Court Opinion

ID: 9308560
Source: CourtListenerOpinion
Date Created: 2022-12-02 17:20:08.273541+00
Date Added: 2024-06-11T17:14:01.558390
License: Public Domain

ZIRPOLI, Judge,
dissenting:
For the reasons stated below, I must respectfully dissent.
This is an appeal by the Secretary of Energy from a decision of the district court declaring a ruling of the Federal Energy Administration (“FEA”)1 procedurally invalid and enjoining the agency from enforcing it against the seven plaintiff-appellees. The district court found FEA Ruling 1974-29, 39 Fed.Reg. 44414 (1974) invalid because the agency failed to employ the notice and comment procedures required by the Administrative Procedure Act (“APA”), 5 U.S.C. section 553(b). I would affirm the district court.
In three separate actions filed in the district court for the District of Kansas, plaintiffs and intervenors, seeking declaratory and injunctive relief, challenged the ruling on procedural and substantive grounds. After the plaintiffs in Energy Reserves Group, Inc. obtained a preliminary injunction enjoining the enforcement of any final agency order based on Ruling 1974-29, the parties in all three actions entered into a stipulation consolidating the cases for a ruling from the court on three issues: ,
1. Whether Ruling 1974r-29 issued by the FEA on December 24, 1974, 39 Fed. Reg. 44414, is arbitrary, unreasonable or in conflict with the Trans-Alaska Pipeline Authorization Act, 43 U.S.C. §§ 1651, et seq., and the Emergency Petroleum Allocation Act of 1973, as amended, 15 U.S.C. §§ 751, et. seq.
2. Whether Ruling 1974-29 was issued by the FEA in compliance with the APA, 5 U.S.C. § 553.
3. If Ruling 1974-29 is valid, whether the Ruling may be applied to the plaintiffs’ sales of crude oil prior to December 24, 1974, the date on which the Ruling was issued by the FEA.
On cross-motions for summary judgment, the district court, without reaching the issues of the substantive validity of the ruling, or of the propriety of its retroactive application, found the ruling procedurally defective because of the agency’s failure to afford interested parties an opportunity to comment on the proposed rule, as required by the APA.

The Stripper Well Exemption

The price which producers of domestic crude oil could lawfully charge for their product has been subject to regulation since *1104August 1973.2 Recognizing, however, that certain oil producing properties could not be operated profitably under the price ceiling, Congress exempted such marginal properties from price controls in two pieces of legislation — the Trans-Alaska Pipeline Authorization Act (“TAPAA”), 43 U.S.C. §§ 1651, et seq., and the Emergency Petroleum Allocation Act of 1973 (“EPAA”), 15 U.S.C. §§ 751, et seq.3 Section 4(e)(2)(A)4 of the EPAA provided that:
The regulation promulgated under subsection (a) of this section shall not apply to the first sale of crude oil produced in the United States from any lease whose average daily production of crude oil for the preceding calendar year does not exceed ten barrels per well.
Oil produced from wells generating no more than ten barrels per day- — commonly known as stripper wells — was thus exempt from domestic crude oil price controls. The exemption was motivated by the fear that stripper wells, whose per barrel cost of extracting oil is higher than it is for more productive wells, could not operate profitably under price controls and would be shut down, thus depriving the nation of the substantial amount of crude oil they produce.5
In section 4(e)(2)(C) of the EPAA, Congress delegated legislative authority to the Cost of Living Council (“CLC”) to promulgate regulations implementing the stripper well exemption. The regulations defined certain of the relevant terms, but failed to define precisely the term “well,” except *1105perhaps by implication.6 It was this gap in the regulatory scheme, later sought to be cured through the issuance of Ruling 1974-29, that lies at the foundation of this lawsuit, for appellees contend that certain types of wells, known as injection wells, should be counted for purposes of determining the average daily production of the wells on a particular property. The PEA sought to exclude such wells through the issuance of an “interpretation” of its earlier regulation, which had exempted stripper well leases from price controls and defined stripper well leases in terms of average daily production per well.
A crude oil producing property typically passes through two stages — the initial, or primary production phase, and the later, or secondary recovery phase. During the primary production stage, oil is brought to the surface by means of the natural pressure in an underground oil reservoir. When the reservoir is depleted to the degree that its internal pressure is no longer sufficient to push the' oil to the surface, secondary recovery techniques may be used. Secondary recovery involves the injection of fluids into the producing formation to drive the crude oil to the surface, and injection wells are used for this purpose. Such wells do not produce petroleum in the sense that oil is brought to the surface through them, but they do contribute to or make possible the recovery of petroleum via other wells on the property. The CLC regulations implementing the stripper well exemption defined,a stripper well lease as one in which production did not exceed ten barrels per well per day, and those regulations, insofar as they defined or limited the term “well” at all, did so by making reference to “the number of wells which produced crude petroleum . . . from that property in that year.”7
These regulations were published on December 14, 1973, approximately one month after the stripper well exemption „was created in the EPAA and TAPAA. A year later, on December 24,1974, the FEA issued Ruling 1974-29, which, purporting to interpret the implementing regulation, stated that the FEA did not consider injection wells to be wells for purposes of the exemption.8 Appellees all hold interests in crude oil producing properties that would qualify *1106for the exemption only if injection wells can be included in the computation. Plaintiff-appellee Braden-Zenith, Inc., for example, alleged in its complaint that it owns an interest in an oil producing property that yielded approximately 80 barrels of crude oil per day for the 12-month period ending September 30, 1976. There were 14 wells on the property during that year, nine of them injection wells, without which no oil at all could have been obtained. Thus, if all 14 wells are counted for purposes of computing average production per well, Bra-den-Zenith would have been exempt from price controls. Under Ruling 1974-29, however, the nine injection wells are not included in the computation, and the remaining five wells are deemed to have produced more than 10 barrels per day.

Rulemaking under the APA

A. Legislative and Interpretative Rules The APA9 requires notice and an opportunity for interested persons to comment prior to the promulgation of a new rule. An exception to such formal rulemaking requirements, however, is provided in 5 U.S.C. § 553(b) for interpretative rules, and the FEA contends that Ruling 1974-29 is the epitome of an interpretative rule,,since it merely seeks to define a term contained in an underlying regulation. See Gibson Wine Co. v. Snyder, 90 U.S.App.D.C. 135, 137, 194 F.2d 329, 331 (1952); Continental Oil Co. v. Burns, 317 F.Supp. 194, 198 (D.Del.1970). The mere fact that a rule appears to be definitional in form, however, does not preclude a finding that it is legislative rather than interpretative and thus subject to the formal rulemaking procedures of the APA. See 1 K. Davis, Administrative Law Treatise § 5.03 at 303 (1958) (discussing Addison v. Holly Hill Fruit Products, Inc., 322 U.S. 607, 64 S.Ct. 1215, 88 L.Ed. 1488 (1944)). If Congress has delegated lawmaking power to the agency, then rules issued pursuant to that grant are leg*1107islative, whether such rules are cast in the form of definitions or in more traditional statutory form.10 The existence of such a delegation of power does not limit an agency to the issuance of legislative rules, but if such a grant has been made, a reviewing court must determine into which category the rule falls, and that determination is constrained neither by the form of the rule nor by the label attached to it by the agency. Lewis-Mota v. Secretary of Labor, 469 F.2d 478, 481-82 (2d Cir. 1972). The FEA’s contention that Ruling 1974-29 defines a term contained in an underlying regulation and is therefore interpretative rather than legislative is particularly difficult to sustain in view of the fact that the agency itself chose to define the other central terms of the stripper well exemption through the issuance of a legislative regulation.11
Rather than be bound by the agency’s own classification, many courts have attempted to discern the impact of the rule on regulated parties and have held those rules with substantial impact to be legislative and thus subject to formal rulemaking procedures. The FEA asserts that the substantial impact test has been discredited and abandoned as a means for distinguishing legislative from interpretative rules,12 but the agency’s interment of the test appears to be premature. This court has recently had occasion to advert to the role of the substantial impact test in judicial review of administrative action, and the language of that case is particularly appropriate here:
In addition to the “good cause” exception to the notice and comment requirements of 5 U.S.C. § 553, there is an exception for “interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice.” § 553(b)(3)(A). In construing this exception, rather than rely on a “facile semantic distinction” between interpretative rules and substantive or legislative rules, courts have looked instead to the “basic purpose of [the] statutory requirements [of notice and comment]” in deciding whether the requirements should be imposed. Pharmaceutical Manufacturer’s Association v. Finch, 307 F.Supp. 858, 863 (D.Del.1970). When an agency action has “palpable effects” upon the regulated industry and the public in general, it is necessary to expose that action “to the test of prior examination and comment by the affected parties.” National Motor Freight Traffic Association v. United *1108States, 268 F.Supp. 90, 96 (D.D.C.1967) (three judge court), aff’d per curiam, 393 U.S. 18 (1968).
The APA’s rulemaking procedures “were designed to assure fairness and mature consideration of rules of general application.” NLRB v. Wyman-Gordon Co., 394 U.S. 759, 764, 89 S.Ct. 1426,1429, 22 L.Ed.2d 709 (1969). The prior publication and opportunity for comment requirements enable “the agency promulgating the rule to educate itself before establishing rules and procedures which have a substantial impact on those regulated.” Texaco, Inc. v. FPC, 412 F.2d 740, 744 (3 Cir. 1969). When the questioned agency action does not jeopardize substantive rights or have a “substantial impact” on the purportedly regulated parties, or “create substantive' effects upon the rights of the parties not involved in the proceedings,” then lack of compliance with the prior notice and comment requirements of the APA is not fatal. Pennsylvania v. United States, 361 F.Supp. 208, 220-22 (N.D.Pa.) (three judge court), aff’d, 414 U.S. 1017, 94 S.Ct. 440, 38 L.Ed.3d 310 (1973).
National Helium Corp. v, FEA, 569 F.2d 1137, 1145-46 (Em.App.1977).
B. Ruling 1974-29 Had a Substantial Impact
While arguing that the test is an inappropriate one, the FEA asserts that the ruling in any event had no substantial impact. Whether one looks to the effect of the ruling on crude oil producers seeking to take advantage of the stripper well exemption or on the oil consuming public,13 however, it is difficult to avoid the conclusion that it had a significant impact. The agency does not dispute the fact that the exclusion of injection wells from the computation of average daily production per well has a sharp economic impact on both producers and consumers. Appellant would have this court conclude, however, that such treatment of injection wells was mandated by Congress when it enacted the exemption, and that Ruling 1974-29 merely restated the obvious intent of the legislation.14
If Ruling 1974-29 were as clearly redundant as the- FEA now asserts, this court might well find that it had no substantial impact. The subject of injection wells is not directly addressed, however, in the statute or its legislative history,15 nor does the implementing regulation provide unambiguous guidance in this area. Moreover, contrary to the apparent assumption in appellant’s argument, a finding that a rule has a substantial impact does not presuppose that the rule is inconsistent with the underlying statute or regulation. Were such a finding a necessary aspect of the test, then rules would be found procedurally defective only in those cases in which they could also be deemed substantively invalid. In the instant case, however, while I would find Ruling 1974-29 to have been issued in the absence of the required procedures and thus need not reach the question of its substantive validity, I note that a party challenging the substantive validity of an FEA regulation bears a heavy burden of persuasion.
Appellant argues further that Ruling 1974-29 had no substantial impact because it merely stated what the agency’s interpretation of the statute and regulation had always been, and it notes that there is no indication in the record that the FEA ever construed the statute or regulation to permit the counting of injection wells. While the agency may not have altered its position with the issuance of Ruling 1974-29, however, it seems fair to conclude that appel-*1109lees were first informed of the agency’s views in this regard when the ruling was published. The stripper well exemption was enacted, and the regulation promulgated, against a long background of federal regulation of stripper properties. In its administration of section 17 of the Mineral Lands Leasing Act of 1920, 30 U.S.C. § 226, for example, the Department of the Interi- or (“DOI”) has, since 1936, permitted the counting of injection wells as producing wells for purposes of qualifying for a reduced royalty to the government when the average daily production of a lease is 10 barrels or less per well.16 Appellant argues that the rule under scrutiny in the instant case, issued pursuant to a different statute and intended to fulfill a different function, cannot be judged in accordance with the treatment accorded injection wells by the DOI. The point, however, is not that the FEA’s treatment of injection wells should necessarily be governed by the treatment of such wells by the DOI, but rather that producers had reasonable grounds for assuming that injection wells would be included in the computation of average daily production per well, and that Ruling 1974-29, not the statute or the underlying regulation, was the first effective notice to producers — particularly those, like plaintiff-ap-pellee Marathon Oil Company, which had been operating on federal lands under DOI regulations — -that injection wells were not to be counted in connection with the stripper exemption.
Appellees contend that the FEA has itself conceded the legislative nature of Ruling 1974-29 by arguing before the district court that, in evaluating the substantive validity of the rule, the court need only find a rational basis. Appellees assert that the rational basis test applies to legislative rules but that interpretative rules are subject to plenary judicial review, with the reviewing court free to substitute its judgment for that of the agency. The distinction between the scope of review for the two types of rules, however, is not as neat as appellees claim,17 and this court has previously indicated that it considers the agency’s interpretative rules worthy of considerable deference.18 Such deference, however, imposes a concomitant obligation on the agency to issue rules having a substantial impact only after educating itself with regard to the wisdom of such rules. Shielded from the independent judgment of this court by the deference paid to its expertise, the agency should not at the same time deprive itself of comment from interested and experienced parties when it issues rules having a substantial impact on those parties.

The Statutory Framework

I am fortified in my conclusion that the FEA should have conducted formal rule-making procedures before issuing Ruling 1974 — 29 by the legislative foundations of the stripper well exemption and of the agency itself. In Section 4(e)(2)(C) of the EPAA, Congress delegated authority to the administering agency to promulgate regulations implementing the stripper well exemption, and the House-Senate Conference Report on the TAPAA stripper exemption directed the agency to promulgate the necessary regulations before the exemption became operative.19 That same Conference Report indicated that the regulations to be promulgated
shall be so designed as to provide safeguards against any abuse, overreaching or altering of normal patterns of operations to achieve a benefit under this section which would not otherwise be available. Congress specifically intends that the regulations shall, among other things, prevent any “gerrymandering” of leases to average down high production wells with a number of low production stripper *1110wells to remove the high production wells from price ceilings.20
Appellant has pointed to the above language in support of its contention that the stripper exemption was to be narrowly construed and that Congress did not intend to permit the counting of injection wells for purposes of qualifying for the exemption.' Whether or not the Report would be capable of supporting the weight appellant would place on it, it does seem clear that Congress intended potential abuses to be prevented through issuance of regulations. Appellant’s argument, therefore, that the counting of injection wells is merely another form of gerrymandering is an argument that ultimately undermines the procedural validity of Ruling 1974 — 29, in view of the expressed congressional preference for rule-making in this area.
Subsequent to the passage and implementation of the stripper well exemption but prior to the issuance of Ruling 1974-29, Congress enacted the Federal Energy Administration Act (“FEAA”), 15 U.S.C. §§ 761, et seq., which created the FEA. Section 7(i) of that Act, 15 U.S.C. § 766(i),21 contains rulemaking provisions distinct from those of the APA, and this court has previously recognized the function of that section:22
Congress recognized that the FEA’s final judgment could only be as good as the information upon which it drew, and prescribed certain procedures — stricter than those of the [APA] — which would permit it to be educated by the most interested and therefore, hopefully, the most knowledgeable parties. [citation omitted.] The agency’s discretion, and thus its latitude for promulgating unwise rules, was to be restrained through this deliberately prescribed process for meaningful comment .
Shell Oil Co. v. FEA, 574 F.2d 512, 516 (Em.App.1978).
Section 7(i) of the FEAA imposes upon the agency stricter rulemaking requirements than those contained in the APA. Section 7(i) requires the agency to publish the proposed rule itself in the Federal Register, whereas the APA merely requires an agency to publish a notice of proposed rule-making. Section 7(i) narrows the APA’s good cause exception to formal rulemaking by permitting a waiver of notice and comment only where the agency finds that strict compliance would cause serious harm or injury to the public health, safety, or welfare. Section 7(i), moreover, requires the agency to afford interested parties an opportunity to present their views and arguments orally whenever a proposed rule “is likely to have a substantial impact on the Nation’s economy or large numbers of individuals or businesses.”23 The legislative history of section 7(i), furthermore, reflects the intention of Congress that the agency interpret generously its obligation to give notice and receive comment on proposed rules. Rep. Broyhill, who introduced the amendment to the FEAA that was to be enacted as section 7(i), remarked upon *1111the impact that would flow from many of the actions taken by the agency and the importance that the agency act only after obtaining the benefit of comment from interested and knowledgeable persons.24 The Conference Report similarly emphasized the importance of formal rulemaking:
It is expected that the exception to the notice provision in paragraph (B) of section 7(i) of the conference substitute will be used very sparingly.
******
The conferees intend that if the Administrator is in doubt about the applicability of any of the standards provided in this section, he will resolve the doubt in favor of the fullest application of procedural safeguards.25
While I believe that the FEA’s obligation to employ formal rulemaking procedures in its promulgation of Ruling 1974-29 can be discerned in the APA itself, without regard to the agency’s specific statutory framework, it is clear that Congress intended the FEA to proceed with an extra measure of caution, a caution deemed advisable in the case of a new agency whose actions would necessarily have widespread impact on the economy. In view of the clear and substantial impact of Ruling 1974 — 29, on consumers as well as- producers of crude oil, the agency was required to observe formal rulemaking procedures.26

Jurisdiction

Although the parties to this appeal did not address the issue of jurisdiction in their briefs, this court raised the matter at oral argument. Some concern was expressed, and some confusion on the part of counsel manifested, with regard to the reviewability of the ruling at issue. In Atlantic Richfield Co. v. FEA, 556 F.2d 542 (Em.App. 1977), this court discussed the narrow circumstances under which interpretations issued by the FEA would be subject to judicial review. The factors there found to justify judicial review — the collateral estoppel effect on the persons who were both directly involved in the transaction and parties to the interpretation proceedings— would not appear to be present here, for, unlike the interpretations involved in that case, here there were no parties to the issuance of the ruling. The interpretations in Atlantic Richfield were issued pursuant to 10 C.F.R. Part 205 Subpart F, §§ 205.80-205.86. Interpretations issued pursuant to that portion of the regulations are arrived at on the basis of requests and information submitted by particular parties. Such interpretations apply to and may be relied upon only by those persons to whom they are specifically addressed and other persons, directly involved in the same transaction or act, upon whom the FEA serves the interpretations.27
The ruling at issue here, however, is another creature entirely. It was issued pursuant to 10 C.F.R. Part 205 Subpart K, §§ 205.150-205.154. Such rulings, though subject to modification or rescission like Subpart F interpretations, are of general applicability, and may be relied upon by anyone.28 Ruling 1974-29 presents a clear legal issue, depends upon no shifting factual circumstances, and provides for no further administrative inquiry.29 It is the- kind of agency action traditionally subject to judicial review, see National Automatic Laundry and Cleaning Council v. Shultz, 143 U.S.App.D.C. 274, 443 F.2d 689 (1971) (cited *1112in Atlantic Richfield Co. v. FEA, supra, 556 F.2d at 553 n.27), and such rulings have been reviewed by this court in the past. See, e. g., Southern Union Production Co. v. FEA, 569 F.2d 1147 (Em.App.1978).
I would affirm the judgment of the district court,

. On October 1, 1977, the Department of Energy assumed the duties of the FEA pursuant to the Department of Energy Organization Act, Pub.L. No. 95-91, 42 U.S.C. § 7101, et seq., and Executive Order No. 12009, 42 Fed.Reg. 46267 (1977). I will refer, however, to the FEA, rather than to the DOE, since we are here concerned with the action of the former agency.

. The Cost of Living Council (“CLC”) issued regulations establishing the two-tier oil pricing system pursuant to the Economic Stabilization Act of 1970 (“ESA”). 12 U.S.C. § 1904 note. These regulations were subsequently adopted pursuant to the Emergency Petroleum Allocation Act of 1973 (“EPÁA”), 15 U.S.C. § 751, et seq. This court has addressed certain issues presented by the two-tier system of crude oil prices and upheld various aspects of the system in Griffin v. United States, 537 F.2d 1130 (Em.App. 1976), cert. denied, 429 U.S. 919, 97 S.Ct. 313, 50 L.Ed.2d 286 (1976); Cities Service Co. v. FEA, 529 F.2d 1016 (Em.App. 1975), cert. denied, 426 U.S. 947, 96 S.Ct. 3166, 49 L.Ed.2d 1184 (1976); Pasco Inc. v. FEA, 525 F.2d 1391 (Em.App. 1975); Consumers Union of United States, Inc. v. Sawhill, 525 F.2d 1068 (Em.App. 1975); and Nader v. Sawhill, 514 F.2d 1064 (Em.App. 1975).

. The EPAA stripper exemption became law on November 27, 1973, eleven days after the TA-PAA exemption, which it superseded.

. This section was repealed on December 22, 1975, by section 401 of the Energy Policy and Conservation Act, Pub.L. No. 94-163, 89 Stat. 946. The stripper well exemption was reinstated in an amendment to the EPAA contained in section 121 of the Energy Conservation and Production Act, Pub.L. No. 94-385, 15 U.S.C. § 757(i), enacted on August 14, 1976. The FEA implemented the exemption through the issuance of regulations contained at 10 C.F.R. § 212.54. .

. The purpose of exempting small stripper wells — wells whose average daily production does not exceed ten barrels per well — from the price restraints of the Economic Stabilization Act (now in Phase IV) and from any system of mandatory fuel allocation is to insure that direct or indirect price ceilings do not have the effect of resulting in any loss of domestic crude oil production from the premature shutdown of stripper wells for economic reasons. As of January 1, 1973, there were 350,000 stripper wells producing ten barrels a day or less. Stripper wells account for 71 percent of all of the oil wells in this country, but produce an average of only 3.6 barrels per day, or only 13 percent of total U.S. domestic crude production.
Many stripper wells are of only marginal economic value. When the costs of their operation exceed the value of their production, they are shut in, and a known and developed crude oil reserve is lost to U.S. production. Removing Phase IV price restraints from these marginal stripper wells has the effect of increasing the value of the crude oil they produce by about $1.30 per-barrel (the difference between $4.02, the current per-barrel ceiling average under Phase IV, and $5.32, the per-barrel average price for “new” domestic crude oil production which is not subject to Phase IV). This price incentive will encourage owners and operators of stripper wells to maintain production and to keep these wells in operation for longer periods of time than would be possible if the value of their crude oil production were determined under Phase IV price ceilings. This increased incentive will, it is anticipated, permit stripper well operators to make new investments in the eligible wells and improve the gathering and other facilities for moving this oil to market.
TAPAA Conf.Rep. No. 93-624, 93rd Cong., 1st Sess., [1973] U.S.Code Cong. & Admin.News, pp. 2523, 2531-32 [hereinafter referred to as TAPAA Conf.Rep.].

. [6 C.F.R.] § 150.54 Certain price adjustments.
(s) Stripper Wells — (1) Rule. Effective November 27, 1973, the price charged for the first sale of domestic crude petroleum and petroleum condensates, including natural gas liquids, produced from any stripper well lease is exempt.
(2) Definitions. As used in this paragraph
“Average daily production” means the qualified maximum total production of domestic crude petroleum and petroleum condensates, including natural gas liquids, produced from a property during the preceding calendar year, divided by a number equal to the number of calendar days in that year times the number of wells which produced crude petroleum and petroleum condensates including natural gas liquids from that property in that year. To qualify as maximum total production, each well on the property must have been maintained at the maximum feasible rate of production, in accordance with recognized conservation practices, and not significantly curtailed by reason of mechanical failure or other disruption in production.
“Domestic crude petroleum” means crude petroleum produced in any of the several States, or the District of Columbia or from the “outer continental shelf’ as defined in 43 U.S.C. 1331.
“First sale” means the first transfer for value by the producer or royalty owner.
“Property” is the right which arises from a lease in existence in 1972 or from a fee interest to produce domestic crude petroleum in existence in 1972 and is coextensive with that property used in paragraph (b) of this section for purposes of determining “base production control level.”
“Stripper well lease” means a “property” whose average daily production of crude petroleum and petroleum condensates, including natural gas liquids, per well did not exceed 10 barrels per day during the preceding calendar year.
38 Fed.Reg. 34465 (1973).

. Id.

. [Ruling 1974-29]
PRODUCTION WELLS FOR PURPOSES OF THE “STRIPPER WELL LEASE” EXEMPTION
Facts. Firm P, a producer of petroleum, produced during the preceding calendar year 150,000 barrels of crude petroleum and petroleum condensates, including natural gas liquids from 40 production wells located on *1106Property A, as defined in 10 CFR 210.32. In addition, there were five injection wells in operation on that property last year. An injection well is one which is used to inject water, air, gas, steam or other materials into the ground to assist in the recovery of crude petroleum through producing wells. Wells which formerly produced crude petroleum may be used for injection purposes, or new wells may be drilled solely for the purpose of injecting materials into oil-bearing formations and reservoirs.
The average daily production per well from Property A was 10.27 barrels, based on the 40 production wells, whereas the average daily production per well would be 9.13 barrels if 45 wells, including the 5 injection wells, were used to calculate the average daily production figure.
Issue. Is an “injection” well a “well” for the purpose of determining whether the average daily production of a property was 10 barrels or less per well in the preceding calendar year, for purposes of the stripper well lease exemption of 10 CFR 210.32?
Ruling. No. Under the FEA regulations, the first sale of domestic crude petroleum and petroleum condensates, including natural gas liquids, produced from any stripper well lease, is exempt from the mandatory price and allocation regulations. A stripper well lease is defined as a property whose average daily production did not exceed 10 barrels per day per well during the preceding calendar year. “Average daily production” is further defined in 10 CFR 210.32(b) as:
The qualified maximum total production of domestic crude petroleum and petroleum condensates, including natural gas liquids, produced from a property during the preceding calendar year, divided by a number equal to the number of days in that year times the number of wells which produce crude petroleum and petroleum condensates, including natural gas liquids, from that property in that year.
Thus, the FEA regulations by their specific language provide that only wells “which produce crude petroleum” are to be counted in calculating average daily production for the purpose of determining whether the stripper well lease exemption applies. While injection techniques help to “produce” crude petroleum, they are not wells which themselves “produce” crude petroleum. Therefore, wells which did not actually yield or produce crude petroleum during the preceding calendar year are not production wells for this purpose. Whether the non-producing well was an “injection” well, a disposal well, a dry well, a spent well or a shut-in well will not change this result.
39 Fed.Reg. 44414 (1974).

. Section 4 of the APA, 5 U.S.C. § 553, was made applicable to the CLC by section 207 of the ESA. Section 207 of the ESA is incorporated into the EPAA by section 5 of the latter Act. 15 U.S.C. § 754(a)(1).

. Davis, commenting on General Electric Co. v. Gilbert, 429 U.S. 125, 97 S.Ct. 401, 50 L.Ed.2d 343 (1976), characterized the result reached by the Supreme Court as follows:
The Court, in accordance with the dominant law, ignored the substantial impact of the rules in deciding that they should be given less weight than force of law. The test the Court used, in accordance with dominant law, was lack of delegation by Congress of authority to make rules having force of law. In the absence of such a delegation, the rules cannot be legislative; in the Court’s words they cannot be “regulations which under the enabling statute . . . themselves supply the basis for imposition of liability.”
K. Davis, Administrative Law of the Seventies § 5.03-3 at 50 (Cum.Supp.1977) (emphasis added). The Court in Gilbert was faced with the question of whether a regulation of the EEOC should be treated as having the force of legislation.

. See n.6 supra.

. See, e. g., Eastern Kentucky Welfare Rights Organization v. Simon, 165 U.S.App.D.C. 239, 251, 506 F.2d 1278, 1290-91 n.30 (1974) (substantial impact test not controlling where the rule is clearly interpretative in nature and without legally binding effect). Professor Davis takes the position that the substantial impact test should not be used to distinguish legislative from interpretative rules, and that the agency’s characterization of its own action should control such classification. Davis states that the test may properly be used, however, to determine whether a particular rule, even though it is interpretative, should be subject to formal rulemaking requirements. See K. Davis Administrative Law of the Seventies § 5.03 at 148, § 6.01-7 at 193 (1976). Since interpretative rules are expressly exempted from the rulemaking requirements of section 4 of the APA, 5 U.S.C. § 553, however, it appears unlikely that, were Ruling 1974-29 found to be interpretative, the agency could be required to institute formal rulemaking in connection with its issuance. See Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc., 435 U.S. 519, 98 S.Ct. 1197, 55 L.Ed.2d 460 (1978).

. See n.5 supra.

. Were this court to find that Ruling 1974-29 was contrary to the intent of Congress when it created the stripper well exemption, of course, the ruling would be substantively invalid, regardless of the procedures employed in issuing it. Espinoza v. Farah Manufacturing Co., 414 U.S. 86, 94-95, 94 S.Ct. 334, 38 L.Ed.2d 287 (1973). Appellees would have us so conclude, but I need not reach this point.

. Counsel for the FEA appear to concede the absence of clear guidance from Congress in this area when, addressing another issue at oral argument, he observed that the subject of injection wells was apparently not discussed when this legislation was enacted.

. 30 C.F.R. § 221.49(b).

. See K. Davis, Administrative Law Treatise § 5.05 (1958).

. See Southern Union Production Co. v. FEA, 569 F.2d 1147, 1152 (Em.App.1978).

. TAPAA Conf.Rep., n.5 supra at 2532.

. Id. at 2532-33.

. Section 7(i)(l)(A)-(C) of the FEAA was repealed by section 709(a)(2)(C) of the Department of Energy Organization Act, n.l, supra. Section 7(i)(l)(A)-(C) was, however, in effect when Ruling 1974 — 29 was issued.

. Amici curiae, the Kansas Independent Oil & Gas Association and the National Stripper Well Association, contend that section 7(i) of the FEAA required formal rulemaking in connection with the issuance of any rule, as that term is defined in the APA, 5 U.S.C. § 551(4). Under such a construction, it is clear that even interpretative rules, normally exempt from the rule-making requirements of section 553, would be subject to formal rulemaking, for section 551(4) defines rules in a broad sense to include legisla-five, interpretative, and several other types of rules, such as rules of internal agency organization and procedure. The breadth of such a reading of section 7(i), however, renders it improbable, for we cannot assume, in the absence of a clear expression of legislative intent, that Congress subjected the FEA to the burden of formal rulemaking in instances where such procedures have generally been recognized to be unnecessary. The reading suggested by appellant, that section 7(i) mandated the manner of giving notice of a proposed rule when such notice was otherwise mandated by the APA, seems a more reasonable construction.

. 15 U.S.C. § 766(i)(l)(C).

. 120 Cong.Rec. 5459 (1974).

. FEAA Conf.Rep. No. 93-788, 93rd Cong., 2d Sess., [1974] U.S.Code Cong. & Admin.News, pp. 2972, 2977.

. I am not unmindful of the findings of fact and conclusions of law reached by the district judge in Grace Petroleum Corp. v. Department of Energy, 456 F.Supp. 945 (W.D.Okl.1978). I would not follow Grace Petroleum, however, because there the court assumed the ruling was interpretative and gave inadequate consideration to the substantial impact of Ruling 1974— 29, a consideration Congress clearly intended, as indicated by section 7(i) of the FEAA.

. 10 C.F.R. § 205.85(c). ■

. 10 C.F.R. § 205.150.

. 10 C.F.R. § 205.154.