Court Opinion

ID: 9308770
Source: CourtListenerOpinion
Date Created: 2022-12-02 17:22:42.235643+00
Date Added: 2024-06-11T17:14:03.485521
License: Public Domain

METZNER, Judge.
Certain jurisdictions (“the States”) appeal from an order of the United States District Court for the District of Kansas (Theis, J.), rejecting the claim of the States that the Department of Energy (“DOE”) had violated the Final Settlement Agreement (“FSA”) in the M.D.L. 378 Stripper Well litigation through its method of calculating refunds to injured parties in crude oil refund proceedings under Subpart V1 of the agency’s regulations. The district court held that neither the Settlement Agreement nor the Subpart V regulations specify a particular formula for DOE to use in calculating refunds, and it upheld, by inference, DOE’s authority to adopt a formula having a rational basis. In re The Department of Energy Stripper Well Exemption Litigation, 671 F.Supp. 1318 (D.Kan.1987). Two briefs amicus curiae have been submitted in support of DOE’s position, one by 28 ocean carriers and 29 foreign air carriers, and one by a group of utilities, transporters and manufacturers. Both amici urge that the States’ appeal be rejected and the district court’s order affirmed.2

FACTS

A. The Stripper Well Litigation and Settlement
The M.D.L. 378 Stripper Well litigation is a consolidation of a number of cases brought by oil producers to enjoin the Federal Energy Administration and, later, the Department of Energy from enforcing Ruling 1974-29 concerning the exclusion of injection wells from computing average daily production of stripper wells. The district court originally enjoined the enforcement of the regulation in question, but ordered the plaintiff oil producers to deposit into escrow the difference between stripper well prices and the controlled price of crude oil set by DOE’s regulations. Ultimately, the validity of Ruling 1974-29 was upheld in In re The Department of Energy Stripper Well Exemption Litigation, 690 F.2d 1375 (TECA 1982), cert. denied, 459 U.S. 1127, 103 S.Ct. 763, 74 L.Ed.2d 978 (1983).
In order to determine the appropriate disposition of the M.D.L. 378 moneys, the district court referred the case to DOE’s Office of Hearings and Appeals (“OHA”) for fact-finding “concerning the particularized tracing and impact of the overcharges at issue.” In re The Department of Energy Stripper Well Exemption Litigation, 578 F.Supp. 586, 597 (D.Kan.1983). It also requested the views of OHA “on how restitution can best be achieved in this case.” 578 F.Supp. at 596. OHA held hearings for this purpose between June and October 1984, and on June 19, 1985, submitted its report as to who were affected. It concluded that it was impossible to trace the overcharges through any particular refiner’s marketing operations. However, OHA also determined that domestic refiners as a class absorbed 2.7 to 8.1 per cent of the overcharges and that the remainder was borne by resellers, retailers and consumers.
In conjunction with the report, DOE issued a statement of restitutionary policy providing for the method of making restitution to the persons or groups entitled to the moneys held in escrow in the M.D.L. 378 litigation. Thereafter, the parties to the case and various intervenors entered into negotiations concerning the distribution of crude oil funds in M.D.L. 378.
*1483DOE concluded that the negotiations relating to the M.D.L. 378 fund provided an appropriate vehicle for exploring a resolution of the restitutionary issues not only for the specific M.D.L. 378 funds, but also for crude oil cases subject to restitution procedures under Subpart Y. See 51 Fed. Reg. 27899-27900 (August 4, 1986). Thus, the FSA addressed the distribution of the M.D.L. 378 funds and the resolution of all other crude oil refund distribution questions.
Claimants who were parties to M.D.L. 378 received their refunds according to a formula devised by DOE.
With respect to crude oil claims by non-parties to the M.D.L. 378 settlement, the Agreement required DOE to issue a Modified Statement of Restitutionary Policy to provide an opportunity for such claimants to submit claims in refund proceedings pursuant to the agency’s Subpart V procedures. To pay such claims, the agreement authorized OHA to reserve up to 20 per cent of all crude oil overcharge funds, other than M.D.L. 378 funds. The remaining 80 per cent, and any funds not otherwise distributed to claimants, is to be divided equally between the States and the federal government.
DOE issued the Modified Statement of Restitutionary Policy for Crude Oil Cases, required by the FSA. 51 Fed.Reg. 27899 (August 4, 1986) (the “MSRP”). Shortly afterwards, OHA announced its intention to follow the MSRP in crude oil refund proceedings under Subpart V, and solicited comments concerning the appropriate procedures to be employed in such cases. 51 Fed.Reg. 29689 (August 20, 1986) (“August 1986 Order”). With respect to the procedures for calculating refunds, the August 1986 Order suggested the use of a “volumetric method” for allocating overcharges. Under this method, the allocation of overcharges “would be made by dividing crude oil overcharge moneys (the ‘numerator’) by the total U.S. consumption of petroleum products during the period of price controls (the ‘denominator’).” 52 Fed.Reg. at 11740. The resulting quotient would then be attributed to each gallon of petroleum products sold while price controls were in effect.
On April 10, 1987, OHA issued a “Notice Explaining Procedures for Processing Refund Applications in Crude Oil Refund Proceedings Under 10 CFR Part 205, Subpart V.” 52 Fed.Reg. 11737 (“OHA Notice”).3 The OHA notice concluded that the “volumetric method” should be adopted for these cases. 52 Fed.Reg. at 11741.
The OHA Notice adopted what it termed a “full parity” approach for calculating the “volumetric” equation. This would include in the “volumetric” numerator the crude oil overcharges that were in DOE’s escrow account when the Settlement occurred, plus the $1.4 billion in the M.D.L. 378 escrow at the time of Settlement, minus the $415 million refunded to refiners, resellers and retailers under the Settlement.
B. The States’ Motion
On May 26, 1987, the States filed a motion with the district court in which they contended that DOE had violated the Agreement in that OHA’s proposed method of calculating refunds by using M.D.L. 378 moneys in the calculation of the total amount of overcharge funds available for distribution by OHA was improper.4 According to the States, OHA would pay refunds that include overcharges from the M.D.L. 378 escrow in addition to funds under OHA control. The States maintained that OHA’s authority to disburse refunds is limited to the DOE escrow funds and does not include funds in the M.D.L. escrow.
The district court found that:
“Neither the Settlement Agreement nor the Subpart V regulations specifies a particular formula DOE must employ in granting refunds. Similarly, the portion of Paragraph IV.B.2.a. relied upon by the States, regarding funds ‘other than the *1484M.D.L. 378 Escrow and the DOE/Amoco Stripper Fund/ speaks only to the division of the remainder of the funds between the DOE and the States. It does not address in any way permissible calculation formulae that DOE may apply to funds within its purview. It also does not express any limitations on what portion of the 20% reserve OHA may utilize in Subpart V refund proceedings. Therefore, the Court holds that the DOE has not violated any provision of the Settlement Agreement by factoring in a portion of other M.D.L. 378 overcharges in compensating Subpart V claimants.”
In re DOE Stripper Well Exemption Litigation, 671 F.Supp. 1318, 1324 (D.Kan.1987).

DISCUSSION

One thing that must be made clear is that no moneys in the M.D.L. 378 escrow and the DOE/Amoco Stripper Fund will be disbursed by DOE in Subpart V proceedings. Under the FSA only 20 per cent of moneys in other escrow accounts are available for distribution in these proceedings.
DOE has never contended that any M.D. L. moneys may be included in the funds that will be distributed. Nor does it contend that OHA’s authority to distribute these funds may exceed 20 per cent of the total. It is clear that OHA is only creating a formula for calculating the proper allocation of funds in the overcharge escrow accounts which were specifically reserved by the Settlement for Subpart V claimants.
The Agreement provides that the States will have a 50 per cent interest in the undistributed portion of the 20 per cent allocated for distribution. It is silent as to how the 20 per cent is to be distributed, and neither the States nor DOE have a vested interest in a specific sum of money.
It is apparent that what the States are worried about is that their share of the funds to be disbursed by OHA will be decreased by the inclusion of the almost $1 billion in M.D.L. funds in the numerator of OHA’s refund formula. Apparently, it is expected that the total amount of disbursements will not use up the 20 per cent. Therefore, the States are attacking the formula because it will result in reducing the size of the undistributed funds in which they have a 50 per cent interest. What the States are entitled to under the FSA is secure. All that OHA’s formula affects is the amount that individual end users will receive in refunds out of the 20 per cent set aside to settle their claims.
In adopting the formula under attack, OHA responded to numerous comments submitted in the proceedings that led up to the OHA Notice. Exercising its discretion to choose a reasonable allocation formula, OHA selected the “full parity” method in order to provide reasonably accurate compensation to those entitled to participate in the fund. This method of allocating the Subpart V refunds paralleled that used in the Stripper Well Settlement, which based refund amounts provided to the settling parties not only on the amount of the specific overcharges escrowed with the Kansas district court, but also on other crude oil overcharge amounts, including the considerable amounts escrowed with DOE or projected to be collected by DOE in the future.
As Judge Theis noted in his August 17, 1987, opinion: “Neither the Settlement Agreement nor the Subpart V regulations specifies a particular formula DOE must employ in granting refunds.” The authority of DOE to adopt a formula having a rational basis was recognized. The States’ complaint that the method chosen will diminish their ultimate share of any residuary refund proceeds provides no basis to upset the reasonable choice made by OHA.
The fact that a different formula might have been devised resulting in an increase in the States’ dollar amount of recovery has no bearing on the issue.
The Opinion and Order appealed from is affirmed.

. The phrase "Subpart V” refers to the DOE regulations found at 10 CFR, Part 205, Subpart V. Those regulations are entitled "Special Procedures for Distribution of Refunds," and establish the procedures pursuant to which refunds may be made to injured persons in order to remedy the effects of a violation of the regulations of the DOE.

. At the conclusion of oral argument in this case, we directed counsel to submit additional briefs on the issue of jurisdiction which was raised by the amicus Utilities. Upon consideration of the briefs, we find such challenge to be without merit, and find that we have both personal and subject matter jurisdiction under the provisions of 28 U.S.C. § 1331, and § 211 of the Economic Stabilization Act, 12 U.S.C. § 1904, note. This issue is more fully discussed in our opinion in In re Department of Energy, Stripper Well Exemption Litigation, MDL 378, Temporary Emergency Court of Appeals, 10-74.

. The certified administrative record of these proceedings is set forth in the Record on Appeal at pp. 56-340.

. The States raise a second objection which is not an issue on this appeal,