kinds (natural gas, hydrogen, carbon dioxide, helium and any others),” and that the term "related hydrocarbons" in the definition of "petroleum" includes "tar sands, asphalt, propane, butane, etc." Conf. Rpt. 94-942, pp. 1920, 24. It is therefore clear that certain petroleum products not specifically mentioned in the definition of "petroleum" in the Act (such as propane), which may be produced as a by-product or associated product in the production of natural gas or crude oil from the naval petroleum reserves are within the meaning of “petroleum” as used in the Act and the sale of such petroleum products by the Secretary of the Navy is exempt from price and allocation controls to the same extent that the sale by the Secretary of crude oil produced from the affected naval petroleum reserves is exempted by the Act.

Crude oil produced from the affected naval petroleum reserves will be eligible for inclusion in the volume of a refiner's crude oil runs to stills for purposes of the domestic crude oil allocation program set forth in 10 CFR 211.67. In addition, since this crude oil may be sold by the Secretary of the Navy at market level prices, no entitlement obligations under § 211.67 will be in effect with respect to the inclusion of this crude oil in a refiner's crude oil receipts. Thus, for purposes of the entitlements programs it will be treated as imported crude oil.

[41 FR 21942, May 28, 1976]

oil substitutes do not fall within t purview of DOE's authority to esta lish mandatory petroleum allocati and price regulations, which is derive from the Emergency Petroleum Al cation Act of 1973, as ament ("EPAA").

For purposes of this Ruling, oil sha is defined as:

A fine-grained sedimentary rock conta ing insoluble organic matter that yields stantial amounts of oil by destructive disti lation.

Tar sands are defined as:

The several rock types that contain an a tremely viscous hydrocarbon which is recoverable in its natural state by conve tional oil well production methods includin currently used enhanced recovery tec niques. The hydrocarbon-bearing rocks a variously known as bitumen-rocks, oil = pregnated rocks, oil sands, and rock aspha Coal is presently defined in 10 CF Part 305.

II. RULING

The EPAA directs the President promulgate regulations providing fe the allocation and pricing of "crude oil, residual fuel oil, and refined petre leum products." The term "crude oil" however, is not defined and Congres did not specify in the Act or its leg tive history whether it intended term "crude production of such cruce oil substitutes derived from oil shale. coal, tar sands or other natural depos its that must be mined before the hy drocarbons can be extracted. Accord ingly, DOE has reviewed the purpose of the EPAA and the circumstance underlying its adoption to determin whether Congress intended the pro duction of such crude oil substitutes be subject to the specific temporar authority which Congress delegated the President under the EPAA. Base on this review, the DOE has conclude that the Congress did not intend thes products to be regulated under the EPAA.

In enacting the EPAA in December 1973, Congress was concerned wit providing temporary authority for th allocation and pricing of only thos petroleum resources that were the actually or threatening to be in short supply. Thus, the purpose of the

PAA was stated in section 2(b) to be

to grant to the President of the ited States and direct him to exerLe specific temporary authority to al with shortages of crude oil, resid1 fuel oil, and refined petroleum oducts or dislocations in their naAnal distribution system." The temrary nature of the regulatory proim envisioned by Congress under e EPAA was underscored by section (1), which initially provided that e regulation required to be promulted under section 4(a) would remain effect only until midnight February 1975.1

At the time of enactment of the PAA, domestic production of crude

substitutes derived from oil shale, al and tar sands was, as it is now, unrtaken only for experimental purses, and the synthetic products obined thereby were not commercially ailable for use as refinery or petroemical feedstocks and were not exected to become commercially availle for several years. From these cts, the DOE has concluded that the ongress clearly did not intend these roducts to be subject to the tempoary regulation required under section (a) of the EPAA when it enacted the PAA to deal with the supply shortges and dislocations in the petroleum ndustry that occurred late in 1973 or hreatened to occur before the end of February 1975.

The DOE recognizes that the initial rice regulations of DOE (then known is the Federal Energy Office) defining he substances subject to price conrols under the EPAA carrier forward, is the Congress contemplated would be the case, regulations having similar Coverage that had previously been adopted by the Cost of Living Council

'The mandatory regulatory authority contained in section 4(a) has subsequently been extended on several occasions. See Pub. L. 93-511 (December 5, 1974), Pub. L. 94-99 (September 29, 1975), Pub. L. 94-133 (November 14, 1975), and Pub. L. 94-163 (December 22, 1975). The fact that this authority has been extended beyond the initial February 28, 1975 expiration date, however, is not relevant to the intent of Congress with respect to the meaning of the term "crudeoil" at the time the EPAA was passed.

("CLC"). The CLC first provided for the regulation of petroleum prices on August 17, 1973, when it adopted Subpart L of 6 CFR Part 150, under Phase IV of the Economic Stabilization Program. CLC was acting pursuant to the authority conferred by the Economic Stabilization Act of 1970 ("Stabilization Act"), the broad purpose of which was to stabilize the economy, improve the Nation's competitive position in world trade, and protect the purchasing power of the dollar. The scope of regulatory authority exercised by CLC under the Stabilization Act was equally broad, extending generally to prices, rents, wages, salaries, dividends, and interest.

The Subpart L regulations of CLC were applicable to "sales of products described in the 1972 Standard Industrial Classification Manual, Industry Code 1311, 1321, or 2911 (except natural gas ***) The applicability

of the CLC Subpart L regulations to the production segment of the petroleum industry was described by Standard Industrial Classification 1311 (except natural gas), which provides, in part, as follows:

Establishments primarily engaged in operating oil and gas field properties. Such activities include exploration for crude petroleum and natural gas; drilling, completing, and equipping wells; operation of separators, emulsion breakers, desilting equipment; and all other activities in the preparation of oil and gas up to the point of shipment from the producing property. This industry also includes the production of oil through the mining and extraction of oil from oil shale and oil sands.

It is expressly contemplated ・・・ that the price controls established by Phase IV under authority of the Economic Stablization Act would continue in effect unless and until required to be modified by the price regulation required to carry out the purposes of this Act. *** (H.R. Rep. No. 628, 93rd Cong., at 26 (1973).)

Congress' contemplation that CLC price controls "would continue in effect unless and until required to be modified" under the EPAA indicates that Congress expected the mandatory authority under the EPAA to be generally coextensive with the scope of the authority exercised by CLC under the Stabilization Act. But it also indicates that the agency assigned responsibility for implementing the EPAA would be under an obligation to take a closer look at the CLC's regulations in order to conform their scope to the specific temporary regulatory purposes of the EPAA.

Accordingly, FEO on April 3, 1974, determined that certain products refined from crude oil, which were specifically included under the Standard Industrial Classification 2911 and thus were price controlled by the CLC under the Stabilization Act, were not within the intended scope of the EPAA (39 FR 12353, April 4, 1974). No action was taken at that time with respect to the crude oil substitutes which are the subject of this ruling inasmuch as they were not being commercially produced and were thought therefore not to warrant specific mention. However, now that the matter has been appropriately brought to the DOE's attention and the agency has had an opportunity to consider whether Congress intended these products to be subject to regulation under the EPAA, the DOE for the reasons outlined above, has concluded that Congress did not so intend.

[41 FR 25886, June 23, 1976]

RULING 1976-5-RETAIL SALES OUTLET OPERATOR'S ENTITLEMENT TO MOTOR GASOLINE

Facts. Firm A operates five branded retail sales outlets of motor gasoline. Each outlet has traditionally offered customers not only gasoline, but also lubricants, automobile accessories, including tires and batteries, and the services of a mechanic. As part of a

change in marketing operations, Firm A is planning to remodel all of its sta tions and to offer self-service sales of gasoline only. Firm A will operate the stations under a different brand name than the name currently used. None c the other goods and services now of fered will continue to be offered once the newly remodeled stations are pu into operation. The changeover will re quire the closing of the stations for two months.

In addition to the five branded retail sales outlets it operates as described above, Firm A also leased one nonbranded retail sales outlet to Firm B Firm B operated the retail sales outlet as a "full service" station until June 30, 1976. On that date, the lease ex pired and Firm A chose not to renew the lease. Firm B did not attempt to open another retail sales outlet. Firm A occupied the site and immediately made preparations to convert the sta tion to "self-service" only, consistent with its overall marketing operations.

Firm C, an independent, non-branded wholesale purchaser-reseller of motor gasoline, operated one retail sales outlet of motor gasoline until June, 1974, when Firm C went out of business and closed the station. The building and land comprising the sta tion's site were sold to Firm D, which planned to erect an office building on the site. Firm D razed the building in preparation for the new construction. However, after experiencing delays for several months in making final ar rangements with contractors, Firm D abandoned its plans to erect an office building and instead built a service station which it now wishes to operate as a non-branded independent market er. The station will offer the same services as the station formerly oper ated on the site by Firm C.

Issues. (1) After remodeling its five retail sales outlets and changing mar keting operations, will Firm A be con sidered a new wholesale purchaser-reseller at each station site?

(2) After taking over the retail sales outlet from its former tenant and changing its marketing operations, will Firm A be considered a new wholesale purchaser-reseller at that station site?

(3) Is Firm D considered a new wholesale purchaser-reseller at the site formerly occupied by Firm C? Ruling-Issue (1). The Mandatory Petroleum Allocation Regulations state that

[elach firm or part of a firm which operates an ongoing business at a retail sales outlet shall be considered a separate firm with respect to each such outlet for purposes of [the motor gasoline allocation regulations] and, therefore, shall be a separate wholesale purchaser-reseller. 10 CFR 211.106(b)(1). The regulations further provide that

[a] wholesale purchaser-reseller which operates a retail sales outlet shall be deemed to have gone out of business with respect to that outlet if it vacates the site on which it conducts such business. 10 CFR 211.106(c)(1).

Whether a particular retail sales outlet has gone out of business depends upon the facts in each case. However, in those instances where as part of an overall plan to alter marketing techniques, a marketer changes its retail outlets from traditional service stations to high volume sales outlets only, the remodeled stations would not be considered "new" retail sales outlets. It is true that a self-service station may very well appeal to a different type of customer than one who frequents the traditional outlet. However, the fact that different customers will be attracted to the remodeled, high-volume station does not lead to the conclusion that a new business has been established at the site of the old station. Retail sales of motor gasoline were conducted prior to and after the change in marketing.

Therefore, the operator of such a retail sales outlet, such as Firm A, is deemed to be conducting an on-going business and is not a new wholesale purchaser-reseller at the site of the old station.

Because Firm A is not a new wholesale purchaser-reseller, it may not apply for assignment of a supplier and base period volume as provided by 10 CFR 211.12(e). Each remodeled outlet which Firm A operates is entitled to the same quantities of motor gasoline it had a right to purchase under the Mandatory Petroleum Allocation Regulations prior to the changeover to

gasoline sales only method of operations.

If Firm A wishes to obtain greater quantities of motor gasoline to be offered for sale to the public, it may take two steps. It may purchase surplus motor gasoline under 10 CFR 211.10(g). Firm A should bear in mind that § 211.10(g)(5) restricts a supplier from distributing surplus product through its owned and operated outlets until the supplier's purchasers who are independent marketers have been afforded the opportunity to purchase surplus product in an amount determined in accordance with 10 CFR 211.10(g)(5).

Firm A may also under 10 CFR 211.13(e) seek an exception to DOE's regulations to provide an adjustment to base period use for each retail sales outlet. Requests for exception should be prepared in accordance with Subpart D of Part 205 (Administrative Procedures and Sanctions, 10 CFR 205.50 et seq.).

Issue (2). The Mandatory Petroleum Allocation Regulations provide that

** [w]henever a wholesale purchaser-reseller of motor gasoline] is deemed to have gone out of business * * * the right to an allocation with respect to the retail sales outlet shall be deemed to have been transferred to its successor on the site, provided such successor established the same ongoing business on the site within a reasonable period of time, as determined by DOE, after its predecessor vacates the premises. 10 CFR 211.106(e).

Thus, when Firm B's lease expired and Firm A succeeded Firm B on the site, Firm B's entitlement was transferred to Firm A. The transferee on the site may be engaged in a new business, but it is not a new wholesale purchaser-reseller for purposes of the Mandatory Petroleum Allocation Regulations, since it is considered to be the continuation of an already existing entity. The amount of the entitlement at the site does not increase upon transfer. Hence, the amount of Firm A's entitlement will be the same as what it would have been if Firm B were still operating the retail sales outlet. Firm A would not have a right to an increased entitlement simply because it plans to modify the marketing operation at the site. Modifying the mode of marketing

does not change the nature of the business, which is the retail sale of motor gasoline. As previously discussed, Firm A could supplement its entitlement by purchasing surplus motor gasoline pursuant to 10 CFR 211.10(g) or by seeking an adjustment to its base period use in accordance with 10 CFR 205.50 et seq.

Issue (3). The situation presented by Firm D is significantly different from that presented by Firm A. The intent of the parties was clearly to cease operations of a retail gasoline sales outlet on the site. Firm C went out of business; Firm D razed the building and initially intended to erect a new building for purposes completely unrelated to the retail sale of motor gasoline. A relatively long period of time passed before Firm D changed its intention and built a new station. Under these circumstances Firm D may apply for assignment of a supplier and base period use pursuant to 10 CFR 211.12(e). Assignment of a base period supplier and determination of the station's base period use will be made by DOE in accordance with the "Guidelines for Evaluation of Applications for Assignment of Supplier and Base Period Use to New Gasoline Retail Sales Outlets" (40 FR 20342; May 9, 1975).

As in the case of Firm A, Firm D may operate its new station using surplus product. Of course, Firm D would not establish any supplier/purchaser relationship with the supplier of surplus product, nor would Firm D establish a base period use if it relied on the purchase of surplus gasoline to operate its retail sales outlet without requesting the assignment of a base period supplier.

[41 FR 36647, Aug. 31, 1976]

RULING 1977–1—CLARIFICATIONS TO MANDATORY PETROLEUM PRICE REGULATIONS APPLICABLE TO DOMESTIC CRUDE OIL

I. BACKGROUND

On April 13, 1976, the Department of Energy ("DOE”) gave notice (41 FR 16179, April 16, 1976) of a proposed rulemaking and public hearing to consider clarifications to certain technical aspects of the Mandatory Petroleum

Price Regulations applicable to domes tic crude oil (10 CFR Part 212, Sub part D).

The DOE did not propose in that rulemaking proceeding to alter any of the major policy decisions already reached or under consideration, in the three rulemaking stages to implement the crude oil pricing policies of the Energy Policy and Conservation Act ("EPCA," Pub. L. 94-163). Rather, the purpose of the rulemaking proceeding was to resolve as many as possible of a variety of more technical subsidiary issues that had arisen in connection with the implementation of the EPCA These issues included those related to the definition of "property" and "posted price"; whether a well is properly classified as an "oil well" for pur poses of the stripper well property rule; the partial rescission and modifi cation of Ruling 1975-15, including the issue whether a property's producing patterns have been “significantly altered" for purposes of the enhanced recovery rule applicable to unitized properties (10 CFR 212.75); and whether the certification of domestic crude oil sales required in 10 CFR 212.131 was adequate to enable crude oil purchasers to report on the Form DOE-P124-M-O, Domestic Crude Oil Purchaser's Monthly Report, notice of which was also issued on April 13 1976.

In the April 13 Notice, DOE set forth tentative conclusions with respect to these issues and solicited comments to aid DOE in resolving these issues in a way that would best com. port with the statutory objectives of the EPCA. DOE indicated that pri mary consideration would be given to interpretive rulings and clarifying amendments (if needed) that would be both administratively feasible and consistent with obtaining optimum production of crude oil in the United States. After receiving written com ments and oral statements, DOE issued on August 20, 1976 a Notice entitled "Clarifications to Mandatory Pe troleum Price Regulations Applicable to Domestic Crude Oil" (41 FR 36172, August 26, 1976), setting forth DOE's determinations with respect to those issues, and adopting certain regulatory amendments designed to improve the