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Judge OKs Huge Settlement on Oil Overcharges

July 08, 1986|Associated Press

WICHITA, Kan. — U.S. District Judge Frank G. Theis approved a monumental oil overcharge settlement on Monday, clearing the way for the payment of as much as $5 billion to all 50 states, six U.S. territories and possessions and various other entities.

Theis also issued an order delaying any disbursement of money for 30 days to allow the filing of appeals. The main case at issue involved more than 40,000 claimants and an escrow fund of $1.433 billion.

The litigation was the result of a disagreement over the classification of several thousand oil wells during government price controls that were in effect from 1973 to 1981. Stripper wells--those that produce 10 barrels or less a day--were exempted from price controls as an incentive to keep them pumping. The U.S. Department of Energy denied stripper-well status for the wells in question.

Charged Higher Price

When lawsuits were filed challenging that decision, Theis ordered producers to charge the higher stripper prices for their oil and put the difference between those prices and controlled prices into an escrow account.

Theis ruled in 1981 the DOE was wrong and should have classified the wells as strippers. The Temporary Emergency Court of Appeals in Washington overturned his ruling. The U.S. Supreme Court refused to hear the consolidated cases.

In November, 1985, DOE and representatives of the claimant groups wanting a cut of the money began negotiating a settlement. DOE announced the agreement May 22.

The negotiated payouts included $298.5 million to refiners, $58.4 million to retailers, $58.4 million to resellers, $45.4 million to agricultural cooperatives, $38.9 million to airlines and $10.7 million to surface transportation companies.

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