Petroleum price controls were originally administered pursuant to the Economic Stabilization Act of 1970 ("ESA"), 12 U.S.C. § 1904 et seq. On April 30, 1974, however, the ESA lapsed and was replaced by the Emergency Petroleum Allocation Act of 1973 ("EPAA"), 15 U.S.C. § 751 et seq. The EPAA, and the accompanying DOE regulations, exempted certain formerly covered products from the mandatory price controls. The new regulations, however, failed to similarly subtract the increased production costs of the newly exempt goods from the denominator of the V factor. As a result, refiners could pass on increased costs of producing exempt goods in the prices charged for non-exempt, covered goods, as well as in the prices of the unregulated exempt goods.
Also on April 30, 1974, the DOE, in an attempt to remedy this situation, passed without notice or the opportunity for comment an emergency regulation ("the 1974 amendment") intended to prevent refiners from incorporating the costs of producing exempt goods into prices charged for covered goods. The 1974 amendment redefined the V factor to add the volume of exempt goods to the denominator of the V factor.
Throughout the regulatory scheme, it was necessary for refiners to obtain DOE permission to allocate increased costs among the prices charged for covered goods. Permission was sought by filing with DOE a Refiner's Monthly Cost Allocation Report ("RMCAR" or "Report.") Following promulgation of the 1974 amendment, ARCO consistently filed RMCARs utilizing the amended V factor. In contrast, two other refiners challenged application of the 1974 amendment. One refiner, Getty, applied for and was granted administrative relief. Another refiner, Mobil, chose to challenge the validity of the 1974 amendment in federal court. In Mobil Oil Corp. v. DOE, 610 F.2d 796 (Temp. Emer. Ct. App. 1979), cert. denied, 446 U.S. 937, 64 L. Ed. 2d 790, 100 S. Ct. 2156 (1980) (Mobil I), the Temporary Emergency Court of Appeals ("TECA") found the 1974 amendment to be invalid based upon the lack of notice and opportunity for comment. Later, in Mobil Oil Corp. v. DOE, 647 F.2d 142 (Temp. Emer. Ct. App. 1981) (Mobil II), TECA permitted Mobil to reallocate its costs in accordance with the unamended V factor. DOE attempted to revive and retroactively implement the 1974 amendment in 1981, but this regulation was also struck down by TECA. Mobil Oil Corp. v. DOE, 678 F.2d 1083, 1090 (Temp. Emer. Ct. App. 1982) (Mobil III).
On three separate occasions in 1980 and 1981, ARCO requested permission from DOE to refile its previous RMCARS using the unamended V factor.
On all three occasions ARCO's requests were denied.
ARCO submitted a fourth request to resubmit its previous RMCARS on March 24, 1982. DOE never responded to this request. ARCO did not further pursue this latest request.
B. The Van Vranken Litigation and Subsequent Events
In 1979, Don Van Vranken, on behalf of a nationwide class of petroleum product resellers, brought an action against ARCO in the Northern District of California alleging that ARCO had overcharged resellers for covered goods purchased between 1974 and 1982.
On April 4, 1988, ARCO moved for summary judgment on the ground that the Mobil decisions allowed it to retroactively reallocate its costs without reference to the invalidated amended V factor. Van Vranken v. Atlantic Richfield Co., 699 F. Supp. 1420, 1421-22 (N.D. Cal. 1988). The practical result of such reallocation would have been to allow ARCO to retroactively increase its costs and thereby increase its banks to offset any overcharge liability. Id. The District Court rejected ARCO's contentions and held that the Mobil trilogy did not provide authorization for non-party refiners to automatically reallocate past production costs. Id. at 1424.
The District Court decision was upheld by TECA in Van Vranken v. Atlantic Richfield Co., 890 F.2d 421 (Temp. Emer. Ct. App. 1989), cert. denied, 494 U.S. 1005, 110 S. Ct. 1298, 108 L. Ed. 2d 475 (1990). TECA rejected ARCO's arguments that the Mobil decisions provided authority for retroactive reallocation of its costs. First, TECA held that the Mobil decisions did not require reallocation. Id. at 423. TECA noted that "neither Mobil I nor Mobil II required Mobil to retroactively reallocate costs," and that "nothing in the regulations required that costs for exempt goods be attributed to covered goods when calculating the maximum allowable price for covered goods." Id. Retroactive reallocation would be required, TECA held, if ARCO's previous cost allocations had been unlawful. Id. But because it was not unlawful for ARCO to have priced its covered goods below the fixed maximum price, as it had done by utilizing the amended V factor formula, ARCO was not required to retroactively reallocate its costs. Id.
Second, TECA rejected ARCO's argument that the Mobil decisions permitted it to reallocate its costs. TECA found that the invalidation of the 1974 amendment by the Mobil courts did not excuse ARCO from compliance with DOE regulations relating to resubmission of RMCARs, and that those regulations conditioned resubmission upon written permission from DOE. See id. at 424. The Court concluded that "ARCO sought, but did not obtain, permission from the DOE to retroactively reallocate costs. . . . ARCO's failure to obtain permission from the DOE precludes it from any relief by this court." Id. (footnote omitted).
TECA also held that ARCO waived its right to relief by not challenging the regulations implementing the amended V factor in a timely manner, as had Mobil and Getty. Id. at 424-25.
Seizing upon language in TECA's decision suggesting that retroactive cost allocation could only be accomplished with DOE permission, ARCO filed an application with DOE to resubmit its RMCARs on December 12, 1989. Administrative Record ("R.") at 38. Again, DOE never responded to ARCO's request. In contrast to its actions following its March 1982 request, ARCO decided to treat DOE's silence as a denial of its application and appealed to the OHA. R. at 1. On February 1, 1991, OHA upheld DOE's constructive denial of ARCO's request, R. at 549-75, prompting ARCO to bring the present action challenging the OHA decision.
II. Standard of Review
The scope of review to be exercised by the Court is limited. Thriftway Co. v. DOE, 867 F.2d 1577, 1580 (Temp. Emer. Ct. App. 1989) (citing City of Long Beach v. DOE, 754 F.2d 379, 385 (Temp. Emer. Ct. App. 1985)). "Congress having authorized administrative control in the DOE, the judicial role requires approval of the DOE's decision if there is a rational basis for it." Id. The limited scope of review is reflected in the standard of review set forth in the EPAA and ESA:
No order of [DOE] shall be enjoined or set aside, in whole or in part, unless a final judgment determines that such order is in excess of the agency's authority, or is based upon findings which are not supported by substantial evidence.
ESA, 12 U.S.C. § 1904 note, incorporated by reference into the EPAA, 15 U.S.C. § 754(a)(1); see Thriftway, 867 F.2d at 1580. The Court must give "great deference" to DOE's interpretation of its regulations based upon its recognized expertise and upon the difficulty of judicial administration of complex programs dealing with the petroleum industry. 867 F.2d at 1580-81.
ARCO argues that OHA's decision in this matter was procedural and that procedural decisions are entitled to less deference than substantive decisions. The Court is not persuaded by ARCO's argument. ARCO analogizes OHA's decision to that in Amoco Corp. v. DOE, 912 F.2d 472 (Temp. Emer. Ct. App. 1990), in which the OHA held that an application for a refund of overcharges for petroleum products was untimely and was subject to dismissal under DOE regulations. Id. at 477. Unlike the decision in Amoco, the decision of the OHA in this case cannot clearly be characterized as a procedural decision.
The standard of review having been set out by the statutes creating the federal petroleum price control scheme, the Court finds no reason to adopt a different standard of review based upon the facts of this case.
III. The OHA Decision and ARCO's Challenges
ARCO brings several challenges to the OHA decision. ARCO contends that OHA's decision was based upon a clear error of judgment and was not supported by evidence in the record. ARCO also claims that DOE is estopped from denying its application to reallocate costs.
A. Good Cause
DOE regulations provide that "DOE will routinely accept submissions or refiling of [cost allocation] reports only within one year after the original filing or submission." 10 C.F.R. § 212.126(d)(1). However,
notwithstanding the provisions of paragraph (d)(1) of this section, a refiner may resubmit or refile reports until June 1, 1979, for months of measurement beginning with September 1973; where expressly authorized by DOE regulation or order; or where DOE grants written permission to resubmit or refile for good cause shown.