Id.; see Plaintiff's Appendix of Charts and Graphs, F.
In January of 1978 the DOE issued to Exxon a Notice of Probable Violation, charging it with violating the oil price regulations in its sale of crude oil produced at the Hawkins Field Unit. On June 8, 1978, the DOE brought this enforcement action.
II. The Unit Property Rule
DOE maintains that the Hawkins Field Unit, because it was formed before February 1976, has always been subject solely to the requirement of 10 C.F.R. § 212.72 that a unit BPCL be established as of the date of unitization. DOE asserts further that the validity of this requirement, referred to herein as the unit property rule, has been definitively resolved by the Temporary Emergency Court of Appeals ("TECA") in Pennzoil Co. v. DOE, 680 F.2d 156 (Em. App. 1982), cert. dismissed, 459 U.S. 1190, 103 S. Ct. 841, 74 L. Ed. 2d 1032 (1983) and that the test of significant alteration in producing patterns, first announced in the preamble to the February 1976 regulations, is relevant to pre-existing units only as guidance in its relaxed enforcement policy.
Exxon denies any controlling effect to the Pennzoil case and launches a wide-ranging attack on both the procedural and substantive validity of the unit property rule. The February 1976 amendments to the regulation, Exxon maintains, were not before the Pennzoil court. The significant alterations test constituted an entirely new regulation, Exxon continues, which cannot be given retroactive effect and which, as applied by DOE, arbitrarily discriminates between units formed before and after February 1976.
A. Procedural Validity
Exxon properly notes that the TECA in Pennzoil did not have before it the question of the procedural regularity of the issuance of the original CLC regulations in 1973.
Exxon argues that the issuance of those regulations was fatally flawed because the notice of proposed rulemaking gave no hint that a unit would be considered a single "property."
Section 207(c) of the Economic Stabilization Act of 1970, 12 U.S.C. § 1904 note, applied to the CLC the informal rulemaking requirements of Section 4 of the Administrative Procedure Act ("APA"), 5 U.S.C. § 553. Section 4(a) of the APA requires that "notice of proposed rule-making . . . shall include . . . either the terms or substance of the proposed rule or a description of the subjects and issues involved." 5 U.S.C. § 553(b)(3). The purpose of the notice requirement is to afford interested parties a meaningful opportunity to participate in the rulemaking process. McCulloch Gas Processing v. DOE, 650 F.2d 1216, 1221 (Em. App. 1981). Notice is sufficient if it "fairly apprise[s] the interested persons of the 'subjects and issues' before the agency." Id. at 1222, quoting American Iron and Steel Institute v. EPA, 568 F.2d 284, 291 (3d Cir. 1977).
Under the two-tier pricing structure proposed by the CLC on July 20, 1973, increased or "new" oil production was to be measured for each "property" on which the producer "has leased" or "owns production rights." 38 Fed. Reg. 19,464; 19,482 (1973). Any amount by which current production exceeded 1972 production in a given month could be sold free of price controls. Id.
Exxon first complains that the "right to produce" concept underlying the unit property rule was absent from the July 20th notice. Plainly, the proposed regulations did not state in so many words that a unit would be considered a single property. Such precision is not required, however, in order to "fairly apprise" interested parties of the issues before the agency, and reaction to the notice here shows that interested parties were in fact properly alerted. Nine industry commenters specifically addressed the need for a precise definition of the term "property". Pennzoil Co. v. DOE, supra, 680 F.2d at 161. Of these, seven suggested that a unit would or should be considered a single property.
Nor was Exxon as befuddled as it now claims to have been. An internal Exxon memorandum written only days after publication of the proposed rules interpreted them to require that a "'base production control level' [be] calculated for each property (Lease or Unit) each month. . . ." PX 21. Mr. M. A. Wright, Chief Executive Officer of Exxon U.S.A., evinced his understanding of the unit property rule when he complained to CLC Director John Dunlop that secondary recovery operations might "substantially extend the producing life of older fields without producing 'new oil' under the Phase IV rules." PX 29 at 11; PX 32 at 8-10. Two weeks after Mr. Wright's comments an Exxon representative attended a mid-August CLC conference at which he learned that a unit of oil leases would be considered a single property under the proposed regulations and that "production levels from the combined properties would have to exceed 1972 levels before they were considered to be producing new oil." PX 37. Finally, and most significant, Exxon belied its claimed incomprehension when it applied a unit BPCL without hesitation at its Webster Unit on September 1, 1973, just days after the final regulation was published. PX 76.
But Exxon's complaint goes further. The final regulations, it claims, differed so substantially from their purposed form as to render the opportunity to comment meaningless and hence the regulation invalid. The court notes at the outset that the fact that a final rule differs, even substantially, from the published proposal, is not fatal; modification of proposed rules does not automatically generate a new round of notice and comment. BASF Wyandotte Corp. v. Costle, 598 F.2d 637, 642 (1st Cir. 1979); International Harvester Co. v. Ruckelshaus, 155 U.S. App. D.C. 411, 478 F.2d 615, 632 (D.C. Cir. 1973). As the court wrote in Trans-Pacific Freight v. Federal Maritime Commission, 209 U.S. App. D.C. 27, 650 F.2d 1235, 1249 (D.C. Cir. 1980), "the whole rationale of notice and comment rests on the expectation that the final rules will be somewhat different -- and improved -- from the rules originally proposed by the agency."
Yet such explanations are unnecessary here, where that portion of the rule sub judice, as finally promulgated, differs hardly at all from its proposed form. Admittedly, the CLC noted in the preamble to the final rule that "Subpart L in its final form has been changed extensively from the proposal that was published on July 19, 1973." 38 Fed. Reg. 22,536. Comparison of the proposed and final forms reveals, however, that the changes were made primarily in those parts of Subpart L dealing with refiners and retailers, and not in that part dealing with crude oil production. Compare 6 C.F.R. §§ 150.355 -- 150.363 (1974), 38 Fed. Reg. 22,539 -- 22,543, with proposed rules 6 C.F.R. §§ 150.355 -- 150.362, 38 Fed. Reg. 19,482 -- 19,483. To be sure, the word property was separately defined in final form, as "the right which arises from a lease or from a fee interest to produce domestic crude petroleum." 6 C.F.R. § 150.354(b) (1974), 38 Fed. Reg. at 22,538. But the proposed formula for calculation of new and old oil referred to the property at which a producer "has leased" or "owns production rights." 38 Fed. Reg. at 19,482. This court perceives no real difference, much less a substantial one, between the two forms.
Contrary to Exxon's contentions, the notice and comment provisions of the APA "d[o] not require every aspect of the proposed order to be explained in the general notice." Common Carrier Conference v. United States, 175 U.S.App. D.C. 244, 534 F.2d 981, 982-83 (D.C. Cir. 1976), cert. denied 429 U.S. 921, 97 S. Ct. 317, 50 L. Ed. 2d 288 (1976). Industry reaction to the CLC proposal, including that of Exxon, indicates that "the industry was generally on notice" as to the workings of the two-tier pricing structure, id, thereby satisfying the notice and comment requirements of the APA.
Exxon contends, however, that CLC failed to satisfy the second requirement of APA procedures for informal rulemaking, namely, that the agency publish, along with the final rules, "a concise general statement of their basis and purpose." 5 U.S.C. § 553(c). The CLC, says Exxon, failed to do so, rendering the oil price regulation invalid.
The primary purpose of requiring a contemporaneous statement of basis and purpose is to enable a reviewing court to judge the reasonableness of a rule in light of its stated aims. American Standard, Inc. v. United States, 220 Ct. Cl. 411, 602 F.2d 256, 269 (1979). But informal rulemaking does not demand an exhaustive listing of factual findings, nor a full reasoned analysis, but instead a "concise general statement." Citizens to Save Spencer County v. EPA, 195 U.S. App. D.C. 30, 600 F.2d 844, 883-84 (D.C. Cir. 1979); see 1 K. Davis, Administrative Law Treatise § 6:12 (2d ed. 1978). And where the agency's aims are obvious and unmistakable, courts have upheld rules with no statement of basis and purpose. See Tabor v. Joint Board for Enrollment of Actuaries, 185 U.S. App. D.C. 40, 566 F.2d 705, 710 (D.C. Cir. 1977); Alabama Ass'n of Insurance Agents v. Board of Governors of the Federal Reserve System, 533 F.2d 224, 236 (5th Cir. 1976); Hoving Corp. v. FTC, 290 F.2d 803, 807 (2d Cir. 1961); American Standard, Inc. v. United States, supra, 602 F.2d at 269. Examination of the preamble to the final oil price regulation, along with contemporaneous agency statements cited therein, when viewed in the surrounding regulatory context, provides ample evidence from which a reviewing court may discern the basis and purpose not only of the regulation generally, but also of that part of it about which Exxon complains, the unit property rule.
The preamble to the final rules stated:
A 2-tier price system has been adopted, providing for a ceiling on domestic crude petroleum prices but allowing new crude and an equivalent amount of old crude to be sold at prices above the ceiling.