Valero Energy Corp. v. United States Department of Energy

509 F. Supp. 644, 1980 U.S. Dist. LEXIS 9644
CourtDistrict Court, W.D. Texas
DecidedNovember 7, 1980
DocketNo. SA-80-CA-369
StatusPublished

This text of 509 F. Supp. 644 (Valero Energy Corp. v. United States Department of Energy) is published on Counsel Stack Legal Research, covering District Court, W.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Valero Energy Corp. v. United States Department of Energy, 509 F. Supp. 644, 1980 U.S. Dist. LEXIS 9644 (W.D. Tex. 1980).

Opinion

MEMORANDUM OPINION AND ORDER

SESSIONS, Chief Judge.

In this cause, Plaintiffs seek injunctive relief restraining Defendants from enforcing their interpretations of certain regulations. As grounds for the relief sought, Plaintiffs challenge the construction of their contract by the Department of Energy (“DOE”) and DOE interpretations of certain regulations. On October 23, 1980, hearing was held in this cause upon the Motions of the Defendants to Dismiss. [646]*646Having considered the exhibits, the motions, and the briefs of counsel, the Court finds the matters presented herein are not yet suitable for adjudication and accordingly dismisses the cause for the reasons set forth below.

REGULATORY PROVISIONS:

The Department of Energy regulates the maximum allowable price for certain petroleum products, including propane, under the authority of the Emergency Petroleum Allocation Act of 1973,15 U.S.C. § 751, et seq. Regulations have been issued governing the computation of the maximum price. In computing the maximum price, product cost increases since the May, 1973, base period may be added in. One of the increased product costs which may be included in the maximum selling price of propane is the cost of natural gas shrinkage. 10 C.F.R. § 212.167. “Cost of natural gas shrinkage” is defined as “the reduction in selling price per thousand cubic feet (MCF) of natural gas processed, which is attributable to the reduction in volume or BTU1 value of the natural gas resulting from the extraction of natural gas liquids, as determined pursuant to the contract in effect at the time for which cost of natural gas shrinkage is being measured, and under which the processed natural gas is sold.” 10 C.F.R. § 212.162. Propane is one of several natural gas liquids (NGLs) and natural gas liquid products (NGLPs) which are removed from “wet” natural gas in producing the processed natural gas sold to the Plaintiff customers in this cause. Plaintiffs claim, and this Court will assume for purposes of this Memorandum Opinion and Order, that DOE has interpreted this regulation to mean that the cost of natural gas shrinkage will be calculated by reference only to the price term of the contract for the sale of the processed natural gas. See Ruling 1975-18 [1975] Fed. Energy Management (CCH) ¶ 16,058, at 16,659. Thus, according to this DOE interpretation of its regulation, if the price term of the sales contract for processed natural gas shows an MCF basis, the cost of natural gas shrinkage must also be computed on an MCF basis, whether or not the “wet” natural gas is purchased by the processor on an MCF or a BTU basis.

Title 10, C.F.R., Part 205, subpart B, of the DOE regulations “establishes the procedure for applying for an exception from a regulation, ruling, or generally applicable requirement based on an assertion of serious hardship or gross inequity.” 10 C.F.R. § 205.50(a)(1). All applications for exception must be filed with the Office of Hearings and Appeals (OHA). 10 C.F.R. § 205.-52(a). The regulations further provide that the Director of OHA shall issue a final decision and order stating the factual and legal basis for the order. 10 C.F.R. § 205.-69B(a). A final decision and order may be appealed to the Federal Energy Regulatory Commission (FERC) within 30 days after issuance by “any person whose interest is adversely affected by a denial of exception relief.” 10 C.F.R. § 205.69B(b). The regulations further require that a person must file a timely appeal and await the issuance of a final decision in the appeal proceeding in order to exhaust administrative remedies in the case of a denial of exception relief. 10 C.F.R. § 205.69B(c).

The DOE regulations also provide, at 10 C.F.R. Part 205, subpart F, “procedures for the filing of a formal request for an interpretation and for the consideration of such a request.” 10 C.F.R. § 205.80(a). A request for interpretation must be filed with the Office of General Counsel or the appropriate regional counsel. 10 C.F.R. § 205.82. “Responses ... to other than formal written requests for interpretation filed with the General Counsel ... or a regional counsel ... are not interpretations and merely provide general information.” 10 C.F.R. § 205.80(a). There is no administrative appeal of an interpretation. 10 C.F.R. § 205.-86. It is clear, therefore, that the word “interpretation” holds a specific meaning in connection with the DOE regulations, and a [647]*647specific procedure must be followed in order to obtain an interpretation.

THE ADMINISTRATIVE PROCEEDINGS:

On August 8, 1978, Lo-Vaca Gathering Company (“Lo-Vaca”) and Coastal States Gas Corporation (“Coastal”), the predecessors of Plaintiff VALERO, filed an application for exception with OHA.2 Included in that application was a request that DOE “permit VALERO ... to utilize the BTU method of calculating natural gas shrinkage in determining increased product costs.” Lo-Vaca and Coastal stated in that application that Plaintiff VALERO would sell processed natural gas on a cost-plus basis, and that those gas sales would be calculated on a BTU purchase-cost basis. However, “for purposes of billing the gas customers, this calculation ... is adjusted to an MCF basis.” The application went on to state that “[although Valero’s initial natural gas sales will not be expressed on a BTU basis, the sales price is directly reflective of and dependent on Valero’s BTU cost. Moreover, the formula reduction in the cost of such gas should approximate closely the sale of gas on a BTU content basis.” Finally, the application stated that “the formula will compensate directly for the major part of the loss of heating value (BTUs) as a result of processing and provide that the price of natural gas to Valero’s customers will be closely equivalent to the price on a strict BTU basis.”

On February 16, 1979, OHA issued its proposed decision and order pursuant to 10 C.F.R. § 205.56. In the proposed decision and order, OHA stated that “Valero will be required to sell the natural gas produced ...

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Bluebook (online)
509 F. Supp. 644, 1980 U.S. Dist. LEXIS 9644, Counsel Stack Legal Research, https://law.counselstack.com/opinion/valero-energy-corp-v-united-states-department-of-energy-txwd-1980.