4

5

the FUA and in the implementing regulations as any electric powerplant or MFBI for which construction or acquisition began on or after the date of the FUA's enactment, November 9, 1978. A "new" unit is also one for which construction or acquisition began after April 20, 1977, and before November 9, 1978. The FUA presumes that all transitional units are "new" unless the DOE classifies such a unit as "existing" for the reasons set forth in section 103(a) (8) and (11) of the FUA, as implemented by 10 CFR Part 515, Transitional Facilities.

or

"New" electric powerplants MFBIS may be absolutely prohibited under Title II of the FUA from using natural gas or petroleum as a primary energy source unless granted an exemption from the prohibition. However "existing" units are subject to less stringent prohibitions under Title III of the FUA. Part 515 of 10 CFR specifies the criteria by which the DOE will classify electric powerplants MFBI's as existing units subject to the prohibitions of Title III rather than continuing to subject the units to the prohibitions of Title II of the FUA as "new" units.

or

One such distinguishing criterion is whether the unit is "operational." For an electric powerplant as well as a MFBI, 515.20(c)(23) defines "operational" as follows:

"Operational" means that a unit is used and useful, has completed its testing phase and is capable of producing a product or providing a service on a continuing basis.

The definition of an "operational" unit set forth in § 515.20(c)(23) has two requirements. The first is that the unit is "used and useful." The second is that the unit "has completed its testing phase and is capable of producing a product or providing a service on a continuing bases." This standard was established to distinguish between those "new" MFBI's and electric powerplants that are subject to reclassification as "existing" units pursuant to the regulations governing transitional facilities and those units that

4FUA section 103(a) (8) and (11).

510 CFR 500.2; see also 10 CFR Part 503, New Electric Powerplants, and Part 505, New Major Fuel-Burning Installations.

will still be classified as "new" units. A unit that was operational on April 20, 1977, is clearly an "existing" unit. However, a unit that "was not operational on April 20, 1977, but for which a contract for the construction or acquisition was signed prior to November 9, 1978," is a transitional facility which may be either a new unit or an existing unit depending upon whether the construction or acquisition could be cancelled, rescheduled or modified without substantial financial penalty or significant operational detriment. The two-part definition of "operational" performs a single differentiation between "existing" and "new" facilities. In the performance of this function, the requirement that a unit be "used and useful" has the same meaning as the requirement that a unit "has completed its testing phase and is capable of producing a product or providing a service on a continuing basis." Only when employed in relation to a unit in this unified manner does the definition of "operational" in 10 CFR Part 515 properly and uniformly differentiate between "existing" units and “new” units.

Accordingly, an electric powerplant may be considered "operational" if it is capable of providing the service of producing "electric power for purposes of sale or exchange" and has completed its testing phase. Such a powerplant would be "used and useful." A MFBI may be considered "operational" when a boiler, gas turbine unit, combined cycle unit, or internal combustion engine is capable of producing a product or providing a service on a continuing basis and has completed its testing phase as performed by the manufacturer and/or supplier of the particular MFBI. Such a MFBI would be "used and useful." In the case of a package boiler purchased for use as a MFBI, for example, the applicable DOE regulations permit a unit to qualify as "operational" as of a specific date for the purposes of implementing 10 CFR Part 515 even if the particular

"See the definition of "electric powerplant" in section 103(a)(7) of the FUA.

'See the definition of "major fuel-burning installation" in section 103(a)(10) of the FUA.

MFBI had not been installed or tested by the purchaser, so long as the purchaser had acquired a unit that the manufacturer had tested.

[45 FR 69211, Oct. 20, 1980]

RULING 1981-1-QUESTIONS AND ANSWERS RELATING TO THE EFFECT OF THE EXECUTIVE ORDER DECONTROLLING CRUDE OIL AND REFINED PETROLEUM PRODUCTS ON THE MANDATORY PETROLEUM ALLOCATION AND PRICE REGULATIONS

On January 28, 1981, the President signed Executive Order 12287, 46 FR 9909 (January 30, 1981), exempting all crude oil and refined petroleum products from the price and allocation controls adopted pursuant to the Emergency Petroleum Allocation Act of 1973, as amended (15 U.S.C. 751 et seq. (1976)) (EPAA). This Order was effective at 12:01 a.m., January 28, 1981.1 This Ruling is issued in order to promote the immediate implementation of this Executive Order. It answers some of the questions received by the Department of Energy (DOE) concerning the Executive Order and DOE regulations after January 27, 1981.

Question #1: Are firms required to follow the reporting, record-keeping, and record maintenance requirements set forth in the Mandatory Petroleum Allocation and Price Regulations after 12:01 a.m., January 28, 1981?

Answer #1: Section 2 of the Executive Order states that: "[a] 11 reporting and record-keeping requirements in effect under the Emergency Petroleum Allocation Act, as amended, shall continue in effect until eliminated or modified by the Secretary of Energy." Accordingly, until the Secretary of Energy promulgates regulations changing the record-keeping requirements, all existing records must be maintained in their current form, and no existing records may be altered or destroyed. Records that relate to matters occurring after January 27, 1981 are still subject to ongoing reporting

1Executive Order 12287 is effective at 12:01 a.m., January 28, 1981, in each different time zone. See 15 U.S.C. 262 (1976). Thus, while the Order was effective on the East Coast at 12:01 a.m., e.s.t., January 28, 1981, it was not effective on the West Coast until 12:01 a.m. p.s.t., January 28, 1981.

or regulatory requirements, and must also be maintained. For example, crude oil producers and crude oil resellers must continue to certify each barrel of crude oil sold in accordance with 10 CFR 212.131, although after January 27, 1981 the crude oil is exempt from any pricing restrictions. In addition, all reports required to be filed by firms for the periods prior or subsequent to January 28, 1981, must still be filed with the appropriate officials until these reporting requirements are modified or eliminated. The on-going record-keeping and reporting requirements also are subject to 10 CFR 205.202 which prohibits any practice that circumvents or contravenes the requirements of the regulations. The failure to maintain, or the destruction or alteration of records, or the failure to submit reports accurately to the DOE could subject a firm to both civil and criminal penalties.

Question #2: How does the Executive Order affect the issuance of entitlements notices for the period prior to January 28, 1981 under 10 CFR 211.66 and 211.67 (the Entitlements Program)?

Answer #2: In section 3 of the Executive Order the Secretary of Energy is given authority to promulgate entitlements notices for periods prior to January 28, 1981, and further to establish a mechanism for entitlements adjustments for periods prior to the Executive Order. Thus, the Secretary will publish in February 1981 an entitlements notice which accounts for crude oil runs to stills in December 1980. The Secretary will also publish in March 1981 an entitlements notice reflecting crude oil runs to stills from January 1, 1981 through January 27, 1981.

For the month of January 1981, each refiner is required to report all information required by the Form ERA-49, the Domestic Crude Oil Entitlements Program Refiners Monthly Report, pursuant to the provisions of 10 CFR 211.66 and 211.67 and the instructions set forth in the Form ERA-49. Each refiner will report its actual crude oil runs to stills for that month. However, each refiner shall also report in Item 7 in the Form ERA-49 its actual crude oil runs to

13-026 0-83--24

stills in the first 27 days of January 1981, or if it does not have that information available, its crude oil runs to stills for the full month of January 1981, multiplied by the fraction 27/31, which will be deemed the firm's crude oil runs to stills for the first 27 days of the month. In a footnote to Item 7, a refiner shall state which method of computation for the first 27 days of January it used in its Form ERA-49.

Each refiner will be required further to report its receipts of crude oil as set forth in 10 CFR 211.66(h) and Form ERA-49, for the entire month of January 1981. Each refiner will also report for the first 27 days of the month its crude oil receipts as set forth in Items 4, 5, 6, 9, and 10 in the Form ERA-49 on the basis of actual crude oil receipts for the first 27 days of January or, if the refiner does not have that information available, on the basis of receipts for the full month, multiplied by 27/31. In a footnote to Items 4, 5, 6, 9, and 10 each refiner shall state which method of computation for the period January 1 through 27, 1981, it used on the Form ERA-49. All reporting and record-keeping requirements will remain in effect. Thus, crude oil must be certified by its proper regulatory classification, such as lower tier, upper tier, etc., even though after January 27 the crude oil could be sold without regard to price controls. Refiners, therefore, should have data as to the tier and type of crude oil received for the entire month of January 1981.

Moreover, each refiner that is otherwise eligible to receive entitlements for eligible products under 10 CFR 211.67(a)(3) or for petroleum substitutes under 10 CFR 211.67(a)(5), or that is required to adjust its volume of crude oil runs to stills pursuant to 10 CFR 211.67(d), shall report in Item 7 or 8 of the Form ERA-49 the volume of eligible products, petroleum substitutes, or reduction in runs to stills for the entire month of January 1981. In addition, each refiner will report its actual volume of eligible products and petroleum substitutes or will adjust its crude oil runs to stills for the first 27 days of January 1981. If that information is not available, a refiner will report the volume of eligible products

or petroleum substitutes or will adjust its crude oil runs to stills by multiplying the monthly calculation of such volumes or the crude oil runs to stills, respectively, by the fraction 27/31. In a footnote to Item 7 or 8 of the Form ERA-49 each refiner shall state which method of computation for the first 27 days of January it used.

Each non-refiner that is eligible to receive entitlements for eligible products under 10 CFR 211.67(a)(3) or for petroleum substitutes under 10 CFR 211.67(a)(5) is required to report its volume of the eligible products or petroleum substitutes for the entire month of January 1981. In addition, each firm will report its volume of eligible products or petroleum substitutes for the first 27 days of January 1981. If that information is not available, the firm must multiply the full monthly volume of the eligible products or petroleum substitutes by the fraction 27/31. Each firm shall state which method of computation for the first 27 days of January it used.

The DOE will develop a mechanism to implement any adjustments to the Entitlements Program resulting from changes or corrections in crude oil receipts, runs to stills, volumes of other eligible products or volumes of petroleum substitutes by refiners and other eligible firms for months or partial months prior to January 28, 1981.

Question #3: How was a producer to determine the volumes of upper and lower tier crude oil produced and sold from a property during January 1981?

Answer #3: Executive Order 12287 does not affect the determination of the base production control level of a property for the full month of January 1981. Thus, the volumes of old (lower tier) crude oil and new (upper tier) crude oil produced and sold from a property must be determined according to the procedures found in 10 CFR Part 212, Subpart D, for the full month of January 1981. Crude oil produced and sold from a property prior to January 28, 1981, was subject to the pricing requirements of 10 CFR Part 212, Subpart D, and the certification requirements at 10 CFR 212.131. Neither the price regulations of 10 CFR Part 212, Subpart D nor the certification provisions of 10 CFR 212.131

specify any sequence of sale or identify which particular barrels of crude oil are to be sold at lower tier or upper tier ceiling prices. However, a producer was required to deal with purchasers of its crude oil in accordance with its normal business practices as set forth in 10 CFR 210.62 with respect to that purchaser and was not to discriminate among any purchasers of its crude oil in its sale of upper tier or lower tier crude oil during January 1981. A producer's variance from its historical sales practices with respect to a purchaser in January 1981 could be evidence of behavior proscribed under 10 CFR 210.62.

Accordingly, crude oil sold before January 28, 1981 that was properly certified as lower tier or upper tier crude oil was subject to the ceiling price limitations of 10 CFR Part 212, Subpart D. Crude oil sold after January 27, 1981 is exempt from any ceiling price limitation whether or not it was certified as lower tier or upper tier crude oil.

Question #4: May a producer obtain market level prices from a purchaser for crude oil produced prior to January 28, 1981, but sold after January 27, 1981?

Answer #4: The contract terms between a purchaser and a seller determine whether the producer of controlled crude oil produced prior to January 28, 1981, but sold after the effective date of the Executive Order, may obtain market-level prices for its crude oil production. The Mandatory Petroleum Price Regulations do not affect sales after 12:01 a.m., January 28, 1981. The question of the time of sale is to be answered by reference to the contract or agreement, not by reference to the Mandatory Petroleum Allocation and Price Regulations.

Question #5: May crude oil sold in the months of December 1980 and January 1981 be retroactively recertified (or certified) in accordance with 10 CFR 212.131 by a crude oil producer within the consecutive two-month period immediately following month the sale was made?

the

Answer #5: If crude oil would have otherwise qualified for lawful recertification (or certification) prior to the implementation of the Executive

Order, a producer may recertify (or certify) crude oil sold in the months of December 1980 and January 1981 pursuant to 10 CFR 212.131(a)(6) within the consecutive two-month period immediately following the month in which the sale was made. For example, in March 1981 a producer could recertify upper tier crude oil sold in January 1981 as tertiary incentive crude oil if the crude oil would have otherwise qualified for that classification. After March 1981 no such recertifications can be made by a producer of crude oil.

Question #6: May a producer or reseller of controlled crude oil, either lower tier or upper tier crude oil sold prior to January 28, 1981 retroactively increase its price to market level after decontrol if the producer or reseller cannot lawfully recertify the crude oil under 10 CFR 212.131(a)(6) or 212.131(b), respectively?

Answer #6: A producer or crude oil reseller is not permitted to increase retroactively its price for controlled crude oil that it sold prior to January 28, 1981, if the producer or reseller cannot lawfully recertify the crude oil pursuant to 10 CFR 212.131(a)(6) or 212.131(b), respectively. However, if a producer or crude oil reseller can lawfully certify or recertify crude oil pursuant to 10 CFR 212.131(a)(6) or 212.131(b), respectively, that producer or crude oil reseller may of course do So.

Question #7: May a firm first become a qualified producer as defined in 10 CFR 212.78(c) on or after January 28, 1981? Moreover, may the retroactive recertification of crude oil sold in the months of December 1980 and January 1981 as tertiary incentive crude oil be used to recover recoupable allowed expenses that are incurred, paid, and reported after the effective date of the Executive Order, but within the consecutive two-month period within which retroactive certification is permitted under 10 CFR 212.131(a)(6)?

Answer #7: The Tertiary Incentive Program provides that first sales of crude oil by or on behalf of a qualified producer are not subject to the ceiling price limitations of 10 CFR Part 212, Subpart D, provided that the tertiary

incentive revenue does not exceed the allowed expenses attributable to the producer. Tertiary incentive revenue is the difference between the controlled price and the market price received by the qualified producer in accordance with 10 CFR 212.78 and constitutes the front-end money which is the incentive that the program is intended to provide.

Absent the Executive Order, a qualified producer that would have incurred, paid, and reported its allowed expenses prior to February 28 and March 31, 1981, respectively, could have recovered those expenses through the recertification of crude oil sold in the months of December 1980 and January 1981, respectively, as long as those recertifications were made within the consecutive twomonth period within which such certification is permitted under 10 CFR 212.131(a)(6). Executive Order 12287 is intended to provide for an immediate decontrol of crude oil and refined petroleum products. The Order does not abrogate the right that accrued to a firm to establish prices for crude oil prior to January 28, 1981. Thus, a firm may become a qualified producer as defined in 10 CFR 212.78(c) on or after January 28, 1981. A qualified producer may also recover allowed expenses through the recertification of crude oil sold in the months of December 1980 and January 1981, respectively, as long as the producer has incurred, paid, and reported those expenses prior to February 28 and March 31, 1981, respectively.

Question #8: How does a crude oil reseller compute its lawful prices pursuant to 10 CFR Part 212, Subpart L for the period January 1 through January 27, 1981?

Answer #8: A crude oil reseller must generally compute its average markup on a monthly basis under 10 CFR 212.183(a). The average markup is the total revenue in sales of properly certified crude oil by the reseller, less the lawful costs and expenses associated with such sales of crude oil in the month, divided by the number of barrels of crude oil sold by the reseller in the month. See 10 CFR 212.182. Since only a 27-day period rather than the full month was subject to price con

trols, a crude oil reseller's average markup would also reflect prices charged after the exemption of crude oil from price controls. Since some sales of crude oil could be made at prices that were exempt from the price regulations, the average markup could lawfully exceed the permissible average markup of 20 cents per barrel during January 1981. Accordingly, no valid comparison of a crude oil reseller's average markup with its permissible average markup of 20 cents per barrel can be made for the month of January 1981.

In addition, prior to January 28, 1981, crude oil resellers were subject to 10 CFR 212.183(a) which prohibits any markup in certain specified sales of crude oil and to 10 CFR 212.186 which prohibits any markup in a sale in which a reseller performs no service or other function traditionally and historically associated with the resale of crude oil. Moreover, crude oil resellers were subject to all other provisions of 10 CFR Part 212, Subpart L and the certification provisions of 10 CFR 212.131 prior to January 28, 1981. Until further notice, crude oil resellers also must continue to maintain records and file reports in conformance with 10 CFR 212.187.

Question #9: May a seller of refined petroleum products retroactively increase its selling price to a purchaser for a covered product actually sold prior to January 28, 1981?

Answer #9: A seller may not, through a retroactive price assessment, increase its selling price for a covered product sold prior to January 28, 1981 to a level in excess of its maximum lawful price to a purchaser as that concept is discussed in 10 CFR Part 212, Subparts E, F, and K for the period in which the product was sold. A retroactive increase in price will be considered part of the price charged for a product for the period prior to January 28, 1981, and could result in the initiation of enforcement action.

Question #10: Must a retailer of motor gasoline continue to post either the maximum lawful selling price for each grade of motor gasoline or a certification that the maximum lawful selling price for each grade of motor gasoline has been calculated by the