Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.


March 23, 1978

FEDERAL ENERGY ADMINISTRATION and Frank G. Zarb, as Administrator of the Federal Energy Administration, Defendants, and Exxon Corporation, Intervenor-Defendant

The opinion of the court was delivered by: HAIGHT


Plaintiff New England Petroleum Corporation ("NEPCO") commenced this action against defendants Federal Energy Administration and its Administrator Frank G. Zarb (collectively "FEA") to review four initial FEA orders, and three FEA final orders affirming the initial orders on administrative appeal. The orders under review relate to the FEA's granting in part, and denial in part, of exceptions relief requested by NEPCO within the context of the Old Oil Entitlements Program. 39 F.R. 42246, December 4, 1974; 10 C.F.R. § 211.67. NEPCO's second amended complaint, filed on September 27, 1976, specifies twelve separate claims for relief arising out of the FEA orders. NEPCO prays for a declaratory judgment under 28 U.S.C. § 2201, and further necessary or proper relief under 28 U.S.C. § 2202. Jurisdiction is predicated upon the Federal Energy Administration Act of 1974, 15 U.S.C. § 761 et seq., and in particular 15 U.S.C. § 766 and § 767; upon the Emergency Petroleum Allocation Act, 15 U.S.C. § 751 et seq.; and upon the provisions of 28 U.S.C. § 1331. Venue is had in this Court under 28 U.S.C. § 1391(e)(4), NEPCO's principal place of business being New York, New York.

This Court granted the motion of Exxon Corporation ("Exxon") pursuant to Rule 24, F.R.Civ.P., to intervene as an additional party defendant. 71 F.R.D. 454 (S.D.N.Y.1976).

 The case now comes before the Court on cross motions for summary judgment pursuant to Rule 56. NEPCO contends that it is entitled as a matter of law to greater exceptions relief than that granted by FEA. FEA defends the partial relief granted and the denial to NEPCO of further entitlements. Exxon, as an alternative basis for dismissal of NEPCO's complaint, contends that FEA lacked statutory authority to grant NEPCO any relief. That contention provoked FEA to urge, following submission of Exxon's motion papers, that the Court strip Exxon of its status as intervenor, a sanction which NEPCO endorses.

 Since October, 1977, the action has been defended by the Department of Energy, the statutory successor to the FEA (see fn. 100 Infra ). The following continues references to the FEA.

 The Court grants the motions for summary judgment of NEPCO and the FEA in part, denies them in part, and remands the case to the Department of Energy. Exxon's motion for summary judgment dismissing the complaint is denied.



 A. The Old Oil Entitlements Program

 The genesis of the Old Oil Entitlements Program was referred to in this Court's prior opinion, 71 F.R.D. at 456-457, and has been more authoritatively considered by the Temporary Emergency Court of Appeals ("T.E.C.A.") in Pasco, Inc. v. FEA, 525 F.2d 1391 (Em.App.1975), Cities Service Co. v. FEA, 529 F.2d 1016 (Em.App.1975), Cert. den., 426 U.S. 947, 96 S. Ct. 3166, 49 L. Ed. 2d 1184, and Delta Refining Co. v. FEA, 559 F.2d 1190 (Em.App.1977). In Delta Refining Co. the T.E.C.A., quoting in turn the FEA's definition of the program, describes the source from which the present litigation springs:

"In January 1974, pursuant to authority granted it by the Emergency Petroleum Allocation Act of 1973, 15 U.S.C. § 751 et seq., the Federal Energy Office (FEO) issued comprehensive regulations to control the allocation and price of crude oil (10 C.F.R. §§ 210-211 (1974)). These regulations instituted a "two-tiered' system whereby a low price was imposed on "old' crude oil but "new' crude oil (newly discovered oil and oil produced above 1972 production levels from the same property) was exempted from controls.
"In December 1974, to ameliorate the competitive disadvantages among refiners caused by the two-tiered pricing system and by unequal access by refiners to price-controlled "old' oil, FEO's successor, the Federal Energy Administration (FEA), promulgated the Old Oil Entitlements Program. (39 F.R. 42246, December 4, 1974.) As the FEA defines its program:
"The Entitlements Program is designed to remedy the economic distortion created by an unequal distribution of low cost, price controlled old crude oil among domestic refiners, and is implemented by the issuance each month of entitlements to each domestic refiner on the basis of each refiner's volume of crude oil runs to stills. An entitlement is defined as the right of a refiner owning the entitlement to include one barrel of old oil in its adjusted crude oil receipts in a particular month. (10 C.F.R. 211.63.) Under the program, a refiner is issued a sufficient number of entitlements to assure it an old oil supply ratio equal to the adjusted national old oil supply ratio.
"A refiner which has old oil receipts in excess of its entitlements in a particular month is required to purchase a number of entitlements equal to that excess amount. Similarly, a refiner with a number of old oil receipts which is less than the number of its entitlements in a particular month is required to sell those excess entitlements. The price at which entitlements must be sold is fixed each month by the FEA.' " 559 F.2d at 1191.

 B. Impact of the Old Oil Entitlements Program Upon the United States East Coast Market

 As noted, the purpose of the Old Oil Entitlements Program was "to ameliorate the competitive disadvantages among refiners caused by the two-tiered pricing system and by unequal access by refiners to price-controlled "old' oil", Delta Refining Co., supra. However, in one marketing area of the nation, the operation of entitlements program and an earlier FEA program caused substantial and unwanted market distortions. That area was the East Coast.

 As the petroleum industry has developed over the years, the East Coast residual fuel oil market has been supplied for the most part by Caribbean refineries dependent upon foreign crude oil. It appears to be common ground that at the pertinent times, Caribbean imports accounted for 80-90 percent of total sales in that market; and that five companies predominated in the market. Those companies, with their respective market percentage shares during the first nine months of 1974, *fn1" were: Exxon, XX.XX n.* percent; Asiatic Petroleum Corp., XX.XX percent; *fn2" Amerada Hess, XX.XX percent; NEPCO, XX.XX percent; and Texaco, Inc. X.XX percent.

 Amerada Hess owns a refinery in the U. S. Virgin Islands. This is significant because, in consequence, Amerada Hess qualified as a Domestic refiner under FEA programs. *fn3" None of the four competing companies so qualified. NEPCO did not because the Caribbean refinery in which it has a proprietary interest is located at Freeport, the Bahamas. *fn4"

 As a domestic refiner, Amerada Hess participated to its benefit in the Old Oil Entitlements Program. It also benefited from participation as a "refiner buyer" in a previously established FEA device, the Mandatory Crude Oil Sales ("Buy/Sell") Program, 10 C.F.R. § 211.65, under which certain domestic, "independent" refiners were entitled to purchase quantities of price-controlled old oil from other domestic, major integrated refiners. Hess became a purchaser of "old oil" under this program when the program was amended on June 1, 1974; previously Hess had been a net seller.

 The effect of Amerada Hess' exclusive participation in these programs was to give that company a pronounced advantage over its four rivals in the East Coast market. Such participation served to offset Hess' high foreign crude oil costs. Its competitors in the East Coast residual fuel oil market Exxon, Asiatic Petroleum, NEPCO, and Texaco had no such offsets available to them.

 As the administrative record makes clear, there was widespread industry dissatisfaction with the advantage bestowed upon Amerada Hess by operation of the FEA programs. However, NEPCO took the position that it was uniquely and adversely affected by the operation of those programs in the East Coast market. That was because NEPCO, and NEPCO alone, imported residual fuel oil from a Caribbean refinery, but enjoyed neither a crude oil supply of its own in contrast to Exxon, Asiatic Petroleum, and Texaco nor access to price-controlled old oil under the FEA programs in contrast to Amerada Hess. *fn5"

 This perceived state of affairs prompted NEPCO in February of 1975, to apply to the FEA for exceptions relief. NEPCO sought, in short, to participate itself in the entitlements program. The opinions and orders the FEA issued in response to that initial request and its successors form the subject matter of this action. They are considered in detail Supra. It is sufficient for these introductory purposes to state that, at hearings held by the FEA to consider NEPCO's requests, others involved in the industry were critical of the Amerada Hess advantage, but opposed to NEPCO's requested relief. At times during the hearings it was difficult to tell which irritated a particular spokesman more: Amerada Hess' participation in the FEA programs, or NEPCO's efforts to be relieved from the consequences of Hess' participation by participation of its own.

 Throughout the NEPCO opinions and orders the FEA manifested awareness and concern in respect of the East Coast residual fuel oil market. That concern led, in April of 1976, to an amendment of the Old Oil Entitlements Program, so as to (1) reduce by 50 percent the entitlements earned by Hess and other domestic refiners on their residual fuel oil sold in the East Coast market; and (2) grant 30 percent entitlement benefits with respect to residual fuel oil imports into the East Coast markets, other than imports from the U. S. Virgin Islands and Puerto Rico. 41 Fed.Reg. 13899-14000 (April 1, 1976). The effect of these amendments was limited to the East Coast market, since the FEA was specifically addressing the "competitive imbalance in the East Coast residual fuel oil market" caused by the participation of Amerada Hess in the entitlements program, 41 Fed.Reg. 13899 (April 1, 1976), and "this is the only area of the country experiencing substantial market distortions caused by the operation of the entitlements program." Id. at 14000. Enactment of these amendments "obviated further need to issue individual exceptions relief to NEPCO", *fn6" and as will appear, NEPCO has made no claim for such relief subsequent to March of 1976.

 Against this factual background, the Court considers the several NEPCO requests and their disposition by FEA.



 While each NEPCO request and responsive FEA ruling is considered separately Supra, it may prove useful to summarize them here. Essentially there were five applications. Following the FEA's terminology, they will be referred to throughout as NEPCO I, NEPCO II, NEPCO III, NEPCO IV, and NEPCO V.

 NEPCO I *fn7"

 In its initial application, filed on February 27, 1975, *fn8" NEPCO described the then existing East Coast market conditions, with particular reference to the advantage enjoyed by Amerada Hess as the result of participation in the FEA Buy/Sell and Old Oil Entitlements programs, and the economic impact of that advantage upon NEPCO. NEPCO submitted financial statements purporting to show that whereas in 1973 it had a profit before taxes on a consolidated basis of $ XX.X million, in 1974 "NEPCO suffered a financial disaster with losses on a consolidated basis of $ XX.X million." *fn9" That poor result in 1974 and "continuing severe losses" in 1975 were ascribed by NEPCO to "the interplay of a number of factors, prominent among them the discriminatory impact of the Crude Oil Buy/Sell Program and the Old Oil Entitlements Program. *fn10" NEPCO stated that "it cannot continue as a viable competitor without relief from FEA . . ." *fn11" Specifically, FEA was asked to characterize NEPCO as a refiner-buyer in the Buy/Sell Program as of June 1, 1974, and as a domestic refiner, at least for its share of its Bahamas refinery output for United States destinations, in the Entitlements Program from November 1, 1974. *fn12" Such relief, if granted, would of course have been both retroactive and prospective.

 The FEA requested and obtained further data from NEPCO, as well as comments from other concerned companies such as Asiatic Petroleum and Exxon. On May 2, 1975 the FEA filed its decision and order. *fn13" The decision rejected NEPCO's requested relief, but granted limited relief. Specifically, NEPCO was granted an exception to the provisions of 10 C.F.R. § 211.67 (governing the entitlements program and pursuant to which NEPCO was not entitled to participate in it), to the extent that NEPCO was permitted to earn entitlements on residual fuel imports up to a maximum of 3,000,000 barrels per month, adjusted for supplemental import fees. This exception relief was limited in time to the period May 1, 1975, to July 31, 1975; in other words, NEPCO could claim entitlements for the months of May, June and July, 1975. NEPCO was directed to submit further financial and related data to FEA on or before July 10, 1975. The order further provided that, "on the basis of that submission and the principles set forth in this Decision and Order", *fn14" NEPCO could if it chose request an extension of the exception relief beyond July, 1975. Thus was the seed sown for what became NEPCO II.

 NEPCO filed an administrative appeal, pursuant to 10 C.F.R. Part 205, Subpart H, from the FEA's denial of the full relief requested in its application. The appeal decision and order, *fn15" denied NEPCO's appeal in all respects. That order was certified a "final order of the Federal Energy Administration of which an aggrieved party may seek judicial review." *fn16"

 NEPCO sought no judicial review of NEPCO I, either at that time or in these proceedings. Nevertheless, NEPCO I is of central significance to the case at bar because the FEA's rationale, underlying NEPCO I, runs like a leitmotif throughout its subsequent decisions, shaping and explaining them. It is necessary therefore to consider that rationale in some depth.

 The FEA concluded in NEPCO I that, on the basis of as yet unaudited 1974 figures, NEPCO had demonstrated that "a serious hardship exists with respect to NEPCO which warrants exception relief." *fn17" As NEPCO had contended, the FEA found that the benefits enjoyed by Amerada Hess in the FEA programs contributed directly to NEPCO's distress. The decision observes:

"Although Hess did enjoy a cost advantage over NEPCO prior to the promulgation of the Entitlements Program since Hess was permitted to purchase substantial quantities of crude oil under the FEA's Buy-Sell Program from major oil companies at their weighted average cost of crude oil plus thirty cents per barrel and certain adjustments, that advantage has been substantially increased as a result of the Entitlements Program. The competitive advantage which Hess enjoys has also been stabilized as a result of the Entitlement Program which generally equalized the price of crude oil which domestic refiners utilize at a price below the world market price.
"Based on the submissions which NEPCO has made in support of its exception request, it is apparent that the firm's ability to remain a viable independent competitor will be substantially endangered in the absence of exception relief. NEPCO has been in existence for the past twenty-eight years and during that period of time has developed its business enterprise to the point where it has become a strong, major competitor in the residual fuel oil market. For the three year period of 1971 to 1973 NEPCO has steadily increased its sales of residual fuel oil and achieved a net operating profit. This situation however changed dramatically subsequent to the promulgation of the FEA Old Oil Entitlements Program. As a direct result of the advantage which its major competitor received through benefits provided under the FEA regulations, NEPCO expects that it will sustain a significant loss in market share in 1975 and further expects to incur a $ XX million operating loss during 1975. The financial data which NEPCO submitted to the FEA certainly supports the firm's contention that it will not be able to continue to maintain its business operations in residual fuel oil if it continues to sell products at a price which is substantially below the price which it pays for purchasing the raw material alone. An indefinite continuation of the present market environment which is in substantial part a result of the FEA Old Oil Entitlements Program will therefore likely result in the dissolution of NEPCO's residual fuel oil activities and its elimination from its previous historic position as a strong competitor in that market." Rec. 1736.

 In the FEA's view, "the loss of NEPCO as a competitive force in the residual fuel oil market would certainly tend to frustrate" *fn18" Congressional policy objectives that the FEA and its regulations "to the maximum extent practicable", preserve a competitive petroleum industry, including the competitive inability of independent marketers. The FEA had particularly in mind the statements of purpose which appear in Section 4(b)(1) of the Energy Petroleum Allocation Act of 1973, 15 U.S.C. § 753(b)(1), *fn19" and Section 18(a) of the Federal Energy Administration Act of 1974, 15 U.S.C. § 777(a). *fn20" These two statutes, which are the root sources of the agency, its programs, and this litigation, *fn21" will be referred to throughout as the "EPA Act" and "FEA Act" respectively.

 While prepared on the basis of NEPCO's threatened dissolution to extend some exceptions relief, the FEA declined to award the full relief requested. The agency reasoned that the granting of such relief would place NEPCO on a par with Domestic refiners under the Buy/Sell and Entitlements Programs, a status which the FEA regarded as contrary to Congressional intent and therefore inappropriate for a company whose refinery was "located in a foreign country", namely the Bahamas. It was NEPCO's status as a Domestic marketer of refined petroleum products that moved the FEA to grant a "certain degree of special protection" under the statutes. The FEA reasoned thus:

"However, NEPCO has not made a convincing showing that the relief which it seeks is either necessary or appropriate. The specific relief requested by NEPCO, if granted, would permit it to receive virtually the same benefits that domestic refiners enjoy as a result of certain FEA programs. In providing that the regulations promulgated by the FEA "shall apply to all crude oil, residual fuel oil, and refined petroleum products Produced in or imported into the United States ' (EPAA, Section 4(a); emphasis added), and in defining the United States to mean "the States, the District of Columbia, Puerto Rico, and the territories and possessions of the United States' (EPAA, Section 3(7)), the Congress clearly did not intend that refineries located outside of the United States receive the same benefits under FEA programs as domestic refineries. It is therefore not appropriate that the NEPCO refinery which is located in a foreign country be treated as if it were located in the United States as that term is defined in the EPAA.
"However, as a domestic marketer of refined petroleum products NEPCO is entitled to a certain degree of special protection under the EPAA and FEAA with respect to those marketing activities. In view of the showing which NEPCO has made that it is incurring a serious hardship and in view of the competitive position which it occupies with respect to residual fuel oil it is therefore appropriate that NEPCO be granted exception relief which will mitigate the adverse affect to NEPCO which accrues as a result of the benefits which its principal competitor receives under the Entitlements Program. Appropriate relief to achieve this objective can be best implemented by permitting NEPCO to earn entitlements on its residual fuel oil imports up to a maximum of 3,000,000 barrels a month, adjusted for supplemental import fees." Rec. 1738.

 This relief, limited in quantity by the 3,000,000 barrel maximum, the FEA also limited in time to three months. That limitation reflected the agency's recognition of the particular market problem involved, and its intent to study it further. The agency stated:

"In approving exception relief in this case the FEA recognizes that the current market situation in residual fuel oil in the eastern United States is volatile and that further study is warranted with respect to the impact on the entire competitive situation as a result of the benefits which Amerada Hess presently enjoys. That study will be initiated immediately. Consequently, the exception relief which has been approved for NEPCO is limited in duration to no more than three months. Moreover, the relief provided is subject to change on the basis of other general regulatory action which the FEA may take." Rec. 1738.

 The FEA denied NEPCO retroactive relief because, in its view, NEPCO had not proceeded in timely fashion to seek relief; and it had "made no showing that retroactive exception relief is essential in order to preserve its continued viable operations in the residual fuel oil market," Rec. 1739.

 NEPCO prosecuted an administrative appeal, which particularly addressed the denial of retroactive relief, and the subtraction of the supplemental import fee differential in the formula for relief. NEPCO nowhere criticized the "serious hardship or gross inequity" standard contained in the regulations, 15 C.F.R. § 205.50, in respect of exception relief.

 The administrative appeal decision and order, dated August 7, 1975, affirmed the initial order. The appeal decision reiterated the distinction between NEPCO as Foreign refiner (and thus disentitled to parity with domestic refiners) and Domestic marketer (thus entitled to "a certain degree of special protection"). *fn22" The appeal decision's discussion of the limited relief awarded NEPCO is significant because it restates and clarifies the rationale underlying the agency's response to NEPCO's situation:

"NEPCO's final argument addresses certain alleged deficiencies in the formula for computing the value of entitlements issued pursuant to the May 2, 1975 Order. NEPCO's argument in this regard is premised on the assumption that the reason for subtracting the difference between the supplemental import fee on crude oil and the supplemental import fee on residual fuel oil in the formula is designed to put NEPCO in a position roughly similar to that of Hess up to 3,000,000 barrels of residual fuel oil per month. However, NEPCO's assumption is without foundation. The exception relief is intended to confer a temporary benefit on NEPCO in order to preserve the continued viability of the firm during the period when the entire competitive market situation involved is under review by the FEA. The formula is designed to correct for the built-in benefit which accrues to a hypothetical domestic refiner importing crude oil over a domestic marketer of imported residual fuel oil as a result of the Entitlements Program. The formula is not designed to place NEPCO on a parity with Hess, for that would clearly contravene the intent of the Congress and the FEA of affording benefits to domestic refiners." Rec. 1816-1817 (emphasis added).

 The NEPCO I initial and appeal decisions, from which NEPCO sought no judicial review, set the stage upon which the succeeding acts of the drama were played.

 NEPCO II *fn23"

 Pursuant to leave expressed in NEPCO I, the company applied on July 10, 1975 for a continuation of the exceptions relief granted by that earlier order. The FEA received updated and audited material (for 1974) concerning NEPCO's financial condition. A public hearing was held at which representatives from NEPCO and a number of third parties appeared. In its decision issued August 7, 1975, the FEA denied NEPCO an extension of exceptions relief, on the basis that "NEPCO's operating position has improved to the point where the firm's continued activities in the residual fuel oil market are not dependent on its receiving entitlement exception relief during the month of August." *fn24" Reiterating the rationale of NEPCO I, the FEA stated in NEPCO II:

"It is however, important to note that the exception relief which was afforded to NEPCO on May 2 was not designed to eliminate the general operating losses which NEPCO has been experiencing for some time nor to permit NEPCO to attain a favorable competitive position. Rather, the exception relief previously approved was based on the showing that NEPCO could not continue to sustain the type of heavy operating losses in residual fuel oil sales which resulted from the competitive benefits which Hess received under FEA regulatory programs." Rec. 2661.

 The FEA denied relief for August. NEPCO was granted leave to apply, on or before August 23, 1975, for relief in September. *fn25"

 The administrative appeal decision affirmed this order, together with the initial order in NEPCO III, which will be first considered.

 NEPCO III *fn26"

 On August 22, 1975 NEPCO applied for exceptions relief, according to the NEPCO I formula, during the month of September. The FEA denied the application, in a decision and order dated September 17, 1975, reasoning that NEPCO's operating posture was not "markedly different" from that described in NEPCO II, and that NEPCO had not demonstrated that "the firm's continued activities in the residual fuel oil market are dependent upon the approval of exception relief for the month of September." *fn27"

 The administrative appeals decisions, both dated November 10, 1975, affirmed these orders. In the appeals decision addressing the August 7 order, the FEA took the opportunity of restating its rationale for relief underlying NEPCO I:

"NEPCO asserts that once the FEA determined in the May 2 Decision (NEPCO I ) that the firm should be granted exception relief in order to mitigate the hardship which accrues to it as a result of the benefits which Hess receives under the Entitlements Program, exception relief should be extended for additional periods until such time as NEPCO is no longer incurring any operating losses. The firm therefore contends that even though its financial and operating position appears to have improved since the firm submitted the original 1975 financial projections which formed the basis for the relief approved in the May 2 Order, further exception relief was warranted for the months of August and September because NEPCO is continuing to experience operating losses.
"However, it is apparent that in its present Appeals, NEPCO is relying on an erroneous reading of the basis for the FEA's May 2 Decision to grant exception relief to the firm for a limited period of three months. In NEPCO I, the FEA determined that although the firm was not ordinarily eligible to receive any benefits under the Entitlements Program, an indefinite continuation of the market environment which existed at the time and which was in part a result of the Entitlements Program would jeopardize the continuation of the firm's residual fuel oil activities and result in NEPCO's elimination from its historic position as a strong competitor in that market. The Decision also noted that since the market situation was in a state of flux the exception relief granted to the firm would have to be reconsidered at the conclusion of the three month period ending July 31, 1975. See NEPCO I, supra at p. 83,430. Contrary to the assertion which NEPCO makes in its present Appeals, The only reasonable inference to be drawn from the May 2 Order is that exception relief would be extended only upon a further showing by the firm that its continued viability as an ongoing business entity remained in serious jeopardy as a consequence of the FEA Regulatory Programs." Rec. 2704 (emphasis added).

 NEPCO IV *fn28"

 On October 9, 1975 NEPCO applied for an extension of the NEPCO I relief for an additional period of time "commencing with entitlements to be issued and sold in October 1975 with respect to August 1975 imports of residual fuel oil." *fn29" The FEA, in its decision and order of November 17, 1975, extended exception relief for the month of November only. The agency keyed this decision to a showing, based upon financial statements as of September 30, that NEPCO's financial position "is considerably worse than it was when the firm filed its July 10 and August 22 exception applications", and that cash flow problems brought about "a strong possibility . . . that NEPCO will be forced to terminate its activities in the residual fuel oil market in the absence of exception relief." *fn30" That showing was sufficient to trigger the NEPCO I philosophy of survival, while the nation's energy policies and programs received the continuing attention of the President and the Congress. Thus the FEA concluded in NEPCO IV:

"Exception relief should therefore be granted to NEPCO which will permit the firm to continue to operate as a viable, competitive force in the residual fuel oil market while the nation's energy policies are under consideration. This result can best be accomplished by temporarily extending the exception relief which was granted to NEPCO on May 2, 1975 for the month of November. Once this nation's energy policies and programs are established on a long-term basis, a full re-evaluation of NEPCO's position will be necessary in the event that NEPCO seeks further exception relief." Rec. 2933.

 NEPCO prosecuted an administrative appeal, contending that NEPCO I-formula relief should have been granted for October and December of 1975 and January of 1976, in addition to November, 1975. The appeals decision, dated February 17, 1976, rejected that contention and affirmed the relief limited to November. The agency's rationale was restated:

"It should be emphasized that NEPCO is not ordinarily eligible to receive any benefits at all under the Entitlements Program, and the exception relief which was afforded to the firm on May 2 and again on November 17 was not designed to eliminate the general operating losses which NEPCO has been experiencing nor to permit NEPCO to attain a favorable competitive position. See NEPCO II, supra. Instead, the FEA's approval of exception relief in those two instances was premised on the determination that although the firm would not ordinarily receive entitlement benefits, it was necessary to accord NEPCO exceptional treatment on a temporary basis to preserve its viability during a period of uncertainty with respect to the competitive market situation and the future of the FEA regulatory programs. Relief was therefore granted to NEPCO in the May 2 Order to preserve the firm's viability while the FEA studied the entire competitive market situation with respect to residual fuel oil imported from Caribbean refineries, and in the November 17 Order while the President and the Congress reviewed the nation's energy policies and programs." Rec. 2979.

 NEPCO V *fn31"

 On December 3, 1975 NEPCO applied for an extension of exception relief commencing with December, 1975; and (in a suggested departure from the NEPCO I formula) with entitlements to be measured by the actual number of barrels of residual fuel oil sold by NEPCO in the United States in a given month, rather than limited to 3,000,000 barrels per month. *fn32" Numerous third parties forwarded written comments to the FEA, or appeared at another public hearing. The agency's decision and order of February 12, 1976, reviewing NEPCO's condition in the light of the familiar NEPCO I rationale, extended exceptions relief for February and March, 1976, retaining the 3,000,000 barrel per month limitation. The FEA referred to its pending consideration of "the serious problems which exist in the East Coast residual fuel oil market." *fn33" As noted Supra, that consideration culminated in April, 1976 amendments to the Entitlements Program which put an end to the problem. The administrative appeal affirmed the initial order.

 These, then, were NEPCO's applications to the FEA, the agency's responses, and the reasons for those responses. We turn now to the claims for relief NEPCO addresses to this Court.



 This discussion correlates the five NEPCO orders with the claims for relief set forth in the second amended complaint.


 NEPCO has not sought judicial review of NEPCO I.


 NEPCO contends that the FEA's decisive finding, that NEPCO's financial condition had improved to the point where it no longer depended on exception relief for continued activities, is not supported by substantial evidence in the record (First Claim for Relief).

 NEPCO contends that the order *fn34" is arbitrary and capricious because, in accordance with regulations, 10 C.F.R. § 205.50, the FEA imposed more stringent requirements for the granting of relief (a showing of "serious hardship or gross inequity") than those contemplated by the FEA Act, 15 U.S.C. § 766(i) (a showing of "special hardship, inequity, or unfair distribution of burdens" (Second Claim for Relief).

 NEPCO contends that insofar as the FEA rendered its order on the basis of third-party data not made available to NEPCO for purposes of rebuttal, and further failed to state the extent to which such data influenced NEPCO II, the order is based on findings not supported by substantial evidence (Fifth Claim for Relief).

 NEPCO contends that the order is arbitrary and capricious, and not supported by substantial evidence, in that the FEA limited its consideration of NEPCO's need for relief to a period of one month (Seventh Claim for Relief).


 NEPCO makes the same contentions in respect of NEPCO III (Third, Fourth, Sixth and Eighth Claims for Relief) that it put forward in respect of NEPCO II (First, Second, Fifth and Seventh Claims respectively).


 NEPCO contends that insofar as NEPCO IV failed to grant relief for October, 1975, it is arbitrary and capricious and based on findings not supported by substantial evidence (Ninth Claim for Relief), vices which are equally present in the failure to grant ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.