the uncontrolled, free market price). Douglas then invoiced Gulf for these amounts, and, in November and December, 1980, Gulf paid Douglas, which then paid to the 341 Unit, $ 599,768.29 in "tertiary incentive revenues," representing the difference between the upper tier controlled price, and the free market price charged pursuant to TIPP for 25,885.55 barrels of recertified crude oil produced by the 341 Unit in September, 1980. In August, 1979, the 341 Unit filed an Application for Exception with the Office of Hearings and Appeals (OHA), seeking exception relief from DOE's pricing provisions to provide the 341 Unit with money to fund the tertiary recovery project. The OHA's December 31, 1980 Decision granted exception relief, under a plan by which the Unit would receive over $ 60 million for the tertiary recovery project. This December 31 Decision required Gulf to sell entitlements to participants in the Old Oil Entitlements Program, in an amount equal to the monetary relief the December 31 Decision awarded to the 341 Unit. Gulf then paid the proceeds of the entitlements sale to the 341 Unit.
Under Ordering Paragraph 9 of the December 31 Decision's award of exception relief, the 341 Unit was required to waive access to any of the upper-tier certification provisions of TIPP; any revenues received by the 341 Unit through the tertiary incentive program were to be returned to crude oil purchasers within 60 days, with interest. Thus, the December 31 Decision required the 341 Unit to repay to Gulf $ 599,768.29 in tertiary incentive revenues previously received from Gulf, with interest, by March 2, 1981. The December 31 Decision further required that, upon receipt of repayment, Gulf was to recertify as upper-tier receipts in its reports to ERA, any barrels previously reported as tertiary free market receipts in conjunction with the tertiary free market payments made to the 341 Unit. According to Gulf, the effect of this last requirement of the December 31 Decision was to put Gulf in the same position it would have been in had the 341 Unit never recertified price-controlled production as tertiary incentive (price uncontrolled) production.
On March 2, 1981, the 341 Unit sought a brief extension of time for making repayment required by the December 31 Decision. Gulf did not object, and on March 5, 1981, DOE by letter granted an extension to March 9, 1981, for the 341 Unit to comply with Ordering Paragraph 9 of the December 31 Decision.
DOE subsequently issued the March 6 Order, which is the subject of this suit, which Gulf says was a reversal of DOE's position. The March 6 Order rescinded the provisions of Ordering Paragraph 9 of the December 31 Decision, and required the 341 Unit to use the $ 599,768.29 received from Gulf to purchase entitlements directly as a one-time participant in the Old Oil Entitlements Program. According to Gulf, the effect of the March 6 Order is to raise by several dollars per barrel Gulf's cost for the 25,885 barrels of oil recertified to Gulf by the 341 Unit as tertiary incentive crude oil.
This increase in cost will arise from the following analysis: The barrels against which the $ 599,768.29 tertiary incentive differential payment was matched were produced and sold in September 1980. Gulf received and paid for those barrels in October 1980, paying the upper-tier ceiling price of $ 14.83/barrel, or a total pre-entitlement purchase price of $ 383,437.80. Gulf reported these to the Economic Regulatory Administration (ERA), incurring entitlements purchase obligations of.$ 471,736.65, for a total post-entitlement cost of the barrels, before tertiary recertification, of $ 855,174.45, or $ 33.04/barrel.
In November and December, 1980, Gulf paid Douglas Oil Co. $ 599,768.55 for the difference between the controlled price previously paid and the free market price for the barrels, raising the pre-entitlement price of the barrels to $ 56.21/barrel, for a total pre-entitlement cost of $ 1,454,943.00 ($ 855,174.45 $ 599,768.55). Because of internal accounting difficulties, Gulf did not recertify the barrels as tertiary incentive production until March 5, 1981. Thus Gulf has not yet received entitlements credits reflecting the fact that Gulf paid free market price for the oil, and Gulf has thus not been cost equalized through the entitlements program for the tertiary prices paid for the 341 Unit's oil.
Under the December 31 Order, Gulf would receive repayment of the full $ 599,768.55 paid as tertiary incentive prices, and Gulf would not recertify the barrels to ERA for purposes of entitlements credits. Gulf's post-entitlement cost for the 25,885 barrels of September 1980 production would continue to be the $ 33.04/barrel that existed before the 341 Unit was eligible for tertiary incentive pricing, which the 341 Unit subsequently waived in connection with the before mentioned exception proceeding.
Under the March 6 Order, the 341 Unit will use the $ 599,768.55 to purchase entitlements directly as a participant in the entitlements program. Because Gulf recertified the 25,885.55 barrels of crude oil as tertiary incentive production in its March 5 report to ERA, Gulf will receive a credit for the recertified barrels. The amount of the credit will depend on the value of an entitlement for the last month of the entitlements program, January 1981, because that is the month covered by the March 5 report. Gulf has estimated the value of the entitlements, and calculates that the credit it will receive for the 25,885.55 barrels will be $ 526,007.19. Gulf's post-entitlement crude cost for the 25,885.55 barrels will therefore be $ 35.89/barrel under the March 6 Order. This is derived as follows:
($ 1,454,943.00 [present total cost] -- $ 526,007.19 [estimated entitlements])
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