- The Washington Times - Monday, May 14, 2001

Motor fuels are among the most heavily taxed yet essential consumer commodities in existence with federal and state levies accounting for 50-75 cents or more per gallon. These regressive, unavoidable taxes hit everyone alike rich and poor, those on fixed incomes, the elderly all of us.
Its bad enough that the government gouges us to such an extent on a basic necessity of modern life. At least we get the roads paved and maintained in return (motor fuels taxes are used to finance the upkeep of Americas highway infrastrcuture). But private, for-profit gouging of American motorists is another matter.
You may be surprised to learn that a goodly bit of every tankful tithe youll pay this summer and onward goes not to Big Government, but rather to Big Oil. Or at least, to one large oil company: Unocal.
Specifically, an amount of money equivalent to 5.75 cents per gallon on the "reformulated gasolines" that must be sold in certain areas of the country under federal law will be going straight from motorists pockets into the corporate coffers of Unocal a company that, ironically, no longer even sells gasoline in the United States.
The arrangement which makes this profiteering possible was affirmed by default last week, when the Supreme Court refused to hear a case that challenged a patent held by Unocal on the mix of fuel additives that constitute "reformulated gasoline" under federal regulatory rules.
"Reformulated gas" is designed to burn cleaner and thus decrease emissions from motor vehicles; it is also, however, much more costly to produce and creates refining and distribution problems problems that foster tighter fuel supplies and surging per gallon costs at the pump. It was the reformulated gas issue that contributed to last summers price spikes and which will put the arm on American drivers again this summer.
The case against Unocal was brought by five other major oil companies companies that must now pay a royalty of 5.75 cents per gallon to Unocal for the right to produce the reformulated gasoline required by law in more and more areas of the country. The total amount at issue is projected at $7 billion-plus. These costs, of course, dont get paid by the oil companies they are passed on to motorists. The royalty issue may also cause shortages as some refiners elect not to produce reformulated gas at all in order to avoid having to pay a tithe to Unocal.
Now, had Unocal invented a new type of gasoline or some new additive, process or refining technique this would be a clear-cut case of legitimate intellectual property rights, and Unocal would be entitled to profit from its discovery.
But what actually happened is another matter entirely. Unocal secured its patents not by any new discovery, fuel type or additive but in effect, on regulatory wording. Specifically, on the legal terminology defining the blend of pre-existing fuels and additives that qualify as reformulated gas under the regulatory code. And it secured these patents in secret while participating in a cooperative consortium with the other oil companies on the reformulated fuel project.
The idea behind the consortium was simple: It would be easier to satisfy government requirements regarding what constituted reformulated gasoline if the various oil companies got together, shared notes and agreed on a uniform standard that would satisfy the regulators. Then, rather than have each oil company producing its own variety of reformulated gas with multiple standards, each differing only slightly in terms of the mix of additives, processes, etc. all the companies would agree on a single standard acceptable to the government.
This would make it simpler and less costly to refine and distribute the new fuel. What happened instead was that Unocal, while working with the other companies on a way to satisfy government regulators, was also working "cooperatively" toward securing a patent on what would become the regulatory standard for reformulated gasoline. Unocal even worked discretely with the regulators themselves to tailor its patent application to precisely fit the wording of what ultimately became the regulatory standard. Unocal scientist Peter Jessup acknowledged in court that Unocals patent claims "were narrowed" to "resemble the regulations."
Again, Unocals patent is not for a new type of fuel it simply confers property rights on the way in which existing and well-known fuel additives are mixed together so as to comply with a regulatory standard. This is akin to holding a patent on the wheel or on chocolate and demanding that everyone from Hershey to Nestle to the Cadbury Creme Egg Easter Bunny dig deep and pay a royalty.
Company representative Barry Lane observed: 'We believe that almost any gasoline that would be practical to make and meet state requirements would fall within the scope of our patent." Unocals patent putsch may have been a clever business stratagem but its unsavory nonetheless. American drivers can contemplate all of this at each fill-up this summer, and marvel at the way a company can game the regulatory process to line its pockets.

Eric Peters is an editorial writer for The Washington Times and a nationally syndicated automotive columnist.


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