Getty Oil Co. v. Department of Energy

ZIRPOLI, Judge,

dissenting:

I respectfully dissent. I cannot accept the proposition that the EPAA imposed upon the FEA “a mandatory non-discretionary duty” to regulate the price of the solvents at issue here and that this court therefore need not examine the pricing regulations to determine whether they in fact applied to appellant’s product. While I believe that the agency has the authority under the EPAA to regulate the price of solvents, I consider it wholly impermissible for the agency to contend that, while it may have failed to include such products in its pricing regulations, the price of such products was nonetheless subject to controls since the agency had no right to promulgate regulations that did not include solvents.

The agency’s mandatory duty to regulate the price of solvents is presumably found in section 4(a) of the EPAA, 15 U.S.C. § 753(a), which provides in pertinent part:

[T]he President shall promulgate a regulation providing for the mandatory allocation of crude oil, residual fuel oil, and each refined petroleum product, in amounts specified in and at prices specified in . such regulation.

Having concluded that solvents fall within the scope of the term “each refined petroleum product,” the district court merely noted the fact that the statute appears to require the President to impose price controls and concluded that the price of solvents was ipso facto controlled, without regard to the action taken by the agency.

The majority, in adopting the reasoning of the district court, conveys the impression that the inclusion of solvents within the category of refined petroleum products is a self-evident truth. On the contrary, the power of the agency to regulate these products, as distinguished from its duty to do so, was a subject of vigorous dispute by the parties to this appeal. It requires a considerable amount of interpretation to reach the conclusion that solvents should be included within the scope of the statute, and it is questionable whether one would reach that conclusion at all without the benefit of the presumption that great weight is to be accorded the agency’s interpretation of its statutory mandate. It is precisely that exercise of agency expertise, its informed discretion, that led the FEA to conclude that solvents should be regulated if the purposes of the EPAA were to be effectuated. The agency itself, prior to the institution of this litigation, clearly considered its regulation of solvents an exercise of discretion rather than a discharge of ministerial obligation.1

*844While the EPAA seems to impose a mandatory duty on the President to regulate the price of “each refined petroleum product,” the scope of that phrase is so ambiguous as to necessarily invest the agency with a certain amount of discretion in determining precisely what products are subject to regulation. That discretion is not transformed into a mandatory duty merely by virtue of its exercise, particularly when, as Getty contends is the case here, that discretion is sought to be exercised retroactively.

The cases cited by the majority provide little support for the existence of such a mandatory duty in the context of this case. In Consumers Union of U. S., Inc. v. Sawhill, 512 F.2d 1112 (Em.App.1975), vacated, 525 F.2d 1068 (Em.App.1975), this court considered the question whether the EPAA imposed upon the agency a mandatory duty to regulate the price of crude oil and whether that obligation was validly discharged by permitting “new oil” to be sold at the market price. In the first opinion of the court, it was held that the agency had failed to perform its duty in setting the price of new oil at the market level. A rehearing en banc was granted, however, and this court held that the agency had acted within the scope of its discretion in regulating the price of new oil with reference to the free market.

Even the initial decision in Consumers Union, however, did no more than direct the agency to establish a ceiling price. It did not even hint that the agency, having failed to place a ceiling on the price of new oil, could, by virtue of its mandatory duty to do so, retroactively impose such a ceiling and seek to collect the “overcharges” from every crude oil producer in the country.

Mobil Oil Corp. v. FEA, 566 F.2d 87 (Em. App.1977), provides even less support for the majority. Mobil upheld the right of the agency to regulate the price of natural gas liquids against the challenge that the EPAA was not intended to apply to such products. This court found natural gas liquids to come within the scope of the term “refined petroleum products,” but there was no indication that the agency was under a mandatory duty to regulate in this area. On the contrary, the basis of the decision in Mobil was this court’s recognition that Congress intended to grant the agency broad discretion in carrying out its mandate and that the agency was empowered to decide, subject to judicial review, which products it was necessary to regulate.

This court has explicitly recognized that the agency has been assigned a task of such enormity that Congress must have intended it to devise a wide range of reasonable means for carrying out its statutory duty. See Marathon Oil Co. v. FEA, 547 F.2d 1140 (Em.App.), cert. denied, 430 U.S. 983, 97 S.Ct. 1679, 52 L.Ed.2d 378 (1977). That recognition cannot be squared with the majority’s apparent conclusion that the agency’s failure to promulgate a particular regulation does not relieve an oil refiner of the *845duty to follow such non-existent regulation since the agency had no choice but to issue such a regulation.

If the price of solvents was subject to controls during the period of time relevant to this appeal, then those controls must be found in the agency’s regulations, not in the agency’s assertedly mandatory duty to issue such regulations. While the majority dismisses appellant’s attack on the regulations, even the agency concedes that the pricing regulations, by their literal terms and without any need on Getty’s part to resort to hypertechnical obfuscation, simply failed to cover solvents. It may well be that the agency intended to draft regulations covering solvents, but the plain fact is that it did not do so.

The agency argues, however, that Getty was on notice of the regulation of the price of solvents by virtue of the inclusion of solvents in the allocation regulations.2 The fact that a certain product is covered by the allocation regulations, however, does not lead inexorably to the conclusion that such product is also covered by the agency’s pricing regulations. Some products have in fact been intentionally subjected to one set of controls but not the other.3 More significant, perhaps, since the question before this court is the degree of notice Getty should be presumed to have received from the allocation regulations, is the fact that counsel for neither Getty nor the agency could state with certainty at oral argument whether the pricing and allocation regulations have always been precisely parallel. The agency argues that Getty should have read the regulations as a whole and thus realized that since solvents were subject to allocation controls they were also subject to price controls. Such an argument loses considerable force when counsel for the agency cannot say whether any products have ever been subject to only one set of regulations.

While this court has wisely declined to hold the agency to a standard of “technical absolutism,” California v. Simon, 504 F.2d 430, 439 (Em.App.), cert. denied, 419 U.S. 1021, 95 S.Ct. 496, 42 L.Ed.2d 294 (1974), the agency has not been granted carte blanche to ignore required procedures, particularly where such procedures are viewed as essential to the fair treatment of regulated parties. See Shell Oil Co. v. FEA, 574 F.2d 512 (Em.App.1978). The agency’s failure to include solvents in its pricing regulations for the period of time relevant to this case cannot, in fairness to Getty, be cured in the manner approved by the majority. I would reverse the judgment of the district court.

. The affidavit of J. Lisle Reed, director of the Office of Oil and Gas for the FEA, submitted by the agency to the district court in support of its motion for summary judgment, makes this obvious:

*844During the drafting of the regulations, I paid special attention to determining precisely the scope Congress intended the FEO to give to the term “refined petroleum product” in the EPAA. Section 3(5) defined “refined petroleum product” to include “gasoline, kerosene,. distillates (including Number 2 fuel oil), LPG, refined lubricating oil and diesel fuel.” It was my belief, based on my reading of the legislative history of the EPAA and my knowledge of the petroleum industry generally, that the Congress did not intend this list to be all-inclusive, and that the Congress expected the President to exercise judgment in determining which products Congress intended to have subject to regulation under the EPAA. (R. 205-06).
In addition, when drafting the initial allocation regulations I became convinced that it was necessary to regulate petroleum solvents in order to effectuate several of the statutory objectives in section 4(b)(1) of the EPAA. In particular, while I was drafting portions of FEO’s initial mandatory allocation regulations, I was informed by a representative of the Department of Agriculture that shortages of certain solvents . . . were developing and that such shortages threatened to disrupt soy bean oil processing and other food processing industries dependent upon such solvents. I believed that FEO’s failure to allocate solvents could have made it impossible for FEO to meet the objective in section 4(b)(1)(C) of the EPAA to maintain agricultural operations and services related directly thereto. (R. 208).

. Dicta supporting such a proposition may be found in National Helium Corp. v. FEA, 569 F.2d 1137, 1145 n. 17 (Em.App.1977). National Helium, however, dealt with the effect of pricing regulations which, while admittedly vague and ambiguous in their coverage of natural gas liquids, could in fact be read to apply to such products. This court merely noted that, in view of the clear coverage of the products in the allocation regulations, “National . should have expected the application of price regulations as well.” Id. Such an expectation may have been reasonable in National Helium, where it could be used to cure an ambiguity in the regulations: I fail to see in what manner such an expectation can be attributed to Getty, when the pricing regulations, without ambiguity, simply failed to cover solvents.

. Naphthas used as synthetic natural gas feed-stocks, for example, are presently subject to allocation but not price controls. 10 C.F.R. § 210.35(d)(1) and (2).