Consumers Union of US, Inc. v. Sawhill

• Decision Date: 07 July 1975
• Docket Number: No. DC-26.,DC-26.
• Citation: 525 F.2d 1068
• Parties: CONSUMERS UNION OF the UNITED STATES, INC., Plaintiff-Appellant, v. John C. SAWHILL, Administrator of the Federal Energy Administration, Defendant-Appellee, Independent Petroleum Association of America, etc., et al., Amicus Curiae, and State of Louisiana, Amicus Curiae.
• Court: U.S. Temporary Emergency Court of Appeals Court of Appeals

525 F.2d 1068

CONSUMERS UNION OF the UNITED STATES, INC., Plaintiff-Appellant, v. John C. SAWHILL, Administrator of the Federal Energy Administration, Defendant-Appellee Independent Petroleum Association of America, etc., et al., Amicus Curiae, and State of Louisiana, Amicus Curiae.

No. DC-26.

Temporary Emergency Court of Appeals.

July 7, 1975.

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Peter H. Schuck, Washington, D. C., for plaintiff-appellant.

C. Max Vassanelli, Atty., Dept. of Justice, with whom Carla A. Hills, Asst. Atty. Gen., Irving Jaffe, Acting Asst. Atty. Gen., and Stanley D. Rose, Atty., Dept. of Justice, were on the brief, for defendant-appellee.

James R. Patton, Jr. and David B. Robinson of Patton, Boggs & Blow, Washington, D. C., Harry E. Barsh, Jr. of Camp, Carmouche, Palmer, Carwile & Barsh, Lake Charles, La., on the brief for amicus curiae State of Louisiana.

William Simon, William R. O'Brien, Harold D. Rhynedance, Jr. of Howrey, Simon, Baker & Murchinson, Washington, D. C., on the brief, for amicus curiae Independent Petroleum Assn. of America and others.

Before TAMM, Chief Judge, and CARTER, HASTIE, ANDERSON, CHRISTENSEN, JOHNSON and HASTINGS, Judges.

TAMM, Chief Judge:

This case was previously before a division of the court, which held, with one member dissenting, that the Federal Energy Administration's (FEA) "new oil" regulation, allowing that oil to be sold without regard to the ceiling price, was invalid under the Emergency Petroleum Allocation Act (the Act). The division also held that FEA's "released oil" regulation, allowing that oil to be sold at a price determined by a formula, was valid under the Act because "nothing in the language of § 4(a) suggests that prices cannot be prescribed or determined in part with reference to or in relation to market price." Consumers Union of United States, Inc. v. Sawhill, 512 F.2d 1112, at 1118 (Em.App.1975). We granted rehearing en bane because of the exceptional importance of the case in relation to FEA's regulatory scheme and, having thoroughly considered the arguments proffered by the parties, are constrained to vacate the judgment of the division majority for the reasons set forth in the concurring and dissenting opinion, attached hereto as an appendix, which we adopt together with the modification herein.

Although the background and regulatory framework are adequately described in the attached appendix, there remains one point that was only recently brought to the attention of the court, which requires further explication. Effective August 29, 1974, FEA amended its released oil regulation to provide that released oil, like new oil, be sold without regard to the ceiling price. 39 Fed.Reg. 31622-24 (Aug. 30, 1974). Since the released oil formula as discussed in the opinions of the division is no longer applicable, the amended released oil regulation must stand or fall with the new oil regulation. Our reasoning upholding it is twofold. First, both parties agree that the amended released oil regulation does not effectuate a change in the substance of its predecessor. See id. at 31622-23; Appellant's Supp.Mem. on Rehearing at 3-4. Thus, by amending the released oil regulation, FEA has only clarified an aspect of the two-tier system "expressly contemplated" by Congress when it passed the Act. App. at 4, 9-10. Second, the most recent statistics indicate that new and released oil account for approximately 22 percent of domestic crude production. Thus, as stated in the division dissenting opinion, "FEA's utilization of free market price for a maximum of 22 percent of all crude production (excluding stripper wells) is . . . a statutorily permissible means of accomplishing the necessary balancing of objectives." App. at 14. Of course, this is not to say that FEA may, consistent with its statutory responsibilities, unilaterally implement changes in its regulatory scheme not contemplated by Congress and not reflective of a balancing approach.

Unfortunately, Judge Anderson, with all due respect, apparently misperceives several fundamental aspects of our opinion. After thorough study of the opinion, he arrives at the conclusion that we "construe `the grant of such broad regulatory discretion' to empower the FEA to free any category of crude oil from all regulation without complying with the required exemption procedure." Judge Anderson's Dissent at 1083-1084. To allay any subsequent misunderstanding, we categorically state that this characterization of our holding today is simply incorrect; our decision concerns new and released oil—old oil is unquestionably quite another matter. The dissent further suggests that we somehow heavily rely upon the goal of section 4(b)(1)(I) as "a justification for finding such a grant of the unlimited power as the majority would accord to FEA." Id. at 1084. This too is incorrect—we recognize that section 4(b)(1)(I) is but one of nine equally important goals and, certainly would not even attempt our dissenting colleague's leap of faith to elevate any one of those goals to the level of a mandatory duty as the dissent does with the goal of equitable prices. Id. at 1082 ("mandatory duty to establish equitable prices"), 1088 ("statutory prescription" and "equitable price requirement "). Notably, the dissent again makes no mention of the importexport oil problem. App. at 1085-1086. Finally, we are pleased that the dissent recognizes that (1) FPC v. Texaco "differed critically from the present case," Dissent at 1086 and (2) the present regulatory scheme provides "a strong incentive to drill wells which were not active during the base period," id. at 1087, thus illustrating FEA's effective balancing approach to the overall problem.

The judgment of the division is vacated and the district court is affirmed for the reasons stated in the division concurring and dissenting opinion and herein.

So ordered.

APPENDIX

TAMM, Chief Judge (concurring and dissenting):

While I agree with that portion of the majority opinion which upholds FEA's "released" oil regulation, 10 C.F.R. § 212.74(b), I would also uphold the "new" oil regulation, 10 C.F.R. § 212.-74(a).

I

I begin with an analysis of the relevant portions of the Act, their legislative history and the regulations promulgated thereunder. In response to widespread shortages of petroleum and petroleum products, Congress enacted the Emergency Petroleum Allocation Act, with its avowed purpose "to grant to the President of the United States and direct him to exercise specific temporary authority to deal with shortages of crude oil, residual fuel oil, and refined petroleum products or dislocations in their national distribution system." 15 U.S.C. § 751(b) (Supp. III, 1973). Hence, section 4(a) of the Act, 15 U.S.C. § 753(a), requires the President to "promulgate a regulation providing for the mandatory allocation of crude oil, residual fuel oil, and each refined petroleum product, in amounts . . . and at prices specified in (or determined in a manner prescribed by) such regulation." While unequivocally directing pervasive regulation, the Conference Report opined that "the clear and firm understanding on the part of the Managers of both Houses is that the mandatory allocation program . . shall not be designed or implemented in a manner which would have the net effect of occasioning a substantial reduction in the total supply of crude oil, residual fuel oil or refined petroleum products. It is expected that the President in applying the mandatory controls . . . will assiduously avoid that result."¹

Regardless of their specific terms, Congress also directed that, "to the maximum extent practicable," the regulations so promulgated provide for the following objectives:

(A) protection of public health, safety, and welfare (including maintenance of residential heating, such as individual homes, apartments, and similar occupied dwelling units), and the national defense;

(B) maintenance of all public services (including facilities and services provided by municipally, cooperatively, or investor owned utilities or by any State or local government or authority, and including transportation facilities and services which serve the public at large);

(C) maintenance of agricultural operations, including farming, ranching, dairy, and fishing activities, and services directly related thereto;

(D) preservation of an economically sound and competitive petroleum industry; including the priority needs to restore and foster competition in the producing, refining, distribution, marketing, and petrochemical sectors of such industry, and to preserve the competitive viability of independent refiners, small refiners, nonbranded independent marketers, and branded independent marketers;

(E) the allocation of suitable types, grades, and quality of crude oil to refineries in the United States to permit such refineries to operate at full capacity;

(F) equitable distribution of crude oil, residual fuel oil, and refined petroleum products at equitable prices among all regions and areas of the United States and sectors of the petroleum industry, including independent refiners, small refiners, nonbranded independent markets, branded independent marketers, and among all users;

(G) allocation of residual fuel oil and refined petroleum products in such amounts and in such manner as may be necessary for the maintenance of exploration for, and production or extraction of, fuels, and for required transportation related thereto;

(H) economic efficiency; and

(I) minimization of economic distortion, inflexibility, and unnecessary interference with market mechanisms.

15 U.S.C. § 753(b)(1) (Supp. III, 1973). The qualifying language, "to the maximum extent practicable," was "intended to give the President administrative flexibility in marshalling short supplies and equitably assigning them to particular needs."² A cursory reading of the objectives clearly indicates frequently competing interests; thus, "to...