Atlantic Richfield disclosed Monday that it has offered the Energy Department $225 million to settle government claims that Arco violated oil price controls in effect from the early 1970s until January, 1981.
The Los Angeles-based oil company said in a filing with the Securities and Exchange Commission that it will reduce fourth-quarter pretax earnings by $225 million or "the amount of any settlement reached with the DOE."
An Arco spokesman said the Energy Department hasn't taken any action on Arco's offer. The department contends that Arco owes it $499.3 million, of which $239.9 million represents the alleged overcharges. The remaining amount is interest on the overcharges.
Not Settled Yet
The Energy Department declined to discuss the case. Carl Corrallo, the department lawyer who is heading the Arco investigation, said only that "the case with Arco is not settled." He said he would not discuss the case "until a preliminary agreement is reached--if it is ever reached."
Arco has denied any wrongdoing. If its settlement offer is rejected, it can fight the government's claim within the Energy Department or in the courts.
Oil industry analysts said this charge, combined with the $1.5-billion charge taken by Arco in the second quarter to cover restructuring, stock repurchases and write-downs, will give the company its first yearly loss ever.
Eugene L. Nowak, an oil industry analyst with Dean Witter Reynolds in New York, said that, as a result of the proposed settlement, Arco is likely to report a loss for 1985 of more than $100 million.
In 1984, Arco reported earnings of $567 million on revenue of $25.2 billion. Arco's common shares closed Monday at $62, down $1 on the New York Stock Exchange.
The Energy Deparment previously said the overcharges stemmed from oil trades, some of which involved Marc Rich & Co., the Swiss commodity trading firm. Marc Rich & Co. pleaded guilty to fraud in oil trading a year ago and paid the government a $150-million fine.
The allegations are part of a broader investigation into possible price-control violations by other firms that the department has not identified. Earlier this year, the department levied a $509-million fine against Cities Service for alleged violations of pricing controls involving oil trades. Cities Service, now a unit of Los Angeles-based Occidental Petroleum, has denied any wrongdoing.
Under price controls, oil was divided into several price categories. The difference in price between "old" oil, the lowest-price oil, and uncontrolled oil could be as much as $30 a barrel.
Oil companies controlled large amounts of low-priced oil. According to testimony by a former Arco trader, Frank E. Smith, the company simultaneously sold resellers low-priced oil at controlled prices and uncontrolled oil at above-market prices.