Oil Companies Win $1.3 Billion Judgment Against DOE

In a district court in Wichita, Kansas, Judge Frank Theis has sided with oil companies in a suit against the Department of Energy (DOE). The judge's decision would return $1.3 billion to the companies. The corporations, which include Exxon, Mobil, Texaco, Standard, and Gulf, had claimed that a DOE pricing rule violated Congress's desire to increase domestic production of oil.

Their civil action turned on whether "fluid injection wells" should have been subject to price controls, or whether they should have been treated like "stripper" wells.

In the past, Congress had exempted "stripper" wells-which produce less than 10 barrels a day-from oil pricing regulations, in an attempt to make it more profitable to operate these marginal oil fields, thereby stimulating domestic oil production.

The DOE maintains in its pricing regulations that fluid injection wells-in which the oil must be forced to the surface by pumping in a fluid-are to be excluded from the definition of "stripper"' wells; as a result, oil from such wells would be subject to price controls. The oil companies argued that fluid injection wells are a crucial part of the operation of oil fields and that the oil produced from these wells should be sold at the higher prices allowed for "stripper" fields.

Judge Theis agreed with the oil companies, ruling that "the manner in which the Department excluded the wells was arbitrary and capricious" and that the DOE "regulation is invalid and must be struck down."

"The DOE is likely to appeal the case, but an official statement has not yet been released," said Nancy Chrisman of the Office of Special Counsel in the DOE's litigation branch.

- Lisa Bescherer