Atlantic Refining Company v. Standard Oil Company

• Decision Date: 07 June 1962
• Docket Number: No. 16721 and 16725.,16721 and 16725.
• Citation: 304 F.2d 387
• Parties: The ATLANTIC REFINING COMPANY, Appellant, v. STANDARD OIL COMPANY (Incorporated in New Jersey) et al., Appellees. INDEPENDENT REFINERS ASSOCIATION OF AMERICA et al., Appellants, v. STANDARD OIL COMPANY (Incorporated in New Jersey) et al., Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

304 F.2d 387 (1962)

The ATLANTIC REFINING COMPANY, Appellant, v. STANDARD OIL COMPANY (Incorporated in New Jersey) et al., Appellees.

INDEPENDENT REFINERS ASSOCIATION OF AMERICA et al., Appellants, v. STANDARD OIL COMPANY (Incorporated in New Jersey) et al., Appellees.

Nos. 16721 and 16725.

United States Court of Appeals District of Columbia Circuit.

Argued February 23, 1962.

Decided June 7, 1962.

Petition for Rehearing July 30, 1962.

Petition for Rehearing Denied July 30, 1962.

Mr. Henry B. Weaver, Jr., Washington, D. C., with whom Messrs. Ray S. Donaldson, Thomas C. Matthews, Jr., George A. Avery, Washington, D. C., and Roy W. Johns, Philadelphia, Pa., were on the brief, for appellant in No. 16,721.

Mr. Elmer E. Batzell, Washington, D. C., for appellants in No. 16,725.

Mr. Daniel M. Gribbon, Washington, D. C., with whom Messrs. Hugh B. Cox and Henry P. Sailer, Washington, D. C., were on the brief, for appellee Standard Oil Company (New Jersey).

Mr. Morton Hollander, Attorney, Department of Justice, with whom Asst. Atty. Gen. William H. Orrick, Jr., was on the brief, for appellees Udall and Moore.

Before WILBUR K. MILLER, Chief Judge, PHILLIPS, Senior United States Circuit Judge for the Tenth Circuit,¹ and FAHY, Circuit Judge.

Petition for Rehearing by the Division July 30, 1962.

Petition for Rehearing En Banc Denied En Banc July 30, 1962.

PHILLIPS, Circuit Judge.

Standard Oil Company, a New Jersey corporation, brought an action against Stewart Udall, Secretary of the Interior, seeking a declaratory judgment adjudging § 10(b) of Oil Import Regulation No. 1, as amended and revised, promulgated by the Secretary, purportedly under Presidential Proclamation No. 3279 of March 10, 1959, as amended, 19 U.S.C.A. § 1352a note, to be illegal, and that any method of allocation of imported foreign crude oil that distributes quotas in an inverse ratio to size of refinery inputs is illegal.

Independent Refiners Association of America, a corporation organized under the laws of the District of Columbia, Farmers Union Central Exchange, Inc., a Minnesota corporation, Frontier Refining Company, a Wyoming corporation, and Sioux Oil Company, a Colorado corporation, filed applications for leave to intervene in such action as of right, under Rule 24(a) (2) of the Federal Rules of Civil Procedure, 28 U.S.C., or in the alternative for permissive intervention in such action, under Rule 24(b) of such rules.

Number 16,725 is an appeal from an order denying such applications.

The Atlantic Refining Company, a Pennsylvania corporation, filed an application to intervene in such action as of right, under Rule 24(a) (2), or in the alternative for permissive intervention, under Rule 24(b).

Number 16,721 is an appeal from an order denying Atlantic's application.

The following facts appear from an affidavit of the Secretary of the Interior, filed in the instant action. In 1949, with the development of prolific oil fields in the Middle East, especially in Kuwait and Saudi Arabia, a large surplus of petroleum became available to the free world. According to the United States Bureau of Mines Minerals Yearbook for 1950, production in Kuwait increased from 16,000 barrels per day in 1946 to 250,000 barrels per day in 1949 and in Saudi Arabia from 21,000 barrels per day in 1944 to 475,000 barrels per day in 1949. The World Petroleum Statistics — 1960, No. 156 of the United States Bureau of Mines, listed total production in the Middle East for 1960 at 4,603,000 barrels per day.

Because these new fields are endowed with unusually large reservoirs of readily producible oil and because labor costs in the Middle East are considerably below those in the United States, the cost of producing a barrel of this foreign oil is considerably less than the cost of producing a barrel of crude oil in the United States. Moreover, tanker rates on foreign flag tankers hauling oil from the Persian Gulf and the Caribbean are not subject to United States Maritime Union rates prevailing on American flag tankers, which, pursuant to the provisions of the Merchant Marine Act of 1920, 41 Stat. 999, 46 U.S.C.A. § 884, must be used in hauling domestic oil from the United States ports on the Gulf of Mexico to the east coast ports of the United States. In view of the fact that the United States is the largest single consumer of oil, accounting for approximately 50 per cent of the world consumption, it was only natural that the surplus of cheap foreign oil would gravitate to United States markets. The United States Bureau of Mines Monthly Petroleum Statement No. 463 indicates that the United States was a net exporter in 1947 of 5,088,000 barrels of petroleum and by 1954 had become a net importer in the amount of 254,222,000 barrels and by 1960 such net amount of oil imports had increased to 591,784,000 barrels.

Postings in the Oil & Gas Journals for January, 1959, show 34 gravity Arabian crude at the port of Ras Tanura, on the Persian Gulf, was $1.80 per barrel, as opposed to Texas Refugio, 34 gravity at $3.23 per barrel and Louisiana Bayou Sale, 34 gravity at $3.18 per barrel.

Soon after the influx of cheap foreign oil began to supplant domestic oil, it became evident that if that trend was permitted to continue it would further discourage domestic production and exploration to the point where the United States would be relying almost entirely on foreign sources for its oil.

The maintenance of a strong, dynamic and healthy domestic crude oil industry is essential to insure an adequate amount of domestic oil and refined petroleum products in time of national emergency and thereby insure the national security of the United States. Hence, the purpose of the Proclamation, and Regulation No. 1, implementing such Proclamation, was not only to preserve a great national industry, but to prevent impairment of our national security. The Secretary, in the affidavit referred to above, stated it was to achieve those purposes that controls over the importation of foreign crude oil were imposed.

Because, by 1954, the rapidly increasing importation of low-cost foreign crude oil into the United States had become a matter of serious concern, both to the domestic petroleum industry and to Government agencies and officials having to do with petroleum matters, the President in that year appointed a Cabinet Committee on Energy, Supplies and Resources Policy to study oil imports. The Committee, after investigation and study, recommended that imports should not exceed the 1954 relationship of imports to domestic crude oil production. Further studies were undertaken between 1954 and July, 1957. On July 29, 1957, a voluntary import program was inaugurated. Under that program, import quotas were established by the United States for qualified importers, who were to adhere voluntarily to such quotas. However, some importers did not adhere and as a result further study was made by the Office of Civil Defense and Mobilization. The Director of that Office recommended the establishment of a mandatory import program, which was put into effect in 1959 through the Proclamation.

The Proclamation recited that crude oil and its derivatives were being imported in such quantities as to threaten national security, fixed permissible imports in Districts I to IV, inclusive, at approximately nine per cent of the total demand in the United States² and directed the Secretary to issue regulations allocating permissible imports, which regulations should provide "for a fair and equitable distribution among persons having refinery capacity in relation to refinery inputs * * * during an appropriate period or periods selected by the Secretary and may provide for distribution in such manner as to avoid drastic reductions below the last allocations under the Voluntary Oil Import Program."

In March, 1959, the Secretary promulgated Regulation No. 1, which imposes in part in § 10(b) the so-called sliding scale, for allocation of permissible imports. Under § 10(b) and the sliding scale therein established, importers who have average refinery inputs of 0 to 10,000 barrels per day are permitted to import 11.1 per cent of such refinery inputs; those who have average refinery inputs of 10 to 20,000 barrels per day are permitted to import 10.2 per cent of such refinery inputs; those who have average refinery inputs of 20 to 30,000 barrels per day are permitted to import 9.3 per cent of such refinery inputs, and in like manner the percentage of allowed imports decreases as the average refinery input increases. Standard characterizes this system as a method of distribution quotas in inverse relation to the size of refinery inputs. The fact is, that in each bracket each refinery is permitted to import the same percentage, but we are not here concerned with the merits.

Refiners Association is a nonprofit corporation, made up of independent refiners, all of which are organized, existing and operating in the United States. Each of such members is a marketer of petroleum products in interstate commerce, receives an allocation of crude oil to be imported into the United States on the basis of § 10(b) and in its respective marketing area competes directly with Standard and its subsidiaries. Farmers Union is a federated cooperative corporation in its petroleum activities. It is principally a refiner and through local cooperatives, which own all of its stock, it is a marketer of petroleum products in interstate commerce. Frontier is principally a refiner of petroleum products and markets such products in interstate commerce. Sioux Oil is principally a refiner of petroleum products and markets such products in interstate commerce. Farmers Union, Frontier and Sioux Oil each received an allocation of crude oil to be imported into the United States on the basis of § 10(b) and each in its respective marketing area competes directly with Standard and its subsidiaries.

Atlantic is an integrated petroleum company, engaged in the...