Texaco to Pay U.S. $1.25 Billion in Settlement of Price Disputes : Claims Stem From 1973-81 Selling of ‘Old’ Oil for ‘New’
Texaco Inc. said today it has agreed to pay the government $1.25 billion to settle disputes related to its pricing of crude and refined products during the 1973-1981 period of price controls.
The payments will begin with a $400-million first installment when the agreement is closed, and will be stretched over the next 5 1/2 years, the company said at its White Plains, N.Y., headquarters.
“Texaco has set aside reserves for this contingency and, as a result, this settlement will have no impact on current earnings,” James W. Kinnear, Texaco’s president, said in a statement.
Texaco is not the first oil company to tangle with the Department of Energy over this issue.
Judgment Against Exxon
In January, 1986, the U.S. Supreme Court upheld a lower court decision ordering Exxon Corp. to repay consumers more than $2 billion in refunds and interest for overcharging on the sale of oil from one Texas field between 1975 and 1981.
The Energy Department has recovered--or been seeking to recover--billions of dollars more from numerous oil companies and other businesses on essentially the same premise: that during the 1973-81 era of federal price controls, companies made illegal profits by classifying so-called “old” oil as “new” oil, thus permitting it to be sold at higher prices.
Texaco’s settlement “resolves an unusually massive, complex set of issues arising out of the more than $70 billion worth of business the company conducted in crude oil and refined products in the U.S. over this period,” Kinnear said.
Texaco said the DOE had estimated that its claims against Texaco “could have totaled $2.1 billion.”
Like Exxon, Texaco had maintained that it could not be held accountable for confusing federal regulations defining what was “old” oil and what was “new” oil.
Rules Called Ambiguous
These were “ambiguous and were clarified and revised several times during the period in question,” Texaco said.
The settlement is subject to agreement on the final terms, various regulatory approvals and appropriate confirmation by the U.S. Bankruptcy Court.
“Conclusion of these matters will free Texaco from years of additional and costly litigation--allowing us to concentrate our efforts on making our company stronger and more productive as we emerge from Chapter 11,” Kinnear said.
Last April, the nation’s third-largest oil company filed for protection under federal bankruptcy laws to avoid having to post a potentially ruinous bond while appealing a $10.3-billion judgment held against Texaco by Pennzoil Co.
Pennzoil won the judgment when a Houston jury ruled that Texaco had improperly interfered with a bid by Pennzoil to acquire part of Getty Oil Co. and bought Getty itself.