Appendix — Hollingsworth Oil Co. v. United States

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8 5 = ] 9 6 4 > Supreme Court, U.S,

FILED

MAY SO 1988

ADSEER SS PANIOL, JR

CLERK

No.

IN THE a

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1986

HOLLINGSWORTH OIL COMPANY, GLENN

HOLLINGSWORTH, and RONNIE HOLLINGSWORTH,

JR..,

Petitioners,

vs.

UNITED STATES OF AMERICA,

Respondent.

APPENDIX TO

PETITION FOR WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

F. Epwin HALLMAN, JR.

Ww. Scott SCHULTEN

DECKER, COOPER & HALLMAN

A Professional Corporation

1500 The Rhodes-Haverty Bldg.

134 Peachtree Street, N.W.

Atlanta, Georgia 30303

(404) 522-1500

M. CLarkK SPoDEN

DEARBORN & EWING

1200 One Commerce Place

Nashville, Tennessee 37239

(615) 259-3560

Attorneys for Petitioners

TABLE OF CONTENTS

Page

Decision of the Sixth Circuit Court of Appeals 1

Decision of the United States District Court for the

Middle District of Tennessee 5

Denial by Sixth Circuit Court of Appeals of Petition

for Rehearing En Banc _. 13

Government’s Brief on Appeal 14

Federal Rule of Criminal Procedure 16 44

18 U.S.C. §3500 48

10 C.F.R. Part 211 | 50

(nlite tion NRE CE WE ARIE AHF ik i

No. 85-5218

IN THE

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

UNITED STATES OF AMERICA, )

Plaintiff-Appellant )

) On Appeal From

v. ) The United States

) District Court For

HOLLINGSWORTH O1L Company, INc., ) The Middle District

GLENN HOLLINGSWORTH, and ) of Tennessee

)

RONNIE HOLLINGSWORTH, JR., )

Defendants-Appellees. )

BEFORE: JONES and CONTIE, Circuit Judges; and

PECK, Senior Circuit Judge.

Per Curiam. This is an appeal from a district court or-

der dismissing the defendants’ indictments alleging viola-

tions of 18 U.S.C. §§ 1001 and 371. The district court found

that dismissal was warranted because of a lengthy delay in

bringing the indictments and the prejudice resulting from

that delay. On review, we reverse the order.

Defendant, Hollingsworth Oil Company (‘““HOC”’) was a

participant in a set-aside program designed by the United

States Department of Energy (“DOE”) to provide motor

gasoline to persons qualifying for hardship assistance. The

Tennessee Energy Authority (““TEA”) was the agency des-

ignated to administer the program in the state of

Tennessee.

The government commenced an investigation against

the defendants when on September 7, 1979, the defendant

Glenn Hollingsworth allegedly told investigators for the

General Accounting Office that he had made false applica-

tions for set-aside fuel. On February 21, 1981, the DOE

served civil subpoenas on the defendants for documents

pertaining to the TEA set-aside program. After the defend-

ants failed to comply with the subpoenas, the government,

on November 3, 1981, brought an action to enforce the sub-

poenas. The district court judge heard argument on the en-

forcement action on January 21, 1982. An order was not is-

sued until September 28, 1983, granting enforcement of the

subpoenas.

The DOE gained access to the defendants books and

records in December, 1983. In June 1984, the case was re-

ferred to the United States Attorney for prosecution. The

case was finally submitted to the grand jury in August 1984

and an indictment subsequently returned on September 20,

1984.

The defendants were indicted for violating 18 U.S.C. §

1001 which prohibits knowingly or willfully making false

statements to a government agency, and 18 U.S.C. § 371

which prohibits conspiracies to commit any offense against

the United States. In the indictment, the Government

charged that the defendants fraudulently applied to the

TEA for more than one million gallons of set-aside gasoline

for themselves and their customers, which resulted in the

eventual wrongful receipt of 891,000 gallons of the gasoline

by the defendants.

Sometime in 1981, the DOE sent a memorandum,

dated January 28, 1981, to its agencies authorizing the de-

struction of all set-aside files and records. TEA did not de-

stroy its primary files until the agency moved its offices in

the spring of 1984. Following the return of the indictment,

the defendants served subpoenas duces tecum upon the

government demanding, inter alia, production of the origi-

nal sci-aside applications. All of the defendants’ applica-

tions for the set-aside gasoline had been destroyed by the

government. The government did copy portions of some of

these applications before they were destroyed, but they

were found to be smeared and illegible.

;

The defendants filed a motion to dismiss the indict-

ment based on five grounds. Four of the grounds were dis-

missed by the district court. The only one addressed by the

district court, and before this court, is the defendants’ mo-

tion to dismiss the indictment for the “government’s unrea-

sonable preindictment delay [that] materially prejudiced”

them in their right to a new trial. The district court dis-

missed the indictment for this reason.

The issue before this court is not a novel one. It is a

well established rule of law that an indictment should be

dismissed for preindictment delay only if the delay caused

substantial prejudice to the defendants’ rights to a fair trial

and the delay was an intentional device by the government

to gain a tactical advantage over the defendants. United

States v. Gouveia, 104 S.Ct. 2292, 2300 (1984); United

States v. Marion, 404 U.S. 307, 324 (1971); See United

States v. Lovasco, 431 U.S. 783, 789-90, 795 n.17 (1977).

The only disagreement among the circuits on the interpre-

tation of this two element test is whether to construe the

word “and” conjunctively or disjunctively. See United

States v. Mays, 549 F.2d 670, 675 n.6 (9th Cir. 1977).

The Sixth Circuit’s interpretation of Marion and its

progeny is clear. A defendant must show that both parts of

the test are met before he is entitled to have the indictment

dismissed. United States v. Duncan, 763 F.2d 220, 222 (6th

Cir. 1985). In fact, the law in this circuit dictates that if a

defendant has not shown that the delay was intentionally

caused by the government to gain a tactical advantage, an

inquiry into whether the defendant has been substantially

prejudiced by the delay is unnecessary. Jd. at 223; United

States v. Greene, 737 F.2d 572, 574-75 (6th Cir. 1984).

The district court found that the delay was not inten-

tional on the part of the government and that sufficient ex-

planation existed for the delay. It also found that the de-

fendants demonstrated actual prejudice through the delay

due to the destruction of the TEA documents. Under the

existing law in this circuit, the defendants did not make the

necessary showing entitling them to dismissal of the com-

plaint. The district court, however, took its analysis one

step further. It found that the Government negligently per-

mitted the destruction of the documents and such negli-

gence warranted dismissal of the indictment. This ruling

was based on an interpretation of the law by the Ninth Cir-

cuit. See United States v. Mays, 549 F.2d at 678. In Mays,

the court held that a defendant’s showing that the Govern-

ment negligently caused the delay and that the defendant

suffered actual prejudice from the delay required dismissal

of the indictment. Even if, however, we were to accept the

holding of Mays as law in this circuit, the district court

misapplied Mays in this case. The purported negligence of

the Government in this case was in destroying the TEA

documents. Destruction of the TEA documents did not con-

tribute to the delay, it contributed, if anything, to the de-

gree of prejudice suffered by the defendants. Thus, the dis-

trict court’s reasoning even under the law in the Ninth

Circuit is incorrecv.

Reversal of the district court’s error, however, need not

be prejudicated on the basis of its misapplication of Mays.

This circuit has already set the standard for dismissing an

indictment for preindictment delay. See Duncan, 763 F.2d

at 222-23; Greene, 737 F.2d at 574-75. The district court

was in error when it failed to apply that standard.

We also find it necessary to address a second issue

raised by this appeal. The defendants interpret the district

court’s decision as resting not on the Marion doctrine but

on the “preservation of the evidence doctrine” as embodied

in California v. Trombetta, 104 S.Ct. 2528, 2534 (1984).

Simply stated, that doctrine imposes a duty on the prosecu-

tion to preserve potentially exculpating evidence. The de-

fendants, however, mischaracterize the basis of the district

court’s opinion. We do not read the district court’s discus-

sion of this doctrine as being an independent basis for dis-

missal of the indictment. Rather, the district court dis-

cussed the doctrine in conjunction with the Marion test as

me ger

a means of demonstrating the potential prejudice suffered

by a defendant when evidence is destroyed.

Even if we were to find the district court’s discussion of

this doctrine to be an independent basis for its order, we

must still reverse the order. Assuming the destruction of

the TEA documents does fall within the doctrine as defined

by Trombetta, dismissal of the indictment during the pre-

trial stage of the proceedings is not the required remedy.

Nothing in the Trombetta opinion supports such a result.

Accordingly, the district court’s order dismissing the

indictments of the defendants is REVERSED.

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF TENNESSEE,

NASHVILLE DIVISION

UNITED STATES OF AMERICA, )

Vs. ) Docket No. 3-84-00164

HOLLINGSWORTH O1L ComPANy, )

GLENN HOLLINGSWORTH, )

RONNIE HOLLINGSWORTH, JR. )

MEMORANDUM AND ORDER

Pending before the Court is defendants’ motion to dis-

miss the indictments in this case. This cause came on for

hearing on January 30, 1985. For the reasons discussed be-

low, the Court GRANTS the motion to dismiss the indict-

ments in this case.

Defendants are accused of violations of 18 U.S.C. §

1001, which prohibits making false statements, knowingly

and willfully, and 18 U.S.C. § 371, which prohibits conspira-

cies to commit any offense against the United States. Spe-

cifically, the indictment charges in four counts that defend-

ants made false representations and statements to the

Tennessee Energy Authority (“TEA”) in a program under

the jurisdiction of the United States Department of Energy.

At the center of the prosecution are the applications for

hardship assistance, which allegedly were prepared by de-

fendants for defendants and defendants’ customers and

submitted to TEA officials.

The federal government commenced its investigation in

1979. On September 7, 1979, defendant Glenn Hollings-

worth allegedly told investigators for the General Account-

ing Office that he had made false applications for set-aside

fuel.! On September 20, 1984, an indictment in four courts

was filed against defendants.

The defendants raise five issues in its memorandum in

support of the motion to dismiss the indictments: (1) as a

matter of law, the indictment fails to show a violation of 18

U.S.C. § 1001; (2) the indictment fails to satisfy the require-

ments of prosecution under 18 U.S.C. § 1001; (3) because

there was no definition of “hardship” in the administration

of the Tennessee set-aside program, defendants did not

(and could not) submit false statements; (4) the Govern-

ment willfully destroyed documents that were crucial to a

proper defense; and, (5) the Government's delay of five

years in seeking the indictment warrants dismissal.

As to the first three of these issues, their resolution de-

pends on the facts that would be developed at trial. While

the position of defendants that the law as applied in their

case failed to define key terms in the crimes of which they

stand accused, it would be premature for the Court to dis-

miss the indictment until the prosecution had an opportu-

nity to present the facts that it believes constitute violation

of 18 U.S.C. § 1001. As to the fourth issue, the defendants

have failed to convince the Court that the Government will-

fully destroyed the documents sought by the defendants.

1. Under the set-aside program the federal government allo-

cated or set aside fuel for the states to distribute.

stale od

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In the last issue, the Court notes that the defendants

are not claiming that the statute of limitations has run on

the counts of which they stand accused; instead, they argue

that because the Government failed to seek an indictment

in a timely manner, they no longer have access to certain

crucial material, which has been destroyed by the State of

Tennessee.? In United States v. Marion, 404 U.S. 307

(1971), the Supreme Court recognized that “the statute of

limitations does not fully define the appellees’ {defendants’]

rights with respect to the events occurring prior to indict-

ment.” Jd. at 324. Of crucial importance to the Court was

that in order to dismiss a prosecution because of pre-accu-

sation delay by prosecutors, the defendant must be able to

demonstrate actual prejudice. Jd. Accord United States v.

Gouveia, __ U.S. __, 104 S.Ct. 2292, 2299-2300 (1984). In

refusing to proscribe the specific circumstances that would

warrant dismissal, the Court stated: “[t]o accommodate the

sound administration of justice to the right of the defend-

2. Almost all of the files sought by the defendants were de-

stroyed in 1984 when the TEA-Energy Division changed loca-

tions. Until 1982, the state was eal to keep those records. On

June 11, 1981, T. Wendell Butler, Acting Deputy Administrator,

Economic Regulatory Administration of the United States De-

— of Energy stated in a memorandum addressed to all

irectors:

SUBJECT: DISPOSAL OF STATE SET-ASIDE

PROGRAM RECORDS

The President’s Executive Order No. 12287 of January

28, 1981, abolished Federal controls on the pricing and allo-

cation of motor gasoline and propane, thereby cancelling the

State Set-Aside Program as of March 31, 1981.

Although the need for access to your set-aside program

records is unlikely, we request your cooperation in retaining

these files through calendar year 1982. We ask for your co-

operation in this matter in view of possible litigation action

and/or review for research purposes by historians.

Mr. Wayne Porter, Office of Field Operations, Economic

Regulatory Administration, has been designated as the con-

tact for matters concerning this program. He may be

reached at (202) 653-3379.

ant to a fair trial will necessarily involve a delicate judg-

ment based on the circumstances of each case.” Marion,

404 U.S. at 324-25.

Nevertheless, in spite of the case by case approach

proffered in Marion, the Tenth Circuit has construed

Marion so as to produce a test of two factors that the de-

fendant must prove: (1) actual prejudice to the defendant

resulting from the delay plus (2) the fact that “the delay

was purposefully designed to gain an actual advantage or to

harass the defendants.” United States v. Revada, 574 F.2d

1047, 1048 (10th Cir. 1978). In support of its position, the

Tenth Circuit observed:

As to due process rights under the Fifth Amendment

{,] Marion cited with approval the fact that the Gov-

ernment conceded dismissal would be required “if it

were shown at trial that the pre-indictment delay in

this case caused substantial prejudice to appellees’

rights to a fair trial and that the delay was an inten-

tional device to gain tactical advantage over the ac-

cused.” 404 U.S. at 324, 92 S.Ct. at 465.

574 F.2d at 1048.

The entire sentence from which that clause in Marion was

taken, reads as follows:

Thus, the Government concedes that the Due Process

Clause of the Fifth Amendment would require dismis-

sal of the indictment if it were shown at trial that the

pre-indictment delay in this case caused substantial

prejudice to appellees’ rights to a fair trial and that the

delay was an intentional device to gain tactical advan-

tage over the accused.

Marion, 404 U.S. at 324 (footnote omitted). Therefore, if

actual prejudice and intentional delay for tactical advan-

tage could be shown, the prosecution should be dismissed.

But only this particular set of circumstances (actual

prejudice plus intentional delay) was discussed by the

Court in Marion as justifying dismissal. After stating the

Government's position, the Court went on the state:

However, we need not, and could not now, determine

when and in what circumstances actual prejudice re-

sulting from pre-accusation delays requires the dismis-

sal of the prosecution. Actual prejudice to the defense

of a criminal case may result from the shortest and

most necessary delay; and no one suggests that every

delay-cased detriment to a defendant’s case should

abort a criminal prosecution.

Id. at 324-25 (footnotes omitted).

The rule in the Sixth Circuit is consistent with this

Court’s reading of Marion. See United States v. Alred, 513

F.2d 330, 332 (6th Cir.), cert. denied, 423 U.S. 828 (1975)

(“given a sufficiently unexplained pre-indictment delay and

sufficient prejudice stemming from such delay, a pre-indict-

ment delay could violate due process.” (footnote omitted)).

In United States v. Swainson, 548 F.2d 657 (6th Cir.), cert.

denied, 431 U.S. 937 (1977), the Sixth Circuit stated that if

defendants proved actual prejudice and intentional delay,

they would be entitled to dismissal. Jd. at 663-64. But there

is no indication in Swainson, just as in Marion, that the

Sixth Circuit was holding that that was the only set of cir-

cumstances in which dismissal was proper. The Ninth Cir-

cuit has also supported a broader reading of Marion. In

United States v. Mays, 549 F.2d 670 (9th Cir. 1977), the

court rejected an inflexible approach in determining

whether the prosecution should be dismissed. Jd. at 678.

Specifically the court required actual prejudice to the de-

fendant and “some culpability on the Government's part ei-

ther in the form of intentional misconduct or negligence.”

Id.

In the case at bar, applying the logic developed by the

Sixth Circuit in Alred, and United States v. Giacalone, 477

F.2d 1273, 1276-77 (6th Cir. 1973), and by the Ninth Circuit

in Mays, a court should consider dismissal if defendants

demonstrate a pre-indictment delay of sufficient duration

and actual prejudice resulting from that delay. It is the

judgment of the Court that under the circumstances of this

case, defendants have satisfied these two threshold consid-

erations. First, it cannot be disputed that a delay occurred.

The alleged false documents were filed in 1978; the Govern-

ment commenced its investigation in 1979; and in 1981, ac-

cording to the Government, one of the defendants admitted

that he had knowingly filed false documents. Yet the Gov-

ernment did not seek an indictment until September 1984.

Second, it is equally clear to the Court that defendants

have suffered actual prejudice as a result of the delay. As

evidenced by defendant's extensive memoranda, a substan-

tial element of their defense would be based on a position

that their prosecutions are barred for vagueness because

there were no definitions of key terms in the set-aside pro-

gram—by either the federal or the state government; as a

result, defendants were never on notice as to what acts were

unlawful. However, all of the documents of the TEA were

destroyed prior to the indictments, making it extremely dif-

ficult, if not impossible, for the defendants to put on docu-

mentary proof or to locate key witnesses. Therefore, the

Court concludes that defendants have demonstrated delay

and actual prejudice.

Having satisfied the two threshold considerations of

delay and actual prejudice, the defendants must finally

show that the Government was intentionally or negligently

responsible for the delay or for the creation of the actual

prejudice. Marion, 404 U.S. at 324-25; Alred, 513 F.2d at

332; Mays, 549 F.2d at 678. The Court will initially address

the question of intentional delay. The courts have thus far

recognized at least two situations thai satisfy this require-

ment. First, if the Government intentionally delayed bring-

ing the indictment, dismissal is appropriate. Marion, 404

U.S. at 324; Revada, 574 F.2d at 1048. A second reason for

dismissal is if there is “a sufficiently unexplained pre-in-

dictment delay.” Alred, 513 F.2d at 323; Giacalone, 477

F.2d at 1276-77. The Court finds that there has been no

intentional delay by the Government and that sufficient ex-

planation exists for the delay.

Now the Court turns its attention to the question of

whether the Government was negligent in allowing the doc-

uments to be destroyed. In Giacalone, 477 F.2d at 1276, the

Sixth Circuit held that absent a showing of intentional gov-

ernmental delay, actual prejudice must be demonstrated.

This Court has previously determined that defendants suf-

fered actual prejudice, and it now finds that the Govern-

ment negligently permitted the pre-indictment destruction

of the documents of the TEA, knowing that it had an ongo-

ing criminal investigation involving those documents. See

Mays, 549 F.2d at 678. It is this negligence that warrants

dismissal. The Government cannot argue successfully in re-

buttal that it made copies of those documents. The Govern-

ment admittedly copied only portions of those documents,

and many of those copies are partially or completely

illegible.

A recent Supreme Court decision serves as contrast for

the case at bar and demonstrates the concern of which the

courts must be mindful in determining whether destruction

of evidence jeopardizes the right to a fair trial. In Califor-

nia v. Trombetta, _. U.S. __, 104 S.Ct. 2528 (1984), a de-

fendant suspected of drunk driving challenged the failure of

the state to preserve his breath sample. The defendant

maintained that the state’s failure to preserve the sample

jeopardized his ability to put on one of his defenses. /d. at

2534. The Supreme Court, however, held that under the

facts of that case, the state had not violated the Federal

Constitution. The Court cited the following reasons for

finding for the state: (1) breath samples were routinely de-

stroyed and did not represent an attempt to avoid disclos-

ing helpful information to the defendant; (2) the record re-

vealed no allegation of official animus towards the

defendant; (3) the breath analyzer used was very accurate

and was periodically reviewed and certified by the Califor-

nia Department of Health; and (4) the policy of not pre-

serving breath samples satisfied the requirements of consti-

tutional materiality in that although the value of the

evidence may have been obvious, the evidence could have

been obtained from other sources. Jd. at 2534-35.

In contrast, the documents in the instant case were not

“routinely” destroyed but were destroyed when the TEA

changed locations and with the expressed approval of the

federal government. In addition, the Government’s copies

are not an accurate collection of all the documents and in

fact many of those “copies” do not depict all of what was

contained in the originals. Finally, the documents in ques-

tion were definitely “constitutionally material,” in that they

had exculpatory value that was apparent to the Govern-

ment, as evidenced by the fact that it had copies made, and

were of such a nature that the defendants would be unable

to obtain comparable evidence by any other means. See

Trombetta, 104 S.Ct. at 2534; United States v. Agurs, 427

U.S. 97, 109-114 (1976).

Because of the Government’s negligence in failing to

protect the documents and the resulting prejudice to the

defendants’ ability to put on an adequate defense, it is the

judgment of this Court that the Due Process Clause of the

Fifth Amendment bars the prosecution of these defendants.

Therefore, the Court hereby DISMISSES the indictments

against all defendants.

Entered this the 8th day of February, 1985.

No. 85-5218

IN THE

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

UNITED STATES OF AMERICA.

Plaintiff-Appellant

Vv.

ORDER

HOLLINGSWORTH O1L Company. INC.

GLENN HOLLINGSWorRTH, and

RONNIE HOLLINGSWORTH, JR.,

Defendants-Appellees

Before: JONES and CONTIE, Circuit Judges; and

PECK, Senior Circuit Judge

eee eee eee

The Court having received a petition for rehearing en

banc, and the petition having been circulated not only to

the original panel members but also to all other active

judges of this Court, and less than a majority of the judges

having favored the suggestion, the petition for rehearing

has been referred to the original hearing panel.

The panel has further reviewed the petition for rehear-

ing and concludes that the issues raised in the petition were

fully considered upon the original submission and decision

of the case. Accordingly, the petition is denied.

ENTERED BY ORDER OF THE

COURT

John P. Hehman, Clerk

No. 85-5218

IN THE

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

UNITED STATES OF AMERICA,

Appellant,

Vv.

HOLLINGSWORTH OIL COMPANY, GLEN

HOLLINGSWORTH, and RONNIE HOLLINGSWORTH,

JR.,

Appellees.

ON APPEAL FROM THE UNITED STATES

DISTRICT COURT FOR THE MIDDLE

DISTRICT OF TENNESSEE

OPENING BRIEF FOR THE UNITED STATES

Joe B. BRowN

United States Attorney

Middle District of Tennessee

Louis M. FiscHER

Attorney

Department of Justice

Washington, D.C.

TNR ror 6

TABLE OF CONTENTS

Page

Ee ae 1

EE 1

ES 2

1. Background for the tilictenout and the

charges against appellees ..———si=—a“—s(«(isi‘(‘itstt , 2

2. Appellees’ motion to dismiss the indictment

and the district court’s ruling ss. V4 6

Argument... : Sat Se tae aon ra | 9

The District Court’s decision rests on faulty

factual and legal foundations and therefore must

be reversed. 2 pole ire 9

Conclusion........... ee TT |

Certificate of Service _. Rimceine re hs. staat

Citations

CASEs:

Bowles v. Seminole Rock Co., 325 U.S. 410 (1945) 23

Bray v. United States, 423 U.S. 73 (1975) | 10

California v. Trombetta, 104 S.Ct. 2528 (1984) . 18

Chapman v. California, 386 U.S. 18 (1967) _. 21

Dickerson v. New Banner Institute, Inc., 460 U.S. 103

a 22

Hamling v. United States, 418 U. 1S. 87 (1974) 26

Luce v. United States, 104 S.Ct. 460 (1984) . - 21

McCulloch Gas Processing Corp. v. Department of

Energy, 650 F.2d 1216 (Emer. Ct. App. 1981) 23

McDonnell Douglas Corp. v. United States, 754 F.2d

365 (Fed. Cir. 1985) 5

Mobile Oil Corp. v. Tully, 653 F.2d 497 ine Ct.

App. 1981) | 22

Opper v. United States, 348 U.S. 84 (1954) 17

Payne v. Rees, 738 F.2d 118 (6th Cir. 1984) | 13, 14-15

Pennzoil Company v. Department of Energy, 680

F.2d 156 (Emer. Ct. App. 1982) ............ 7 22

Rubin v. United States, 449 U.S. 424 (1981) 22

Russello v. United States, 104 S.Ct. 296 (1983)... 22

Serfass v. United States, 420 U.S. 377 (1975) .. 11

Smith v. United States, 348 U.S. 147 (1954) 17

Udall v. Tallman, 380 U.S. 1 (1965) 23

United States v. Birney, 686 F.2d 102

DE Ue: TOOOR bess css .. 18, 2

United States v. Boles, 684 F. P9d 534 (8th Cir. 1989) 13

United States v. Brown, 667 F.2d 566 (6th Cir. 1982) 13

United States v. Carlson, 697 F.2d 231

(Sth Cr. 1968)........... ., 13, 14

United States v. Cooper, 482 F.2d 1939 ie: Ct.

App. 1973) 10

United States v. Daniels, 698 F.2d 221 (4th Cir. 1983) 25

United States v. Gouveia, 104 S.Ct. 2292 (1984) 3. 7

United States v. Greene, 737 F.2d 572

(6th Cir. 1984)... | 13, 14

United States v. Gutierrez, 696 F.2d 753 (10th Cir.

1962) =... Pane ae 13

United States v. Hasting, 461 U.S. 499 ( (1983), 21

United States v. Hollingsworth, No. 81-3746 (Sept.

28, 1983), at 1 ne 5

United States v. nei Oil | Co. No. 6-34

(Emer. Ct. App. April 25, 1985) | 10

United States v. Indelicato, 611 F.2d 376 (1st Cir.

1979) 13

United States v. Jenkins, 701 F.2d 850 (10th Cir.

apenas pers | 25

A OC RE ARREST INES RR NEE OO ene nt

United States v. Lawson, 683 F.2d 668 (2d Cir. 1982)

United States v. Lindstrom, 698 F.2d 1154 (11th Cir.

| AROS en One torn 47 RE a i -

United States v. Lovasco, 431 U.S. 783 (1977) .....

United States v. Marion, 404 U.S. 307 (1971)...

United States v. Marler, 756 F.2d 206 (1st Cir. 1985)

United States v. Mays, 549 F.2d 670

be : PU eR ree MeN RAN Le tie AF oe Bey 8, 14, 15, 18,

United States v. McInnis, 601 F.2d 1319 (5th Cir.

ny Ae errr NE NE ny! Shoe 8 28.

United States v. Mills, 641 F.2d 785 (9th Cir. 1981)

United States v. Moran, 759 F.2d 777

oe ae SIN eee so A Aeon 8 a 14, 19,

United States v. Otto, 742 F.2d 104 (3d Cir. 1984) |

United States v. Puett, 735 F.2d 1331

RE is hb Ne eee OMe ee SA as

OED io oak kes dese Pet ee ee

United States v. eens. 726 F.2d 913 (2d Cir.

| er en xt we ok wl eh *

United Statée v. Scott, 437 U. s. 82 2 ( 1978) .

United States v. Solomon, 688 F.2d 1171 (7th Cir.

BN oo i-0 ic OE wie ee ee a ee

United States v. Stinson, 594 F. od 982 (4th Cir. 1979)

United States v. Swacker, 628 F.2d 1250 (9th Cir.

ee es

United States v. bie 548 F. od 657 (6th Cir.

1977) .....

United States v. aklie. 665 F.2d 579 (6th Cir.

1982) |

United States v. Turkette, 452 U. S.. 576 ( 1981)

United States v. Uni Oil, Inc., 646 F.2d 946 (5th Cir.

1981)

United States v. Valle, 697 F.2d 152 (6th Cir. 1983)

United States v. Watkins, 709 F.2d 475 (7th Cir.

RR yt eo: a aie pax eer artes aie Wena

United States v. Wehling, 676 F.2d 1053 (5th Cir.

1983) .. AE ee

United States v. ves 104 Ss. Ct. 1038 (1985) .

United States v. Zang, 645 F.2d 999 (Emer. Ct. pom

1981) |

Wong hen v. United States, 371 ‘U. S. 471 1 (1963)

STATUTES AND RULES:

Emergency Petroleum Allocation Act of 1973, 15

U.S.C. 751 et seq.

Emergency Rules of TEA State Set-Aside Program,

Section 1530-1-0-.08(4)

Mandatory Petroleum Allocation Regulations, 10

C.F.R. Part 211

211.13(c)

211.103(b)

211.104(a)

211.104(b)

211.104(e)

12 U.S.C. 1904

15 U.S.C. 751

15 U.S.C. 754(a)(1—

18 U.S.C. 371

18 U.S.C. 1001

18 U.S.C. 3731

31 U.S.C. 702(a)

Pa er

IN THE

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

No. 85-5218

UNITED STATES OF AMERICA,

Appellant,

¥.

‘HOLLINGSWORTH OIL COMPANY, GLENN

HOLLINGSWORTH, and RONNIE HOLLINGSWORTH,

JR.,

Appellees.

ON APPEAL FROM THE UNITED STATES

DISTRICT COURT FOR THE MIDDLE

DISTRICT OF TENNESSEE

OPENING BRIEF FOR THE UNITED STATES

ISSUE PRESENTED

Whether the district court improperly dismissed appel-

lees’ indictment because of preindictment delay, when the

court found that the government had presented a sufficient

explanation for the delay and had not acted deliberately to

gain a tactical advantage over appellees, when much of the

delay was attributable to appellees’ own actions, and where

the district court erroneously determined that appellees

suffered prejudice from the delay.

STATEMENT OF THE CASE

On September 20, 1984, appellees were indicted by a

grand jury in the United States District Court for the Mid-

dle District of Tennessee on three counts of making false

statements in matters within the jurisdiction of the Depart-

ment of Energy (18 U.S.C. 1001), and one count of conspir-

ing to commit those offenses (18 U.S.C. 371 and 1001).

Prior to trial, appellees moved to dismiss the indictment on

the ground, inter alia, that they had suffered a due process

deprivation on account of preindictment delay. After con-

sidering briefs and oral argument, the district court (Nixon,

J.) granted their motion on February 8, 1985. Pursuant to

18 U.S.C. 3731, the governmert appeals from that ruling.

STATEMENT OF FACTS

1. Background for the indictment and the charges

against appellees.

a. The indictment in this case arose from the Emer-

gency Petroleum Allocation Act of 1973, 15 U.S.C. 751 et

seq., and the Department of Energy’s resu!ting Mandatory

Petroleum Allocation Regulations, 10 C.F.R. Part 211. The

regulatory scheme was intended to ensure that petroleum

products would be distributed on an equitable basis in the

event of a shortage in supplies (see indictment at 2; appel-

lees’ brief in support of motion to dismiss indictments [sic]

at 5-7 (“appellees’ memorandum”)). By executive order of

January 28, 1981, the President terminated federal controis

on pricing and allocations of gasoline (see district court’s 2/

8/85 opinion at 3 n.2 (“2/8/85 op.”)).

Under the petroleum allocation regulations, a supplier

of automotive gasoline was required to parcel out its prod-

ucts fairly amongst its distributors. Major refiners and im-

porters of gasoline were required to notify each state of the

estimated volume of gasoline that would be sold and con-

sumed in that state. In turn, the Department of Energy de-

termined amounts of gasoline that would be “set aside” by

such refiners or importers for use in that particular state to

meet hardship or emergency requirements. Those amounts,

and their distribution, constituted an individual state’s

“set-aside program” (see indictment at 2-3).

Similarly, under the applicable regulations, a distribu-

tor’s share of automotive gasoline was determined by his

purchases from his supplier during a designated 12-month

period, known as a “base period.” In this particular case,

the relevant base period was November 1977 through Octo-

ber 1978, inclusive (see indictment at 2). A distributor

could purchase from a supplier the same amount of gasoline

that he had purchased in the corresponding month of the

base period. In other words, if a distributor purchased

100,000 gallons of gasoline from his supplier in November

1977, then he could purchase 100,000 gallons in November

1979 and each succeeding November. Relief was available,

however, through the state set-aside programs, which would

allow overages to a distributor on a showing of hardship or

emergency (id. at 2-3).'

The Department of Energy delegated the administra-

tion of state set-aside programs to each state. The State of

Tennessee established the Tennessee Energy Authority

(“TEA”) to administer its set-aside program. Those distrib-

1. In addition, Department of Energy regulations provided

that a distributor could obtain relief from his monthly quota be-

cause of unvsual growth in his business, defined as at least 10°

above the vu...ne of his purchases in his base period months. 10

C.F.R. 211.104(a), (b), and (e) and 211.13(c). Likewise, amounts

of gasoline supplied to priority users — Department of Defense-

related activities and bulk purchasers engaged in agriculture, en-

ergy production, or provision of emergency, sanitation, telecom-

munications or passenger transportation services, as well as cargo

or freight hauling — were not counted against a distributor’s

monthly allocation. 10 C.F.R. 211.103(b).

utors who submitted an application for hardship assistance

were eligible to receive gasoline allotments from the TEA’s

program. Under regulations issued by the TEA on July 31,

1979, an applicant was required to complete a form “Appli-

cation for Exceptional Hardship Assistance for 30 Day

Maximum” (id. at 3). Insofar as applicable here, that appli-

cation sought information as to whether the applicant had

previously submitted such an application, a showing that

the applicant had unsuccessfully contacted two suppliers

for the petroleum product he sought, his own total product

requirements for the month, how much product he had on

hand and the number of days his present supply would last,

and how the fuel would be used (ibid.). In addition, the dis-

tributor was required to submit a separate application for

each purchaser for whom the distributor requested 1,000 or

more gallons of fuel. A shorter statement was necessary for

consumers of less than 1,000 gallons of fuel (ibid.).

On receipt of the application, a TEA caseworker

ecreened the application for completeness and accuracy.

Before releasing set-aside fuel, TEA’s regulations required a

caseworker to consider the total amount of gasoline in the

set-aside program for the month, the number of applica-

tions for set-aside gasoline, and the applicant’s specific re-

quests, including amount, historical demand and daily con-

sumption, storage capacity, and his allocation status under

federal regulations (Section 1530-1-0-.08(4), Emergency

Rules of TEA State Set-Aside Program).

b. The investigation concerning appellees began as a

result of appellee Glenn Hollingsworth’s admission, during

a September 1979 audit of the administration of the set-

aside program by the General Accounting Office, that he

had falsified applications for hardship assistance to the

TEA.* On February 21, 1981, the Department of Energy

served civil subpoenas on appellees for their documents

concerning the TEA set-aside program. Appellees refused

to comply with those subpoenas, however, and on Novem-

ber 3, 1981, an action was brought in the court below to

enforce the subpoenas. The same district judge who later

dismissed appellees’ indictment heard the enforcement ac-

tion on January 21, 1982, but he did not issue an order

granting enforcement until September 1983 (see district

court’s memorandum opinion in United States v. Hollings-

worth, No. 81-3746 (Sept. 28, 1983), at 1 (“9/23/83 op.”’)).

The Department of Energy finally gained access to appel-

lees’ books and records in December 1983, and in June 1984

the case was referred to the United States Attorney for

prosecution. A grand jury investigation commenced in Au-

gust 1984 and culminated with the return of an indictment

the following month (see government’s response to motion

to dismiss at 10-11 (“government's response”)).

The indictment charged appellees with making false

applications to the TEA for more than one million gallons

of set-aside gasoline, resulting in appellees’ eventual wrong-

ful receipt of 891,000 gallons of such gasoline. The indict-

ment asserted that appellees’ applications for hardship as-

sistance to the TEA were fraudulent in that their customers

did not qualify for such assistance, and that appellees di-

verted the gasoline for other uses. Included within the overt

2. The Government Accounting Office (“GAO”) is the inves-

tigating arm of Congress and is independent of the Executive

Branch. See 31 U.S.C. 702(a); McDonnell Douglas Corp. v.

United States, 754 F.2d 365, 368 (Fed. Cir. 1985). As a result, the

GAO could not formally recommend prosecution of appellees but

rather only could request the Department of Justice to investi-

gate appellee Hollingsworth Oil Company for possible prosecu-

tion. The Department of Justice in turn routinely referred the

GAO request to the Department of Energy for investigation, since

the set-aside program was within the latter epartment's

jurisdiction.

acts of the conspiracy count were 13 monthly applications

for set-aside gasoline made by the individual appellees on

behalf of their gasoline distribution company between Octo-

ber 1978 and November 1979, inclusive (see indictment,

Count 1, at pages 4-7). The allegedly false applications for

the months of September through November 1979 consti-

tuted the three substantive counts (id. at pages 7-9 (Count

1, Overt Acts Numbers 12-14 and Counts 2 through 4)).

2. Appellees’ motion to dismiss the indictment and

the district court's ruling.

Prior to trial, appellees moved to dismiss the indict-

ment on various grounds. They first claimed that the allega-

tions of the indictment were insufficient to state an offense

under Section 1001. They also argued that, as a matter of

law, the government could not prove certain elements of the

Section 1001 offenses because the TEA regulations on

which the charges rested failed to adequately define “hard-

ship” and because the TEA had vested so much discretion

in its employees in making hardship determinations that it

was impossible for appellees to have committed an offense

(see appellees’ memorandum at 22-41).

In addition, they asserted that the government had un-

reasonably delayed bringing this case to a grand jury, and

they claimed that that delay prejudiced them because the

TEA had destroyed certain of its records in early 1984.’

3. In their brief in suppers of their motion to dismiss their

indictment, appellees said that they had served a subpoena on the

State of Tennessee on November 6, 1984, and that they received

many documents in response to their subpoena. Though, accord-

ing to appellees’ representation, “all pri Tennessee State

Set-Aside files{,] including all Hollingsworth Oil Company docu-

ments[,] had been destroyed,” appe admitted that “several

state set-aside management documents” still existed (appellant's

memorandum at 15). Included within such documents that appel-

lees received were: the Tennessee state set-aside program case re-

They argued that their defense rested on TEA’s practices in

applying the hardship and emergency regulations and that

that defense could be shown only through the destroyed

records. Appellees also claimed that the government

wilfully destroyed those documents and that the preindict-

ment delay was engineered in order to gain a tactical ad-

vantage over appellees (id. at 41-54).

The district court conducted a hearing on appellees’

claims on January 30, 1985. At that time, the court heard

legal argument only. Though the government had a witness

in the courtroom—a former investigator for the Depart-

ment of Energy—to testify about his photocopying of TEA

records concerning appellees, the court sustained appellees’

objection to that testimony (1/30/85 Tr. 38-39).*

Following that hearing, the court below issued a memo-

randum opinion in which it rejected appellees’ claims con-

cerning the adequacy of the indictment; the court reasoned

that those issues had to await development of the evidence

at trial (2/8/85 op. 2). The court also found that the govern-

ment did not willfully destroy the TEA documents that ap-

pellees sought (ibid.).

With respect to the preindictment delay claim, how-

ever, the district court ruled in appellees’ favor. Relying on

the Ninth Circuit’s decision in United States v. Mays, 549

view officer’s manual (id. at 17, 30); a TEA August 1979 summary

of the Manda Petroieum Allocation Program (id. at 18); an

official TEA publication listing criteria for case officer’s review of

hardship or eimergency assistance applications (id. at 19, 34-36),

as well as a January 1980 TEA memorandum clarifying rules on

such case processing (id. at 20).

4. government then made an offer of proof about the

testimony. According to the proffer, the investigator was given

the entire TEA file concerning Hollingsworth Oil Company and

photocopied those = that were not already in the govern-

ment’s possession. He also verified the authenticity of copies of

— that the Department of Energy already had (1/30/85

r. 39).

F.2d 670 (1977), the district judge reasoned that a showing

of prejudice to the defendant, coupled with either inten-

tional or negligent behavior by the government, was suffi-

cient to require dismissal (2/8/85 op. 6). In this regard, the

court below first found that appellees had suffered actual

prejudice through the destruction of TEA records. Since

appellees claimed that their defense would rest on a show-

ing that the TEA did not define key terms in its regulations

for the persons administering the set-aside program, the de-

struction of the TEA records deprived appellees of that de-

fense, as well as the ability to locate witnesses (id. at 6-7).

And while the court found that there was no intentional de-

lay by the government and that there was a sufficient rea-

son for the preindictment delay (id. at 7), the court below

nonetheless concluded that the government was negligent

in failing to protect the TEA records from destruction (id.

at 7-8). The court deemed the copies made by the govern-

ment of TEA records to be insufficient to rebut its negli-

gence, particularly since not all the TEA documents were

copied. The court also determined from the fact that the

government copied the records that the documents must

have had obvious exculpatory value (id. at 8-9). In the

court’s view, the government’s negligence, coupled with the

prejudice to appellees, was sufficient to warrant dismissal of

the indictment (ibid.).

ARGUMENT

THE DISTRICT COURT’S DECISION RESTS ON

FAULTY FACTUAL AND LEGAL FOUNDATIONS

AND THEREFORE MUST BE REVERSED

As we show below, this case involves the district court’s

refusal to follow settled law governing claims of preindict-

ment delay. The district court properly found that the gov-

ernment had not acted intentionally or to seek an unfair

advantage in not securing an indictment against appellees

until October 1984. The court also correctly found that the

government had furnished a sufficient explanation for the

delay. Nonetheless, the court below dismissed the indict-

ment on the ground that appellees had suffered substantial

prejudice from preindictment delay and that the govern-

ment had acted negligently in allowing TEA documents to

be destroyed. In so ruling, the district court ignored this

Court’s settled precedent concerning claims of preindict-

ment delay. In addition, the court incorrectly attributed the

delay, albeit because of negligence, to the government. Fi-

nally, the court below incorrectly made a determination of

prejudice in advance of trial rather than awaiting the proof

at trial and considering other materials that would be avail-

able to appellees. Consequently, it is clear that the decision

below cannot stand.°*

5. Prior to the setting of a briefing schedule in this case,

appellees moved to dismiss this appeal. hey first claimed that

the government was improperly pursuing simultaneous appeals in

this Court as well as the Temporary Emergency Court of Appeals

(“TECA”). In our response, we pointed out that while protective

notices of appeal had been filed to both courts, the Solicitor Gen-

eral had directed that the appeal in this case be pursued in this

Court. Accordingly, we eval a stay proceedings in TECA. We

did not dismiss the appeal in TECA because, though the instant

case involves Title 18 offenses and the issues on appeal are ones

purely of criminal law, the prosecution itself relates to the Emer-

gency Petroleum Allocation Act of 1973 (“EPAA”), 15 U.S.C. 751.

TECA has jurisdiction over cases involvin interpretations of the

regulations under that statute (see 15 U.S.C. 754(a)(1), incorpo-

rating 12 U.S.C. 1904 note), but that court has held that it does

not have jurisdiction over appeals of Title 18 criminal prosecu-

tions that are bottomed on violations of the EPAA. United States

v. Zang, 645 F.2d 999, 1002 (Emer. Ct. App.), cert. denied, 454

U.S. 864 (1981); United States v. Cooper, 482 F.2d 1393, 1397

(Emer. Ct. App. 1973). The Fifth Circuit also has held that it has

jurisdiction over Title 18 offenses arising from violations of the

EPAA. United States v. Uni Oil, Inc., 646 F.2d 946, 949 (5th Cir.

1981); see also Bray v. United States, 423 U.S. 73, 75 (1975). In

response to appellees’ simultaneous motion to dismiss our appeal

in TECA, that court dismissed our appeal, relying on the above

cases, and thereby agreeing that this Court has jurisdiction over

_—_—

A. Since The District Court Found That The Gov-

ernment Did Not Intentionally Delay Appellees’

this appeal. United States v. Hollingsworth Oil Co., No. 6-34

(Emer. Ct. App. April 25, 1985). In the event that this Court

might be of the view that the issues in this appeal —— on an

interpretation of — under the EPAA, the Court could

refer that issue to TECA as a separate appeal.

Appellees also argued that the Double Jeopardy Clause

barred this appeal. They claimed that the district court’s dismis-

sal of the indictment amounted to an acquittal because the de-

stroyed documents, in their view, were the basis for the indict-

ment. That contention obviously is frivolous. In the first place,

the destroyed documents could not have been the basis for appel-

lees’ indictment, because the government never had possession of

them. But what evidence the grand jury may or may not have

seen is immaterial to appellees’ double jeopardy claim. The cru-

cial point is that the government never had a chance to present

any evidence concerning appellees’ guilt at trial, so the district

court’s ruling cannot possibly be construed as an acquittal. That

is made all the more clear by the Supreme Court’s decisions in

~~ v. United States, 420 U.S. 377 (1975), and United States

yv. Scott, 437 U.S. 82 (1978). In Serfass the Court rejected a de-

fendant’s double jeopardy claim that was virtually identical to ap-

pellees’ here. In that case, the district court had granted the de-

fendant’s motion to dismiss that rested on his factual defense at

trial. 420 U.S. at 389-390. Like appellees here, Serfass argued that

the district court’s ruling constituted the “ ‘functional equivalent

of an acquittal on the merits.’” Jd. at 390. The Supreme Court

reversed, holding that a pretrial ruling simply does not subject a

defendant to jeopardy. The Court emphasized that unless a de-

fendant risks determination of his guilt, jeopardy does not attach.

Id. at 391-392. And in Scott the Court not only reaffirmed that

the government may appeal a pretrial dismissal of an indictment,

but the Court also explicitly extended that rule to dismissals on

account of preindictment delay. 437 U.S. at 95. Moreover, the

Court also held that the government could even appeal such a

ruling that occurred during trial because that kind of termination

of a prosecution would not constitute an acquittal on the merits.

Id. at 98-100 & n.11.

This Court has followed the reasoning of Scott and Serfass.

In United States v. Valle, 697 F.2d 152, 154 (6th Cir.), cert. de-

nied, 461 U.S. 918 (1983), the Court held that jeopardy does not

attach to a district court’s consideration of evidence in connection

with a motion to dismiss an indictment and thus does not prevent

the government from appealing the dismissal of the indictment.

Accord, United States v. McInnis, 601 F.2d 1319, 1322-1323 (5th

Cir. 1979). Similarly here, the district court’s ruling, even though

Indictment And That The Government Had Fur-

nished An Adequate Explanation For The Pre-

indictment Delay, The Court Wrongly Dismissed

The Indictment.

1. The Supreme Court has addressed the question of

preindictment delay on several occasions. In United States

v. Marion, 404 U.S. 307 (1971), the Court recognized that in

certain circumstances, where a defendant demonstrates ac-

tual prejudice stemming from preindictment delay and that

the government caused the delay in order to gain a tactical

advantage over him, the Due Process Clause could warrant

dismissal of an indictment. Jd. at 424. In United States v.

Lovasco, 451 U.S. 783 (1977), the Court expanded on that

view and made clear that a showing of prejudice alone was

not sufficient but rather was only a necessary threshold to a

due process claim arising from a preindictment delay. In

addition, a defendant had to show an improper basis for the

delay. Jd. at 789-790. The Court went on to point out that

mere investigatory delay was not equivalent to the delay

prohibited by Marion—one undertaken to gain a tactical

advantage over an accused. Jd. at 795-796. And just last

Term the Court reemphasized that “the Fifth Amendment

requires the dismissal of an indictment *** if the defendant

can prove that the government’s delay in bringing the in-

dictment was a deliberate device to gain an advantage over

him and that it caused him actual prejudice in presenting

his defense.” United States v. Gouveia, 104 S.Ct. 2292,

2300 (1984) (citing Lovasco and Marion). The reasons for

based in part on its consideration of certain documents that the

government may intend to introduce at trial, did not place appel-

lees in jeopardy. Not only did the district court not resolve any

issue of appellees’ guilt or innocence, but the ruling occurred

prior to trial, so appellees faced no risk of a finding of guilt. Ac-

cordingly, under Scott and Serfass, the government clearly may

appeal the decision below.

such a strenuous burden on a defendant are obvious. Dis-

missal of an indictment is a drastic remedy, and there are a

myriad of reasons, almost all of them legitimate, for a pros-

ecutor’s delay in securing an indictment from a grand jury.

See Lovasco, 431 U.S. at 790-796.

Following those decisions, this Court consistently has

held that in order for a defendant to succeed on a claim of

due process deprivation due to a preindictment delay, a de-

fendant must show both that he suffered substantial

prejudice as a result of the delay and that the government

acted intentionally in order to seek an improper tactical ad-

vantage over the defendant. E.g., Payne v. Rees, 738 F.2d

118, 122 (6th Cir. 1984); United States v. Greene, 737 F.2d

572, 574-575 (6th Cir. 1984); United States v. Brown, 667

F.2d 566, 568 (6th Cir. 1982); United States v. Roberts, 548

F.2d 665, 668 (6th Cir.), cert. denied, 431 U.S. 920 (1977);

United States v. Swainson, 548 F.2d 657, 663 (6th Cir.),

cert. denied, 431 U.S. 937 (1977). It is not enough to show

one prong of the standard; a defendant must satisfy both

parts of the test in order to succeed. United States v.

Greene, 737 F.2d at 574.®

6. The overwhelming majority of the circuits that have con-

sidered this issue agree with this Court that a defendant must

demonstrate both actual prejudice as well as intentional govern-

mental delay for a bad purpose before a defendant can gain dis-

missal of his indictment due to preindictment delay. E.g., United

States v. Marler, 756 F.2d 206, 213, 215 (1st Cir. 1985); United

States v. Indelicato, 611 F.2d 376, 382 (1st Cir. 1979); United

States v. Otto, 742 F.2d 104, 107-108 (3d Cir. 1984); United

States v. Stinson, 594 F.2d 982, 984 (4th Cir. 1979); United

States v. Carlson, 697 F.2d 231, 236 (8th Cir. 1983); United

States v. Boles, 684 F.2d 534, 536 (8th Cir. 1982); United States

v. Gutierrez, 696 F.2d 753, 755 (10th Cir. 1982), cert. denied, 461

U.S. 909 (1983); United States v. Puett, 735 F.2d 1331, 1334-1335

(llth Cir. 1984); United States v. Lindstrom, 698 F.2d 1154,

1157-1158 (11th Cir. 1983). The Fifth and Seventh Circuits have

conflicting lines of cases, one of which requires a defendant to

prove prejudice plus intentional delay by the government (United

States v. Wehling, 676 F.2d 1053, 1059-1060 (5th Cir. 1982);

Contrary to that settled line of cases, however, the

court below did not require appellees to show that the gov-

ernment intentionally delayed indicting them in order to

gain a tactical advantage over appellees. Rather, the district

court incorrectly reasoned (2/8/85 op. 3-6) that neither this

Court’s nor the Supreme Court’s decisions concerning pre-

indictment delay claims required a defendant to make a

dual showing of intentional delay and prejudice. Instead,

the district court chose to rely (id. at 6) on the Ninth Cir-

cuit’s decision in United States v. Mays, 549 F.2d 670,

which balanced the quantum of prejudice suffered by the

defendant against the government’s degree of culpability.

But Mays obviously is at odds with this Court’s rulings on

the prerequisites to a successful claim of preindictment de-

lay. Hence, the decision below must fall on that ground

alone.

Beyond that, since the district court found that the

preindictment delay here was not intentional and that, in

fact, the government had a satisfactory reason for the delay

(2/8/85 op. 7), appellees’ due process claim must be re-

United States v. Watkins, 709 F.2d 475, 479 (7th Cir. 1983)),

while the other line requires a showing of prejudice and some

lesser degree of impropriety by the government (United States v.

Townley, 665 F.2d 579, 582 (5th Cir.), cert. denied, 456 U.S. 1010

(1982); United States v. Solomon, 688 F.2d 1171, 1179 (7th Cir.

1982)). The Second Circuit has pretermitted the question

whether prosecutorial negligence would suffice if a defendant es-

tablished actual prejudice from preindictment delay. See United

States v. Birney, 686 F.2d 102, 105 n.1 (2d Cir. 1982). Hence, as

of now, that court requires proof of prejudice coupled with a

showing of unjustifiable governmental conduct, such as deliberate

delay to gain a tactical advantage over an accused. United States

v. Lawson, 683 F.2d 688, 694 (2d Cir. 1982); United States v.

Ruggiero, 726 F.2d 913, 925 (2d Cir.), cert. denied, 105 S.Ct. 118

(1984). Only the Ninth Circuit would allow a preindictment delay

claim on proof of prejudice coupled with governmental negli-

gence, but even then the degree of prejudice would have to be

quite severe. United States v. Moran, 759 F.2d 777, 781-782 (9th

Cir. 1985).

jected. Because appellees failed to satisfy the government

bad-faith prong of the equation, there is no need whatso-

ever to examine whether appellees suffered any prejudice.

United States v. Greene, 737 F.2d at 574-575. Accord,

United States v. Puett, 735 F.2d at 1334-1335; United

States v. Carlson, 697 F.2d at 236. See also Payne v. Rees,

738 F.2d at 122 (a defendant must show that the govern-

ment had no valid reason for the delay or that the delay

was designed to gain a tactical advantage).

2. Moreover, while we do not agree with the Ninth Cir-

cuit’s decision in Mays, 549 F.2d 670, appellees’ claim still

must fail even under the balancing test employed in Mays.

That is because the court below improperly attributed the

delay prior to indictment solely to the government.

In June 1981, the Department of Energy sent a memo-

randum to all directors of state set-aside programs. That

memorandum requested that the States retain their records

concerning those programs at least through 1982 (see 2/8/85

op. 3 n.2). The TEA complied with that request and in fact

maintained its records until the spring of 1984, when many

of the records were destroyed as part of a relocation of the

office (ibid.; see also appellees’ memorandum at 16).

In February 1981, the Department of Energy served a

civil subpoena duces tecum on appellees for their records

concerning applications for and purchases of sot-aside gaso-

line. Appellees refused to comply with the subpoena, so the

Department of Energy was forced to move for enforcement

of the subpoena (see 9/28/83 op. at 1). That enforcement

petition was filed on November 3, 1981. A hearing was held

on January 21, 1982, but the district court did not enter an

order enforcing the subpoena until September 28, 1983

(ibid.; see also government’s response at 10). It was not un-

til December 1983 that appellees provided their books and

records to the Department of Energy. The Department

then moved expeditiously to review those records. In May

1984, internal departmental recommendations were made

for prosecution, and in June the Department of Energy re-

ferred the case to the United States Attorney’s Office for

prosecution (government’s response at 10-11).

All this makes abundantly clear that not only—as the

court below found (2/8/85 op. 7)—was there a reasonable

basis for the preindictment delay, but also that most of the

delay was attributable to appellees ard the district court

rather than to the government. Had appellees not resisted

production of their records but rather had timely produced

them in March 1981 as requested in the Department of En-

ergy subpoena, or had the district court acted promptly to

enforce the subpoena, the Department could have com-

pleted its review of their records in ample time to preserve

the TEA documents that were destroyed some three years

later. The period of delay engendered by appellees’ refusal

to comply with the Department of Energy subpoena was

more than two and one-half years. The indictment against

appellees was returned in September 1984. However, when

allowance is made for the two and one-half years spent en-

forcing the subpoena, the indictment could have been re-

turned as early as March 1982—over two years prior to the

time when the TEA records in question were destroyed.

Thus, but for appellees’ resistance to the civil Department

of Energy subpoena, it is obvious that the indictment could

have been returned in ample time to preserve the TEA

records.’ By refusing to comply with the subpoena, appel-

7. Until appellees’ records were available, the Department

of Energy did not have a sufficient basis on which to make a rec-

ommendation for either civil or criminal proceedings against ap-

pellees. Contrary to appellees’ argument below, Glenn Hollings-

worth’s admission in 1979 to a Government Accounting Office

auditor that he had falsified records was not enough to mount a

prosecution. An uncorroborated confession or admission of cer-

tain elements of an offense is not a sufficient basis for conviction

lees thereby prolonged the administrative review process

and lengthened the period before the Department of En-

ergy could make a prosecution referral to the Department

of Justice and the United States Attorney. Accordingly, it is

plain to see why the district court found (2/8/85 op. 7) that

the government had provided a sufficient explanation for

the delay. At the least, then, appellees are equally responsi-

ble for the preindictment delay and the destruction of the

TEA documents.®

of a crime in the federal courts. Smith v. United States, 348 U.S.

147, 152-155 (1954); Opper v. United States, 348 U.S. 84, 90-91

(1954); see also Wong Sun v. United States, 371 U.S. 471, 488-

489 (1963). As a result, in order to determine whether to recom-

mend appellees’ prosecution, the Department of Energy had to

secure appellees’ records and compare them to information from

other sources, including customers on whose behalf appellees had

submitted hardship applications to the TEA. Moreover, a review

of those records could have been beneficial to appellees; if De-

partment auditors determined that information in appellees’

records was exculpatory or otherwise negated appellees’ criminal

intent, appellees might well have escaped prosecution.

In addition to those reasons, it is of course well settled that

the government does not have to bring an indictment at any spe-

cific time. As the Supreme Court recognized in United States v.

Lovasco, 431 U.S. 783, “prosecutors do not deviate from ‘funda-

mental conceptions of justice’ when they defer seeking indict-

ments until they have probable cause to believe an accused is

guilty; indeed it is unprofessional conduct for a prosecutor to rec-

ommend an indictment on less than probable cause.[{] It should

be equally obvious that prosecutors are under no duty to file

charges as soon as probable cause exists but before they are satis-

fied they will be able to establish the suspect’s guilt beyond a rea-

sonable doubt.” /d. at 790-791 (footnote omitted). Nor are prose-

cutors constitutionally obligated to file charges as soon as they

marshal enough evidence to prove a defendant’s guilt but before

they have completed their investigations. Jd. at 792-795 (footnote

omitted). Accord, United States v. Gouveia, 104 S.Ct. at 2300 n.7.

Hence, it is clear that it was not improper to delay the prosecu-

tion referral here until appellees complied with the Department

of Energy subpoena and that Department could be sure of the

merits of the case against appellees.

8. The decision in California v. Trombetta, 104 S.Ct. 2528

(1984), on which the district court in part relied (2/8/85 op. 8-9),

does not support the court’s conclusions. In that case, the Su-

preme Court held that the state’s failure to retain breathalyzer

iii nas: seceinid a en ne mnrecaurer end

Under those circumstances, appellees cannot succeed

even under the Mays standard. The Ninth Circuit plainly

would not penalize the government for preindictment delay

when a defendant bears concomitant responsibility for a

large part of the delay. See 549 F.2d at 678 (where a de-

fendant has established actual prejudice, “it then becomes

incumbent upon the government to provide the court with

its reasons for the delay’’). Likewise, the Mays court clearly

would have rejected the defendant’s claim had there been

an adequate explanation—.as here—for the delay. While the

court there said that the government’s burden of explana-

samples did not deprive the defendant of due process. In so rul-

ing, the Court observed that the government’s duty to preserve

evidence is “limited to evidence that might be expected to play a

significant role in the suspect’s defense.[] To meet this standard

of constitutional materiality, *** evidence must both possess an

exculpatory value that was apparent before the evidence was de-

stroyed, and also be of such a nature that the defendant would be

unable to obtain comparable evidence by other reasonably availa-

ble means.” Jd. at 2534. Contrary to the district court’s conclu-

sion (2/8/85 op. 8-9), the TEA records here did not satisfy that

test. The records the investigator copied were appellees’ applica-

tions for set-aside gasoline and their supporting applications from

customers. As such, the records certainly had no apparent excul-

patory value; rather, the Department of Energy investigator cop-

ied those records because they appeared to be inculpatory in na-

ture. This obvious inference certainly is more logical than the

district court’s conclusion (id. at 9) that the fact that copies were

made showed that the records must have had exculpatory value.

Our submission is reinforced by the fact that, as we discuss more

fully in the text below (see pages 22-23, infra), individual agency

employees’ actions are entitled to little weight in determining

how an agency’s regulations were interpreted. Accordingly, it is

difficult to understand how the materiality of the documents to

appellees’ defense should have been obvious to the government

prior to the records’ destruction. Moreover, to the extent that the

district court concluded (2/8/85 op. 9) that the TEA documents

were not “routinely” destroyed, the court obvious!y was incorrect.

The TEA had ceased to function as an agency implementing the

set-aside program, because that program was terminated in 1981.

Hence, we fail to understand how a state agency’s destruction of

documents for a no-longer functioning office can be considered

anything but “routine.”

tion for the delay would rise in relation to substantial shor -

ings of prejudice to a defendant, the court still was .vn-

cerned only with the reasons for the delay. If the delay was

explained satisfa..orily, then a defendant could not prevail.

549 F.2d at 678. Inasmuch as the court below found that

there was a sufficient explanation for the delay here, appel-

lees were not entitled to relief even under the Mays rule.

Indeed, the Ninth Circuit’s recent interpretations of

the Mays standard emphatically demonstrate that the dis-

trict court’s finding that the government had adequately

explained the delay here should have ended appellees’

claim. See United States v. Moran, 759 F.2d at 783, where

the district court had concluded that while the government

had not delayed intentionally in order to gain an advantage

over the defendant, the government still had benefitted

from the delay. The court of appeals reversed, however, be-

cause “our cases clearly require some showing of govern-

mental culpability to prove a deprivation of due process.”

Ibid. In the instant case, the court below reached essentially

the same conclusion as did the district court in Moran. By

finding that the government had presented an adequate ex-

planation for the delay, the court relieved the government

of any responsibility for the delay. Nonetheless, the court

went on to conclude that the government was negligent in

failing to preserve the TEA documents from destruction (2/

8/85 op. 8, 9). That conclusion is equivalent to the Moran

district court’s finding that the government had gained a

benefit from the delay. Moreover, as we pointed out above,

given appellees’ equal responsibility for the delay here, the

documents’ destruction should not be attributed to the gov-

ernment alone. See also United States v. Swacker, 628 F.2d

1250, 1254 n.5 (9th Cir. 1980), where the court approved a

district court’s finding of no culpability on the part of the

government for delaying indictment until the prosecutors

were more certain of the quality and quantity of the evi-

dence against the defendant. The district court credited

that same explanation for the delay here. Accordingly, even

under the Ninth Circuit’s balancing test, appellees’ claim

would not succeed.

B. The District Court Also Erred In Determining

That Appellees Suffered Actual Prejudice From

The Preindictment Delay.

In addition to concluding that the government was neg-

ligent in not preserving the TEA records, the district court

also determined that appellees suffered actual prejudice

from the preindictment delay. The court found that appel-

lees were prejudiced by destruction of the TEA records be-

cause, in the court’s view, appellees were deprived of their

defense of showing how the term “hardship” was adminis-

tered by the TEA (2/8/85 op. 6-7). In part, the court below

bottomed its conclusion that the documents must have

been exculpatory on the fact that a Department of Energy

investigator copied the records (id. at 9). We submit that

the district court erred in assessing appellees’ claim of

prejudice prior to trial rather than in light of the full trial

record. In addition, the court clearly was wrong in deeming

the TEA documents to be exculpatory.

The Supreme Court recently has reemphasized that

claims of prejudice cannot be analyzed without reference to

the entire record at trial, because, in light of the evidence

and instructions, an error might be harmless. United States

v. Young, 104 S.Ct. 1038, 1047 (1985); Luce v. L'nited

States, 104 S.Ct. 460, 464 (1984); United States v. Hasting,

461 U.S. 499 (1983). In Hasting, the Court pointed out that

“(sjince Chapman [v. California, 386 U.S. 18 (1967)], the

Court has consistently made clear that it is the duty of a

reviewing court to consider the trial record as a whole and

to ignore errors that are harmless, including most constitu-

tional violations.” 461 U.S. at 509. That rule is particularly

appropriate here, where it is impossible to assess accurately

the prejudice, if any, to appellees caused by preindictment

delay without awaiting developments at trial.

In the first place, as we pointed out above (see page 18

n.8, supra), the court below clearly was wrong in concluding

that the exculpatory nature of the TEA documents was

demonstrated by the fact that a Department of Energy in-

vestigator copied some of them. The copied records were

appellees’ applications for set-aside gasoline and their sup-

porting applications from appellees’ alleged customers.

Rather than being exculpatory, the documents were copied

because of their falsity; they led investigators to customers

who in turn stated that they had not applied for set-aside

gasoline and knew nothing about any overage requests. Ac-

cordingly, it is abundantly clear that appellees cannot rely

on the fact that certain documents were copied to prove

that they suffered any prejudice.

More importantly, the district court confused the role

of individual TEA employees’ actions and the validity of

the TEA regulations that underlay the instant charges.

Whether the TEA regulations were too vague to provide no-

tice of their requirements, as appellees claimed, has to be

determined in the first instance from the plain language of

the regulations themselves. See Russello v. United States,

104 S.Ct. 296, 299 (1983); United States v. Turkette, 452

U.S. 576, 580 (1981); see also Dickerson v. New Banner In-

stitute, Inc., 460 U.S. 103, 110 (1983); Rubin v. United

States, 449 U.S. 424, 429-431 & n.8 (1981). If the terms of

those regulations are vague, then it will be the government's

burden to come forward with evidence of agency interpreta-

tion to buttress the validity of the regulations. In determin-

ing agency interpretations of similar regulations, however,

TECA has held that individual agency employees’ interpre-

tations or actions, as opposed to institutional interpreta-

tions, are entitled to little weight. Pennzoil Company v. De-

partment oj Energy, 680 F.2d 156, 161 & n.8, 171 (Emer.

Ct. App. 1982), cert. dismissed, 459 U.S. 1190 (1983); Mobil

Oil Corp. v. Tully, 653 F.2d 497, 501-502 (Emer. Ct. App.

1981), vacated on other grounds, 455 U.S. 245 (1982); Mc-

Culloch Gas Processing Corp. v. Department of Energy,

650 F.2d 1216, 1229 (Emer. Ct. App. 1981). See also Udall

v. Tallman, 380 U.S. 1, 16-17 (1965); Bowles v. Seminole

Rock Co., 325 U.S. 410, 413-414 (1945). Hence, the individ-

ual caseworkers’ actions in approving or disapproving ap-

pellees’ or other requests for set-aside gasoline is not mate-

rial to a determination of the relevant terms of TEA’s

regulations.”

Under those circumstances, it is difficult to understand

how the loss of TEA records concerning the processing of

appellees’ applications harmed appellees. The district court

apparently accepted appellees’ argument that notations

made by individual TEA caseworkers were material to their

defense of how TEA defined and applied the term “hard-

ship” from its regulations concerning the set-aside program

(see 2/8/85 op. 6-7; appellees’ memorandum at 33-41). But

that contention fails to recognize that, as we pointed out

above, entries made by a TEA caseworker on appellees’ or

other companies’ applications simply did not bear the im-

primatur of an official agency interpretation. Thus, the un-

availability of TEA’s records containing caseworkers’ ac-

tions will not have any bearing on appellees’ defenses to the

charges against them. Accordingly, the preindictment delay

and resulting loss of TEA’s records did not prejudice appel-

lees. And if any official interpretations of the regulations

9. We also note that, contrary to appellees’ claims of de-

struction of material documents, it appears that most, if not all,

of the official Tennessee interpretations of the TEA regulations

exist. Appellees received several such interpretations in response

to their subpoena to the State (see appellees’ memorandum at 15-

20, 30, 34-36 and exhibit D).

have been lost so that the government will not be able to

utilize those interpretations at trial, appellees will have

benefitted rather than suffered from the delay.'’® Indeed,

the delay itself certainly aided appellees in at least one re-

spect: because the statute of limitations had expired, only

three of the thirteen allegedly false filings listed in the con-

spiracy count could be brought as substantive counts (see

government’s response at 11).

Moreover, the court below also ignored the fact that

appellees have subpoenead a vast amount of Department of

Energy documents as well as records irom the General Ac-

counting Office.’ Coupled with the copies of TEA’s official

interpretations of its regulations and other TEA documents

that appellees already have received (see page 7 n.3, supra),

it is quite speculative to conclude, as the district court ap-

10. The same is true with respect to the copies of appellees’

records from TEA files. The district court found those records to

be incomplete and partially illegible (2/8/85 op. 8, 9). But the il-

legibility relates to caseworkers’ handwritten entries on the

records; we have already discussed the lack of materiality of such

notations. As to completeness, on appellees’ objection the district

court prevented the Department of Energy investigator who cop-

ied the documents from testifying (1/30/85 Tr. 38-39). The inves-

tigator would have testified that he verified the accuracy of cer-

tain copies of appellees’ records that were already in the

Department’s possession, and he would have said in addition that

he copied all other records pertaining to appellees that were in

their TEA file (id. at 39). But if a trial court were not to accept

that testimony and consequently were to exclude certain of appel-

lees’ TEA records, that ruling likewise would redound to appel-

lees’ benefit. Accordingly, in this respect also the preindictment

delay has been anything but harmful to appellees.

11. On November 6, 1984, appellees served subpoenas on

the Department of Energy and the General Accounting Office, re-

questing records of investigations of set-aside programs, not just

in Tennessee but nationwide and irrespective of whether those in-

vestigations resulted in prosecutions. The government moved to

quash those subpoenas, but the district court denied that motion

to quash and then denied a motion for reconsideration of that

order. As a result, the Department of Energy is conducting a la-

borious, box by box search in order to prepare a response to ap-

pellees’ subpoena.

parently did (2/8/85 op. 6-7), that appellees will not be able

to mount a defense to the charges against them. But a de-

fendant must show more than speculative prejudice in or-

der to prevail on a claim of preindictment delay. United

States v. Moran, 759 F.2d at 782; United States v. Jenkins,

701 F.2d 850, 855 (10th Cir. 1983); United States v. Birney

686 F.2d 102, 105-106 (2d Cir. 1982). Since it is clear that

when the missing TEA records are viewed correctly, they

are at most collateral to the issues at trial, appellees simply

have not met their burden of showing prejudice.

Appellees’ other claim of prejudice concerning the

missing records was that the TEA documents would have

provided them with names of potential witnesses to support

their contention that case workers were given total discre-

tion whether to approve an application (see 2/8/85 op. 7;

appellees’ memorandum at 21, 45). What we have already

said, however, concerning the weight to be given individual

employees’ actions likewise disposes of this part of appel-

lees’ contention about their need for the TEA documents.

Appellees’ claims thus are like those cases in which a de-

fendant has merely asserted that he has lost the testimony

of witnesses due to delay prior to indictment. The courts of

appeals, however, have uniformly rejected such claims, par-

ticularly where—as here—there was no showing of the sub-

stance or relevancy of the witness’ testimony. E.g., United

States v. Jenkins, 701 F.2d at 855; United States v. Dan-

iels, 698 F.2d 221, 224 (4th Cir. 1983); United States v.

Mills, 641 F.2d 785, 788-789 (9th Cir.), cert. denied, 454

U.S. 902 (1981). In essence, then, it is clear that appellees

merely are seeking to flood the trial with irrelevant docu-

ments and witnesses so as to confuse the jury, an attempt

that should not be countenanced. See Hamling v. United

States, 418 U.S. 87, 127 (1974). Accordingly, just as they

failed to satisfy the first prong of the test for preindictment

delay claims, appellees also have failed to demonstrate ac-

tual prejudice from the delay. As a result, the decision be-

low must be reversed.

CONCLUSION

For the foregoing reasons, it is respectfully submitted

that the judgment of the district court should be reversed.

JOE B. BROWN

United States Attorney

Middle District of Tennessee

LOUIS M. FISCHER

Attorney

Department of Justice

Washington, D.C.

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that copies of the foregoing

Opening Brief for the United States have been mailed to

counsel for appellees at the following addresses:

F. Edwin Hallman, Jr., Esquire

Wm. Scott Schulten, Esquire

DECKER, COOPER & HALLMAN

1300 The Rhodes-Haverty Bldg.

134 Peachtree Street, N.W.

Atlanta, GA 30303

M. Clark Spoden, Esquire

DEARBORN & EWING

Suite 1200

One Commerce Place

Nashville, TN 32739

Dated: July 16, 1985 Louis M. Fischer

LOUIS M. FISCHER

Attorney, Appellate Section

Criminal Division

Department of Justice

P.O. Box 899

Ben Franklin Station

Washington, D.C. 20044-0899

Rule 16. Discovery and Inspection

(a) Disclosure of Evidence by the Government.

(1) Information Subject to Disclosure.

(A) Statement of Defendant. Upon request of a de-

fendant the government shall permit the defendant to in-

spect and copy or photograph: any relevant written or re-

corded statements made by the defendant, or copies

thereof, within the possession, custody or control of the

government, the existence of which is known, or by the ex-

ercise of due diligence may become known, to the attorney

for the government; the substance of any oral statement

which the government intends to offer in evidence at the

trial made by the defendant whether before or after arrest

in response to interrogation by any person then known to

the defendant to be a government agent; and recorded tes-

timony of the defendant before a grand jury which relates

to the offense charged. Where the defendant is a corpora-

tion, partnership, association or labor union, the court may

grant the defendant, upon its motion, discovery of relevant

recorded testimony of any witness before a grand jury who

(1) was, at the time of his testimony, so situated as an of-

ficer or employee as to have been able legally to bind the

defendant in respect to conduct constituting the offense, or

(2) was, at the time of the offense, personally involved in

the alleged conduct constituting the offense and so situated

as an officer or employee as to have been able legally to

bind the defendant in respect to that alleged conduct in

which he was involved.

(B) Defendant’s Prior Record. Upon request of the

defendant, the government shall furnish to the defendant

such copy of his prior criminal record, if any, as is within

the possession, custody, or control of the government, the

existence of which is known, or by the exercise of due dili-

: gence may become known, to the attorney for the

| government.

quest of the defendant the government shall permit the de-

fendant to inspect and copy or photograph books, papers,

documents, photographs, tangible objects, buildings or

places, or copies or portions thereof, which are within the

possession, custody or control of the government, and which

are material to the preparation of his defense or are in-

tended for use by the government as evidence in chief at

the trial, or were obtained from or belong to the defendant.

ch AR i en

(D) Reports of Examinations and Tests. Upon

request of a defendant the government shall permit the de-

fendant to inspect and copy or photograph any results or

reports of physical or mental examinations, and of scientific

tests or experiments, or copies thereof, which are within the

possession, custody, or control of the government, the exis-

tence of which is known, or by the exercise of due diligence

may become known, to the attorney for the government,

and which are material to the preparation of the defense or

are intended for use by the government as evidence in chief

at the trial.

(2) Information Not Subject to Disclosure. Ex-

cept as provided in paragraphs (A), (B), and (D) of subdivi-

sion (a)(1), this rule does not authorize the discovery or in-

spection of reports, memoranda, or other internal

government documents made by the attorney for the gov-

ernment or other government agents in connection with the

investigation or prosecution of the case, or of statements

made by government witnesses or prospective government

witnesses except as provided in 18 U.S.C. § 3500.

(3) Grand Jury Transcripts. Except as provided in

Rule 6 and subdivision (a)(1)(A) of this rule, these rules do

rot relate to discovery or inspection or recorded proceed-

ings of a grand jury.

(4) Failure to Call Witness. The fact that a wit-

ress’ name is on a list furnished under this rule shall not be

grounds for comment upon a failure to call the witness.

(b) Disclosure of Evidence by the Defendant.

(1) Information Subject to Disclosure.

(A) Documents and Tangible Objects. If the de-

fendant requests disclosure under subdivision (a)(1)(C) or

(D) of this rule, upon compliance with such request by the

government, the defendant, on request of the government,

shall permit the government to inspect and copy or photo-

graph books, papers, documents, photographs, tangible ob-

jects, or copies or portions thereof, which are within the

possession, custody, or control of the defendant and which

the defendant intends to introduce as evidence in chief at

the trial.

(B) Reports of Examinations and Tests. If the

defendant requests disclosure under subdivision (a)(1)(C)

or (D) of this rule, upon compliance with such request by

the government, the defendant, on request of the govern-

ment, shall permit the government to inspect and copy or

photograph any results or reports of physical or mental ex-

aminations and of scientific tests or experiments made in

connection with the particular case, or copies thereof,

within the possession or control of the defendant, which the

defendant intends to introduce as evidence in chief at the

trial or which were prepared by a witness whom the defend-

ant intends to call at the trial when the results or reports

relate to his testimony.

(2) Information Not Subject to Disclosure. Ex-

cept as to scientific or medical reports, this subdivision does

not authorize the discovery or inspection of reports, memo-

randa, or other internal defense documents made by the de-

fendant, or his attorneys or agents in connection with the

investigation or defense of the case, or of statements made

by the defendant, or by government or defense witnesses, or

by prospective government or defense witnesses, to the de-

fendant, his agents or attorneys.

(3) Failure to Call Witness. The fact that a wit-

ness’ name is on a list furnished under this rule shal! not be

grounds for comment upon a failure to call a witness.

trial, a party discovers additional evidence or material pre-

viously requested or ordered, which is subject to discovery

or inspection under this rule, he shall promptly notify the

other party or his attorney or the court of the existence of

the additional evidence or material.

(d) Regulation of Discovery.

(1) Protective and Modifying Orders. Upon a

sufficient showing the court may at any time order that the

discovery or inspection be denied, restricted, or deferred, or

make such other order as is appropriate. Upon motion by a

party, the court may permit the party to make such show-

ing, in whole or in part, in the form of a written statement

to be inspected by the judge alone. If the court enters an

order granting relief following such an ex parte showing, the

entire text of the party’s statement shall be sealed and pre-

served in the records of the court to be made available to

the appellate court in the event of an appeal.

(2) Failure to Comply With a Request. If at any

time during the course of the proceedings it is brought to

the attention of the court that a party has failed to comply

with this rule, the court may order such party to permit the

discovery or inspection, grant a continuance, or prohibit the

party from introducing evidence not disclosed, or it may

enter such other order as it deems just under the circum-

stances. The court may specify the time, place and manner

of making the discovery and inspection and may prescribe

such terms and conditions as are just.

(e) Alibi Witnesses. Discovery of alibi witnesses is gov-

erned by Rule 12.1.

As amended Feb. 28, 1966, eff. July 1, 1966: April 22, 1974,

eff. Dec. 1, 1975; July 31, 1975, Pub.L. 94-64, § 3(20)-(28),

89 Stat. 374, 375.

§3500. Demands for production of statements

and reports of witnesses.

(a) In any criminal prosecution brought by the United

States, no statement or report in the possession of the

United States which was made by a Government witness or

prospective Government witness (other than the defendant)

shall be the subject of subpoena, discovery, or inspection

until said witness has testified on direct examination in the

trial of the case.

(b) After a witness called by the United States has tes-

tified on direct examination, the court shall, on motion of

the defendant, order the United States to produce any

statement (as hereinafter defined) of the witness in the pos-

session of the United States which relates to the subject

matter as to which the witness has testified. If the entire

contents of any such statement relate to the subject matter

of the testimony of the witness, the court shall order it to

be delivered directly to the defendant for his examination

and use.

dered to be produced under this section contains matter

which does not relate to the subject matter of the testimony

of the witness, the court shall order the United States to

deliver such statement for the inspection of the court in

camera. Upon such delivery the court shall excise the por-

tions of such statement which do not relate to the subject

matter of the testimony of the witness. With such materiai

excised, the court shall then direct delivery of such state-

ment to the defendant for his use. If, pursuant to such pro-

cedure, any portion of such statement is withheld from the

defendant and the defendant objects to such withholding,

and the trial is continued to an adjudication of the guilt of

the defendant, the entire text of such statement shall be

preserved by the United States and, in the event the de-

fendant appeals, shall be made available to the appellate

court for the purpose of determining the correctness of the

ruling of the trial judge. Whenever any statement is deliv-

ered to a defendant pursuant to this section, the court in its

discretion, upon application of said defendant, may recess

proceedings in the trial for such time as it may determine

to be reasonably required for the examination of such state-

ment by said defendant and his preparation for its use in

the trial.

(d) If the United States elects not to comply with an

order of the court under subsection (b) or (c) hereof to de-

liver to the defendant any such statement, or such portion

thereof as the court may direct, the court shall strike from

the record the testimony of the witness, and the trial shall

proceed unless the court in its discretion shall determine

that the interests of justice require that a mistrial be

declared.

(e) The term “statement”, as used in subsections (b),

(c), and (d) of this section in relation to any witness called

by the United States, m —

(1) a written statement made by said witness and

signed or otherwise adopted or approved by him;

(2) a stenographic, mechanical, electrical, or other re-

cording, or a transcription thereof, which is a substantially

verbatim recital of an oral statement made by said witness

and recorded contemporaneously with the making of such

oral statement; or

(3) a statement, however taken or recorded, or a tran-

scription thereof, if any, made by said witness to a grand

jury.

PART 211—MANDATORY PETROLEUM

ALLOCATION REGULATIONS

211.66 Reporting requirements.

211.67 Allocation of domestic crude oil.

211.69 Entitlements adjustment mechanism.

APPENDIX A STANDBY REGULATIONS

EpiToriAL Norte: Regulations in this part are affected

by a document published at 44 FR 37938, June 29, 1979.

See the redesignation table appearing in the Finding Aids

section of this volume.

§ 211.66 Reporting requirements.

(a)-(h) [Reserved]

(i) Monthly transaction report. On or prior to the tenth

day of each month, commencing with the month of Febru-

ary 1975, each refiner and eligible firm that was required to

purchase or sell entitlements for the third month prior to

the month in which the report is filed shall file with the

DOE a report certifying its purchases or sales of entitle-

ments for that prior month.

(Emergency Petroleum Allocation Act of 1973, 15 U.S.C.

751 et seg., Pub. L. 93-159, as amended, Pub. L. 93-511,

Pub. L. 94-99, Pub. L. 94-133, Pub. L. 94-163, and Pub. L.

94-385; Federal Energy Administration Act of 1974, 15

U.S.C. 787 et seq., Pub. L. 93-275, as amended, Pub. L. 94-

332, Pub. L. 94-385, Pub. L. 95-70, and Pub. L. 95-91; En-

ergy Policy and Conservation Act, 42 U.S.C. 6201 et seq.,

Pub. L. 94-163, as amended, Pub. L. 94-385, and Pub. L.

95-70; Department of Energy Organization Act, 42 U.S.C.

7101 et seg., Pub. L. 95-91; E.O. 11790, 39 FR 23185; E.O.

12009, 42 FR 46267)

{39 FR 42247, Dec. 4, 1974, as amended at 40 FR 10445,

Mar. 6, 1975; 46 FR 20512, and 20520, Apr. 3, 1981]

NOTE: The provisions of this section may be affected

by Standby Regulation 211-1. Standby Regulation 211-1

appears in Appendix A to Part 211. For the convenience of

the user, a table listing all Standby Regulations and sec-

tions affected appears in the Finding Aids section of this

volume.

§ 211.67 Allocation of domestic crude oil.

(a) Issuance of entitlements. (1) For each month, com-

mencing with the month of June 1978, each refiner shall be

issued a number of entitlements by the ERA equal to the

number of barrels of crude oil included in the total volume

of that refiner’s crude oil runs to stills for that month mul-

tiplied by the national domestic crude oil supply ratio for

that month, subject to the entitlement adjustment for small

refiners set forth in paragraph (e) of this section and the

entitlement adjustments in paragraph (a)(4) of this section.

(2) Refiners to which entitlements shall be issued

under this section shall include all refiners classified as re-

finer 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 DOE

for purposes of § 211.65, shall apply to the DOE for certifi-

cation of its refinery capacity for purposes of qualifying to

receive entitlements under this section. With respect to the

granting of any such application for certification, the DOE

shall consider the factors set forth in § 211.65(b)(1)(v) and

(vi).

(3) For each month in the period July 1, 1979 through

September 30, 1981, each eligible firm that has imported an

eligible product in that month shall be issued a number of

entitlements equivalent to fifty percent (50%) of the num-

ber of entitlements that would be received by a refiner

(without giving effect to the provisions of § 211.67(e)) in

that month with respect to inclusion of a number of barrels

of crude oil in that refiner’s crude oil runs to stills equal to

a number of barrels of that eligible product imported by

that eligible firm. An eligible product is imported for pur-

poses of this paragraph (a)(3) in the month, as specified on

Customs Forms 7501 and 7505, as appropriate, in which im-

portation takes place.

(4) For each month, commencing with the month of

June 1978, the number of entitlements issued under para-

graph (a)(1) of this section to each refiner shall be increased

by: (i) The number of barrels of California lower tier crude

oil included in its adjusted crude oil receipts in that month

multiplied by a fraction, the numerator of which is $2.38

plus or minus $.09 for each degree API gravity (or fraction

thereof) by which the weighted average gravity of all Cali-

fornia lower tier crude oil included in that refiner’s adjusted

crude oil receipts in that month either falls below or ex-

ceeds, respectively, 18 degrees API, and the denominator of

which is the entitlement price for that month; and (ii) the

number of barrels of California upper tier crude oil in-

cluded in its adjusted crude oil recuipts in that month mul-

tiplied by a fraction, the numerator of which is $1.45 plus

or minus $.09 for each degree API gravity (or fraction

thereof) by which the weight average gravity of all Califor-

nia upper tier crude oil included in that refiner’s adjusted

crude oil receipts in that month either falls below or ex-

SN ike al ond nm ay Re

ceeds, respectively, 18 degrees API, and the denominator of

which is the entitlement price for that month: Provided,

That the dollar value of additional entitlements issued

under this paragraph (a)(4) shall not exceed the dollar

value of the obligation (as calculated under paragraph (b)

of this section) for the crude oil with respect to which such

additional entitlements are issued. The refiner shall calcu-

late and report the weighted average gravity of California

lower tier crude oil and California upper tier crude oil sepa-

rately, and in calculating such weighted average gravities

shall (A) determine the gravity of such crude oil for each

receipt of such crude oil in that month on the basis of the

gravity of such crude oil at the time it becomes a receipt,

and (B) determine a single monthly weighted average grav-

ity for such crude oil by weight averaging (on a volumetric

basis) of all such individual receipts in that month.

(5)(i) For each month, entitlements shall be issued with

respects to a petroleum substitute as follows:

(A) In the case of a shale oil used as a feedstock or fuel

in a domestic refinery, the refiner shall be issued, upoii cer-

tification prior to January 28, 1981, to ERA that the shale

oil has been used as a feedstock or fuel in a domestic refin-

ery, that number of entitlements that would be received by

the refiner if each barrel of the shale oil were a barrel of

crude oil.

(B) In the case of a shale oil used or sold for use do-

mestically as fuel other than in a refinery, the producer of

the shale oil shall be issued, upon certification prior to Jan-

uary 28, 1981, to ERA that the shale oil has been used or

sold for use domestically as fuel other than in a refinery,

that number of entitlements that would be received by a

refiner if each barrel of the shale oil were a barrel of crude

oil.

biomass and mixed with gasoline, the producer of the ethyl

alcohol shall be issued that number of entitlements that

would be received by a refiner if a barrel of ethyl alcohol

were equal to 0.6189 barrels of crude oil; Provided, that en-

titlements will be issuable to a producer of ethyl alcohol

only upon written certification prior to January 28, 1981, by

the producer to ERA that

(1) The producer has actually mixed the ethyl alcohol

with gasoline and used the resulting mixture domestically

as fuel or sold the mixture for domestic use as fuel; or

(2) In any case where the producer sells the ethyl alco-

hol prior to mixing with gasoline, the producer has received

written certification from a subsequent purchaser that such

person

(1) Has been the first person to actually mix the ethyl

alcohol with gasoline;

(11) Has used the resulting mixture domestically as fuel

or sold the mixture for domestic use as fuel;

(111) Has based certification as to such use or sale upon

documentation; and

(iv) Will maintain such documentation in a manner so

as to be available for inspection at any time by the ERA

within five years.

(D) In the case of municipal solid waste, the person

who first processes the municipal solid waste to produce a

solid fuel shall be issued that number of entitlements that

would be received by a refiner if each ton of municipa! solid

waste processed were equal to 1.40 barrels of crude oil; Pro-

vided, that entitlements will be issuable to the processor of

the municipal solid waste only upon written certification

prior to January 28, 1981, by the processor to ERA that the

processor has (1) actually used the solid waste or solid de-

eee ie ik,

rivative thereof domestically to produce useful energy and

that the energy thus produced has actually been used as

fuel; or (2) sold the solid waste or solid derivative thereof or

useful energy produced from either the solid waste or its

derivative for domestic use as fuel.

(E) In the case of methane derived from municipal

sewage or domestic landfills, the collector of the methane

shall be issued, upon certification prior to January 28, 1981,

to ERA that the methane has been used or sold for use do-

mestically as fuel, that number of entitlements that would

be received by a refiner if each unit of methane having a

gross heating value of 5.7 million BTU’s were a barrel of

crude oil.

(F) In the case of solid waste or a solid or gaseous de-

rivative thereof which has been designated as a petroleum

substitute by ERA in an order issued pursuant to § 205.95

of this chapter before January 28, 1981, that person desig-

nated by ERA as eligible to participate in the entitlements

program with respect to such petroleum substitute shall be

issued that number of entitlements that would be received

by a refiner if the unit of measurement established by ERA

for that petroleum substitute were a barrel of crude oil.

(G) In the case of a liquid petroleum substitute which

has been designated as a petroleum substitute by ERA in

an order issued pursuant to § 205.95 of this chapter before

January 28, 1981, and which has a gross heating value of 5.7

million or more BTU’s per barrel, that person designated

by ERA as eligible to participate in the entitlements pro-

gram with respect to the petroleum substitute shall be is-

sued that number of entitlements that would be received by

a refiner if a barrel of the petroleum substitute were a bar-

rel of crude oil.

(H) In the case of a liquid petroleum substitute which

has been designated as a petroleum substitute by ERA in

an order issued pursuant to § 205.95 of this chapter before

January 28, 1981, and which has a gross heating value of

less than 5.7 million BTU’s per barrel, that person desig-

nated by ERA as eligible to participate in the entitlements

program with respect to the petroleum substitute shall be

issued that number of entitlements that would be received

by a refiner if a barrel of the petroleum substitute were

equal to a fraction of « barrel of crude oil, the numerator of

which would be the gross heating value in BTU’s per barrel

of the petroleum substitute, and the denominator of which

would be 5.7 million BTU’s. An order issued by ERA to

designate a petroleum substitute shall also designate the

firm to which entitlements will be issued and the manner in

which the use of the petroleum substitute by that firm shall

result in entitlement issuances.

(ii) Each firm shall in its initial report to ERA for pur-

poses of receiving entitlements pursuant to the provisions

of paragraph (a)(5)(i) of this section submit written certifi-

cation that all local, state, or federal permits or licenses re-

quired with respect to the production, distribution or any

other use of the petroleum substitute have been obtained

and provide copies of such permits and licenses and, as re-

quired by ERA, any information submitted to a governmen-

tal body for the purpose of obtaining any applicable permit

or license. Each such firm shall in its initial report and each

month thereafter submit any information required by ERA

to be submitted by such firm on forms adopted by ERA for

purposes of determining the entitlements issuable to such

firm. A firm shall provide written certification in any sub-

mission that the information set forth therein is accurate

and based upon documentation, and, further, that such firm

shall maintain such records in a manner so as to be availa

ble for inspection at any time by the ERA within five years.

Records required to be kept under this subparagraph shall

A nc Ne NG SNES Yn ADAP Ue jas Per ne nail tats eel

5s ictaitita teste Waiahl ieee

be made available for inspection at any time upon the re-

quest of a representative of ERA.

(6)(i) For each month in the period May 1, 1979

through October 31, 1979, each firm that imports “distillate

fuel oil, less No. 4” and “kerosene” as those terms are de-

fined in the instructions to ERA Form ERA-60, that is the

importer of record under a license issued pursuant to Part

213 of this chapter, and that owns the product at the time

of importation thereof pursuant to that license shall be is-

sued a number of entitlements equal to the number of bar-

rels of distillate fuel oil, less No. 4, and kerosene imported

in that month by that firm multiplied by a fraction, the nu-

merator of which is $5, and the denominator of which is the

entitlement price for that month.

(ii) For purposes of paragraph (a)(6), the time of im-

portation shall be the earliest of the following dates as spec-

ified on the Customs Form 7501 or 7505: (A) The “release

date”; (B) the “entry date”; (C) the “validation date”; (D)

the “PAID stamp date”; (E) the “date of importation”; or

(F) the “withdrawal date.”

(7)(i) For each month commencing with the month of

August 1980, the United States Government shall be issued

entitlements for crude oil purchased for, delivered to, and

accepted for delivery to the Strategic Petroleum Reserve in

the following month. The number of entitlements issued

shall be calculated in accordance with the provisions of

paragraphs (a)(7)(iii) through (vi) of this section.

(ii) In any case where the United States Government

acquires from a refiner or other firm crude oil for storage in

the Strategic Petroleum Reserve pursuant to an exchange

or matching purchase and sale transaction, no domestic

crude oil shall be deemed to have been transferred by that

refiner or other firm in that exchange or transaction and

such volume of domestic crude oil deemed to have been re-

tained shall be included in a refiner’s crude oil receipts in

the month in which such domestic crude oil is delivered to

and accepted for delivery to the Strategic Petroleum Re-

serve, and the United States Government shall be issued

entitlements for the month prior to the month in which

such domestic crude oil is delivered to and accepted for de-

livery to the Strategic Petroleum Reserve. The number of

entitlements issued shall be calculated in accordance with

the provisions of paragraphs (a)(7)(iii) through (vi) of this

section on the basis of the volume of crude oil given up by

the Government in any such exchange or transaction. Not-

withstanding anything to the contrary in 10 CFR Part 212,

in any matching purchase and sale transaction subject to

this paragraph, the United States Government may pay and

the seller may receive any price for the crude oil purchased

by the United States Government for the Strategic Petro-

leum Reserve.

(iii) One entitlement shall be issued for each barrel or

imported crude oil and each barrel of domestic crude oil the

first sale of which is not subject to the ceiling price limita-

tions of Subpart C of Part 212 of this chapter.

(iv) A fraction of an entitlement shall be issued for

each barrel of upper tier crude oil other then ANS upper

tier crude oil, the numerator of which is the difference be-

tween the reported weighted average cost per barrel to re-

finers of upper tier crude oil other than ANS upper tier

crude and the reported weighted average cost per barrel to

refiners of lower tier crude oil, and the denominator of

which is the entitlement price.

(v) A fraction of an entitlement shall be issued for each

barrel of ANS upper tier crude oil, the numerator of which

is the difference between the reported weighted average

cost per barrel to refiners of ANS upper tier crude oil and

the reported weighted average cost per barrel to refiners of

hE A NNN LE, PENNS

lower tier crude oil, and the denominator of which is the

entitlement price.

(vi) The calculations in paragraphs (a)(7)(iv) and

(a)(7)(v) of this section shall be based on the entitlement

price fixed for, and the weighted average costs reported for,

the month prior to the month in which the crude oil is de-

livered to the Strategic Petroleum Reserve.

(b) Required purchase of entitlements by refiners. (1)

For each month, commencing with the month of February

1976, each refiner that has been issued fewer entitlements

for that month than the number of barrels of deemed old

oil (as calculated under paragraph (b)(2) of this section) in-

cluded 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 deemed old

oil (as so calculated) included in that refiner’s adjusted

crude oil receipts for that month and the number of entitle-

ments issued to and retained by that refiner. Entitlement

purchases required under this paragraph (b) of this section

with respect to a particular month shall be effected by the

close of the second month following that month.

(2) To calculate the number of barrels of deemed old

oil included in a refiner’s adjusted crude oil receipts for

purposes of the definition of national domestic crude oil

supply ratio in § 211.62, paragraph (b)(1) of this section,

and paragraph (c) of this section shall be calculated as

follows:

(i) Each barrel of old oil shall be equal to one barrel of

deemed old oil;

(ii) Each barrel of upper tier crude oil (except ANS up-

per tier crude oil) shall constitute that fraction of a barrel

of deemed old oil, the numerator of which is equal to the

reported weighted average cost per barrel to refiners of im-

ported crude oil, stripper well crude oil (as defined in Part

212 of this chapter), incremental tertiary crude oil (as de-

termined pursuant to § 212.78), tertiary incentive crude oil

(as determined pursuant to § 212.78), heavy crude oil (as

determined pursuant to § 212.59), newly discovered crude

oil (as determined pursuant to § 212.79), market level new

crude oil (as determined pursuant to § 212.74), and other

domestic crude oils the first sale of which is exempt from

the provisions of Part 212 of this chapter for that month,

less such weighted average cost per barrel to refiners of up-

per tier crude oil (except ANS upper tier crude oil), and the

denominator of which is the entitlement price for that

month;

(iii) Each barrel of ANS upper tier crude oil shall con-

stitute that fraction of a barrel of deemed old oil the nu-

merator of which is equal to the reported weighted average

cost per barrel to refiners of imported crude oil, stripper

well crude oil (as defined in Part 212 of this chapter), incre-

mental tertiary crude oil (as determined pursuant to §

212.78), tertiary incentive crude oil (as determined pursu-

ant to § 212.78), heavy crude oil (as determined pursuant to

§ 212.59), newly discovered crude oil (as determined pursu-

ant to § 212.79), market level new crude oil (as determined

pursuant to § 212.74), and other domestic crude oils the

first sale of which is exempt from the provisions of Part 212

of this chapter for that month, less such weighted average

cost per barrel to refiners of ANS upper tier crude oil, and

the denominator of which is the entitlement price for that

month.

month, commencing with the month of February 1976, each

refiner that has been issued a greater number of entitle-

ments for that month than the number of barrels of

deemed old oil (as calculated under paragraph (b)(2) of this

section) included in its adjusted crude oil receipts shall sell

such excess entitlements, and the United States Govern-

ment and any eligible firm (other than a refiner) that has

been issued entitlements'shall sell such entitlements.

(d) Adjustments to volume of crude oil runs to stills.

(1) A refiner’s volume of crude oil runs to stills shall (i) in-

clude (A) the volume of crude oil processed by another re-

finer for that refiner pursuant to a processing agreement

and (B) the volume of crude oil processed by that refiner

for a person other than a refiner pursuant to a processing

agreement, and (ii) exclude the volume of crude oil

processed by that refiner for another refiner pursuant to a

processing agreement.

(2) The volume of a refiner’s crude oil runs to stills in a

particular month for purposes of the calculations in para-

graph (a)(1) of this section and the calculations for the na-

tional domestic crude oil supply ratio shall be reduced by

that refiner’s volume of export sales under § 212.53 of this

chapter in that month of refined petroleum products (in-

cluding aviation fuels as defined in § 211.142 of this part,

but excluding refined lubricating oils) and residual fuel oil,

including sales to a domestic purchaser which certifies the

product is for export; provided, however, that the volume of

a refiner’s crude oil runs to stills for a month shall not be

reduced by that refiner’s volume of export sales of Bunker

C and Navy Special fuel oils and No. 4 diesel, which are

sold for use as a marine fuel on a voyage departing from a

United States port.

(3) The volume of a refiner’s crude oil runs to stills in a

particular month for purposes of the calculations in para-

graph (a)(1) of this section and the calculations for the na-

tional domestic crude oil supply ratio shall include the total

number of barrels of plant condensate and the total number

of barrels of synthetic crude oil made from tar sands which

are imported from Canada and are utilized in that month as

inputs to distillation units by a refiner, measured in accor-

dance with the Bureau of Mines Form 6-1300-M. Neither

plant condensate nor synthetic crude oil made from tar

sands which are imported from Canada shall be eligible for

inclusion in the volume of a refiner’s crude oil runs to stills

under this paragraph (a)(3) of this section unless payment

has been made in accordance with Presidential Proclama-

tion No. 3279, as amended, of any import license fees appli-

cable to crude oil as defined for purposes of this section,

which is imported for refining.

(4) For the period July 1, 1979 through September 30,

1981, for purposes of the calculations in paragraph (a)(1) of

this section and the calculations for the national domestic

crude oil supply ratio (but not for purposes of paragraph (e)

of this section), the velume of crude oil runs to stills of any

domestic refiner attributable to production of residual fuel

oil transported in foreign flag tankers for sale (whether di-

rectly for consumption or for resale) cr use in the eligible

market (as defined in § 211.62) shall be reduced by fifty

percent (50°: ). Any export sales of residual fuel oil giving

rise to a deduction under paragraph (d)(2) of this section

shall not be considered as residual fuel oil production for

purposes of this paragraph (d)(4) of this section.

(5)(i) The volume of a refiner’s crude oil runs to stills

beginning with the month of January, 1981 in a particular

month for purposes of the calculations in paragraph (a)(1)

of this section and the calculations for the national domes-

tic crude oil supply ratio shall include the number of bar-

rels of naphthas which are imported into Puerto Rico

(other than imports from the U.S. Virgin Islands and other

than naphthas imported into Puerto Rico which are ac-

quired pursuant to an exchange or similar matching

purchase and sale transaction for naphthas produced by a

refinery located in the United States) and are utilized in

that month as a petrochemical feedstock at a petrochemical

eh Cts NBL CA AE NR cae

plant owned or operated by that refiner in Puerto Rico, as

reduced in paragraph (d)(5)(ii) of this section. The number

of eligible varrels of naphthas for a particular month fur-

ther shall be multiplied by a fraction the numerator of

which is equal to the weighted average per barrel cost of all

naphthas imported into Puerto Rico for that month as to

which entitlement issuances are sought less the imputed per

barrel cost of domestically produced naphthas for that

month, and the denominator of which is the entitlement

value for a barrel of crude oil included in the volume of a

refiner’s crude oil runs to stills for that month. For pur-

poses of this paragraph (d)(5)(i) of this section, the im-

puted per barrel cost of domestically produced naphthas for

a particular month, commencing with January, 1981 shall

be equal to 117 percent of the weighted average per barrel

cost of all the crude oil receipts for all domestic refiners for

that month.

(ii) The volume of naphthas eligible for inclusion in the

volume of a refiner’s crude oil runs to stills in a particular

month under paragraph (d)(5)(i) of this section shall be re-

duced by the volume of export sales (under § 212.53 of this

chapter, including sales to a purchaser which certifies it or

an entity affiliated with that purchaser will export the prod-

uct so purchased), for that month of products produced at

the petrochemical piant that has processed the imported

naphthas.

(iii) Notwithstanding any other provisions of this sec-

tion, a firm other than a refiner that owns a petrochemical

plant in Puerto Rico shall be eligible to receive entitlements

with respect to naphthas processed at such a plant on the

same basis as is provided for refiners in paragraphs (d)(5)

(i) and (ii) of this section, except that such a firm shall not

be eligible for any additional entitlements under the provi-

sions of paragraph (e) of this section. Any such firm shall

file reports under § 211.66 on the same basis as a refiner.

(iv) Any firm that is eligible for entitlement issuances

under this subparagraph shall obtain appropriate certifica-

tions from any other firm to which it sells products pro-

duced at a petrochemical plant located in Puerto Rico.

Such certification shall set forth whether or to what extent

the products so purchased will be sold (whether directly by

that other firm or indirectly through any firm affiliated with

that other firm) in transactions that constitute export sales

under § 212.53 of this chapter. Any firm purchasing prod-

ucts produced at a petrochemical plant located in Puerto

Rico shall, upon the request of the owner or operator of

that facility, certify to that owner or operator as to whether

or what extent the further sale of those products by that

firm (or any affiliate thereof) will constitute export sales

under § 212.53.

(6)—(7) [Reserved]

(8) Commencing with the month of July 1978, the vol-

ume of a refiner’s crude oil runs to stills in a particular

month for purposes of the calculations in paragraph (a)(1)

of this section and the calculations for the national domes-

tic crude oi! supply ratio shall include the total number of

barrels of the liquid produced from oil shale that is found

in the United States and used as a refining feedstock,

blending feedstock or fuel in a domestic refinery in that

month by a refiner.

(9) Commencing with the month of January 1979, the

volume of crude oil runs to stills of a refiner in a particular

month as to any of its refineries located in the State of

Alaska, for purposes of the calculations in paragraph (a)(1)

of this section and the calculations for the national domes-

tic crude oil supply ratio, shall not include the number of

barrels of unfinished oils or partially-refined petroleum

products injected or reinjected by that refinery into the

Trans-Alaska Pipeline System in that month.

(e) Small refiner bias. (1) In addition to the number of

entitlements issuable under paragraph (a) of this section,

subject to the limitations set forth in paragraphs (e)(2), (3),

and (4) of this section, effective for refiners’ volumes of

crude oil runs to stills for June 1979, each small refiner

shall be issued the following number of additional entitle-

ments for each day of a particular month:

(i) For each small refiner with respect to its refineries

with a daily average volume of crude oil runs to stills of 0 to

10,000 barrels in that month, each such refinery shall re-

ceive a number of entitlements equal to the number of bar-

rels of such refinery’s daily average volume of crude oil runs

to stills for that month multiplied by a fraction, the numer-

ator of which is $.96, and the denominator of which is the

entitlement price for that month;

(ii) For each small] refiner with respect to its refineries

with a daily average volume of crude oil runs to stills of

10,000 to 30,000 barrels in that month, each such refinery

shall receive a number of entitlements equal to a fraction,

the numerator of which is $9,600 plus $.315 for each barrel

by which such refinery’s daily average volume of crude oil

runs to stills exceeds 10,000 barrels for that month, and the

denominator of which is the entitlement price for that

month;

(iii) For each small refiner with respect to its refineries

with a daily average volume of crude oil runs to stills of

30,000 to 50,000 barrels in that month, each such refinery

shall receive a number of entitlements equal to a fraction,

the numerator of which is $15,900 minus $.095 for each bar-

rel by which such refinery’s daily average volume of crude

oil runs to stills exceeds 30,000 barrels for that month, and

the denominator of which is the entitlement price for that

month;

(iv) For each small refiner with respect to its refineries

with a daily average volume of crude oil runs to stills of

50,000 to 100,000 barrels in that month, each such refinery

shall receive a number of entitlements equal to a fraction,

the numerator of which is $14,000 minus $.10 for each bar-

rel by which such refinery’s daily average volume of crude

oil runs to stills exceeds 50,000 barrels for that month, and

the denominator of which is the entitlement price for that

month;

(v) For each small refiner with respect to its refineries

with a daily average volume of crude oil runs to stills of

100,000 to 175,000 barrels in that month, each such refinery

shall receive a number of entitlements equal to a fraction,

the numerator of which is $9,000 minus $.12 for each barrel

by which such refinery’s daily average volume of crude oil

runs to stills exceeds 100,000 barrels for that month, and

the denominator of which is the entitlement price for that

month.

(2) Effective for refiners’ volumes of crude oil runs to

stills for June 1977, no entitlements shall be issuable under

paragraph (e)(1) of this section with respect to any volume

of a small refiner’s crude oil runs to stills attributable to a

processing agreement for the account of that small refiner

with another refiner.

(3) Each small refiner shall separately identify in its re-

ports filed pursuant to § 211.66(h) of this subpart any

volumes of its crude oil runs to stills not eligible (under the

provisions of paragraph (e)(2) of this section) for small re-

finer bias entitlements.

(4) For purposes of the calculations in paragraph (e)(1)

of this section, the daily average volume of a particular

small refiner’s crude oil runs to stills shall be computed as

follows: The daily average volume of a small refiner’s crude

oil runs <o stills (with respect to all of its refineries) shall be

multiplied by a fraction, the numerator of which is the ca-

pacity of that particular small refinery as certified pursuant

to paragraph (a)(2) of this section, and the denominator of

which is the capacity of that small refiner (with respect to

all of its refineries) as certified pursuant to paragraph (a)(2)

of this section.

(f) Transactions under § 211.65. (1) Effective for sales

for the allocation quarter commencing March 1, 1976 under

§ 211.65 of this subpart, no sale by a refiner-seller under

§ 211.65 shall be deemed for purposes of this section to in-

clude any volume of domestic crude oil. If a refiner-seller

sells actual volumes of domestic crude oil under § 211.65,

the related volumes of old oil and upper tier crude oil shall

be included in that refiner-seller’s crude oil receipts in the

month in which the sale is made. For purposes of the ad-

justments set forth in paragraph (a)(4) of this section, a re-

finer-buyer’s receipts of imported crude oil and Alaska

North Slope crude oil shal] include volumes of crude oil

shall include volumes of crude oil sold under § 211.65 to

that refiner-buyer.

(2) For sales for allocation quarters prior to the alloca-

tion quarter commending March 1, 1976, each sale by a re-

finer-seller under § 211.65 shall be deemed to include

volumes of old oil (and upper tier crude oil, if any) propor-

tionate to the volumes thereof included in the deliveries of

crude oil to that refiner-seller that determine the price at

which the sale is made under § 212.94 of Part 212. Any

volumes of domestic crude oil so deemed to be included in

any sale under § 211.65 shall be reflected in the crude oil

receipts of the refiner-buyer concerned. As to each sale for

any such prior allocation quarter, each refiner-seller shall

certify to the refiner-buyer the volume of old oil (and upper

tier crude oil, if any) included in the volume of crude oil

sold within twenty-eight (28) days following the month in

which the crude oil is delivered to or for the account of the

refiner-buyer in accordance with the provisions of § 212.131

of Part 212.

(2) In determining the weighted average landed cost of

crude oil delivered to a refiner-seller in a month pursuant

to § 212.94 of Part 212, the cost of any required purchases

or revenues from any sales of entitlements by that refiner-

seller shall not be taken into account.

(g) Exchanges of crude oil. (1) Subject to the provi-

sions of paragraph (g)(3) of this section, in any exchange of

crude oil in which only quality and location differentials are

given effect in the calculation of the exchange ratio, or in

any matching purchase and sale transaction which has the

same effect as such an exchange, no volumes of domestic

crude oil shall be deemed to have been transferred. Any

volumes of domestic crude oil exchanged away or sold pur-

suant to any such exchange or matching purchase and sale

transaction shall be considered as having been retained by

the refiner or other firm that has so exchanged away or sold

such volumes, regardless of the volume of crude oil received

or purchased by that refiner or other firm in such exchange

or transaction.

(2) Subject to the provisions of paragraph (g)(3) of this

section, volumes of domestic crude oil deemed to be re-

tained by a refiner under the provisions of paragraph (g)(1)

of this section shall be (i) included in that refiner’s crude oil

receipts at the time the crude oil acquired pursuant to the

related exchange or purchase and sale transaction consti-

tutes a crude oil receipt under § 211.62 of this subpart to

that refiner, or (ii) certified as old oil, upper tier crude oil,

ANS crude oil, stripper well crude oil (as defined in Part

212 of this chapter), heavy crude oil (as determined pursu-

ant to § 212.59), incremental tertiary crude oil (as deter-

mined pursuant to § 212.78), tertiary incentive crude oil (as

determined pursuant to § 212.78), newly discovered crude

oil (as determined pursuant to § 212.79) market level new

crude oil (as determined pursuant to § 212.74), or any other

domestic crude oil the first sale of which is exempt from

Part 212 of this chapter, as the case may be, under the pro-

visions of § 212.131 of Part 212 when the crude oil acquired

pursuant to the related exchange or purchase and sale

transactions is sold to another firm.

(3) Where a refiner exchanges away or sells volumes of

domestic crude oil in an exchange or matching purchase

and sale transaction of the type described in paragraph

(g)(1) of this section and receives in exchange or purchases

in the transaction foreign crude oil that is delivered and

processed outside the United States, that refiner shall in-

clude any domestic crude oil so exchanged away or sold by

it in its crude oil receipts as of the date that domestic crude

oil is so exchanged away or sold.

(4) The provisions of paragraph (g)(1) of this section

shall not apply to transactions involving domestic crude oil

which is exchanged away by a firm other than a refiner for

foreign crude oil that is not processed in a refinery located

in the United States. Any firm other than a refiner that has

exchanged away or sold domestic crude oil within the

United States pursuant to an exchange transaction in which

other crude oil is also transferred outside the United States

shall comply with the certification requirements of §

212.131 of Part 212 as to any volumes of old oil or upper

tier crude oil, as the case may be, so exchanged away or

sold. Any domestic crude oil delivered to a refiner in the

United States pursuant to a transaction of the type de-

scribed in this paragraph (g)(4) shall be included in the

crude oil receipts of the refiner that receives, directly or in-

directly through further sales or exchanges, the volumes of

domestic crude oil that are the subject of the transaction, as

provided in § 211.62 of this subpart.

(5) For purposes of this paragraph (g), “refiner’’ means

any firm that owns, operates or controls the operations of

one or more refineries, and includes any entity that is a part

of or affiliated with, or that controls or is controlled by

(whether directly or indirectly), a refiner.

(h) Averaging of crude oil receipts. Upon application

by a refiner in accordance with the procedures established

under Subpart G of Part 205 of this chapter within thirty

(30) days following the close of a month, the DOE may ad-

just the crude oil receipts of that refiner for that month to

permit the portion of such crude oil receipts specified by

the DOE to be included in the crude oil receipts of that

refiner for one or more subsequent months, if the volume of

crude oil receipts in that month is significantly dispropor-

tionate to the volume of that refiner’s crude oil runs to stills

for that month due to a shutdown (by reason of either a

mechanical failure or normal maintenance procedures) re-

sulting in a fifty (50) percent or greater portion of that re-

finer’s refinery capacity not having been operable for the

duration of that month.

(i) Issuance and transfer of entitlements. (1) The DOE

shall issue entitlements for each month (effective for the

month of February 1976 and subsequent months) pursuant

to a notice issued on the fifteenth day of the second month

following that month.

(2) Each notice published by the DOE evidencing the

issuance of entitlements under this section shall specify as

to a particular month the national domestic crude oil sup-

ply ratio, the name of each refiner and other eligible firm to

which entitlements have been issued, the number of barrels

of deemed old oil included in each refiner’s adjusted crude

oil receipts, the number of entitlements issued to each such

refiner or other firm, the number of entitlements required

to be purchased or sold by each such refiner or other firm,

See

and the price at which entitlements shall be purchased and

sold.

(3) No transfer of an entitlement shall be effective if

made to any firm that is not purchasing such entitlement to

fulfill such firm’s obligations under this section.

(4) The price at which entitlements shall be sold and

purchased shall be fixed by the ERA for each month and

shall be the exact differential between the weighted average

cost per barrel to refiners of old oil and such weighted aver-

age cost of imported crude oil, stripper well crude oil (as

defined in Part 212 of this chapter), heavy crude oil (as de-

termined pursuant to § 212.59), incremental tertiary crude

oil (as determined pursuant to § 212.78), tertiary incentive

crude oil (as determined pursuant to § 212.78), newly dis-

covered crude oil (as determined pursuant to § 212.79),

market level new crude oil (as determined pursuant to §

212.74), and other domestic crude oils the first sale of which

is exempt from the provisions of Part 212 of this chapter,

such costs to be equivaient to the delivered costs to the

refinery.

(j) Reporting errors. (1) Refiners and eligible firms

shall correct any errors contained in reports filed pursuant

to § 211.66 by filing an amended report for the particular

month. Based on any reporting errors so corrected, the

DOE in its discretion may adjust entitlement issuances to

the refiner or eligible firm in one or more months subse-

quent to the month in which the amended report is filed

with the DOE, by issuing fewer entitlements than the num-

ber of otherwise issuable, by requiring the refiner or eligible

firm to purchase entitlements in order to correct for excess

entitlements issued in a prior month or by issuing entitle-

ments over and above the number otherwise issuable to

compensate for too few entitlements having been issued in

such prior month. All entitlement issuances or purchase re-

quirements under this subparagraph shall give effect to any

differential between the entitlement price for the month in

which any correction is reflected as compared with the enti-

tlement price for the month as to which the reporting error

was made (except with respect to corrections to volumes of

crude oil runs to stills where a corresponding adjustment to

crude oil receipts was made as contemplated by the term

“adjusted crude oil receipts” in § 211.62) and such other

factors as the DOE deems appropriate.

(2) Notwithstanding the provisions of paragraph (j)(1)

of this section, corrections of reporting errors for the

months November 1974 through August 1975 shall be made

as follows. DOE shall recalculate for those months the

purchase and sale obligations (giving effect to any applica-

ble relief under decisions and orders issued by DOE’s Office

of Exceptions and Appeals and to the provisions of Special

Rule No. 3 for Subpart C) of all refiners and eligible firms

based on inclusion in each month of each refiner’s and eligi-

ble firm’s corrected volume (as reported to the DOE) of

crude oil runs to stills, volume of old oil included in its

crude oil receipts (other than adjustments effected as con-

templated by the term ‘adjusted crude oil receipts” in §

211.62) and eligible product imports. No entitlement price

adjustment as contemplated by paragraph (j)(1) of this sec-

tion shall be made in the calculations under this paragraph

(j)(2). DOE shall then aggregate for each refiner and eligible

firm its net purchase or sale amount (in dollars) for these

months (giving effect to the published purchase and sale

obligations for these months) and apply these amounts in

substantially equal portions (translated into current entitle-

ment values) to that refiner’s or eligible firm’s entitlement

purchase or sale obligations for the months of July 1976

through February 1977.

(3) For purposes of this paragraph, errors required to

be corrected by the filing of amended reports include (i)

OM ee ee eee eee

clerical errors, and (ii) inaccurate estimates as to the do-

mestic crude oil pricing composition of a particular volume

of crude vil where the refiner had no basis, in prior experi-

ence or otherwise, on which to make that estimate.

(k) Failure to consummate transactions. The DOE

may direct refiners or eligible firms that have not purchased

the required number of entitlements under this section for

a particular month to purchase such required number of

entitlements at a price specified by the DOE from any re-

finer or eligible firm that has entitlements for such month

available for sale. The DOE may direct refiners or eligible

firms that have entitlements available for sale to sell such

entitlements at a price specified by the DOE to refiners or

eligible firms that have not purchased their required num-

ber of entitlements under this section.

(1) Certification by non-refiners. Within twenty-eight

(28) days following each month, commencing with the

month of January 1978, each firm other than a refiner that

has delivered crude oil to a refiner for processing for the

account of such firm pursuant to a processing agreement in

that month shall certify to that refiner the respective

volumes of and that firm’s costs for old oil (separately iden-

tifying any California lower tier crude oil), upper tier crude

oil (separately identifying any California upper tier crude

oil), ANS crude oil, stripper well crude oil (as defined in

Part 212 of this chapter), incremental tertiary crude oil (as

determined pursuant to § 212.78), tertiary incentive crude

oil (as determined pursuant to § 212.78), other domestic

crude oils the first sale of which is exempt from Part 212 of

this chapter, and imported crude oil contained in the crude

oil so delivered to that refiner.

(m) Adjustments to crude oil and product costs—(1)

Refiners—(i) Entitlements purchased. (A) The cost of enti-

tlements purchased in a particular month pursuant to this

section by refiners, which shall be calculated exclusive of

any reduction in such costs in a particular month because

of entitlements issued for the importation of eligible prod-

ucts and exclusive of the cost of entitlements purchased in

a particular month pursuant to adjustments to a refiner’s

crude oil runs to stills under paragraph (d)(4) of this sec-

tion, shall be added to the cost of crude oil purchased or

landed in that month (which is the period “t” (the month

of measurement), for purposes of calculating the increased

cost to be applied to product prices in the following month

under the “A’’ factor of the general formulae of §

212.83(c)(2) of this chapter): provided, that, to the extent

that the obligation of a refiner to purchase entitlements is

reduced by volumes of crude oil processed by a refiner for a

firm other than that refiner pursuant to a processing agree-

ment, and that the monetary value of that reduced

purchase obligation is used to reduce the processing fee

otherwise payable by that firm under the processing agree-

ment, or is otherwise passed on to that firm, such monetary

value may also be added by that refiner to its cost of crude

oil purchased or landed in that month, but shall be sub-

tracted from the cost of crude oil purchased or landed in

that month by the firm to which the monetary value of the

reduced purchase obligation is passed on pursuant to this

paragraph.

(B) The reduction in the cost of entitlements pur-

chased in a particular month because of entitlements issued

for the importation of eligible products shall be subtracted

from the total cost of the product concerned, purchased or

landed in that month (which is the period “t” (the month

of measurement), for purposes of calculating the increased

costs to be applied to prices of that product under the “Bt”

factor of the appropriate formula for that product of §

212.83(c) of this chapter).

month pursuant to the adjustments to a refiner’s crude oil

runs to stills under paragraph (d)(4) of this section shall be

a cost of crude oil purchased or landed in that month which

shall not be applied to product prices pursuant to the “A”

factor of the general formulae of § 212.83(c)(2) of this chap-

ter, but which shall instead be applied only to prices for

residual fuel oil sold in or into the East Coast market.

(ii) Entitlements sold. (A) The sales revenues from en-

titlements sold in a particular month pursuant to this sec-

tion by refiners, which shall be calculated exclusive of any

reduction in such sales revenues in a particular month pur-

suant to adjustments to a refiner’s crude oil runs to stills

under paragraph (d)(4) of this section, and exclusive of any

sales revenues from the sale of entitlements issued for the

importation of eligible products, shall be subtracted from

the cost of crude oil purchased or landed in that month

(which is the period “t” (the month of measurement), for

purposes of calculating the increased costs to be applied to

all product prices in the following month under the “A'”

factor of the general formulae of § 212.83(c)(2) of this chap-

ter); provided, that, to the extent that the sales revenues

from entitlements which are issued for volumes of crude oil

processed by a refiner for a firm other than that refiner pur-

suant to a processing agreement are used to reduce the

processing fee otherwise payable by that firm under the

processing agreement, or are otherwise passed on to that

firm, such sales revenues shall not be subtracted by that re-

finer from its cost of crude oil purchased or landed in that

month, but shall be subtracted from the cost of crude oil

purchased or landed in that month by the firm to which the

entitlement sales revenues are passed on pursuant to this

paragraph.

(B) The sales revenues from entitlements issued for the

importation of eligible products which are sold in a particu-

lar month shall ve subtracted from tne tral cost of the

product concerned, purchased or landed in that month

(which is the period ‘“‘t” (the month of measurement), for

purposes of calculating the increased costs to be applied to

prices of that product under the “B;t” factor of the appro-

priate formula for that product of § 212.83(c)(2) of this

chapter).

sold in a particular month pursuant to the adjustments to a

refiner’s crude oil runs to stills under paragraph (d)(4) of

this section shall be a cost of crude oil purchased or landed

in that month which shall not be applied to product prices

pursuant to the “A” factor of the general formulae of §

212.83(c)(2) of this chapter, but shall instead be applied

only to prices for residual fuei vil svid in or into the East

Coast market.

(2) Resellers and retailers. The sales revenues from en-

titlements sold pursuant to this section by resellers or re-

tailers shall be subtracted from the cost of the product in

inventory for which the entitlements were issued, so as to

reduce the weighted average unit cost of that product in in-

ventory computed pursuant to § 212.92 of this chapter.

(3) Sales of eligible products to eligible firms. The to-

tal amount of any reductions in the cost of eligible products

to the seller because of entitlements issued for the importa-

tion of such products, which are required by paragraphs

(m)(1) and (m)(2) of this section, shall be applied exclu-

sively to the determination of maximum lawful prices

charged in sales in which the purchaser does not receive en-

titlements for the importation of an eligible product. Sepa-

rate price calculations shall be made for sales of eligible

products in which the purchaser receives entitlements for

the importation of eligible products, which shall comply in

all respects with the regulations of Subparts E or F of Part

U2 A shim chaghan, varepr that thea wneut fh inamanck

product cost used to compute such prices shall not be re-

duced because of entitlemens issued for the importation of

eligible products.

(4) Timing. The date of purchase or sale of entitle-

ments for purposes of determining the date on which a cost

or a cost reduction is incurred under § 212.83(c) or § 212.93

of this chapter shall be the date on which the transaction is

reported to have taken place on the monthly transaction re-

port filed with the DOE under paragraph (i) of § 211.66.

(Emergency Petroleum Allocation Act of 1973, 15 U.S.C.

751 et seq., Pub. L. 93-159, as amended, Pub. L. 93-511,

Pub. L. 94-99, Pub. L. 94-133, Pub. L. 94-163, and Pub. L.

94-385; Federal Energy Administration Act of 1974, 15

U.S.C. 787 et seq., Pub. L. 93-275, as amended, Pub. L. 94-

332, Pub. L. 94-385, Pub. L. 95-70, and Pub. L. 95-91; En-

ergy Policy and Conservation Act, 42 U.S.C. 6201 et segq.,

Pub. L. 94-163, as amended, Pub. L. 94-385, and Pub. L.

95-70; Department of Energy Organization Act, 42 U.S.C.

7101 et seg., Pub. L. 95-91; E.O. 11790, 39 FR 23185; E.O.

12009, 42 FR 46267)

(41 FR 13903, Apr. 1, 1976]

EpitoriAL Nore: For FR citations affecting § 211.67,

see the List of CFR Sections Affected in the Finding Aids

section of this volume.

§ 211.69 Entitlements adjustment mechanism.

(a) Scope. This section applies to all refiners and other

firms listed on any Entitlements Notice issued with respect

to crude oil runs-to-stills and crude oil receipts during the

period October 1, 1980, through January 27, 1981, as well as

to any other firms which owe money to, or are entitled to

receive money from, the entitlements program.

(b) Purpose. This section provides a method for an or-

derly termination of the domestic crude oil entitlements

program originally established in § 211.67.

that are contained in or necessary to the implementation of

this section shall have the same meanings as under the pro-

visions of 10 CFR Part 211 that were in effect on January

27, 1981, except as specifically set forth in the following

definitions:

“Adjustment” means the receipt of an invoice of recer-

tified crude oil previously booked into a refiner’s account in

a month during the reporting period which results in a

change to the volume and/or category as previously re-

ported on the ERA-49 and a subsequent invoice to a re-

ported volume based on either a prior invoice or a good

faith estimate. A good faith estimate is a volume based on

that refiner’s past experience as to its composition for pric-

ing purposes of domestic crude oil of the same origin.

“Amendment” means a resubmission of a previously

filed report for a month in the reporting period resulting

from an internal company error.

“Claim” means the dollar amount determined by ERA

to be owed to a firm resulting from adjustments, amend-

ments or other modifications to any one or more Fntitle-

ments Notices issued by ERA pursuant to § 211.67 for the

period from October 1, 1980, through January 27, 1981, or

resulting from an administrative or judicial determination.

“Crude oil runs-to-stills” includes crude oil runs-to-

stills applicable to the Entitlements Notice issued for each

month in the reporting period, increased for any month for

which a firm received entitlements pursuant to §&

211.67(a)(3) or § 211.67(a)(5) by a number equal to the

number of entitlements issued pursuant to these sections in

that month, divided by the national domestic crude oil sup-

ply ratio for that month.

“ERA” means the Economic Regulatory Administra-

tion of the Department of Energy (DOE).

“Obligation” means the dollar amount determined by

ERA to be owed by a firm as a result of adjustments,

amendments or other modifications to any one or more En-

titlements Notices issued by ERA pursuant to § 211.67 for

the period from October 1, 1980, through January 27, 1981,

or resulting from an administrative or judicial

determination.

“Reporting period” means the period October 1, 1980,

through January 27, 1981.

(d) Determination of claims and obligations—(1)

Amendments. Firms shall correct all errors contained in re-

ports filed pursuant to § 211.66 or § 211.67(a)(5)(ii) for the

reporting period by filing amended reports which must be

received by ERA by August 15, 1981. For each month for

which an amended report is filed by a firm pursuant to this

subsection, ERA shall determine for that firm: (i) The obli-

gation for that month by determining the dollar value of

the amendment, using the entitlement data for that month;

or (ii) the claim for that month by determining the dollar

value of the amendment, using the entitlement data for

that month.

(2) Invoice adjustments. (i) All refiners shall report to

DOE on Form ERA-49 for each reported category of crude

oil the sum of all adjustments to the volume of crude oil

receipts during the reporting period not previously reported

to ERA. If a refiner has no adjustments for the reporting

period, it shall file a report of zero adjustments. Reports

must be received by ERA by August 15, 1981.

(ii) Refiners shall designate on the Form ERA-49 the

month during the reporting period when the crude oi! sub-

ject to the adjustment first was received.

(iii) For each month for which an adjustment is filed by

a refiner pursuant to this subsection, ERA shall determine

for that refiner: the obligation for that month by determin-

ing the dollar value of the increased number of barrels of

deemed old oil, using the deemed old oil ratios and the en-

titlement price for that month; or, the claim for that month

by determining the dollar value of the decreased number of

barrels of deemed old oil, using the deemed old oil ratios

and the entitlement price for that month.

(3) Other claims and obligations. (i) ERA shall deter-

mine the dollar value of any other claims or obligations of

any firm in any month which is not otherwise included in

paragraphs (d)(1) or (2) of this issue by using the entitle-

ment price and other entitlement data for that month.

(ii) To the extent that any claim or obligation deter-

mined pursuant to paragraph (d)(3)(i) of this section is not

applicable to a particular month in the repori.ag period,

ERA shall prorate the amount of such ciaim or obligation

equally among all months in the reporting period.

(d) Total calculation. (1) ERA shall determine the net

calculation for each month in the reporting period by sub-

tracting the sum of all obligations for that month from the

sum of all claims for that month.

(2) The proportional share of the net calculation for

each firm for each month in the reporting period shall be

determined by multiplying the net calculation by a fraction.

The numerator of the fraction is equal to the crude oil

runs-to-stills for that firm used to compute the Entitle-

ments Notice for that month, and the denominator is equal

to the sum of the crude oil runs-to-stills of all firms used to

compute the Entitlements Notice for that month.

(3) For each firm, ERA shall determine the sum of its

proportional shares of the net calculations for each month

as computed pursuant to paragraph (e)(2) of this section,

which shall be the total calculation for that firm.

(f) Net obligations and ne- claims. ERA shall deter-

mine each firm’s net obligation or net claim as follows:

(1) If the sum of its claims for the reporting period,

minus the sum of its obligations for the reporting period,

and minus its total calculation (determined pursuant to

paragraph (e) of this section) is greater than zero, it is a net

claim and the firm shall be entitled to that sum of money

from firms with net obligations.

(2) If the sum of its claims for the reporting period,

minus the sum of its obligations for the reporting period,

and minus its total calculation (determined pursuant to

paragraph (e) of this section) is less than zero, it is a net

obligation and the firm shall be required to pay that sum of

money to firms with net claims.

(g) Settlement of net obligations and net claims. (1)

As soon as practicable after August 15, 1981, ERA shall

publish in the FEDERAL REGISTER a list of the net claim or

net obligation of each firm. Firms with net obligations shall

complete payments of such obligations to firms with net

claims within 10 days from the date of publication of the

list in the FEDERAL REGISTER.

(2) ERA may direct firms which have not paid monies

equal to their net obligations under this section to transfer

money, not in excess of their net obligation, to such firms as

determined by ERA.

(3) Within 20 days from the date of publication of the

list of net claims and obligations, each firm with a net claim

or obligation shall certify to ERA in writing that it has

completed the transactions required by this section, with

whom the transaction has been completed and the dollar

amounts for each firm. Certifications should be addressed

to:

Entitlements Program Office, Economic Regulatory

Administration, 20th Street Postal Station, P.O. Box

19326, Washington, D.C. 20461

(4) If a firm with a net claim does not receive any or all

of its money from firms with net obligations, that firm may

apply to ERA for an order establishing the amount of the

deficiency. Upon issuance of the order by ERA, the firm

shall be deemed to have a claim against the entitlements

program pursuant to paragraph (h)(1) of this section for the

amount of the deficiency.

(h) Post-clean-up claims and obligations. (1)(i) If after

issuance of the list of net obligations and net claims, the

Office of Hearings and Appeals of the Department of En-

ergy, the Federal Energy Regulatory Commission or a court

of competent jurisdiction determines, in an order no longer

subject to appeal, that any party is entitled to a claim

against the entitlements program, firms listed on the list of

net obligations and net claims issued pursuant to paragraph

(g)(1) of this section shall owe the amount of the claim.

(ii) Each firm shall pay to the party receiving the order

an amount equal to the claim determined pursuant to para-

graph (h)(1)(i) of this section multiplied by a fraction, the

numerator of which is equal to the total crude oil runs-to-

stills for that firm used to compute Entitlements Notices in

the reporting period, and the denominator of which is the

sum of the crude oil runs-to-stills for all firms used to com-

pute Entitlements Notices in the reporting period.

(2)(i) If after issuance of the list of net obligations and

net claims, the Office of Hearings and Appeals of the De-

partment of Energy, the Federal Energy Regulatory Com-

mission or a court of competent jurisdiction determines, in

an order no longer subject to appeal, that any party has an

obligation to the entitlements program, other than as a re-

sult of entitlements enforcement actions, firms listed on the

list of net obligations and net claims issued pursuant to

paragraph (g)(1) of this section shall be owed that

obligation.

(ii) The party shall pay to each such firm an amount

equal to the obligation multiplied by a fraction, the numer-

ator of which is equal to the total crude oil runs-to-stills for

that firm used to compute Entitlements Notices in the re-

porting period, and the denominator of which is the sum of

the crude oil runs-to-stills for all firms used to compute En-

titlements Notices in the reporting period.

(3) For purposes of paragraphs (h)(1) and (h)(2) of this

section, an order for which there is no explicit statutory or

regulatory time limit on appeals shall be deemed to be “no

longer subject to appeal” if the order is not appealed within

60 days from the date of issuance of the order.

(The information collection requirements contained in par-

agraph (g)(3) were approved by the Office of Management

and Budget under control number 1903-0073)

[46 FR 36098, July 13, 1981, as amended at 46 FR 43654,

Aug. 31, 1981; 46 FR 63209, Dec. 31, 1981]

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.