Attorney General Lockyer Conditions Chevron-Texaco Merger on Divestitures to Prevent Further Concentration of California Gasoline Marketplace

Friday, September 7, 2001
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(LOS ANGELES) – Attorney General Bill Lockyer today announced that Chevron Corp. and Texaco Inc. have agreed as a condition of their $45 billion merger to divesting Texaco's domestic gasoline refining and retailing interests and guaranteeing long-term crude oil contracts to independent refiners in California's Central Valley.

"Given a marketplace already controlled by a handful of oil companies, we fought for key concessions to avoid a chokehold from another oil company merger," Lockyer said. "Faced with the Chevron and Texaco merger, we looked at creative ways within the constraints of antitrust laws to preserve competition in the state's gas and crude oil market in the interest of California consumers."

The proposed antitrust settlement was filed today in federal court in Los Angeles by California and 11 other states. The states are Alaska, Arizona, Florida, Hawaii, Idaho, Nevada, New Mexico, Texas, Oregon, Utah and Washington. The Federal Trade Commission also has been reviewing the merger of San Francisco-based Chevron and Texaco of White Plains, New York.

Under the merger conditions, Texaco will shed its gas and refining assets in the United States to another buyer, possibly Shell, subject to review by the states and the FTC. Texaco has been involved in the refinery, wholesale and retail motor gasoline markets in joint ventures with Shell known as Equilon in the West and Midwest and Motiva in the East.

To preserve competition in the refinery market, the proposed merger agreement for California requires the new ChevronTexaco company to provide a 10-year supply contract at market rates for crude oil to independent refiners Kern Oil and Refining and San Joaquin Refining. The independent refiners also must be guaranteed pipeline access to crude oil supplies.

Chevron-Texaco Merger Settlement

To avoid further concentration of the aviation fuel market from the merger, the antitrust settlement requires Texaco to sell its Aviation Gasoline Division in California and the other states. The division represents approximately $750 million in sales a year nationally to fuel small aircraft with non-turbine engines.

The divestiture would prevent West Coast Chevron and Texaco from controlling more than half of the non-kerosene aviation fuel market. Chevron also is prohibited from acquiring any part of the aviation gasoline supply contract with Frontier's El Dorado refinery. Any changes in aviation gas purchase and sale agreements would require review by the states.

In shedding its Equilon assets, the new ChevronTexaco Corp. would be prohibited from selling Texaco-branded fuels through June 30, 2002 to provide a transition for the new owner of the 720 Texaco gasoline stations in California. Texaco operates over 12,700 gasoline stations across the country. Independent gasoline wholesalers and retailers would be allowed to continue using the Texaco brand until they choose to switch. Additionally, ChevronTexaco Corp. must notify the states if Texaco-branded stations are being reacquired.

The divestitures and other concessions are designed to prevent the new company from controlling over 33 percent of California's gasoline market and easing the impact on the crude oil marketplace.

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