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Consolidated Edison Company of New York, Inc. v. Bodman

February 1, 2007


The opinion of the court was delivered by: Emmet G. Sullivan United States District Judge


Pending before the Court are plaintiffs' and defendants' motions for summary judgment. Plaintiffs bring this action to challenge a crude oil refund award by the Office of Hearings and Appeals ("OHA") of the Department of Energy ("DOE") to Lubrizol Corporation ("Lubrizol") as a beneficiary of the crude oil overcharge restitution program. After the OHA's initial determination in favor of Lubrizol and award of $557,736, see Administrative Record ("A.R.") at 227-29 (OHA Decision and Order, August 12, 2004), plaintiffs filed a complaint in this Court contesting the determination. See Consol. Edison Co. of N.Y. v. Abraham, No. 04-1732-EGS (D.D.C. 2004). OHA agreed to reconsider its determination and the case was dismissed without prejudice. Upon reconsideration, OHA reached the same conclusion, though using different reasoning. A.R. at 708-14 (OHA Supplemental Order, June 27, 2005). Plaintiffs challenge the new decision, arguing that OHA's determination violates long-standing principles and that its conclusions lack substantial evidence.

Upon consideration of the parties' motions, the responses and replies thereto, the applicable law, and the entire record, the Court determines that OHA's construction of its rules and regulations is reasonable, and that its conclusions are supported by substantial evidence. Therefore, for the reasons stated herein, defendants' Motion for Summary Judgment is GRANTED and plaintiffs' Motion for Summary Judgment is DENIED.


The history of this case is rooted in the OPEC oil embargo of the 1970's. See Consol. Edison Co. of N.Y. v. Bodman, 449 F.3d 1254, 1255-56 (D.C. Cir. 2006). In response to the embargo, the DOE imposed price controls on crude oil sold in the United States between 1973 and 1981. Id. at 1255. When certain producers were found to have violated the price controls and overcharged for crude oil, the DOE obtained refunds from them. Id. A long-running and complex lawsuit then commenced regarding the fate of the refunded overcharges, which culminated in a settlement whereby DOE agreed to disburse refunds to the federal and state governments, and to individual injured parties out of a Reserve Fund. Id. at 1255-56. This restitution system for individual parties is known as "Subpart V." Id. at 1256; see 10 C.F.R. Pt. 205, subpt. V.

OHA developed procedures for disbursing refunds under Subpart V in order to compensate applicants who suffered economic injury due to the improperly high prices of crude oil. See Implementation of Special Refund Procedures, 52 Fed. Reg. 11737 (Apr. 10, 1987). These procedures resolve three issues: (1) the types of petroleum purchases for which refunds are available; (2) requirements for demonstrating economic injury from these purchases; and (3) the amount of refund. See id. The method for determining the amount of the refund is the "volumetric" method, which calculates a refund amount per gallon of oil by dividing the total collected overcharges by the amount of oil used in the United States from 1973 to 1981. See id. at 11739-41.

Relevant to this case are OHA's standards for demonstrating economic injury. In order to efficiently adjudicate refund applications, OHA utilizes presumptions in deciding injury:

Applicants who were end-users (ultimate consumers) of petroleum products whose businesses are unrelated to the petroleum industry and who were not subject to the DOE price regulations are presumed to have absorbed rather than passed on alleged crude oil overcharges, and need not submit any further evidence of injury beyond volumes of product purchased in order to receive a refund.

Id. at 11743-44. In contrast, "[r]esellers and retailers of petroleum products must submit detailed evidence of injury, and may not use presumptions of injury established by OHA in refund cases involving refined petroleum products." Id. at 11744. OHA's procedures do not define the terms of "reseller" or "end-user."

At issue in this case is the refund application of Lubrizol, a specialty chemical company, which purchased petroleum products and then created and sold chemicals which contained significant amounts of petroleum components. A.R. at 708 (OHA Supplemental Order, June 27, 2005). Lubrizol's principal products are "additives" for engine oils, automotive and industrial fluids, and gasoline and diesel fuels. A.R. at 88-89 (Lubrizol submission to OHA, July 2, 1992). These chemicals and additives enhance the performance of lubricating oils and fuels. Id. at 88. On December 14, 1987, Lubrizol submitted an application for a refund with the crude oil overcharge refund program, seeking to be compensated for approximately 368 million gallons of petroleum products. A.R. at 1-2. (Application for Crude Oil Refund)

In the decision now at issue, OHA first determined that Lubrizol purchased petroleum products that qualify for the refund, which plaintiffs do not contest. Id. at 709-10. OHA next determined that Lubrizol was not a reseller, but instead an end-user of petroleum products. Id. at 710-12. In doing so, OHA utilized the definition of the term "reseller" from the original price control regulations, which defined it as a business that resells petroleum products "without substantially changing their form." Id. at 710 (citing 10 C.F.R. § 212.31 (1975)). Based on Lubrizol's submissions, OHA concluded that Lubrizol did substantially change the nature of its products, and thus was not a reseller. Id. at 711-12. Therefore, under OHA's presumption of injury, Lubrizol was granted a refund of $557,736. Id. at 712-13.

Plaintiffs are a group of utilities and manufacturers, who will cumulatively receive a significant portion of the total refunds under Subpart V. See Consol. Edison Co. of N.Y. v. Bodman, 445 F.3d 438, 440, 443 (D.C. Cir. 2006) (discussing similar group of plaintiffs). Plaintiffs challenge the award to Lubrizol because it will decrease the refund amount available to them. See Consol. Edison Co. of N.Y. v. Richardson, 233 F.3d 1376, 1382-83 (Fed. Cir. 2000) (holding that successful oil refund claimants have standing to challenge an oil refund award to a third party).


This Court's review of OHA's decision, made pursuant to the Emergency Petroleum Allocation Act of 1973 ("EPAA"), is limited. Agency action pursuant to the EPAA will be vacated "only if it is in excess of the agency's authority, or is based upon findings which are not supported by substantial evidence." Phoenix Petroleum Co. v. FERC, 95 F.3d 1555, 1567 (Fed. Cir. 1996). "Because substantial evidence means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion," courts "will reverse for lack of substantial evidence only when the record is so compelling that no reasonable ...

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