Court Opinion

ID: 9308578
Source: CourtListenerOpinion
Date Created: 2022-12-02 17:20:20.083268+00
Date Added: 2024-06-11T17:14:02.294893
License: Public Domain

GRANT, Judge,
dissenting.
I respectfully dissent. In my view, the decisive issue in this case is more properly stated as.follows:
Whether the district court erred in finding that the FEA’s Appeal Decision and Order, which determined that under Section 212.83 only costs of crude oil which are fixed and certain in a month of measurement may be included in the calculation of increased product costs available for recovery in a current month, is *1298inconsistent with this regulation and thus exceeded the scope of FEA’s authority.
The applicable regulation here (Section 4(b)(2)(A) of the Emergency Petroleum Allocation Act) provides that in determining prices, the regulations
(a) shall provide for a dollar-for-dollar passthrough of net increases in the cost of crude oil . and refined petroleum products through the retail level.
The ceiling prices of petroleum products to each class of purchasers were frozen at May 15, 1973 levels with an adjustment to permit the passthrough of increased product costs incurred in the month of measurement. A refiner is not permitted to pass through to its customers any more than that May 15, 1973 base price, plus a dollar-for-dollar passthrough of subsequent net increases in its product costs incurred between the month of measurement and the month of May, 1973, plus certain non-product costs “and measured pursuant to the provisions of Section 212.83 . . . etc.” The definition of the term “landed cost,” as set forth in Section 212.83(b) of the FEA Mandatory Price Regulations, prior to its amendment on October 31, 1974, read as follows:
“Landed Cost” means:
(1) For purposes of complete arms-length transactions, the purchase price at the point of origin plus the actual transportation cost.
(2) For purposes of products purchased in arms-length transactions and shipped pursuant to a transaction betweén affiliated entities, the purchase price at the point of origin plus the transportation cost computed by use of the accounting procedures generally accepted and consistently and historically applied by the firm concerned.
(3) For purposes of products purchased in a transaction between affiliated entities and shipped pursuant to an arms-length transaction, the cost of the product computed by use of the customary accounting procedures generally accepted and consistently and historically applied by the firm concerned plus the actual transportation cost.
(4) For purposes of products purchased and shipped pursuant to a transaction between affiliated entities, the costs of the product and the transportation both computed by use of the customary accounting procedures generally accepted and consistently and historically applied by the firm concerned. (10 C.F.R. § 212.83(b)). (Emphasis supplied.)
Sohio points to the repeated reference to and acceptance of “the use of the customary accounting procedures generally accepted and consistently and historically applied by the firm concerned” in the above-quoted Section 212.83(b). However, as the district court properly pointed out and need be repeated here, only Paragraphs 2, 3, and 4 are so modified and they are not involved in this proceeding. In Paragraphs 2, 3, and 4, FEA had thereby identified those few specific instances in which historical or customary accounting procedures could be used. It is my view that if it were intended that any particular form of accounting would fill the demands of Paragraph 1, the FEA would have said so. The fact that such language is not used in Paragraph 1, alone among the four paragraphs of the Section, can but emphasize the fact that accounting procedures could not be applied that would interfere with the plain language of the paragraph, namely, that “landed cost, for purposes of complete arms-length transactions [means] the purchase price at the point of origin, plus’the actual transportation cost.” No language could be clearer. It can only mean ascertainable costs, actually and in fact incurred in the month of measurement. We must recognize that there is a difference in incurring an obligation and incurring a cost.
If a refiner is to be permitted to enter into a “time-trade” transaction promising to re-deliver crude oil five or six months in the uncertain future, and then estimate his current costs on the basis of what he thinks his re-delivery costs of crude oil are going to be *1299five or six months in the future, are we also going to permit him to gamble on what the market will be a year hence, or more? Nobody required Sohio to enter into this transaction. It was done by the company to meet present customer demands and to remain competitive in the open market. It was a routine business decision, probably not uncommon between the large oil refiners. It is true that there did exist an obligation to pay something at a specified future date but that amount was unknown and, of course, would be subject to the vagaries of a fluctuating and uncertain world market. I have no quarrel with the procedure, but I am unable to agree with a “costing” program that requires today’s consumers to pay for those unknown and uncertain higher oil prices that may be inflicted on the world economy five or six months hence.
Applying this to the facts of the case at bar, I can see no justice in a system that would require the American gas-consuming public to pay those estimated higher prices in September and October, 1973, that the refiner will not be required to pay out until the spring of 1974. The price of oil on the world market in the spring of 1974 was more than double the price prevailing in the fall of 1973 when this “time-trade” arrangement was entered into. Why should the refiner be permitted to exact from the consumer, months and months in advance, those higher prices that OPEC and inflation might later inflict upon us? In approving such a program, are we not, in effect, exacting additional monies from the consumer to serve as an interest-free loan or advance to the refiner, not to be paid out by him until actual prices are known and he will make re-delivery of the oil he has contracted to re-deliver? Accounting procedures and mathematical formulae aside, I cannot escape the conclusion that, by approving this program, Sohio is passing through to its customers more in increased product costs than it was actually paying out at that time, and requiring the customer to help underwrite Sohio’s operations in a rising and uncertain market.
Nor am I able to agree with the majority on the inapplicability of the rationale of Thor Power Tool Co. v. Commissioner of Internal Revenue Service, 439 U.S. 522, 99 S.Ct. 773, 58 L.Ed.2d 785 (1979), to the issue here under consideration. True, Thor is a tax case, arising out of a taxpayer’s write-down of inventory “in accord with generally accepted accounting principles,” but which IRS decreed should be disallowed on the ground that the write-down did not serve to reflect income clearly for tax purposes.
In pointing out the differing objectives of tax and financial accounting,* the Supreme Court, in Thor, said:
Third, the presumption petitioner postulates is insupportable in light of the vastly different objectives that financial and tax accounting have. The primary goal of financial accounting is to provide useful information to management, shareholders, creditors, and others properly interested; the major responsibility of the accountant is to protect these parties from being misled. The primary goal of the income tax system, in contrast, is the equitable collection of revenue; the major responsibility of the Internal Revenue Service is to protect the public fisc.
This difference in objectives is mirrored in numerous differences of treatment. Where the tax law requires that a deduction be deferred until “all the events” have occurred that will make it fixed and certain, United States v. Anderson, 269 U.S. 422, 441 [46 S.Ct. 131, 134, 70 L.Ed. 347] (1926), accounting principles typically require that a liability be accrued as soon as it can reasonably be estimated. Conversely, where the tax law requires that income be recognized currently under “claim of right,” “ability to pay,” and “control” rationales, accounting principles may defer accrual *1300until a later year so that revenues and expenses may be better matched. Financial accounting, in short, is hospitable to estimates, probabilities, and reasonable certainties; the tax law, with its mandate to 'preserve the revenue, can give no quarter to uncertainty. This is as it should be. Reasonable estimates may be useful, even essential, in giving shareholders and creditors an accurate picture of a firm’s overall financial health; but the accountant’s conservatism cannot bind the Commissioner in his efforts to collect taxes. . . .
Finally, a presumptive equivalency between tax and financial accounting would create insurmountable difficulties of tax administration. Accountants long have recognized that “generally accepted accounting principles” are far from being a canonical set of rules that will ensure identical accounting treatment of identical transactions. “Generally accepted accounting principles,” rather, tolerate a range of “reasonable” treatments, leaving the choice among alternatives to management. Such, indeed, is precisely the case here. Variances of this sort may be tolerable in financial reporting, but they are questionable in a tax system designed to ensure as far as possible that similarly situated taxpayers pay the same tax. If management’s election among “acceptable” options were dispositive for tax purposes, a firm, indeed, could decide unilaterally — within limits dictated only by its accountants — the tax it wished to pay. Such unilateral decisions would not just make the Code inequitable; they would make it unenforceable. (439 U.S. at 542-44; 99 S.Ct. at 786-87, 58 L.Ed.2d at 801-803 (Emphasis added.)
These words from Thor are equally applicable to the decisive question presented in this appeal.
Furthermore, in evaluating the agency’s own interpretations of the regulations, it is helpful to examine the Congressional intent in enacting the Emergency Petroleum Allocation Act, 15 U.S.C. § 751 et seq. Congress provided therein that regulations promulgated thereunder shall “to the maximum extent practicable” provide inter alia for the “equitable distribution of crude oil, residual fuel oil, and refined petroleum products at equitable prices . . . .” Section 4(b)(1)(F).
The Conference Report accompanying the EPAA unequivocally explained that the reference to “equitable prices” in the list of the nine EPAA objectives, set forth in Section 4(b)(1), is:
specifically intended to emphasize that one of the objectives of the mandatory allocation program is to prevent price gouging or price discrimination which might otherwise occur on the basis of current shortages. On the other hand, it is contemplated that the prices for allocated fuels will be set at levels or pursuant to methods which will permit adequate compensation. . . . Most importantly, the President must, in exercising this authority, strike an equitable balance between the sometimes conflicting need of providing adequate inducement for the production of an adequate supply of product and of holding down spiraling consumer costs. 2 CCH Energy Management, H 10,610, p. 10619-11. (Emphasis added.)
The price regulations here at issue provided that the selling price of petroleum products to each class of purchasers was frozen at May 15, 1973 levels, “with an adequate adjustment to permit the pass-through of increased product costs incurred between the month of measurement and the month of May, 1973.” This, to me, represents an attempt to comply with the expressed Congressional intent to “hold down spiraling consumer costs.” Certainly nothing could be more inflationary than charging tomorrow’s prices today.
Guided by that clear expression of Congressional intent, I would hold that the FEA Appeal Decision and Order, which determined that under 10 C.F.R. § 212.83 only costs of crude petroleum which are fixed and certain in the month of measurement may be included in the calculation of increased product costs available for recovery *1301in a current month, is consistent with the regulations and did not exceed the scope of FEA’s authority.

 We are here presented with a consideration of the differing objectives of the EPAA and financial accounting.