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Politicians will holler about ChevronTexaco Corp.’s $18 billion bid for Unocal Corp., but antitrust lawyers in Washington predict smooth sailing for the deal, largely because the two should be able to allay regulators’ concerns that the merger will exacerbate the rise in fuel prices. Over the past decade, Unocal has focused on exploration and refining while selling its marketing and distribution assets — the very areas of ChevronTexaco’s strength. While ChevronTexaco is expanding its exploration and production operations, this is an area so fraught with risk that regulators are likely to welcome consolidation, antitrust lawyers say. Lawmakers have been especially vocal in recent months about energy sector mergers that many fear are fueling the rise in energy prices, particularly what consumers pay at the pump. Ron Wyden, D-Ore., a member of the Senate Energy and Natural Resources Committee, delayed the appointment of Federal Trade Commission Chairman Deborah Platt Majoras last year on grounds that she did not adequately address the impact the industry’s consolidation on rising fuel prices. The $18 billion ChevronTexaco-Unocal merger will almost certainly be reviewed by the FTC, which will be under intense political pressure to oppose the merger. “It will be awkward for [Majoras],” said a lawyer watching the deal. “But there are lots of companies in exploration, and there really aren’t overlaps.” Howard University Antitrust Law Professor Andy Gavil, among others, agreed that while the politics of gasoline prices will raise questions about the deal, Unocal’s sale of its marketing and distribution businesses will help persuade regulators that the merger won’t raise gasoline prices. The FTC’s most recent report on the petroleum industry, issued in August, suggested that there are compelling pro-competitive reasons to allow mergers of exploration and production assets. “Some of these scale economies relate to risk management in pursuit of crude oil supplies,” the report said. “In many cases, crude oil exploration and production ventures have become more risky as firms seek new sources of supply where extraction is more difficult and uncertain — such as the deep water Gulf Coast — or where there are difficult geopolitical issues — such as in the Caspian Basin. These risks have encouraged consolidation not only among major petroleum companies well known to consumers at the pump but also among large ‘independent’ crude oil producers.” Both ChevronTexaco and Unocal are exploring in the Caspian. While the merger could prompt congressional hearings that could delay the deal, few observers expect them to delay its closure. As for the expected FTC review, it’s unclear whether Chairman Majoras will be recused from the matter. Her former partner, Joe Sims of Jones Day, represents ChevronTexaco. Chevron’s general counsel, Charles James, is also a former Jones Day partner, as well as a former assistant attorney general for antitrust at the Department of Justice, where Majoras was his deputy. Copyright �2005 TDD, LLC. All rights reserved.

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