press release

Unocal cleaner-burning gasoline patents are 'not a factor' in Midwest gasoline price increases

Chicago, Ill., June 19, 2000 -- Unocal Corporation's patents for cleaner-burning motor gasolines are not a factor in the recent increase in gasoline prices in Chicago and the Midwest, the company told a Congressional delegation here today (see text of remarks).

"Our patents represent a major breakthrough in cleaner-burning motor fuels," said William Ichord, vice president of Unocal's Washington, D.C., office. "Unocal's patents are not a barrier to the manufacture and sale of reformulated gasolines mandated by the U.S. Environmental Protection Agency. There is no reason to think that they have been a significant factor in the rising price of gasoline sold in the Midwest."

In reality, the Unocal patents "provide refiners and blenders with cost-effective ways to meet new Federal clean air standards and improve air quality," Ichord said. "If we were collecting license fees or royalties, the impact on gasoline prices in the Midwest would be less than 2 cents per gallon."

Unocal has neither initiated or threatened any legal action on its patents for cleaner-burning gasolines.

Recent statements to the media by various refiners, industry associations and analysts support Unocal's position that the patents are not a factor in the current gasoline situation.

Exxon Mobil's CEO told Bloomberg that his company was making all of the RFG gasoline it could make and that it was not infringing on Unocal's patents. An EIA analyst told Dow Jones that the Unocal patents were a relatively minor factor in the U.S. gasoline market. This was echoed by a senior official with Williams Companies, a pipeline operator in the Midwest, in testimony before a U.S. Senate subcommittee last week. The American Automobile Association told CBS MarketWatch, "There have been some missed signals between U.S. regulators and the energy industry. The oil refiners actually seem to be caught flat-footed in being prepared to meet this regulatory deadline. That's artificially increased the price of gasoline to consumers."

Ichord added that Unocal is not collecting any fees or royalties on gasolines sold in the Midwest. "Although we are currently in preliminary discussions with potential licensees, a number of important players in the marketplace still have not talked to us. No agreements have been finalized and no fees have been collected," Ichord said.

In April 1995, six of the world's largest gasoline refiners filed suit against Unocal in California, challenging the validity of the company's "393" (Patent No. 5,288,393) patent. A U.S. District Court jury in 1997 returned a verdict validating the "393" patent and awarding Unocal 5.75 cents per infringing gallon. Later that year, a U.S. District Court judge ruled that Unocal acted properly during the course of the application and review of the patent with the U.S. Patent and Trademark Office.

In March 2000, the U.S. Circuit Court in Washington, D.C., upheld the lower court decision and jury verdict. "The courts have clearly ruled in our favor," Ichord said.

Ichord stressed that the 5.75 cents per gallon figure was determined by the District Court jury, not Unocal.

Ichord went on to say that many refiners have publicly declared that they can blend around Unocal's patents.

During the jury trial in California, it was found that only 29 percent of gasoline manufactured by the six major refiners during five months in 1996 infringed on Unocal's "393" patent. That computes to 1.7 cents per gallon of RFG manufactured in that period. Assuming that gasoline manufactured in the Midwest follows a pattern similar to California, the impact on prices would be less than 2 cents per gallon.

"The recent run-up in gasoline prices has extended to such areas as Detroit and southern Illinois where EPA RFG is not even being sold," Ichord said. "This very strongly suggests that rising gasoline prices in the Midwest today are the result of a variety of factors unrelated to Unocal's patents, including high crude oil prices, refinery problems and pipeline interruptions."

Unocal's patents

In the late 1980s, Unocal researchers discovered unexpected relationships

between certain gasoline properties and particular tailpipe emissions. The company's research found that by controlling certain properties, one could achieve significant reduction in smog-causing tailpipe emissions. Unocal applied for its first patent in December 1990. That "393" patent was issued in February 1994.

Unocal today holds five patents for new, useful and non-obvious compositions of motor gasolines that substantially reduce unwanted air emissions using current refining technology and motor vehicles. The compositions outlined in the patents involve specifications of certain parameters of various grades of gasolines, including Reid Vapor Pressure (RVP), olefin content, and distillation points.

These gasolines provide significant potential health benefits by reducing unwanted tailpipe emissions, compared with typical motor fuels, and without the need to use MTBE or other oxygenates. Unocal's cleaner-burning gasoline formulations can be made with existing refining and blending hardware.

For more information about Unocal's patented cleaner-burning gasoline formulations, see the special on-line report on Unocal's RFG patents.

Updated: June 2000