Chevron, Unocal Reach Deal on Gasoline Patents
California oil companies Chevron Corp. and Unocal Corp. announced Wednesday that they had reached a tentative agreement with federal regulators to settle claims related to Unocal’s long-disputed patents for cleaner-burning gasoline.
The agreement with Federal Trade Commission staff members, if approved by the five commissioners, would clear a hurdle for San Ramon-based Chevron in its bid to buy its El Segundo-based counterpart. The companies announced the $16.4-billion acquisition in April.
But the effect for motorists remained unknown Wednesday, as no terms of the deal were disclosed.
Six of Unocal’s rivals in refining -- including Chevron at one time -- had contended that the patents gave Unocal an illegal monopoly over the state-mandated formula for less-polluting gas. State energy officials had estimated that royalties paid to Unocal could result in as much as $500 million a year in higher pump prices.
Unocal contended that it had properly received the patents, which were ruled valid in a jury trial in U.S. District Court and upheld on appeal. The company said royalties would not exceed $150 million annually.
The FTC would not comment Wednesday, other than to issue a proposed order stating that the case be dropped, pending the commission’s approval.
Representatives of refiners BP, which owns the Arco brand, Valero Energy Corp. and Shell Oil Co. could not be reached for comment late Wednesday.
Terms of the proposed settlement should be released in the next couple of days, after FTC commissioners open a 30-day period for public comment, said Barry Lane, a Unocal spokesman. Acceptance of the deal should “resolve the outstanding issues associated with Chevron’s proposed acquisition of Unocal,” he said.
The patents concern the fuel blend that had been developed by the California Air Resources Board and several major refiners, including Chevron and Exxon Mobil Corp.
Agency spokesman Jerry Martin said Wednesday that the air board in the early 1990s sought help from all the major oil refiners that sold in the California market.
“It was a cooperative effort, but, unfortunately, Unocal quietly went to D.C. and got a patent,” he said.
The FTC filed civil antitrust charges against Unocal, contending that the patents provided the company with unlawful market power to demand royalties from all gasoline companies that sold the state-sanctioned blend.
Martin said the air board, which had submitted a legal brief in support of the FTC’s case, hoped that Unocal would drop all its rights under the patents and return the gasoline formula to the public domain.
“Obviously, our desire is they not charge all the companies for use of a state-mandated fuel,” Martin said.
The California Department of Justice, which cooperated with the FTC investigation of Unocal’s patents, is looking to the proposed agreement to “protect California drivers from undue price increases at the gas pump,” said Tom Dresslar, a spokesman for Atty. Gen. Bill Lockyer.
Unocal shares rose 37 cents to $58.47 and Chevron gained 5 cents to $54.83 on Wednesday. The announcement came after the close of trading.
