The Department of Energy charged yesterday that Exxon corp., the world's largest petroleum producer, has overcharged its crude oil customers by $183.3 million since 1973.
In a suit filed in U.S. District Court here, DOE asked that the alleged overcharges plus interest be refunded to the federal treasury.
The action stems from intensive government auditing of U.S. oil transactions after the 1973 Arab oil embargo and the subsequent world oil prie increases.
Exxon, which was notified in January that it might face such charges, last night strongly denied any overcharging.
Exxon Senior Vice President O. L. Luper said in a telephone interview from Houston that the suit was "unexpected because the issue is already before the courts and because the DOE is apparently ditching its own administrative procedures."
He said that Exxon filed suit in federal court in Dallas two months ago challenging DOE's interpretations of its own regulations, and claiming the charges were invalid.
Luper added that this kind of matter is usually handled by DOE administrative action, and no in the courts.
At issue in this case is a two-tiered oil pricing system created after the oil embargo to encourage increased domestic production of crude oil.
The Energy Department is charging that Exxon was pumping what should have been classified as "old oil," and selling it as "new oil." The so-called "new oil" is allowed to be sold at a higher price because it supposedly represents increased production.
"New oil" is worth $6 to $8 a barrel more than old under the incentive program.
"Essentially," said one DOE attorney involved in the Action, "we are saying that Exxon has taken old oil and turned it into new oil without producing any more oil."
Basically, Exxon is charged with the "alteration of producing patterns" at several of its wells at Hawkins Field, Texas.
It is alleged that Exxon shut down several old wells, but merely shifted the production of those wells to a smaller number of new wells using gas injections into the oil field to maximize production.
Exxon then reportedly considered the production from the newer wells as "new oil," despite the fact that total production from Hawkins Field was not actually increased.
DOE attorneys said that they were asking that the excess profits allegedly realized from the "shifting" be returned to the U.S. Treasury because "it would be difficult to effect a price rollback since many of the products involved have since been decontrolled, and because it is also difficult to identify customers."
They said, too, that since Exxon sold much of the production to its own refineries, much of the added charge was at first paid by Exxon to itself, and later passed on to unspecified customers.
Energy Department attorney Car Corallo, of the agency's special counsel's office, said it chose to go into court because we anticipated this would wind up in the courts sooner or later anyway, and it is the strategy of this office to go to the courts and dispel any notion that we are afraid of taking such actions before the courts.