Texaco Inc. agreed Tuesday to pay $1.25 billion to the U.S. Department of Energy in settlement of various disputes over the pricing of oil during the period of federal price controls from 1973 to 1981.
Texaco is the latest energy company to come to terms with the government in its prolonged, complicated investigation of the way oil was classified during price controls. At least 400 cases are involved, with total settlements expected to reach $8.2 billion.
The biggest such settlement was with Exxon Corp., whose obligation of $2.1 billion was upheld by the courts in 1986.
As with other companies, the final figure reached in the Texaco negotiations fell far below the government's initial claim.
In federal Bankruptcy Court in White Plains, N.Y., where Texaco took refuge from creditors after losing a $10.3-billion jury verdict to Pennzoil Corp., the federal government claimed that Texaco owed it $2.2 billion.
Texaco said the settlement will have no effect on current earnings. The deal calls for an initial payment of $400 million with the balance to be paid over five years.
The establishment of a financial reserve to cover the expected Energy Department settlement was among the costs contained in a previously announced $4.9-billion writedown in Texaco's fourth quarter of 1987. That led to a quarterly net loss of $4.76 billion.
"As we have stated previously, Texaco has set aside reserves for this contingency and, as a result, this settlement will have no impact on current earnings," said James W. Kinnear, chief executive of Texaco.
Still unresolved is a potential Internal Revenue Service claim of as much as $6.5 billion stemming from Texaco's purchase and sale of Saudi Arabian oil from 1979 to 1981.
The Energy Department settlement covered 12 cases, most of which contended that Texaco had wrongfully classified certain crude oil as "new" oil rather than "old" oil. New oil was not subject to price controls, and owners could charge more for it.
Hundreds of related alleged schemes were uncovered during the period of price controls, some of which involved swapping domestic oil for uncontrolled foreign oil.
A department spokesman said the Texaco case brings the total settlements to $7.3 billion. The government expects to collect another $900 million, he said.
The settlements dictate various ways to distribute the money. In the Exxon case, for example, the courts directed that the entire $2.1 billion to be distributed to energy conservation programs in states, with $200 million earmarked for California.
The government said the Texaco money will be divvied up differently, and it wasn't yet known how much will go where.