When Maryland got a $36 million share of Exxon's oil overcharge refund in 1986, what could the state legally spend that money on?

Plain-English summary

After a decade-long federal case found Exxon had overcharged consumers on crude oil during federal price controls, a court ordered Exxon to disgorge over $2 billion, including interest, for distribution to the states. The chairman of Maryland's Energy Overcharge Restitution Trust Fund asked the Attorney General to spell out exactly how the state could use its roughly $36 million share, since the federal court order incorporated restrictive terms from a federal budget provision known as the Warner Amendment.

The opinion concluded the money came with real strings attached. It could be spent only on one or more of five specific, mostly federally modeled energy conservation programs (weatherization, energy conservation, institutional conservation, energy extension services, and low-income energy assistance), not on any other state or private program serving similar needs. Both the refund's principal and the interest it earned had to be spent as quickly as consistent with efficient use, not parked indefinitely in a low-spend trust. None of the money could go toward administrative overhead, though it could pay for direct program materials and the salaries of staff actually delivering services. And critically, the state could not use the windfall as an excuse to cut its own existing or planned funding for those programs, since the money was meant to supplement, not replace, what taxpayers already funded.

Currency note

This opinion was issued in 1986. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Could Maryland have spent its 1986 Exxon overcharge refund on any state program it wanted, or just energy programs?
Only energy programs, according to this opinion. The Attorney General concluded the refund could be used only for one or more of five specific, largely federally modeled energy conservation programs identified in the underlying court order and the Warner Amendment, such as weatherization and low-income energy assistance, and could not be redirected to other government or private programs addressing similar needs.

Could Maryland have just held the Exxon refund money in a trust fund and spent only the interest, the way it normally handled large oil overcharge deposits?
No. The opinion concluded that holding the Exxon principal indefinitely and spending only interest would violate the restitutive purpose of the court's order, which required that both principal and interest be disbursed to the designated programs as promptly as consistent with their efficient use.

Could the state have cut its regular budget for weatherization or energy assistance programs once the Exxon refund started covering some of the cost?
No, according to the opinion. It concluded that using the refund to replace, rather than supplement, funding the programs would otherwise have received was prohibited "supplantation" under both the federal court order and Maryland's own Trust Fund statute, and that any budget cuts to those programs needed a justification independent of the Exxon money's availability.

Background and statutory framework

A federal district court found Exxon Corporation liable for pricing overcharges on domestic crude oil from January 1975 through the end of federal price controls in January 1981, ordering restitution of roughly $895 million plus interest, ultimately exceeding $2 billion after the Supreme Court denied review. The court adopted, largely without modification, the disbursement framework from the "Warner Amendment," a federal budget provision limiting how oil overcharge escrow funds could be used by the states: only for five listed energy conservation programs, only as a supplement to (not a substitute for) other available funding, never for administrative expenses, and reported on annually to the court and the Department of Energy. Maryland's own 1984 Energy Overcharge Restitution Trust Fund statute created a Board of Trustees to manage such refunds, generally requiring principal over $500,000 to stay in trust with only interest spent, except when a condition of accepting a particular refund required otherwise, and separately barring any refund from supplanting existing or planned program funding.

The opinion reconciled these two frameworks by treating the Exxon court order's promptness and full-disbursement requirements as displacing the Trust Fund statute's normal cap on spending principal, since the court order itself amounted to "a condition of acceptance" triggering the statute's own exception. It read the administrative-expense ban narrowly, using floor statements from the Amendment's congressional sponsors to distinguish prohibited administrative overhead from permitted direct service costs like installer wages and weatherization materials. On the anti-supplantation requirement, the opinion could not draw a bright-line rule from the statute's text alone, so it recommended a practical safeguard: the state should avoid reducing or reallocating already-appropriated or budgeted funding for an eligible program unless the reason for the cut was demonstrably independent of the Exxon money becoming available, warning that any appearance of using the refund to displace ordinary funding risked violating the court's order and jeopardizing Maryland's standing in other, larger pending oil overcharge cases.

Citations

Statutes:

• Sections 208B and 209 of the Economic Stabilization Act of 1970, 12 U.S.C. §1904 (basis for the federal restitution action against Exxon)
• Chapter 759, Laws of Maryland 1984 (creating the Energy Overcharge Restitution Trust Fund, codified as NR Title 13)
• NR §13-105(f)(2) (Board of Trustees' duty to assess needs and disburse funds)
• NR §13-106, §13-106(a), (b), (b)(1), (b)(3), (c), and (d) (allocation guidelines, principal-holding rule and exceptions, low-income priority, anti-supplantation requirement)
• NR §13-406(e) (unobligated funds carry over in the Trust Fund rather than reverting to the General Fund)
• Pub. L. No. 97-377, 96 Stat. 1830, 1919, §155 (1982) (the Warner Amendment)
• Article III, §32 of the Maryland Constitution (state budgeting process, discussed re: "funds otherwise available")
• Chapter 782, Laws of Maryland 1986 (later amendment to the Trust Fund statute, per the opinion's Editor's Note)
• 42 U.S.C. §623(d) and 33 U.S.C. §1256(c) (examples of federal maintenance-of-effort funding provisions, contrasted with the Warner Amendment)

Cases:

• United States v. Exxon, 561 F. Supp. 816 (D.D.C. 1983), aff'd, 773 F.2d 1240 (Temp. Emer. Ct. App. 1985), cert. denied, 54 U.S.L.W. 3499 (U.S. Jan. 28, 1986)
• Bonray Oil Co. v. DOE, 472 F. Supp. 899, 904 (W.D. Okla. 1978), aff'd per curiam, 601 F.2d 1191 (Temp. Emer. Ct. App. 1979)
• In re Kansas Stripper Well Litigation, MDL No. 378 (D. Kan.)

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/1986/Volume71_1986.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

OIL OVERCHARGE RESTITUTION

EXXON Refund—Restrictions On The Use Of The Refund-Supplanting Of State Funds Prohibited.

March 5, 1986

The Honorable Louis L. Goldstein
Chairman, Board of Trustees
Maryland Energy Overcharge Restitution Trust Fund

You have requested our opinion concerning the restrictions that will apply to the State's use of certain oil overcharge refunds. These funds are being made available to Maryland and the other states, subject to the requirements that were established by United States District Court for the District of Columbia to govern the use of the funds. United States v. Exxon, 561 F. Supp. 816 (D.D.C. 1983), aff'd, 773 F.2d 1240 (Temp. Emer. Ct. App. 1985), cert. denied, 54 U.S.L.W. 3499 (U.S. Jan. 28, 1986) (No. 85-429).

Accordingly, this opinion sets forth our interpretation of the court's decision and other applicable law. For the reasons stated below, we conclude that:

1. The refund may be used only for one or more of five designated energy conservation programs.

2. Both the refund principal and the interest earned on it must be spent as soon as possible, consistently with their efficient and effective use.

3. The refund may not be spent on administrative expenses but may be spent on services directly related to the recipient programs.

4. The refund may not be used to supplant State funds otherwise available for the recipient programs.

In its use of the Exxon refund, the State must be cognizant not only of its present obligation to comply with the Exxon order but also of the prospect of additional, large refunds in other cases. Careful adherence to the letter and the underlying intent of the Exxon order may well yield significant future benefits for the consumers of Maryland.

I
United States v. Exxon

This action was filed by the United States Department of Energy ("DOE") pursuant to the provisions of Sections 208B and 209 of the Economic Stabilization Act of 1970, 12 U.S.C. §1904. DOE sought civil penalties and restitution from Exxon Corporation for overcharges on domestic crude oil produced from January 1975 until the end of federal oil price controls in January 1981. On March 25, 1983, the United States District Court for the District of Columbia entered partial summary judgment in favor of DOE and directed Exxon to refund $895,501,163.85 in overcharges, together with interest from the dates of the overcharges. 561 F. Supp. at 818 and 857-58.1

Exxon appealed to the Temporary Emergency Court of Appeals, which affirmed, without modification, the district court's decision. 773 F.2d 1240 (Temp. Emer. Ct. App. 1985). Thereafter, Exxon sought review by the United States Supreme Court. On January 27, 1986, the Supreme Court denied Exxon's petition for certiorari, thereby concluding this protracted litigation. 54 U.S.L.W. 3499 (U.S. Jan. 28, 1986) (No. 85-429). Therefore, the decision of the district court, undisturbed on appeal, will govern the use of the Exxon refund and is the focus of our analysis.

After holding Exxon liable for the total overcharges alleged by DOE, the district court found that, through the operation of the federal oil price regulations in effect at the time of the overcharges, Exxon's unlawfully inflated prices were passed through the nationwide distribution system in the form of increased costs from producer to refiner to jobber to retailer, and, finally, to the ultimate consumers. 561 F. Supp. at 853. The court concluded that the overcharges "were borne by ultimate consumers of petroleum products throughout the entire country" and that "the broad scattering of the ill effects of Exxon's wrongdoing render[ed] impossible the tracing of the overcharges to their ultimate victims and the calculation of the precise damages suffered by each." Id.

Section 209 of the Economic Stabilization Act prescribes restitution as the remedy for violations of the oil price regulations. 12 U.S.C. §1904. Exercising its broad equitable powers to fashion a restitutive remedy in the case, the district court chose as the remedial framework a provision, known as the Warner Amendment, that had been incorporated into the continuing appropriations resolution for fiscal year 1983.2 The Warner Amendment sets forth a formula for the disbursement of certain escrowed oil overcharge refunds under the control of the Secretary of Energy. The court directed Exxon to pay the full amount of the overcharges, together with accrued interest, into an escrow account in the United States Treasury. The funds are to be held in trust by DOE and disbursed within 10 days to the states and territories, in accordance with the procedures set forth in the Warner Amendment.

With some minor modifications, the district court ordered that the Warner Amendment "apply in its entirety under this court's order as the set of terms and conditions governing DOE's handling of the escrow account established to receive restitution payments from Exxon." 561 F. Supp. at 856 n.59.3 The judgment of the court further provides that "the States and other eligible jurisdictions shall use all funds [disbursed pursuant to the judgment in this case] in a manner consistent with this Court's Memorandum Opinion of March 25, 1983, and shall report annually to this Court and to DOE the manner in which said funds have been used until all such funds shall have been expended." United States v. Exxon, No. 78-1035 (D.D.C. June 7, 1983). This latter requirement, which does not appear in the Warner Amendment, imposes a continuing reporting obligation on the states and jurisdictions receiving the Exxon refunds.

In accordance with the district court's decision, DOE will imminently disburse approximately $36,000,000 to the State of Maryland. A letter signed by the Governor, which was requested by DOE as a prerequisite to disbursement, confirms the State's intention to adhere to the requirements concerning the use of the funds.

II
Maryland Energy Overcharge Restitution Trust Fund

In 1984, the General Assembly established an Energy Overcharge Restitution Trust Fund and created a Board of Trustees to manage and make disbursements from the Trust Fund. Chapter 759, Laws of Maryland 1984, codified as Title 13 of the Natural Resources Article ("NR" Article). This enabling statute directs the Board of Trustees to "assess and determine the respective needs of the citizens of the State, develop plans for the allocation and disbursement of trust funds in accordance with those needs ... and ... to disburse funds accordingly." NR §13-105(f)(2).

Although the statute permits the Board to exercise discretion in determining the energy needs of the citizens of Maryland and devising means for addressing those needs, NR §13-106 sets forth guidelines that the Board must observe in developing plans for the allocation and disbursement of trust funds. The Board is directed to give priority in funding to low-income residential weatherization programs, "to the extent practicable and permitted by law." NR §13-106(c). However, the statute provides that the allocation guidelines set forth in NR §13-106 are subject to any restrictions on the use or allocation of overcharge refunds "expressly provided by statute or required as a condition of acceptance" of a particular overcharge refund. NR §13-106(a). Moreover, the Board may disburse funds "solely to supplement, and not to supplant, the existing and planned funding for the recipient programs." NR §13-106(d).

The statute further provides that if overcharge refunds totaling in excess of $500,000 are received by the Board, the refunds are to be held in the Trust Fund and the principal is not to be expended. NR §13-106(b)(1). However, the principal of the Trust Fund may be expended even if it exceeds $500,000 if that expenditure "is required as a condition of acceptance of oil overcharge refunds." NR §13-106(b)(3).

III
Use of the Exxon Refund

A. The Warner Amendment—Introduction

As discussed in Part I above, the district court in Exxon adopted, without substantive modification, the provisions of the Warner Amendment as the terms governing the disbursement of monies that Exxon was directed to disgorge. The clear intent of the court, expressed in its opinion, is that the Exxon monies are to be treated in most respects by the states as though they were disbursed pursuant to the Amendment. 561 F. Supp. at 856. Therefore, we must examine the provisions of the Amendment and its legislative history for guidance regarding the use of the Exxon refund.

The Warner Amendment was enacted on December 21, 1982, as part of the continuing appropriations resolution for fiscal year 1983. The Warner Amendment directed the Secretary of Energy to disburse from escrowed oil overcharge refunds under DOE control amounts not to exceed $200,000,000 for use by the states in one or more of five energy conservation programs identified in the law.4

Section (a) of the Amendment states the law's purpose: "[T]o provide the Secretary of Energy the exclusive authority for the disbursement of the designated petroleum violation escrow funds for limited restitutional purposes ... which are reasonably expected to benefit the class of persons injured by such violations." The Amendment further provides that the states shall use these funds as if such funds were received under one or more of five designated energy programs. Section (c). The five programs designated in the Amendment for receipt of overcharge monies are ongoing, primarily federally-funded, energy conservation programs operated by state governments. In addition, section (f) of the Amendment prohibits the use of funds received under the Amendment for any administrative expenses of DOE, any state, or any energy conservation program. Finally, funds received pursuant to the Amendment must be used as a supplement to, and not a substitute for, otherwise available funding for the programs. Section (c).

B. Programs Eligible for Funding

Section (c) of the Warner Amendment provides that the states shall use the refunds "as if such funds were received under one or more energy conservation programs." Subsection (e)(2) defines "energy conservation programs" as:

"(A) the program under Part A of the Energy Conservation and Existing Buildings Act of 1976 (42 U.S.C. 6861 and following);
(B) the program under Part D of Title III of the Energy Policy and Conservation Act (relating to primary and supplemental State agency conservation programs; 42 U.S.C. 6321 and following);
(C) the program under Part G of Title III of the Energy Policy and Conservation Act (relating to energy conservation for schools and hospitals; 42 U.S.C. 6371 and following);
(D) the program under the National Energy Extension Service Act (42 U.S.C. 7001 and following); and
(E) the program under the Low-Income Home Energy Assistance Act of 1981 (42 U.S.C. 8621 and following)."

In Maryland, the counterparts of these programs are administered by the State Departments of Human Resources and Natural Resources. The State programs are:

(1) the Maryland Weatherization Program (COMAR 07.06.05) (administered by the Department of Human Resources through the Community Services Administration);
(2) the Maryland Energy Conservation Program (administered by the Department of Natural Resources through the Maryland Energy Office of the Maryland Energy Administration);
(3) the Maryland Institutional Conservation Program (administered by the Department of Natural Resources through the Maryland Energy Office of the Maryland Energy Administration);
(4) the Maryland Energy Extension Services (administered by the Department of Natural Resources through the Maryland Energy Office of the Maryland Energy Administration); and
(5) the Maryland Energy Assistance Program (COMAR 07.06.06) (administered by the Department of Human Resources through the Community Services Administration).

The requirement that the funds are to be used as if they were received "under one or more energy conservation programs" suggests that the states have broad discretion in deciding whether to apply the Exxon refund to all or any number of the designated programs. Section (c) (emphasis added). Legislative history confirms that Congress intended that the States would assess the energy needs of their citizens and respond accordingly by allocating the refund to those programs that would most swiftly and efficiently meet the most critical needs.5 It follows that the Board may, in its discretion, allocate the entire refund to a single program or to more than one.6

The terms of the court order and the Amendment make clear that the Exxon monies may not be allocated for programs other than those identified in the Amendment. For example, funds may not be awarded to other governmental or private weatherization or energy assistance programs, even though such programs might service the same or comparable areas of need. This restriction does not, however, preclude such programs from applying for funding from the Exxon distribution, under the State Energy Conservation Program or through the State Energy Extension Services.

C. Timing of Expenditures

The Amendment does not prescribe a specific time period within which the funds must be expended. However, the states are required to identify to the Secretary of Energy, within one year from the date on which the funds are received, the specific program or programs to which funds will be allocated. Section (c). Although the Amendment does not specify a time period for the expenditure of the funds, the legislative history clearly indicates the intention of the Amendment's sponsors that the funds be allocated and disbursed by the states at the earliest date compatible with the most efficient and effective use.7

In its judgment, the district court ordered the states to "use all funds [disbursed pursuant to the Exxon case] in a manner consistent with [the] court's Memorandum Opinion of March 25, 1983, and [to] report annually to [the] court and to DOE the manner in which said funds have been used until all such funds shall have been expended." United States v. Exxon, No. 78-1035 (D.D.C. June 7, 1983) (judgment) (emphasis added). Read together with the legislative history, the court's statement reflects an expectation that the states will allocate and disburse the refund to one or more of the identified programs on a schedule that strikes a balance between the swiftest possible distribution and the most efficient use of these monies to achieve the purpose to which they are dedicated.

D. Use of the Principal

The Maryland Trust Fund statute provides, in pertinent part, that:

"The principal of the Trust Fund may be expended if:
(1) the principal of the Trust Fund does not exceed $500,000;
(2) An energy emergency is declared by the Governor, as provided in Article 41, §15B (c-1) of the Code, and then only for the purposes of subsection (a)(1) of this section; or
(3) It is required as a condition of acceptance of oil overcharge refunds." NR §13-106(b).

The plain effect of this provision would be to maintain, in trust, the principal amounts of oil overcharge refunds totaling in excess of $500,000 and permitting the expenditure only of the interest earned on the trust principal. Two exceptions stated in the subsection are a declaration by the Governor of an energy emergency or the presence of a conflicting condition imposed on the use of a given refund. We conclude that the latter exception is applicable to the Exxon funds.

The court's requirement that "all funds" derived from the Exxon refund be disbursed and expended efficiently and expeditiously prohibits the deposit of those monies into a trust that generally permits expenditure of interest only. Such an arrangement, based upon arbitrary spending limitations that are not directly related to the ability of the designated program or programs to efficiently use the available principal, would violate the restitutive purpose of the remedy chosen by the court. The equitable doctrine of restitution underlying the Exxon decision, that Exxon be forced to disgorge its wrongful gains and that the overcharges be remitted to the states for the benefit of the injured parties, requires in part that the consumers be restored to the position that they would have occupied but for the wrongful conduct in question. Restatement (Second) of Restitution §1 (Tent. Draft No. 1, 1983). Any plan that would arbitrarily withhold all or a portion of the principal would violate this concept and, in turn, the order of the court.

Similar considerations govern the maintenance by the Board of whatever portion of the Exxon refund is not expended within the first year after its receipt. We reiterate that the Board, in effect, acts as a fiduciary for the citizens of the State with respect to the Exxon refund. Accordingly, it is our opinion that, in dealing with the Exxon refund (and, indeed, with any other oil overcharge refunds received under comparable conditions), the Board and the State should be guided by the same considerations that apply to fiduciary relationships in other, more traditional circumstances. This, of course, includes exercising reasonable care to conserve the trust funds and avoid any use that may jeopardize the trust principal.

For example, to the extent that any portion of the Exxon refund must be held over for future distribution, the Board may not lend or otherwise shift all or a portion of the remaining Exxon refunds to another fund or trust that is not under the Board's direct management and supervision. Cf. 66 Opinions of the Attorney General 56 (1981) (State, as trustee of Fair Campaign Financing Fund, may use the Fund only in accordance with its purpose).

This intent to preserve and maintain separately the monies in the Trust Fund is reflected in the Board's enabling statute, as well. NR §13-406(e) provides: "Any portion of the appropriated funds that are not obligated at the end of the fiscal year shall not revert to the General Fund and shall be carried over in the Trust Fund for use in the next fiscal year." This statutory language underscores the Board's duty under the court order to maintain all undisbursed refunds in the Trust Fund until their distribution.

In sum, any action that would conflict with the judicial mandate of expeditious disbursement or would place the refund monies beyond the Board's control would violate both the court's order and the enabling statute and would jeopardize future oil overcharge refund recoveries.

E. Use of Interest Earned on the Principal

There is no clear guidance in either the district court's opinion or the Amendment regarding the use of the interest that will be earned on the principal of the Exxon funds after the monies have been disbursed to the states. The legislative history of the Amendment also provides no pertinent direction.

Despite the lack of any express statement by the court about interest, the legal principles underlying the remedy implemented by the court provide guidance as to the State's use of interest collected on the Exxon funds. After holding Exxon liable for the overcharges, the district court determined that the oil-consuming public bore the brunt of Exxon's overcharges. The court found that, "As a result of the pervasive system of price control which then existed ... Exxon's overcharges were not... borne by Exxon itself, but instead were borne by ultimate consumers of petroleum products throughout the entire country." 561 F. Supp. at 853 (footnote omitted). The district court held, in effect, that the injured parties were the citizens of the states, and not the states themselves.

The equitable principles of restitution require that the wrongdoer be forced to disgorge his wrongful gains and that the lost benefits be restored to the injured parties. Restatement (Second) of Restitution §1 (Tent. Draft No. 1, 1983). Responding to this mandate, the district court ordered Exxon to refund not only the actual amount of the overcharges (calculated by DOE to be $895,501,163.85) but also to pay interest on those overcharges from the date of the overcharges. In so holding, the court cited the decision of another federal district court that: "'[T]he requirement that sellers who violate regulations and orders promulgated under the [federal petroleum price control statute] also pay interest on the amount of the overcharge is a rational method to "make whole" those who have been overcharged.'" 561 F. Supp. at 858 (quoting Bonray Oil Co. v. DOE, 472 F. Supp. 899, 904 (W.D. Okla. 1978), aff'd per curiam, 601 F.2d 1191 (Temp. Emer. Ct. App. 1979)).

This reasoning is reflected in the court's judgment as well, which ordered "that the monies deposited by Exxon into the escrow account shall be held in trust by the Treasury and shall earn interest." United States v. Exxon Corp., No. 78-1035 (D.D.C. June 7, 1983) (emphasis added). The court further ordered that, upon the conclusion of the appellate process, the Treasury "shall disburse the monies deposited by Exxon together with the interest earned thereon, to each of the States." Id. (emphasis added). In this way, the court ensured that the interest earned on the principal amount, after it had been disgorged by the wrongdoer, would be distributed, together with the principal, to the injured parties, the consumers of petroleum products throughout the United States, including the State of Maryland. The court thereby confirmed its view that the principles of restitution, in the context of oil overcharge cases, require that the injured parties receive not only the actual amount of the overcharges, but also all interest that accrues on the overcharges until the time that the principal amount is actually disbursed.

As we have emphasized throughout this opinion, the role of the State in the distribution process is not that of an ultimate recipient. Rather, the State acts as a fiduciary for Maryland citizens who were injured by Exxon's overcharges. Accordingly, we conclude that all interest earned on Exxon funds while they are held in trust by the State must be disbursed through one or more of the eligible programs, together with the principal, for the benefit of the oil-consuming public.

F. Administrative Expenses

Section (f) of the Warner Amendment states that: "No funds disbursed under this section may be used for any administrative expenses of the Department of Energy or of any State, whether incurred in connection with any energy conservation program or otherwise." This prohibition is unambiguous and bars the use of Exxon funds for administrative expenses, even though federally-appropriated funds may normally be used for such expenses under the regulations of a particular program. The legislative history of the Amendment supports a strict reading of section (f).8

The legislative history, however, also reflects a congressional intent that section (f) should not be interpreted to limit the use of refunds for direct services that comprise the substance of the programs, such as the purchase of materials or the payment of salaries for installers, trainers, and other personnel essential to and directly involved in the delivery of conservation services.9

In our view, then, section (f) prohibits the use of refund monies from the Trust Fund to pay salaries of State or program officials or to pay other costs of administration but does not bar expenditures directly related to the energy conservation objectives of the programs.

G. Supplementation of State Funding

Section (c) of the Amendment provides that: "Funds disbursed under this section shall be used to supplement, and not supplant, funds otherwise available for such programs under Federal or State law." As with the matter of interest earned on the refund, neither the district court's opinion nor the legislative history of the Amendment provides any express guidance with regard to the interpretation of this provision.

This requirement, containing no definition or elaboration of the contrasting terms "supplement" and "supplant," imposes a standard that does not lend itself to a "bright line" rule regarding its applicability.10 However, the underlying principle is reasonably clear: Because the State is a fiduciary, it may not use the Exxon funds, directly or indirectly, for anything other than an extra component of aid to the beneficiaries of the trust arrangement. The refund is not to serve other State purposes, either through direct application or by displacing resources that would otherwise go to the beneficiaries.

In practical terms, the inquiry that is required by the section (c) prohibition on supplantation of otherwise available funding is whether a decision to reduce funding for an eligible program would have been made even if the program were not eligible to receive Exxon funds. In short, with respect to State budgetary and appropriation decisions, a case by case analysis will have to be undertaken in each instance when a reduction or reallocation of funding is contemplated for any of the programs that have been, or likely will be, designated to receive Exxon funds, to determine whether the change would constitute a prohibited supplantation of otherwise available funding.11

At least until additional guidance is provided by the court or DOE about the meaning of the Amendment's section (c), we strongly advise that State funds allocated for an eligible program, either already appropriated by the General Assembly or included by the Governor in an as yet unapproved budget bill, not be reduced or reallocated unless the reason for doing so can be shown to be independent of the Exxon distribution. Conversely, a decision to reduce or reallocate funds expressly based on anticipated Exxon funds would not only pose a serious risk of noncompliance with the court order but would also risk the loss of funds from overcharges at issue in other cases.

The court order applies, of course, to the State generally. In addition, the Board of Trustees must comply with a comparable restriction in its enabling statute:

"Disbursements from the Trust Fund to programs funded by the State or with federal funds administered by the State shall be used solely to supplement, and not to supplant, the existing and planned funding for the recipient programs." NR §13-106(d).12

If, in light of the particular circumstances at the time, the Board concludes that "existing" or "planned" levels of funding for a program have in fact been reduced because of the availability of the Exxon refund, it would be prohibited by this statute from disbursing funds for that program, lest a "supplant[ing]" occur. Such a result, reduced funding for that conservation program, would be wholly at odds with the purpose of the Exxon restitution and the Trust Fund itself. Thus, we emphasize the importance of an independent basis for any decision to reduce either already appropriated or budgeted funds for a recipient program.

IV
Potential Future Refunds

Scrupulously careful adherence by the State to the order of the district court in Exxon is supported by a significant monetary incentive. Specifically, the conduct of the states, individually and collectively, with respect to the Exxon monies will be closely monitored by Congress, the federal government (in particular, the Office of Management and Budget), the oil industry, and other parties who object to the disbursement of overcharge refunds through the states to the public. Any misuse of the Exxon monies or failure to adhere to the requirements of the court's order would lend support to an argument that has been and undoubtedly will again be raised before judicial and administrative tribunals: that the states are not an efficient or dependable vehicle for achieving restitution through oil overcharge refunds.

Although the Exxon litigation was certainly the largest single overcharge case, dozens of oil overcharge proceedings are now pending that, collectively, hold the potential for recoveries equal to and possibly greater than the recovery in Exxon. For example, in In re Kansas Stripper Well Litigation, MDL No. 378 (D. Kan.), an escrow fund containing in excess of $1.2 billion is held under the control of the United States District Court for the District of Kansas. The court currently is in the process of selecting a remedial structure for the distribution of these funds. If the court chooses a distribution plan similar to that ordered by the court in Exxon, Maryland's share of this disbursement would be approximately $23 million. However, any failure by this or the other states to adhere to the guidelines established for the use of the Exxon monies would provide factual support for the inevitable argument on behalf of the oil industry and other claimants that refund money should not be returned to the states for distribution to their citizens.

V
Conclusion

In sum, it is our opinion that the district court decision in United States v. Exxon directs the State to allocate the refund among one or more of five energy conservation programs. Although the funds need not be expended within a prescribed period of time, both the principal and interest must be spent by the programs within the minimum amount of time necessary for the most efficient achievement of the energy conservation objectives that the programs are designed to meet. The refund principal may not be held indefinitely in trust but must be disbursed together with the interest. The Board of Trustees must, within one year from the date on which the funds are received, select and identify to the Secretary of Energy the program or programs that will receive the Exxon refund and must thereafter report annually to the court and DOE on the expenditure of Exxon funds until the exhaustion of both interest and principal. Although no part of the refund may be spent by the State or any of the programs for administrative expenses, portions of the refunds may be spent, as necessary, to purchase necessary materials and to pay the salaries of personnel essential to and directly involved in the delivery to the consumers of the programs' services. Any reductions in appropriations or budgetary allocations for the designated programs may be made only upon grounds independent of the availability of monies derived from the Exxon disbursement.

We recognize that issues may well arise in the future that are not addressed in this opinion. Our overall recommendation is that the Board of Trustees and other State officials, in dealing with the Exxon refund, be mindful of the principles of restitution and adhere to the district court's mandate that the funds be distributed promptly and efficiently to the petroleum product consumers in the State who are in greatest need of energy conservation assistance.

Stephen H. Sachs
Attorney General
Michael F. Brockmeyer
Assistant Attorney General and Chief, Antitrust Division
Yuri B. Zelinsky
Assistant Attorney General

Jack Schwartz
Chief Counsel
Opinions and Advice

Editor's Note: Chapter 782 of the Laws of Maryland 1986 amended the Trust Fund statute in several respects, none inconsistent with the conclusions of this opinion.

1 The district court declined to assess civil penalties against Exxon. 561 F. Supp. at 858. The accumulated interest currently exceeds $1.2 billion, raising the total judgment against Exxon to approximately $2.1 billion.

2 Pub. L. No. 97-377, 96 Stat. 1830, 1919, §155 (1982). Pertinent aspects of the Warner Amendment are examined in detail in Part III of this opinion.

3 In its order, the court struck as irrelevant those provisions of the Warner Amendment that limit the monies that the Secretary of Energy may disburse to: (1) a total of $200,000,000, (2) funds that "are not likely to be required for satisfying claims of potential claimants..." and (3) funds "the use [of which] would be consistent with orders covering such funds." 561 F. Supp. at 856 n.59.

4 In January 1983, the Secretary of Energy disbursed $200,000,000 to the states and territories.

5 In debate on the floor of the Senate, Senator Warner stated that the amendment "would allocate monies to [the states], giving them the discretion to direct the funds to the highest priority energy-related projects in their particular States." 128 Cong. Rec. S15115 (daily ed. Dec. 16, 1982) (statement of Sen. Warner). Similarly, Senator Percy noted that "the States under this Amendment are provided a great deal of flexibility in order to design programs which will meet the special needs of consumers in the States in the quickest manner possible." 128 Cong. Rec. S15116 (daily ed. Dec. 16, 1982) (statement of Sen. Percy). Senator Hatfield stated that the Amendment requires "the States[to] choose from five federally authorized State and local energy programs." 128 Cong. Rec. S15702 (daily ed. Dec. 20, 1982) (statement of Sen. Hatfield).

6 But see NR §13-106(c) (priority to be given to low-income residential weatherization programs).

7 Speaking on the floor of the Senate, Senator Warner stated, "the Amendment would direct States to send out these funds now." 128 Cong. Rec. S15115 (daily ed. Dec. 16, 1982) (statement of Sen. Warner) (emphasis added). Senator Percy, also speaking on the floor of the Senate, stated that "the Amendment provides the States substantial flexibility in order to design programs which will meet the special needs of consumers in the States in the quickest manner possible." 128 Cong. Rec. S15116 (daily ed. Dec. 16, 1982) (statement of Sen. Percy) (emphasis added). Senator Hatfield, submitting the Report of the Conference Committee on the continuing resolution, stated that the "distribution of these funds is for the purpose of having limited by expeditious restitution to claimants who have been injured by petroleum pricing and allocation violations." 128 Cong. Rec. S15702 (daily ed. Dec. 20, 1982) (statement of Sen. Hatfield) (emphasis added).

8 For example, Congressman Dingell stated on the floor of the House of Representatives: "We provided that none of the funds should be used for administrative expenses." 128 Cong. Rec. H10435 (daily ed. Dec. 20, 1982) (statement of Rep. Dingell) (emphasis added).

9 Senator Hatfield stated on the floor of the Senate that: "Subsection (f) of the [Amendment] prohibits the use of these funds for administrative expenses, but shall not be constrained to limit the use of funds for those direct services, such as, labor costs associated with low-income weatherization and retrofit activities." 128 Cong. Rec. S15703 (daily ed. Dec. 20, 1982) (statement of Sen. Hatfield). Similarly, Congressman Dingell, speaking on the floor of the House, stated: "We would not want to see these funds used to pay salaries or other expenses of those administering those programs, although we recognize that direct labor costs for installing weatherization or the other materials would, of course, not be precluded." 128 Cong. Rec. H10435 (daily ed. Dec. 20, 1982) (statement of Rep. Dingell).

10 In this respect, the Warner Amendment differs markedly from other provisions in federal law designed to assure certain minimum levels of state funding. See, e.g., 42 U.S.C. §623(d) (federal payments for child welfare services contingent upon state funding not "less than the total of the State's expenditures ... for fiscal year 1979"); 33 U.S.C. §1256(c) (federal grants for water pollution control programs contingent upon state funding not "less than the expenditure by such State ... for such recurrent program expenses during the fiscal year ending June 30, 1971"). While a particular level of past funding might well be relevant to application of the Warner Amendment's "supplement, and not supplant" formulation, it cannot be viewed as itself determinative under the Amendment's language.

11 We recognize that the phrase "funds otherwise available for such programs under ... State law" arguably might be read to apply only to already appropriated funds, which under Maryland law are the only funds presently "available." See Article III, §32 of the Maryland Constitution. However, we doubt that the court, in adopting this aspect of the Warner Amendment, intended to incorporate the varying procedural characteristics of each state's budgeting process. Moreover, if the bar to supplantation were wholly inapplicable to potential reductions in the budget bill, much of the purpose of the Exxon refund mechanism, to provide additional help to the victims of overcharges, would be defeated. In any event, we believe that prudence dictates an avoidance of actions that risk a finding of noncompliance with the court order. See also note 12 below and accompanying text.

12 NR §13-106(d) was enacted later than, and with knowledge of, the Warner Amendment. Chapter 759, Laws of Maryland 1984. The reference to "existing and planned funding" in NR §13-106(d) therefore presumably reflects the General Assembly's understanding of the scope of the phrase "funds otherwise available" in the Amendment. See note 11 above.