Government loses nerve in effort to force Occidental unit to sell poisonous chemical.

Government loses nerve in effort to force Occidental unit to sell poisonous chemical

Government efforts to force a unit of Occidental Petroleum Corp. to sell a vital nerve-gas chemical to the Defense Department have been called off for now, officials said last week.

"We are trying to find other sources, whether they are part of the government or not," said Lt. Col. Steven Roy, a Defense Department spokesman. Roy said any future contacts with Occidental Chemical would be "up to the Commerce Department."

Dallas-based Occidental Chemical - a wholly owned subsidiary of Southland oil giant Occidental Petroleum Corp. - was asked last August by the Pentagon to sell the Army 160,000 pounds of thionyl chloride. The chemical is a key ingredient in the production of modernized nerve-gas weapons. Occidental Petroleum, however, balked, stating March 29 it was against corporate policy to sell materials that may "contribute to the proliferation or manufacture of chemical weapons."

Frank Ashley, a spokesman for Los Angeles-based Occidental Petroleum, would not say when the decision to refuse the government's request was made, but he said the policy had been "in effect for some time." He refused to comment whether Occidental currently holds any Defense Department contracts or whether the policy was tied to improved American-Soviet relations.

The Commerce Department, looking for a domestic supplier for the chemical, denied recent reports it was poised to invoke a 40-year-old national security law to force Occidental and another company to sell thionyl chloride. Under the Defense Production Act of 1950, the Commerce Department can force a private company, under certain conditions, to complete contracts and orders deemed important for national security.

"No action has been taken by the Department of Commerce to direct any companies to produce thionyl chloride for the U.S. government," said Commerce Department spokeswoman Mildred Cooper in a prepared release last week. "The matter is presently under review within the Administration. No decision has been made at this time."

Cooper said a decision to invoke the Defense Production Act, and how it might relate to Occidental Chemical, would probably not be made in the near future.

After being turned down by Occidental, the Defense Department asked Pittsburgh-based Mobay, a subsidiary of West German-based Bayer AG, also refused the government's request.

Occidental Chemical produces agricultural products, specialty chemicals and plastic and industrial compounds. Its 1989 revenues of $5.2 billion represented more than one quarter of Occidental Petroleum's total sales.

Occidental was the biggest publicly held, Los Angeles-based company last year, according to a Business Journal survey.