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MOBIL OIL CORP. v. DOE

April 9, 1979

MOBIL OIL CORPORATION, Plaintiff,
v.
The DEPARTMENT OF ENERGY, Dr. James R. Schlesinger, Secretary of Energy and Barton R. House, Assistant Administrator, Office of Fuels Regulation, Economic Regulatory Administration, Department of Energy, Defendants



The opinion of the court was delivered by: DUFFY

This action was commenced by the plaintiff, Mobil Oil Corporation (hereinafter referred to as "Mobil"), against the Department of Energy (hereinafter referred to as "DOE"), the Secretary of Energy, Dr. James R. Schlesinger, and the Assistant Administrator of Energy in the Office of Fuels Regulation, Barton R. House. The action was precipitated by the issuance of three orders by the DOE directing Mobil to sell a total of 2,466,240 gallons of motor gasoline to three designated refineries. Mobil, at the time of the orders had no contract with any of the three refiners involved for the supply of motor gasoline or crude oil.

I. Statutory Background:

In November 1973 Congress enacted and the President signed into law the Emergency Petroleum Allocation Act (hereinafter referred to as the "EPAA"). 15 U.S.C. § 751 Et seq. The stated purpose of the EPAA was to grant to the President authority to effectively deal with shortages of various petroleum products or the inequitable distribution of these products across the nation. The Act authorized the President, Inter alia, to "promulgate a regulation providing for the mandatory allocation of (petroleum products) in amounts specified in (or determined in a manner prescribed by) and at prices specified in (or determined in a manner prescribed by) such regulation." 15 U.S.C. § 753(a).

 The general objectives outlined in the Act are many and varied. Those objectives applicable to the case at bar provide that to the maximum extent practicable the regulation promulgated under 15 U.S.C. § 753(a) shall provide for:

 
(C) maintenance of agricultural operations, including farming, ranching, dairy, and fishing activities, and services directly related thereto;
 
(D) preservation of an economically sound and competitive petroleum industry; including the priority needs to restore and foster competition in the producing, refining, distribution, marketing, and petrochemical sectors of such industry, and to preserve the competitive viability of independent refiners, small refiners, nonbranded independent marketers, and branded independent marketers;
 
(F) equitable distribution of crude oil, residual fuel oil, and refined petroleum products at equitable prices among all regions and areas of the United States and sectors of the petroleum industry, including independent refiners, small refiners, nonbranded independent marketers, branded independent marketers, and among all users; and
 
(I) minimization of economic distortion, inflexibility, and unnecessary interference with market mechanisms.

 In December 1973 the President, via Executive Order, established the Federal Energy Office (hereinafter referred to as the "FEO"), and delegated to that office all authority vested in him by the EPAA. Thereafter, the FEO adopted Mandatory Fuel Allocation Rules. These Rules, as revised, now appear at 10 C.F.R. Part 211, §§ 211.1 Et seq. and, in pertinent part provide:

 
(a) To meet imbalance that may occur in the supplies of any product subject to this part, the FEO may order the transfer of specified amounts of any such product from one region or area to another. Further, the FEO may allocate any such supplies of such products among suppliers in order to remedy supply imbalances. § 211.14.

 The above quoted section remains in full force and effect.

 The FEO was subsequently replaced by the Federal Energy Administration which in turn gave way to the Department of Energy. Suffice it to say that DOE is now responsible for the administration and enforcement of the Mandatory Petroleum Allocation Regulations (hereinafter referred to as "the regulations").

 The practical import of the regulations is that a petroleum refiner, such as Mobil, may be ordered by the DOE to supply a specified amount of a designated petroleum product to another petroleum supplier/marketer at a set price if that supplier/marketer is otherwise unable to obtain that product. The mechanics of the mandatory allocation program, as set forth in the EPAA, dictates that any mandatory allocation to a supplier/marketer be in an amount not less than the amount sold or otherwise supplied to the supplier/marketer during the corresponding "base period." Simply stated, it is that amount of the particular product being allocated which was sold to the supplier/marketer during the comparable month during the period July 1977 through June 1978.

 On the other side of this allocation equation, we have the "allocation fraction." This fraction represents the amount of a particular petroleum product available to the supplier, divided by the amount required to fulfill its base period (comparable month during July 1977 through June 1978) supply obligations. It is the percentage of the allocated product that must be delivered. This allocation fraction applies to all mandatory allocations save allocations to those supplying agricultural users in which case supply of 100 percent of their current requirement is mandated.

 This action arises out of three "allocation orders" issued by the DOE which directed Mobil to deliver certain quantities of gasoline to three agricultural cooperatives due to certain "supply imbalances."

 Mobil commenced this action and moved for preliminary relief to enjoin enforcement of these orders pending final determination of this suit. A hearing was held before me on April 5, 1979. Both sides were given the opportunity to present witnesses and evidence in support of their positions. This opinion shall constitute my findings of fact and conclusions of law.

 II. Facts:

 In late February and early March of this year, the Midland Cooperatives, Inc. (hereinafter referred to as "Midland"), Farmland Industries (hereinafter referred to as "Farmland") and Land-O-Lakes, Inc. (hereinafter referred to as "Land-O-Lakes"), three agricultural cooperatives, applied to the DOE for the issuance of orders, pursuant to 10 C.F.R. § 211.14(a), directing that they be supplied with various quantities of motor gasoline for March 1979 by suppliers serving their market area. The three applications for mandatory allocations were specifically made to "remedy a supply imbalance for March 1979" in the market area of Midland, Farmland and Land-O-Lakes. In all ...


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