Full opinion text
MEMORANDUM OF OPINION DENYING THE DEFENDANTS’ MOTION TO DISMISS MANOS, District Judge. Between December 6,1976 and April 20, 1977, nine petroleum refining corporations filed complaints in this court seeking a. preenforcement declaratory judgment invalidating the Federal Energy Administration’s (FEA) current interpretation of the petroleum price control regulations that governed the petroleum market during the 13 months between January 1, 1975 and January 31, 1976. On April 22, 1977 the defendants, The Federal Energy Administration and its Administrator, filed a motion to consolidate the nine separate cases and to dismiss the complaint of each refiner corporation. On April 25, 1977 the court conducted a conference in chambers, at which all parties were represented by counsel. On- April 27, 1977 the court, upon agreement of the parties, ordered: (1) a stay without prejudice, of all proceedings in the nine cases pending this court’s decision on the defendants’ motion to dismiss; (2) a stay of “all proceedings before the Federal Energy Administration’s Office of Exceptions and Appeals concerning the manner in which refiners recovered their non-product costs. . . . ”; (3) a briefing schedule for the parties to present arguments to the court in the form of legal memoranda on the FEA’s motion to dismiss. On May 26, 1977 the court received the last legal memorandum from the parties. On June 3, 1977 the Consumers Union of the United States moved the court to file an Amicus Curiae brief on the motion to dismiss, which motion the court now grants. After considering the arguments of the parties and the Amicus Curiae, the court overrules the FEA’s motion to dismiss, for the reasons stated in today’s Memorandum of Opinion. I. STATUTORY AND REGULATORY BACKGROUND In 1970 the Congress enacted the Economic Stabilization Act, vesting the President of the United States with power to administratively regulate prices throughout the economy. See, 12 U.S.C.A. § 1904 note §§ 201-220 (Supp.1977). On August 19, 1973, the Cost of Living Council, acting under delegated authority originating from the Economic Stabilization Act, promulgated regulations imposing complex mandatory price controls on crude oil and petroleum products. On November 27, 1973, the Emergency Petroleum Allocation Act of 1973 (EPAA) became law. See, Pub.L. 93-159, 87 Stat. 629. The EPAA incorporated most of the provisions of the 1970 Economic Stabilization Act. Section 4(a) of the EPAA provided for the mandatory allocation and pricing of petroleum products and Section 4(b)(1) of the EPAA set forth nine objectives which were to be achieved, “to the maximum extent practicable,” by the President in whatever allocation and pricing program was devised. With regard to determining prices, Section 4(b)(2)(A) of the EPAA provided that regulations promulgated by the President: “. . . shall provide for a dollar-for-dollar passthrough of net increases in the cost of crude oil, residual fuel oil, and refined petroleum products to all marketers and distributors at the retail level.” See, Pub.L. 93-159, § 4(b)(2)(A); 1973 U.S.Code, Congressional and Administrative News, p. 695. On December 4,1973 the President issued Executive Order No. 11748, establishing the Federal Energy Office (FEO) and delegating to the newly created FEO all the authority vested in him by the EPAA, Pub.L. 93-159, 87 Stat. 629, the Economic Stabilization Act as it related to petroleum pricing, 12 U.S.C. §§ 1904 note §§ 201 et seq., and the Defense Production Act of 1950 (DPA), as amended, 50 U.S.C.App. §§ 2061 et seq., as that act related to the President’s energy responsibilities. The President also ordered the chairman of the CLC to transfer his pricing authority under the Eeonomic Stabilization Act to the FEO Administrator insofar as that authority related to energy. On December 13, 1973, the FEO, pursuant to its newly acquired authority, published proposed regulations, which incorporated by reference the earlier CLC’s Phase IV petroleum price regulations. These regulations were formally promulgated by the FEO on December 27,1973, and the incorporated CLC Phase IV petroleum price regulations, were recodified and renumbered on January 14, 1974. Thus the FEO’s January, 1974 petroleum price regulations substantially conformed to the petroleum price regulations issued by the CLC in August, 1973. The reigning petroleum price regulations in August, 1973 (CLC regulations) and January, 1974 (FEO regulations) imposed controls at three levels of the petroleum industry — producers, refiners, and resellers/retailers. The price regulations applicable to refiners such as all plaintiffs in this case, as of January, 1974, may be briefly described in the following fashion. BASIC PRICE RULE. In general, refiners could not exceed their weighted average May 15, 1973 selling prices in transactions with given classes of purchasers, plus an adjustment designed to permit a dollar-for-dollar passthrough of increased “product" (i. e., raw material) costs incurred between the month of measurement and the month of May, 1973. This price was known as the “base price” for a product. Any increased product costs used in computing base prices had to be applied equally within each class of purchaser, as defined by reference to prices in effect on May 15, 1973. A refiner was prohibited from increasing its base prices, through the passthrough of increased product costs, more than once per month. INCREASED PRODUCT COSTS. Increased product costs were defined as the difference between the total cost of crude oil and refined products incurred during the month of measurement, and the total costs of crude oil and refined products incurred during the month of May, 1973. APPORTIONMENT OF INCREASED PRODUCT COSTS. Increased product costs could be passed through in refined product prices in the month of measurement. For most refined products (e. g., butane, naphtha, kerosene), a refiner could apportion its total increased product costs among its many product lines in whatever proportion it chose, so long as it did not discriminate among or within the various classes of purchaser of each particular refined product. For certain refined products, however, such as gasoline and Nó. 2 heating oil, the Phase IV and initial FEO regulations provided special limitations on a refiner’s discretion in passing through increased product costs. BANKED PRODUCT COSTS. Any amounts of increased product costs which a refiner was unable to recover in a price increase in the month following the month of measurement, because of competitive market conditions or other factors, could be accumulated or “banked” for recovery in a later month. NON-PRODUCT COSTS. In addition to the above passthrough of increased product costs as part of base prices, refiners that experienced “non-product” costs (such as increased labor, taxes and other operating and marketing costs) could apply to the CLC (and later to the FEO) for permission to passthrough such increases pursuant to special rules requiring a refiner to “prenotify” and justify to the agency the basis for such increased non-product costs, and then wait a minimum of 30 days before implementing the price increase. No regulatory provision explicitly addressed the issue of banking non-product costs or the sequencing of product and non-product cost passthroughs, and product costs were not permitted to be passed through in excess of base prices if it would cause the refiner to exceed a predetermined profit margin limitation. On May 7, 1974, the Federal Energy Administration Act of 1974 (FEA Act) became law. See, 15 U.S.G. §§ 761, et seq. On June 25, 1974, pursuant to Executive Order No. 11790, the FEO became the Federal Energy Administration and assumed all responsibilities of the FEO. On September 10, 1974, the FEA proposed extensive amendments to the refiner price rules in a Notice of Proposed Rule-making published in the Federal Register. These regulations did not expressly designate the sequence of recovery of increased product and non-product costs for refiners. However, they did revise the methodology and procedural mechanism for recovering non-product costs by substituting an administratively unsupervised system of increased cost recovery for the system of “prenotification” that had been previously required. On November 29, 1974, the FEA promulgated final amendments to its petroleum price regulations, effective January 1, 1975. These amendments, expressly,prohibited refiners from banking their unrecovered non-product costs. On December 22,1975 the Energy Policy Conservation Act of 1975 (EPCA), Pub.L. 94-163, became law. Section 402(a) of the EPCA, see, 1975 U.S. Code Congressional and Administrative News, 89 Stat. 946, amended the EPAA, Pub.L. 93-159, § 4(b)(2)(A) to insure that petroleum price regulations: “shall provide for a dollar-for-dollar passthrough of net increases in the cost of crude oil, residual fuel oil, and refined petroleum products at all levels of distribution from the producer through the retail level . . . .” On January 7, 1976, the FEA announced a Notice of Proposed Rulemaking in preparation for designing amendments to the petroleum price regulations in order to reflect the policy adjustments which Congress mandated by enacting the EPCA, Pub.L. 94-163 The January 7 notice did not explicitly discuss the sequence by which a refiner should be permitted to recover costs by increasing prices, i. e., the January 7 notice did not explicitly state that all product costs must be passed through into price increases before any non-product costs could be passed through into a price increase. On February 1, 1976, after conducting a public hearing, the FEA issued a new regulation, 10 C.F.R. § 212.85, expressly stating that all product costs must be passed through into increased prices before any non-product costs could be passed through. At the same time, the new regulations retained the old rule that non-product costs which were not passed through within a specified time after measurement, could not be banked for recoupment at a later date. The February 1, 1976 regulations retained the rule that product costs which a refiner chose not to immediately pass through into his base price, thereby increasing his allowable selling price, could be banked, and thus stored for recoupment at an indefinite future date. The February 1, 1976 rule, expressly mandating the “product cost first” sequence for price increases, applied to all price increases from February 1, 1976 forward, as part of the regulatory amendments generated in response to the enactment of the EPCA, Pub.L. 94-163, in December, 1975. However, in the preamble to the February 1, 1976 promulgation, the FEA stated its interpretation that the regulations governing the period January 1, 1975 through January 31, 1976 embodied an identical “product cost first” sequence rule. The preamble states: “Many of the comments received by FEA pointed out that the proposed regulations were silent as to the order in which the various categories of increased costs would be deemed to have been recouped by refiners in their prices for covered products. A new § 212.85 is therefore being adopted, stating the order in which increased costs will be deemed to have been recouped. “Under FEA price regulations (both prior to today’s amendment and as amended), refiners determine their ‘increased product costs’ . . . , on a calendar month basis, by taking the difference between their May 31, 1973 . product cost per barrel and their . product cost per barrel for the month for which increased cost are being measured, and then- multiplying each per barrel amount by the numbers of barrels . purchased in that month. . . . The total dollar amount of increased . product . . . costs which is thus determined for a calendar month may not be passed through in prices for products which are above a refiner’s May 15, 1973 prices until the calendar month following the month in which they were incurred and measured. “To the extent that the total amount of a refiner’s increased costs ... is not recovered in prices charged during the following calendar month, such increased costs may be carried forward or ‘banked’ and passed through in prices charged in subsequent months. . Non-product costs may not be ‘banked’ and are therefore considered to be recouped only after all available ‘increased product costs’ . . . have been applied to establish ‘base prices.’ “FEA . . . has, in the amendments adopted today, distinguished among the various categories of unrecovered increased costs, and specified the required order of recoupment. “Except for the complexities introduced by [the EPCA] . . . , the order specified in the new § 212.85 is the same as that under the regulations previously in effect. “ . . . Increased non-product costs . must be recouped last.” 41 Fed.Reg. 5111, 5113 (February 4,1976) (emphasis added). After the February 1, 1976 preamble and announcement, many refiners, including some of the plaintiffs in this case, notified the FEA that they had interpreted the regulations that governed the period January 1, 1975 through January 31, 1976 to permit the passthrough of non-product costs before the passthrough of product cost, i. e., exactly the reverse sequence which the FEA first explicitly stated on February 1, 1976 was the correct interpretation of the regulations controlling petroleum prices between January 1, 1975 and January 31, 1976. The court designates this group of refiners as the “Reverse Sequential” group. After the February 1, 1976 announcement a different group of refiners, of which some of the plaintiffs in this case are members, notified the FEA that they had followed a third interpretation of the regulations governing prices between January 1, 1975 and January 31, 1976. This group interpreted those regulations to mandate a “proportional” approach to the recovery of non-product costs. Under the approach used by most of the “proportional” recovery companies, increased product costs and non-product costs were deemed recovered in selling prices in the same proportion in which they were utilized in calculating maximum allowable prices for specific items marketed. In months in which prices charged for a particular petroleum product were below their maximum allowable levels, application of the proportional approach meant that some non-product costs would be recovered before all available product cost increases had been exhausted, though it also meant that the opportunity to recover some increased non-product costs would be lost forever. Both the Reverse Sequential group and the Proportional group proclaimed to have never understood that the FEA regulations controlling the period January 1, 1975 through January 31, 1976 mandated the “product-cost first” approach, since those regulations did not explicitly state such a requirement. Thus the ultimate issue on the merits of the plaintiffs’ pre-enforcement declaratory judgment action currently pending before this court first surfaced as a dispute between the plaintiff refiners and the FEA on February 1, 1976. That issue is: Whether the FEA’s petroleum price regulations, governing petroleum prices during the period January 1, 1975 through January 31, 1976, validly stated that all available product costs had to be passed through as base price increases before any non-product cost increments could permissibly be passed through to increase the market price of a petroleum item? However, the issue of the accurate interpretation of the petroleum price regulations governing the period January 1, 1975 through January 31, 1976 is not the issue now before this court on the defendants’ motion to dismiss. The defendants argue that the plaintiffs’ pre-enforcement declaratory judgment action should be dismissed because the substantive issue of which interpretation of the regulations in effect during the designated time frame is correct is: (1) an issue not yet ripe for judicial determination; (2) an issue on which available administrative remedies have not yet been exhausted; (3) an issue on which this court should defer to administrative proceedings under the doctrine of “primary jurisdiction.” II. FACTS PERTAINING TO THE DEFENDANTS’ MOTION TO DISMISS The promulgation of § 212.85, explicitly imposing a “product-cost first” rule for the period February 1, 1976 forward, accompanied by the FEA’s comments in the preamble that the agency interpreted the regulations controlling the period January 1, 1975 through January 31, 1976 to implicitly embody the same product-cost first rule, triggered an immediate outcry from both the Reverse Sequential refiners and the Proportional refiners. On March 3, 1976 the FEA issued a Notice of Proposed Rulemaking, furnishing reasons for the “product-cost first” rule discussed in the February 1,1976 announcement and stating that the FEA would now consider whether § 212.85 should be modified, whether such modifications should be retroactive to February 1, 1976, and whether “clarifying amendments” should be adopted with respect to the period January 1, 1975 through January 31, 1976. The FEA’s March 3, 1976 Notice of Proposed Rulemaking stated the agency’s reasons for its “product-cost first” rule: “On February 1, 1976 the Federal Energy Administration (‘FEA’) issued amendments to its regulations (41 FR 5111, February 4,1976) implementing the pricing policies of sections 401 and 402 of the Energy Policy and Conservation Act (‘EPCA,’ Pub.L. 94-163). The FEA stated in the preamble to the amendments that it was considering issuing a notice of proposed rulemaking and public hearing to ‘address a number of the issues regarding non-product costs raised in comments during this rulemaking.’ Two such issues raised in the comments were the order of recoupment of increased non-product costs and the prohibition against the carry-forward or ‘banking’ of increased non-product costs. This notice of proposed rulemaking and public hearing will address these issues further. “To the extent that the total dollar amount of a refiner’s ‘increased product costs’ . . . incurred in the ‘month of measurement’ is not recouped in prices charged during the following, or ‘current’ month, such increased product costs may be carried forward or ‘banked,’ and, subject to certain limitations, are available for recovery in prices charged in subsequent months. However, pursuant to § 212.83(e)(9) (numbered § 212.83(3)(6) prior to the February 1, 1976 amendments), increased non-product costs (e. g., increased costs of marketing, refinery fuel, labor, additives, etc.) which are not recouped in the month following the month in which they were incurred may not be ‘banked’ or carried forward ‘for use in computing allowable prices in excess of base prices in any subsequent month.’ “In the February 1, 1976 amendments, a new § 212.85 was adopted stated [stating] the order in which increased costs are deemed to be recouped, including both product and non-product costs, and including the new categories of costs that were established to implement the pricing policy provisions of the EPCA. Section 212.85 requires refiners to recover: first, total available increased product costs . and second, increased non-product costs only after all available increased products have been recouped. The FEA stated in the preamble to the amendments adding § 212.85: ‘To the extent that the total amount of a refiner’s increased costs of crude oil incurred in one calendar month . is not recovered in prices charged during the following calendar month . such increased costs may be carried forward or “banked” and passed through in prices charged in subsequent months, subject to certain limitations. Non-product costs may not be “banked” and are therefore considered to be recouped only after all available “increased product costs” (increased costs of crude oil and of purchased products) have been applied to establish “base prices.” * * * * * * ‘Except for the complexities introduced by the statutory two-month and ten percent limitations, the order specified in the new § 212.85 is the same as that under the regulations previously in effect.’ “The purpose of requiring refiners to recoup all available increased product costs prior to recouping any increased non-product costs is to prevent refiners from carrying forward or banking increased non-product costs. Pursuant to § 212.83(e)(9) refiners may not carry forward or ‘bank’ increased non-product costs which are not recouped in the month following the month in which they are incurred. Accordingly, a refiner which recoups increased non-product costs before recouping all of its available increased product costs and ‘banks’ its unrecouped available increased product costs is, in effect, ‘banking’ an amount of increased product costs equal to the amount it ‘banks.’ Thus the practical effect of permitting refiners to pass through increased non-product costs before recouping all available increased product costs would be to permit non-product costs to be ‘banked’ or carried forward in violation of § 212.83(e)(9). “Resellers, reseller-retailers, and retailers are not permitted to carry forward unrecouped increased non-product costs. Ruling 1975-16 (40 FR 40834, September 4, 1975) states: ‘Pursuant to § 212.93(e), Firm X is permitted to carry forward unrecovered “increased costs,” as defined in § 212.92 (i. e., unrecovered increased product costs), for recovery in a subsequent month. The regulations do not include a corresponding provision for the carry forward of amounts by which prices charged do not take full advantage of the authorization in § 212.93(b) to charge prices in excess of those otherwise permitted to reflect increased non-product costs. i * * * prjces are regarded as being constituted of three elements, in the sequence in which those elements are set forth in the regulations; i. e., first, May 15, 1973 price; second, the increased product costs; and, third, increased non-product costs.’ “Thus, Ruling 1975-16 not only holds that resellers, reseller-retailers, and retailers may not ‘bank’ unrecouped increased non-product costs but specifically states the sequence, of recovery of increased costs which is necessary in order to prevent the ‘banking’ of increased non-product costs. “On February 17, 18, and 19, 1976, as required by section 11(a) of the Emergency Petroleum Allocation Act of 1973, as amended, (EPAA), FEA held public hearings and received written comments with respect to the adequacy and continuing necessity of FEA’s mandatory price and allocation regulations to achieve the goals of the EPAA. A number of refiners commented that the sequence of recoupment of increased costs as set forth in § 212.85 was contrary to FEA’s stated policy of granting refiners greater pricing flexibility. These refiners argued that in order to grant greater pricing flexibility and thus avoid distortions of refinery operations, the sequence of recoupment of increased product and non-product costs should be at the refiners option, subject to the limitations imposed by the EPCA. “FEA has become aware that several different methods of calculation are being applied by refiners in computing the amount of non-product costs that are applied in prices charged during a month and the amount of these costs that are recovered in sales during a month. In some instances, non-product costs have been applied or recovered first. It appears other refiners are prorating total cost recoveries between product and non-product cost increases. Both methods of calculation, in effect, cause the ‘bank’ of product costs to subsidize the current recovery of non-product costs. This suggests that refiners are construing the ‘base price’ (May 15, 1973 prices plus increased product costs) and a ‘price in excess of the base price’ (i. e., base price plus non-product costs) differently than FEA had previously'formally construed these terms. (See: “Gulf Oil Corp.,’ Case No. FEA-0301, FEA ¶ 80,552, March 21, 1975,)” See, 41 Fed.Rég. 9196, 9199-9200 (March 3, 1976). The March 3, 1976 announcement also states the FEA’s purpose for conducting a public hearing and rulemaking proceeding with respect to the February 1, 1976 “product-cost first” statement: “The purpose of this notice of rulemaking and public hearing is to gain information concerning the combined effects of § 212.83(d) and (e)(9) and the new § 212.-85, as adopted February 1,1976 to comply with the EPCA two-month and ten percent limitations, on the ability of refiners to pass through increased product and non-product costs. In particular, FEA wishes to determine whether the regulations in their present form operate so as to have a serious adverse impact on refining operations. “Accordingly, FEA invites interested parties to comment on the following: “1. Should the specified order of recovery of increased product and increased non-product costs be modified to permit a proportionate share of each type of costs to be recovered each month? To illustrate, if a firm recouped 80 percent of its available increased product costs in sales during a month (and ‘banked’ 20 percent), under this alternative treatment it would be permitted to recoup up to 80 percent of its increased non-product costs (but not to ‘bank’ the remaining 20 percent). What other method of computing such recovery could be devised? “As FEA noted in the amendments of February 1, 1976, the designation of the order of cost recovery was provided at the specific requests of participants in that proceeding, and was intended to assure that those costs of crude oil first incurred could be considered to be first recouped, in order to minimize the adverse effects of the two-month and 10 percent limitations imposed by the EPCA. “2. Should some or all of any increased non-product costs not recouped during the month following the month in which they were incurred be permitted to be carried forward, or ‘banked,’ for recovery in subsequent months? (See § 212.-83(e)(9).) “3. To what extent would the proposals contemplated in this proceeding change or affect the type of calculations presently being applied by refiners. In addition, FEA requests that refiners identify other applicable regulations (e. g., definition of ‘base price,’ § 212.82(b); allocation of increased non-product cost, § 212.83(d); etc.) which would require change or modification to effect the proposals advanced herein. “FEA also requests comments from' refiners as to what order of recovery of increased product and non-product costs they employed prior to February 1, 1976 and the reasons for selecting the particular order of recovery used. “FEA is proceeding with this aspect of its review of the price regulations regarding non-product costs on an expedited basis in view of comments which have been received since issuance of the February 1 amendments stating that those amendments seriously threaten to disrupt refinery operations, to impair maintenance of normal inventory levels and to result in wide month-to-month price fluctuations. In light of these potentially disruptive effects, FEA will consider in this proceeding whether the amendments, if any, which are adopted herein should be made retroactive to February 1, 1976 in order to coincide with the effective date of § 212.85, and whether clarifying amendments should be made with respect to the order in which increased non-product costs were to have been recovered under regulations in effect prior to February 1, 1976.” See, 41 Fed.Reg. 9196, 9200 (March 3, 1976) (emphasis added). On March 18, 1976, a public hearing was held at which numerous respondents, including the plaintiffs in this case, testified. Both the Reverse Sequential group and the Proportional group protested the inauguration of a strict all available “product cost first” rule, arguing that such a rule violated the EPAA, Pub.L. 93-159, as amended by the EPCA, Pub.L. 94-163, for the period February 1, 1976 forward. In addition, the protestors urged that such a rule would damage the refining industry as well as the public at large. Both groups emphatically challenged the FEA’s interpretation that the regulations governing January 1, 1975 through January 31, 1976 mandated the “product-cost first” concept. On April 6, 1976, the FEA rescinded § 212.85, the explicit “product-cost first” rule effective as of the date of its original issuance, February 1, 1976. In doing so the FEA catalogued a wide array of adverse consequences that could be expected to flow from the “product-cost first” rule in combination with other restrictions in the regulations. Specifically, the FEA stated that the rule “would tend to have undesirable inflationary effects on current market prices,” that “prices would also tend to wide monthly fluctuations,” that the rule could operate as “a disincentive for refiners to build up inventories,” that it would provide refiners an incentive to “decrease refinery production,” and that, because of the restrictions, “capital investment to expand refiner capacity might be reconsidered and deferred or eliminated.” In addition to rescinding the explicit “product-cost first” rule for the period February 1, 1976 forward, the April 6, 1976 regulatory amendments eliminated the “base price” concept, and permitted, for the time frame February 1, 1976 forward, the passthrough of unrecouped non-product costs into price increases, according to a proportional formula, similar to the approach which the “Proportional” refiners adopted in construing the regulations which governed the period January 1, 1975 through January 31, 1976. Although the FEA’s April 6, 1976 announcement changed the price regulations controlling the period February 1, 1976 forward, the agency was mute regarding its earlier interpretation that the regulations which governed January 1, 1975 through January 31, 1976 mandated a “product-cost first” passthrough price rule for the earlier time frame. The only comment uttered by the FEA regarding the January 1,1975 through January 31, 1976 period in its April 6, 1976 announcement was: “FEA is also still considering appropriate action, including further regulation amendments pursuant to this rulemaking proceeding, regarding the rules on recoupment of increased non-product costs prior to February 1, 1976.” See, 41 Fed.Reg. 15330, 15333 (April 12, 1976). On August 3, 1976, the FEA announced that it was currently considering a “Proposed Class Exception” for at least some of the refiners who, between January 1, 1975 and January 31, 1976, passed non-product costs into price increases in a fashion different than the “product-cost first” rule which the FEA continued to maintain was the correct interpretation of the regulations that governed that period. The FEA acknowledge that some refiners might in “good faith” have “misinterpreted” the regulations to permit recoupment of non-product costs on a proportional basis; that the FEA audit manual also “partially reflected this view;” that the regulations contained “possibly ambiguous language;” that refiners might have been misled by “certain information diseeminated by FEA;” and that enforcing an all “produet-cost first” approach might result in “potentially massive refunds or ‘bank’ reductions,” which could have a drastic effect on the cash resources of refiners who in good faith set prices on the proportional interpretation of the regulations, (emphasis added). See, 41 Fed.Reg. 33282, 33283 (August 9, 1976). The FEA’s notice declared: “During 1975 and January 1976, the passthrough of increased non-product costs was subject to a profit margin limitation (i. e., a refiner could pass through increased non-product costs only if its profit margin in the current fiscal year did not exceed its base period profit margin). The regulations referred to the passthrough of increased non-product costs as a price increase above base prices. Section 212.83(e)(9) prohibited ‘banking’ of unrecovered increased non-product costs; § 212.87(b) provided for allocation of such costs to each product or product category of the type ‘i’ on a volumetrically proportional basis; and § 212.83(d) required increased non-product costs to be recovered among individual covered products in the same proportions as increased product costs were recovered. The purpose of § 212.83(d) was to provide a basis for allocating increased non-product costs among individual covered products within the category of general refinery products, in much the same manner that § 212.87(b) provided for allocation of increased non-product costs among products or product categories of the type ‘i,’ “However, it appears that § 212.83(d) was understood by many refiners to authorize a proportional computation of the portions of each type of increased costs— product and non-product — deemed to have been recovered in.prices charged by refiners, whether or not all available increased product costs had first been recovered. The FEA audit manual, which was apparently available to some but not all refiners, also partially reflected this view. “Statements included in various notices of proposed rulemaking, however, have generally reflected the former rather than latter interpretation of the regulatory language referred to above, which required increased product costs to be recovered before increased non-product costs. “To enforce the regulations as requiring recovery of all increased product costs prior to the recovery of any increased non-product costs during the period January 1, 1975 through January 31, 1976— thus resuiting in potentially massive refunds or ‘bank’ reductions — could have a drastic effect on cash resources of refiners who in good faith set prices based on the ‘proportional’ interpretation of the regulations. “If firms were to be required to apply individually for exceptions relief, FEO believes that a significant number of refiners would apply and be eligible for such relief on the basis of serious hardship or gross inequity. “Although FEO believes that its interpretation of the meaning of the language used in the regulations is correct — i. e., increased product costs were required to be recovered first; banking of unrecovered increased non-product costs was not permitted — it nevertheless acknowledges that refiners might have concluded in good faith that recoupment on a proportional basis was permitted as a result of possibly ambiguous language in § 212.-83(d) and certain information disseminated by FEA.” See, 41 Fed.Reg. 33282, 33283 (August 9, 1976) (emphasis added). At the same time that the FEA recognized that the regulations covering the period January 1, 1975 through January 31, 1976 partially supported the interpretation of the Proportional refiners, the FEA restated its position that the petroleum price regulations governing that period furnished no support for the Reverse Sequential refiners. The FEA announced, “It is FEO’s understanding that some refiners interpreted the regulations in yet another manner, to permit the addition to May 15, 1973 prices of, first, available increased non-product costs and, second, the amount of available increased product costs required to reach desired selling prices, thus permitting the refiner to carry forward or ‘bank’ all unrecovered increased costs — since under this approach all such unrecovered costs would have been deemed unrecovered increased product costs, which could be carried forward. The regulations were not intended to authorize this approach nor can FEO find in the regulations any arguable basis for use of this approach.” See, 41 Fed.Reg. 33282, 33283 (August 9, 1976) (emphasis added). Based on the FEA’s fixed interpretation of the regulations governing the period January 1, 1975 through January 31, 1976, and the above delineated policy considerations, the FEA announced that it would consider the possibility of initiating class exception proceedings to “authorize the ‘proportional’ cost recovery approach retroactively for all refiners,” and to furnish those firms “which properly applied the cost recovery rules” with an opportunity to retroactively adjust their “banks” upward according to the proportional passthrough concept. See, 41 Fed.Reg. 33282-33283 (August 9, 1976) (emphasis added). The FEA solicited data from all refiners in order to quantify the magnitude of the problem, and thereby facilitate consideration of the proposed class exception. On September 15,1976, the FEA released the results of the survey it initiated in connection with the proposed class exception announced on August 3, 1976. See, 41 Fed.Reg. 40559 (September 20, 1976). The FEA’s description of the “Background” of the survey reiterates the agency’s interpretation of the regulations that governed the period between January 1, 1975 and January 31, 1976, and also noted factors that might have caused some refiners to interpret those regulations differently. The survey data released demonstrated that all refiners subject to the applicable regulations sustained an aggregate total of 4.3 billion dollars worth of increased non-product costs during the period January 31, 1976, and that: (1) all refiners subject to the regulations in question actually passed through, in price increases, 3.7 billion dollars of increased non-product costs; (2) if all refiners had employed the proportional interpretation of the applicable regulations, then the total amount of increased non-product cost passed through as price increases would have been 3.6 billion dollars; (3) if all refiners had employed the product-cost first rule espoused by the FEA, then the total amount of increased non-product cost passed through into market price increments would have been 2.4 billion dollars. The survey data published by the FEA on September 20,1976 revealed that the differences between the amount of “non-product cost” price increases allowed under the FEA’s interpretation of the applicable regulations and the amount of “non-product cost” increases allowable under a “proportionate” passthrough interpretation, or on the other hand, the amount actually passed through, equaled approximately 1.3 billion dollars. Thus, according to the FEA’s understanding of the applicable regulations, during the applicable period, the refiners overcharged the American public in an amount equaling 1.3 billion dollars. In the eyes of the FEA, strict enforcement of its regulations would result in orders against refiners, such as the plaintiffs in this case, to either issue refunds to purchasers or decrease the refiners’ banks in an industry-wide aggregate of 1.3 billion dollars. The results of the FEA’s survey, also revealed: (1) that 104 firms responded to its request for information regarding non-product cost passthroughs during the time frame January 1, 1975 through January 31, 1976; (2) that 46 firms either applied the FEA’s interpretation of the applicable regulations or passed through no non-product costs: (3) that 29 refiners fell into the category of “Proportional” firms, i. e., firms which passed through a proportion of non-product costs ahead of product costs in formulating their monthly selling prices; (4) that 29 refiners fell into the Reverse Sequential category, 1. e., they passed through non-product costs ahead of all product costs in formulating their selling prices. After presenting this data the FEA’s announcement stated: “FEA also requests specific comments on whether the sequential [product-cost first] interpretation rule is inequitable in application because the data indicates that it operates to prevent refiners from recovering 1.9 billion dollars of the 4.3 billion dollars of FEA allowable increased non-product costs.” See, 41 Fed.Reg. 40559, 40560 (September 20, 1976). Three days after the results of the FEA’s survey were released to the public, Frank G. Zarb, the Administrator of the FEA wrote a letter to Congressman John D. Dinged, Chairman of the House of Representatives’ Subcommittee on Energy and Power, stating: “Recent press reports about FEA’s proposed class exception on the passthrough of increased non-product costs by refiners before February 1, 1976 have caused me grave concern that basic FEA policies and procedures involved in the resolution of this proceeding may be misunderstood. I have, therefore, decided to issue a notice in the Federal Register explaining these policies and procedures in greater detail. Knowing of your interest in this matter, I would like to call these policies and procedures to your attention. “First, FEA has never permitted, and shall never permit any firm to be excused from compliance with our regulations merely on the basis that a misinterpretation of the regulations was made in good faith. Moreover, under FEA’s regulations regarding exception relief, no firm may be relieved of its legal requirement to comply with FEA’s regulations solely on the grounds of good faith reliance on erroneous guidance from FEA personnel. Both of these principles have been fully enunciated in published FEA exception decisions. The only basis upon which a firm could obtain relief under the regulations would be pursuant to a finding, in an adjudicatory proceeding before FEA’s Office of Exceptions and Appeals, that enforcement of the regulations under all relevant circumstances would, in fact, cause a serious hardship or gross inequity to that firm. “Second, as you know, in our August 3, 1976 notice of this proposed class exception, FEA reaffirmed that the interpretation which was issued on February 1, 1976 of the November 29, 1974 regulations is correct, i. e., increased product costs were required to be recovered first and banking of unrecovered increased non-product costs was not permitted. We fully intend to enforce this interpretation of the regulations in all instances other than those in which a firm has applied for and been granted relief by FEA’s Office of Exceptions and Appeals. “Third, although the nature of the proceeding for which a notice was issued on August 3,1976 was termed a ‘class exception,’ it should more accurately be considered as an invitation to all refiners to apply for exception relief in a consolidated exceptions proceeding because FEA perceived that many firms had misapplied the regulations in a similar manner. Of the total number of approximately 135 domestic refiners, 104 responded to the August 3 notice by submitting data. Accordingly, this proceeding, in fact, now involves 104 separate cases, all of which relate to the same subject matter. “The need to handle this ‘class exception’ on a firm by firm basis has become apparent after receipt of the data submitted by each of the 104 refiners, since not all refiners misapplied the regulations for the same reasons or to the same ex-, tent. To determine the precise impact of requiring full compliance with the correct interpretation of the order of recovery for each of the 104 refiners involved has •necessitated an audit of each refiner, a process which is now underway. We still intend to hold a consolidated hearing on October 13 on the common issues involved in this proceeding in order to permit maximum public participation in our decision making process. However, no decision will be rendered with respect to any particular refiner until the' audit of that firm is completed and a determination is made whether strict compliance with FEA regulations by that particular firm would, in light of all the circumstances and impacts, result in a serious hardship or gross inequity to that firm. In determining whether to grant exception relief in a specific case, you may be assured that FEA will consider the interests of consumers and all others who may be affected by any exception relief granted. A balancing of interests and equities will be made in each case to assure that the interests of all affected parties are protected. “Finally, I wish to assure you that FEA has in no way prejudged the propriety of the activities of any firm which has applied for relief in this proceeding.' As is always the case in compliance and exception cases, we have a completely open mind. Before any final decisions are made, we still must gather more detailed information with respect to each of the refiners seeking relief and consider as well both written comments and oral presentations at the public hearing. The ultimate form of relief, if any, that may be granted could, of course, conceivably take as many different forms as there are firms participating in this proceeding.” (emphasis added). On October 5, 1976, the FEA published a notice- stating the procedures and criteria designed to govern the exception proceedings. The “Introduction” to the October 5,1976 document reaffirmed the validity of the FEA’s interpretation of the petroleum price regulations governing the period January 1, 1975 through January 31, 1976, and stated the agency’s firm intention to enforce that interpretation. “In the August 3, 1976 notice of this proposed class exception, FEA reaffirmed that the interpretation which was issued on February 1, 1976 of the November 29, 1974 regulations is correct, i. e., increased product costs were required to be recovered first and banking of unrecovered increased non-product costs was not permitted. FEA wishes to emphasize that it fully intends to enforce this interpretation of the regulations in all instances other than those in which a firm has applied for and been granted relief by FEA’s Office of Exceptions and Appeals.” The October 5, 1976 announcement repeated the FEA’s earlier stated recognition that some refiners, acting in good faith, could have interpreted the regulations in question differently from the interpretation adhered to by the agency. “In the August 3, 1976 notice of this proceeding, FEA acknowledged that ‘refiners might have concluded in good faith that recoupment on a proportional basis was permitted as a result of possibly ambiguous language in § 212.83(d) and certain information disseminated by FEA.’ “Although FEA acknowledged in its August 3,1976 notice that refiners might have concluded in good faith that other interpretations of the regulations than the sequential interpretation adopted by FEA were correct, FEA has never permitted any firm to be excused from compliance with its regulations merely on the basis that a misinterpretation of the regulations was made in good faith. . Moreover, under FEA’s regulations regarding exception relief, no firm may be relieved of its legal requirement to comply with FEA’s regulations solely on the grounds of good faith reliance on erroneous guidance from FEA personnel.” See, 41 Fed.Reg. 43953-43954 (October 5, 1976) (emphasis added). The criteria for exception relief set out in the October 5, 1976 notice required each individual refiner to demonstrate entitlement to an exception by proof that it would suffer “serious hardship or gross inequity” from enforcement of the FEA’s interpretation of the applicable regulations. The agency particularly stressed that the key to success in the exception proceeding was proof of unique facts demonstrating that strict enforcement of FEA’s predetermined, correct interpretation of the regulations governing the January 1, 1975 through January 31, 1976 time frame, would work a “serious hardship or gross inequity” on a particular refiner. “The nature of this proceeding, therefore, although termed a ‘class exception,’ is more accurately described as an invitation to all refiners to apply for individual exception relief within the scope of a consolidated exceptions proceeding. Such a proceeding is appropriate in this instance because FEA perceived that many firms had misapplied the regulations in a similar manner. However, although the FEA might consider a number of individual exception applications on a consolidated basis if they raise common questions of fact or law, it is still envisioned that any firm requesting exception relief must establish on an individual basis that it is subject to a serious hardship or gross inequity as a result of the FEA regulatory requirements. “The only basis upon which a firm may obtain relief under the regulations is pursuant to a finding, in an adjudicatory proceeding before FEA’s Office of Exceptions and Appeals, that enforcement of the regulations under all relevant circumstances would, in fact, cause a serious hardship or gross inequity to that firm. Serious hardship and gross inequity are the criteria set forth in 10 CFR 205.55(b) upon which an application for an exception may be granted. “The conditions under which any particular firm might be able to support a finding of serious hardship or gross inequity are many and varied. For example, FEA noted in its August 3,1976 proposal, that the enforcement of regulations concerning increased non-product cost recovery could ‘have a drastic effect’ on the cash resources of certain refiners. It is possible that those firms in light of all the circumstances in the case, might be able to support a claim of ‘serious hardship.’ FEA also noted that it intended to ‘assure * * * equitable treatment for those refiners that ‘properly applied the cost recovery rules.’ These particular firms might find their cost recovery positions — relative to other firms — to be dis- advantageous to the extent other firms are granted exceptions relief. It is also possible that these firms, depending on the other factors that exist in the case, could establish the type of inequity that constitutes a basis for exception relief. In making these types of showing, firms may, as in prior FEA exception cases, offer evidence that there was a certain degree of ambiguity in the regulations or that they acted in good faith reliance on erroneous statements contained in FEA documents as part of the total circumstances which FEA should consider in deciding the equities of their cases. However, as stated above, a showing of good faith misunderstanding, merely by itself, will not constitute a sufficient basis for relief.” See, 41 Fed.Reg. 43953^3954 (October 5, 1976). The FEA also indicated that a grant of exception relief was partly dependent on the interests of consumers and other affected persons. “Finally, in determining whether to grant exception relief in a specific case, FEA will also consider the interests of consumers and all others who may be affected by any exception relief granted. A balancing of interests and equities will be made in each case to assure that the interests of all affected parties are protected. FEA stresses that it has in no way prejudged the propriety of the activities of any firm which is participating in this proceeding. Before any final decisions are made, more detailed information. will be gathered with respect to each of the refiners seeking relief and both written comments as well as oral presentations at the public hearing will be considered in the context of individual cases.” See, 41 Fed.Reg. 43954, 43955 (October 5, 1976). On November 18,1976 the FEA, pursuant to its statutory duty under the Energy Conservation and Production Act (ECPA) of 1976, Pub.L. 94-385, issued guidelines generally applicable- to all exception proceedings before the agency. These guidelines reiterate the FEA’s view. that exception relief is restricted to unique, individual factual circumstances. The November 18,1976 guidelines state: “It is not the intention of the conferees, however, that these provisions require the FEA to anticipate all situations' in which relief may be appropriate in the future, since the exceptions process is designed in substantial measure to resolve factual situations which could not have been and were not contemplated at the time the general statutory or regulatory programs were adopted. Conf.Rep., Pub.L. 91-385. CCH Fed. Energy Guidelines, Par. 10,521, at p. 10,480. “It should also be recognized, however, that each exception application submitted ' to the Federal Energy Administration must be considered on the basis of the particular factual circumstances presented in the application.” See, 41 Fed.Reg. 50856 (November 18, 1976). The November 18,1976 exception guidelines also stress that the FEA takes a particularly dim view of “retroactive” exceptions such as those which the FEA now contends are available to the plaintiffs in this case. The FEA’s retroactive exception guidelines state: “In these applications, firms usually request a reduction in their outstanding obligations or an increase in their rights which accrued during a prior period. In addition, submissions are received in which an increase in future rights or reduction in future obligations is requested for the purpose of remedying a gross inequity or serious hardship which was experienced during a prior period. These types of applications are considered requests for retroactive exception relief. In evaluating these requests, the FEA has consistently held that retroactive exception relief will be granted only if an applicant, in addition to satisfying the criteria applicable to all exception requests, shows compelling reasons why retroactive exception relief is warranted or that it would experience an irreparable and severe injury in the absence of retroactive exception relief. “One of the principle policy considerations underlying the FEA’s stringent position concerning retroactive exceptions, is the danger that retroactive exceptions, by tending to ratify violations of the FEA Regulations, may diminish the incentive which firms in the petroleum industry have to learn the applicable law and even encourage noncompliance with the law, thereby frustrating the effectuation of important statutory objectives. The FEA’s position also reflects a concern that third parties who have acted in reliance upon apparently fixed rights might be injured by the approval of retroactive relief, and that there may be a disruptive impact upon the economy if market transactions which have already occurred and established business relationships are disturbed. “In the context of considering a request for retroactive relief, the FEA has construed severe a.nd irreparable injury to signify such a severe financial hardship so as to preclude the firm from continuing its essential operations. “Similarly, the FEA has held that a particularly strong showing of justifiable detrimental reliance upon FEA action may furnish compelling reasons for granting retroactive exception relief.” See, 41 Fed.Reg. 50856, 50861-50862 (November 18, 1976) (emphasis added). In November and December of 1976 a number of refiners filed petitions for exception relief from the FEA’s interpretation that the petroleum price regulations governing the period January 1, 1975 through January 31, 1976 mandated a “product-cost first” sequence for passing through increased costs into market prices. Among the firms which filed such exception petitions were Exxon, Shell, and Conoco. The FEA furnished this court with copies of the Exxon and Shell petitions as attachments to the agency’s motion to dismiss. Both refiners assert inter alia, in their petition that they should receive exception relief because their own interpretation of the applicable regulations, which in both instances coincide with the “proportional” approach, was accurate and that the language of the regulations is inconsistent with the all “product-cost first” doctrine adopted by the FEA. Exxon’s exception petition, filed on November 23, 1976 pertinently states: “Pursuant to the provisions of 10 C.F.R. § 205.50 et seq. and in connection with pending exception and rulemaking proceedings, Exxon Company, U.S.A., a division of Exxon Corporation (hereinafter called ‘Exxon’), respectfully requests the Federal Energy Administration (hereinafter called ‘FEA’) to grant Exxon an exception from the FEA’s interpretation of the provisions of 10 C.F.R. § 212.82, § 212.83, and § 212.87 which will recognize as proper and correct the method used by Exxon to recoup non-product cost increases during the period beginning July 18,1974 and ending January 31, 1976. “During the time period covered by this Application for Exception, Exxon established base prices by allocating increased product costs to May 15, 1973 prices in such amounts as were deemed appropriate in keeping with the purposes and goals of the FEA and in keeping with the purposes of and subject to the limitations in the regulations. Increased product costs not allocated to base prices were set aside, i. e., ‘banked,’ for recovery in future months. Increased non-product costs were then added to base prices to establish selling prices in accordance with the limits imposed by orders issued by the FEA in response to pre-notifications prior to January 1, 1975, and in accordance with the proportion of increased product costs allocated to each product after that date. This manner of allocation of increased costs was in exact compliance with the plain meaning of the words used in the regulations and in accordance with the purposes and goals of those regulations as stated at that time by the FEA. “A requirement that increased non-product costs could not be included in setting prices until all available increased product cost had been allocated would have penalized refiners who charged prices less than the absolute legal maximum, thereby encouraging higher prices. This regulatory incentive is directly contrary to stated FEA policy objectives of moderation in pricing. Accordingly, the only basis for the FEA position is a new policy position, unstated by the FEA until 1976, that immediate use of all increased non-product costs during the period prior to February 1, 1976 was essential to the policy and goals of the FEA. . Therefore, the regulations would be interpreted as requiring that such increased non-product costs be recovered currently or lost. This position may not now be adopted by the FEA because: “A. Such position is contrary to the plain meaning of the regulations issued by the FEA.” The Shell exception petition asserts a similar claim: “This application should not be construed as an admission that Shell has in any way misinterpreted, or failed to comply with, any regulation of the FEA relating to the passthrough of increased product or non-product costs. Further, this application should not be construed as an admission, that the regulations at issue were lawfully promulgated or that interpretations of such regulations by FEA were proper, reasonable, authorized by law or substantiated by fact. “First, Shell’s analysis of the pertinent FEA regulations and underlying statutes resulted in the proper interpretation of the regulations concerning the recovery of product and non-product cost increases. The fact that FEA personnel confirmed Shell’s interpretation is further evidence of the propriety of Shell’s analysis. “The regulations promulgated in, December 1974 were silent as to the specific sequence in which refiners were to account for product and non-product cost increases in computing the allowable prices for petroleum products. However, after a thorough analysis of the regulations and legislative history of the statutes authorizing the FEA to issue such regulations, Shell concluded that the regulations were intended to permit refiners to recover product and non-product cost increases on a proportionate basis.” On March 17, 1977, the FEA permitted Consumers Union of the United States Incorporated, currently the Amicus Curiae before this court, the right to intervene at public expense as a party, representing consumer interests, in the three refiner exception proceedings initiated in the FEA’s Office of Exceptions and Appeals by Exxon, Continental Oil Company (Conoco), and Southland Oil Company. On March 23, 1977, Melvin Goldstein, the Director of the FEA’s Office of Exceptions and Appeals, issued a Decision and Order setting preliminary ground rules for the exception proceedings involved in this case. Noting that these exception proceedings differed fr