Atlantic Richfield Co. v. United States Department of Energy

500 F. Supp. 1301, 1980 U.S. Dist. LEXIS 9640
CourtDistrict Court, E.D. Pennsylvania
DecidedOctober 31, 1980
DocketCiv. A. No. 80-1427
StatusPublished
Cited by1 cases

This text of 500 F. Supp. 1301 (Atlantic Richfield Co. v. United States Department of Energy) is published on Counsel Stack Legal Research, covering District Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Atlantic Richfield Co. v. United States Department of Energy, 500 F. Supp. 1301, 1980 U.S. Dist. LEXIS 9640 (E.D. Pa. 1980).

Opinion

MEMORANDUM OPINION AND ORDER

WEINER, District Judge.

This is a suit challenging the validity of the Petroleum Substitute Amendments to [1303]*1303the crude oil “Entitlements Program”, 10 C.F.R. Part 211 (1980), of defendant United States Department of Energy (DOE). The “Entitlements Program” is a regulatory scheme for the allocation and price control of crude oil. The challenged regulations provide for the issuance of crude oil “entitlements” to producers and users of domestic petroleum substitutes.

Plaintiff oil companies are refiners of crude oil and marketers of refined petroleum products; defendant-intervenors are municipal and private producers and users of petroleum substitutes.

Plaintiffs challenge DOE’s statutory authority to adopt the regulations under the Emergency Petroleum Allocation Act, 15 U.S.C. §§ 751-760. Plaintiffs also attack DOE’s alleged failure to comply with certain procedural rulemaking requirements of the Administrative Procedure Act, 5 U.S.C. § 553, the Federal Energy Administration Act, 15 U.S.C. §§ 761-786, and the Department of Energy Organization Act, 42 U.S.C. §§ 7101-7352.

Presently before the court are cross-motions for summary judgment. The parties have stipulated that there are no genuine issues of material fact to be resolved and that the matter is ripe for summary judgment. Oral argument on the motions was held on August 29, 1980. For the reasons set forth below, the plaintiffs’ motion for summary judgment is denied, and the defendant’s and defendant-intervenor’s cross-motions for summary judgment are granted.

I

The Emergency Petroleum Allocation Act (EPAA) confers upon the DOE authority to allocate and control the price of crude oil and petroleum products. The purpose of the EPAA is to “minimize the adverse impacts on the American people and domestic economy of shortages of crude oil, residual fuel oil, and refined petroleum products or dislocations in their national distribution system.” 15 U.S.C. § 751(b).

DOE’s price regulation of crude oil grew out of the controls originally imposed by the Cost of Living Council (CLC) in 1973, 38 Fed.Reg. 22536 (Aug. 22, 1973), pursuant to the Economic Stabilization Act of 1970, as amended, 12 U.S.C. § 1904.1 The controls established a “two-tier” price system for domestic crude oil. Under the system, imported crude oil and “new” domestic crude oil, defined as oil from properties which were not producing in 1972 and increased production amounts from pre-1973 properties, were permitted to sell at free market world prices. “Old” domestic crude oil, defined as oil produced from pre-1973 producing properties in quantities no greater than 1972 monthly production volumes, was subject to mandatory price controls tied to May, 1973 price levels. The two-tier system was designed to limit domestic prices while providing a financial incentive for increased production.

Following passage of the EPAA and creation of the Federal Energy Office (FEO) the regulations were re-promulgated. 39 Fed.Reg. 1924 (Jan. 15, 1974). Subsequent modifications imposed controls on “new” domestic oil in addition to “old” domestic oil. 41 Fed.Reg. 1564 (Jan. 8, 1976), 41 Fed.Reg. 4931 (Feb. 3, 1976).

Dramatic increases in the price of imported crude oil in 1973 and 1974 widened the disparity between the controlled price for “old” oil and the market price for “new” oil. Acting pursuant to its authority under the EPAA, the DOE promulgated regulations providing for the mandatory allocation of crude oil. Without such regulation refiners with large volumes of, or greater access to, lower-cost “old” oil would gain a competitive advantage over refiners more dependent on higher-cost “new” oil. The major beneficiaries of this “old” oil-“new” oil price disparity were the major integrated oil companies, such as plaintiffs.

The Entitlements Program was designed to insure that all refiners and marketers shared equally in the benefits of price-controlled oil and the burdens of uncontrolled oil. Under the Entitlements Program, DOE allocates domestic price-controlled oil without requiring the oil’s physical transfer. [1304]*1304Allocation is accomplished by means of a paper transfer of rights or “entitlements” to such oil. A refiner secures one entitlement for each barrel of cheap oil it refines. Refiners who have received and who wish to refine more than their proportionate fair share of cheap oil are required to buy additional entitlements from other participants in the program who have received less than their share. The price of an entitlement is fixed by DOE to reflect the price differential between controlled and uncontrolled oil.

The savings on cheap “old” oil are thus shared among all participants in the program in a way which approximates what would have occurred if the “old” oil had been physically shared. As a result, petroleum products derived from expensive imported oil can be priced as if produced, in part, from price controlled domestic oil. As the average price of oil is depressed, alternative fuels become less competitive.

Thus, besides ensuring that the economic benefits of low cost “old” oil are not restricted to those with historical access to such oil, the Entitlements Program also has the effect of creating an economic incentive for the importation of expensive foreign crude oil, and an economic disincentive for the production of petroleum substitutes.2

In order to alleviate this market distortion created by the Entitlements Program, DOE has adopted a series of Petroleum Substitute Amendments. The amendments are designed to allocate a portion of the economic advantage of access to price controlled domestic crude oil, in the form of entitlements, to users and producers of certain petroleum substitutes.

The first relevant amendment was proposed by DOE in July, 1977, 42 Fed.Reg. 38599 (July 29,1977), and provided that any shale oil3 used by the refiners would be automatically eligible for entitlements on the same basis as was imported oil. In the same notice, DOE requested comments so that it could gather and evaluate information on the possible inclusion in the program, on a case by case basis, of other domestic synthetic liquid fuels. The proposed rule was made final in May, 1978, 43 Fed.Reg. 21429 (May 18, 1978), to be effective July 1, 1978. The May, 1978 notice again solicited comments on possible eligibility for inclusion of synthetic liquid fuels in the Entitlements Program.

DOE thereafter issued a proposed regulation, 43 Fed.Reg. 38844 (Aug. 3, 1978) which later became final as 44 Fed.Reg. 6895 (Feb. 5, 1979). This regulation sets forth the guidelines outlining procedures by which it might make case by case determinations as to the entitlements eligibility of individual petroleum liquid substitutes.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Montana Power Co. v. Edwards
531 F. Supp. 8 (D. Oregon, 1981)

Cite This Page — Counsel Stack

Bluebook (online)
500 F. Supp. 1301, 1980 U.S. Dist. LEXIS 9640, Counsel Stack Legal Research, https://law.counselstack.com/opinion/atlantic-richfield-co-v-united-states-department-of-energy-paed-1980.