Atlantic Richfield Co. v. United States Department of Energy

655 F.2d 1118, 1981 U.S. App. LEXIS 11705
CourtTemporary Emergency Court of Appeals
DecidedJuly 7, 1981
DocketNo. 3-25
StatusPublished
Cited by5 cases

This text of 655 F.2d 1118 (Atlantic Richfield Co. v. United States Department of Energy) is published on Counsel Stack Legal Research, covering Temporary Emergency Court of Appeals 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, 655 F.2d 1118, 1981 U.S. App. LEXIS 11705 (tecoa 1981).

Opinions

LACEY, Judge.

At issue is the validity of regulations promulgated by the Department of Energy (DOE), by which price-controlled, domestic crude oil (old oil) entitlements are allocated to producers of certain petroleum substitutes. Appellants, plaintiffs below, are four major oil companies that have challenged these regulations. Defendant-appel-lees are DOE and sixteen intervening public and private users and producers of petroleum substitutes.

On cross-motions for summary judgment, the district court held, first, that regulations allocating domestic crude oil entitlements for use of petroleum substitutes are within DOE’s statutory authority to allocate old oil under the Emergency Petroleum [1120]*1120Allocation Act of 1973 (EPAA), 15 U.S.C. §§ 751-760h (1976), and, second, that the plaintiffs-appellants’ attacks on the procedural validity of the regulations are without merit. App. 554. The summary judgment motions by DOE and the intervenors were granted; plaintiffs-appellants’ motion was denied.

I

The EPAA directs the President to

promulgate a regulation providing for the mandatory allocation of crude oil, residual fuel oil, and each refined petroleum product, in amounts specified in (or determined in a manner prescribed by) and at prices specified in (or determined in a manner prescribed by) such regulation.

15 U.S.C. § 753(a) (1976). The statute was passed by Congress “to deal with the present or threatened severe economic hardships caused by shortages of imported and domestically produced crude oil, all of which constituted a ‘national energy crisis’ and a threat to the public health, safety, and welfare.” Pasco, Inc. v. FEA, 525 F.2d 1391, 1394 (Em.App.1975). Congress further directed that the power to allocate and to control the price of oil be “exercised for the purpose of minimizing the adverse impacts of such shortages or dislocations on the American people and the domestic economy,” 15 U.S.C. § 751(b) (1976), and to further certain generally stated objectives. These objectives included

(A) protection of public health .. . safety and welfare ... and the national defense;
(B) maintenance of all public services (including facilities and services provided by municipally, cooperatively, or investor owned utilities or by any State or local government or authority ...);
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(D) preservation of an economically sound and competitive petroleum industry; . . .
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(F) equitable distribution of crude oil, residual fuel oil, and refined petroleum products at equitable prices among all regions and areas of the United States and sectors of the petroleum industry • • • >
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(H) economic efficiency; and
(I) minimization of economic distortion, inflexibility, and unnecessary interference with market mechanisms.

Id. § 753(b)(1).

Pursuant to this mandate, the Federal Energy Office (FEO) established price controls on certain kinds of domestic crude oil,1 setting up a “two-tier” price system for domestic crude oil. 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 oil, on the other hand, was not. To insure that the benefits of access to this cheaper price-controlled old oil would be shared equitably, the Federal Energy Administration (FEA) adopted the entitlements program, by which it allocated old oil, without requiring its physical transfer, through the exchange of entitlements among refiners and other firms. 10 C.F.R. § 211.67 (1980).

Under the program, each refiner and other participants in the program are issued a number of entitlements representing their share of the available domestic, price-controlled old oil. Refiners having access to more than their share of old oil must purchase entitlements beyond their initial allocation from other participants in the program. By buying entitlements, refiners with access to more than their share of old oil surrender a portion of the economic ad[1121]*1121vantage conferred by that access. The broad effect of the entitlements program was to confer upon consumers the benefits of reduced prices with a minimum of economic dislocation.2

However, the price and allocation system created adverse side effects. By artificially depressing the price of petroleum below world market levels, the program actually encouraged use of petroleum. And, since products made entirely from imported oil were priced as if they were made in part from cheaper price-controlled oil, the program encouraged importation of foreign oil and correspondingly discouraged substitution of otherwise competitive domestic fuels. Thus, the program fostered, rather than decreased, the Nation’s dependence on imported oil. DOE, and FEA before it, viewed this economic distortion — created by its system of allocation and price controls— as contrary to the purpose of Congress in enacting the EPAA; to alleviate, to the maximum extent possible, American dependence on high-priced foreign crude oil. See 42 Fed.Reg. 38599 (July 29, 1977); 44 Fed.Reg. 63515 (Nov. 5, 1979).

In the past, the agency has adjusted the entitlements program to reduce or eliminate economic incentives encouraging the use of foreign oil. Thus it has established special entitlements treatment for the use of California crude oil, see 10 C.F.R. § 211.-67(a)(4) (1980); 42 Fed.Reg. 62897 (Dec. 14, 1977); 43 Fed.Reg. 26540 (June 20, 1978), and crude oil from the Alaskan North Slope, see 10 C.F.R. § 211.67(b)(2) (1980); 42 Fed.Reg. 41565 (Aug. 17, 1977) as amended 45 Fed.Reg. 46752 (July 10, 1980), to assure that refiners would have incentives to use these crudes instead of foreign oil. In 1975 FEA began to allocate entitlements to domestic refiners for processing “synthetic” oil derived from Canadian tar sands on the same basis as foreign crude oil. The agency made this adjustment without objection from the refining industry, even though such “synthetic” oil was itself not subject to allocation or price control by the agency. 10 C.F.R. §§ 211.67(a)(3) (1980); 40 Fed. Reg. 39847, 39848 (Aug. 29, 1975).

• The regulations here challenged were promulgated on October 31 and November 12, 1979, 44 Fed.Reg. 63515 (Nov. 5, 1979); 44 Fed.Reg. 66183 (Nov. 19, 1979), pursuant to rulemaking proceedings commenced in May of that year. 44 Fed.Reg. 32225 (June 5, 1979).

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655 F.2d 1118, 1981 U.S. App. LEXIS 11705, Counsel Stack Legal Research, https://law.counselstack.com/opinion/atlantic-richfield-co-v-united-states-department-of-energy-tecoa-1981.