ASHLAND INC. PROVIDES UPDATE ON THE PROPOSED TRANSFER OF ITS INTEREST IN MARATHON ASHLAND PETROLEUM LLC
20 December 2004 - Ashland Inc

As previously announced in March 2004, Ashland entered into an agreement with Marathon through which Ashland would transfer its 38-percent interest in MAP to Marathon. The transaction is subject to several previously disclosed conditions, including receipt of a favorable private letter ruling from the IRS with respect to the tax treatment of the transaction. Earlier this year, Ashland submitted a request to the IRS for a private letter ruling on the tax treatment of the transaction.

Ashland reported in its Form 10-K filing on December 14, 2004, that it had engaged in discussions with the IRS with respect to the complex tax issues related to this transaction and had not resolved all issues. At that time, Ashland reported that it could not predict whether the requested rulings would be received.

The IRS has now indicated that it does not intend to provide all the rulings requested by Ashland and Marathon. As previously disclosed, Ashland might have incurred Section 355(e) gain on the transaction equal to the difference between the fair market value of Ashland and the tax basis of Ashland.

One of the IRS rulings requested was that the tax basis in Ashland not be reduced by the assumption of contingent liabilities associated with discontinued business operations in a way that would cause additional Section 355(e) gain to be recognized. The IRS has informed Ashland and Marathon that it intends to rule adversely on this specific tax basis issue. Under the IRS’ indicated position on this issue, the basis of the Ashland shares would be reduced by the amount of such contingent liabilities in a manner that would likely create significant additional Section 355(e) gain. Ashland believes that the IRS would grant all other requested rulings that are conditions to closing the transaction.

Ashland and Marathon disagree with the IRS' position on the contingent liabilities issue and will attempt to further discuss this issue with the IRS. However, Ashland believes that it is unlikely that the previously announced transaction will close.

Ashland remains pleased with its ownership interest in MAP and, therefore, does not have any plans to exercise its option to put its interest in MAP to Marathon. Nonetheless, if the previously announced transaction does not close, Ashland would consider other alternatives for the transfer of its interest to Marathon. There is a substantial risk that no acceptable alternative transaction will be identified.

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