Murphy Oil Corporation v. Hickel

• Decision Date: 08 March 1971
• Docket Number: No. 20202.,20202.
• Citation: 439 F.2d 417
• Parties: MURPHY OIL CORPORATION, Plaintiff-Appellee, v. Walter J. W. HICKEL, Secretary of the Interior, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

439 F.2d 417 (1971)

MURPHY OIL CORPORATION, Plaintiff-Appellee, v. Walter J. W. HICKEL, Secretary of the Interior, Defendant-Appellant.

No. 20202.

United States Court of Appeals, Eighth Circuit.

March 8, 1971.

Donald L. Horowitz, Atty., Dept. of Justice, Washington, D. C., William D. Ruckelshaus, Asst. Atty. Gen., Bethel B. Larey, U. S. Atty., Robert V. Zener, Attys., Dept. of Justice, Washington, D. C., for defendant-appellant.

William J. Wynne, Crumpler, O'Connor, Wynne & Mays, El Dorado, Ark., for plaintiff-appellee, Murphy Oil Corp.

Before VOGEL, MEHAFFY and LAY, Circuit Judges.

VOGEL, Circuit Judge.

This is an appeal from the United States District Court for the Western District of Arkansas. That court awarded Murphy Oil Company, appellee, a declaratory judgment correcting what it found to be an interpretative error by the Secretary of the Interior under the Mandatory Oil Import Program,¹ and a mandatory injunction requiring the Secretary to increase Murphy's crude and unfinished oil import allocation under that program.² The Secretary appeals. Jurisdiction of the federal courts is based upon 28 U.S.C.A. § 1331.

A brief review of the purpose and history of the Oil Import Program is essential in order to better comprehend the context in which this case arises and our disposition of the issues.³

Originally, the program to regulate the amount of oil imported into the United States was voluntary and was initiated to alleviate the national security problems arising because of the extensive reliance by American industry on the overseas importation of foreign oil. See Eastern States Petroleum & Chemical Corp. v. Seaton, D.D.C., 1958, 165 F. Supp. 363.

Further study indicated that the voluntary program would not satisfactorily curb the reliance on imported oil and the President ordered a Mandatory Oil Import Program. Proclamation 3279, 73 Stat. c25 (1959). Two geographical areas were established for the program, one east of the Rocky Mountains (Districts I-IV) and the other west of the Rocky Mountains (District V). Generally, persons could not import crude or unfinished oils into these areas without a license and an import allocation which would be provided upon application to the Secretary of the Interior. The Secretary was instructed to issue regulations for the operation of the program which regulations were to provide, in part, for

"* * * a fair and equitable distribution among persons having refinery capacity in these districts 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." Proclamation 3279, 73 Stat. c25, 3(b) (1) (1959).

Under the regulations a person entitled to apply for an allocation who has had either refinery capacity in the districts or recent refinery inputs, (32A CFR Chap. X § 4(a))

"* * * includes an individual, a corporation, firm, or other business organization or legal entity, and an agency of a State, territorial, or local government, but does not include a department, establishment, or agency of the United States; * * *." 32A CFR Chap. X § 22(a).

This definition is limited by the important rule of § 4(g):

"A person is not eligible individually for an allocation of imports of crude oil and unfinished oils or finished products if the person is a subsidiary or affiliate owned or controlled, by reason of stock ownership or otherwise, by any other individual, corporation, firm, or other business organization or legal entity. The controlling person and the subsidiary or affiliate owned or controlled will be regarded as one. Allocations will be made to the controlling person on behalf of itself and its subsidiary or affiliate but, upon request, licenses will be issued to the subsidiary or affiliate." (Emphasis supplied.) 32A CFR Chap. X § 4 (g).

The regulations provided that the import allocation would be the larger of 1) a percentage of certain of the applicant's previous inputs which percentage was to be computed on a scale which decreased the allocation as input volume increased (input basis) or 2) a fixed percentage of the last allocation under the Voluntary Import Program (historical basis). 32A CFR Chap. X § 10.

A subsequent proclamation, Proclamation 3290, 73 Stat. c39 (1959), amended Proclamation 3279 to allow the unrestricted import of oil from Canada by overland means,⁴ and also to exclude the Canadian oil from the computation of the input basis. The practice continued of including Canadian crude oil in the computation of the historical basis. Thus, a company with a high Canadian input would generally have a higher import quota on the historical basis than it would have on the input basis.

Proclamation 3279 was amended again to provide for a gradual reduction of allocations made on the historical basis and for a more rapid reduction of the historical basis allocations which reflect imports of Canadian crude. Proclamation 3509, 77 Stat. 963 (1962). Shortly after the Middle East crisis of June 1967, another amendment provided that historical allocations reflecting imports of Canadian crude oil should not be reduced beyond the point which

"* * * would result in a reduced historical allocation which is smaller than an allocation for the same period would be if computed (for the purposes of comparison only) on the basis of a total of refinery inputs (of the holder of the historical allocation) which includes inputs of crude oil and unfinished oils imported * * * by overland means from Canada." Proclamation 3823 subd. 2(b) (1), 82 Stat. 1603, 1604 (1968).

This provision places a floor under and prevents a drastic reduction of the historical allocations of those "Northern Tier" refineries which are refineries located in the northern states (Michigan, Minnesota, Wisconsin) and peculiarly dependent on the import of Canadian oil.⁵

Basically then the program requires application by a qualified § 4(g) person for an import quota. Upon issuance of a license the company receives the larger of (a) the sliding scale percentage of its input basis or (b) the fixed (but gradually decreasing) percentage of the historical basis which is supported to some extent by a minimum floor provision for the Northern Tier importers.

Murphy Oil Company owns refineries at Superior, Wisconsin (Superior) and at Meraux, Louisiana (Meraux). Both were purchased by Murphy with recognized histories under the voluntary program and Superior is one of the Northern Tier refineries.⁶ Operating statistics from the Superior and Meraux refineries traditionally were combined to determine Murphy's proper quota. From the adoption of the mandatory program through 1967 Murphy received eleven allocations based on the historical calculation. For the allocation period 1967 Murphy's inputs became the basis for its allocations.

With respect to the allocation awarded to Murphy for 1968 which again had been determined on the appropriate percentage of inputs, Murphy filed an appeal with the Oil Import Appeals Board on the grounds that an interpretative error had been made in determining its allocation under the recently revised version of Proclamation 3279.⁷ Its basic contention there and throughout the ensuing proceedings was that since the minimum floor proviso was designed to benefit Northern Tier producers, and since only one of Murphy's refineries was in the Northern Tier, its historical allocation must be computed separately or otherwise Murphy will lose the benefit of the floor. Murphy contended that its allocation should be increased from 4,174 B/D to 5,482 B/D on the grounds that the allocation for the Superior refinery should have been calculated separately on the basis of 37.75 percent (the minimum floor) of the refinery's last allocation of 4300 B/D under the Voluntary Oil Import Program.

On December 11, 1968, the Oil Import Appeals Board which may modify any allocation made to any person on the grounds of "exceptional hardship or error", 32A CFR Chap. X § 21 (b) (1), denied Murphy's petition. In pertinent part, it ruled that:

"The Board views these circumstances as significant. Although the Regulations apparently contain no explicit prohibition against dual basis (historical and input) calculation of a refiner\'s allocation, it is certain that such procedure has never been followed and would be contrary to the intent of the Regulations. The rule set forth in Section 4(g) is, in essence, that one eligible applicant (refiner in this case) gets one allocation in any (one) administrative area (e.g., Districts I-IV). The rule forbids allocations to subsidiaries, or affiliates owned or controlled by the `controlling person.\' In effect, petitioner is seeking two allocations, computed separately and dissimilarly, for its two refineries. The fact that the two allocations could be added together and issued as a single quantity to the controlling person, Murphy, would not alter the substance of the case. Section 4(g) is not only necessary to preserve the integrity of the sliding scale, but it is grounded in the practical consideration that many multi-facility companies use the allocation earned by one plant for the benefit of another.

"Amendment 6, in pertinent part, was adopted to put a floor under Northern Tier historical allocations. Neither the language nor the intent of this amendment (or its authorizing Proclamation) is relevant to the question of dual computation of allocations. Also the Board perceives no indication that the effect of this amendment has been to impose exceptional hardship on the petitioner.

"It is the opinion of the Board that petitioner has failed to demonstrate exceptional hardship attributable to the Program and also failed to show error on the part of the Administrator in his determination of petitioner\'s 1968 allocation." Decision on the Petition of Murphy Oil Corporation, Oil Import Appeals Board,

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