IN RE DEPT. OF ENERGY STRIPPER WELL LITIGATION, M.D.L. No. 378

• Decision Date: 07 September 1990
• Docket Number: M.D.L. No. 378,Civ. A. No. 78-1513.
• Court: U.S. District Court — District of Kansas
• Parties: In re The DEPARTMENT OF ENERGY STRIPPER WELL EXEMPTION LITIGATION. Howard STOUT, Lorena Houlton and Mary E. Hall, Co-Trustees of the Charles S. Page Trust, and Gulf Oil Corporation, Plaintiffs, v. UNITED STATES DEPARTMENT OF ENERGY, et al., Defendants.

746 F. Supp. 1452

In re The DEPARTMENT OF ENERGY STRIPPER WELL EXEMPTION LITIGATION Howard STOUT, Lorena Houlton and Mary E. Hall, Co-Trustees of the Charles S. Page Trust, and Gulf Oil Corporation, Plaintiffs, v. UNITED STATES DEPARTMENT OF ENERGY, et al., Defendants.

M.D.L. No. 378 Civ. A. No. 78-1513.

United States District Court, D. Kansas.

September 7, 1990.

Joseph W. Kennedy of Morris, Laing, Evans, Brock & Kennedy, Wichita, Kan., for Exxon and ARCO.

Emmett Lewis, Washington, D.C., co-counsel for Exxon.

Sam Perkins, Washington, D.C., co-counsel for ARCO.

Ellen Toll, Asst. Atty. Gen., State of Alaska, Anchorage, Alaska, James F. Flug of Lobel, Novins, Lamont & Flug, Washington, D.C., for State of Alaska.

MEMORANDUM AND ORDER

THEIS, District Judge.

This matter is before the court on the Department of Energy's ("DOE") motion for summary judgment against Gulf Oil Corporation ("Gulf") (Doc. 1283), DOE's two amended motions for summary judgment (Doc. 1804, 1825), and the counter motion for partial summary judgment filed by Chevron U.S.A. Inc. ("Chevron") (Doc. 1587). The court heard oral argument on the motions on May 30, 1990. The DOE is seeking judgment against Chevron (successor to Gulf) in the amount of $162,449,034 plus interest accruing after December 31, 1989, through date of payment into the escrow.¹

From the court's review of the voluminous pleadings, affidavits, and calculations, it appears that the parties have resolved all material disputes regarding the accuracy of the DOE's overcharge calculations. DOE's amended motions for summary judgment (Doc. 1804, 1825) reflect various changes in the calculations based at least in part on Chevron's responsive pleadings. There appear to be no material facts in issue; consequently, summary judgment is appropriate.

DOE's motion for summary judgment identified five factors which resulted in a deficiency in Gulf's deposits into escrow: (1) in calculating its pre-November 1978 overcharges, Gulf deducted a portion of its overcharges reflecting the percentage interests owned by others in various leases; (2) Gulf deducted severance taxes attributable to overcharge amounts for the period prior to November 1978; (3) Gulf used a separate reservoir basis for calculating post-August 1976 overcharges when the properties were certified as stripper on a leasewide basis; (4) Gulf made certain "incorrect" adjustments which Gulf now concedes were improper; and (5) although Gulf's overcharges date from November 1973, Gulf delayed deposits into the escrow account until August 1979.

Chevron's motion for partial summary judgment raises the following issues: (1) that no interest was due before Gulf began making deposits into the escrow pursuant to the court's preliminary injunction; (2) that the United States Rule (payments are applied first to accrued interest then to principal) should not apply; (3) interest, if any is to be awarded, should not exceed the cost to Chevron of borrowing the principal amounts at issue; (4) Chevron is entitled to use the property configurations resulting in the least liability for overcharges; (5) Chevron is entitled to offsets for undercharges which occurred on certain units; and (6) Chevron should not be liable for severance taxes paid to Texas which have not been refunded and should not be liable for interest on severance taxes paid to Texas and New Mexico.

The court is familiar with the standards governing the consideration of a motion for summary judgment. The Federal Rules of Civil Procedure provide that summary judgment is appropriate when the documentary evidence filed with the motion "shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). A principal purpose "of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses...." Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). The court's inquiry is to determine "whether there is the need for a trial—whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986).

The burden at the summary judgment stage is similar to the burden of proof at trial. The court must enter summary judgment "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322, 106 S.Ct. at 2552. The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact on its claim(s). Rule 56, however, imposes no requirement on the moving party to "support its motion with affidavits or other similar materials negating the opponent's claim." Id. at 323, 106 S.Ct. at 2553 (emphasis in original). Once the moving party has properly supported its motion for summary judgment, the nonmoving party may not rest upon mere allegations or denials, but must set forth specific facts showing a genuine issue for trial, relying upon the types of evidentiary materials contemplated by Rule 56. Fed.R.Civ.P. 56(e). Each party must demonstrate to the court the existence of contested facts on each claim it will have to prove at trial. Celotex, 477 U.S. at 324, 106 S.Ct. at 2553. The court reviews the evidence on summary judgment under the substantive law and based on the evidentiary burden the party will face at trial on the particular claim. Anderson, 477 U.S. at 254, 106 S.Ct. at 2513.

For the purposes of the cross motions for summary judgment, the following facts are uncontroverted. The court notes that the DOE's initial calculations have been revised based on matters raised in Chevron's responsive pleadings. The following statement of facts is drawn from the DOE's initial motion for summary judgment, Chevron's response and motion for partial summary judgment, and DOE's response thereto.

1. Gulf certified and sold crude oil produced from the properties identified in Gulf's response to Interrogatory 2 as stripper well oil based on the inclusion of injection wells.

2. Although Gulf's overcharges date from November 1973, it did not deposit any monies into an interest-bearing escrow account until August 1979.

3. In calculating the amount of its initial payment to the escrow account covering overcharges for the period prior to November 1978, Gulf deducted the portion of the overcharges reflecting the percentage interests owned by others. Chevron disputes DOE's characterization of this fact. Chevron asserts that Gulf excluded amounts that had been already paid to other interest owners as those owners' shares of the difference between the stripper well price for crude oil and the controlled price. The court does not believe that this wording dispute is material. By Chevron's own admission, Gulf's initial deposit did not include certain amounts reflecting other interest owners' shares.

4. Gulf deducted severance taxes attributable to overcharge amounts for the period prior to November 1978. Again, Chevron disputes DOE's wording of events. Chevron admits that Gulf, in calculating the amount of its initial payment to the escrow account, excluded amounts that had been paid to the states of New Mexico and Texas as severance taxes on the stripper well price increment.

5. For the purpose of its payment to the escrow, Gulf calculated the post-August 1976 overcharges on crude oil produced from four properties — Hutchings Stock Association Tract K, Keystone Cattle Company Tract F, McElroy Consolidated No. 1, and E.W. Estes Tract B — on a separate reservoir basis when Gulf continued to certify those properties as stripper on a leasewide basis.

6. DOE initially claimed that Gulf calculated the post-1976 overcharges on Keystone Cattle Company Tract A on a separate reservoir basis when the property was certified as stripper on a leasewide basis. Although DOE does not specifically address the issue, it appears that DOE has withdrawn this claim. See Doc. 1806 (Supplemental Declaration of John Wesner) ¶ 12 (accepting the errors identified by Chevron in the overcharge calculations for this tract).

7. Gulf made certain "adjustments" in December 1981 which were intended to reverse some prior payments. The adjustments consisted of a payment to the escrow account of $13,471,087 and instructions to the escrow holder to allocate the deposit among certain properties, and to reallocate some prior deposits among certain properties.

8. Using the interest rate set forth in DOE's Policy Statement on Interest, 46 Fed.Reg. 21,412 (April 10, 1981) and using the United States Rule that deposits are applied first to interest, the remaining deficiencies with interest as of December 31, 1989, total $162,449,034.

9. Gulf paid $87,956,798.60 to the escrow account in August 1979.

10. Gulf gave written notice of the court's injunction to other interest owners who had received a portion of the overcharges. Gulf suggested that they consider paying to the escrow account the amounts that they had received which were covered by the disputed stripper oil certifications in the period prior to November 1978. Several interest holders provided funds totalling $932,210.62, which Gulf paid into the escrow in March 1980.

11. On June 5, 1986, Chevron paid to the escrow account $83,150.85 which the State of New Mexico had paid to Chevron as a refund, without interest, of severance taxes paid by Gulf on amounts claimed by DOE to be overcharges.

12. On September 8, 1986, Chevron paid to the escrow fund $13,945,936.

13. At all times between November 1973 and January 1981, Keystone Cattle Company Tracts A, B, and F were within the Keystone NCT Tract, all of which was subject to a single right to product...