Attorney General Hardy Myers today announced that two of the largest petroleum products companies in the world have agreed to major concessions in a settlement agreement concerning their merger. Oregon is joined by the Federal Trade Commission and 11 other states today in filing settlement papers allowing the merger of Chevron Corporation and Texaco Inc.
The companies have agreed to sell all of Texaco's interests in the downstream motor gasoline assets and sales in the United States, including its interests in refineries, and wholesale and retail gasoline sales. They also have agreed to sell Texaco's aviation gasoline assets in a number of states, including Oregon.
According to market surveys of companies that supply gasoline in Oregon, Chevron supplies approximately 21 percent sold to Oregon consumers and Texaco and Shell, in a joint venture called Equilon, supply approximately 30 percent. Chevron claims that after the merger, ChevronTexaco will be the nation's third largest producer of oil and gas, will have assets of $77 billion with $66.5 billion in revenue, and will be able to produce 2.7 million barrels of oil per day with reserves of 11.2 billion barrels.
"We were extremely concerned that the merger as originally planned would give the new company, ChevronTexaco Corporation, too much market power," Myers said. "This type of merger often results in consumers paying higher prices for gasoline because of the reduction in competition in the marketplace."
Under the terms of settlement, the companies must divest all of Texaco's interest in Equilon and relinquish their right to use the Texaco brand name for the sale of motor gasoline through June 2003. Independent motor gasoline wholesalers and retailers will be allowed to continue using the Texaco brand through June 2003, and in a number of instances, beyond June 2003 until they can switch to another brand.
"Due to this divestiture, we believe the new ChevronTexaco Corporation will be prevented from taking over the market and the action will allow the buyer of Texaco's interests in Equilon to build its own brand," Myers said.
According to Myers, the settlement will prevent ChevronTexaco from acquiring any additional market share in the refining, wholesale or retail motor gasoline markets or the aviation gasoline markets in Oregon as a result of the merger, thus preserving competition in each of those markets at pre-merger levels.
Today's settlement also includes a requirement that the companies divest Texaco's aviation gasoline assets in a number of states, including Oregon. "Without such a provision, a combined ChevronTexaco would control approximately 80 percent of the aviation gasoline market in Oregon, which serves primarily small, general aviation aircraft," Myers said.
If the sale of Texaco's interest in Equilon fails to materialize, the settlement requires that the interest be placed in an irrevocable trust until another sale can be arranged. The new buyer must be acceptable to state and federal regulators. Avfuel Corporation of Michigan has been identified by regulators as a possible buyer for Texaco's aviation gasoline assets.
Other specifics in the settlement include giving the 12 participating states the ability to monitor the manner in which the divestitures are accomplished including requiring Chevron/Texaco to submit compliance reports every 60 days until divestiture is completed. Chevron/Texaco also must produce additional documents and information if requested by the states.
Oregon Department of Justice will be reimbursed approximately $250,000 for attorney and investigative fees.
Kevin Neely, Justice, (503) 378-6002
Jan Margosian, (503) 947-4333 (media line only) firstname.lastname@example.org