People of State of California, State Lands Com'n v. Simon

• Decision Date: 14 August 1974
• Docket Number: No. 9-12.,9-12.
• Citation: 504 F.2d 430
• Parties: PEOPLE OF the STATE OF CALIFORNIA, Acting By and Through the STATE LANDS COMMISSION, et al., Plaintiffs-Appellees, and State of Louisiana, Plaintiff Intervenor-Appellee, v. William E. SIMON et al., Defendants-Appellants.
• Court: U.S. Temporary Emergency Court of Appeals Court of Appeals

504 F.2d 430

PEOPLE OF the STATE OF CALIFORNIA, Acting By and Through the STATE LANDS COMMISSION, et al., Plaintiffs-Appellees, and State of Louisiana, Plaintiff Intervenor-Appellee, v. William E. SIMON et al., Defendants-Appellants.

No. 9-12.

Temporary Emergency Court of Appeals.

July 26, 1974.

As Modified August 14, 1974.

Jay L. Shavelson, Asst. Atty. Gen., with whom Evelle J. Younger, Atty. Gen., Warren J. Abbott, and Richard A. Haft, Deputy Attys. Gen., Los Angeles, Cal., were on the brief, for plaintiffs-appellees, People of State of California.

Robert F. Shannon, with whom Leonard Putnam, City Atty., Harold A. Lingle, and Robert W. Parkin, Deputy City Attys., of City of Long Beach, Cal., were on the brief, for plaintiff-appellee, City of Long Beach.

E. F. Barnett, Lake Charles, La., with whom Camp, Carmouch, Palmer, Carwile & Barsh, Lake Charles, La., were on the brief, for plaintiff-intervenor-appellee, State of Louisiana.

Allen W. Hausman, Atty., Dept. of Justice, Washington, D. C., with whom Carla A. Hills, Asst. Atty. Gen., and Stanley D. Rose and Bruce G. Forrest, Attys., Dept. of Justice, Washington, D. C., were on the brief, for defendants-appellants.

Richard A. Del Guercio, Los Angeles, Cal., with whom Demetriou & Del Guercio, James R. Jurecka, Los Angeles, Cal., and Joseph A. Helyer, were on the brief, for amici curiae Edgington Oil Co., and Independent Refiners Ass'n of California.

John E. Sparks, San Francisco, Cal., with whom Robert C. Maddox, and Brobeck, Phleger & Harrison, San Francisco, Cal., were on the brief, for amicus curiae Union Oil Co. of California.

Before CARTER, CHRISTENSEN, and ESTES, Judges.

CHRISTENSEN, Judge.

The decisive issue on this appeal is whether the Federal Energy Office (FEO) had already terminated a rule making proceeding initiated by its predecessor The Cost of Living Council (CLC) when it rescinded the state and local government exemption of crude oil from price controls in reliance upon, and effective as of the date of, the CLC's original rule making notice contemplating such action. We are told that for the appellees alone some quarter of a billion dollars in contested charges, together with daily accessions of more than a million, directly depends upon the answer.¹ We have been mindful also of even farther reaching agency actions and policies which, consistent with basic fairness, are to be respected within applicable requirements and guidelines of the Economic Stabilization, the Administrative Procedure and the Emergency Petroleum Allocation Acts. Having concluded that in this vital process of modern government² the rule in question was not aborted by any significant malformation, we reverse the judgment of the district court which treated the FEO's withdrawal of the state and local government exemption as invalid.³

With powers vested in the President by the Economic Stabilization Act and by him delegated to CLC, the latter on August 22, 1973, as part of its Phase IV price control program, issued Cost of Living Council Regulations which provided comprehensive price controls for various types of property. By the terms of "Subpart L", all crude petroleum produced in the United States was subject to price regulation, except for new and released petroleum and petroleum produced from stripper wells, which were left free of price control to encourage additional domestic production. But an exemption was established for certain prices and fees charged by state and local governments and government property.⁴ By interpretation of the agency this exemption covered sale of crude oil by those governments in their proprietary capacities.⁵

On October 25, 1973, CLC issued a notice of proposed rule making⁶ which among other things stated:

"Notice is hereby given that, pursuant to the authority of Executive Orders 11695 and 11730, Cost of Living Council, as part of its continuing review of the operation of price controls with respect to the petroleum industry is considering the adoption of certain amendments to exclude sales of `covered products' as defined in Subpart L from the exemption of price adjustments by State and Local governments."

The notice invited interested persons to participate in the rule-making by submitting written data, views or arguments with respect to the proposed regulation and specified that all comments received by November 24, 1973, "will be considered by the Council before final action is taken on the proposed regulation". California and Louisiana, among others, timely submitted comments. It is not contended by any party that the notice and proceedings up to this point were deficient either in form or substance or that they would not have permitted the promulgation of a regulation by FEO as successor to CLC validly removing the state and local government exemption had the former not reiterated the exemption in establishing the regulatory framework of its activities under the circumstances hereinafter noted.

The Emergency Petroleum Allocation Act of 1973 was approved on November 27, 1973. Section 4(a) required the President to provide within fifteen days after enactment for the mandatory allocation of crude oil and various petroleum products in amounts and at prices "specified (or determined in a manner prescribed by)" his regulations.

The FEO was created by Executive Order 11748⁷ on December 4, 1973. Its Administrator was thereby vested with all powers delegated to the President by the Emergency Petroleum Allocation Act, and the Chairman of CLC was authorized to delegate to the Administrator "such authority under the Economic Stabilization Act as may be necessary to carry out the purposes of that Act with respect to energy matters."

Acting pursuant to Section 4(a) the FEO issued proposed mandatory fuel allocation regulations⁸ on December 11, 1973. Part 201 of these regulations adopted by reference the pricing provisions of CLC's Phase IV Regulation mentioned above,⁹ thus continuing in effect the state and local government exemptions in accordance with the CLC's interpretation.

On December 26, 1973, the Chairman of CLC issued an order delegating to the Administrator of FEO the powers vested in him pursuant to Executive Orders 11695 and 11730 "to make determinations and take actions required or permitted by the Economic Stabilization Act of 1970, as amended, with respect to petroleum products and crude oil . . . ." and further providing as follows:¹⁰

"6. All orders, regulations, circulars or other directives issued and all other actions taken pursuant to any authority delegated to the Administrator by this order prior to and in effect on the date of this order are hereby confirmed and ratified, and shall remain in full force and effect, as if issued under this order, unless or until altered, amended or revoked by the Administrator or by such competent authority as he may specify."

One of the "actions taken" pursuant to the delegated authority was the pending rule making proceeding which had been instituted on October 25, 1973.

On December 27, 1973, Mandatory Fuel Allocation Regulations were adopted by the FEO as proposed on December 11, 1973.¹¹ The pricing provisions set out in Part 201 were thus adopted, continuing in effect the state and local government exemption. These regulations specified January 15, 1974, as the implementation date for all of the provisions.

On January 14, 1974, one day before the implementation date last mentioned, FEO revoked the December 27 regulations and promulgated revised regulations designated as Parts 205, 210, 211 and 212 of Title 10, Chapter II of the Code of Federal Regulations. Part 212 set out in full pricing provisions for crude oil and other petroleum products. Section 212.52(b) expressly stated: "Prices charged for any sale or leasesale of a covered product which included crude oil by state and local governments are exempt." In explanation, the Deputy Administrator stated:¹²

"A new Part 210 has been created establishing the general rules which apply to both the price control and allocation programs. This part extracts sections previously located in Subpart A of Part 200 and in the Phase IV Price Regulations in 6 CFR Part 150.

"The creation of Part 210 recognizes the compelling necessity of viewing both allocation and price problems within the context of a single regulatory framework.

. . . . . .

"Due to the fact that a substantial revision of the regulatory scheme has occurred and the Federal Energy Office realizes that unanticipated problems with the regulations will surely arise, the Federal Energy Office is inviting comment on these regulations. Although no specific future changes are currently anticipated, the Federal Energy Office would appreciate all comments or suggestions which might assist in future improvements to the program. . . ."

Neither the FEO's December 11 proposal, its regulations of December 27, nor the January 14 codification contained any reference to the rule making proceeding instituted October 25, 1973, by CLC and delegated in general language as noted above by the latter to FEO on December 26. The appellees, in line with the opinion of the court below, contend that this circumstance, coupled with the FEO comment of January 14 hereinabove quoted, indicated an abandonment or termination of the rule making proceeding in question. The appellants draw the opposite conclusion, contending that the absence of any express disposition, the inherently ongoing nature of that process and the interim necessity of establishing on its own responsibility the mandatory regulatory framework with reference to which the proposed rule making could continue and, indeed, was continued under consideration, negated any implied or constructive termination.

In any event, on February 21, 1974, FEO issued an order, by which it expressly acted upon the CLC's Notice of Proposed Rule Making dated October 25, 1973, to revoke the exemption for state and local governments effective as of the...