Full opinion text
OPINION LATCHUM, Chief Judge. Six oil companies instituted these actions to challenge the Federal Energy Administration’s (“FEA”) belated interpretation of a regulatory scheme affecting prices from January 1, 1975 to February 1, 1976 (“the relevant period”). That interpretation required refiners .to allocate monthly sales revenues first to the recoupment of all increased “product costs’’ (primarily the costs of crude oil and purchased petroleum products) and then to the recoupment of increased “non-product costs” (most operating and marketing costs). See 41 Fed.Reg. 5111, 5113 (February 4, 1976). The defendants are the Department of Energy (“DOE”) and its Secretary, as successors in interest of the FEA and its Administrator. In their complaints the plaintiffs sought (1) a declaratory judgment concerning the meaning and validity of the regulations during the relevant period, (2) an injunction against the FEA’s anticipated application of its interpretation of the regulations, (3) an estoppel against FEA enforcement of its interpretation against the plaintiffs on the basis of their good faith reliance on the conduct and statements of various FEA officials, and (4) a determination whether the plaintiffs’ constitutional claims are substantial and should be certified to the Temporary Emergency Court of Appeals (“TECA”). On August 11, 1977, 435 F.Supp. 1239, the Court granted in part and denied in part the FEA’s motion to dismiss the actions or stay them pending completion of administrative consideration. The Court held that the following legal issues were appropriate for immediate consideration: (1) What is the meaning of the applicable regulations in effect during the relevant period, e. g., did they permit or require the use of the Proportional Method to recover increased costs, (2) If the regulations were in effect as now interpreted by the FEA, are such regulations invalid because they (a) exceeded FEA’s statutory authority, (b) were issued without notice and applied retroactively in violation of the Administrative Procedure Act, 5 U.S.C. § 553, or (c) were . issued without first obtaining an inflationary impact statement in violation of Executive Order No. 11821, 39 Fed.Reg. 41501 (Nov. 29, 1974). 435 F.Supp. at 1249. The parties have filed cross-motions for summary judgment and this opinion addresses the issues raised by those motions. One other prefatory remark is in order, however. The United States District Court for the Northern District of Ohio recently granted summary judgment against the FEA on issues 1 and 2(b) above in nine related actions brought in that District (“the Ohio litigation”). This Court previously denied a motion by the FEA to transfer the instant actions to the Northern District of Ohio, or, alternatively, to stay the cases sub judice until a decision was rendered in the Ohio litigation. The principal distinction between these cases and the Ohio litigation is that all of the plaintiffs here recovered their product and non-product cost increases on a pro-rata basis, while the majority of the Ohio plaintiffs recovered their non-product cost increases first. The underlying facts are the same in both instances and have been set forth in detail in the two opinions filed by Judge Manos of the Northern District of Ohio. I. BACKGROUND FACTS On August 19, 1973, the Cost of Living Council (“COLC”) adopted a complex set of price regulations specifically applicable to the petroleum industry. The regulations were promulgated under the Economic Stabilization Act of 1970, as amended, 12 U.S.C. § 1904 note, and Phase IV of the Economic Stabilization Program. In December 1973, the Federal Energy Office (“FEO”) assumed the pricing authority of the COLC as it related to energy, and on January 14, 1974, the FEO recodified the COLC’s Phase IV Petroleum Price Regulations. The regulations in effect in January 1974 imposed a ceiling on the prices that the plaintiffs and other refiners could charge based on each refiner’s selling prices on May 15, 1973. However, at the beginning of each month a refiner could increase its selling prices for the coming or “current” month to reflect the increased product costs it incurred in the preceding month (“the month of measurement”). The regulations permitted a refiner complete discretion to charge any price to a particular class of purchasers in the current month up to a price equal to the sum of (1) the weighted average price charged to the same class of purchasers on May 15, 1973 and (2) the increased product costs incurred between the month of measurement and the month of May 1973. See 10 C.F.R. § 212.83(f), 39 Fed.Reg. 1953 (January 15, 1974). The latter price was known as the “base price” for a product. Thus a refiner could pass through its product cost increases (“PCI”) on a dollar-for-dollar basis by charging a selling price equal to the base price in the month following the month in which the PCI were incurred. Any product cost increases which a refiner was unable to recover in a price increase in the current month, because of competitive market conditions or other reasons, could be carried over or “banked” for use in determining base prices for a subsequent month. Besides enabling refiners to pass through increased product costs automatically as part of their base prices, the regulations authorized the pass-through of increases in non-product costs, such as labor and marketing costs, subject to certain limitations. Refiners could use their non-product cost increases (“NPCI”) to justify a price exceeding the base price as long as they continued to incur those increases. However, a refiner first had to “prenotify” the FEO and then wait a minimum of thirty days before implementing the price increase. The regulations also precluded a refiner from charging a price in excess of the base price in any fiscal year in which its profit margin exceeded the profit margin achieved during the base period (May 1973). Non-product cost increases were computed using a “rate of increase” approach in contrast to product cost increases, which were computed using a “dollar amount” concept. Finally, the regulations did not explicitly state whether NPCI could be banked. The FEO became the Federal Energy Administration in June 1974. In a notice of proposed rulemaking published on September 10, 1974, the FEA announced a “comprehensive revision” of the petroleum price regulations. With respect to non-product cost increases, the FEA proposed to eliminate the “prenotification” procedure and to replace it with an automatic pass-through system similar to that used for the pass-through of increased product costs. Effective December 1, 1974, the FEA adopted these changes and others which limited the categories of increased non-product costs that could be passed through to purchasers. The base price concept was not altered. In addition to finalizing several of the proposed amendments, the December 1974 rulemaking added a new provision [10 C.F.R. § 212.83(e)(4)], which prohibited the banking of unrecovered non-product cost increases. This provision required refiners to absorb any non-product cost increases which they failed to recover through price increases in the month following the month in which the NPCI were incurred. The amount of NPCI a refiner would have to absorb in a given month depended, however, on the method or sequence used to allocate recoveries between product and non-product cost increases. The regulations did not explicitly specify a particular sequence of recovery; consequently, refiners used at least three different methods. One method, the non-product cost increase first method (“NPCI First”), treated all non-product cost increases as having been recovered first, and the product cost increases as having been recovered last. A second method, the “NPCI Last” method, treated all product cost increases as having been recovered first, and non-product cost increases as having been recovered last. A third method, the “Proportional Method,” treated product and non-product cost increases as having been recovered pro rata. Phillips Petroleum Co. v. FEA, 435 F.Supp. 1239 (D.Del.1977). The example in the footnote below illustrates the effect of each method on the amount of NPCI a refiner must absorb when revenues do not permit recoupment of all cost increases. Between January 1, 1975, when the amendments to the regulations first affected prices, and February 1, 1976, several FEA officials, through instruction manuals, directives, forms and worksheets issued to FEA auditors and later disseminated to many refiners, as well as through private statements to refiners, indicated that the agency construed its regulations to permit or require the use of the proportional method. Each of the six plaintiffs and at least twenty-three other refiners used the proportional method during the relevant period. In order to reflect the pricing policies of Sections 401 and 402 of the Energy Policy and Conservation Act of 1975 ("EPCA”), the FEA promulgated amendments to its petroleum price regulations effective February 1, 1976. One of these regulations (10 C.F.R. § 212.85) explicitly required refiners to use the NPCI Last method to calculate recoupment of increased costs. In addition to setting forth a prospective rule, the FEA, in the preamble to the February 1, 1976 rulemaking, publicly announced for the first time its position that the regulations affecting pricing during the period from January 1, 1975 to February 1, 1976 had always required that “increased non-product costs ... be recouped last.” The FEA’s endorsement of the NPCI Last method provoked immediate and widespread criticism from the refiners, who objected to its application prospectively, as well as retroactively. In April 1976, after providing notice and holding public hearings, the FEA revoked retroactively to February 1, 1976 the regulation requiring use of the NPCI Last method and the pre-existent regulation prohibiting the banking of non-product cost increases. The FEA found that these two regulations, if in effect at the same time, would spur inflation, cause widely fluctuating prices for petroleum products, discourage refiners from building product inventories, reduce refinery production, and diminish capital investments. Despite these findings, the FEA deferred any decision on “appropriate action . . . regarding the rules on recoupment of increased non-product costs prior to February 1, 1976.” Thereafter, the agency steadfastly maintained the position that the regulations affecting prices from January 1, 1975 to February 1, 1976 implicitly required refiners to use the NPCI Last method. On August 3, 1976, however, the FEA proposed a “class exception” to permit all refiners who were not constrained by the profit margin limitation to recompute their increased cost recoveries during the relevant period using “the ‘proportional’ cost recovery approach.” 41 Fed.Reg. 33282, 33283 (August 9, 1976) (emphasis supplied). The agency noted that “many — perhaps even a majority of — refiners” had used either the proportional or the NPCI First method during the relevant period. Further, the FEA “acknowledge[d] 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.” Id. at 33283. The responses of 104 refiners surveyed regarding the proposed class exception showed that many refiners had computed cost recoveries using a method other than the NPCI Last method. The FEA concluded that as a result approximately $1.3 billion in additional non-product cost increases had been passed through in prices. This information appeared in the Wall Street Journal on September 10, 1976 and immediately elicited a critical response from the Honorable John D. Dingell, Chairman of the Subcommittees on Energy and Power of the House Committee on Interstate and Foreign Commerce. In the wake of further criticism from Congressman Dingell and discussions between the Congressman and FEA Administrator Zarb and his subordinates, the FEA obsequiously changed its position and publicly announced: (1) that it would not grant exceptions to the enforcement of the NPCI Last method interpretation on the ground of “good faith reliance on erroneous guidance from FEA personnel” and (2) that it would not grant the proposed class exceptions but would require each refiner to “establish . . . that it is subject to a serious hardship or gross inequity as a result of the FEA regulatory requirements.” In late 1976 and early 1977, various refiners began filing applications for exception relief. On March 23, 1977 the FEA announced it would evaluate three of the exception applications before it as “representative” of the applications which had been filed or could be expected. After holding three hearings, the FEA decided in April 1977 that it would not review the correctness of its interpretation of the regulations or the lawfulness of them, as construed, in the exception proceedings. The agency also failed to formulate rules governing the procedures to be followed in the exception proceedings. Discouraged by the limited scope of the exception proceedings and the procedural uncertainties, the three representative parties selected by the FEA withdrew their exception applications. Immediately thereafter, five of the six plaintiff refiners in these cases filed suit in this Court. II. CONTENTIONS OF THE PARTIES The plaintiff refiners challenge the validity of the FEA’s interpretation of the regulations on both substantive and procedural grounds. Substantively, the plaintiffs contend that the regulations in effect during the relevant period either required refiners to use the proportional method to compute cost recoveries or permitted them to do so, because there was no valid regulation prescribing a method for computing cost recoveries. The plaintiffs find support for an interpretation requiring use of the proportional method in numerous contemporaneous constructions of the December 1, 1974 regulations by FEA officials and auditors and also in the text of the regulations, specifically in 10 C.F.R. § 212.83(d). Moreover, the plaintiffs argue the regulations provide no support for the NPCI Last requirement which the FEA contends was applicable. From a procedural standpoint, the plaintiffs assert that the purported regulation regarding the allocation of cost recoveries is invalid, because the FEA ignored all the applicable rulemaking requirements in promulgating it. The plaintiffs challenge the validity of the regulation prohibiting the banking of non-product cost increases for similar reasons, particularly the FEA’s failure to provide adequate notice and opportunity to comment. The defendants on the other hand strenuously contend the requirement that non-product cost increases be recovered last, if at all, had been implicit in the petroleum price regulations for refiners from the beginning of Phase IV in the latter part of 1973 until the revision of the regulations, effective February 1, 1976. During that period, the FEA asserts, any method of cost recovery which would have permitted non-product cost increases to be recovered before all product cost increases had been recovered clearly would have contravened three regulatory provisions: (1) the “base price/price in excess of base price” rule; (2) the provision authorizing the banking of unrecovered increased product costs; and (3) the prohibition against banking unrecovered increased non-product costs. The FEA dismisses Change Notice 3-1975-1 and the other communications cited by the plaintiffs, which required or permitted refiners to recover costs on a pro rata basis, as being nothing more than “unauthorized and unofficial guidance . . . disseminated by auditors during the first half of 1975 . . . which was plainly erroneous on its face.” While conceding that this allegedly erroneous advice may constitute a predicate for relief on grounds of detrimental reliance — an issue remanded to the agency for consideration in the first instance — the FEA argues that it should not be considered in determining the meaning of the regulations, because only the agency’s lawyers have the authority to interpret its regulations. Further, the FEA contends that throughout the relevant period its official constructions of the regulations consistently required the use of the NPCI Last method and that its senior legal advisors did not “focus” on the problem of cost recovery until February 1976. Because it contends the regulations implicitly required use of the NPCI Last method prior to and throughout the relevant period, the FEA responds to the procedural arguments of the plaintiff refiners by attempting to show that each of the regulations giving rise to the implication of the NPCI Last requirement was promulgated in accordance with the requisite rulemaking procedures. These cases are presently before the Court on cross-motions for summary judgment. Having concluded that there is no genuine issue as to any material fact and that all material issues can be decided as a matter of law, the Court finds these cases appropriate for disposition by way of summary judgment. Fed.R.Civ.P. 56. III. THE MEANING OF THE REGULATIONS It is undisputed that the regulations at issue here contained no explicit provision governing the method of allocating product and non-product cost recoveries. The FEA, however, urges the Court to find that the regulations, as construed by it, implicitly required the use of the NPCI Last method for computing cost recoveries. Whether the regulations required use of this method or simply failed to require the use of any particular method, as the plaintiffs contend, depends on (A) the meaning of the regulations in effect prior to the relevant period, (B) the meaning of the amendments to the regulations adopted in December 1974 and the effect of those amendments on the overall regulatory scheme, and (C) the contemporaneous construction of the amendments by the agency and its officials. The Court now turns to an examination of those matters. A. The Regulations in Effect Prior to the Relevant Period. The base price and banking concepts, as they are applicable here, originated in Phase IV of the Economic Stabilization Program. Under Phase IV, large manufacturers other than refiners could increase their prices above base prices (the average price charged during a historical base period) only in order to pass through allowable cost increases. Manufacturers who charged prices in excess of base prices were subject to profit margin limitations and had to prenotify their cost increases to the COLC at least 30 days before implementing a price increase. On August 17, 1973 the COLC adopted special regulations governing the pricing of petroleum products, which defined “base price” as the refiner’s selling price on May 15, 1973 plus the increased costs of imports and domestic crude petroleum above the May 15, 1973 cost. Due to this unique definition of base price, refiners could pass through automatically on a dollar-for-dollar basis their product cost increases. With respect to other allowable cost increases (non-product cost increases), however, refiners were subject to the same constraints as large manufacturers. Such costs could be used to justify a price in excess of base price, but only if the refiner met the profit margin limitation and prenotified the COLC of its “weighted average percentage price increase justified [by increased non-product costs]” at least 30 days before the effective date of the price increase. On September 18, 1973 the COLC introduced procedures for “banking” unrecouped product cost increases. Because the initial banking provision created some confusion, it was amended in November 1973 to make clear that if, for any reason, the prices charged for a particular product resulted in revenues insufficient to recoup all product cost increases allocated to that product, the refiner could bank the unrecouped costs for use in computing base prices for a subsequent month. The regulations in effect prior to December 1, 1974 did not state explicitly whether non-product cost increases could be banked. The only public explanation for the special treatment of refiners’ product cost increases in the Phase IV regulations was the following statement contained in a press release issued by Dr. John Dunlop, Chairman of the COLC, on August 10, 1973: The Council has been very concerned that the final regulations strike a delicate balance between constraining prices while at the same time encouraging the necessary increase in supplies which the country must have. The Council is aware that energy prices must be allowed to rise in order to stimulate development of new energy reserves and make possible the purchase of higher cost foreign oil. At the same time, we must prevent unnecessary price increases. Docket Item 79, exh. C-5. The COLC especially wanted to avoid price gouging in sales of products like gasoline and heating oil, for which there was high consumer demand and relatively little demand elasticity (i. e., products consumers would buy at almost any price). Therefore, the regulations distinguished between two broad categories of products. The first category, later referred to as “special products,” consisted of gasoline and distillates (No. 2 diesel fuel and No. 2 heating oil). The second category included all other covered products and was denominated “covered products other than special products.” By the end of 1973, the COLC had adopted mathematical formulas for allocating both product and non-product cost increases among the various special products and covered products other than special products for purposes of determining prices. The regulations provided general formulas for computing the amount of increased product costs attributable to each of the three product categories. Under these formulas, the total dollar amount of increased product costs attributable to a particular product category for the current month equaled the sum of four cost components: (1) the increased cost of crude oil allocated to that product category, (2) the increased cost of purchased products of that category, (3) the amount of unrecovered PCI (the “bank”), and (4) the amount of PCI reallocated to products other than special products by the refiner (represented by the symbol “H”). The formulas allocated the total increased cost of crude oil incurred by a refiner in the month of measurement (represented by the symbol “t”) among the three product categories based on the percentage of the total volume of sales in a historical reference period attributable to each category. The “H” factor manifested the COLC’s desire to hold down prices on special products. The regulations permitted a refiner to reallocate PCI otherwise attributable to sales of special products to the category of covered products other than special products for the purpose of computing base prices, but not vice versa. For the two special products, distillates and gasoline (represented by the symbols “i = l and 2”, respectively), the amount of PCI available for application to prices in the current month (represented by the symbol “u”) was divided by the sales volume expected during that month to determine the increment in cents per gallon (represented by the symbol “D¡u”) which could be added to the May 15, 1973 selling prices of that product to compute base prices. The regulations did not require refiners to convert the total dollar amount of PCI attributable to covered products other than special products (represented by the symbol “D¡u”) into a cents-per-gallon figure. Instead, the refiners could apportion the total dollar amount of PCI available among the various covered products other than special products (such as residual oil and jet fuel) in whatever amounts they deemed appropriate. A further explanation of the mathematical formulas involved appears in the footnote. The method for computing non-product cost increases was significantly different. First, a refiner determined the percentage rate of increase in non-product costs from the base period to the current period. This figure was then converted into a percentage price increase justified by non-product cost increases, which, if approved upon prenotification, could be used to increase prices above base prices throughout the consecutive 12-month period, provided the increased non-product costs continued to be incurred. As in the case of PCI, the regulations required refiners to convert the percentage price increase into a cents-per-gallon figure for each of the special products. The computed price increment could be added to base prices in each of the following 12 months. For covered products other than special products, however, refiners had to compute only the total dollar amount available for addition to base prices in the consecutive 12-month period as a result of increased non-product costs. The regulations afforded refiners broad discretion in deciding which products in the “other covered products” category should bear the price increases and, more importantly for purposes of the instant litigation, how much of the increased costs should be passed through in any one month. The only limitation on this flexibility was the requirement that “for any fiscal quarter, the weighted average of all price increases ... in [that product category] ... not exceed the percentage of cost justification.” On January 14, 1974, the FEO recodified and renumbered the COLC’s Phase IV petroleum price regulations. Sections 150.-355 and 150.356 of the Phase IV regulations were recodified at 10 C.F.R. §§ 212.82 and 212.83, respectively. No other changes material to this litigation were made before the relevant period. 1. The Base Price Rule The FEA contends that permitting refiners to recover their increased product and non-product costs proportionately, as the plaintiffs did here, would contravene the “base price/price in excess of base price” rule. This rule enabled refiners to pass through product cost increases automatically and permitted them to increase prices above base prices only in order to pass through increased non-product costs. According to the FEA, the base price rule imposed a sequence for including costs in the calculation of the maximum allowable price — May 15, 1973 selling prices, first, all PCI second, and NPCI third. The FEA further contends that refiners should have inferred the NPCI Last method of cost recovery from this pricing sequence. The FEA’s arguments rest on two important premises, both of which the plaintiffs have challenged: (1) that the base price is “fixed”, that is, for a particular product and class of purchaser in a given month the base price is equal to the May 15, 1973 selling price plus all product cost increases allocated to that product; and (2) that the base price rule establishes a sequence for determining prices which also governs the recovery of costs from revenues at the end of the month. As the court observed in Standard Oil II, the FEA must establish the validity of both of the above premises in order to make out its “base price” argument. In Standard Oil II Judge Manos considered the fixed base price issue and held that the regulations did not “require refiners to include all product costs in their base prices before they could apply increased non-product costs over their base price[s].” For the reasons discussed below, this Court has concluded that the base price rule, regardless of whether base price is fixed or flexible, does not require the use of a particular method or sequence of cost recovery. Accordingly, the Court finds it unnecessary to consider the first of the two above-mentioned premises and assumes arguendo that base price is fixed. Turning to the issue of whether the “base price/price in excess of base price” rule established a sequence for the recovery of increased product and non-product costs, the Court notes first that there is absolutely no indication in the regulations that the base price concept applies to anything other than pricing. From the inception of the Phase IV petroleum price regulations until the end of the relevant period on February 1, 1976, the pertinent provision of the regulations provided in effect: (c) Allowable price in excess of the base price. A refiner may only charge a price in excess of the base price of a covered product in order to recover on a dollar-for-dollar basis increased non-product costs incurred between the month of measurement and the month of May 1973. ... The clear intent of this regulation is to keep prices down. It explicitly prohibits a refiner from implementing a price increase for any reason other than to recoup increased costs, but it does not address the issue of cost recovery. Contrary to the repeated assertions of the FEA’s counsel at oral argument, the above-quoted regulation does not say to refiners: “If you charged a price in excess of the base price at the beginning of the month, you could recover non-product costs [at the end of the month]. If you did not, you could not.” Indeed, the FEA admits that a refiner that received revenues sufficient to recover more than all of its available PCI could have applied the excess to the recoupment of NPCI, even if the selling price had been below the base price. The official communications and decisions cited by the FEA as evidence that it contemporaneously construed the base price regulations to require use of the NPCI Last method of cost recovery are equally unpersuasive. The strongest support for the FEA’s position appears to be the so-called “Gulf Appeal,” which concerned a two-sentence proviso the FEA included in several orders approving prenotified refiner price increases in the latter part of 1974. The first sentence of the proviso merely stated FEA’s position that the base price is fixed; it clearly related only to pricing. The second sentence virtually defies comprehension and the Court will not hazard a guess about its meaning. Gulf received a prenotification decision and order containing a similar proviso on October 18,1974 and immediately asked for an explanation. An FEA official apparently advised Gulf that all product cost increases, including banked PCI, had to be recovered before any non-product cost increases could be recovered. Asserting that the regulations did not require such a sequence of recovery, Gulf appealed. In the instant litigation the FEA quoted at length from Gulf’s appeal memorandum, which clearly challenged the NPCI Last method and requested that the proviso be deleted from the prenotification order. The defendants herein cite the FEA’s refusal to delete the proviso as evidence of the FEA’s interpretation of the regulations to require use of the NPCI Last method. An examination of the FEA’s decision on the Gulf appeal, however, reveals that the agency never explicitly addressed the method of cost recovery. The FEA held “there is no merit to Gulf’s contention that Section 212.82 does not authorize the provision of the . Order which prohibits Gulf from applying any portion of the price increase authorized by the Order to any covered product which is being sold below base price levels.” In other words, the FEA upheld the fixed base price concept and, because the proviso embodied that concept, the FEA refused to delete it from the prenotification Order. Similarly, the language quoted by the defendants from the decision on the Gulf appeal merely restates the agency’s interpretation of base price as fixed — an interpretation this Court has assumed to be valid. The fact that the FEA must resort to quoting the arguments presented to it by a refiner in order to find express support for its argument that the sequence for setting prices established by the base price rule also governs the sequence of cost recovery further demonstrates the weakness of its position. 2. The PCI Banking Provision Another basis advanced by the FEA for inferring a requirement that non-product costs be recovered last is the banking provision contained in section 212.83 prior to the relevant period. The FEA contends the computational requirements of section 212.83, as implemented by Form FEO-96 and the instructions thereto, cannot be squared with any recovery method other than the NPCI Last method. Section 212.-83(d) authorized banking of PCI, whenever the prices charged “result[ed] in the recoupment of less total revenues than the entire amount of increased product costs calculated for that product.” 39 Fed.Reg. 1956 (January 15, 1974). The instructions to Form FEO-96 directed refiners to compute the “bank” for each product category by subtracting “the total amount of revenues received, during the Period of Measurement, in excess of the May 15, 1973 selling prices” of products in that category from “the total number of dollars of increased [product] costs which were attributable to [that product category] and available for recovery in the Period of Measurement.” Neither the regulations nor the instructions to Form FEO-96 specified a method for computing the amount of non-product cost increases recovered each month. The FEA interprets the above mentioned provisions to require a refiner charging a price above base price to apply all revenues received in excess of the May 15, 1973 selling price toward the recovery of available product cost increases before applying any portion of those revenues toward the recovery of non-product cost increases. Thus, under the FEA’s interpretation, a refiner that (1) had a total of $1,000,000 in PCI available for recovery in the current month, (2) had $200,000 in approved prenotified NPCI, (3) had established a selling price at the beginning of the current month which included all those costs, and (4) as a result, had received revenues in excess of the May 15, 1973 selling price totaling $1,100,000, would recover all $1,000,000 . of its PCI and $100,000 of the available NPCI. As the plaintiffs point out, however, the computations required by section 212.83(d) and the instructions to Form FEO-96 yield no NPCI recovery in the situation posited above; instead, they produce a PCI overrecovery of $100,000, which would have to be subtracted from the May 15, 1973 selling price to compute the base prices for the subsequent month. The FEA deftly avoids this anomalous result by construing the silence of the regulations concerning the recovery of NPCI to mean that such costs must be recovered last. As is demonstrated below with respect to the issue of NPCI banking prior to the relevant period, an equally plausible explanation for the absence of any reference to NPCI recovery is that the methods of handling PCI and NPCI during the prenotification period were conceptually so different that there was no need to discuss recovery of NPCI. The same sort of imprecision evident in the use of “total revenues” in section 212.83(d) instead of “total revenues in excess of May 15, 1973 selling price” may have existed in the instructions to Form FEO-96; that is, the latter term may have been intended to include only those revenues generated by the price increment based on product cost increases. The point is the agency’s silence on the method of cost recovery is ambiguous. Thus, the banking provision and Form FEO-96 do not require use of the NPCI Last method. 3. The Prohibition Against Banking Non-Product Cost Increases Finally, the defendant asserts that use of the proportional method of recovery would contravene the prohibition against the banking of non-product cost increases. The FEA contends the banking prohibition was implicit in the regulatory scheme in effect during the prenotification period. For the reasons given below, the Court disagrees. Before December 1974, the methodologies used to compute and pass through product and non-product cost increases were qualitatively different. Non-product cost increases were computed in terms of the “rate of increase” of such costs in the month preceding prenotification over the same costs incurred during a historical base period. These rates of cost increases were converted into “weighted average percentage price increases,” which, if approved after prenotification, could be added to base prices throughout the consecutive twelvemonth period. 10 C.R.F. § 212.82(b), (c), 39 Fed.Reg. 1952-53 (January 15, 1974). Under this system, the FEA in effect used the rate of increase in non-product costs as an indicator or forecast of the level of non-product costs in the succeeding twelvemonth period. This is particularly evident in the provision that makes the application of an approved prenotified price increase contingent upon whether the refiner continues to incur the prenotified non-product cost increases. Id. § 212.82(b), (d). In contrast, the method for computing price increases based on product cost increases, which has been referred to as the “dollar-cost pool” method, operated retrospectively. At the beginning of each month, refiners determined the total amount of PCI available for pass-through that month by adding the amount of PCI incurred in the preceding month to the amount of previously incurred but as yet unrecovered PCI. The refiners then could increase their prices for’ the current month by an amount calculated to permit recovery of all or some portion of the product cost pool allocated to each of the three product categories. If the additional revenues resulting from the price increases above the May 15, 1973 selling prices were not sufficient to recoup all the available PCI, the unrecovered costs could be “banked” for inclusion in the cost pool for the following month. Banking served two purposes in the dollar-cost pool methodology: (1) it provided pricing flexibility by enabling refiners to pass through less than all their available PCI in the current month without forfeiting the right to pass through the remainder later; (2) it provided a mechanism to control the effect of errors in estimating sales volumes. The FEA contends the regulations implicitly prohibited the banking of NPCI, because the rate of increase method contained nothing analogous to banking and the regulations expressly provided for banking only with respect to PCI. The Court finds the first reason unpersuasive because the regulations governing NPCI contained provisions that to a large extent fulfilled the same purposes as banking did with respect to PCI. The FEA has admitted that, at least as to covered products other than special products, the regulations did permit refiners to forego charging a prenotified price increase in one month and still recover the underlying non-product cost increases by adding a greater price increment in another month in the same fiscal quarter. The banking provision protected against overrecoveries of PCI due to underestimation of sales volume by requiring refiners to subtract the amount of any overrecovery from the following month’s cost pool. The requirement that refiners continue to incur prenotified non-product cost increases during the effective period of an approved price increase served the same purpose. Approval of a prenotified price increase above the base price meant that the refiner could increase its selling prices by the prenotified amount in each of the following twelve months regardless of whether the additional revenues in any particular month were less than or greater than the NPCI incurred. Likewise, the Court does not consider the silence of the regulations concerning NPCI banking indicative of an intent to prohibit such banking. More probably, it reflects the fact that the concept of banking with the requisite matching of previously incurred costs against revenues has no place in the prospectively applied “rate-of-increase” scheme for passing through increased non-product costs. Viewed in this light, the failure to provide for NPCI banking while, at the same time, permitting PCI banking, reasonably can be construed as meaning that the agency has taken no position on the issue of NPCI banking whatsoever. Thus, the absence of a provision authorizing NPCI banking is ambiguous at best. In summary, the FEA has failed to establish that the regulations in effect prior to the relevant period implicitly required use of a non-product cost last method of recovery. The “base price/price in excess of base price” rule and the formulas pertaining to the banking of product cost increases do not necessarily preclude the application of alternative methods of cost recovery, such as the proportional method. Further, the Court concludes the regulations in effect during the prenotification period did not prohibit, implicitly or otherwise, the banking of non-product cost increases. B. Regulations Affecting Prices During the Relevant Period. On September 10, 1974 the FEA issued a notice of proposed rulemaking announcing the “first proposed comprehensive revision” of the petroleum price regulations since the end of 1973. Regarding the pass-through of non-product cost increases, the FEA proposed to eliminate the “prenotification” procedure and to replace it with an automatic pass-through for certain increased non-product costs on a basis which retained the profit margin limitation on the pass-through of such costs, but which was otherwise similar to the procedure used for the pass-through of increased product costs. In the same notice, the FEA proposed to limit the extent to which refiners could pass through banked product cost increases in subsequent months. On November 1,1974, the FEA adopted final amendments to the banking regulations. The regulations, as amended, limited the amount of banked increased product costs that could be passed through in any month to ten percent of the total amount of the bank. One month later the FEA adopted with a few modifications the amendments relating to the pass-through of non-product cost increases that had been set forth in the September 10, 1974 notice. The amendments became effective on December 1, 1974, but because they provided for a 30-day lag in the recovery of all costs, the amendments did not affect prices until January 1, 1975. The new regulations lessened the differences in the handling of product and non-product cost increases. Besides deleting the prenotification procedure, the FEA eliminated the “rate-of-increase” method of computing NPCI and required refiners to calculate product and non-product cost increases using the same “dollar amount” or “dollar cost pool” method. 39 Fed.Reg. 42368 (December 5, 1974). The agency adopted several of the other proposed amendments at the same time, including a new section (10 C.F.R. § 212.87), which defined the categories of increased non-product costs that a refiner could pass through. Finally, the December 1, 1974 rulemaking contained a provision which had not been set forth explicitly in the notice of proposed rulemaking; this provision expressly prohibited the banking of NPCI. The other regulations affecting the pass-through of non-product cost increases remained unchanged. The FEA retained the base price rule and the requirement that a price in excess of the base price be charged only “in order to recover on a dollar-for-dollar basis increased non-product costs incurred between the month of measurement and the month of May 1973 and measured pursuant to the provisions of § 212.87.” The regulations, as amended, still subjected a refiner that charged a price in excess of the base price to the profit margin limitation. The December 1, 1974 regulations, like those in effect during the prenotification period, contained no explicit provision specifying a method for allocating product and non-product cost recoveries. The FEA, relying on the same three regulatory provisions discussed earlier in relation to the prenotification period, contends the regulations as amended required use of the NPCI Last method. This argument appears to have two distinct bases: (1) that the regulatory scheme implicitly requires refiners to recover non-product cost increases last and (2) that the FEA so interpreted the regulations during the relevant period. To establish the first proposition the FEA must show the NPCI Last requirement is the only reasonable interpretation which the language of the regulations will bear. This subsumes a secondary issue in these cases, viz., whether the regulations reasonably could be construed to permit use of the proportional method of recovery. If the regulations do not compel use of the NPCI Last method, the Court must examine the FEA’s contemporaneous construction of the regulation for guidance in resolving the resultant ambiguity. For the Supreme Court has held that in interpreting “an administrative regulation a court must necessarily look to the administrative construction of the regulation if the meaning of the words used is in doubt.” Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 414, 65 S.Ct. 1215, 1217, 89 L.Ed. 1700 (1945). In examining the regulatory scheme and the FEA’s contemporaneous construction of it, the Court adopts the viewpoint taken by the Second Circuit in Tobin v. Edward S. Wagner Co., 187 F.2d 977 (C.A. 2, 1951), that: “regulations, precisely because they particularize, ought not be as generously interpreted as the statute. In fairness to the regulated, the provisions of the regulations should not be deemed to include what the administrator, exercising his delegated power, might have covered but did not cover. True, in deciding what they do cover, we must not regard their literal terms merely, but must also give much weight to administrative interpretive rulings which have been published and of which the regulated are thus on notice.” Id. at 979, quoted in Standard Oil II, supra, slip op. at 66. Having concluded the regulations in effect during the prenotifieation period contained no implicit NPCI Last requirement, the Court need only consider whether the December 1, 1974 amendments to the regulatory scheme give rise to such an implication. The FEA made three changes relevant to this litigation: (1) the elimination of the prenotification procedure, (2) the change from a “rate of increase” to a “dollar cost pool” method of calculation, and (3) the prohibition of non-product cost banking. The agency described these changes as procedural and emphasized its intent to conform the procedures for handling NPCI to those for PCI, “while retaining the essential substantive features of the [pre-existing] non-product cost pass-through regulations.” 39 Fed.Reg. 32721 (September 10, 1974). The only restriction that the agency cited as applying to the pass-through of NPCI but not of PCI was the profit margin limitation. Id. at 32721. The profit margin limitation by its terms applied only to firms which charged prices in excess of the base prices at any time during a fiscal year; like the base price rule, it did not impose a sequence of cost recovery. In light of the minimal substantive significance the FEA attached to the elimination of the prenotification procedure and the changeover to a “dollar cost pool” method for calculating NPCI, it is highly unlikely that a refiner would have inferred an NPCI Last requirement from either or both of those changes. See Standard Oil II, supra, slip op. at 58-59. The contrast between the total absence of comment on the method of cost recovery prior to the adoption of the December 1974 amendments and the outcry from refiners in February 1976 when the FEA publicly announced that it interpreted the regulations to require non-product cost increases to be recovered last attests to the validity of this conclusion. Because the amendments required both product and non-product cost increases to be computed and passed through on a dollar cost pool basis, the reasons for rejecting the FEA’s argument that the banking provision and the instructions to Form FEO-96 implicitly imposed a sequence of recovery must also be reconsidered. Aside from the prohibition against NPCI banking, the December 1974 regulations do not mention the recovery of non-product cost increases. The FEA did promise to issue a new Form FEA-96 to replace the old Forms FEO-96 and CLC-22, but it did not adopt a new form until after the relevant period had ended. A proposed revision of Form FEO-96 was issued in April 1975, but it provided no guidance concerning the proper method for recovering non-product costs. Indeed, the record indicates that the failure to adopt a final revision of FEO-96 may have been due in part to the comments received from refiners demanding clarification of the sequence of recovery and the inability of the FEA’s Office of Compliance and Office of General Counsel to resolve their differences on that issue. Because the FEA did not revise either the regulations or Form FEO-96 to reflect clearly that non-product costs were to be recovered last, the Court finds no reason to alter its conclusion that no such requirement is implicit in either the banking provision or the instructions to Form FEO-96. • The prohibition against NPCI banking represents the only substantive amendment to the regulations governing non-product costs adopted in December 1974. The FEA argues that to permit recoveries to be computed using any method' other than the NPCI Last method would allow refiners, in effect, to bank non-product costs, thereby rendering the banking prohibition a nullity. The Court disagrees. The regulation provides in pertinent part: (4) Increased non-product costs calculated pursuant to § 212.87 for the month of measurement which are not recouped in the current month . . . may not be carried forward for use in computing allowable prices in excess of base prices in any subsequent month. 10 C.F.R. § 212.83(e)(4), 39 Fed.Reg. 42372 (December 5, 1974). Nothing in this provision addresses the method of cost recovery. Situations in which at least some non-product costs could be recovered before all product costs had been recovered come readily to mind. For example, under the proportional method, a refiner that incurred $100,-000 in NPCI and $900,000 in PCI in the month of measurement, but received revenues in excess of the May 15, 1973 selling prices of only $700,000 in the current month, would deem ten percent or $70,000 of the $700,000 to represent the recoupment of its NPCI and ninety percent or $630,000 to be the recoupment of its PCI. The refiner could bank the $270,000 in unrecovered product cost increases but would lose forever the $30,000 in unrecovered non-product cost increases. This result does not contravene the manifest intent or the express language of the regulation prohibiting refiners from carrying forward unrecouped NPCI. In addition, the Court notes that the FEA adopted section 212.83(e)(4) without providing any explicit notice or any explanation of its purpose. In such circumstances, the Court is not disposed to stretch the language of the banking prohibition and the other regulations cited by the FEA to obtain a construction which would require use of the NPCI Last method. This case is very similar to Sampson v. Clark, 162 F.2d 730 (Em.App.1947), which involved the application of the Office of Price Administration’s (“OPA”) maximum allowable price regulations to the plaintiff, a “new manufacturer.” The regulations required manufacturers to compute a maximum price which in turn necessitated determination of direct labor costs. The regulations provided: “ ‘Direct labor costs’ shall be calculated on the basis of wage rates paid by you on March 31, 1942.” The plaintiff was not in business on that date; therefore, he argued the maximum price regulations, which failed to indicate the method for computing wage rates in such circumstances, did not apply to him. Id. at 732-33. An OPA Board of Review held against the plaintiff because “[t]he structure of the regulation . . . certainly afforded [him] a rather direct clue to the prices which he might assume would be valid.” Id. at 733 (emphasis supplied). The Administrator admitted the existence of “some indefiniteness as to the method of determining wage rates,” but nevertheless upheld the Board, stating the plaintiff had a duty to seek a clarification from the OPA with regard to any doubts he had as to the meaning of the regulations. Id. at 733. The OPA’s argument in Sampson v. Clark bears a striking resemblance to the argument advanced by the FEA in these cases. The Emergency Court of Appeals, however, rejected the OPA’s position and held the regulatory scheme, even though clearly intended to include new manufacturers, like the plaintiff, did not apply because the regulations furnished no standard by which new manufacturers could calculate wage rates. Id. at 735. In the instant case, the regulations do not clearly prescribe any method for determining cost recoveries. The FEA argues that the “base price/price in excess of base price” rule, the PCI banking provision, and the prohibition against banking NPCI, when taken together preclude the use of any method of recovery other than the NPCI Last method. The agency easily could have spelled out a sequence of recovery through an amendment to the regulations or perhaps through a ruling or an official interpretation during the relevant period. It would be inappropriate for this Court to infer an NPCI Last rule from the several regulations collectively relied upon by the FEA. The foundation is too tenuous to support a rule having so substantial an impact on the firms regulated. This conclusion does not mean, however, that the agency could not reasonably have construed the regulations to require use of the NPCI Last method. Because the plaintiffs seek a declaration that the regulations required or permitted use of the proportional method, the Court must consider two further questions: (1) whether the FEA interpreted the regulations in effect during the relevant period to require that non-product cost increases be recovered last; and if not, (2) whether an interpretation which would permit costs to be recovered proportionally is reasonable and consistent with the language of the regulations. Based on the record of contemporaneous construction in these cases, the Court concludes that both issues must be resolved in the plaintiffs’ favor. C. Contemporaneous Constructions of the Regulations. When faced with regulations whose meaning is ambiguous or uncertain, courts generally place great weight on the interpretations given to those regulations by the officers or agency charged with the responsibility of administering them. See, e. g., Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 13 L.Ed.2d 616 (1965); Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 414, 65 S.Ct. 1215, 89 L.Ed. 1700 (1945); California Molasses Co. v. California & Hawaiian Sugar Co., 551 F.2d 1230, 1232 (T.E.C.A.1977); University of Southern California v. COLC, 472 F.2d 1065, 1068 (T.E.C.A.1972), cert. denied, 410 U.S. 928, 93 S.Ct. 1364, 35 L.Ed.2d 590 (1973). An agency’s contemporaneous construction of its own regulations deserves great deference. As Mr. Justice Cardozo said in Norwegian Nitrogen Products Co. v. United States, 288 U.S. 294, 315, 53 S.Ct. 350, 358, 77 L.Ed. 796 (1933): “administrative practice, consistent and generally unchallenged, will not be overturned except for very cogent reasons if the scope of the command is indefinite and doubtful. . . . The practice has peculiar weight when it involves contemporaneous construction of a statute by the men charged with the responsibility of setting its machinery in motion, of making the parts work efficiently and smoothly while they are yet untried and new.” (Citation omitted). There is a dispute in this case, however, over what, if any, interpretation of the regulations the FEA adopted during the relevant period. The plaintiffs cite numerous public statements by FEA personnel endorsing the proportional method and contend that the FEA construed the regulations in effect during the relevant period to permit use of that method. The FEA attempts to dismiss the pronouncements on which the plaintiffs rely as clearly erroneous and merely the unauthorized and unofficial views of several of the agency auditors. The FEA further avers that it has always interpreted the regulations in effect during the relevant period as impliedly requiring refiners to use the NPCI Last method of cost recovery. Before reviewing the evidence of the agency’s contemporaneous construction of the regulations affecting prices from January 1, 1975 to February 1, 1976, the Court will address the more general objections raised by the FEA concerning the statements made by its auditors and others. First, the agency’s argument that only the FEA’s General Counsel and his staff had the authority to issue official interpretations of its regulations, does not deprive statements by auditors and other officials of the agency of their value as evidence of contemporaneous construction. This is especially true here because the Court has assumed arguendo that the FEA did not officially interpret the regulations to require use of the proportional method, and therefore will examine the evidence of contemporaneous construction only to determine whether the FEA construed the regulations during the relevant period to require use of the NPCI Last method and whether the language of the regulations supports an interpretation which would permit use of the proportional method. Given the limited extent of the inquiry, it is clearly appropriate to resort to the experience and informed judgment of auditors, compliance officials, staff attorneys and others within the FEA for guidance. Courts consider contemporaneous expressions of opinion by low-ranking officials highly relevant and material evidence of the general understanding of ambiguous regulatory provisions. For example, in California Molasses Co. v. California & Hawaiian Sugar Co., 551 F.2d 1230 (T.E.C.A.1977), a private party brought an action under Section 210 of the Economic Stabilization Act of 1970 to enforce the Phase IV price regulations against a competitor. The plaintiff challenged the interpretation of the regulations held by the IRS, which at that time had responsibility for effecting compliance with the price regulations. Of particular relevance here, the court in California Molasses rejected the plaintiff’s argument that “the IRS rulings were routine reviews by local personnel and accordingly were of a type or level not entitled to the deference customarily given to administrative agency determinations.” Id. at 1235. Noting that the IRS and its agents had “delegated authority and expertise in reviewing price control compliance,” the court upheld the IRS determination on the ground that it was a reasonable interpretation of regulations which “were ambiguous at best.” Id. at 1235, 1239. Similarly, this Court will not discount the importance of statements of the FEA’s auditors and compliance officials simply because they were not authorized to issue formal interpretations of the agency’s regulations. Many of the statements supporting the proportional method appeared in instructional materials and manuals prescribing operating procedures for auditors. Deference has been accorded to the views expressed in staff manuals and other guidance issued to an agency’s personnel in several cases. A division of the Office of Compliance distributed explanatory material to the FEA’s auditors in the field with instructions to use the proportional method until the FEA revised Form FEO-96. The FEA itself recently recognized the importance of such information in disposing of an appeal under the Freedom of Information Act, Fulbright & Jaworski, 3 FEA ¶ 80,505 (November 11, 1975). The agency ordered the disclosure of an intra-agency memorandum which “discussfed] certain portions of the FEA mandatory price regulations and applie[d] the conc