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was extracting enough oil from its active wells to meet 18
percent of its refineries’ needs.
Throughout its existence, CRA obtained crude oil from
its own production facilities, from other entities owned by
petitioner, and from unrelated third parties. CRA refined
this oil into finished petroleum products which it sold to
petitioner for resale to its patrons. CRA and its
subsidiaries also maintained inventories of crude oil and
refined petroleum products. CRA shipped finished products
from its refineries directly to petitioner’s customers.
CRA would generally send invoices to petitioner, and
petitioner would send invoices to its customers.
Petitioner charged competitive market prices for the
petroleum products it sold to its patrons. Petitioner’s
management believed that its patrons would derive their
benefits through the receipt of patronage refunds rather
than through discount purchases. Petitioner’s management
always intended to generate a net profit at the cooperative
level without undercutting prevailing market prices.
From 1943 until mid-1992, petitioner was the largest
interest holder in a refinery located in McPherson, Kansas,
which was operated by the National Cooperative Refinery
Association (NCRA). Mr. Cowden was the first president of
NCRA, and its other members were, like petitioner, regional
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