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AIRCO, INC. v. MORTON

September 13, 1976

AIRCO, INC., Plaintiff,
v.
Rogers C. B. MORTON, Secretary of the Interior, et al., Defendants


Werker, District Judge.


The opinion of the court was delivered by: WERKER

WERKER, District Judge.

The plaintiff, Airco, Inc., is a New York corporation, one business activity of which is the sale and distribution of helium, in liquid and gaseous form. Its customers include federal agencies and their contractors. The plaintiff filed this action pursuant to 28 U.S.C. § 1331, alleging jurisdiction under the Helium Act and the Administrative Procedure Act. Specifically, plaintiff seeks an injunction and declaratory judgment against three federal officers on the ground that they are engaging in illegal and unauthorized conduct with respect to the plaintiff. The defendants are Rogers C. B. Morton, Secretary of the Interior; Thomas V. Falkie, Director, Bureau of Mines; and A. L. Harder, Contracting Officer, Bureau of Mines. Both sides have moved for summary judgment.

 The Helium Act Amendments of 1960, 50 U.S.C. § 167, et seq., were passed because of a concern in Congress that the supply of helium available in the United States would be depleted by 1980-1985 at the present rate of consumption. See 106 Cong.Rec. 18544 (1960). Helium, found only in gaseous form, is used by commercial industry and the federal government. It is considered to be a vital part of our national defense, and missile, and atomic energy programs. As of 1960, the Department of Defense, the Atomic Energy Commission, the National Aeronautics and Space Administration and other federal agencies were responsible for 70% of the helium consumption in the United States. Twenty percent was used by industry for federal defense and atomic energy contracts. The remainder was used by private industry. 106 Cong.Rec. 18544 (1960).

 The only feasible source of helium is natural gas of which helium may comprise from 0.5% to 8 or 9% of the total volume. At the time the Helium Act Amendments were passed, vast quantities of helium were wasted. As natural gas was mined to be used, for example as fuel, the helium was not extracted; rather, it remained in the gas stream to be burned off as the natural gas was used. The purpose of the Amendments was to prevent the real possibility that the sources of this vital element would be exhausted.

 Under the Helium Act of 1960, the Government provided for private industry to construct and operate helium extraction plants along the principal pipelines transporting helium-bearing natural gas to consumers. All helium so produced would be purchased by the Government and, except for the amount needed for current use, stored for later consumption. Congress intended that the Government, in selling the helium purchased under this statutory scheme would charge a premium over the price it had paid to acquire the helium. This surcharge would permit the amortization of the advances for the purchases of helium and other expenditures authorized by the Act within a 25-year period. 50 U.S.C. § 167d(c). Congress also provided as a last resort if private industry refused to cooperate that the Department of the Interior would have the power of condemnation to take wells or the helium itself to "accomplish the preservation and conservation of helium." 106 Cong.Rec. 18544 (1960).

 Private industry which was not burdened by the cost of long-term planning for the conservation of helium could afford to sell helium at a lower price than that set by the Secretary of the Interior for Government sales. Underselling by private industry would undermine the conservation effort and to prevent that the Act provided at 50 U.S.C. § 167d(a) that "The Department of Defense, the Atomic Energy Commission, and other agencies of the Federal Government to the extent that supplies are readily available, shall purchase all major requirements of helium from the Secretary."

 However, Congress intended

 
"to foster and encourage individual enterprise in the development and distribution of supplies of helium, and at the same time provide . . . a sustained supply of helium which, together with supplies available or expected to become available otherwise, will be sufficient to provide for essential Government activities." 50 U.S.C. § 167m.

 To effectuate this policy, the Secretary promulgated regulations at 30 C.F.R. § 601.1, et seq., which allowed Federal agencies to purchase their helium requirements from either the Bureau of Mines or eligible private distributors. 30 C.F.R. § 602.3. To be eligible, private distributors were required to purchase from the Bureau of Mines at least such quantities of helium as they sold to Federal agencies. *fn1" In this context it is important to note the statement of Elmer Bennet, Under Secretary of the Department of the Interior, in testifying before the House on the Helium Act Amendments: "If any part of the helium market should be supplied by direct sales from a private plant to consumers, the payout plan would be jeopardized accordingly." Hearings on H.R. 8440, 8451, 10548, 11030 Before the Subcommittee on Mines and Mining of the House Committee on Interior and Insular Affairs, 86th Cong., 2d Sess. at 67 (1960).

 It is within the context of this statutory framework that the instant litigation arose. Airco, Inc. entered into a contract with the Bureau of Mines by virtue of which it qualified as an "eligible" private distributor of helium. Pursuant to this contract and the regulations which were incorporated by reference, Airco was required to report all sales of helium to federal agencies and contractors and to replenish its inventory of helium sold to such federal agencies and contractors with purchases from the Bureau of Mines.

 Airco sold helium to two federal contractors, the University of Chicago as operator of Argonne National Laboratory and the University of Notre Dame. The purchase orders contained provisions requiring that the helium supplied pursuant to those orders be Bureau of Mines helium. The helium ordered and supplied under these purchase orders was liquid helium. Airco, in making its report to the Bureau of Mines, admitted that none of the liquid helium sales had been reported. Furthermore the company failed to report any sales of liquid or gaseous helium to federal contractors. Finally Airco did not make compensating purchases of Bureau of Mines helium to cover these sales. It is undisputed that at this time the Bureau of Mines did not store or sell liquid helium.

 As a result of this failure to report helium sales the Bureau of Mines notified Airco that it was in violation of its contract with the Bureau. Upon Airco's failure to provide "corrected" reports, the Contracting Officer issued Findings of Fact and Decisions on December 9, and 10, 1974. Airco, without conceding the appropriateness of this procedure, appealed the decision to the Board of Contract Appeals of the Department of the Interior (ICBA). Simultaneously, Airco instituted this action. Airco moved to stay the ICBA proceedings pending the resolution of this case. By order dated March 28, 1975, the ICBA granted the motion.

 Airco makes two arguments which the court will consider separately.

 In support of its position that liquid sales need not be reported, the company cites section 6 of the Helium Act Amendments, 50 U.S.C. § 167d(a) which requires federal agencies to purchase all major requirements from the Secretary "to the extent that supplies are readily available." Defendant Harder, Contracting ...


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