary to a procompetitive or efficiency-enhancing collaboration may be lawful under the rule of reason. Significantly, lawful joint bidding "contemplates subsequent joint productive activity, which entails a measure of risk sharing or joint provision of some good or service." 12 PHILLIP E. AREEDA & HERBERT HOVENKAMP, Antitrust Law ¶ 2005d, at 75 (2d ed. 2005). For example, if a firm, which cannot or might not otherwise compete on a particular bid, joins with another firm to pool resources or share risk, their joint bidding might increase competition by increasing the number of bidders.

The unlawful bidding arrangement took place against the backdrop of discussions among the parties under an MOU about a broader agreement, but any such broader collaboration remained just a "vague possibility." However, the second, lawful arrangement took place later, pursuant to a more concrete collaborative arrangement. The factors relevant to that characterization were these:

[The lawful collaboration was formed] ... after significant negotiations between the parties, was reflected in an agreement that provided for joint exploration and development of lands located within the defined area. It was specifically designed to facilitate the efficient production of gas and included provisions for the joint acquisition and ownership of leases in the area, for conducting joint operations, and for building and operating a pipeline system to transport gas to end-users which required substantial capital investment. Defendants' agreement to share ownership of future leases acquired by either party aligned their incentives to cooperate in achieving the goals of the collaboration and discouraged any one Defendant from appropriating an undue share of the collaboration's benefits. Defendants' collaboration, thus, allowed them to pool their resources and share the risks of exploration for, and development of, the natural resources, which provided an opportunity to realize significant production efficiencies.

Joint bidding arrangements and "area of mutual interest" provisions are quite common in the upstream business. Indeed, the bidding arrangement that the government deemed lawful in SG Interests was memorialized in an Area of Mutual Interest Agreement and an Option and Participation Agreement to jointly acquire and develop leases and pipelines in the relevant area.

As the SG Interests case suggests, when used properly in the context of collaborative efforts, these arrangements would be deemed to be in compliance with the antitrust laws. The US antitrust agencies, in their "Antitrust Guidelines for Collaborations Among Competitors,"recognize that "competitive forces are driving firms toward complex collaborations to achieve goals such as expanding into [new] markets, funding expensive innovation efforts, and lowering production and other costs." The antitrust laws encourage procompetitive collaborations that help achieve these goals, as is often the case with joint bidding and development arrangements among E&P companies.

Parties must be careful to utilize these arrangements only in the context of a larger collaboration that will withstand antitrust scrutiny from the government or private parties. The government will examine the facts, such as those quoted above, to see if the collaboration is one in which, to use the government's language from SG Interests, "procompetitive efficiencies arise."


1. See Indictment in re United States of America vs. Aubrey K. McClendon, filed with The United States District Court for the Western District of Oklahoma.

2. See U.S. Department of Justice's Press Release dated March 1, 2016, available at https://www.justice.gov/opa/pr/former-ceo-indicted-masterminding-conspiracy-not-compete-oil-and-natural-gas-leases, last checked on March 8, 2016.)

3. One of the co-authors of this legal update, William Stallings, joined Mayer Brown in its Washington office after service as Chief of the Transportation, Energy and Agriculture Section of the Antitrust Division of the United States Department of Justice. While at the Antitrust Division, he had responsibility for the SG Interests case.

4. See Response of Plaintiff United States to Public Comments on the Proposed Final Judgment, U.S. v. SGI Interests I, Ltd. et al., Case No. 1:12-CV-00395 (D. Colo. 2012), available at https://www.justice.gov/atr/case-document/file/510586/download, last checked on March 8, 2016.)

Originally published 8 March 2016

Learn more about our Antitrust & Competition and Oil & Gas practices.

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2016. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.