Lea Exploration, Inc. v. Department of Energy

843 F.2d 510, 1988 U.S. App. LEXIS 4607, 1988 WL 26339
CourtTemporary Emergency Court of Appeals
DecidedFebruary 29, 1988
DocketNos. 5-122, 5-123
StatusPublished
Cited by19 cases

This text of 843 F.2d 510 (Lea Exploration, Inc. v. 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
Lea Exploration, Inc. v. Department of Energy, 843 F.2d 510, 1988 U.S. App. LEXIS 4607, 1988 WL 26339 (tecoa 1988).

Opinion

WESLEY E. BROWN, Judge.

This case arises under Section 209 of the Economic Stabilization Act of 1970.1 Lea Exploration (Lea) brought an action for declaratory relief in United States District Court, seeking a judgment stating that Lea did not violate the Department of Energy’s (DOE) Mandatory Petroleum Price Regulations.2 The DOE counterclaimed, alleging that Lea improperly classified oil from two of its wells as “newly discovered crude oil,” and overcharged customers on sales of oil from those two wells. The Government sought restitution for the overcharges under Sec. 209.

The District Court issued a memorandum ruling which granted in part and denied in part both parties’ motions for summary judgment. The court held that sales of oil from Lea’s “Wilbert & Sons” well violated DOE regulations, but that sales from the “John Germany” well did not. The trial court ordered Lea to make restitution for overcharges on the Wilbert well, but denied the Government’s request for prejudgment interest on the restitution award. The Government now appeals the District Court’s finding that sales of oil from the Germany well did not violate DOE regulations and also challenges the court’s denial of prejudgment interest. In addition, the District Court rejected Lea’s argument that the Government’s claim was barred by a statute of limitations or by laches. Lea challenges this ruling on a cross-appeal, [512]*512and also argues the trial court erred by refusing to strike a Government affidavit from the record.

I. The Definition of “Produced”

This case involves regulation 10 C.F.R. Sec. 212.79(b) (1979), which stated: “ ‘Newly discovered crude oil’ means domestic crude oil which is: ... (2) produced ... from a property from which no crude oil was produced in calendar year 1978.” The regulations allowed oil which qualified as newly discovered to be sold at higher prices than other types of oil. See generally 10 C.F.R. Part 212.

Lea completed and tested the Germany well in November of 1978, in Iberville Parish, Louisiana. During well tests, Lea extracted approximately ten (10) barrels of oil from the well. The oil was allowed to run into a test pit, where it was burned off. Lea burned the oil because there was no surface storage equipment in place at the well site. Lea contends that oil was not “produced” from this well, as that term was used in Sec. 212.79, since the test oil from the well was not retained but was burned off. The Government, on the other hand, maintains that oil was “produced” once it was extracted from the ground.

The issue of when oil was produced is also raised in a companion case, United States v. Ladd Petroleum Corp., 843 F.2d 506 (Temp.Emer.Ct.App.1988). For the reasons set forth in the Ladd case, we hold that oil was “produced” from the well when it was extracted from the ground in a measurable amount. Lea’s subsequent disposition of the oil had no effect on whether oil from the well qualified for “newly discovered” status.

The trial court in the present case examined Sec. 212.79 and DOE Ruling 1980-3, which interpreted Sec. 212.79, in its memorandum ruling. The court stated: “The agency’s ruling prohibits property, from which oil in measurable amounts was extracted in 1978, from qualifying as ‘newly discovered crude oil.’ ” (Record on Appeal, Vol. Ill at p. 396) (emphasis added). Because oil was extracted from the Wilbert well in 1978, the court ruled that the well did not qualify for newly discovered status. (This ruling is not challenged on appeal.) As to the John Germany well, however, the court applied a different standard. The court stated:

In the case of the Germany No. 1, a miniscule amount of condensate was extracted during well tests and then burned in the mud pit. This cannot qualify as a ‘measurable amount’ of production in 1978 since the oil was not produced. Oil was extracted from this well, the something extra — storage, retention, processing — which elevates mere extraction to production was noticeably absent in the Germany No. 1 well tests. (Record on Appeal, Yol. Ill at p. 397) (emphasis in original).

As we concluded in the Ladd case, oil was “produced,” for purposes of Sec. 212.-79, once it was extracted from the ground in a measurable amount. We therefore reverse the trial court’s finding that the Germany well did not produce oil in 1978, and find that sales of oil from the well in 1979 and 1980 violated Sec. 212.79(b). Furthermore, we find that ten (10) barrels of oil constituted a “measurable amount” as required by Ruling 1980-3. Because the standard unit of measure for oil is the barrel, ten barrels is clearly a “measurable amount” of oil. See 45 Fed.Reg. 48577.

II. Prejudgment Interest

The trial court refused to award prejudgment interest on the restitution award arising out of sales of oil from the Wilbert well. The Government argues on appeal that an award in restitution must include prejudgment interest, while Lea argues that the trial court properly exercised its discretion in denying interest. Although we reject the Government’s argument that a trial court must always include prejudgment interest, we find that under the circumstances of this case, prejudgment interest must be awarded on overcharges from both of Lea’s wells.

The trial judge has some discretion in deciding whether to award prejudgment interest. United States v. Exxon, 773 F.2d 1240, 1279 (Temp.Emer.Ct.App.1985); cert. [513]*513denied, 474 U.S. 1105, 106 S.Ct. 892, 88 L.Ed.2d 926 (1986). This discretion is not within limits, however, and we have recognized that under the Economic Stabilization Act restitution should make victims of overcharges whole, unless some compelling reason counsels otherwise. Citronelle-Mobile Gathering, Inc. v. Herrington, 826 F.2d 16, 28 (Temp.Emer.Ct.App.1987). Thus, under normal circumstances, an award of restitution under Sec. 209 will include prejudgment interest. Cf. Donovan v. Brown Equipment & Service Tools, Inc., 666 F.2d 148, 156-57 (5th Cir.1982) (Judge’s discretion to order restitution should be exercised consistently with the purposes of the act which authorized it; in view of the purposes behind the Fair Labor Standards Act, the district court’s denial of restitution was an abuse of its “small residue of discretion.”).

This court has, on occasion, found compelling reasons for denying prejudgment interest. See e.g., Eastern Air Lines, Inc. v. Atlantic Richfield Company, 712 F.2d 1402 (Temp.Emer.Ct.App.1983), cert. denied, 464 U.S. 915. (Prejudgment interest denied where the amount of overcharges was uncertain). In the Herrington

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Bluebook (online)
843 F.2d 510, 1988 U.S. App. LEXIS 4607, 1988 WL 26339, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lea-exploration-inc-v-department-of-energy-tecoa-1988.