# Petition — Cities Service Co. v. Federal Energy Administration > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385003_1788%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1976 - **Citation:** 426 U.S. 947 ## Text { — | FEB 27 976 | MICHAEL RODAK, JR. Crem | 4 ET wR K i IN THE ——aad Supreme Court of the United States OctToBeR TERM, 1975 No. 25-1230 Citres SERVICE COMPANY Cities SERVICE Or CoMPANY, Petitioners Vv. FEDERAL ENERGY ADMINISTRATION FRANK G. ZARB, ADMINISTRATOR, Respondents PETITION FOR A WRIT OF CERTIORARI TO THE TEMPORARY EMERGENCY COURT OF APPEALS OF THE UNITED STATES Paut A. LENZINI 1709 New York Avenue, N.W. Washington, D.C. 20006 CHARLES V. WHEELER Box 300 Tulsa, Oklahoma 74102 Attorneys for Petitioners Dated: February 27, 1976 Press or Byron S. ADAMS PRINTING, INC., WASHINGTON, D. C. ~~ re ee eee INDEX i Page Ee CT eT ee ee eee ae 1 SEE. vec cccutcranhwenseseuens Peake denen 2 TT Ne rE ey a 2 ConstTITUTIONAL Provisions, STATUTES AND ReGuta- EE EEE ics onc n05'gt.tnansonediadenase es 3 SN OS eek dc snk nade bbe raeueen ene 3 The Two-Tier Price System for Crude Oil ......... 3 Other Measures Stenmuing From the Two-Tier Sys- PR er eer ee or eee Te eT ete Peer 5 The Cost Equalization Program ................. 8 ey I IN, oo oo oc cee ced eecdeunsas 10 Reasons ror GRANTING THE Writ oF CERTIORARI ...... 10 1. Does the CEP Constitute the Exaction of a Tax by an Administrative Agency? ...............6: 11 2. Does the CEP Constitute a Taking of Private Property Without Just Compensation in Violation of the Piste Dmmemementy 2... cc ciccscccccdee’ 15 3. Was Resort by the Court Below to General Con- gressional Objectives in Order to Sustain the CEP Proper When the Enabling Provision of the HE PAA, Relied Upon by Respondents to Justify the CEP Did Not Explicity er Implicity Authorize oe, A Meee ey aircrney Meike 17 SINE ava g ua be oh na cdent ony casendbeneeecuien 20 il INDEX—Continued Page a Ae rrr rr rrr r rrr rrr rE re la Opinion of the Temporary Emergency Court of Ap- DOMED cc ccccrecccecccctcesecesncenesscsvecss la Order Denying Rehearing .........0.60eeee eee eee Wa Findings of Fact and Conclusions of Law of the Dis- We GS an. boc ha ccassbonevunceeescasseucss 24a Order of the District Court .......... 0c e eee eee 37a b . MPTEPESETETELETETETTIE TIT Cee 38a Constitutional Provisions Involved .............4. 38a Statutory Provisions Involved .........6.-00eees 39a Regulations Involved ..........ee eee e eee ee eeees 4la AUTHORITIES CITED CASES: Armstrong v. United Siates, 364 US. 40 (1960) 2.6... 15 Cincinnati Soap Co. v. United States, 301 U.S. 3808 > g ee eee re eee rrr per re rer rt ee 14 Grimaud vy. United States, 220 U.S. 506 (1911) ...... 14 Hampton & Co. v. United States, 276 US, 894 (1928). 12 Moon v. Freeman, 379 F.2d 382 (9th Cir. 1967) ....... 13 National Cable Television Ass'n v. United States, 415 Pe Se MED cn bccn decade unsnadwndeesensady 12 Regional Rail Reorganization Act Cases, 419 U.S. 102 SED én kcuuas povdisccnssbhassncaseeseennnsas 15 Rodgers v. United States, 138 F.2d 992 (6th Cir. 1943) 18 United States v. Causby, 328 U.S. 256 (1946) ........ 16 United States v. Constantine, 296 U.S. 287 (1935)... 12, 18 United States v. General Motors Corp., 323 U.S. 373 (| errr rrr re TT rc cTeTert Tet TT). 16 United States v. Kansas City Life Ins. Co., 339 US. (> 6 a Pewrreryrrrrrrr Tore errr TTT Tr 16 United States vy. Stangland, 242 F.2d 8438 (7th Cir. | eeereerr rr re rrrres Terre rer TT re ere 13 INDEX—Continued iii . Page ConsTITUTION, STATUTES: U.S. Constitution, Article 1, Section 8, Clause 1 .. 3, 10, 12 U. S. Constitution, Amendment V 3, 10, 15 eee © oe ee eee eee Kmergency Petroleum Allocation Act of 1973, 87 Stat. 627, 15 U.S.C. $§ 751-756 CE Go lia c ss shut ed suaaGauwes ean os 3,17 I OED VU adn ON on ébasbesdexkes ve 3, 17,18 REGULATIONS: a OI an 6 ceduWs hu Gaedieuécudesds 6 ey EE 6 hes Kau ec eceosedusducduxckiedunes 7 es EEE 6 badass CA eR decode ebherdeudid eae 9 ADMINISTRATIVE DecIsions: Jacksonville Electric Authority, 2 FIA, § 80,553, CCH Federal Energy Guidelines (March 21, 1975) .... 20 Swann Oil, Ine., 2 FEA, § 80,505 (Jan. 9, 1975) 2.2.0... 20 Jacksonville lectrie Authority, 2 FIA, § 83,008 (Jan. cen evesiedtedetechvedulle skdonsdiciaece 20 Better Ilome Heat Council, Ine., as modified, CCH Kederal nergy Guidelines, {| 20,131 (July 24, ST +446 eu taden wiesccecend tases 4 ebeaedcdeewks 20 IN THE Supreme Court of the United States OcToBER TERM, 1975 No. Cirres SERVICE COMPANY Ciries Servicer Or, COMPANY, Petitioners v. FepERAL ENERGY ADMINISTRATION Frank G. Zars, ADMINISTRATOR, Respondents PETITION FOR A WRIT OF CERTIORARI TO THE TEMPORARY EMERGENCY COURT OF APPEALS OF THE UNITED STATES Petitioners Cities Service Company and Cities Serv- ice Oil Company, a wholly owned subsidiary of Cities Service Company, respectfully pray that a writ of cer- tiorari issue to review the judgment of the Temporary Kmergeney Court of Appeals entered on December 31, 1975. OPINION BELOW The opinion of the Temporary Emergency Court of Appeals, not yet reported, appears in the appendix hereto, p. la, infra. The findings of fact and econclu- sions of law of the U.S. District Court for the District 2 of Columbia entered on July 10, 1975, appears at ap- pendix p. 24a, infra. JURISDICTION The judgment of the Temporary Emergency Court of Appeals was entered on December 31, 1975. Pur- suant to Rule 6 of the Temporary Emergency Court of Appeals, petition for rehearing was timely filed on January 14, 1976, together with petitioners’ motion for stay of mandate. The latter motion was granted on Jan- uary 14, 1976. Petition for rehearing was denied on January 28, 1976. This Court has jurisdiction under section 211(g) of the Economic Stabilization Act of 1970, as amended, 85 Stat. 750, 12 U.S.C. § 1904 note (Supp. 1975), which is incorporated by section 5(a) (1) of the Emergency Petroleum Allocation Act of 1973, 87 Stat. 633, 15 U.S.C. §754(a)(1), and under 28 U.S.C, § 1254(1). QUESTIONS PRESENTED 1. Whether the Cost Equalization Program insti- tuted by respondents, 10 C.F.R. § 211.67, con- stitutes a tax, which may not be exacted by an administrative agency. 2. Whether petitioners suffer a taking of private property without just compensation in viola- tion of the Fifth Amendment to the U. 8. Con- stitution by a regulation which requires that pe- titioners each month make cash payments di- rectly to other refiners where the regulation mandating such cash payments contains no pro- vision which secures to petitioners compensa- tion for or recovery of such cash payments. 3. Whether the Emergency Petroleum Allocation Act, 87 Stat. 627, 15 U.S.C. §§ 751-756, which 3 authorizes and directs the Federal Energy Ad- ministration to provide by regulation for the mandatory allocation of crude oil and refined petroleum products at prices to be specified in such regulation authorizes the agency to re- quire, under pain of criminal fine and civil pen- alty, payments of cash from petitioners to other refiners to ‘‘entitle’’ petitioners to process cer- tain crude oil already owned by petitioners. CONSTITUTIONAL PROVISIONS, STATUTES AND REGULATIONS INVOLVED This case involves Article I, Section 8, Clause i, Con- stitution of the United States and the Fifth Amend- ment to the Constitution of the United States as well as sections 4(a) and 4(b)(1) of the Emergency Petro- leum Allocation Act of 1973, as amended, and certain administrative regulations, viz., 10 C.F.R. §§ 211.62 and 211.67. The foregoing are reprinted at appendix pp. 38a-5la, infra. STATEMENT OF THE CASE The Two-Tier Price System for Crude Oil In August 1973, as part of an effort to control wide- spread inflation, the President through the Cost of Living Council (CLC) implemented Phase IV of the Economie Stabilization Program, a mandatory pro- gram of price and wage controls covering most sectors of the U.S. economy including the petroleum industry. Beginning in 1973 the petroleum industry was charae- terized by rapidly rising world prices which had sur- passed the domestic price of oi] and growing U. S. dependence on foreign sources of oil. In consequence, the Phase 1V petroleum regulations involved a mix- 4 ‘ ture of inflation control and price incentive to encour- age new domestic production of crude oil. For erude oil, CLC instituted a two-tier price sys- tem under which a ceiling price was established for production classified as ‘‘old’’ oil while all other do- mestic production, classified as ‘*new,”’ ‘‘released,’’ and ‘*stripper’’ oil was not subject to price control and thus could be sold at the free market price. ‘*Old’’ oil was defined 2s crude oil produced from a property up to that property’s 1972 base production level. ‘‘ New”’ oil was oil produced in excess of the property’s 1972 base production level. ‘‘ Released”? oil was an equiva- lent amount of old oil for every ‘‘new”’ barrel pro- duced, such old oil thus being released for sale at the free market price. ‘‘Stripper’’ well oi] was oil from wells which produce less than ten barrels per day. See generally 38 Fed. Reg. 22536 et seq. (August 22, 1973). The free market price was chiefly influenced by prices for oil imported from the Middle East which were increasing sharply. Thus, for example, the price of Arabian light crude, a representative foreign crude oil, had increased from approximately $3.07 per bar- rel in August 1973 to approximately $11.65 in January 1974. Par. 14, Affidavit of FEA Associate Assistant Administrator Vernon (hereinafter ‘‘Vernon Affida- vit’’), Stipulated Record on Appeal, 330 (hereinafter ‘*Record’’). By contrast the ceiling price for old oil was established by CLC at approximately $5.25 per barrel on December 19, 1973, and remains at that level. Ibid. In October 1973, following outbreak of the Arab-Is- raeli conflict, an embargo against the United States and certain other countries resulted in sharp reduction ) of exports of Arab oil to the United States. In re- sponse to the resulting shortages Congress on Novem- ber 27, 1973, enacted the Emergency Petroleum Allo- eation Act, 87 Stat. 627, 15 U.S.C. §§ 751-756 (here- inafter ‘‘the EPAA”’), authorizing and directing the President to promulgate a regulation providing for mandatory allocation of erude oil, residual fuel oil, and refined petroleum products at prices to be speci- fied in or determined by such regulations. §4(a), 87 Stat. 629, 15 U.S.C. § 753(a). By Executive Order 11748 dated December 4, 1973, there was established in the Executive Office of the President the Federal Energy Office (FEO) under the direction of an Ad- ministrator to whom was delegated all authority vest- ed in the President by Congress in the EPAA. 38 Fed. Reg. 33575 (December 6, 1973). FEO on January 14, 1974, promulgated regulations in implementation of the EPAA which adopted and continued the two-tier pricing system for domestic crude oil previously estab- lished by CLC, 39 Fed. Reg. 1923 et seq. (January 15, 1974). Other Measures Stemming from the Two-Tier System By reasoning of increasing free market prices, the Federal Energy Administration (FEA)* conceived that the competitive viability of small and independ- ent refiners was threatened. The problems noted by FEA were that (1) operating costs and capital ex- penditures of small refiners had traditionally been higher than those of competitors and this condition ‘FEA was established by Congress on June 27, 1974, as an independent agency in the exeentive branch, sueceeding to the authority and responsibility of FEO. Federal Energy Administra- tion Act, 88 Stat. 97, 15 U.S.C. §§ 761-766. See Executive Order 11790, 39 Fed. Reg. 23185 (June 27, 1974). 6 was exacerbated by the two-tier cost disparity; (2) small refiners had traditionally marketed their prod- ducts at a lower price than those of major branded refiners; (3) many small and independent refiners were placed in a severe cost-price squeeze; (4) many small and independent refiners were unable to absorb the full amount of their increased crude costs; and (5) many small and independent refiners were required to charge higher prices for products than their com- petitors and suffered loss of market share on account of such higher prices.’ In an attempt to alleviate such distortions FEA and its predecessor FEO took three steps. First, it issued on January 14, 1974, its so-called ‘December 1’’ rule, 10 C.F.R. § 211.64 (now 10 C.F.R. § 211.63(a)), which pro- vides in substanee that supplier/purchaser reiation- ? FEA specifically stated its concern as follows: ‘*To meet competition, however, many refiners and marketers (with higher input costs) had to endure a severe cost-price squeeze, Many small and independent refiners and independ- ent marketers—unable to absorb the full amount of such costs —were required to charge higher prices for their products with a consequential loss of market shares.’’ Par, 17, Vernon Affidavit, Record, 331. ‘*Moreover, since independent marketers and many small and independent refiners were disadvantaged by this development, the distortion threatened the competitive viability of the inde- pendent sector of the petroleum industry.’’ Par. 18, Vernon Affidavit, Record, 332. ‘‘FEA believes that a bias is necessary to compensate rela- tively small refiners for higher operating costs, proportion- ately greater capital expenditure requirements, and the fact that such refiners must, in many cases, market their products at a lower price than the products of the major branded re- finers.’’ 39 Fed. Reg. 39741-742. (November 11, 1974). ? a ee il we te a te ~~ 7 ships in effect for sales, purchases and exchanges of domestie crude oil on December 1, 1973, shall remain in effect for the duration of the crude oil allocation program. By freezing all crude oil supplier/purchaser relationships as of December 1, FEO sought to prevent moves by major integrated refiners to divert low-cost old oil to their own refineries. Pars. 8, 19, Vernon Affi- davit, Record, 326, 332. The December 1 rule is an ap- propriate exercise of FEA’s authority to allocate crude oil. A second step designed to correct supply imbalance and to grant small and independent refiners access to the benefits of price-controlled old oil was the Man- datory Crude Oil Sales program, 10 C.F.R. § 211.65, effective February 1, 1974. The purpose of this so- called ‘‘buy/sell program’’ was to assure each small and independent refiner preferential allocations such that they obtained volumes of crude oil not less than volumes obtained during 1972. Sales to small and inde- pendent refiners are made by the fifteen largest U.S. refiners which are neither ‘‘small’’ nor ‘‘independent”’ within the meaning of those terms as set forth in see- tion 3 of the EPAA. Buy/sell program sales are made at a refiner/seller’s weighted average crude oil price thereby giving small and independent refiners some access to the benefits of price-controlled old oil and thus lessening to some extent the crude cost disparities among refiners. The buy/sell program is also within respondents’ authority to allocate crude oil. Not satisfied that these measures would maintain the competitive viability of small and independent refin- ers, FEA next embarked upon a far-reaching program of cost equalization which goes beyond allocation au- thority and which gives rise to this litigation. S The Cost Equalization Program On August 18, 1974, FEA issued a notice of pro- posed rulemaking entitled ‘‘Allocation of Old Oil.’ 39 Fed. Reg. 31650 et seq. (August 30, 1974). Under the proposal certain refiners would be directed to make cash payments in the nature of a subsidy to other re- finers. As stated by FEA, ‘‘The proposed is intended to give all refiners the financial benefits associated with access to supplies of old oil by, in effect, allocating old oil to each refiner in such a way so as to give such re- finer its proportionate share of total domestie supplies of old oil.”’ 39 Fed. Reg. at 31650. In justificat’ on of the program the Supplementary Affidavit of John Ver- non submitted by respondents in the trial court states: ‘“When the excessive profits reported by major inte- grated oil companies in the recent past are contrasted with the serious economic problems facing many small and independent refiners and independent marketers as a result of high input costs they are not able to pass through ... FEA believes that the need for the equal allocation of ‘old’ oil and resulting equalization of input costs becomes clear and is unquestionably in the publie interest.”’ Par, 13, Supplementary Affidavit of John Vernon, Confidential Reeord, 55. The mechanics of the cost equalization program (hereinafter ‘‘the CEP’’) are that each month FEA calculates a ratio known as the national old oil supply ratio. The ratio is determined by comparing total old by multiplying that refiner’s runs to stills for the month to total crude oi runs to stills (erude oil processed) for all refiners for the month. The number of entitle- ments issued to a particular refiner is then determined by multiplying that refiner’s runs to stills for the month by the national old oil supply ratio. Thus, for example, a es > Ci 2 ob ek Oe ee re re me ed) ce eh tie 6 te ee eet A OP Bs 9 if total old oil receipts nationally amount to forty per- cent of total runs to stills, then a refiner having run 100,000 barrels per day in that month would be issued entitlements by FEA permitting it to include in its old oil receipts for the month 40,000 barrels per day of old oil. If, in fact, the refiner’s actual receipts of old oil were less than 40,000 barrels per day the refiner would be listed in the FEA notice as a seller of entitlements for the difference. On the other hand, if the refiner’s actual receipts of old oil for the month exceeded 40,000 barrels per day, it would then be required to purchase (from an entitlements seller) the right to include in receipts the excess old oil. The CEP issued as a final rule by FEA on Novem- ber 29, 1974. 10 C.F.R. § 211.67, 39 Fed. Reg. 42246 (December 4, 1974). The first month for which entitle- ments issued was November 1974 and on January 10, 1975, FEA published its notice wherein FEA issued entitlements for the month of November 1974. 40 Fed. Reg. 2560 (January 13, 1975). Petitioners were listed in the notice as having more old oil receipts than en- titlements thereby requiring purchase by petitioners of 699,089 entitlements at #5 each, subject to non-com- pliance sanctions in the form of eriminal fines and civil penalties. In each succeeding month respondents have pub- lished entitlement notices and each notice has required petitioner to purchase rights to include old oil in pe- titioners’ crude oil receipts. For the first thirteen months of the CEP, November 1974 through November 1975, petitioners have been required to purchase a total of 14,934,556 entitlements at a total cost of $109,- 942,176.62. The CEP has been and will continue for 10 the foreseeable future to be a major part of the energy program implemented by respondents. The Instant Litigation In the District Court and subsequently in the Tem- porary Emergency Court of Appeals, petitioners chal- lenged the legality of the CEP as applied to them on both constitutional and statutory grounds. Jurisdiction of the District Court was founded on section 5(a) (1) of the EPAA, which incorporates sections 205-211 of the Economie Stabilization Act, as amended, 85 Stat. 750, 12 U.S.C. § 1904 note (Supp. 1975). Petitioners argued that the CEP is patently unconstitutional be- cause it constitutes an administratively imposed tax in violation of Article I, Section 8, Clause 1 of the Con- stitution as well as a taking of private property with- out just compensation in violation of the Fifth Amend- ment and asserted also that the CEP exceeded statu- tory authority because it constitutes neither allocation nor the establishment of prices. As a factual matter petitioners argued that they were seriously injured by the CEP because the program merely affords a pros- pect of recovery from the marketplace of sums re- quired to be transferred to other refiners. For the first four months of the CEP petitioners had been required to make entitlement payments totaling $23.9 million but had not recovered such sums from the marketplace. REASONS FOR GRANTING THE WRIT OF CERTIORARI The question raised in this proceeding is whether a federal administrative agency may require one person te subsidize another by direct cash payments for the purpose of maintaining and financing the competitive viability of the person subsidized. Petitioners are justi- MEP tak A ae te 11 fied in invoking the certiorari powers of this Court for the reason that, in answering in the affirmative the question set forth above, the court below has gone be- yond prior decisions of this Court in assessing the per- missible scope of the regulatory powers of an admin- istrative agency and in approving the CEP in light of limits imposed hy Article I, Section 8, Clause 1 of the Constitution and the Fifth Amendment thereto. This case therefore calls for exercise of this Court’s power to reconfirm or redefine powers which may be exercised by and through administrative agencies. The precise issues can best be stated in the form of three questions arising from the decision below.. l. Does the CEP Constitute the Exaction of a Tax by an Administrative Agency? This case presents difficult and important questions concerning whether the exaction of money payments by an administrative agency to support an alleged public purpose constitutes the imposition of a tax. May an administrative agency mandate cash payments from one sector of an industry to another and justify such action, having the essential characteristics of a tax, as a regulatory measure? The contours of such novel power in an administrative agency should be charted by this Court. If the CEP is valid then an administra- tive agency may exact monetary payments from one group directly to another and justify the action by ascribing to it a regulatory effect. The facts of this case present a classic situation in which a sector of the national economy is faced with economic hardship due to forces over which it has little control. The public interest in preservation of that disadvantaged sector demands that it not fail. As 12 most frequently has been the case the solution involves subsidies for those enterprises comprising the disad- vantaged sector. Invariably the subsidies, such as those for fishing vessels, the merchant marine, and airplane manufacturers, have been appropriated from public funds generated by taxes levied by Congress. Here, for the first time, an administrative agency has usurped the authority of Congress to raise the money to support the subsidy. By Article I, Section 8, Clause I of the Constitution it is Congress that has the ‘‘power to lay and collect Taxes.’’ 'axation is thus a legislative function and, as recently reaffirmed by this Court, Congress is ‘the sole organ for levying taxes.’’ National Cable Tele- vision Ass'n V. United States, 415 U.S. 336, 340 (1974). If the exaction of a tax may be delegated by Congress, then plainly there has been a failure by Congress to lay down in the EPAA an intelligible principle to which respondents are directed to conform, National Cable Television Ass’n v. United States, supra; ef. Hampton & Co. vy. United States, 276 U.S. 394 (1928). The CEP constitutes a direct and involuntary mone- tary exaction imposed on petitioners for the direct benefit of other refiners. Indeed, since inception of the CEP in November 1974 through November 1975, pe- titioners have been required to transfer to other re- finers direct cash payments aggregating $109,942,176.62 for the purchase of 14,934,556 entitlements. During the same period all buyers of entitlements made direct cash transfers to other refiners in a total amount of $1,524,424,457.08. Regardless of a designation given it, an exaction will be classified by its purpose and operation. United ., ower. ee... 655 13 States v. Constantine, 296 U.S. 287 (1935). The pur- pose of the entitlements program, as stated by re- spondents, is [T]o give all refiners the financial benefits associ- ated with access to supplies of old oil by, in effect, allocating old oil to each refiner in such a way so as to give such refiner its proportionate share of total domestic supplies of old oil. 39 Fed. Reg. 31650 (August 30, 1974). In operation, the CEP mandates petitioners to purchase the right to process quantities of domestic crude oil already owned. The court below held that the CEP was not a tax because it does not raise money for the government or for its support and because the object of the scheme is regulation. In this respect the court held that the CEP regulates ‘‘refiners’ access to crude oil’’ and is thus a regulatory measure. That determination does not sur- vive analysis. The scheme is offered as an allocation measure but it accomplishes results that allocation cannot properly achieve. Thus, while petitioners may be required to sell old oil at the controlled price, they cannot be forced to purchase oil at the higher, free market price. In effect the CEP requires such a pur- chase and serves no purpose other than to distribute to other refiners the financial benefits associated with petitioners’ property.’ In contrast to regulation as normally understood, the CEP neither encourages, dis- courages, restricts or deters activity. It simply man- * Entitlement payments are not sanctions as were the penalty payments in Moon v. Freeman, 379 F.2d 382 (9th Cir. 1967) ; United States v. Stangland, 242 F.2d 843 (7th Cir. 1957); and Rodgers v. United States, 138 F.2d 992 (6th Cir. 1943), cited by the court below. It is well settled that Congress may establish a sanction and delegate to an agency authority to declare the type of 14 dates cash payments by petitioners to other refiners. The condition which triggers the exaction is the re- ceipt by petitioner of certain crude oil for processing. In Cincinnati Soap Co. vy. United States, 301 U.S. 308 (1937), an excise tax imposed by Congress upon the first domestic processing of coconut oil was challenged by petitioners as not a true tax but a regulatory meas- ure outside the field of federal power. The Court dis- posed of the contention holding that the exaction was purely an excise tax upon a manufacturing process for revenue purposes ‘‘and in no sense a regulation of the process itself.”’ 301 U.S. at 312. The sheer size of the monetary exactions in the in- stant case is persuasive that the CEP is designed to raise revenue in order to fund the subsidy deemed to be necessary for the continued viability of a segment of the petroleum industry. If this be a public purpose then funds for administration of such a program should come from the general fund of the treasury. It strains the imagination to attribute any purpose to the CEP other than the raising of revenue. The mone- tary exaction imposed on petitioners is not merely an incidental feature but plainly the essential feature of the scheme. The instant case squarely presents the im- portant question whether such an administrative scheme is permissible. activity which merits the sanction, E.g., Grimaud vy. United States, 22) U.S. 506 (1911). Unlike those cases, which involved adminis- trative imposition of monetary sanctions imposed by Congress, the entitlement payments here are established by respondents. More- over, entitlement payments have nothing to do with enforcement of the CEP which is effectuated instead through the fine and penalty sanctions established by Congress. See § 5(a)(1), Emergency Pe- troleum Allocation Act, 87 Stat. 633, 15 U.S.C. § 754(a) (1). 15 2. Does the CEP Constitute a Taking of Private Property Without Just Compensation in Violation of the Fifth Amendment? The Fifth Amendment to the U.S. Constitution pro- scribes the taking of ‘‘private property .. . for public use, without just compensation.’’ In contradistinction to ‘‘just compensation,’’ which has been interpreted by this Court to mean ‘reasonable, certain, and ade- quate provision for obtaining compensation,’’ Regional Rail Reorganization Act Cases, 419 U.S. 102, 124-125 (1974), ‘‘taking’’ has never admitted of a ready defi- nition. Some governmental actions result in a direct appropriation of private property, while other actions merely generate indirect, consequential loss of private property. The question as to whether the loss is direct and thus a taking, or incidental and therefore beyond the scope of constitutional protection, has continually troubled this Court. As noted in Armstrong v. United States, 364 U.S. 40 (1960): This case and many others reveal the difficulty of trying to draw the line between what destruc- tions of property by lawful governmental actions are compensable ‘‘takings’’ and what destructions ee and therefore not compen- sable. 364 U.S. at 48. Given a governmental regulation that admittedly has an adverse effect on private property, how attenuated must the injury be to be rendered in- cidental or consequential, as distinct from direct? Lacking a rule of general applicability, this Court has tailored ad hoe guidelines based on unique factual premises placed before it in discrete cases. E.g., Arm- strong Vv. United States, supra, (acquisition by govern- ment of materials subject to unperfected materialmen’s 16 lien held a taking) ; United States v. Kansas City Life Ins. Co., 339 U.S. 799 (1950) (destruction of agricul- tural value of land by raising water table held a tak- ing); United States v, Causby, 328 US. 256 (1946) (low and frequent airplane flights t.at interfere with enjoyment and use of land held a taking); United States v. General Motors Corp., 323 U.S. 373 (1945) (condemnation of right of temporary oceupancy of leased premises held a taking). This case presents the Court with its first oppor- tunity to determine (a) whether a regulatory scheme such as that described herein constitutes a taking for a public purpose, and (b) whether petitioners have been given their constitutional due of reasonable, cer- tain, and adequate provision for compensation. Were this case merely an aberration, the fact that it is one of first impression might not, in itself, warrant the grant of certiorari. The distinguishing characteristic of the CEP, however, is its seductive simplicity and the prospect that it may well serve as a model for fu- ture programs that purport, though ‘‘equalization « costs”? in a sector of the economy, to serve a regu.:- tory purpose. Viewed in this light, the opinion of the court below, which goes beyond any prior precedent in sanctioning a confiseatory program of expropriation without just compensation, merits the attention of this Court. The undisputed facts herein are that petitioners have been required to pay huge sums of money to competing refiners on a monthly basis. Respondents argue that such action is sanctioned by a statute which provides that erude oil shall be allocated at prices specified by regulation. Yet the questions remain, does a taking for a publie use occur where petitioners are 17 required te pay direct cash subsidies to competing re- finers for the privilege of processing oil already owned by petitioners? Assuming that a public purpose obtains, have petitioners received just compensation where they are told they might recover their costs in the market at some future, unspecified date, but given no guarantee of same? These questions have yet to be addressed by this Court. This case presents the issues squarely and they should be met. 3. Was Resort by the Court Below to General Congressional Objectives in Order to Sustain the CEP Proper When the Enabling Provision of the EPAA, Relied Upon by Respondents to Justify the CEP, Did Not Explicitly or Implicitly Authorize the Program? In addition to challenging the CEP as unconstitu- tional, petitioners also asserted in the court below that the CEP is in excess of statutory authority. If statutory authority therefor exists, it must be found within see- tion 4(a) of the EPAA. It is that section of the EPAA which vests the executive with the specific means to accomplish the litany of objectives set forth by Con- gress in section 4(b)(1). The court below character- ized this argument as a ‘‘misinterpretation of Section 4(a) of the Allocation Act”? and as an unreasonable ‘‘bifureation of the authority conferred on the FEA under Section 4(a) from the objectives of 4(b).” Ap- pendix, pp. 8a, 9a, infra. The court below held instead that ‘‘authority under Section 4(a) must be read to- gether with the objectives which the exercise of that authority is to obtain.’’ Ibid. This interpretation is manifestly improper. While the specific means or powers bestowed by Congress on an agency may be exercised to achieve the 18 objectives to be accomplished by a statute, whether agency action is permissible must depend upon whether such action is channeled through the powers conferred and not whether particular action might attain a stated objective. Aceordingly, respondents’ authority under section 4(a) may not expand, aecordion-like, to accom- plish the objectives laid down in section 4(b)(1) as if respondents had been authorized to ‘‘take such action as necessary’’ to accomplish such broad, virtually un- limited objectives as protection of ‘‘national defense.”’ EPAA, §4(b)(1)(A), 87 Stat. 629, 15 U.S.C. § 753 (b)(1)(A).* To the contrary, section 4(a) authorizes regulations providing for mandatory allocation of covered products at prices to be specified in the regu- lations, and thus respondents are limited to allocation and price regulation in seeking to accomplish congres- sional objectives. This is the view of the case taken both by petitioners and respondents in the District Court and before the Temporary Emergency Court of Appeals and, indeed, considerable effort was made by both sides in arguing that the CEP does or does not constitute allocation or price control. Remarkably, the court below did not * Indeed, section 102 of S. 1570 as reported by the Senate Com- mittee on Interior and Insular Affairs provided that ‘‘In imple- menting the authority granted under this Act the President shall take such actions as are necessary to achieve the following specific objectives... .’’ S. Rep. No. 53-159, 2 (1973) (Emphasis added.) The foregoing was deleted in the committee of conference and the conference substitute generally followed the provisions of the House amendment. IH. Rep. No. 93-628, 11 (1973). As eventually enacted, section 2(b) of the EPAA provided that ‘‘The purpose of this Act is to grant to the President of the United States and direct him to exercise specific temporary authority to deal with shortages of crude oil... .”’ § 2(b), 87 Stat. 628, 15 U.S.C. § 751(b). (Emphasis added. ) Po . on 19 decide that crucial question, resorting instead to a bottom-line determination that the CEP is ‘‘clearly within the authority conferred on the FEA under the Alloeation Act”’ because petitioners’ ‘‘insistence upon the bifurcation of the authority conferred on the FEA under Section 4(a) from the objectives of 4(b), in their endeavor to assert the lack of specific authority under the Aijlocation Act is unwarranted and unrea- sonable.’’ Appendix, p. 9a, infra. The CEP is neither an exercise of allocation nor price authority because it yields results that allocation and price regulation could not yield. Thus while peti- tioners may be mandated to sell erude oil at the con- trolled price they may not be forced to purchase high- priced crude oil. Respondents argue that the CEP is an exercise of allocation authority because the program achieves the ‘‘same result’’ as a physical transfer of erude oil. It is thus argued by respondents that under a physical allocation program FEA could have directed each refiner with more than its proportionate share of old oil to transfer its excess barrels to a less favored refiner in exchange for an equal number of barrels of uncontrolled crude oil with the selier of old oil charging approximately $5.25 per barrel and the seller of uncontrolled oil charging the free market price. Par. 22, n., Vernon Affidavit, Record, 334. But plainly this justification is unsound because there is not, and could not properly be, any authority in the EPAA to permit FEA to mandate a forced purchase of crude oil. It is inconceivable that Congress contemplated that persons for whose protection the EPAA was enacted, viz., purchasers at equitable prices, be forced to pur- chase covered products allocated to them. Indeed, re- spondents’ own decisions have uniformly held that the 20 FEA regulations do not prohibit any purchaser from declining to purchase an allocated product from any supplier. Jacksonville Electric Authority, 2 FEA 80,533, CCH Federal Energy Guidelines (March 21, 1975); Swann Oil, Inc., 2 FEA 80,505 (January 9, 1975) ; Jacksonville Electric Authority, 2 FEA 183,008 (January 9, 1975) ; Better Ilome Heat Council, Inc., as modified, CCIL Federal Energy Guidelines, {! 20,131 (July 24, 1974). Yet it is evident that a physical trans- fer of old oil for uncontrolled oil could yield the results obtained under the substitute CEP only if a refiner ean be forced to purchase high-priced erude oil. Ac- cordingly, petitioners submit that the CEP aecom- plishes more than allocation or price control could ac- complish and is therefore in excess of authority. CONCLUSION For the foregoing reasons this petition for writ of certiorari should be granted. Respectfully submitted, Paut A, LENZINI 1709 New York Avenue, N.W. Washington, D.C. 20006 CuirLtes V. WHEELER Box 300 Tulsa, Oklahoma 74102 Attorneys for Petitioners Dated: February 27, 1976 APPENDIX la APPENDIX Opinions Below TEMPORARY EMERGENCY COURT OF APPEALS OF THE UNITED STATES No. DC-34 Cities Service Company anp Cities Service Or Company, Plaintiff s-A ppellants, Guur On Corporation, Exxon Corporation, MARATHON O1L Company ano Hunt On. Company, Amici Curiae, v. FeperaL Enercy ADMINISTRATION AND Frank G. Zarp, Defendants-A ppellees, and AsuHianp Om, Inc., Amicus Curiae. (Fitrep December 31, 1975) Appeal from the United States District Court for the District of Columbia (Civ. 75-0653) Before Curistensen, Estes, and Jounson, Judges. Estes, Judge. This suit was commenced in the United States District Court for the District of Columbia by Cities Service Com- pany and its wholly-owned subsidiary Cities Service Oil Company (Cities Service), plaintiffs-appellants, to obtain injunctive reliet from all or part of their purchase obli- gations under the Old Oil Entitlements Program,’ 10 CFR 1 Cities Service sought to enjoin the imposition or enforcement of any entitlement purchase obligations based on its refining more old oil than the national average or, in the alternative, to enjoin the imposition or enforcement of any entitlement purchase obliga- tions based on its refining its own old oil production. 2a § 211.67 (Entitlements Program), 39 FR 42,246 (Dee. 4, 1974), and a declaratory judgment that the actions of the Federal Energy Administration,’ et al. (FEA), defend- ants-appellees, in promulgating the Entitlements Program were unlawful on the grounds that such actions were: in excess of the agency’s statutory authority; arbitrary, ca- pricious, and an abuse of discretion; not in accordance with the governing statute; and an unconstitutional bur- den on the plaintiffs.* Cities Service based these contentions on its allegations that the program fails to physically allocate any crude oil or set the prices for such oil; that Cities Service is unable to pass through its increased costs under the pro- gram on a dollar-for-dollar basis as mandated by section 4(b)(2)(A) of the Emergency Petroleum Allocation Act * Congress established the Federal Energy Administration under the Federal Energy Administration Act of 1974, 88 Stat. 97, 15 U.S.C. § 761 (1975 Supp.), ‘‘to assure a coordinated and effective approach to overcoming energy shortages. . . .’? 15 U.S.C. § 761(b). * Pursuant to 10 CFR § 205 ~ bpart D, Cities Service filed an application with the Office of Exceptions and Appeals of the FEA for exception relief from the Entitlements program for purchase obligations arising out of the erude oil runs to stills made by Cities Service in November. Cities Service Company, Case No. FEE 1443 (filed 2-7-75, decided 2-20-75), 3 CCH Energy Management {| 83,043. Subsequently, Cities Service filed an application for com- plete exception relief from the Entitlements program for the dura- tion of the regulations’ existence, Cities Service Company, Case No. FEE 1459 (filed 2-13-75, decided 3-27-75), 3 CCH Energy Management © 83,100. Both applications for relief were denied by the FEA. Under 10 CFR § 205.58 and § 205.100(b), a party ag- grieved by an order issued by the FEA under, inter alia, 10 CFR $205 subpart D, has not exhausted its administrative remedies until an appeal has been filed pursuant to 10 CFR § 205, subpart If, and an order granting or denying the appeal has been issued. Cities Service filed an appeal from the February 20, 1975 decision of the FEA, which was also denied. Cities Service Company, Case No. FEA 0385 (filed 3-24-75, decided 4-8-75), 3 CCH Energy Management § 80,568, 3a of 1973, 87 Stat. 628, as amended, 15 U.S.C. § 753(b) (2) (A) (1975 Supp.) ; that the classification of buyers and sellers under the program lacks a rational basis; the program causes further market distortions; that the small refiner bias is arbitrary and capricious; that under the program Cities Service is required to make cash payments to its refiner-competitors which is not mandated by the Alloca- tion Act and constitutes an unconstitutional taking of property for private purposes without just compensation prohibited by the Fifth Amendment, and that the pro- gram is an unconstitutional tax prohibited by Article I, See. 8, cl. 1 of the Constitution. On July 10, 1975, the district court consolidated the hearing on plaintiffs’ motion for a preliminary injunction with a plenary hearing on the merits; denied the plain- tiffs injunctive relief; refused to certify plaintiffs’ consti- tutional claims, finding them insubstantial and without merit;* and entered judgment for the defendants. Cities Service Company, et al. v. F.E.A,, et al. (D.D.C. CA No. 75-653, July 10, 1975), 3 CCH Energy Management {| 26,024. Most of plaintiffs’ contentions were rejected by the district court for the reasons three district courts had held that FEA’s Entitlements program was authorized by the governing statute and the constitutional questions pre- sented were without merit. Exxon Oil Company v. F.E.A. *Under section 211(c) of the Economie Stabilization Act of 1970, 84 Stat. 799, as amended (Stabilization Act), 12 USC § 1904 note (1975 Supp.), as incorporated into the Allocation Act by section 5(a)(1) thereof, 15 USC § 754(a)(1) (1975 Supp.), in any action where the district court determines that a substantial con- stitutional issue exists, the court must certify such issue for reso- luticn by the Temporary Emergency Court of Appeals. As the district court stated, citing Delaware Valley Apartment House Owners’ Ass’n v. U.S., 350 F.Supp. 1144 (E.D.Pa. 1972), aff’d, 482 F.2d 1400 (TECA 1973): ‘‘[s]uch [constitutional] questions are not substantial if they are plainly without merit or if previous Suprenie Court decisions appear to foreclose the subject.’’ 3 CCH Energy Management { 26,024 at p. 26,224. 4a (D.N.J. CA No. 75-150, Jan. 30, 1975), dismissed for lack of jurisdiction, 516 F.2d 1397 (TECA, 1975), 3 CCH En- ergy Management {| 26,019; Marathon Oil Co. v. F.E.A. (N.D. Ohio CA No, 75-36, Jan. 31, 1975), 3 CCH Energy Management { 26,015, dismissed for lack of jurisdiction, 916 F.2d 1397 (TECA, 1975), 3 CCH Energy Management 1 26,019; Gulf Oi Corporation v. F.E.A., 391 F.Supp. 856 (W.D.Pa. 1975), 3 CCH Energy Management {| 26,014, dis- missed for lack of jurisdiction, F.2d —— (TECA Slip Opinion No, 3-6, June 20, 1975). Notice of appeal was filed in this court by Cities Service on July 18, 1975. Exxon, Marathon, and Gulf, respectively, have filed briefs £n support of Cities Service’s position. Cities Service is an integrated petroleum company en- gaged in producing, transporting, refining, purchasing, and selling crude oil and petroleum products. A high propor- tion of the erude oil Cities Service refines is its own ‘‘old”’ oil production, i.e., crude oil the price of which is controlled by the FEA at approximately $5.25 under the two-tier price system, 10 CFR § 212.73.° The two-tier price system was upheld by this court in a comprehensive opinion dis- cussing the validity and effects of the system in Consumers Union v. Sawhill, -—— F.2d , rehearing en bane (Slip Opinion No. DC-26, July 7, 1975), 3 CCH Energy Man- agement § 26,011, vacating 512 F.2d 1112 (TECA, 1975). r > . . . . . . lhe two-tier price system effectively minimized the in- flationary impact of rising world-wide oil prices and pro- vided necessary incentives for increased domestic produe- ° The Cost of Living Council originated the ‘‘two-tier”’ pricing system for crude oil as a part of Phase IV of the Stabilization Pro- gram. 6 C.PLR. § 150, Subpart L, 38 F.R. 22,536 (Aug, 22 1973) These rules were subsequently adopted by the Federal Energy Office as 10 CFR § 212, Subpart D, 39 F.R. 1924 (Jan, 15 1974), The Federal Energy Office became the Federal Energy Administra- tion on June 27, 1974, pursuant to the Federal Energy Administra- tion Act of 1974, Pub, L. 93-275, 88 Stat. 97, 15 U.S.C. § 761 (1975 Supp.). 5a tion. However, with the end of the Arab oil embargo and emergence of adequate crude oil supplies, the in-put cost of crude oil to refiners assumed crucial significance. Con- sumers could buy gasoline from stations with the lowest prices, rather than from stations with the shortest wait- ing lines. Thus, the great disparity between the price of controlled and uncontrolled erude oil was having an un- equal impact on all refiners * and, contrary to other objec- tives of the Allocation Act, contained in sections 4(b)(1) (A)-(I), economie distortions, interference with the com- petitive viability of the small and independent sectors of the petroleum industry, and inequitable prices to consum- ers developed in certain areas of the country under the two-tier system due to the varying reliance of the geo- graphic region in which they made gasoline and petroleum product purchases on uncontrolled domestic and imported oil. Seeking to remedy this situation without losing the ben- eficial aspects of the two-tier price system, the FEA pro- mulgated the Entitlements Program.’ The basic purpose ® As this court stated in Pasco, Inc. v. F.E.A., —— F.2d (TECA Slip Opinion No. )-7, Oct. 14, 1975), 3 CCH Energy Management { 26,031 at p. 26,252, ‘‘During the base period of May, 1973, composite crude oil costs of all refiners were approximately equal; however, with the pricing system in effect, the major inte- grated oil companies, who as a class had far greater aecess to old oil, had significantly lower composite erude oil costs in refining their products than did the small and independent refiners.’’ Prior to the advent of the two-tier price system, Cities Service had higher weighted average crude oil costs than the weighted average cost for all major refiners; however, the circumstances necessitating implementation of the two-tier system and passage of the Alloca- tion Act resulted in the composite crude oil costs of Cities Service falling below that of other majors and the small and independent refiners. The Entitlements Program originated in a notice of proposed rulemaking issued by the FEA on August 28, 1974, 39 F.R. 31,650 (Aug. 30, 1974), following which publie hearings were held and over 600 comments were received by the FEA. A second notice of Ea of the Entitlements Program was to spread the benefit of access to old price-controlled oil and the burden of depen- dence on uncontrolled oil among all sectors of the petro- leum industry, all regions of the country, and among all consumers of petroleum products,’ while retaining the in- centives for increased production and anti-inflationary measures which the two-tier price system provided. The Entitlements Program essentially requires petro- leum refiners to shift their over-all reliance on controlled or uncontrolled oil to a more balanced position among all the refiners. A refiner must, under the Entitlements Pro- gram, have one entitlement for each barrel of old oil which it refines during any month. The FEA issues a certain number of entitlements to each refiner each month, based on that refiner’s proportionate share of all old oil refined on a nation-wide basis, adjusted somewhat by the small refiner bias.° The program thus commenced on the prem- ise that all refiners should be including an equal propor- tionate share of price-controlled oil in their refinery runs each month. proposed rulemaking was issued by the FEA on November 7, 1974, 39 F.R. 39,740 (Nov. 11, 1974), following which the FEA received over 175 comments on the proposed rule. On November 29, 1974, the FEA issued the Entitlements regulation in its final form. 39 FR. 42,246 (Dee. 4, 1974). * This court has previously stated with regard to a small refiner that: ‘‘Paseo, a profitable producer-refiner, operating in the pe- troleum industry, must accept its fair and equitable share of the burdens as well as the benefits of the programs implementing the Allocation Act which the national energy crisis necessitated.’’ Pasco, Inc. v. FEA, —— F.2d (TECA Slip Opinion No, 10-7, Oct. 14, 1975), 3 CCH Energy Management § 26,031 at p. 26,256. ° The small refiner bias provides additional entitlements to small refiners in an amount based on a designated percentage of each small refiner’s average daily volume of crude oil runs to stills. 39 F.R. 42,246 (Dee. 4, 1974). 7a Entitlement purchase obligations are imposed en a re- finery when, on the basis of information supplied to the FEA, it has been determined that the refiner was running more old oil as a percentage of its total crude oil refinery runs than the national average and consequently does not have sufficient entitlements for all of the old oil it has refined during that month. Those refiners with less old oil in their refinery runs than the national average would receive more entitlements than necessary for compliance, which they may sell to those refiners which have purchase obligations under the regulations. Thus, [b]y requiring refiners and importers who sell entitle- ments to reduce their crude oil or product costs by the amount of the entitlement sales proceeds, and al- lowing a purchaser of entitlements to include the cost of entitlements in its crude oil costs, the FEA basi- eally equalized the average weighted erude oil costs of all refiners, thereby eliminating the inequities caused by the ‘two-tier’ pricing me Pasco, Ine. v. FEA, F.2d —— (TECA Slip Opinion No. 10-7, Oct. 14, 1975), 3 CCH Energy Management { 26,031, at p. 26,252, rev’g —— F.Supp. -—— (D.Wy.Dkt. No. €75-91, Aug. 27, 1975), 3 CCH Energy Management {] 26,025. Cities Service contends on this appeal that the Fntitle- ments Program is not authorized by the Allocation Act and is not within the FEA’s authority to allocate and spee- ify prices for crude oil, residual fy! oil and refined pe- troleum products. This contention is based upon Cities Service’s misinterpretation of Section 4(a) of the Allo- cation Act and a disregard of the objectives, set forth by Congress in Section 4(b), which the regulations promul- gated under Section 4(a) are to achieve ‘‘to the maximum extent practicable.’’ Cities Service contends that the ob- jectives of Section 4(b) set forth goals to be accomplished by regulations promulgated under the Allocation Act, but Sa that those goals do not delegate any power or authority to the FEA independent of that authority contained in Section 4(a). It asserts that statutory goals such as ‘‘pro- tection of public health, safety and welfare ... and the national defense’’ are too broad to constitute a grant of any authority independent of Section 4(a). A proper interpretation of the Allecation Act and its provisions requires recognition of the fact that the author- ity under Section 4(a) must be read together with the ob- jectives which the exercise of that authority is to obtain. As stated by the Supreme Court in Richards vy. United States, 369 U.S. 1, 11, 82 S.Ct. 585, 591 (1962) : “We believe it fundamental that a section of a statute should not be read in isolation from the Context of the whole Act... .”’ In Mastro Plastics Corporation v. National Labor Rela- tions Board, 350 U.S. 270, 76 S.Ct. 349, 100 L.Ed. 309 (1956), the Supreme Court, in interpreting Section 8(d) of the National Labor Relations Act, as amended, rejected ‘‘a narrowly literal construction’’ of the statute and stated: If the above words are read in complete isolation from their context in the Act, such an interpretation is possible. However, ‘‘In expounding a statute we must not be guided by a single sentence or member of a sentence but look to the provisions of the whole law and to its object and policy.’’ United States v. Bois- dore’s Heirs (U.S.), 8 How 113, 122, 12 L.Ed. 1009. 550 U.S. at 285, 76 S.Ct. at 359, 100 L.Ed. at 321. N.L.R.B. v. Lion Oil Co., 352 U.S. 282, 288, 77 S.Ct. 330, 1 L.Ed.2d 351, 337 (1957); Allied Chem. & Alkali Wkrs. v. Pittsburgh Plate Glass Co., 404 U.S. 157, 185, 92 S. Ct. 383, 400, 30 L..Md2d 341 (1971); Golden State Bottling Co., Inc. v. N.L.R.B., 414 U.S. 168, 177, 94 S.Ct. 414, 421, 38 L.Ed.2d 388 (1973). In a recent decision of the Supreme Court, it has reaf- firmed these principles of statutory construction in holding 9a that the language and meaning of Section 7602 of the In- ternal Revenue Code of 1954 [| which authorizes the Internal Revenue Service (IRS) to issue summons to further its tax investigations] had to be interpreted in a manner consis- tent with the authority to conduct broad investigatory in- quiries conferred on the IRS under Section 7601, in order to avoid frustrating the purpose of those inquiries. United States v. Bisceglia, 420 U.S. 141, 150 (1975). In the Joint Explanatory Statement of the Committee of Conference on the Allocation Act, Conference Report 93- 628, 2 U.S. Code Cong. & Ad. News, 93 Cong., Ist Sess. 2688, 2689, the Committee stated: ‘*The President is intended to have full flexibility in devising the most effective and effi- cient means of meeting the priority needs of the American people identified in Section 4(b).’’ Thus, the allocation and pricing authority of Section 4(a) are without vitality un- less and until the FEA exercises such authority in a man- ner which, to the extent practicable, gives effect to the ob- jectives of Section 4(b). Neither was the allocation authority considered by Con- gress as being separate and apart from the pricing author- itv conferred on the FEA. The Conference Report states: “The conference committee has decided to couple price controls with the mandatory allocation authority so as to focus in a single act decision-making authority and respon- sibility for dealing with the fuels shortage situation .... Congress intends to force the Administration to rationalize and harmonize the objective of equitable allocation of fuels with the objective of the Economie Stabilization Act.’’ Con- ference Report 93-628, supra, 2 U. S. Code Cong. & Ad. News, 93d Cong., Ist Sess. 2688, 2702. Therefore, plaintiff’s insistence upon the bifurcation of the authority conferred on the FEA under Section 4(a) from the objectives of 4(b), in their endeavor to assert the lack of specifie authority under the Allocation Act for the Entitlements Program, is unwarranted and unreasonable. The Entitlements Program 10a is clearly within the authority conferred on the FEA under the Allocation Act.*° Cities Service further contends on this appeal that the Entitlements Program, 10 CFR § 211.67, as promulgated by the FIA, violates Section 4(b)(2)(A) of the Allocation Act by failing to provide Cities Service with an effective means of passing through its costs resulting from the En- titlements Program on a dollar-for-dollar basis. The Allo- eation Act, under Section 4(b)(2)(A) mandates that the FEA, in promulgating its regulations, provide a dollar-for- dollar pass-through of net increases in the cost of crude oil. The FEA has responded to this mandate through 10 CFR § 212.83(¢)(2). Under this regulation the cost of entitle- * While it is not necessary to go further in finding authority for the Entitlements program, we note that in Pasco, Inc. v. FEA, supra, 3 CCH Energy Management at p. 26,258, n. 21, this court stated that: ‘‘[t]he Committee Reports of the Senate and House are quite enlightening on the FEA’s authority to promulgate the Entitlements program.’’ During its consideration of the first exten- sion of the Allocation Act, a Senate Committee stated that the Allo- cation Act provides ample authority for the F E.A. to institute a system of price equalization to provide that a]! s.zments of the indus- try benefit from lower-priced domestic oil. The Committee was urged to amend the Act to achieve this objective but has been assured that F.E.A. intends to institute a price equalization program under existing authority in the immediate future. S. Rep. No. 93-1082, Comm. on Interior and Insular Affairs, 93d Cong., 2d Sess. at 2 (Ang. 9, 1974). Further, a House Committee Report, issued two months later, clearly indicates the FEA’s authority to institute a system of price equalization applicable to crude oil, residual fuel oil and refined products to eliminate the re- gional and competitive inequities which result from a depend- ence upon high-cost imported oils and petroleum products. The F.E.A.’s stated commitment to Subcommittee Chairman Mace- . donald during the hearings on this bill to move promptly on a price equalization program has convinced the Committee Pr eee lla ment purchases and the revenues from entitlement sales must be added to or deducted from the cost of crude oil purchased or landed in that month, for the purposes of cal- culating the increased cost to be applied to product prices for the following month under the ‘‘ A+’’ factor of Section 212.83(¢)(2), which is the general product pricing formula. Cities Service argues that because it has certain banked costs which it was unable to pass through in earlier months prior to the promulgation of the Entitlements Program, it cannot now pass through its entitlements costs due to the current passing through by Cities Service of these former banked costs. The FEA pass-through regulation provides that specific amendments to the Act to compel such action may prove to be unnecessary. HI. Rep. No. 93-1443, 93d Cong., 2d Sess. at 3 (Oct. 8, 1974). Cities Service contends that such legislative reports are ‘‘sub- sequent legislative history’’ such as are proscribed by the Supreme Court in Regional Rail Reorganization Act Cases, 419 U.S. 102, 132 (1974). The Court there stated, ‘‘post-passage remarks of legis- lators, however explicit, cannot serve to change the legislative intent of Congress expressed before the Act's passa’ e.’’ However, in this ease the Allocation Act was directly before Congress by reason of the expiration of the Act and the necessity of extending its provi- sions as Congress saw fit. Therefore, the above reports are con- temporaneous with the Act’s extension and, further, the remarks are not being used to indicate any different legislative intent, but rather that intent expressly found by a contemporaneous construc- tion of the Act by the agency charged with administering it. Courts give great deference to the construction of an Act by the agency charged with administering it, and hence where Congres- sional intent congruous therewith is found to have been expressed not subsequent to the Act’s passage but contemporaneously with the Act’s renewal, its pertinence to the court’s task in adjudging the agency’s exercise of authority under the Act is clear. See, gen- erally, Udall v. Tallman, 380 U.S. 1 (1965) ; Pacific Coast Meat Job. Ass’n, Inc. v. Cost of Living Coun., 481 F.2d 1388 (T.E.C.A. 1973) ; University of Southern California v. Cost of Living Coun., 472 F.2d 1065 (T.E.C.A. 1972). 12a for the pass-through of costs other than those derived from the Entitlements Program." However, Cities Service has, during the first four months of 1975, passed through under this regulation costs totaling more than their $23.9 million of entitlement purchases incurred over the same period of time.’* Whether or not the increased costs which Cities Service passed through were banked costs or entitlement costs, the FEA pass-through regulation is clearly effective for the purpose for which it was promulgated.'® Whether or not Cities Service passes through its entitlement costs in the month following their purchase, or in a much later month, depends on business judgments which Cities Serv- ice must make. The Allocation Act does not guarantee that all increased costs will be absorbed by the market place without any change in the market shares of the respective companies when they pass through such costs under section 4(b)(2)(A); rather, the Act merely mandates that an op- portunity for the pass-through of such costs be provided. This the FEA has done, and this court holds that the En- titlements Program does not violate section 4(b)(2)(A) of the Allocation Act. ** Under 10 CFR § 212.83, a refiner’s increased product and non- product costs may be included to the extent provided in § 212.83, in the computation under § 212.82 of base prices and allow. ole prices in excess of the base prices for covered products, ** See Finding of Fact Number 25, Cities Service vy. F.E.A., —~ F.Supp. (D.D.C, CA No, 75-653, July 10, 1975), 3 CCH Energy Management § 26,024 at p. 26,221, — ’* The district court did not, as appellant erroneously contends, premise its finding that Cities Service had failed to show that it could not recover its entitlement purchase costs from the market place on the conelusion that every dollar Cities Service recovered during the first four months of 1975 constituted a recovery of en- titlement purchase costs. The district court found that during the first four months of 1975 Cities Service was passing its increased costs through under 10 CFR § 212.83 and thus a mechanism was clearly available by which Cities Service could have passed through its entitlement purchase costs if it had chosen to do so. a tie sh 13a Cities Service further contends that the Entitlements Program is arbitrary and capricious and constitutes an abuse of administrative discretion on the part of the FEA, for the reasons that: the entitlements regulation faiis to provide for a separation of those companies within the pe- troleum industry which are integrated companies from those which are not: the Entitlements Program impacted on the market in such a way as to require certain further market distortions by the FEA through its exception proc- ess; and the small refiner bias included within the Entitle- ments regulation, 10 CFR § 211.67(e), is arbitrary and capricious. As stated in Pasco, Inc. y. F.E.A., supra, 3 CCH Energy Management {| 26,031, at p. 26,256. fiJn reviewing the discharge of an ageney’s function in interpreting the Act, promulgating regulations thereunder and applying and enforcing such regula- tions, this court has recognized that where administra- tive control has been Congressionally authorized, the ‘‘iudicial function is exhausted when there is found to be a rational basis for the conclusions approved by the administrative body.’’ Pacific Coast Meat Jobbers As- sociation, luc. vy. Cost of Living Council, 481 F.2d 1388, 1391 (TECA 1973), which was quoting from Missis- sippi Valley Barge Co. v. United States, 292, U.S. 282, 286-287, 54 S.Ct. 692, 694, 78 L.Ed. 1260 (1934). This court, in Pasco, found that the plaintiffs in that case had failed to establish that the Entitlements Program was arbitrary, capricious, or beyond the agency’s authority due to its failure to make a differentiation within the regulation between refiners producing their own crude oil and those refiners purchasing their refining needs. In so holding, we stated: The regulation, [10 C.F.R. 211.67] by granting en- titlements to those refiners with old oil ratios below the national ratio due to their own high production of l4a new, released and stripper well oil, merely provides for the continuation of the monetary incentive which was a fundamental part of the ‘‘two-tier’’ pricing system. The correction of economic distortion and un- fair competitive conditions occasioned by the ‘‘two- tier’’ system was considered essential by Congress and the FEA. ... This court finds ample support for the entitlements regulation as promulgated by the FEA and, considering the urgent need for action, the im- plementing agency’s program for achieving the varied objectives of the Allocation Act was certainly rational and neither arbitrary, capricious, nor beyond the au- thority of the agency. Pasco, Inc. v. F.E.A., supra, 3 CCH Energy Management {| 26,031, at p. 26,258. We therefore hold that the Entitlements regulation is a rational response to the changing conditions under which the objectives of section 4(b) must be read, and that the regulation is not arbitrary, capricious or an abuse of ad- ministrative discretion. In accord with the decisions of three district courts which had previously faced the question of the constitu- tionality of the Entitlements Program, Exxon Oil Com- pany Vv. F.E.A., supra; Marathon Oil Co. v. F.E.A., supra; and Gulf Oil Corporation v. F.F.A., supra, the district court in this case found that the contentions of Cities Serv- ice as to the unconstitutionality of the program did not present susbtantial constitutional questions requiring certi- fication to this court. Cities Service contends on this appeal that the entitlement purchase obligations imposed on it under 10 CFR § 211.67 are ‘‘a prima facie case of taking private property and direct bestowal upon another’’; that Cities Service is being deprived of its secure access to do- mestic oil; that the Entitlements regulation constitutes a taking without just compensation; and that it is an uncon- stitutional tax. Be 8 ee et nee ame. 8 Bed ae Re UR Rn ees ee ee en ee 15a Claims for compensation from the government based upon the Fifth Amendment to the Constitution require a direct appropriation by the government of the claimant’s property and do not encompass ‘‘consequential injuries re- sulting from the exercise of lawful power.’’ Knox v. Lee, 79 U.S. 457, 551 (1870). In reviewing an order of the War Production Board which required the shut-down of non- essential gold mines due to the short supply of equipment and resources, the Supreme Court, in United States v. Central Eureka Mining Co., 357 U.S. 155, 168 (1958), ree- ognized that action under a regulation may so diminish the value of property as to constitute a taking, but stated: ‘*(T]he mere fact that the regulation deprives the property owner of the most profitable use of his property is not necessarily enough to establish the owner’s right to com- pensation.’’ ** Cities Service and the amici curiae ardently contended that Thompson v. Cons "idated Gas Utilities Corp., 300 U.S. 55 (1937), ‘‘closely ; arallels’’ or ‘‘controls’’ this ap- peal and mandates a finding that the Entitlements program is unconstitutional. For the reasons discussed below we re- ject this contention. In Thompson, the Supreme Court held invalid a gas pro- ration order issued by the Texas Railroad Commission which limited the production of sweet gas from the plain- tiffs’ wells to an amount below their production levels, transportation and marketing capacities, and contractual market requirements. This order was issued December 10, 1935, pursuant to House Bill No. 266 (Acts of Texas 1935, ce. 120, Vernon’s Ann. Civ Stats. Texas, art. 6008), which ‘ This court had previously held, with regard to the Economic Stabilization Program, that the imposition of price ceilings on beef or the freezing of beef prices was not a ‘‘taking of their property without just compensation in violation of the due process clause of the fifth Amendment.’’ Western States Meat Packers Ass’n Ine. v. Dunlop, 482 F.2d 1401, 1403 (TECA 1974). 16a was enacted as ‘‘a comprehensive conservation statute.’’ * Consolidated Gas Utilities Corp. v. Thompson, 14 F.Supp. 318, n. 3, 319-321 (W.D.Tex. 1936). The Supreme Court stated that the statute, construed as authorizing regulations to prevent waste, and to create and protect correlative rights of owners in a common reservoir of gas ..., is a valid exercise of the State’s undoubted power to legislate to those ends. ... But, obviously, the proration orders would not be valid if shown to bear no reasonable relation either to the prevention of waste or the protection of correlative rights.... 300 U.S. 55, 69. Finding that plaintiffs had amply demon- strated that their operations were free of waste and that continued operations would not be prejudicial to any public 1° The Commission order in question indicated that because of the lack of any market demand for natural gas, ‘‘intolerable waste ‘ was occurring and ‘‘by the fall of 1934, in excess of one billion cubic feet of gas was being blown into the air daily.’’ Consolidated Gas Utilities Corp. v. Thompson, 14 F.Supp. 318, n. 3, p. 319-321 (W.D. Tex. 1936). The Supreme Court, quoting from special find- ings of the lower court, found adequate support for plaintiff's assertions that House Bill 266 was a conservation statute intended to prevent waste and that the plaintiffs were not committing any wasteful acts. Phe Court stated: ‘‘Before House Bill 266 went into effect, grossly wasteful practices in the production of natural gas in the Panhandle field were occurring,’’ but ‘‘most of this waste was due to the extravagant production of natural gas from oil wells and to the production of gas from gas wells and processing such gas for the extraction of a very smal! quantity of natural gasoline therefrom and popping or wasting to the air the residue gas, which constituted 97% of the fuel value of the gas in its orig- inal state. .. . No evidence was offered—indeed, it was not even seriously claimed—that anything complainant had done or contemplated doing has, in the slightest degree, contributed or will contribute to that waste.’ Thompson v. Consolidated Gas Utilities Corp., 300 U.S. 55, 70 (1937). l7a interest or private property rights, the Court concluded that the ‘‘sole purpose’? of the orders limiting the plain- tiff’s production was ‘‘to compel complainants to afford markets to those having none,’’ 300 U.S. 55, 77-8, and as such, the orders were invalid. However, in Railroad Com. v. Rowan & Nichols Oil Co., 310 U.S. 575 (1940), the Supreme Court upheld an oil pro- ration order of the Texas Railroad Commission for the East Texas oil field against a Fourteenth Amendment at- tack that by virtue of allowances made to ** marginal wells” (which would have had to be prematurely abandoned had the proration formula restricted their low productive ea- pacity), ‘*[t}he Commission’s proration formula as applied permits other leaseholders, more leniently treated, to cap- ture oil at a more rapid rate than is possible for the re- spondent, thereby draining away oil which underlies re- spondent’s leased lands.’? 310 U.S. 577, 578. The individual interests of the small well operators and their effect on the state’s economy, as well as the general problem of pro- rating the oil and gas production in the state, were consid- ered by the Court to be within the province of the Com- mission.”” The Court particularly noted, at 310 U.S. 577, O83 n. 1, that: *® Referring to the complex “‘ brood of litigation’’ challenging the administrative determinations which developed out of the states’ attempts to adjust leasehold owners’ interests with the ‘‘rule of eapture,’’ the Court, in Railroad Com. v. Rowan & Nichols Oil Co., 310 U.S. 573, 580-584 (1940), stated: [S]uch cases are only episodes in the evolution of adjustment among private interests and in the reconciliation of all these private interests with the underlying public interest in such a vital source of energy for our day as oil. Certainly so far as the federal courts are concerned the evolution of these formulas belongs to the Commission and not to the judiciary. A controversy like this always calls for fresh reminder that courts must not substitute their notions of expediency and fairness for these which have guided the agencies to whom the 18a We are here not concerned with a statute, or orders under it, not thought to enforce state policy **for the prevention of waste, and the protection of correlative rights of owners in the common pool,’’ but directed solely **to compel those who may legally produce, be- ‘ause they have market outlets for permitted uses, to purchase gas from potential producers whom the statute prohibits from producing because they lack such a market for their possible product.’’ Thompson vy. Consolidated Gas Utilities Corp., 500 U.S. 55, 69, 77, 81 L ed 510, 517, 522, 57 S Ct 364, [Emphasis added] The differences between the circumstances and _ princi- ples considered and discussed in Thompson and the rele- vant considerations before us now are abundantly clear. Girossly excessive production in the Hast Texas oil fields twice drove the price of East Texas oil down to ten cents or less per barrel during the early 1930's." In Cities Serv- ice Gas Co. v. Peerless Oil & Gas Co., 540 US. 179 (1950), formulation and execution of policy have been entrusted... . It is not for the Federal courts to supplant the Commission's judgment even in the face of convincing proof that a different result would have been better. ? Hardwicke, Legal History of Proration of Oil Production in Teras, 56 Tex. Bar Ass’n Proceedings 99, 111, 120 (Tex. i.R. 1937). By 1932, oil and gas were ‘‘universally recognized by courts and Legislatures as natural resources; and legislation looking to their conservation and the prevention of .. . [their waste had] been enacted in practically every state where these resources .. . [were] discovered.’’ Danciger Oil & Refining Co. v. Railroad Commission, 49 S.W.2d 837, 840 (Tex. C.A.—Austin 1932). It was legislation dealing with these interests of conservation which spawned con- tumacious production and voluminous litigation for many years. For a background of the Texas experience and the litigation of the oil and gas legislation enacted there, referred to by the Supreme Court in Railroad Com. v. Rowan & Nichols Oil Co., 310 U.S. 573, 580 (1939), as an example of the litigation following administra- tive efforts to solve the adjustment of state and private interests in natural resources, see the Special Order in question and quoted in Consolidated Gas Utilities Corp. v. Thompson, 14 F.Supp. 318, n. 3, 319-321 (W.D. Tex. 1936). 19a the Supreme Court upheld orders of the Oklahoma Cor- poration Commission which required Cities Service to make a connection with, and take natural gas ratably from, a Peerless Oil & Gas Company well at a price no less than seven cents per thousand cubic feet. Finding the minimum price-fixing order lawfui as it was substantially related to the alleviation of ‘‘existing low field prices [which] were ‘resulting in economic waste and conducive to physical waste,’ ’’ the Court rejected Cities Services’ Due Process and Equal Protection attacks on the Commission orders as being *‘ virtually without substance.’’ 340 U.S. 179, 185-6. The factual background which preceded enactment of the Allocation Act evidences the increasingly demanding and complex problems facing the country and its governing bedies. The United States unquestionably has become peri- lously dependent on foreign produced oil, the supply of which is very unstable. By 1975, before the Arab oil em- bargo, the percentage of crude oil imported for consump- tion in the United States had reached 35 per cent."* The Emergency Petroleum Allocation Act of 1973, as amended, was enacted to meet this and other related energy prob- lems. While the nation’s supply of domestie and imported crude oil is presently adequate, there is a severe shortage of domesticaily produced crude oil. The availability of im- ported crude oil is uncertain, and it can be purchased only at drastically higher prices. Greater aecess to lower cost domestic crude oil by the larger refiners as a class, leaving the small and independent refiners as a class to fend for themselves in purchasing the higher priced imported or domestically produced ‘‘new’’ oil, brought about the ne- cessity for the Entitlements program. 1® Project Independence, Executive Summary, 3 CCH Energy Management {] 25,005, at p. 25,012 (Fall 1974). 20a We repeat that the Entitlements program, like others under the Allocation Act, is a temporary program. Condor Operating Co. v. Sawhill, 514 F.2d 351 (TECA 1975), cert. denied, 421 U.S. 976 (1975)."* It composes one segment of an over-all emergency program designed to alleviate the inflationary-recessionary effects on the United States of the Arab oil embargo and the four-fold increase in world oil prices, while the nation prepares itself for energy self- sufficiency and recovery of its econoinie stability and free- dom. The smaller refiners and independent marketers were hit much harder by these world events than were the larger and often integrated oil companies. The fact that Cities Service cannot now capitalize upon these events and refine its own much lower priced oil at will and thereby gain a larger market share or even higher profit margins does not render the program unconstitutional. As stated in Condor Operating Co. v. Sawhill, supra, at 361: The regulation of future action based on rights previ- ously acquired by the person regulated is not per se prohibited by the constitution. Fleming v. Rhodes, 331 U.S. 100 (1947). Reasonable and practical regulations which are generally fair and equitable, although not necessarily so as applied to a particular person, are not unconstitutional when general regulations are nec- essary to accomplish an appropriate congressional purpose. Bowles vy. Willingham, 321 U.S, 505 (1944), Wilson v. Brown, 137 F.2d 348 (Em.Ct. App, 1945). '° The Allocation Act was originally scheduled to expire on Feb- ruary 28, 1975, but on December 5, 1974 it was extended to August 31. 1975. Pub.L. 93-511, 88 Stat. 1608, 1 U.S. Code Cong. & Adm. News, 93rd Cong., 2nd Sess. 1852 (1974). The Allocation Act was extended by Congress again on September 29, 1975 until the 15th of November, Pub. L. 94-99, 89 Stat. 481, 94th Cong., Ist Sess., 121 Cong. Rec. 11 $193 (Sept. 26, 1975). On November 14, 1975, Presi- dent Ford signed Public Law 94-133, which extends the Allocation Act until December 15, 1975. 94th Cong., Ist Sess., 121 Cong. Ree. S. 20046 (Nov. 14, 1975). 2la In determining the validity of the stabilization authority granted the President under the [economic Stabilization Act, the three-judge court in Amalgamated Meat Cuiters & Butcher Work. v. Connally, 337 ¥. Supp. 737, 754 (D.D.C. 1971), noted the relevance of the time frame imposed upon that Act. See Fry v. United States, —— U.S. ,95 S.Ct. 1792, 1796 (1975). This court has recognized time re- straints on the Allocation Act. In Condor Operating Co. v. Sawhill, supra, at p. 562, this court said: Essential powers of government to meet this or other crises in perilous tiines would be frustrated by the adoption of an excessively rigid and unprecedented construction inhospitable to broad realities. ** A limit in time, to tide over a passing trouble, well may justify a law that could not be upheld as a permanent change.’’ Block vy. Hirsch, 256 U.S. 135, 157 (1921). ... Whether the challenged regulation and enforce- ment order would pass muster as a long continuing response to chronic energy problems need not be de- cided.*” 7° A comparable price equalization pooling program, instituted by the Secretary of Agriculture under the Agricultural Marketing Agreement Act of 1937, was upheld by the Supreme Court against contentions that it was contrary to the Fifth and Fourteenth Amendments to the Constitution and an improper delegation of legislative power, in United States v. Rock Royal Co-Operative, 307 U.S. 533 (1939). The program was implemented to insure an adequate supply of milk while providing a fair division of this most profitable market among producers, All milk producers re- ceived a uniform price under the regulation for milk sold to milk handlers even though the value of the milk to the milk handler varied considerably, depending on the particular use made of the milk. However, those handlers putting their milk to a more profit- able use were required, under a formula described by appellants herein as being ‘‘nearly as complex as the CEP [Entitlements Program],’’ to pay money through a pooling arrangement to those handlers using their milk in a less projitable fashion. While the regulation as originally applied and upheld by the Supreme Court did not regulate producer-handlers in their capacities as handlers, 22a Further, it is well established that a regulatory scheme will not constitute a tax within the meaning of Article I, Section 8, Clause 1 of the Constitution, unless the real pur- pose and effect of the statute and regulations promulgated thereunder is to raise revenues for the general support of the government. Head Money Cases (Edye v. Robertson), 112 U.S. 580, 595, 5 S.Ct. 247, 28 L.Ed, 798, 805 (1884) ; Moon v. Freeman, 379 F.2d 382, 391 (9th Cir. 1967) ; United States v. Strangland, 242 F.2d 8438, 848 (7th Cir. 1957); Rodgers v. United States, 138 F.2d 992, 995 (6th Cir. 1943). As the court stated in Rodgers vy. United States, supra, at p. 994: The test to be applied is to view the objects and pur- poses of the statute as a whole and if from such exam- ination it is concluded that revenue is the primary pur- pose and regulation merely incidental, the imposition is a tax and is controlled by the taxing provisions of the Constitution. Conversely, if regulation is the pri- mary purpose of the statute, the mere fact that inci- dentally revenue is also obtained does not make the imposition a tax, but a sanction imposed for the pur- pose of making effective the congressional enactment. Clearly, the Entitlements program does not, even inciden- tally, raise any revenue for the government or for its sup- port. The entitlements regulation furthers the objectives and purposes of the Allocation Act by regulating refiners’ access to crude oil, the price of which has been set below its market value in furtherance of other objectives of the Al- location Act. In addition, the Allocation Act and FEA reg- ulations permit Cities Service to pass through its increased costs under the program and provide measures for the alle- i.e., it did not impose any payment obligation on a handler which was handling or processing its ‘‘own-produced’’ milk, such was subsequently required under an amendment to the regulation issued in 1957. The regulation as amended was upheld in /deal Farms, Inc. v. Benson, 288 F.2d 608 (3 Cir. 1961), cert. denied, 372 U.S. 965 (1963) ; Freeman v. Vance, 319 F.2d 841 (5th Cir. 1962). ee 23a ° viation of extreme hardship through the exemption proe- ess, and the regulatory exceptions from its operations. We hold that the Entitlements Program, promulgated under the authority of the Alloeation Act, is valid and con- stitutional; that the contentions of Cities Service are re- jected; that the judgment of the District Court was correct; and it is affirmed. SO ORDERED. (Caption Omitrep 1x Printine) Upon consideration of Appellants’ Petition for Rehear- ing, Ir Is Orverep that said Petition is denied. For tHe Court /s/ Rutu H. Jacosson Ruth H. Jacobson Clerk January 28, 1976 24a UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA Civil Action No. 75-653 Crtres Service Company, et al., Plaintiffs, v. FeperaL Enercy ApMInistration, et al., Defendants. (Fmep Juiy 10, 1975) Findings of Fact and Conclusions of Law This matter came before the court on plaintiffs’ motion for a preliminary injunction and defendants’ opposition thereto. Plaintiffs interposed no objection to this court consolidating this hearing with a plenary hearing on the merits. (Tr. 12). Defendants objected only in the event that the effectiveness of the passthrough provision was important to plaintiffs’ constitutional argument. (Tr. 53). Under the circumstances the court has concluded that this is a proper case for consolidation of the motions hearing with the hearing on the merits. See Fed. R. Civ. P. 65(a) (2). In particular, this will allow expeditious appellate review of the important entitlements program. Accord- ingly, the following findings of fact and conclusions of law pertain both to plaintiffs’ motion for preliminary in- junction and also to a ruling on the merits. For the reasons which follow plaintiffs’ motion will be denied and judg- ment shall be entered for defendants. Finpinos or Fact 1. Plaintiff Cities Service Company is a corporation organized and existing under the laws of the state of Dela- ware with its principal office and principal place of busi- ness at the Cities Service Building in Tulsa, Oklahoma. Plaintiff Cities Service Oil Company is also a corpora- tion organized and existing under the laws of the state 2a of Delaware with its principal office and principal place of business at the Cities Service Building in Tulsa, Oklahoma. Plaintiff Cities Service Oil Company is a wholly-owned subsidiary of Ciites Service Company. (The plaintiffs here- inafter will be referred to as ‘‘Cities Service’’). 2. Cities Service is engaged in the business of produc- ing, transporting, refining and selling crude oil and refined petroleum products in the United States. Cities Service has a total refinery capacity of 268,000 barrels of erude oil per day. 3. Defendant Federal Energy Administration (FEA) is an ageney and instrumentality of the United States under the Federal Energy Administration Act of 1974, 15 U.S.C. § 761 ef seq; and was established by Executive Or- der No. 11,790 (June 27, 1974). The FEA is charged with administering the Emergency Petroleum Allocation Act of 1973, (*‘Alloeation Act’’) (Pub. L. No. 93-159, November 27, 1973; as amended, Pub. L. No. 93-511, December 5, 1974). 4. Defendant Frank G. Zarb is the Administrator of FEA. 5. The Allocation Act requires FEA, as the delegate of the President, to promulgate a regulation for the man- datory allocation and pricing of crude oil, residual fuel oil and refined petroleum products produced in or imported into the United States (§4(a)). Those regulations are to implement ‘‘to the maximum extent practieable’’, the ob- jectives set forth in Section 4(b)(1) of the Allocation Act. 6. The Section 4(b)(1) objectives are: the protection of public health, safety and welfare; maintenance of all pub- lic services and agricultural operations; preservation of an economically sound and competitive petroleum indus- try, including the priority need to preserve the competi- tive viability of independent refiners, small refiners, non- branded independent marketers, and branded independent 26a marketers; the allocation of crude oil for refiners in the United States to enable such refiners to operate at full capacity; equitable distribution of crude oil, residual fuel oil, and refined petroleum products at equitable prices among all regions and areas of the United States, sectors of the petroleum industry and among all users; economic efficiency; and minimization of economic distortion, inflex- ibility, and unnecessary interference with market mechan- isms. 7. To fulfill these objectives, the President first estab- lished the Federal Energy Office (‘‘FEO’’) which adopted fuel allocation rules in December, 1973 and revised Petro- leum Allocation and Price Regulations on January 14, 1974. (39 F.R. § 1924 et seq.) 8. The regulations adopted by FEO, the predecessor of FEA, incorporate a two-tier pricing system for erude oil, which was established by the Cost of Living Council (“*CLC’’) in August, 1973, during Phase IV of the Eco- nomic Stabilization Program (6 C.F.R. § 150, Subpart L). 9. The two-tier pricing system on crude oil is designed to effectuate two purposes: (1) to curb the inflationary impact on the United States economy of rising erude oil prices caused by the concerted action of certain Arab oil producing nations; and (2) to encourage the development of new sources of domestic oil in order to reduce depend- ence on foreign supplies. The two-tier pricing system seeks to effectuate those dual purposes, basically, by placing a ceiling price on what is termed ‘told’? domestic oil, thereby combating inflationary prices, while permitting newly dis- covered domestic oil to sell at the market price, thereby encouraging the development of domestic supplies. 10. More specifically, the two-tier pricing system im- poses a ceiling price of approximately $5.25 per barrel on all ‘‘old’’ domestic crude oil, which is that amount of oil produced from a given property at or below the level of production from the same property in 1972. Crude oil pro- 27a duced in excess of 1972 production levels from the same property (‘‘new”’ oil) is sold at market prices, and each barrel of ‘‘new’’ oil produced releases from the ceiling _ price a barrel of old oil (‘‘released’’ oil). The first sale of imported crude oil into the United States remains free from price controls under FEA regulations, and the first sale of crude oil produced from ‘‘stripper’’ wells (wells producing less than 10 barrels per day) also is exempted from price controls under Section 4(e)(2)(A) of the Allo- cation Act. 11. Domestic crude oil which is not subject to a ceiling price, i.e., new, released and stripper well oil, presently sells at approximately $11.28 per barrel, while foreign crude oil now sells at approximately $12.63 per barrel. Ap- proximately 60 percent of all crude oil runs to stills in the United States consists of oil not subject to an FEA ceil- ing price, while the balance, FEA price-controlied old oil, represents approximately 40 percent of all crude oil runs to stills. 12. The great disparity between the price of ‘‘old’’ oil and all other forms of oil in the United States, which is a direct result of FEA’s two-tier pricing system was not, however, having an equal impact on all vefiners, marketers and consumers. Instead, there existed uneven access to price controlled ‘‘old’’ oil, with most major integrated oil companies having far greater access to old oil than did the small and independent refiners, as a class. Thus, those refiners, including some majors, which were forced to rely more heavily on uncontrolled domestic or foreign crude oil incurred higher composite crude costs in the refining of products than those which had greater access to price- controlled old oil. The uneven distribution of old oil among refiners which created significant input crude cost differ- entials was translated into significant price differentials among refiners in their sales of refined petroleum products under applicable FEA price regulations. The end result 28a was that marketers and consumers were paying signifi- cantly different prices for the same refined product. 13. With the termination of the Arab oil embargo and a reemergence of adequate supplies, many of those re- finers with higher input costs due to their low proporiion of old oil, and those marketers to whom they sell, have had to endure a severe cost-price squeeze in order to re- main competitive. A significant number of small and in- dependent refiners and independent marketers—unable to absorb the full amount of such costs—were forced to charge higher prices for their products than their competitors. 14. Since the two-tier prieing system made price-con- trolled old oil more valuable to refiners than other types of uncontrolled domestic and foreign erude oil, FEA con- cluded that it was necessary to allocate the benefits of low priced old oil equitably throughout all segments of the petroleum industry, all regions of the country, and all users of petroleum products. Accordingly, on August 30, 1974, FEA published a notice of proposed rulemaking which culminated in the Cost Equalization Program (also referred to as the ‘‘CEP”’’, ‘‘Entitlements Program’’ or ‘Qld Oil Allocation Program’’) at issue in this proceed- ing. 10 C.F.R. § 211.67. 15. Under the cost equalization program, FEA issues monthly to each domestie refiner that number of ‘‘entitle- ments’’ which is equal to the refiner’s proportionate share of the monthly national old oil supply, with an upward ad- justment in the number of entitlements issued to those refiners qualifying for a ‘‘small refiner bias’’. An ‘‘entitle- ment’’ is defined as the right of a refiner owning the en- titlement to include one barrel of old oil in its adjusted crude oil receipts in a particular month. 16. Entitlements issued in January 1975, the first month of the program, apply to November 1974 crude oil runs to stills. Similarly, entitlements issued in February 1975 ap- ~~ 29a ply to December 1974 data, and the same sequence con- tinues for each subsequent month of the program. 17. Refiners with more than their proportionate share of the national old oil supply must purchase entitlements for their excess supply from refiners with less than their proportionate share. Since FEA establishes the price of an entitlement each month with reference to the difference between the controlled and uncontrolled price of crude oil ($5.00 per entitlement for January and February; $6.00 per entitlement for March; $6.75 for April; and $7.31 for May), the net effect of the program is to give all refiners an equitable share of the benefits of price-controlled old oil. 18. To determine the precise number of entitlements issuable to a refiner (a refiner’s proportionate share of the total old oil supply in a given month), FEA computes an ‘‘adjusted national old oil supply ratio’’ for each month. This ratio is the volume of old oil included in the aggre- gate crude oil receipts for all domestic refiners, expressed as a percentage of the total volume of crude oil runs to stills for all domestic refiners for that month. For exam- ple, if the total number of barrels of old oil was 200 million and the total number of crude runs is 500 million bar- rels, the old oil supply ratio is 2/5 or 40 percent. Thus, if all old oil were equitably allocated among all domestic re- finers, each refiner would have crude oil runs which con- sist of 40 percent old oil. Since, however, FEA also issues entitlements to small refiners in a number adjusted up- ward in accordance with a ‘‘small refiner bias’’, the total volume of old oil used to caleulate the national old oil supply ratio must be reduced by the number of additional entitlements so issued. Having established an adjusted national old oil supply ratio in the above manner, FEA applies this ratio to each domestic refiner’s volume of crude oil runs and then issues to each refiner a sufficient number of entitlements to cover that percentage of its crude runs to stills. 30a 19. In addition to the number of entitlements it would otherwise receive as a refiner, a small refiner receives a further number of entitlements under a small refiner bias. Small refiners with a daily average volume of crude oil runs to stills of less than 175,000 barrels for a particular month are issued additional entitlements for each day of that month in a number equal to a designated percentage of its average daily volume, with the percentage basis be- coming greater as crude oil runs become simaller. 10 C.F.R. § 211.67(2). 20. All refiners that sell entitlements are required to count their proceeds on entitlements sales as a reduction in crude oil or product costs. 21. All refiners that buy entitlements are permitted to count the cost thereof as an addition to crude oil costs. FEA rules further permit these increased crude oil costs to be passed through to the ultimate consumer on a dollar for dollar basis (the decision on whether to pass the costs along is left to the individual refiner). 22. Each month FEA publishes a list setting forth the name of each refiner to which entitlements have been issued; the number of entitlements issued to each such refiner ; the number of entitlements to be purchased or sold by each such refiner; and the number of barrels of old oil ineluded in each refiner’s crude oil receipts. Entitlement purchases must be concluded by the last day of the month in which the entitlement list is published. Plaintiffs have been listed as a purchaser in each entitlement notice pub- lished since the advent of the program and up to mid-June, 1975 have purchased entitlements at a total amount of $23,901,194. Pursuant to the Entitlements Notice published on June 23, 1975 (40 F.R. 26498), plaintiffs are required to have purchased an additional 1,116,232 entitlements at a cost of $7.29 per entitlement by June 30, 1975. 23. On February 7, 1975, Cities Service filed with the FEA Office of Exceptions and Appeals its application for ae ST dla exception to the provisions of 10 C.F.R. § 211.67, relating to allocation of old oil, on grounds that the program is unlawful. By decision and order dated February 20, 1975, the Office of Exceptions and Appeals denied Cities Service’s application for exception. Cities Service Company, 2 FEA {| 83,043 (February 20, 1975). 24. On Mareh 24, 1975, Cities Service filed with the IEA Office of Exceptions and Appeals its appeal of the decision and order denying Cities Service’s application for exception. By decision and order dated April 8, 1975, the Office of Exceptions and Appeals denied Cities Service’s appeal. Cities Service Company, 2 FEA {§ 80,568 (April 8, 1975). 25. As of December 31, 1974, Cities Service had sig- nificant amounts of increased product costs which it had banked and which it hoped to recover during 1975. The precise figures are set forth in the Affidavit of Charles D. Head, Jr. Because that affidavit contains arguably con- fidential information, the court will not quote precise fig- ures. During the first four months of 1975 Cities Service has incurred further increased costs; as of April 30, 1975, its increased costs due to entitlement purchases amounted to $23,901,194. In the first four months of 1975 Cities Serv- ice has been able to recover significant amounts in increased product costs. The precise amount is set forth in the Head Affidavit and is in excess of the amount paid for entitle- ments over the same period. From the foregoing the court finds that Cities Service has not shown that it cannot re- coup its entitlement costs from the marketplace. 26. A refiner with more than its proportionate share of the national old oil supply may sell its old oil and thereby avoid the need to purchase entitlements. Concuiusions or Law 1. This court has jurisdiction of this action under Sec- tion 5(*)(1) of the Emergency Petroleum Allocation Act, 32a which incorporates §4 205-211 of the Economic Stabiliza- tion Act of 1970, (‘‘Stabilization Act’’), as amended, P.L. 92-210, 85 Stat. 743. 2. Under Section 211(d) of the Stabilization Act, Dis- trict Courts of the United States may enjoin, temporarily or permanently, the application of a regulation only if the regulation was in excess of the agency’s authority, was arbitrary or capricious, or was otherwise unlawful under 5 U.S.C. 706(a). 3. To qualify for the extraordinary relief of a prelim- inary injunction, plaintiffs must demonstrate: (1) a sub- stantial likelihood of success on the merits; (2) that with- out immediate injunctive relief plaintiffs will suffer irrep- arable harm; and (3) that the public interest will not be impaired by the granting of injunctive relief. Virginia Pe- froleum Jobbers Ass’n vy. Federal Power Commission, 259 F.2d 921, 925 (D.C. Cir. 1958); MeGuire Shaft & Tunnel Corp. v. Local Union Co. 1791, U.M.W., 475 F.2d 1209, 1216 (T.E.C.A.), cert. denied, 412 U.S. 958 (1973). Plain- tiffs have failed to establish any of those elements. 4. The cost equalization program is a valid exercise of FEA’s allocation authority under Section 4(a) of the Allo- cation Act. Through the issuance of entitlements, the pro- gram distributes old oil and uncontrolled oil among do- mestie refiners and, therefore, constitutes an ‘‘alloeation’’ regulation within the plain meaning of Section 4(a) of the Act. As three District Courts already have held, the fact that the program does not require a physical transfer of oil is irrelevant since the program achieves the same result as a physical allotment of oil without the disruptive physi- eal element. Marathon Oil Co. v. FEA, Civil Action No. 73-36, N.D. Ohio, Western Division, January 31, 1975, dis- missed for lack of jurisdiction, —— F.2d , T.E.C.A. No. 6-8, April 21, 1975; Exron Oil Company v. FEA, Civil Action No. 75-150, D.N.J., January 30, 1975, dismissed for lack of jurisdiction, —— F.2d , T.E.C.A. No. 3-5, April —— om . on hs 30a 21, 1975; Gulf Oil Corporation v. FEA, Civil Action No. 75- 157, W.D. Pa., February 4, 1975, dismissed for lack of jurisdiction, —— F.2d ——, T.E.C.A. No. 3-6, June 20, 1975. 5. The principle of a cost equalization program was ap- proved by both Houses of Congress at the time they ex- tended the Allocation Act S. Rep. 93-1082, Comm. on In- terior and Insular Affairs, 93d Cong., 2d Sess. at 2, August 9, 1975; and H. Rep. No. 93-1443, 93d Cong., 2d Sess. at 3, October 8, 1974. 6. The scope of judicial review of FEA’s regulations is a narrow one under Section 706 of the Administrative Pro- cedure Act, 5 U.S.C. § 706. The issue before the reviewing court is not whether the agency’s decision was the best one possible or whether the reviewing court agrees with the decision. Instead, the agency’s decision must be sus- tained if on all the facts it had a rational basis. E.g., Pa- cific Coast Meat Jobbers Ass’n v. Cost of Living Council, 481 F.2d 1239 (T.E.C.A. 1974); Condor Operating Co. v. Sawhill, F.2d —— (T.E.C.A. February 5, 1975), cert. denied, US. (1975); Exxon Corp., et al v. FEA, et al., Civil Action Numbers 74-1617; 74-1658; 74-1705 (D.D.C. June 17, 1975) (Slip op. at 13-14). The Condor court stated: Where the obvious intent of Congress is to give the resident and his delegates broad power to do what reasonably is necessary to accomplish legitimate pur- poses rendered necessary by a recognized emergency, and regulations are fashioned to implement the Con- gressional mandate, the court should not interfere with the prerogative of the agency to select the remedy which for rational reasons is deemed most appropri- ate. ... Exercising of the administrative authority and the accomplishment of purposes enumerated by Congress under the recognized emergency conditions are exceed- 34a ingly complicated undertakings. The petroleum indus- try itself is a complicated one. By reason of its inti- mate and convoluted relationship with the whole econ- omy of the country it also tends to take upon itself the myriad problems besetting marketing and business ac- tivities generally It would be the height of folfy and grievously incompatible with the rule of deference... mvyopically to ‘solve’ these problems solely on the basis of [plaintiff's] situation or by the court’s off-hand ideas of regulatory alternatives differing from the ra- tional approach set by the agency. [Plaintiff] considers only its own situation, But agency orders are not te be read in a vacuum but rather must be interpreted in the entire context in which they arise. 7. FEA’s responsibility to effectuate ‘‘to the maximum extent practicable’? the goals set forth in Section 4(b)(1) of the Allocation Act is a difficult one, and appropriate deference must be accorded agency expertise in light of the often-conflicting objectives of Section 4+ (b)(1). Union Oil Company of California vy. FEA, Civil Action No, CV-74- 1943-MML (C.D. Calif., July 25, 1974); Reeves v. Simon, F.2d , (T.E.C.A. November 27, 1974); Condor Operating Co., supra. 8. The cost equalization program’s allocation of old oil, working in conjunction with FEA’s regulations on the pass-through of increased costs, is a rational attempt by FEEA to remove the inequities which have occurred under the two-tier pricing system. In so doing, the program effec- tuates the Congressional objectives of minimizing inter- ferences with market mechanisms and of fostering com- petition, including the priority need to preserve the com- petitive viability of the small and independent sector. %. The fact that some major integrated oil companies, and a few large independents, are entitlement sellers does 35a not affect the rationality of the program. Rather the in- clusion of large refiners as entitlement sellers properly ef- fectuates the Section 4(b)(1)(2.) Congressional objective of equitable product prices among all sectors of the indus- try and among all users of product, while preserving the competitive viability of the independent sector of the pe- troleum industry (Section 4(b)(1)(D)). Marathon, supra; Exxon, supra; Gulf, supra, 10. The small refiner bias in the issuance of entitlements is a rational attempt to effectuate the Allocation Act's goal of preserving the competitive viability of the small and independent sector of the petroleum industry. Il. The cost equalization program does not violate the **dollar-for-dollar passthrough’? provision of Section 4(b) (2)(A) of the Allocation Act. he Act mandates only that FicA provide refiners with the opportunity to passthrough increased costs. The cost equalization program (10 C.F.R. § 211.67(e)(2) and FEA refiner price regulations (10 C.FLR. § 212.83), which provide for the passthrough of in- creased costs, meet that requirement. Gulf, supra; Exxon, etal. v. FEA, et al., supra, Slip op. at 15-17. 12. The FEA’s method of determining the price of en- titlements is not unlawful. Consumers Union v. Sawhill, No. DC-26 (T.E.CLA. Juiy 7, 1975) (en bane). 13. Insofar as plaintiffs’ constitutional challenges are concerned, this court is without power to decide those is- sues. See § 211(¢)(2) of the Stabilization Act. This court, however, must certify constitutional questions to the Tem- porary Emergency Court of Appeals if it finds the issues to be substantial, Such questions are not substantial if they are plainly without merit or if previous Supreme Court decisions appear to foreclose the subject. See Delaware Valley Apartment House Owner’s Ass’n v. United States, 350 F. Supp. 1144 (B.D. Pa. 1972), aff'd, 482 F.2d 1400 (T.K.C.A. 1973) and California Water Service v. City of 36a Redding, 304 U.S. 252 (1958); see also, Local Union No. 300, Amalgamated Meat Cutters and Butcher Workmen of North America, AFL-C1O vy. McCulloch, 428 F.2d 396 (5th Cir, 1970). 14. As three district courts already have held, plaintiffs’ claim that the cost equalization program violates the Fifth Amendment does not raise a substantial constitutional question, Marathon, supra; Faron, supra; Gulf, supra. The program effeetuates the important public purposes set forth in Section 4(b)(1) of the Allocation Act through a fair and equitable regulatory scheme (Condor Operating Co., supra); does not result in a direct appropriation of property by the Government (**Legal Tender Cases’’; Knox v. Lee, 12 Wall. (79 ULS.)) 457 (1870)): and at its worst, causes a restriction on profits which is not unlawful since such a restriction results from a valid regulatory scheme. (Western States Meat Packers Ass'n v. Dunlop, 482 F.2d 1401 (TLELCLA. 1973) and Local Union No. 11 v. Boldt, 481 V.2d 1392 (T.ELC.A.), cert. dewied, 414 US. 1092 (1975). Moreover, as a valid regulatory scheme, the cost equalization program does not violate the Fifth Amend- ment even though it may deny the owner of the most prof- itable use of its property. United States v. Central Eurcka Mining Co. 257 US. 155 at 168 (1958): United States vy. Rock Royal Cooperative, Inc., 307 US. 585, 571-75 (1989) ; and Thompson v. Consolidated Gas Utilities Corp., 300 US. 55 (1997). Finally, the cost equalization program does not lose its publie character merely because it is implemented through the use of private parties. Berman v. Parker, 348 U.S. 26 (1954). 15. The cost equalization program is not a tax in viola- tion of Article 1, © 8, CL 1 of the Constitution primarily be- enause the program does not raise revenues for the govern- ment, Rodgers v. United States, 138 F.2d 992, 994-995 (6th Cir. 1943); United States v. Stangland, 242 F.2d 843, 848 37a (7th Cir, 1957); Moon v. Freeman, 379 F.2d 382, 390-391 (9th Cir. 1967) but is, instead, a regulatory scheme. 16. Cities Service has failed to establish that it is likely to suffer irreparable harm. 17. Plaintiffs have not established that they have not been or will not be able to recover their entitlement costs through increased prices in the marketplace. Such specula- tive injury is not the basis of finding irreparable harm. Union Oil, supra. 18. Finally, the court concludes that the grant of a pre- liminary or permanent injunction would be contrary to the public interest by exacerbating existing disparities caused by the two-tier pricing system; by creating new inequities in the industry and the marketplace; by seriously imposing unnecessary and unfair burdens on entitlement sellers; and by generally impeding the public interest in securing the goals of the Allocation Act. /s/ Tuomas A. FLANNERY Thomas A. Flannery United States District Judge July 10, 1975 Date (Caption Omirrep 1X PRINTING) (Finep Jeniy 10, 1975) Order Pursuant to Rule 65(a)(2) of the Federal Rules of Civil Procedure it is by the court this 9th day of July, 1975, Orperrp that the court’s consideration of plaintiff’s mo- tion for a preliminary injunction he, and the same hereby is, consolidated with the court’s consideration of the merits of this case. /s/ Tromas A, FLANNERY Thomas A. Flannery United States District Judge J8a (Caption Omitrep IN PRINTING) (Firep Jury 10, 1975) Judgment For the reasons stated in the Findings of Fact and Con- clusions of Law filed with this Judgment, it is by the court this 10th day of July, 1975, OrpereD, Apsvpcep and Drecreep that plaintiffs’ motion for a preliminary injunction be, and the same hereby is, denied; and it is further Orperep, Apsupcep and Decreep that judgment he en- tered for defendants. /s/ Tuomas A, FLANNERY Thomas A. Flannery United States District Judge Constitutional Provisions Involved Article 1, Section 8, Clause 1 of the Constitution of the United States provides: The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Wel- fare of the United States; but all Duties Imposts and Iixcises shall be uniform throughout the United States The Fifth Amendment to the Constitution of The United States provides: No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia,fwhen in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; ner shall be com- tii eaceiaaesd hacia 39a pelled in any criminal case to be a witness against him- self, nor be deprived of life, liberty, or property, with- out due process of law; nor shall private property be taken for public use, without just compensation. Statutory Provisions Involved Section 4(a) of the Emergency Petroleum Allocation Act, 87 Stat. 627, 15 U.S.C. § 753(a), provides: Not later than fifteen days after the date of enact- ment of this Act, the President shall promulgate a reg- ulation providing for the mandatory allocation of erude oil, residual fuel oil, and each refined petroleum product, in amounts specified in (or determined in a manner prescribed by) and at prices specified in (or determined in a manner prescribed by) such regula- tion. Subject to subsection (f), such regulation shall take effect not later than fifteen days after its promul- gation. Except as provided in subsection (e) such reg- ulation shall apply to all crude oil, residual fuel oil, and refined petroleum products produced in or im- ported into the United States. Section 4(b)(1) of the Emergency Petroleum Allocation Act, supra, provides: The regulation under subsection (a), to the maximum extent practicable, shall provide for— (A) protection of public health, safety, and welfare (including maintenance of residential heating, such as individual homes, apartments, and similar occupied dwelling units), and the national defense; (B) maintenance of all public services (including facilities and services provided by municipaily, coop- eratively, or investor owned utilities or by any State or local government or authority, and including trans- 40a portation facilities and services which serve the public at large) ; (C) maintenance of agricultural operations, includ- ing farming, ranching, dairy, and fishing activities, and services directly related thereto; (D) preservation of an economically sound and com- petitive petroleum industry; including the priority needs to restore and foster competition in the pro- ducing, refining, distribution, marketing, and _ petro- chemical sectors of such industry, and to pre erve the competitive viability of independent refiners, small re- finers, nonbranded independent marketers, and branded independent marketers; (E) the allocation of suitable types, grades, and quality of crude oil to refineries in the United States to permit such refineries to operate at full capacity; (F’) equitable distribution of crude oil, residual fuel oil, and refined petroleum products at equitable prices among all regions and areas of the United States and sectors of the petroleum industry, including independ- ent refiners, small refiners, nonbranded independent marketers, branded independent marketers, and among all users; (G) allocation of residual fuel oil and refined petro- leum products in such amounts and in such manner as may be necessary for the maintenance of explora- tion for, and production or extraction of, fuels, and for required transportation related thereto; (H) economie efficiency; and (I) minimization of economie distortion, inflexibility, and unnecessary interference with market mechanisms. 4la Regulations Involved 10 C.F.R. § 211.62 contains the following definitions: ‘*Adjusted crude oil receipts’? means the erude oil receipts of a refiner in a particular month the com- position of which has been adjusted to reflect any in- voice which is received in that month for crude oil (including crude oil sold under § 211.65) delivered to that refiner in any previous month (excluding, how- ever, months prior to November 1974), and which has the effect of increasing or decreasing the volume of old oil received by that refiner in such previous month, ‘*Crude oil receipts’? means, as to a particular re- finer, the volume of crude oil (i) booked into its re- fineries in accordance with accounting procedures gen- erally accepted and consistently and historically ap- plied by the refiner concerned, for its own account or for the account of a firm other than a refiner or (ii) if not previously so booked into its refineries, delivered by that refiner for its account to another refiner pur- suant to a processing agreement with that other re- finer. Crude oil receipts shal! not include crude oil re- ceived by a refiner for the purpose of processing at its refineries for the account of another refiner. A partie- ular crude oil receipt shall be deemed to have oceurred when the related cost is booked into refinery inventory in accordance with accounting procedures generally ac- cepted and consistently and historically applied by the refiner concerned, whether or not such erude oil has been actually received by that refiner, except that crude oil delivered by one refiner to another refiner pursuant to a processing agrement will be deemed to have been delivered by the delivering refiner to the other refiner when the risk of loss passes to the other refiner under the particular processing agreement or when the crude oil is received at the refinery of the other refiner, whichever occurs first. Crude oil which has been added 42a by a refiner to its inventory and which is thereafter sold or otherwise disposed of without processing for the account of that refiner shall be deducted from its crude oil receipts at the time when the related cost is deducted from refinery inventory in accordance with accounting procedures generally accepted and consist- ently and historically applied by the refiner concerned. The volume of old oil included in a refiner’s crude oil receipts shall be evidenced by and consistent with in- voices received with respect to such crude oil receipts. ‘*Entitlement’’ means, for a particular month, the right of a refiner owning the entitlement to include one barrel of old oil in its adjusted crude oil receipts in such month. The issuance and transfer of entitle- ments shall be evidenced on records maintained by the FEA. 10 C.F.R. § 211.67, Allocation of Old Oil, provides as follows: (a) Issuance of entitlements. (1) For each month, commencing with the month of November 1974, each refiner shall be issued entitle- ments by the FEA to include in its adjusted erude oil receipts for that month a specific number of barrels of old oil which will result in an old oil supply ratio for that refiner equal to the adjusted national old oil sup- ply ratio for that month, subject to the entitlement adjustment for small refiners set forth in paragraph (e) of this section. (2) Refiners to which entitlements shall be issued under this section shall include all refiners classified as iefiner-buyers or refiner-sellers as of December 1, 1974 for purposes of § 211.65. Any refiner that is not so classified, or the refinery capacity of which is not certified by the FEA for purposes of 4 211.65, shall apply to the FEA for certification of its refinery ca- 43a pacity for purposes of qualifying to receive entitle- ments under this section. With respect to the granting of any such application for certification, the FEA shall consider the factors set forth in § 211.65(b)(v) and (vi). (b) Required purchases of entitlements by refiners. For each month, commencing with the month of No- vember 1974, each refiner that has been issued fewer entitlements for that month than the number of bar- rels of old oil included in its adjusted crude oil receipts shall purchase a number of entitlements effective for that month equal to the difference between the number of barrels of old oil included in that refiner’s adjusted crude oil receipts for that month and the number of entitlements issued to and retained by that refiner. Entitlement purchases required under this paragraph (b) with respect to a particular month shall be effected by the close of the second month following that month. (c) Refiners and other firms with excess entitle- ments. For each month, commencing with the month of November 1974, each refiner that has been [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385003_1788%3A1. Public record. Not legal advice.