Unocal to Settle Price-Fixing Suit for $78 Million : Litigation: The firm admits no wrongdoing in the proposal, one of the largest settlements reached in a state antitrust action against the oil industry.
Unocal Corp. has signed a $78-million settlement that would drop the company from a massive lawsuit charging six major oil companies with conspiring to cheat the City of Long Beach by holding down prices of crude oil pumped from area tidelands, state officials said Wednesday.
Unocal’s proposed settlement--which must still be signed by Gov. Pete Wilson and approved by state and federal courts--is among the largest reached in a state antitrust action against the oil industry, said Gary Hoecker, a lawyer representing the City of Long Beach who has been involved in the 16-year-old case since its inception.
The proposed settlement dwarfs that agreed to by Atlantic Richfield Co. in 1984, when it paid $22.5 million in cash to be dropped from the price-fixing case. The massive case, initiated by the City of Long Beach in 1975, also names Chevron Corp., Exxon Corp., Mobil Corp., Shell Oil Co. and Texaco Inc.
“It’s outstanding,” Lt. Gov. Leo McCarthy said in an interview Wednesday. “It breaks down the phalanx that the oil companies have presented in this whole price-fixing case.”
In addition to price-fixing charges, the suit broadly alleges that the oil companies conspired to monopolize and control the production, distribution, purchase and sale of crude oil on the West Coast.
Under terms of the proposed settlement, Unocal admits to no wrongdoing. It agrees to pay $40 million in cash, transfer ownership of about $20.2 million in “environmentally sensitive” lands to the public and allow its crude oil pipeline system in California to be used by other crude oil producers and refiners, Hoecker said.
The state also stands to realize an extra $18 million in revenue, because oil production will rise as more producers gain access to Unocal’s pipeline system, the state’s largest, Hoecker said.
“This is a landmark settlement, which provides huge dividends for consumers, environmentalists and taxpayers,” said State Controller Gray Davis, who serves as chairman of the state Lands Commission, one of several plaintiffs in the suit.
“I want to commend Unocal for coming forward and negotiating in good faith to put this matter behind us,” Davis added. “And given the record profits the industry is now enjoying, there is no excuse for the remaining defendants not to settle up with California’s taxpayers.”
Unocal had no comment Wednesday on the proposed settlement. Although the state has spent $40 million to $50 million to pursue the suit this far, Davis said the Unocal settlement “will put us in the black.” Unocal approached the state about a year ago to begin settlement talks, he said.
The settlement comes about four months before a jury trial is to begin in U.S. District Court in Los Angeles on the first part of the complex lawsuit. That portion of the suit alleges a price-fixing conspiracy in the 1960s and 1970s.
A second part of the massive suit, alleging price fixing in the early 1980s, is pending in state court, although no trial has been scheduled.
If the government plaintiffs prevail, estimates of possible damages range as high as $340 million; a successful antitrust action could result in triple damages.
Spokesmen for Chevron, Exxon, Mobil, Shell and Texaco said they were not holding similar settlement talks, and all said they were prepared to challenge the allegations in court.
“We fully expect to try the case, and we fully expect to prevail at trial,” said Robert Mittelstaedt, a Washington lawyer representing Chevron.
Some details of the proposed settlement:
* Unocal will pay $40 million in cash, including $32 million immediately and $8 million over the next year, with interest.
* Unocal agrees to donate 5,125 acres of rare so-called Burton Mesa Chaparral in Santa Barbara County, 130-acre and 95.5-acre parcels of hawk and kite habitats in Contra Costa County, 112.5 acres of rare dune creek lands along San Luis Obispo County’s Oso Flaco Creek and 10 acres in Los Angeles to be added to Harbor City Regional Park.
BACKGROUND The price-fixing suit concerns a 1.5-billion-barrel oil field in Wilmington. In the 1960s, Long Beach sold the major oil firms rights to pump crude oil from the field. The suit alleges that the firms met secretly and conspired to pay artificially low prices for the oil, thus cheating Long Beach and the State of California. The case was dismissed in U.S. District Court in 1985 but reinstated in 1989 by an appeals court. In 1990, the U.S. Supreme Court sent the case back to the district court for jury trial.
