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During the early operation of the HFU, the Federal
Government, acting initially through the Federal Energy
Administration and later through the Department of Energy (DOE),
regulated the price of domestic crude oil through the application
of two-tier price regulations under 10 C.F.R. secs. 212.73 and
212.74 (1975). Producers were required to sell “old” crude oil
at the lower tier price and were allowed to sell “new” crude oil
at a higher price.
In June 1978, the DOE filed suit against Exxon as operator
of the HFU. The DOE contended that Exxon had misclassified crude
oil produced from the HFU, which resulted in overcharges in
violation of the DOE’s petroleum price regulations. Exxon
vigorously defended against the DOE’s allegations. Nevertheless,
on October 9, 1980, Exxon announced to the HFU interest owners
that it would begin to withhold amounts owed to the interest
owners under Exxon’s posted prices for the oil produced. In
justification for tendering less than the amount due under
Exxon’s classification of the oil, Exxon stated that it desired
to create a fund for payment of any liability it might eventually
have to the DOE. The amounts withheld represented the difference
between the higher price charged by Exxon and the lower price the
DOE contended was the maximum lawful selling price. Exxon
withheld these amounts from October 1, 1980, to January 28, 1981,
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