Getty Oil Co. v. Department of Energy

581 F.2d 838, 1978 U.S. App. LEXIS 10099

• Court: Temporary Emergency Court of Appeals
• Decided: July 18, 1978
• Docket: No. 10-14
• Status: Published

Opinions

BECKER, Judge:

The writing of this opinion was reassigned after the original assignment.

This is an appeal from a final summary judgment granted on motion of the appel-lees, defendants in the action in the United States District Court for the Northern District of Oklahoma. When the motion of appellees for summary judgment was granted, an order was entered denying the contemporaneous motion of appellant for summary judgment. The findings of fact and conclusions of law of the District Court are stated in a lucid published opinion of The Honorable H. Dale Cook, United States District Judge for the Northern District of Oklahoma. Skelly Oil Co. v. Federal Energy Administration, et a 1. (N.D.Okl.1977), 448 F.Supp. 16.

We affirm the judgment of the District Court.

Getty Oil Company (Getty) has succeeded to the interests of Skelly Oil Company (Skelly) by merger. Pursuant to Rule 43 F.R.App.P., on the motion of Getty, Getty is hereby substituted as appellant for Skelly.

The original defendants were the Federal Energy Administration (FEA), Frank G. Zarb, Administrator of FEA (Administrator), and Melvin Goldstein, Director, Office of Exceptions and Appeals of FEA. Because of the creation of the superseding Department of Energy (DOE) and the succession of James R. Schlesinger, Secretary of Energy (Secretary) to Frank G. Zarb, Administrator, DOE is hereby substituted for FEA and James R. Schlesinger, Secretary, is hereby substituted for Frank G. Zarb, Administrator of FEA as appellees herein. Melvin Goldstein, Director of The Office of Exceptions and Appeals is dismissed as a party because his joinder as a defendant below was unnecessary and inappropriate.

The action below was commenced by the filing by Skelly of a “Complaint for Review of Administrative Action and Declaratory Judgment” (R. 1-38). Defendants filed an answer consisting of three defenses, including failure to exhaust administrative remedies, and a prayer for general relief (R. 74-81). Jurisdiction of the District Court, and of this Court on appeal, is not controverted and is established.

The materials submitted in support of the motion of appellant for summary judgment (R. 82, 83) consisted of the pleadings, identified documents, and an affidavit of Edward D. Evans, Chief Chemist of Skelly (R. 128-130) with exhibits attached thereto (R. 130— 335).

The cross-motions of appellees for summary judgment (R. 133, 134) relied on the pleadings, identified documents, and the affidavits of J. Lisle Reed, then Director of the Office of Oil and Gas of the FEA (R. 189-209) and of Lon W. Smith, then Acting Director of Case Resolution, Office of Compliance of FEA (R. 336-337), with the exhibit attached thereto (R. 338-362) consisting of a judicial opinion.

Appellant filed motions to strike the affidavit of Lon W. Smith (R. 363, 364) and the affidavit of J. Lisle Reed (R. 365, 366) on the generally stated grounds that each contained irrelevant and self-serving testimony, opinions and conclusions, facts not within the personal knowledge of the affiants, and on the general ground that affiants were not competent to testify to the matters in their affidavits if called to testify. In the alternative the District Court was requested to disregard the unspecified “offensive” portions of the affidavits, which alternative request the District Court granted.

THE CLAIM OF APPELLANT FOR RELIEF

In its complaint, Skelly, predecessor of appellant Getty, states that it sold solvents (“Skellysolves”) manufactured at its refinery, and purchased by it, during the period from January 15, 1974, until the filing of the complaint on June 1, 1976. These solvents derived from petroleum are described as “relatively pure hydrocarbon fractions derived from further processing of a hydrocarbon fraction that boils in the range of 80-450 degrees Fahrenheit” (Appellant’s Br. 3, R. 128-219). This fraction which boils at 80-450 degrees Fahrenheit is admittedly known by the generic name “Naphtha” (Appellant’s Br. 3, R. 128, 195). Naphtha is one of several petroleum “distillates” (Appellant’s Bf. 3, R. 129, 192-193). Appellant contends that “Naphtha” and “Special Naphtha” are “different things” when the terms are used in the petroleum industry, FEA regulations, and federal statutes, and that the term Naphtha excludes special Naphtha solvents such as Skellysolves, the subject of this appeal.

The term “refined petroleum products” is defined in Title 15, U.S.C. § 752(5) of the controlling Emergency Petroleum Allocation Act of 1973 (EPAA) as follows: “. . . gasoline, kerosene, distillates (including Number 2 fuel oil), LPG, refined lubricating oils, or diesel fuel.”

In its complaint, Skelly further stated that on January 15, 1974, when the pricing regulations of the Federal Energy Office (FEO), the predecessor of FEA, (10 C.F.R. Part 212, § 212.31) became effective, Skelly construed its Skellysolves as covered products and priced them accordingly (R. 3). After FEO amended its definition of covered products, effective May 1, 1974, contained in 10 C.F.R. § 212.31, supra, by deleting any reference to the Standard Industrial Classification Manual, Industry Code 1311, Skelly no longer priced its products as covered products (R. 3).

Skelly admitted that on November 4, 1974, it received a Notice of Probable Violation (NOPV) of 10 C.F.R. § 212.82 and § 212.83, resulting from its alleged misconstruction of 10 C.F.R. § 212.31, supra. Skelly’s administrative contest of this NOPV ensued. On November 24, 1975, FEA issued to Skelly a Remedial Order, finding explicitly that the solvents in issue were “covered products" from May 1, 1974, to January 15, 1975, the period in issue in this action (Appellant’s Br. 6, R. 4, 419). An unsuccessful administrative appeal from the merits of the Remedial Order followed.

This Remedial Order required Skelly to refund $2,954,000 and interest to purchasers during that period (Appellant’s Br. 6, R. 219). On appeal, the portion of the latter Remedial Order for restitution was remanded for recalculation. Otherwise, Skelly’s appeal was denied (Appellant’s Br. 6, R. 25-38).

On January 16, 1975, 10 C.F.R. § 212.31 was again amended expressly to include “special naphthas (solvents)” (R. 8, 40 Fed. Reg. 2795).

THE DECISION OF THE DISTRICT COURT

As shown in detail in its published opinion reported in 448 F.Supp. 16, supra, the District Court concluded (1) that the Emergency Petroleum Allocation Act of 1973 (EPAA), Title 15, U.S.C. § 751, et seq., covered solvents of appellant in the category of “refined petroleum products”; (2) that the EPAA imposed a mandatory, non-discretionary duty to promulgate a regulation to allocate and control prices of all products covered by regulation at the time that EPAA was enacted; that, to the extent the amended regulation of April 5, 1974, purported to exempt the solvents in issue without formal action complying with the procedures of Title 15, U.S.C. § 760a, it was void. (The President has since taken formal action under § 760a to except the solvents in question from regulation under the EPAA (Appellant’s Br. 6).)

THE ISSUES PRESENTED

In its original brief (page 1) appellant describes the issues presented as follows:

I. Does the Emergency Petroleum Allocation Act of 1973 confer authority upon the Federal Energy Administration to regulate the price of the solvents which are the subject of this appeal?

II. If the Emergency Petroleum Allocation Act of 1973 does authorize the Federal Energy Administration to regulate the price of the solvents which are the subject of this appeal, is that authority mandatory and non-discretionary or implied and discretionary?

III. Did the Federal Energy Administration fail to exercise such authority during the relevant time period and, if so, does that failure preclude a holding that appellant violated the price regulation?

DECISIONS ON THE ISSUES

I AND II

Since we agree with the holding of the District Court, and the reasoning employed in reaching its decision, that the EPAA imposed a mandatory non-discretionary duty to regulate the pricing and allocation of the Skellysolves, the issues I and II are resolved in favor of appellees. Cf. Consumers Union of U. S., Inc. v. Sawhill (Em. App.1975), 512 F.2d 1112, vacated, 525 F.2d 1068; Mobil Oil Corporation v. Federal Energy Administration (N.D.Tex.1977), 435 F.Supp. 983, aff’d (Em.App.1977), 566 F.2d 87.

The solvents in issue are clearly within the definition of “refined petroleum products” in § 752 quoted above, which expressly includes “distillates”. Title 15, U.S.C. § 752(5). Appellant’s argument based on industrial usage of terms is without merit. Mobil Oil Corporation v. Federal Energy Administration, supra.

The hypertechnical argument that the pricing and allocation of the solvents in issue were somehow exempted from the mandatory coverage of the EPAA is unconvincing and unsupported in the plain language of the EPAA. The intent of Congress expressed in ordinary language prevails. Mobil Oil Corporation v. Federal Energy Administration, supra, 566 F.2d l.c. 97, 98.

Appellant contends that the definition of “covered products” in the amended price regulation effective May 1, 1974, to January 15, 1975, “exempted” and failed to cover the solvents in issue. Its contention is based on an obvious minor defect in drafting a subordinate definition of “middle distillates” in amended 10 C.F.R. § 212.31 covering pricing “Refined petroleum products.” Appellant concedes that the deficiency in the definition was supplied before May 1, 1974, and after January 15, 1975, by reference to “covered product” as any product described in the Standard Industrial Classification Manual, Industry Code 1311 (except natural gas).

Under the controlling decisions of this Court cited above, the statute directing mandatory control of the solvents in issue made any deficiency in the regulation 10 C.F.R. § 212.31 immaterial. The FEO and the FEA had no power to “exempt” any covered products by regulation. The power to exempt products covered by the EPAA was reserved to the President and Congress and required to be exercised in the manner prescribed by § 706a.

We are in full agreement with the District Court on these constructions of the EPAA.

Ill

The third contention of appellant, that the FEA failed to exercise its statutory authority to regulate the price of the solvents in issue, is without merit. As a matter of law, as concluded above, the FEA was required by the EPAA and Title 15 U.S.C. § 752 thereof, to regulate the price and allocation of the solvents in issue. The regulations must be construed consistently-with this statutory duty. Consumers Union of U. S., Inc. v. Sawhill, supra, 525 F.2d l.c. 1077. The fact that the price of the solvents in issue had been regulated under the now expired Economic Stabilization Act is significant in construing the EPAA and regulations issued thereunder. Mobil Oil Corporation v. Federal Energy Administration, supra, 566 F.2d l.c. 89. Further, the allocation of the solvents in issue was clearly covered by the contemporaneous regulations of the FEA. 10 C.F.R. § 211.182. The significance of this is precisely stated by Judge Jameson in footnote 17 of National Helium Corporation v. Federal Energy Administration (Em.App.1977), 569 F.2d 1137, l.c. 1145, as follows:

“National acknowledges the existence of allocation regulations which covered natural gasoline, but contends it cannot be deemed to have had notice of coverage, under price regulations because the two regulatory programs were distinct. Price regulations and allocation regulations, however, derive from the same authority. If National knew of allocation regulations it should have expected the application of price regulations as well.”

Under this rule the existence of the allocation regulation was adequate and fair notice to the appellant that the solvents in issue were covered products the price of which was regulated.

Judge Jameson graphically described the difficult conditions under which the regulations were drafted by the Federal Energy Office (FEO) as the expiration date of the Economic Stabilization Act approached. National Helium Corporation v. Federal Energy Administration, supra, 569 F.2d l.c. 1144. The regulations must be read liberally when drafted under these circumstances.

The question arises: By what regulation was the price of the solvents in issue regulated? The answer is obvious. The price regulation 10 C.F.R. § 212.83 governed the price of all covered products. It was a general price rule in being at all times material in this case, stated fully in understandable narrative and symbolic equations. Appellant priced the solvents in issue under this, regulation before May 1, 1974, and after January 15, 1975. Appellant wrongfully failed to price its solvents under the price regulation in the period from May 1, 1974, to January 15, 1975.

Further, appellant relies on principles of due process and equitable estoppel in support of its claim that the judgment of the District Court should be reversed even if issues II and III are ruled in favor of the appellees. We disagree for many reasons. For to approve application of these doctrines in these circumstances would vitiate the intent and mandate of Congress in the enactment of the EPAA, that we and the District Court perceive; would vitiate the doctrine of Consumers Union of U. S., Inc. v. Sawhill, supra; and would extend the doctrines of due process and equitable es-toppel beyond the limits of the law.

There is no violation of due process in imposing price regulation and allocation obligations in the energy emergency or any similar emergency. Bowles v. Willingham, 321 U.S. 503, 64 S.Ct. 641, 88 L.Ed. 892 (1944); Condor Operating Company v. Sawhill (Em.App.1975), 514 F.2d 351. The EPAA and the regulations . were not so vague that a due process violation occurred. On this issue the authorities relied on by appellant are inapposite.

While we do not believe the elements of equitable estoppel exist in this record, the doctrine cannot be invoked to avoid duties lawfully imposed by Congress to protect the public interest. Scott Paper Company v. Marcalus Manufacturing Co., 326 U.S. 249, l.c. 257, 66 S.Ct. 101, l.c. 105, 90 L.Ed. 47, l.c. 52; United States v. Consolidated Mines & Smelting Co., Ltd. (C.A. 9 1971), 455 F.2d 432, l.c. 446-447.

For the foregoing reasons the orders and judgment of the District Court are affirmed.