PETRACO-VALLEY OIL & REFINING v. US Dept. of Energy

• Citation: 633 F.2d 184
• Decision Date: 07 May 1980
• Docket Number: No. 5-47,5-48.,5-47
• Court: U.S. Temporary Emergency Court of Appeals
• Parties: PETRACO-VALLEY OIL & REFINING CO., Applicant, v. UNITED STATES DEPARTMENT OF ENERGY, Respondent. PETRACO-VALLEY OIL & REFINING CO., Appellant, v. UNITED STATES DEPARTMENT OF ENERGY, Appellee.

633 F.2d 184

PETRACO-VALLEY OIL & REFINING CO., Applicant, v. UNITED STATES DEPARTMENT OF ENERGY, Respondent.

PETRACO-VALLEY OIL & REFINING CO., Appellant, v. UNITED STATES DEPARTMENT OF ENERGY, Appellee.

Nos. 5-47, 5-48.

Temporary Emergency Court of Appeals.

Submitted February 15, 1980.

Decided May 7, 1980.

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Robert L. Ketchand, Butler, Binion, Rice, Cook & Knapp, Houston, Tex., with whom Thomas W. Houghton, Rueben C. Casarez, Nancy Leighton and William N. Blanton, III, Houston, Tex., were on brief for applicant-appellant Petraco-Valley Oil & Refining Co.

Mark Kreitman, Dept. of Energy, Washington, D. C., with whom Nancy C. Crisman and Thomas P. Humphrey, Washington, D. C., were on the brief for respondent-appellee Department of Energy.

Before INGRAHAM, ESTES and BECKER, Judges.

WILLIAM H. BECKER, Judge.

In No. 5-47, Petraco-Valley Oil & Refining Co. (Petraco) filed in this Court an original application for a temporary "stay", and for preliminary and permanent injunctions to prevent the United States Department of Energy (DOE) from enforcing an "alleged obligation" of Petraco to purchase 211,750 entitlements for September 1979. DOE opposes this application. On February 4, 1980, before hearing of oral arguments, a temporary "stay" in No. 5-47 was granted by the Presiding Judge of this Panel, and later continued in force by this Panel after the hearing of oral arguments on February 15, 1980.

In No. 5-48, Petraco, plaintiff below, filed a notice of appeal from an order entered by the United States District Court for the Southern District of Texas "purporting to deny Plaintiff's Motion for Temporary Restraining Order" entered on February 1, 1980 in Civil Action No. H-80-180. DOE has moved to dismiss this appeal for lack of jurisdiction, and on other grounds.

For the reasons stated hereinafter, in No. 5-47 the original application for injunctive relief is denied and the temporary stay order is vacated; in No. 5-48 the appeal is dismissed.

Petraco is a Texas corporation exclusively engaged in the business of refining crude oil and marketing the refined products. It is classified by DOE as a "small and independent refiner" as defined in 10 C.F.R. § 211. (January 14, 1980 Decision and Order of Office of Hearings and Appeals (OHA) of DOE Denying Application for Temporary Exemption dated November 19, 1979, Paragraph 2, "Decision" hereinafter.) Petraco owns and operates a refinery in Brownsville, Texas which began operations in September 1979. To begin operations Petraco purchased a start-up inventory of 262,000 barrels of crude oil. (Decision, paragraph 2.)

DOE determined that, on the basis of its crude oil receipts during September 1979, Petraco was obligated under the Entitlements Program, 10 C.F.R. § 211.67, to purchase 211,750 entitlements during the month of November 1979. (Entitlements Notice for September 1979, 44 Fed.Reg. 68515, published November 29, 1979.)

Earlier, Petraco had been given notice of this obligation which was later listed in the Entitlements Notice for September 1979, supra.

Petraco states that it had been notified by mailgram on October 12, 1979 by the Economic Regulatory Administration (ERA) of DOE that ERA had suspended all exemptions from the obligations of the Entitlements Program in the form of start-up inventory adjustments pending resolution of regulatory questions and that applications based on "hardships created by this action should be submitted to the Office of Hearings and Appeals" of DOE for appropriate action.

On November 19, 1979 Petraco filed with DOE its Application for Temporary Exception Relief from its asserted obligation to purchase entitlements based on the receipts of Petraco in September 1979 of its "start-up" crude oil inventory. Petraco asked for the temporary exception pending the determination of an Application for Exception that it stated it intended to file, but had not filed at the time No. 5-47 was filed in this Court nor at the time the notice of appeal was filed in No. 5-48. (Counsel at oral argument on February 15, 1980 stated that the application for exception relief was filed the day before, and furnished a copy thereof.)

In the administrative proceedings on its Application for Temporary Exception Relief filed November 19, 1979, and later in its complaint for injunctive relief, filed in the District Court for the Southern District of Texas in Civil Action No. H-80-180 on January 25, 1980, and in the original action for injunctive relief filed in this Court on February 4, 1980 in No. 5-47, Petraco has stated the following grounds for relief:

1. Since the Entitlements Program began in 1974, the entire crude oil inventories of price-controlled domestic crude oil of then existing refiners were expressly exempted from the Entitlements Program, citing 10 C.F.R. § 211.62 issued by the Federal Energy Administration (FEA), predecessor of DOE.

2. Thereafter, since November 1, 1974, FEA and ERA of DOE, which succeeded the FEA in the administration of the Entitlements Program, routinely granted start-up inventory adjustments to new refiners to bar discrimination against, and to promote entry of, new refineries, and to place them on an equal footing with refineries in existence on November 1, 1974, and to promote the increase of domestic refinery capacity, and because of the "fact" that the amount of crude oil that a refiner must maintain in inventory to sustain normal operations is never refined.

3. On November 28, 1978, Petraco's representative met with "officials from ERA and Office of General Counsel of DOE to advise them of plans for its new refinery" and to learn of the availability of exemptions of start-up inventories of new refineries from the Entitlements Program; that at the November 1978 meeting and at additional meetings in April, July, August and September, 1979, and thereafter, the "Entitlement Programs Manager" and other "responsible DOE officials" repeatedly assured Petraco that the new Brownsville refinery would receive a start-up inventory adjustment equal to the normal inventory of the refinery, notwithstanding the issuance in January 1979 of Sierra Anchor Refining Co., 3 DOE ¶ 80,114 (1979), in which OHA of DOE questioned the authority of ERA to grant start-up inventory exemptions from the Entitlement Program, and remanded the question to ERA. Further, that following the Sierra Anchor Refining Co. decision, OHA did not rescind the start-up adjustment that Sierra Anchor Refining Co. had received, and left undisturbed other start-up inventory adjustments ERA had granted; that on July 17, 1979 ERA and DOE advised Petraco that it was still the official policy of ERA to grant start-up inventory adjustments for new refineries despite the Sierra Anchor Refining Co. decision, supra.

4. On September 6, 1979, "ERA notified applicant by telephone that its refinery qualified for and would receive a start-up inventory adjustment and that written confirmation would be mailed within a week." Further, Petraco continued to advise "ERA officials" of its plans and discussed "continuing availability" of a start-up inventory adjustment for its Brownsville refinery as late as October 10, 1979, one day before ERA undertook to suspend all start-up inventory adjustments.

5. Solely in reliance on the above described assurances by ERA of a start-up inventory adjustment and its continuing award of such adjustments to others, and in anticipation of a start-up of its refinery in mid-August 1979, Petraco purchased in August 179,323 barrels of (price-controlled) lower tier crude oil at $7.89 ($6.29 plus $1.60 for freight charges) and 100,000 barrels of (price-controlled) upper tier crude oil at $15.11 ($13.51 plus $1.60 for freight charges) per barrel. After receiving delivery of this crude oil, applicant Petraco commenced operations at its new refinery by refining 95,988 barrels of the price-controlled crude oil prior to the end of September 1979.

6. The mailgram notice of October 12, 1979 from ERA of suspension of start-up inventory adjustments was received without any prior notice.

7. On November 19, 1979 Petraco filed its Application for a Temporary Exception Relief and Temporary Stay asserting a right to a 262,000 barrel start-up inventory adjustment based on the following: (a) the impropriety or inequity of ERA's suspension; (b) the reasonableness of reliance of applicant on the continuing practices and assurances of ERA that applicant would receive a start-up inventory adjustment; and (c) estoppel of DOE.

8. The Entitlements List published November 29, 1979 stated that Petraco was required to purchase 211,750 entitlements at a total cost of $3,805,-147.50. Petraco did not purchase the entitlements because of the policy of ERA to refrain from enforcing entitlement obligations while an application for a stay was pending before OHA of DOE.

9. Petraco "does not currently have the funds (either on hand or expected as accounts receivable) to satisfy its present short-term liabilities to its various creditors as well as this unforeseen entitlements obligation." Failure to enjoin enforcement of the entitlements obligations "will seriously cripple if not completely destroy the continuing viability of Appellant's business."

10. In the District Court and in this Court Petraco adds the following conclusions: On January 14, 1980 OHA denied the relief sought by Petraco in a formal decision, "which is not subject to any administrative review, see 10 C.F.R. § 205.126," and which "effectively decides all the legal issues concerning the legality of ERA's October 11, 1979 suspension notice and ERA's Entitlements Notice for September 1979. Any administrative appeal of these notices would therefore be futile. While the January 14 Order implies that some future exception relief may possibly be available ... OHA has decided all issues Applicant could raise in any effort to obtain additional relief."

11. On January 18, 1980

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