Citronelle-Mobile Gathering, Inc. v. O'LEARY

• Decision Date: 15 September 1980
• Docket Number: Civ. A. No. 77-101-P.
• Citation: 499 F. Supp. 871
• Parties: CITRONELLE-MOBILE GATHERING, INC., et al., Plaintiffs, v. John F. O'LEARY, etc., et al., Defendants.
• Court: U.S. District Court — Southern District of Alabama

499 F. Supp. 871

CITRONELLE-MOBILE GATHERING, INC., et al., Plaintiffs, v. John F. O'LEARY, etc., et al., Defendants.

Civ. A. No. 77-101-P.

United States District Court, S. D. Alabama, S. D.

September 15, 1980.

COPYRIGHT MATERIAL OMITTED

Lester M. Bridgeman, Washington, D. C., G. Sage Lyons and Cooper C. Thurber, Mobile, Ala., for plaintiffs.

William A. Kimbrough, Jr., U. S. Atty., Mobile, Ala., Brian G. Kennedy, Dept. of Justice, Washington, D. C., Diana D. Clark, Dept. of Energy, Washington, D. C., for defendants.

ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT ON COUNTERCLAIM

PITTMAN, Chief Judge.

This action was filed by Citronelle-Mobile Gathering, Inc. and others, requesting declaratory and injunctive relief against officials of the Federal Energy Administration, now the Department of Energy, and the Secretary of the Department of Commerce.

The government filed a counterclaim seeking to compel Bart B. Chamberlain, Jr. (Chamberlain), Citronelle-Mobile Gathering, Inc. (Gathering), and Citmoco Services, Inc. (Services) (hereinafter sometimes collectively referred to as "defendants"), to make restitution of alleged overcharges received relating to four transfers of crude petroleum to Grand Bahamas Petroleum Company, Ltd. (PETCO), a wholly owned subsidiary of the New England Petroleum Corporation (NEPCO), between December 20, 1973 and May 26, 1974. The first three shipments were sold at a price of $14.00 per barrel and the final shipment at $13.00 per barrel, prices admittedly higher than the price the defendants could lawfully have charged had the sales been made in the United States to United States purchasers.

The government seeks to recover the difference between the payments the defendants actually received and the maximum lawful selling prices allowed by the provisions of the Economic Stabilization Act of 1970, as amended, 12 U.S.C. § 1904 note (ESA); the Emergency Petroleum Allocation Act of 1973, 15 U.S.C. § 751 et seq. (EPAA); and the regulations promulgated thereunder which establish the ceiling price for the first sale of domestic crude oil, and the maximum lawful selling price for the resale of domestic crude oil, 6 C.F.R. Part 150 and 10 C.F.R. Part 212. The government also seeks a declaratory judgment that the defendants violated the laws in question, and to recover civil penalties and costs from the defendants.

All parties have filed motions for summary judgment on the counterclaims. They informed the court there were no disputed facts. None were filed as required by Local Rule 8:

When a motion for summary judgment is filed . . . if it is contended that there are material factual disputes, the party shall point out the disputed facts appropriately referenced .... Failure to do so will be considered an admission that no material factual dispute exists.

FINDINGS OF FACT

The defendants Gathering and Services are corporations duly organized and existing under the laws of the State of Delaware, having their principal place of business in Mobile, Alabama. The companies are commonly controlled and were, at all times pertinent hereto, engaged in the business of purchasing crude oil produced principally in the Citronelle field in Mobile County, Alabama, and reselling that crude oil at Mobile, Alabama. Defendant Chamberlain is an officer, director and the principal stockholder, owning a majority of the stock, of the companies. He is a citizen and resident of the State of Alabama.

James R. Schlesinger, Secretary of the Department of Energy, is successor to John F. O'Leary, former Administrator of the Federal Energy Administration (FEA); Donald E. Allen was Regional Administrator, Region IV of FEA, at the time of commencement of this action. Juanita M. Kreps is the Secretary of Commerce of the United States.

Pursuant to the Emergency Petroleum Allocation Act of 1973, 15 U.S.C. §§ 751 et seq., and Executive Order 11748, the Federal Energy Office (later the FEA and now the Department of Energy) issued regulations governing the allocation and pricing of crude oil and refined petroleum products, published at 10 C.F.R. Parts 205, 210, 211, 212 (effective January 14, 1974). At all times relevant hereto, prior to the effectiveness of the FEA regulations, pricing and crude oil was subject to regulations of the Cost of Living Council (CLC), 6 C.F.R. Part 150 issued pursuant to the Economic Stabilization Act of 1970, 12 U.S.C. § 1904 note.

Exports, and domestic sales for export, of crude petroleum subject to export license regulations of the Department of Commerce (DOC) were and are expressly excluded from FEA's petroleum allocation regulations, 10 C.F.R. § 211.1. Prices charged for export sales, including sales to a domestic purchaser which certifies the product is for export, are exempt from FEA's petroleum pricing regulations, 10 C.F.R. § 212.53.

From time to time during the period December 1973 to April 1974, the defendant companies contracted with Grand Bahamas Petroleum Company, Ltd. (PETCO) to sell crude oil to PETCO, at a price higher than the domestic price permissible under otherwise applicable FEA regulations, for refining in the Bahamas at a refinery partly owned by PETCO. During this period applications for a license were made to and approved by DOC as follows:

On or about December 20, 1973, Gathering filed an application for a license to export 250,000 barrels of crude oil to PETCO in the Bahamas. On or about December 21, 1973, this application was approved and a validated export license (No. C-31226-701-1) issued on December 26, 1973, as requested in the application.

On or about December 20, 1973, Gathering filed a second application for a license to export 250,000 barrels of crude oil to PETCO in the Bahamas. On or about January 2, 1974, the second application was approved and validated export license (No. B XXXXXX-XXX-X) issued as requested in the application.

On or about January 17, 1974, Gathering filed an application to amend the first application to include an additional quantity of crude oil, which amendment was approved on January 18, 1974.

On or about February 22, 1974, Gathering filed an application for a third license to export 250,000 barrels of crude oil to the Bahamas. On or about February 25, 1974, the third application was approved and a validated export license (No. C-40226-703-1) issued to Gathering as requested in that application.

On or about April 2, 1974, Services filed an application for a license to export 250,000 barrels of crude oil to the Bahamas. On or about April 12, 1974, this fourth application for export license was approved and a validated export license (No. 40416-708-1) issued on April 15, 1974, for the shipment of 184,000 barrels of crude oil to the Bahamas.

Each application for export license disclosed that a volume of refined petroleum equivalent to the quantity of crude oil to be exported would be re-exported from the Bahamas to the United States by PETCO. The applications for the export licenses and the amendment issued to Gathering and Services truthfully set forth all facts upon which the Office of Export Administration of DOC issued the export licenses and the amendment. No export license or amendment thereto was issued to or approved for the defendant companies or either of them, or for Bart B. Chamberlain, Jr., at any time in 1973 or 1974 other than those above identified. None of the export licenses or amendments thereto identified above was at any time revoked or cancelled.

Pursuant to the four export licenses issued to the defendant companies above identified, and to Commerce Department Export regulations allowing for 10% tolerance in shipments pursuant to export licenses, crude oil was shipped from Mobile, Alabama, to Freeport, Bahamas, during the period January 1974 to May 1974 as follows:

a. On or about January 6, 1974, Gathering shipped 279,000 barrels of crude oil from Mobile to Freeport.

b. On or about January 22, 1974, Gathering shipped 255,000 barrels of crude oil from Mobile to Freeport c. On or about February 25, 1974, Gathering shipped 231,000 barrels of crude oil from Mobile to Freeport.

d. On or about May 26, 1974, Services shipped 200,000 barrels of crude oil from Mobile to Freeport.

The defendants were paid by PETCO for the first three shipments at the agreed-upon price of $14.00 per barrel, and for the last shipment at the agreed-upon price of $13.00 per barrel.

I. Parties to the Transactions

Defendant Citronelle-Mobile Gathering, Inc. operates an oil pipeline in the Citronelle oil field in southwest Alabama. It also purchases crude oil for resale. Defendant Citmoco Services, Inc. operates a terminal facility in the Citronelle field; it has purchased crude oil for resale as well. Defendant Bart B. Chamberlain, Jr. owns approximately 90% of Gathering, and 87.5% of Services. He owns the largest working interest in the Citronelle field among some 900 owners. Chamberlain Testimony at 18-20, 23, 50-51.

New England Petroleum Company (NEPCO) is a New York corporation with its headquarters in New York. NEPCO's primary business is the sale of No. 6 heating oil in the United States. NEPCO depended primarily, but not exclusively, for its supply of No. 6 heating oil on Grand Bahamas Petroleum Company (PETCO), its wholly-owned Bahamian-incorporated subsidiary. PETCO arranges for the refining of its crude oil by Bahamas Oil Refining Company (BORCO), a Bahamian partnership. BORCO is owned by two entities. The first is "PETCO Partnership," which is a partnership of two NEPCO subsidiaries, Grand Bahamas Petroleum Company and PETCO, Ltd., an "offshore" corporation. The subsidiaries through this partnership own 50% and 15%, respectively, of BORCO. The remaining 35% is owned by Chevron Oil of the Bahamas, Ltd., a subsidiary or affiliate of Standard Oil of California. Costikyan Dep. at 25, 74; Covert Dep. at 9; Jackson Dep. at 29; Lauria Dep. (May 29, 1979) at 63-64.

PETCO purchased crude oil for its own account, had BORCO...