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CROWN CENT. PETROLEUM CORP. v. FEDERAL ENERGY ADMI

March 18, 1976

CROWN CENTRAL PETROLEUM CORPORATION and United Refining Company, Plaintiffs, Hawaiian Independent Refinery, Inc., Plaintiff-Intervenor,
v.
FEDERAL ENERGY ADMINISTRATION and Frank G. Zarb, Defendants



The opinion of the court was delivered by: GESELL

 GESELL, District Judge.

 This declaratory judgment action comes before the Court on the merits. It presents a pure question of statutory construction which was fully briefed and argued.

 The controversy arises against the background of the Entitlements Program and two-tier system for pricing oil which was initiated by the Cost of Living Council as part of its Stabilization Program under the Economic Stabilization Act of 1970, as amended, 12 U.S.C. § 1904 note. See Cities Service Co. v. FEA, Em.App., 529 F.2d 1016 (1975); Pasco, Inc. v. FEA, Em.App., 525 F.2d 1391 (1975); and Consumers Union v. Sawhill, Em.App., 525 F.2d 1068 (1975).

 Recently the Energy Policy and Conservation Act (EPCA), 89 Stat. 871, Pub.L. No. 94-163, 42 U.S.C. § 6201 note, expressly exempted small refiner entitlement buyers which satisfy certain enumerated criteria from the obligation to purchase entitlements on their first 50,000 barrels per day of input or receipts. In particular, § 403 of EPCA reads as follows:

 
(a) Section 4 of the Emergency Petroleum Allocation Act of 1973 [ 15 U.S.C. § 753], as amended by this Act, is further amended by adding at the end thereof the following:
 
"(e) Any provision of the regulation under subsection (a) of the section --
 
"(1) Which requires the purchase of entitlements, or the payment of money through any other similar cash transfer arrangement, the purpose of which is to reduce disparities in the crude oil acquisition costs of domestic refiners, and
 
"(2) which is based upon the number of barrels of crude oil input, or receipts, or both, of any refiner,
 
shall not apply to the first 50,000 barrels per day of input, or receipts, or both, of any refiner whose total refining capacity (including the refining capacity of any person who controls, is controlled by, or is under common control with such refiner) did not exceed on January 1, 1975, and does not thereafter exceed 100,000 barrels per day. The preceding sentence shall not affect any provisions of the regulation under subsection (a) of this section with respect to the receipt by any small refiner as defined in section 3(4) of payments for entitlements or any other similar cash transfer arrangement."

 The Federal Energy Administration promptly implemented this statutory exemption through the adoption of Special Rule No. 6, 41 Fed.Reg. 1044 (January 6, 1976), to the Entitlements Program regulation, 10 C.F.R. § 211.67. In this Special Rule, FEA stated it was taking into account the small refiner buyer exemption in precisely the same manner as it accounted for all prior administrative exemptions awarded to entitlement purchasers through decisions of FEA's Office of Exceptions and Appeals. That is, the Special Rule provides that the exemption is "given effect in the calculations under § 211.67 by proportionately increasing entitlement purchase and reducing entitlement sale obligations." 41 Fed.Reg. 1044, 1045 (January 6, 1976).

 It is contended by plaintiffs that this reduction of benefits from sale of entitlements is contrary to § 403(a) of EPCA. Focusing on the last sentence of that provision, plaintiffs argue essentially that the small refiner buyer exemption must be put into effect in such a way so as not to diminish the maximum amount of revenue which small refiner sellers of entitlements ...


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