Wiggins Bros., Inc. v. Department of Energy

• Decision Date: 14 October 1981
• Docket Number: No. 5-53,5-57.,5-53
• Citation: 667 F.2d 77
• Parties: WIGGINS BROTHERS, INC., et al., Plaintiffs-Appellees, v. DEPARTMENT OF ENERGY, and James B. Edwards, Secretary of Energy, Defendants-Appellants.
• Court: U.S. Temporary Emergency Court of Appeals Court of Appeals

667 F.2d 77

WIGGINS BROTHERS, INC., et al., Plaintiffs-Appellees, v. DEPARTMENT OF ENERGY, and James B. Edwards, Secretary of Energy, Defendants-Appellants.

Nos. 5-53, 5-57.

Temporary Emergency Court of Appeals.

Argued January 20, 1981.

Decided October 14, 1981.

As Amended October 26, November 2 and November 12, 1981.

Certiorari Denied March 29, 1982.

John P. McKenna, Dept. of Energy, Washington, D.C., with whom Alice Daniel, Asst. Atty. Gen., Civ. Div., Dept. of Justice, Nancy C. Crisman, Frank W. Krogh and Samuel Soopper, Dept. of Energy, Washington, D.C., were on the brief, for defendants-appellants.

A. B. Conant, Jr., of Shank, Irwin, Conant, Williamson & Grevelle, Dallas, Tex., with whom Karen S. Bedell and Richard L. Allen, Dallas, Tex., were on the brief, for plaintiffs-appellees.

David J. Beck, Ronald D. Secrest, Fulbright & Jaworski, Houston, Tex., for Exxon Corp., amicus curiae.

Before HOFFMAN, INGRAHAM and BECKER, Judges.

Certiorari Denied March 29, 1982. See 102 S.Ct. 1749.

WILLIAM H. BECKER, Judge.

THE RECORD ON APPEAL

The massive record filed in this Court (with disparate typed numbers and mechanically stamped numbers, which latter are used as page references, all inclusive cited with zeros omitted) includes the following:

A. "Record on Appeal — Pleadings File" (R.) in two volumes with pages 1-336 (000001-000336) in Volume 1, and pages 337-628 (000337-000628) in Volume 2;

B. "Record on Appeal — Administrative Record" in five volumes, with pages 1-79 in Volume 3, pages 80-170 in Volume 4, pages 171-601 in Volume 5, pages 602-1051 in Volume 6, and pages 1052-1614 in Volume 7;

C. Joint Appendix (J.A.), pages 108-628; and

D. Exhibits A, B, C and D submitted in this Court November 4, 1980, under seal by Exxon Corporation, Amicus Curiae. These exhibits purport to be a memorandum dated September 20, 1974, and copies of depositions and deposition exhibits taken by plaintiffs in this case, in the multidistrict stripper well litigation in the District of Kansas entitled In Re: Department of Energy Stripper Well Exemption Litigation, M.D.L. No. 378, as follows:

1. Exhibit A, Deposition of George V. Biondi taken September 10, 1980;

2. Exhibit B, Deposition of William N. Walker taken September 11, 1980 3. Exhibit C, Deposition of Linda Elizabeth Buck taken September 10, 1980; and

4. Exhibit D, Memorandum dated September 20, 1974, to John Vernon, Associate Assistant Administrator for Fuels Management, from Randall B. Alldrodge, through Edmund Winterbottom, Manager, Crude Oil, Refinery Yield, Petroleum Feedstocks, discussing effects of excluding and including injection wells in the well count under the stripper well litigation.

All deponents were lawyers formerly employed by one or more predecessors of the Department of Energy (DOE) before the issuance of the stripper well regulations and Ruling 1974-29. Biondi and Buck were subordinate employees. Walker was general counsel for the Cost of Living Council (CLC) until January 1974, and thereafter for the Federal Energy Office (FEO) until June 1974, when he was consultant for the Federal Energy Administration (FEA) until August 1974.

These depositions were taken over objections by DOE on grounds of "predecisional" and attorney-client privileges.

THE JUDGMENT OF THE DISTRICT COURT

The DOE and the Secretary of Energy, defendants-appellants (appellants hereinafter), appeal from a judgment of the United States District Court for the Northern District of Texas (1) declaring that injection wells may be counted as "wells that produced crude oil" under the Marginal Property Rule, 10 C.F.R. 212.72 (as amended effective June 1, 1979), and (2) enjoining the DOE "from excluding the counting of injection wells in the application of the Marginal Property Rule to the plaintiffs' property" (J.A. 273).

The judgment, from which this appeal was taken, was entered July 23, 1980 and was accompanied by a Memorandum containing findings of fact and conclusions of law (J.A. 274-279).

The issues were heard in the District Court on cross motions for summary judgment described hereinafter. The judgment for the plaintiffs-appellees (appellees hereinafter) (J.A. 273) was entered on the grant of appellees' motion for summary judgment (J.A. 108). Appellants' motion for summary judgment or in the alternative to dismiss (J.A. 137) was denied (J.A. 273).

DECISION

We reverse the judgment in favor of the appellees and direct entry of an order for appellants denying appellees' motion for summary judgment, and remand the action to the District Court for further proceedings consistent with this opinion.

The summary of the material facts and the reasons for this decision follow.

The Reasoning of the District Court

The reasoning of the District Court is set forth in its memorandum containing its findings of fact and conclusions of law (J.A. 274-279) as follows:

This suit is an action challenging the Department of Energy's ability to attach its unexpressed but intended meaning to a regulation promulgated under the Department of Energy's rule making authority. The plaintiffs are property owners in Cochran County, Texas who claim that their oil producing property is entitled to treatment as marginal property under Department of Energy rules. The Department of Energy maintains, however, that the plaintiffs' property is not marginal property and that therefore the plaintiffs are not entitled to the price allowances made for oil produced on marginal property. This difference of opinion concerns the definition of the phrase "wells that produced crude oil" and this court is called upon to construe and declare the meaning of that phrase. The action is now before the court on cross motions for summary judgment and the defendants' motion to dismiss.

The facts in this case are fairly simple and for the most part have been stipulated. The parties have agreed that under the plaintiffs sic definition of the phrase "wells that produced crude oil", the Cochran County property is marginal property.

On the other hand, the parties have also agreed that if the Department of Energy's definition is proper the Cochran County property is not marginal property. Additionally, the property has been certified as marginal property by the plaintiffs effective June 1, 1979.

The reason there is a conflict over the proper classification for the plaintiffs' property lies in the Marginal Property Rule itself. Appearing at 10 C.F.R. § 212.72, the rule was promulgated in 1979, with the purpose of regulating the price of crude oil produced from marginal property. Marginal property is defined as property whose average daily production per well in 1978 did not exceed specified maximums at various completion depths. Average daily production is defined as the total production of crude oil produced from a property, divided by 365 times the number of wells that produced crude oil from the property in 1978. Unfortunately, the body of the rule does not define "wells that produced crude oil" or "well" and the parties to this suit are claiming differing definitions to these terms.

The plaintiffs assert that a well that produces crude oil is any well that assists in the production of crude oil. Under their definition of the regulatory term, recovery wells as well as injection wells would be included in the definition of "wells that produced crude oil." The Department of Energy adopts the position that only recovery wells are included in the phrase "wells that produced crude oil."

For the purposes of this opinion, recovery wells can be described as wells from which crude oil actually flows. Injection wells can be described as wells through which substances are forced into the subsurface. The purpose of this injection procedure is to increase pressure in subterranean petroleum reservoirs forcing more crude oil to the surface through recovery wells.

Before the court can consider whether it may construe the disputed terms, the defendants' motion to dismiss for failure to state a claim upon which relief can be granted must be considered. The Department of Energy asks that the complaint be dismissed because, they contend, it impermissibly asks the court to rewrite the Marginal Property Rule to include the counting of injection wells. In support of this argument the Department of Energy states that a court may not rewrite an administrative regulation nor may it invalidate one part and allow the remaining parts to stand. While the court is in agreement with this statement of the law, it does not find it applicable in this case. The court does not perceive that the plaintiffs seek to have any portion of the Marginal Property Rule struck down or expanded. Rather, it appears to the court that they only seek to have a portion of the rule defined in order to avoid possible civil and criminal sanctions. Since the terms they seek to have defined are not defined within the body of the regulation, this court does not find that it is being asked to impermissibly rewrite or strike down any portion of the regulation. Accordingly, the motion to dismiss is denied.

Both parties have also filed motions for summary judgment and while the parties have differed in their approach to resolution of this case upon summary judgment they basically argue the same issue. That issue being a definition of "wells that produced crude oil." The plaintiffs go directly to the dispute and simply ask the court to construe the term and give the regulation its plain meaning. On the other hand, the Department of Energy has colored the question before the court as one of procedural and substantive validity. Nevertheless, the court is of the opinion that the proper resolution of this case requires the court to construe the words "wells that produced crude oil" and that after that determination is made, summary judgment will be proper.

The Department of Energy contends that it is clear in the body of the regulation that they did not intend to count injection wells when

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