The opinion of the court was delivered by: ROBINSON
MEMORANDUM OPINION AND ORDER
AUBREY E. ROBINSON, Jr., District Judge.
In these consolidated actions Plaintiffs Independent Gasoline Marketers Council, Inc. et al ., and Marathon Oil Corporation, seek to enjoin the defendants
from implementing or enforcing the Petroleum Import Adjustment Program ("PIAP" or "the Program") proclaimed by the President of the United States in Proclamation 4744 (45 Fed.Reg. 22864; April 3, 1980), as amended by Proclamation 4748 (45 Fed.Reg . 25371; April 15, 1980) and Proclamation 4751 (45 Fed.Reg . 27905; April 25, 1980). This Program was created as a result of the report to the President on March 14, 1979, by the Treasury Secretary, acting pursuant to Section 232(b) of the Trade Expansion Act of 1962 as amended (TEA), that oil was being imported into the United States "in such quantities and under such circumstances as to threaten to impair the national security." 44 Fed.Reg . 18818 (March 29, 1979). The investigation upon which this determination was founded had been initiated on March 15, 1978, by W. Michael Blumenthal, former Secretary of the Treasury, in the exercise of his authority under Section 232. Information and advice were solicited from the Secretary of Defense, the Secretary of Energy, the Secretary of State, the Secretary of Commerce, the Federal Reserve Board, the Central Intelligence Agency and other appropriate officers of the United States regarding the effects on national security of the imports of petroleum and petroleum products. Those matters specified in Section 232(c) of the TEA and other relevant factors were considered.
The Treasury Secretary found that the level of imported oil threatened our national security. He recommended that President Carter take action. The President's response was the enactment of the PIAP, which was implemented primarily to lower domestic gasoline consumption by raising the retail price of all gasoline by $.10 per gallon. Its mechanism may be summarized as follows:
Under the PIAP, a license fee would be imposed on imported crude oil and gasoline. The amount of the fee (presently estimated at $4.62 per barrel of crude oil and $4.35 per barrel of gasoline) would float, and would be determined by the effect of the fee on the retail price of gasoline. The PIAP would be terminated if and when Congress increases the present $.04 per gallon excise tax to $.14 per gallon.
The initial cost of the fee would be borne by importers. In the case of crude oil, importers would be fully reimbursed for the payment of the fee through the PIAP's entitlement program. That mechanism would require domestic gasoline refiners to purchase entitlements from importers; the price of the entitlements would vary monthly to insure full reimbursement.PIAP further provides that all costs incurred from the conservation fee may be passed through the chain of distribution. At the refiner level the nature of the fee changes, however. Instead of remaining solely on imported oil, the PIAP provides that the cost of the fee is to be borne by jobbers, and then consumers, of both domestic and imported gasoline.
In economic terms, the PIAP may best be viewed as a demand-side disincentive.
The Program would initially attempt to curb demand for imported oil and gasoline in a judicially approved manner. See FEA v. Algonquin SNG , note 3, supra . The PIAP mechanism completely undermines this demand-side disincentive, however, by contemplating that the cost of the fee would eventually be paid by consumers of both domestic and imported gasoline. Thus, the imposition of the fee would not put imported oil at a competitive disadvantage with domestic oil, and the demand for imported oil would not decrease proportionately to domestic oil. Rather, the specific demand-side disincentive initially placed on imported oil is, under the PIAP, transformed into a generalized demand-side disincentive on the purchase of all gasoline.
Because of the displacement of the initial import fee onto both domestic and imported oil, and the nature of the fee itself, the PIAP could not act as a disincentive to reduce imports. As was noted earlier, the amount of the conservation fee would float, depending on the cost necessary to effectuate a $.10 per gallon increase at the retail level. In January of 1980, 6,122,000 barrels of oil were imported into the United States. If the PIAP had been in effect in January of 1980, the import fee would have been $4.79 per barrel.Assuming that domestic production remained constant and imports increased to 6,783,000 barrels per day, the import fee would decrease by more than ten percent. Likewise, assuming that domestic production remained constant and imports decreased to 6,022,000 barrels per day, the import fee would increase by two percent.Thus, the PIAP would result in increased fees as importation of oil decreases, and decreased fees, should the amount of imported oil increase. Rather than attempt to directly decrease the amount of oil imported into the United States, the PIAP attempts to decrease the total amount of oil consumed, and therefore could have only a collateral effect on the retailing of foreign oil.
Under Section 232 of the Trade Expansion Act, 19 U.S.C. § 1862(b), if the Secretary of Commerce
has found after an appropriate investigation that imports of an article "threaten to impair the national security," the President is authorized to "take such action, and for such time, as he deems necessary to adjust the imports of such article" so as to lessen the threat to national security. Defendants argue that the TEA standing alone authorizes the Petroleum Import Adjustment Program. They contend first that Section 232 empowers the President to impose license fees as he has done in the PIAP. They argue further that the TEA gives the President authority to channel the impact of that fee to gasoline sales because doing so will (a) enable the program to have the desired effect on imports and (b) equitably distribute the burden of the program throughout the nation.
In FEA v. Algonquin, SNG, Inc., 426 U.S. 548, 96 S. Ct. 2295, 49 L. Ed. 2d 49 (1976), the Supreme Court held that Section 232 authorizes the President to impose a system of license fees as a means of controlling imports. In that case, respondents had argued that the section empowers the President to control imports only by imposing "direct" controls such as quotas and not through the use of license fees. In holding to the contrary, the Court found that the statute authorizes not only quantitative restraints that affect the supply of imported goods, but also monetary measures, such as license fees, that control imports by affecting demand. The Court noted that a license fee itself "as much as a quota has its initial and direct impact on imports, albeit on their price as opposed to their quantity." Id ., at 571, 96 S. Ct. at 2307. Although concluding that the statute authorizes a license fee, the Court cautioned that its conclusion does not mean that "any action the President might take, as long as it has even a remote impact on imports, is also so authorized." Id . (emphasis in original).
Algonquin is not dispositive of the instant action. The import fee approved by the Supreme Court in that case directly affected the price of imported oil relative to domestic oil. Standing alone, the import fee component of the PIAP would have a similar effect. In the context of the PIAP mechanism as a whole, however, the import fee has no "initial and direct impact on imports" similar to that of the fee approved in Algonquin . Nor is it intended to have such a result. The purpose and effect of the entitlements component of the PIAP mechanism is to neutralize the "initial and direct impact" that the fee standing alone would have on oil imports. Under the system as outlined above, the $.10 per gallon conservation fee imposed on all gasoline is used to offset the initial import fee in its entirety. No monetary burden is imposed on imported oil that is not imposed on domestic oil. Thus the effect of the PIAP is to impose a $.10 per gallon conservation fee on all gasoline sales. Any impact on imports will be indirect and will result from the general gasoline conservation fee, not from the initial import fee.
To determine whether the Trade Expansion Act authorizes the PIAP, the Court must look to the design of the program as a whole.Analysis of the manner in which PIAP would function belies Defendants' contention that it is structured to lower demand for imported oil in particular rather than demand for oil generally. Two aspects of the program undercut Defendants' argument. First, as discussed above, the initial import fee is completely offset by the entitlements mechanism. Second, assuming a stable level of domestic oil production, the per barrel import fee would decrease if the level of imports rose.
The rationale underlying PIAP thus reduces to the contention that TEA empowers the President to impose a $.10 per gallon "conservation fee" on all gasoline so as to lower demand for the product. The TEA provides no such authority.
TEA does not authorize the President to impose general controls on domestically produced goods either through a monetary mechanism or through a quantitative device. The statute provides for regulation of imports. A regulation on imports may incidentally regulate domestic goods. The regulation of domestic oil contemplated by PIAP, however, is not incidental to regulation of imported oil. Rather, it is a primary purpose of the program, and is essential to the goal of reducing demand for all gasoline regardless of its source. Moreover, the impact of the oil conservation fee is greater on domestically produced oil than on imported oil since the former comprises roughly sixty (60) per cent of all crude oil utilized today, and Defendants acknowledge that the PIAP's effect on import levels will be slight.
In Algonquin , the Supreme Court indicated that TEA does not authorize "any action the President might take, as long as it has even a remote impact on imports." Any possible benefits of the PIAP on levels of oil imports are far too remote and indirect for the TEA alone to support the program. The remoteness of the program's effect on imports is apparent from three factors. First, the quantitative impact of the program on import levels will admittedly be slight. Second, the program imposes broad controls on domestic goods to achieve that slight impact. Third, Congress has thus far denied the President authority to reduce gasoline consumption through a gasoline conservation levy.
PIAP is an attempt to circumvent ...