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MOBIL OIL CORP. v. FTC

March 2, 1977

Mobil Oil Corp., Gulf Oil Corp., Shell Oil Co., and Standard Oil Co. of California
v.
Federal Trade Commission, and Lewis A. Engman, Chairman, Paul Rand Dixon, Member, Mary Elizabeth Hanford, Member, Stephen Nye, Member, Mayo J. Thompson, Member, and Charles A. Tobin, Secretary, as officers of the Federal Trade Commission.



The opinion of the court was delivered by: CANNELLA

Opinion

CANNELLA, D.J.: Plaintiffs' motion for summary judgment is granted. Defendants' motions to dismiss the complaint and, alternatively, for summary judgment are denied.

On July 18, 1973, the Federal Trade Commission ("FTC" or "Commission") issued a complaint, In the Matter of Exxon Corp., et al., Docket No. 8934 (hereinafter this administrative proceeding will be referred to as Exxon), charging the plaintiffs herein and four other major oil companies with violations of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45. The respondents in Exxon are charged with combining to monopolize the refining of crude oil into petroleum products, maintaining monopoly power over the refining process, and restraining trade and maintaining a noncompetitive market structure in this industry. The Commission also is challenging certain alleged practices including joint ventures in transport and in onshore and offshore lease bidding. By way of relief, Commission counsel stated that they were seeking substantial divestiture of the pipelines and refinery capacity owned by the Exxon respondents. *fn1" Specifically, the proposed relief includes:

 (1) The divestiture of 40 to 60 percent of respondents' refinery capacity in the relevant market and the establishment of 10 to 13 new firms;

 (2) The divestiture of all crude and produce pipelines which connect directly to the new firms and are owned and operated by the refining department of the parent; and

 (3) The transfer to the new firms of fractional ownership shares in connecting joint venture pipelines. *fn2"

 Soon after the commencement of the action, the Exxon respondents moved to require complaint counsel to file an environmental impact statement ("EIS") exploring the environmental consequences of the proposed relief. In support of their joint motion, the Exxon respondents argued that the requested relief would constitute "major Federal action significantly affecting the quality of the human environment" within the meaning of Section 102(2)(C) of the National Environmental Policy Act of 1969 ("NEPA"), 42 U.S.C. § 4332(2)(C). *fn3"

 On February 5, 1975, the administrative law judge denied the motion to require an EIS as well as a motion for immediate certification to the Commission. In so acting, he placed primary reliance upon an FTC rule *fn4" exempting law enforcement proceedings instituted by the Commission from the requirements of § 102(2)(C). On February 25, 1975, the Exxon respondents' request to file an interlocutory appeal from the denial of their motion was denied by the administrative law judge. They then petitioned for extraordinary review by the Commission, which was denied on April 29, 1975.

 On June 6, 1975, five of the nine Exxon respondents brought the instant action seeking to enforce FTC compliance with the requirements of § 102(2)(C) of NEPA. Plaintiffs have moved for summary judgment on their claims that complaint counsel are required by § 102(2)(C) of NEPA to file an EIS and that § 1.82(d) of the FTC's Rules of Practice is void as being in conflict with NEPA. In response to this motion the defendants have cross-moved for dismissal pursuant to Rule 12(b) of the Federal Rules of Civil Procedure on the grounds that the plaintiffs lack standing, that their suit is premature and that their complaint fails to state a claim upon which relief can be granted and, alternatively, for summary judgment. Based upon the Court's finding that the Commission's institution of the Exxon proceeding constitutes a "major Federal significantly affecting the quality of the human environment," 42 U.S.C. § 4332(2)(C), the Court concludes that plaintiffs herein are entitled to summary judgment.

 Standing

 The threshold issue in this case is whether plaintiffs have standing to challenge the FTC's institution of an enforcement proceeding against them without first having filed an environmental impact statement.

 Whether a litigant has standing to seek judicial determination of his claims has been litigated on numerous occasions before the United States Supreme Court. In a recent opinion, the Court stated:

 This inquiry involves both constitutional limitations on federal-court jurisdiction and prudential limitations on its exercise. E.g., Barrows v. Jackson, 346 U.S. 249, 255-256, 97 L. Ed. 1586, 73 S. Ct. 1031 (1953)....

 In its constitutional dimension, standing imports justiciability: whether the plaintiff has made out a "case or controversy" between himself and the defendant within the meaning of Art. III. This is the threshold question in every federal case, determining the power of the court to entertain the suit. As an aspect of justiciability, the standing question is whether the plaintiff has "alleged such a personal stake in the outcome of the controversy" as to warrant his invocation of federal-court jurisdiction and to justify exercise of the court's remedial powers on his behalf. Baker v. Carr, 369 U.S. 186, 204, 7 L. Ed. 2d 663, 82 S. Ct. 691 (1962).

 Warth v. Seldin, 422 U.S. 490, 498-99, 45 L. Ed. 2d 343, 95 S. Ct. 2197 (1975).

 When the litigant claims that he is "[a] person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute," 5 U.S.C. § 702, the standing test has been articulated as whether the complainant has suffered "injury in fact" to an interest "arguably within the zone of interests to be protected or regulated" by that statute. *fn5" Association of Data Processing Serv. Orgs. v. Camp, 397 U.S. 150, 153, 90 S. Ct. 827, 25 L. Ed. 2d 184 (1970); *fn6" accord, Evans v. Hills, 537 F.2d 589, 590-92 (2d Cir. 1976) (en banc). But see K. Davis, Administrative Law of the Seventies § 22.02-11 (1976). Although the injury in fact in Data Processing was economic, the Court recognized that this "interest, at times, may reflect 'aesthetic, conservational, and recreational' as well as economic values." 397 U.S. at 154; accord, United States v. SCRAP, 412 U.S. 669, 686-87, 93 S. Ct. 2405, 37 L. Ed. 2d 254 (1973); Sierra Club v. Morton, 405 U.S. 727, 733-34, 31 L. Ed. 2d 636, 92 S. Ct. 1361 (1972).

 The interests sought to be protected by NEPA may be gleaned from the statute's declaration of purpose:

 To declare a national policy which will encourage productive and enjoyable harmony between man and his environment; to promote efforts which will prevent or eliminate damage to the environment and biosphere and stimulate the health and welfare of man; to enrich the understanding of the ecological systems and natural resources important to the Nation....

 42 U.S.C. § 4321. Accordingly, plaintiffs have standing to bring this action only if they have alleged - and can prove - environmental injury in fact.

 Such injury was alleged in United States v. SCRAP, supra, wherein environmental organizations sought to enjoin the enforcement of an Interstate Commerce Commission order that would allow railroads to collect a surcharge. They argued, as do the plaintiffs herein, that the agency's failure to file an EIS rendered its action unlawful. The allegations of the environmental organizations that their members used the natural resources in the Washington metropolitan area for recreation and "that this use was disturbed by the adverse environmental impact caused by the nonuse of recyclable goods brought about by a rate increase on those commodities," 412 U.S. at 685, were found sufficient to confer standing on the groups to challenge the rate increase. *fn7"

 In the instant action, plaintiffs allege that the relief requested by the FTC in the enforcement proceeding would result in unnecessary depletion of our nation's natural resources. As oil companies, dependent upon these resources, plaintiffs would thereby suffer injury in fact. The injury alleged is thus both economic (without the necessary supply of resources, the companies might suffer reduced revenues) and environmental (by virtue of their status as oil companies, plaintiffs have a stake in our nation's environment).

 Additionally, plaintiffs allege that the proposed divestiture of a substantial percentage of their refineries and pipelines would have a polluting effect on the environment. It is claimed, for example, that various aspects of a refinery's operations, including - "the sulfur content of the crude oil refined, the percentage of capacity at which it is operated and the means of transportation used for crude oil and refined product" - directly affect the environment. *fn8" A relationship thus established between the environment and a particular refinery, it would follow that any change in operations inevitably would have an environmental impact.

 The FTC also is challenging the number of processing arrangements and exchange agreements among the major oil companies. It is alleged by the plaintiffs that restrictions on these arrangements, which are designed to reduce transportation, would lead to increased fuel consumption and pollution.

 The FTC is further objecting to the oil companies' practices concerning joint ventures in lease bidding. The plaintiffs contend that any alteration in these practices, especially with respect to offshore drilling, would affect the environment. In support of this argument, they cite the 1974 Draft Environmental Impact Statement prepared by the Bureau of Land Management of the United States Department of Interior re: Proposed Increase in Acreage to be Offered for Oil and Gas Leasing on the Outer Continental Shelf. According to this Report, the production of oil, which entails "accidental loss of debris, discharge of drill cuttings, sand, drilling fluids, the burial of pipelines, and the accidental spillage of oil or other toxic materials," id., vol. 2, at 162, involves environmental consequences to the land, water and living organisms as well as affecting the aesthetic environment.

 The above allegations, if proved, would be sufficient to confer standing on the plaintiffs. Because the Commission also has accused the plaintiff companies of diverting investment funds from domestic to foreign crude exploration and production, however, they will not be put to this proof. The Court is persuaded by plaintiffs' argument that an increase in domestic exploration and production "would, by its very terms, change the scope and speed with which domestic reserves are developed and depleted, thereby affecting vital supplies of natural resources," *fn9" and agrees that "[this] intention to alter the way in which society's resources are used in and of itself supplies sufficient need for an impact statement. *fn10"

 Support for this conclusion may be found in National Helium Corp. v. Morton, 455 F.2d 650 (10th Cir. 1971). That case involved a challenge to the Secretary of the Interior's decision to terminate contracts for the purchase of helium from the plaintiff companies. The plaintiffs claimed that the Secretary could not terminate these contracts without complying with the impact statement process. Anticipating an objection to their standing to raise NEPA claims, the plaintiffs "alleged that if the helium is not extracted by them from the natural gas before the natural gas is delivered to the consumer, the helium would be vented into the atmosphere and lost when the natural gas was consumed as fuel." Id. at 653. The court found that the companies were motivated not only by their pecuniary interest in the continuation of the contracts, but also shared the public interest in avoiding needless "rapid depletion of the helium resources of the country." Id. at 656. Based upon these findings, the Tenth Circuit affirmed the judgment below enjoining the contracts' termination pending the Secretary's compliance with NEPA.

 The depletion of our nation's resources is an injury to the very interest to be protected by NEPA. Like the plaintiffs in National Helium, the instant plaintiffs have shown that they would be among the injured, compare Sierra Club, supra, 405 U.S. at 735-40, and the Court therefore finds that they have standing to bring this action.

 The Government's reliance on two cases in which plaintiffs lacked standing to advance their claims, is misplaced. In Zlotnick v. Redevelopment Land Agency, 2 ELR 20235 (D.D.C. 1972), aff'd without opinion, 494 F.2d 1157 (D.C. Cir. 1974), wherein plaintiffs opposed an urban renewal plan, the court found that their interest in enjoining condemnation of their land was financial only. The plaintiffs did not live in the affected area and the land they owned consisted merely of a downtown lot. Noting plaintiffs' continuing efforts towards a ...


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