B-223728, JUL 25, 1986

B-223728: Jul 25, 1986

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THIS IS A PROPER EXERCISE OF THE LEGISLATIVE FUNCTION OF THE CONGRESS. STATES ARE NOT "PERSONS" PROTECTED BY THE DUE PROCESS CLAUSE OF THE FIFTH AMENDMENT. THE STATES HAVE NO VESTED RIGHTS TO FUTURE OIL OVERCHARGE REVENUE UNDER THE SETTLEMENT OR COURT ORDER. DUE TO THE EXTREMELY SHORT DEADLINE WITHIN WHICH WE HAVE HAD TO WORK. OUR CONCLUSIONS ARE. BEING BASED ON THE LIMITED RESEARCH WE HAVE BEEN ABLE TO DO. THE SETTLEMENT THE STRIPPER WELL SETTLEMENT IS THE CULMINATION OF MANY YEARS OF LITIGATION RESULTING FROM DOE'S PROMULGATION AND ENFORCEMENT OF PETROLEUM PRICING REGULATIONS UNDER THE EMERGENCY PETROLEUM ALLOCATION ACT OF 1973. THE PARTIES TO THE SETTLEMENT AGREEMENT WERE THE DOE. THE REMAINDER OF THE FUNDS ARE TO BE DIVIDED EQUALLY BETWEEN THE UNITED STATES AND THE STATES.

B-223728, JUL 25, 1986

ENERGY - DEPARTMENT OF ENERGY - AUTHORITY AND RESPONSIBILITY - OIL PRICE AND ALLOCATION REGULATION - RECOVERED OVERCHARGES - DISTRIBUTION PROPRIETY DIGEST: 1. PROPOSED LEGISLATION ALTERING THE DEPARTMENT OF ENERGY'S RESTITUTION POLICY BY DIRECTING THAT ALL FUTURE OIL OVERCHARGE FUNDS, WHICH CANNOT BE RETURNED TO INDIVIDUAL VICTIMS OF OVERCHARGES, BE DEPOSITED IN THE TREASURY RATHER THAN DIVIDED EQUALLY BETWEEN THE UNITED STATES AND THE STATES, DOES NOT VIOLATE THE CONSTITUTIONALLY MANDATED SEPARATION OF LEGISLATIVE AND EXECUTIVE POWERS. THE CHANGE OF POLICY WOULD BE EFFECTED BY A STATUTE, ENACTED BY BOTH HOUSES OF THE CONGRESS AND PRESENTED TO THE PRESIDENT FOR SIGNATURE. THIS IS A PROPER EXERCISE OF THE LEGISLATIVE FUNCTION OF THE CONGRESS. ENERGY - DEPARTMENT OF ENERGY - AUTHORITY AND RESPONSIBILITY - OIL PRICE AND ALLOCATION REGULATION - RECOVERED OVERCHARGES - DISTRIBUTION PROPRIETY 2. PROPOSED LEGISLATION DIRECTING THAT ALL FUTURE OIL OVERCHARGE FUNDS, WHICH CANNOT BE RETURNED TO INDIVIDUAL VICTIMS OF THE OVERCHARGES, BE DEPOSITED IN THE TREASURY, DOES NOT VIOLATE THE CONSTITUTIONALLY MANDATED SEPARATION OF LEGISLATIVE AND JUDICIAL FUNCTIONS EVEN THOUGH THE DEPARTMENT OF ENERGY AGREED TO DIVIDE THESE FUNDS EQUALLY BETWEEN THE UNITED STATES AND THE STATES UNDER A COURT APPROVED SETTLEMENT AGREEMENT. THE LEGISLATION WOULD NEITHER PRESCRIBE THE OUTCOME OF PENDING LITIGATION NOR REQUIRE THAT A CASE BE DECIDED IN FAVOR OF THE UNITED STATES. FURTHER, THE LEGISLATION WOULD NOT ALTER THE RIGHTS OF THE PARTIES ESTABLISHED BY THE COURT ORDER. THE LEGISLATION WOULD MERELY CHANGE THE FUTURE APPLICATION OF THE COURT ORDER, WHICH THE CONGRESS MAY DO. ENERGY - DEPARTMENT OF ENERGY - AUTHORITY AND RESPONSIBILITY - OIL PRICE AND ALLOCATION REGULATION - RECOVERED OVERCHARGES - DISTRIBUTION PROPRIETY 3. PROPOSED LEGISLATION DIRECTING THAT ALL FUTURE OIL OVERCHARGE FUNDS, WHICH CANNOT BE RETURNED TO INDIVIDUAL VICTIMS OF THE OVERCHARGES, BE DEPOSITED IN THE TREASURY, RATHER THAN DIVIDED EQUALLY BETWEEN THE STATES AND THE UNITED STATES, AS PROVIDED IN A COURT APPROVED SETTLEMENT, DOES NOT CONSTITUTE A FIFTH AMENDMENT TAKING OF PROPERTY OF THE STATES. STATES ARE NOT "PERSONS" PROTECTED BY THE DUE PROCESS CLAUSE OF THE FIFTH AMENDMENT. FURTHER, THE STATES HAVE NO VESTED RIGHTS TO FUTURE OIL OVERCHARGE REVENUE UNDER THE SETTLEMENT OR COURT ORDER.

THE HONORABLE PETE V. DOMENICI:

CHAIRMAN, COMMITTEE ON THE BUDGET

UNITED STATES SENATE

IN YOUR LETTER OF JULY 24, 1986, SUBMITTED JOINTLY WITH SENATOR CHILES, YOU REQUESTED OUR VIEW ON THE CONSTITUTIONALITY OF PROPOSED CONGRESSIONAL ACTION WHICH WOULD RECOUP FOR DEPOSIT IN THE GENERAL FUND OF THE TREASURY OIL OVERCHARGE PAYMENTS COLLECTED IN THE FUTURE BY THE DEPARTMENT OF ENERGY (DOE). THE QUESTION ARISES BECAUSE OF THE OPINION AND ORDER OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS APPROVING A COMPREHENSIVE SETTLEMENT IN THE CASE OF IN RE: THE DEPARTMENT OF ENERGY STRIPPER WELL EXEMPTION LITIGATION, M.D.A. NO. 378 (D.KAN., JULY 7, 1986). SPECIFICALLY, YOU ASKED:

"WOULD LEGISLATION MANDATING THE RECOUPMENT OF FUTURE OIL OVERCHARGE PAYMENTS NOT DIRECTLY ALLOCATED TO INJURED PARTIES, IMMEDIATELY DISTRIBUTED BY THE SETTLEMENT AGREEMENT, OR HELD IN A COURT'S ESCROW ACCOUNT FOR DISTRIBUTION (INCLUDING DEFICIENCY PAYMENTS), VIOLATE THE CONSTITUTION'S SEPARATION OF POWERS CLAUSE OR BE CONSIDERED A TAKING OF VESTED STATES' PROPERTY UNDER THE FIFTH AMENDMENT?"

DUE TO THE EXTREMELY SHORT DEADLINE WITHIN WHICH WE HAVE HAD TO WORK, OUR CONCLUSIONS ARE, OF NECESSITY, TENTATIVE, BEING BASED ON THE LIMITED RESEARCH WE HAVE BEEN ABLE TO DO. WITH THIS CAVEAT, WE CONCLUDE THAT THE PROPOSED LEGISLATIVE ACTION WOULD NOT VIOLATE THE CONSTITUTION.

THE SETTLEMENT

THE STRIPPER WELL SETTLEMENT IS THE CULMINATION OF MANY YEARS OF LITIGATION RESULTING FROM DOE'S PROMULGATION AND ENFORCEMENT OF PETROLEUM PRICING REGULATIONS UNDER THE EMERGENCY PETROLEUM ALLOCATION ACT OF 1973. THE PARTIES TO THE SETTLEMENT AGREEMENT WERE THE DOE; PETROLEUM REFINERS, RESELLERS AND RETAILERS; CERTAIN SPECIFIC CONSUMERS INCLUDING AIRLINES, AGRICULTURAL COOPERATIVES, SURFACE TRANSPORTERS, AND UTILITIES; AND THE STATES /1/ ON BEHALF OF THEMSELVES AND THEIR CITIZENS. THE SETTLEMENT INVOLVED THREE DISTINCT MATTERS: (1) THE DISTRIBUTION OF ESCROW AND OTHER FUNDS IN THE STRIPPER WELL CASE ITSELF; (2) THE DISTRIBUTION OF OTHER CRUDE OIL OVERCHARGE FUNDS; AND (3) THE RESOLUTION OF LITIGATION INVOLVING DOE'S ENTITLEMENTS PROGRAM.

WITH RESPECT TO THE STRIPPER WELL ESCROW FUNDS, THE SETTLEMENT PROVIDES FOR FIXED DISTRIBUTIONS TO THE REFINERS, RESELLERS, RETAILERS AND CONSUMERS. THE REMAINDER OF THE FUNDS ARE TO BE DIVIDED EQUALLY BETWEEN THE UNITED STATES AND THE STATES, TO BE USED FOR ENERGY-RELATED USES. WITH RESPECT TO OTHER OVERCHARGE FUNDS, EITHER ADMINISTERED BY DOE OR HELD IN ESCROW IN OTHER LITIGATION, THE SETTLEMENT LIKEWISE PROVIDES FOR EQUAL DISTRIBUTION TO THE STATES AND TO THE UNITED STATES.

FURTHER, AS PART OF THE SETTLEMENT, AND IN ACCORDANCE WITH ITS INTERPRETATION OF CURRENT STATUTORY LAW, DOE AGREED TO MODIFY ITS RESTITUTIONARY POLICY SO THAT INDIVIDUAL CLAIMANTS MAY HAVE THE OPPORTUNITY TO ESTABLISH ENTITLEMENT TO A PORTION OF OVERCHARGE REFUNDS. ANY FUNDS NOT DISTRIBUTED TO SPECIFIC CLAIMANTS WOULD AGAIN BE DIVIDED EQUALLY BETWEEN UNITED STATES AND THE STATES.

AS WE UNDERSTAND YOUR QUESTION, PROPOSED LEGISLATIVE ACTION WOULD AFFECT DOE'S MODIFIED RESTITUTIONARY POLICY BY PROVIDING THAT ALL FUNDS WHICH CANNOT BE REFUNDED TO SPECIFIC VICTIMS OF VIOLATIONS OF PRICING REGULATIONS WOULD BE DEPOSITED IN THE TREASURY, RATHER THAN BEING DIVIDED EQUALLY BETWEEN THE UNITED STATES AND THE STATES. FURTHER, WE UNDERSTAND THAT LEGISLATION ACTION WOULD APPLY TO OVERCHARGE REFUNDS COLLECTED BY DOE IN THE FUTURE, NOT TO FUNDS THAT WERE TO BE DISTRIBUTED UNDER THE PROVISIONS OF THE SETTLEMENT.

SEPARATION OF POWERS

YOU SPECIFICALLY ASKED WHETHER THE PROPOSED LEGISLATIVE ACTION WOULD VIOLATE THE SEPARATION OF POWERS DOCTRINE. WE SHALL ADDRESS THIS QUESTION IN TWO PARTS RELATING TO THE EXECUTIVE AND JUDICIAL BRANCHES.

EXECUTIVE BRANCH. DOE ADMINISTERS THE EMERGENCY PETROLEUM ALLOCATION PROGRAM, AND ENTERED INTO THE SETTLEMENT AGREEMENT, UNDER AUTHORITY DELEGATED BY THE CONGRESS BY STATUTE. THE MODIFIED RESTITUTIONARY POLICY AGREED TO BY DOE WOULD BE IMPLEMENTED UNDER THIS DELEGATION.

THE PROPOSED LEGISLATION ACTION WOULD ALTER DOE'S POLICY BY ENACTMENT OF LEGISLATION PROVIDING THAT ALL UNDISTRIBUTED FUNDS ARE TO BE RECOVERED BY THE UNITED STATES. SEE GENERALLY, H.R. REP. NO. 100 598 (PART I), 99TH CONG., 2D SESS. 68 (1986); H.R. REP. NO. 664, 99TH CONG., 2D SESS. 28-29 (1986). SUCH LEGISLATION WOULD RESULT FROM ENACTMENT BY BOTH HOUSES OF THE CONGRESS AND PRESENTMENT TO THE PRESIDENT, AS REQUIRED BY ART. I, SEC. 7 OF THE CONSTITUTION. THIS CONGRESSIONAL ACTION WOULD BE A PROPER EXERCISE OF THE LEGISLATIVE FUNCTION AND WOULD NOT VIOLATE THE SEPARATION OF POWERS BETWEEN THE LEGISLATIVE AND EXECUTIVE BRANCHES.

THIS CONCLUSION IS IN ACCORD WITH THE SUPREME COURT'S DECISION IN IMMIGRATION AND NATURALIZATION SERVICE V. CHADHA, 462 U.S. 919 (1983). THREE TIMES IN THE DECISION THE COURT INDICATED THAT THE CONGRESS COULD AFFECT EXECUTIVE BRANCH EXERCISE OF DELEGATED AUTHORITY BY LEGISLATION. FIRST, THE COURT STATED:

"EXECUTIVE ACTION UNDER LEGISLATIVELY DELEGATED AUTHORITY THAT MIGHT RESEMBLE 'LEGISLATIVE' ACTION IN SOME RESPECTS IS NOT SUBJECT TO THE APPROVAL OF BOTH HOUSES OF THE CONGRESS AND THE PRESIDENT FOR THE REASON THAT THE CONSTITUTION DOES NOT SO REQUIRE. THAT KIND OF EXECUTIVE ACTION IS ALWAYS SUBJECT TO CHECK BY THE TERMS OF THE LEGISLATION THAT AUTHORIZED IT; AND IF THE AUTHORITY IS EXCEEDED IT IS OPEN TO JUDICIAL REVIEW AS WELL AS THE POWER OF CONGRESS TO MODIFY OR REVOKE THE AUTHORITY ENTIRELY." 462 U.S. AT 953, N.16.

THE COURT THEN EXPLAINED:

"DISAGREEMENT WITH THE ATTORNEY GENERAL'S DECISION ON CHADHA'S DEPORTATION *** NO LESS THAN CONGRESS' ORIGINAL CHOICE TO DELEGATE TO THE ATTORNEY GENERAL THE AUTHORITY TO MAKE THAT DECISION, INVOLVES DETERMINATIONS OF POLICY THAT CONGRESS CAN IMPLEMENT IN ONLY ONE WAY; BICAMERAL PASSAGE FOLLOWED BY PRESENTMENT TO THE PRESIDENT. CONGRESS MUST ABIDE BY ITS DELEGATION OF AUTHORITY UNTIL THAT DELEGATION IS LEGISLATIVELY ALTERED OR REVOKED." ID. AT 954-55.

FINALLY, THE COURT NOTED:

"TO ACCOMPLISH WHAT HAS BEEN ATTEMPTED BY ONE HOUSE OF CONGRESS IN THIS CASE REQUIRES ACTION IN CONFORMITY WITH THE EXPRESS PROCEDURES OF THE CONSTITUTION'S PRESCRIPTION FOR LEGISLATIVE ACTION: PASSAGE BY A MAJORITY OF BOTH HOUSES AND PRESENTMENT TO THE PRESIDENT." ID. AT 958.

IN OUR OPINION, THE PROPOSED STATUTORY CHANGE OF DOE'S RESTITUTIONARY POLICY WOULD SATISFY THE REQUIREMENTS OF THE CHADHA DECISION AND WOULD THUS NOT VIOLATE THE SEPARATION OF POWERS BETWEEN THE LEGISLATIVE AND EXECUTIVE BRANCHES.

JUDICIAL BRANCH. THE STRIPPER WELL SETTLEMENT WAS APPROVED BY ORDER OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS. MDL NO. 378 (JULY 7, 1986). THUS THE SETTLEMENT HAS BECOME PART OF THE JUDGMENT OF THE COURT. DISTRIBUTION OF FUNDS HELD IN ESCROW AT THE TIME OF THE ORDER WERE TO BE DISTRIBUTED UNDER ORDER OF THE COURT. DOE'S CHANGE OF ITS RESTITUTIONARY POLICY WAS ALSO TO BE EFFECTED UNDER THE ORDER OF THE COURT.

UNDER THE CONSTITUTIONALLY REQUIRED SEPARATION OF LEGISLATIVE AND JUDICIAL POWERS, THE CONGRESS MAY NOT ENACT LEGISLATION WHICH PRESCRIBES THE RULE OF DECISION IN A PENDING CASE OR REQUIRES THAT THE CASE BE DECIDED IN THE GOVERNMENT'S FAVOR. UNITED STATES V. SIOUX NATION OF INDIANS, 448 U.S. 371, 402-04 (1980); UNITED STATES V. KLEIN, 80 U.S. (13 WALL.) 128, 146-48 (1872); NATIONAL JUVENILE LAW CENTER, INC. V. REGNERY, 738 F.2D 455 (D.C. CIR. 1984). NOR MAY THE CONGRESS BY STATUTE ABROGATE A COURT JUDGMENT AND THUS ALTER THE RIGHTS OF THE PARTIES ESTABLISHED BY THE JUDGMENT. SEE HODGES V. SNYDER, 261 U.S. 600, 603 (1923); PENNSYLVANIA V. WHEELING AND BELMONT BRIDGE COMPANY, 59 U.S. (18 HOW.) 421, 431 (1856); CERRO METAL PRODUCTS V. MARSHALL, 467 F.SUPP. 869, 878 (E.D. PA. 1979). HOWEVER, THE CONGRESS MAY ENACT LEGISLATION WHICH CHANGES THE FUTURE APPLICABILITY OF A COURT DECISION. CERRO METAL PRODUCTS, SUPRA, AT 879.

THE PROPOSED LEGISLATIVE ACTION WOULD NOT ATTEMPT TO PRESCRIBE THE RULE OF DECISION IN ANY PENDING CASE OR REQUIRE AN OUTCOME FAVORABLE TO THE UNITED STATES. NOR WOULD IT OVERTURN THE STRIPPER WELL JUDGMENT SO AS TO ALTER THE RIGHTS OF ANY OF THE PARTIES VESTED BY THE COURT ORDER. DESCRIBED TO US INFORMALLY BY COMMITTEE STAFF, THE LEGISLATION WOULD NOT APPLY TO FUNDS ALLOCATED TO SPECIFIC INJURED PARTIES, FUNDS DISTRIBUTED BY THE SETTLEMENT DECREE, OR FUNDS CURRENTLY HELD IN ESCROW EITHER BY A COURT OR DOE. THE STATUTE WOULD ONLY AFFECT DOE'S DISTRIBUTION OF ANY OIL OVERCHARGE FUNDS IT COLLECTS IN THE FUTURE.

THE SETTLEMENT AGREEMENT AND THE RESULTING COURT ORDER ARE BASED ON THE INTERPRETATION BY DOE AND THE COURT OF THE STATUTORY LAW AS IT NOW EXISTS. SO LONG AS THE STATUTE REMAINS UNCHANGED, THE COURT'S ORDER WOULD CONTROL DOE'S FUTURE DISTRIBUTION OF OVERCHARGE FUNDS. HOWEVER, THE CONGRESS HAS THE CONSTITUTIONAL AUTHORITY TO AMEND THE STATUTE PROSPECTIVELY, THUS REQUIRING A DIFFERENT FUTURE DISTRIBUTION THAN THAT PROVIDED BY THE SETTLEMENT AND ORDER. AS THE STRIPPER WELL COURT RECOGNIZED:

"*** ACTION ON THE PART OF THIS COURT WILL NOT IMPEDE OR IMPAIR THE LEGISLATURE FROM PERFORMING ITS CONSTITUTIONALLY ASSIGNED FUNCTION. CONGRESS POSSESSES FULL AUTHORITY TO PASS ANY LEGISLATION IT DEEMS WISE AND PROPER." SLIP OPINION AND ORDER, AT 29.

WE THUS CONCLUDE THAT THE PROPOSED LEGISLATION WOULD NOT VIOLATE THE SEPARATION OF LEGISLATIVE AND JUDICIAL POWERS.

FIFTH AMENDMENT TAKING

THE STAFF HAS ALSO ASKED WHETHER THE PROPOSED LEGISLATION MIGHT BE CONSIDERED AN UNCONSTITUTIONAL TAKING OF RIGHTS VESTED IN THE STATES BY THE STRIPPER WELL SETTLEMENT. AS THE PROPOSED LEGISLATION WOULD ONLY APPLY TO DISTRIBUTION OF FUTURE OVERCHARGE FUNDS, IT COULD ONLY AFFECT ANY RIGHTS THE STATES MAY HAVE ACQUIRED UNDER DOE'S AGREEMENT TO DISTRIBUTE FUNDS 50 PERCENT TO THE FEDERAL GOVERNMENT AND 50 PERCENT TO THE STATES IN THE FUTURE.

INITIALLY WE NOTE THAT THE COURTS HAVE HELD THAT THE STATES ARE NOT "PERSONS" IN THE CONTEXT OF THE DUE PROCESS CLAUSE OF THE FIFTH AMENDMENT. SEE SOUTH CAROLINA V. KATZENBACH, 383 U.S. 301, 323-24 (1966); OKLAHOMA V. FERC, 494 F.SUPP. 636, 661 (W.D. OK. 1980); B-212222, JANUARY 5, 1984. FURTHER, EVEN IF THE STATES WERE ENTITLED TO PROTECTION UNDER THE FIFTH AMENDMENT, THE PROPOSED LEGISLATION WOULD NOT AFFECT ANY RIGHTS OF THE STATES VESTED BY EITHER THE STRIPPER WELL SETTLEMENT OR THE ORDER OF THE STRIPPER WELL COURT.

THE STRIPPER WELL SETTLEMENT AND ORDER AT MOST VESTED THE STATES' RIGHTS TO 50 PERCENT OF THE FUNDS, THEN HELD IN ESCROW BY EITHER DOE OR THE COURTS, THAT WERE NOT OTHERWISE TO BE DISTRIBUTED TO VICTIMS OF REGULATORY VIOLATIONS. HOWEVER, THE SETTLEMENT AND ORDER COULD NOT VEST THE RIGHTS OF THE STATES TO ANY PART OF MONEYS THAT WERE NOT YET COLLECTED AND THUS NOT HELD IN ESCROW BY EITHER DOE OR THE COURTS. THEREFORE, AS NO VESTED STATES' RIGHTS WILL BE AFFECTED BY THE PROPOSED LEGISLATION, IT CANNOT BE CONSIDERED A TAKING UNDER THE FIFTH AMENDMENT.

WE TRUST THAT THIS OPINION IS RESPONSIVE TO YOUR NEEDS. UNLESS IT IS RELEASED EARLIER BY THE COMMITTEE, THIS LETTER WILL BE AVAILABLE TO THE PUBLIC 5 DAYS FROM TODAY.

/1/ THE STATES ALSO INCLUDED THE DISTRICT OF COLUMBIA, PUERTO RICO, AMERICAN SAMOA, GUAM, THE NORTHERN MARIANAS AND THE U.S. VIRGIN ISLANDS.