TEE ATTORNEY GENERAL 

OF TEXAS 

August 21. 1987 

Honorable Grant Jones 

chai?Fman 

Finance committee 

Texas State Senate 

P.O. Box 12068 

Austin, Texas 78711 

Honorable Clint Hackney 

Chairman 

Energy Committee 

Texas Rouse of Representatives 

P. 0. Box 2910 

Austin. Texas 78769 

Gentlemen: 

You ask the following question: 

Opinion No. m-772 

Re: Authority of the governor 

to effect the disbursement of 

petroleum overcharge funds 

Does the Governor have authority to effect the 

disbursement of petroleum overcharge funds 

currently held by this State absent legislative 

appropriation of such funds by the Legislature? 

In other words, absent legislative appropriation 

to himself or affected agencies, does the Governor 

have the authority under federal or state law to 

direct the Comptroller to transfer the State's 

share of petroleum overcharge funds, currently 

held in the State Treasury, to the accounts of 

specified state agencies or commissions and in so 

doing, permit such agencies or conrmissions to 

expend such funds pursuant to the Governor's 

directives? 

You explain that your question arose because of money that Texas 

received as a result of two lawsuits: U.S. V. Exxon, 561 F. Supp. 816 

(D.D.c. 1983). aff'd. 773 F.2d 1240 (Temp. Emer. Ct. App. 1985). cert. 

denied, 106 S.Ct.92 (1986) (hereinafter Exxon), and In re:The 

Department of Energy Stripper Well Exemption Litigation, 578 F. Supp. 

586 (D. Kan. 1983) settled, Final Settlement Agreement of M. D. L. No. 

378 (D. Kan. 1986) (hereinafter Stripper Well). Both of those 

lawsuits involved distribution of escrow accounts containing money 

p. 3622 
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Honorable Clint Hackney 

Page 2 (31-772)' 

collected from oil companies because of violations of the Emergency 

Petroleum Allocation Act, 15 U.S.C. §7193. Because of the difficulty 

of identifying who actually paid the overcharges, the court in Exxon 

and the settlement agreement in Stripper Well fashioned remedies 

intended to approximate restitution. The bulk of the money involved 

in Exxon and Stripper Well was awarded to the states to be used for 

energy conservation programs. Under the terms of both the court order 

in Exxon and the settlement agreement in Stripper Well the states have 

discretion to determine how the money will be allocated among various 

conservation programs. You ask sevfral questions about the proper 

in-state distribution of that money. The disposition of the Exxon 

money raises more complex issues than the disposition of the Stripper 

Well money, and we will address those issues first. 

In Exxon the district judge ordered that the escrow funds be 

spent by the states in accordance with the terms of Section 155 of 

Public Law No. 97-377, 96 Stat. 1830, 1919-20 (1982) (hereinafter 

"section 155"). 561 F. Supp. at 856. Section 155, which Congress 

enacted to distribute $200 million in petroleum overcharge funds that 

had been in an escrow account for several years, provides: 

(a) It is the purpose of this section to 

provide the Secretary of Energy the exclusive 

authority for the disbursement of the designated 

petroleum violation escrow funds for limited 

restitutional purposes (1) which are reasonably 

expected to benefit the class of persons injured 

by such violations, and (2) which, based on 

information previously provided to Congress by the 

Secretary of Energy, are likely not to be, through 

procedures established by regulation, otherwise 

refunded to injured persons because the purchasers 

of the refined petroleum products cannot be 

reasonably identified or paid or because the 

amount of each purchaser's overcharge is too small 

to be capable of reasonable determination. 

1. Since we drafted this opinion, the legislature has enacted 

and the governor has signed a bill that gives the governor's office 

certain authority in regard to distribution of petroleum overcharge 

funds. S.B. 33, 70th Leg., 2d C.S. ,(1987). The legislature also 

appropriated oil overcharge funds for certain projects. S.B. 1. 70th 

Leg., 2d C.S.. art. V, §81, at V-82 (1987). The appropriation and 

delegation of authority to the governor's office are in accord with 

the proper procedures under Texas law for.allocating and appropriating 

the funds in question. 

p. 3623 
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Page 3 (JM-772) - 

P 

(b) As soon as practicable, the Secretary of 

Energy shall disburse designated petroleum 

violation escrow funds to the Governors of the 

States in accordance with the formula set forth in 

subsection (d). 

(c) Amounts disbursed to the Governor of any 

state shall be used by the Governor as if such 

funds were received under one or more energy 

conservation programs. The Governor shall 

identify to the Secretary within one year after 

the time of disbursement the energy conservation 

program or programs to which the funds are or will 

be applied. Funds disbursed under this section 

shall be used ,to supplement, and not supplant, 

funds otherwise available for such programs under 

Federal or State law. 

(d) The disbursement by the Secretary of Energy 

to each State shall be based on the ratio, 

calculated by the Secretary, which-- 

(1) the volume of refined petroleum 

products consumed within that State during the 

period beginning September 1, 1973, and ending 

January 28, 1981. bears to 

(2) the volume of refined petroleum 

products consumed within.all States during such 

period. 

Calculations made by the Secretary of Energy under 

this subsection shall be based upon estimates by 

the Secretary from reasonably available 

iufomation. 

(e) For purposes of this section-- 

(1) The term 'designated petroleum violation escrow funds' means amounts (not in 

excess of $200,000,000) which are derived from 

settlements from alleged petroleum pricing and 

allocation violations generally resulting in 

overcharges to purchasers of refined petroleum 

products and held in trust accounts administered by the Department of Energy on December 

17, 1982, and which-- 

(A) are not likely to be required for 

p. 3624 
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Bonorable Clint Hackney 

Page 4 (JM-772) 

satisfying claims of potential claimants 

identified in the proceedings of the 

Office of Hearings and Appeals initiated 

prior to December 17. 1982, or identified 

in judicial proceedings initiated prior to 

such date; and 

(B) the use of under this section 

would be consistent with the remedial 

order or consent order covering such 

funds. 

(2) -fh= term 'energy conservation 

programs' means-- 

(A) the program under Part A of the 

Energy Conservation and Existing Buildings' 

Act of 1976 (42 U.S.C. 6861 and 

following); 

(B) the programs under part D of 

title III of the Energy Policy and 

Conservation Act (relating to primary and 

supplemental State energy conservation 

programs; 42 U.S.C. 6321 and following); 

(C) the program under part G of title 

III of Energy Policy and Conservation Act 

(relating to energy conservation for 

schools and hospitals; 42 U.S.C. 6371 and 

following); 

(D) program under the National Energy 

Extension Service Act (42 U.S.C. 7001 and 

following); and 

(E) the program under the Low-Income 

Home Energy Assistance Act of 1981 (42 

U.S.C. 8621 and following). 

(3) The term 'State' means each of the 

several States, the District of Columbia, the 

Commonwealth of Puerto Rico, and any territory 

or possession of the United States. 

(4) The term 'Governor,' when used with 

respect to any States. means the Governor or 

the chief executive officer of that State. 

p. 3625 
Honorable Grant Jones 

Eonorable Clint Hackney 

Page s (JM-772) 

(5) The term 'refined petroleum product' 

mean* gasoline, kerosene, distillates, 

(including Number 2 fuel oil), LPG (other than 

ethane), refined lubricating oils, diesel fuel, 

and residual fuel oil, but does not include 

refinery feedstocks. 

(f) No funds disbursed under this section may 

be used for any administrative expenses of the 

Department of Energy or of any State, whether 

incurred in connection with any energy 

conservation program or otherwise. (Emphasis 

added). 

In short, section 155 orders the Secretary of Energy to disburse the 

money to the states, and it directs the states to allocate the money 

among the five energy conservation programs listed in section 155. 

Because section 155 provides that the secretary shall disburse the 

money to "the Governor" and that the money "shall be used by the 

Governor," questions have arisen about the role Congress intended 

governors to play in allocating section 155 money and, thus, Exxon 

money. Two different interpretations of the references to governors 

in section 155 have been suggested. 

One suggested interpretation is that Congress simply intended to 

disburse the section 155 money to the states and to allow the states 

to use their traditional decision-making processes to +termine how 

the money would be distributed among the five programs. The other 

suggested interpretation of section 155.1s that the references to the 

governor were intended to give a governor authority to determine how 

the money would be allocated among the five conservation programs 

listed in section 155, regardless of the role the governor plays in a 

state's decision-making process under state law. For Texas there is 

2. You explain that in 1983 when Texas received money under 

section 155. the governor did not exercise any authority in 

determining how the section 155 money would be spent. Rather, you 

explain, the Texas Energy and Natural Resources Advisory Counsel 

(TENRAC) recommended to the legislature how the money should be distributed among the conservation programs listed in section 155. See 

generally Acts 1979, 66th Leg., ch. 666, at 1545 (establishing TEN= 

and authorizing TENRAC to recommend to the legislature and governor 

policies and actions affecting energy and natural resources). You 

state that the legislature appropriated the money in accordance with 

TENRAC's recommendation. See Acts 1983, 68th Leg., ch. 1095, Art. V, 

581, at 5729, 6233. - 

p. 3626 
Honorable Grant Jones 

Honorable Clint Hackney 

Page 6 (JM-772) 

an important difference between those two interpretations because 

under Texas law the legislature, not the governor, has authority to 

allocate and appropriate state funds. See Attorney General Opinion 

C-530 (1965)(federal funds deposited InThe state treasury become 

state funds). Before we address the question of the proper 

interpretation of section 155, we will explain the role of the 

legislature under state law in allocating and appropriating state 

funds, including funds received from the federal government. 

As a general rule, money received by the state is to be deposited 

in the state treasury. V.T.C.S. art. 4393-1, 14.004(a). Although 

there are several exceptions to that rule, funds received from th3 

federal government are generally not within any of those exceptions. 

3. Article 4393-l. section 4.003(b), sets out four exceptions 

to the general rule that funds received by the state are to be 

deposited in the state treasury. One of those exceptions is for 

"funds held in trust or escrow for the benefit of a person or entity 

other than a state agency." V.T.C.S. art. 4393-l. 54.003(b)(2). See 

also Friedman v. American Surety Co. of New York, 151 S.W.2d 570, 580 

(Tex. 1941). That exception is sometimes referred to as the "trust 

fund" exception. In a different context, this office has referred to ? 

federal funds as "trust funds." Attorney General Opinion M-468 (1969) 

stated that federal funds to be expended for a specific purpose are 

held by the state in trust for the benefit of the programs being 

administered and that interest earned on federal funds remains part of 

the special fund or trust ,fund. Although most federal funds are 

"trust funds" inasmuch as they may not be diverted, we do not think 

that federal funds are, as a rule. within the "trust funds" exception 

to article 4393-l. That exception is for money held in trust "for the 

benefit of a person or entity other than a state agency." We do not 

think that the the funds in question, or federal funds generally, are 

held "for the benefit of a person or entity other than a state agency" 

for purposes of that exception. The funds in question were awarded to 

the state to be used for conservation programs. Some state agency 

will administer the programs for which the funds are used. Although 

those programs, like all activities of state government, are intended 

to ultimately benefit individuals rather than agencies, the 

individuals who will ultimately benefit are as yet unidentified. It 

is the responsibility of the state to identify precisely how the funds 

will be used and which individuals will benefit. In those 

circumstances, we think that funds that are intended for a progiram to 

be administered by a state agency are funds held for the benefit of 

state agency, for purposes of the trust fund exception set out in 

article 4393-1, section 4.003(b)(2). _ See Attorney General Opinion 

(Footnote Continued) 

? 

'p. 3627 
Honorable Grant Jones 

Honorable Clint Hackney 

Page 7 (JM-772) 

See Attorney General Opinion E-120 (1973); see also General 

Appropriations Act, Acts 1986, 69th Leg., 3d C.S., ch. 13, art. V, 520 

at 594 (appropriating federal funds out of the state treasury). You 

tell us that the Exxon and Stripper Well money received pursuant to 

the court order in Exxon was in fact deposited in the treasury. 

Under the Texas Constitution no money can be withdrawn from the 

state treasury except pursuant to an appropriation made by the 

legislature. Tex. Const. art. VIII, 96; Bullock v. Calvert, 480 

S.W.2d 367, 370 (Tex. 1972). This constitutional provision applies to 

all funds in the treasury, including funds dedicated to a special 

purpose. Attorney General Opinion V-412 (1947). 

Most federal funds, like the Stripper Well and Exxon funds, are 

special funds and may not be diverted from the purpose for which they 

were granted to the state. Attorney General Opinion M-468 (1969). 

Because a state's discretion in the use of federal funds is often 

severely restricted, the legislature's appropriation of federal funds 

is usually largely Pro forma. For example, the 69th Legislature 

appropriated federal funds received by the state in the 1986-87 

biennium to the agencies that are to administer those funds: 

All funds received from the United States 

government by state agencies and institutions 

named in this Act are hereby appropriated to such 

agencies for the purposes for which the federal 

grant, allocation, aid, payment or reimbursement 

was made subject to the following: 

(1) Federal funds including unexpended balances 

shall be deposited to and expended from the 

specific program identified under each agency's 

(Footnote Continued) 

M-468 (1969)~ (federal funds for a specific program are held in trust 

for the benefit of the program). See also-Attorney General Opinion 

JM-479 (1986) ("Service Charge Trust Fund" held by the Texas Surplus 

Property Agency is a trust for the benefit of a state agency and not 

within the "trust fund" exception to the State Funds Reform Act). Cf. 

Attorney General Opinion IN-363 (1981) (fund for benefit of prison= 

is to be held outside state treasury). Thus. we believe that the 

money in question was properly placed in the state treasury. We also 

note that the legislature has routinely appropriated federal funds out 

of the treasury. See General Appropriations Act, Acts 1986, 69th 

Leg., 3d C.S., ch. 13,art. V. 120 at 594. See also Attorney General 

Opinion C-551 (1965)(discussing the appropriation of federal "trust" 

funds). 

p. 3628 
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Honorable Clint Hackney 

Page 8 (JM-77?) 

appropriation bill pattern. 

No federal funds may be expended for programs 

or activities other than those which have been 

reviewed by the Sixty-ninth Legislature and 

authorized by specific language in this Act or 

encompassed by an agency's program structure as 

established by this Act. 

General 

art. V, 

Appropriations Act, Acts 1986, 69th Leg., 3d C.S., ch. 13, 

$20 at 594 (emphasis added). See also S.B. 1. 70th Leg., 2d 

C.S.. art. V, 921. at V-60 (1987); Acts 1983, 68th Leg., ch. 1095, 

art. V, §20, at 6216; Acts 1981, 67th Leg., ch. 875, art. V, %18, at 

3808. The first paragraph of the provision above would appear to 

appropriate section 155 money --and thus Exxon settlement money--to the 

governor's office since the governor's office is the institution that 

is to receive 'section 155 money. The emphasized paragraph, however, 

negates any such appropriation by prohibiting the expenditure of 

federal funds for programs other than those reviewed by the 69th 

Legislature and encompassed by an agency's program structure. The 

program' structure for the governor's office under the 1986-87 

appropriations act does not include the programs listed in section 

155. Further, no general state statute currently in effect devolves 

upon the governor's office the authority to administer a program 

listed in section 155 such that the general appropriation of funds for 

1986-87 could encompass these disbursements. The legislation 

discussed in footnote 1 does, of course, give the governor's office 

authority to administer section 155 programs for the 1988-89 biennium. 

A corollary of the legislature's exclusive control over the 

appropriation of state funds is its exclusive control over how state 

funds are to be spent. Attorney General Opinion JM-256 (1984). Under 

state law the governor has no power to make determinations about how 

state money is to be distributed unless that power is expressly given 

to him by constitutional or statutory grant. Attorney General 

Opinions H-120 (1973); M-910 (1971). See generally Tex. Const..art. 

IV, 510. Thus, under Texas law the governor would have authority to 

determine how the Exxon money is to be allocated only if the 

legislature delegated that authority to him. 

With those aspects of Texas law in mind, we turn to the 

interpretation of section 155. If. as it has been suggested. section 

155 was intended to give governors the authority to allocate and 

disburse the funds regardless of state law, a troublesome question 

presents itself as to whether Texas may accept the funds even though 

acceptance of the funds under the terms of the grant would require the 

governor to take action that is beyond his powers under state law. 

See Madden, The .Constitutional and Legal Foundations of Federal 

Grants, in Federal Grant Law (M. Mason ed. 1982)(pointing out that 

p. 3629 
Honorable Grant Jones 

Honorable Clint Hackney 

Page 9 (JM-772) 

courts have nenerallv considered federal grants to be inducements that 

states are -free td refuse). See also Brown, Federal Funds and 

National Supremacy: The Role of State Legislatures in Federal Grant 

Programs, 28 Am. U. L. Rev. 279 (1979). 

Several state courts have considered whether federal grant 

programs are intended to increase the power of governors to set 

priorities and allocate resources. In Opinion of the Justices, 381 

A.2d 1204 (N.H. 1978). the court considered whether the state 

legislature could designate the state health planning agency for 

purposes of administering a federal grant program. The federal 

legislation stated that the agency should be "selected by the 

Governor." The New Rampshire court wrote: 

If this federal act precludes the legislature 

from creating the State health planning agency, 

the words, 'selected by the Governor,' must be 

read as, 'selected by the Governor notwithstanding 

State constitutional restrictions on his authority 

and to the exclusion of any legislative involvement in the process.' This, of course, presumes 

that the federal authorities, in drafting the 

National Health Planning and Resources Development 

Act of 1974, intended that the Governor of a State 

would select an agency~for designation on his own 

without any legislative involvement in the 

process. The legislative history does not justify 

such a conclusion. See [1974] U.S.Code Cong. 6 

Admin. News, pp. 7891-x 

The statutory scheme is clear -- the State must 

work out the details of its commitment to health 

planning, presumably in compliance with the State 

constitution, and then enter into agreement with 

the federal authorities. The thrust of both the 

Federal Act and its predecessors is that the State 

should construct its own administrative plan and 

designate its planning agency. Then the Governor, 

acting as the agent of the State, will apply for 

designation of that agency. The federal act does 

not confer on the Governor the right to disregard 

the State's constitutional processes in selecting 

the agency for the administration of the State 

health plan. 

. . . . 

p. 3630 
Honorable Grant Jones 

Honorable Clint Hackney 

Page 10 (JMa772) 

If any doubt exists, the federal law should not 

be interpreted to infringe upon those powers of 

the States that are essential to their 'ability to 

function effectively in a federal system.’ Fry v. 

United States, 421 U.S. 542, 547 n.7, 95 S.Ct. 

1792, 1796, 44 L.Ed.2d 363 (1975); accord National 

League of Cities V. Usery, 426 U.S. 852, 96 S.Ct. 

2465. As stated by the Court some years earlier: 

In a dual system of government in which, 

under the Constitution. the states are 

sovereign . . . an unexpressed purpose to 

nullify a state's control over its officers 

and agents is not lightly to be attributed 

to Congress. 

Parker V. Brown, 317 U.S. 341, 351, 63 S.Ct. 307, 

313, 87 L.Ed. 315 (1943). Hence, we find no clear 

manifestation of congressional intent to override 

the constitutional powers of our legislature to 

determine which agency will be designated as the 

health planning office for New Hampshire. Shapp 

v. Sloan, 27 Pa. Cmwlth. at 326, 367 A.2d at 799. 

381 A.2d at 1210-11. 'Because of the New Hampshire court's resolution 

of that issue, the court did not have to reach another question 

raised: whether an attempt by Congress to require the governor to 

exercise certain powers would preclude New Hampshire's acceptance of 

the federal funds in question. 381 A.2d at 1206. 

In Shapp v. Sloan, 391 A.2d 595 (Pa. 1978). appeal dism'd sub 

nom. Thornburgh v. Casey. 440 U.S. 942 (1979). the Supreme Court of 

Pennsvlvania . __.._, ~~~~~~~ uoheld ~. the constitutionalitv of a state statute that 

required that all federal funds received by the state be deposited in 

the state's general fund and that also prohibited the ,expenditure of 

federal funds except pursuant to a specific appropriation by the 

state's general assembly. In response to the argument that federal 

funds are intended to be used by the state executive branch without 

legislative approval, the court wrote: 

Nothing in the federal legislation pursuant to 

which these funds are granted suggests that the . 

same principles by which programs wholly state 

funded are operated are inapplicable to programs 

for which federal funds are supplied. That the 

executive agency or official must use federal 

monies within the program for which they were 

intended, and must provide an accounting to show 

that they were so used, does not lead to the 

p. 3631 
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Honorable Clint Backnev 

Page 11 (JM-772) - 

C 

conclusion that the funds are under that 

official's control and outside the control of the 

legislature. 

Shapp v. Sloan. 391 A.2d at 604. See also Anderson v. Regan, 425 N. 

E.Zd 792, 793-94 (N.Y. 1981) (under New York constitution federal 

funds are subject to appropriations process). 

A number of state courts have held that federal funds are outside 

their states' legislative appropriation processes. State ex rel. Sego 

v. Kirkpatrick, 524 P.2d 975, 986 (N.M. 1974) (under New Mexico law 

state legislature has no power to appropriate federal funds); MacManus 

v. Love, 499 P.2d 609, 610-11 (Colo. 1972) (under Colorado law federal 

funds are not subject to the power of the General Assembly to make 

appropriations). These decisions, however. have turned on 

requirements of state law, not requirements of federal law. In a 

recent affirmation of the position that federal funds are not subject 

to the Colorado legislative appropriation process, the Colorado 

Supreme Court emphasized that its decision was based on state law and 

was not required by federal law: 

As long as the funds are not diverted from 

their intended purposes and the terms and 

conditions prescribed by the congress -are not 

violated, there is no inconsistency between the 

provisions of the federal programs and state 

legislative administration of the funds. The 

federal government has expressly given the states 

a wide discretion in dealing with these funds. 

That discretion is most logically exercised by the 

branch of state government which is constitutionally empowered to exercise control over all 

expenditures. 

. . . . 

State courts have not felt constrained. by 

federal law to reach conclusions that uniformly 

grant state legislatures the power of appropriation over state funds. Congress has left the 

issue of state legislative appropriation of 

federal block grants for each state to determine. 

Colorado General Assembly v. Lamm. No. 85SA70, slip op; at 13 (Cola. 

June 1, 1987). 

At least one law review article has considered whether federal 

grant programs can enhance the powers of governors. Brown, Federal 

Funds and National Supremacy: The Role of State Legislatures .in 

p. 3632 
Honorable Grant Jones 

Honorable Clint Hackney 

Page 12 (JR-772) 

Federal Grant Programs, 28 Am. U. L. Rev. 279 (1979). Without 

conclusively determining that a federal grant program can increase the 

powers of -a governor; the author concluded that Opinion of the 

Justices, 381 A.2d 1204 (N.H. 1978). applied the proper test in 

requiring a, "clear manifestation of congressional intent" before it 

would conclude that Congress intended to invade the traditional powers 

of state legislatures. See also United States v. Bass, 404 U.S. 336, 

349-50 (1971) (where statute is ambiguous, court assumes congressional 

intent not to diminish state power); L. Tribe, American Constitutional 

Law, 243-44, 304 (1978)(a rule like the clear statement requirement is 

essential in determining whether Congress intended to exercise its 

commerce power in full because "Congress must be prevented from 

resorting to ambiguity as a cloak for its failure to accommodate the 

competing interests bearing on the federal-state balance"); Bulletin 

76-4 of the Advisory Commission on Intergovernmental Relations (Nov. 

1976)(recommending that state legislatures include a:;a:ed;;zl aid in 

appropriations bills). Therefore. we conclude proper 

approach to use in interpreting section 155 is to determine whether 

there is a clear manifestation of congressional intent to alter 

states' traditional decision-making processes. We now address that 

issue. 

Section 155 states that petroleum violation escrow funds are to 

be disbursed to the governor of a state- and that the governor. is to 

use those funds as if they were received under one or more of the five 

energy conservation programs. It also states that the governor shall 

identify to the Secretary of Energy the program or programs to which 

the money will be applied. On its face. then, section 155 appears to 

give the governor authority to determine how the money is to be 

allocated among the five energy conservation programs. In Opinion of 

the Justices and Shapp, however, such references to "governors* were 

found to be inadequate to show a clear indication that Congress 

intended to upset states' traditional decision-making processes. 

The Congressional Record shows that the purpose of section 155 

was to distribute .$200 million in escrow .accounts that had been 

collected since 1978 for oil overcharges to consumers. 149 Cong. Rec. 

S15,115-16 (1982) (daily ed. Dec. 16, 1982) (statement of Senator 

Warner). The issue that most concerned the House and the Senate was 

how the money could be most fairly distributed among the states. See, 

x, 149 Cong. Rec. at Sl5.131 (statements of Senator Ford). Neither 

the House nor the Senate demonstrated any concern about whether or not 

state legislatures played a role in allocating the funds once they had 

been distributed to the states. In the discussions of section 155 in 

both the House and the Senate, some members talked about the bill in 

terms of distribution of the money to the states for allocation by the 

states. Others talked in terms of distribution to the governors for 

allocation by the. governors. There was no discussion; however, of 

prohibiting legislatures from playing their traditional roles in 

p. 3633 
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Honorable Clint Hackney 

Page 13 (JM-772) 

decision-making. Because nothing in the statute and nothing in the 

legislative history of the statute indicates that Congress intended to 

increase the powers of governors in those states in which the 

governor's powers were inadequate to allocate public money or that 

Congress intended to limit the role of legislatures, we conclude that 

Congress did not intend to confer on a governor the right to disregard 

his state's constitutional process for appropriating and allocating 

funds. Opinion of the Justices, 381 A.2d at 1210. Therefore, in 

Texas the legislature must determine or delegate the authority to 

determine how the Exxon money should be allocated among the five 

conservation programs listed in section 155, and the legislature must 

appropriate the e money in order for it to be withdrawn from the 

treasury. And, as indicated in footnote I, the legislature has now 

done so. Because we interpret section 155 as not disrupting the 

traditional state decision-making process, we need not address the 

difficult issue of whether Texas may accept money under the condition 

that the governor exercise powers he does not possess under state law. 

The same principles of Texas law governing allocation and 

appropriation of state funds are applicable to the money Texas 

receives pursuant to the Stripper Well settlement. The settlement 

requires that the money must be spent on energy programs. The 

~settlement conditions applicable to the states include the following: 

f. State Use of Funds. Funds available for 

distribution to the States shall be allocated 

among them on the basis of historical consumption 

patterns of refined petroleum products in the 

United States during the Settlement Period in the 

proportions as set forth in Exhibit H hereto, 

provided that no funds shall be distributed to a 

State until such State has submitted the signed 

Letters of Assurance required by this Paragraph. 

The payment mechanism set forth herein shall be 

then exclusive means of achieving distribution of 

the funds. The Attorney General of each State 

shall deliver to the Governor of such State, for 

the Governor's execution, duplicate originals of a 

Letter of Assurance in the form set forth in 

Exhibit I to this Agreement. Within 20 days 

following the date of the Approval Order, the 

Attorney General shall deliver to the Clerk of the 

Court and to the Administrator of ERA, DOE, such 

Letters of Assurance signed by the Governor of 

such State. At the same time, the Attorney 

General of each State shall designate in writing 

to the disbursing official of the M.D.L. 378 

Escrow whether disbursement shall be by check or 

by wire transfer, and if by wire transfer, shall 

p. 3634 
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Honorable Clint Hackney 

Page 14 (JM-772) 

provide instructions for the transmittal of funds. 

Disbursement of all funds to such State thereafter 

shall be in the form designated by the Attorney 

General and made payable to 'The State of 

t Physical delivery of a check 

shall be made by the disbursing official to the 

Attorney General and in the case of a wire transfer, advance written notice of the date and amount 

of the wire transfer shall be delivered to the 

Attorney General prior to the sending of each wire 

transfer. Upon receipt of each check or wire 

transfer notice, the Attorney General shall 

deliver it promptly to the Governor of such State. 

As used in this Paragraph II.B.3.f. 'Attorney 

General' means the Attorney General of a State, or 

his or her duly authorized representative, and 

includes any other State official who intervened 

in M.D.L. 378 prior to the execution of the 

Memorandum of Understanding of January 24, 1986 

preceding this Agreement. In the case of any 

State where an official other than or in addition 

to the Attorney General intervened in M.D.L. 378 

prior to January 24; 1986, all references in this 

Paragraph II.B.3.f to the Attorney General shall 

mean the Attorney General jointly with such 

official. Such funds (including interest earned 

on the funds following their receipt by the 

States) will be utilized as follows: 

I. Public Notice. Each State will give 

reasonable notice to the public that it has 

received the funds and will generally describe 

the types of restitutionary programs on which 

the State may expend the funds. Each State 

will conduct informal hearings at which the 

public may present its views concerning such 

expenditures. Any State which has held 

hearings with regard to the uses of Oil 

overcharge refunds during the two-year period 

preceding the date of the Approval Order will 

not be required to hold additional hearings. 

Legislative hearings in accordance with 

appligable State procedures shall be sufficient 

to comply with the requirements of this subsection. 

ii. Restitutionary Program. Monies 

received by any State shall be utilized to fund 

one or more existing or new energy-related 

p. 3635 
Honorable Grant Jones 

Honorable Clint Hackney 

Page 15 (JM-772) 

programs which are designed to benefit, directly or indirectly, consumers of petroleum 

products within the State. State governments 

are familiar with the particular energy needs 

of their citizens. . . . (Emphasis added.) 

In re: The Department of Energy Stripper Well Exemption Litigation, 

M.D.L. No. 378. Final Settlement Agreement at 8 (D. Kan. 1983). Under 

that settlement "the state" is to-receive the money? The settlement 

states that before a state receives funds the governor must sign 

letters of assurance, to be provided by the state's attorney general, 

that the money will be spent for approved programs. Otherwise, the 

governor is not mentioned. There is no basis in the language of the 

settlement for arguing that the settlement was intended to give the 

governor any role in determining how the funds should be allocated, 

much less a role that would be beyond his constitutional powers. It 

is the role of the legislature to comply with the requirements of the 

settlement in the allocation of the money, and to appropriate the 

money in accordance with that allocation. 

SUMMARY 

The legislature, not the governor, has 

authority to allocate and appropriate oil 

overcharge funds distributed as a result .of two 

lawsuits. Section 155 of Public Law No. 97-377, 

96 Stat. 1830 (1982), was not intended to increase 

the role of the governor in allocating and 

appropriating funds received under that section. 

JIM MATTOX 

Attorney General of Texas 

MARY KELLER 

Executive Assistant Attorney General 

JUDGE ZOLLIE STKAKLFY 

Special Assistant Attorney General 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by Sarah Woelk 

Assistant Attorney General 

p. 3636