National Distillers & Chemical Corp. & National Hydrocarbons, Inc. v. Department of Energy

662 F.2d 754, 1981 U.S. App. LEXIS 17009
CourtTemporary Emergency Court of Appeals
DecidedOctober 9, 1981
DocketNo. 3-24
StatusPublished
Cited by6 cases

This text of 662 F.2d 754 (National Distillers & Chemical Corp. & National Hydrocarbons, 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
National Distillers & Chemical Corp. & National Hydrocarbons, Inc. v. Department of Energy, 662 F.2d 754, 1981 U.S. App. LEXIS 17009 (tecoa 1981).

Opinion

PER CURIAM:

Plaintiffs-Appellants, National Distillers and Chemical Corporation and its wholly-owned subsidiary National Hydrocarbons, Inc. (hereinafter collectively referred to as “Distillers”) appeal from the district court’s order dismissing their complaint and from the district court’s denial of their motion for relief from the prior order (498 F.Supp. 707 (1980)). The district court found that Distillers had not exhausted its administrative remedies and therefore the matter was not ripe for adjudication. We affirm.

Distillers operates a gas processing and petrochemical plant at Tuscola, Illinois which extracts ethane from a “wet” natural gas stream supplied by pipeline. Distillers uses the ethane to make polyethelene and other products. Distillers also converts other portions of the natural gas stream into butane and propane which it then sells to Phillips Petroleum Company, which in turn sells the butane and propane to its own customers. Historically, the price paid by Phillips to Distillers has been a percentage of the revenues Phillips receives on the sale of butane and propane to its customers.

In 1974, the Federal Energy Administration (“FEA”), predecessor to the Department of Energy (“DOE”) pursuant to the Emergency Petroleum Allocation Act (“EPAA”), 15 U.S.C. § 751, et seq., promulgated regulations that governed the maximum price at which Distillers could sell propane and butane to Phillips. See 10 C.F.R. Part 212, Subpart K. The maximum [756]*756price that Distillers could charge depended on whether its sales to Phillips were “first sales” or “net-back sales.” Believing that its sales to Phillips were net-back sales, Distillers charged Phillips prices allowable under the net-back sales regulation.

Prior to initiating an audit of Distillers in 1978, DOE personnel informed Distillers of their preliminary view that Distillers’ sales to Phillips should have been treated as first sales under Subpart K and that Distillers could apply for a formal interpretation (“Interpretation”) pursuant to 10 C.F.R. Part 205, Subpart F. The audit proceeded and Distillers applied to DOE’s General Counsel for an Interpretation.

In May 1979, following completion of the audit, DOE issued to Distillers a Notice of Probable Violation (“NOPV”). The NOPV expressed the view of the enforcement personnel that Distillers’ sales to Phillips should have been classified as first sales and that, therefore, there was reason to believe that Distillers had overcharged Phillips by approximately seventy-two million dollars. The NOPV also informed Distillers regard-, ing the penalties and sanctions provided in 10 C.F.R. § 205.203.

On June 15, 1979, approximately two weeks after the issuance of the NOPV, DOE’s General Counsel dismissed Distillers’ request for an Interpretation, stating that “the issues which you have raised in your request are best resolved in connection with the administrative procedures designed specifically for consideration of an NOPV.”

Distillers instituted this action in the district court approximately two months after its request for an Interpretation had been dismissed by DOE. Distillers contended that DOE was required to respond to its application for an Interpretation. We agree with the district court that since administrative proceedings were pending in the DOE, it was not required to issue an Interpretation in response to Distillers’ request. Distillers urges that in this particular situation DOE should be required to issue an Interpretation because of the threat of continuing interest and penalties in the event that its sales to Phillips are deemed to be first sales and not net-back sales. However, if there was a threat, it no longer exists. On January 30, 1981 President Reagan issued Executive Order 12287, 46 Fed.Reg. 9909, decontrolling crude oil and refined petroleum products. This Order exempts all crude oil and refined petroleum products from the price and allocation controls adopted pursuant to the EPAA. Thus the propane and butane sold by Distillers to Phillips are no longer subject to the price controls imposed by 10 C.F.R. Part 212, Subpart K and Distillers is no longer threatened with further daily penalties for possible violations of Subpart K.

It appears that during the proceedings before the district court and before this Court, administrative proceedings are continuing before the DOE in connection with the NOPV. However, there is no outstanding final binding order and the proceedings have not been concluded. Therefore, it is clear that Distillers has not exhausted its administrative remedies.

For the foregoing reasons, the district court dismissed the proceeding, finding that Distillers’ complaint did not present a “case or controversy” ripe for judicial resolution and that judicial review may not be had until the administrative proceedings are completed. We agree.

The dismissal below was without prejudice to Distillers’ right to seek judicial review if a final binding order is issued by DOE. See Section 503 of the Department of Energy Organization Act, 42 U.S.C. § 7193. It is possible that upon review of the preliminary assessments contained in the NOPV, DOE may modify or withdraw some of them. Such modification could well obviate the need for judicial review. See McKart v. United States, 395 U.S. 185, 193, 89 S.Ct. 1657, 1662, 23 L.Ed.2d 194 (1969). In a recent decision, Energy Cooperative, Inc. v. DOE, 659 F.2d 146 (1981), we held that the existence of such a likelihood requires that administrative remedies first be exhausted: “Exhaustion should be required ... (3) when an agency could correct an error on its own volition obviating [757]*757the need for judicial intervention altogether.” Id. at 5. In another recent decision, Hawthorne Oil and Gas Corp. v. DOE, 647 F.2d 1107 (1981), we again underlined the importance of a party’s first exhausting its administrative remedies before resorting to the courts.

Distillers, however, contends that Section 207(b) of the Economic Stabilization Act, 12 U.S.C. § 1904 note, confers upon it a right to the requested Interpretation. The Section provides in part:

“Any agency authorized by the President to issue rules, regulations, or orders under this title shall, in regulations prescribed by it, establish procedures which are available to any person for the purpose of seeking an interpretation, modification, or rescission of, or seeking an exception or exemption from, such rules, regulations, and orders.”

Distillers also relies upon 10 C.F.R.

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Bluebook (online)
662 F.2d 754, 1981 U.S. App. LEXIS 17009, Counsel Stack Legal Research, https://law.counselstack.com/opinion/national-distillers-chemical-corp-national-hydrocarbons-inc-v-tecoa-1981.