              TEE       ATTORNEY           GENERAL
                            OF   TEXAS

                            August 21. 1987




Honorable Grant Jones                      Opinion No. m-772
chai?Fman
Finance committee                          Re: Authority of the governor
Texas State Senate                         to effect the disbursement of
P.O. Box 12068                             petroleum overcharge funds
Austin, Texas 78711

Honorable Clint Hackney
Chairman
Energy Committee
Texas Rouse of Representatives
P. 0. Box 2910
Austin. Texas 78769

Gentlemen:

    You ask the following question:

            Does the Governor have authority to effect the
         disbursement   of   petroleum   overcharge   funds
         currently held by this State absent legislative
         appropriation of such funds by the Legislature?
         In other words, absent legislative appropriation
         to himself or affected agencies, does the Governor
         have the authority under federal or state law to
         direct the Comptroller to transfer the State's
         share of petroleum overcharge funds, currently
         held in the State Treasury, to the accounts of
         specified state agencies or commissions and in so
         doing, permit such agencies or conrmissions to
         expend such funds pursuant to the Governor's
         directives?

     You explain that your question arose because of money that Texas
received as a result of two lawsuits: U.S. V. Exxon, 561 F. Supp. 816
(D.D.c. 1983). aff'd. 773 F.2d 1240 (Temp. Emer. Ct. App. 1985). cert.
denied, 106 S.Ct.92     (1986) (hereinafter Exxon), and In re:The
Department of Energy Stripper Well Exemption Litigation, 578 F. Supp.
586 (D. Kan. 1983) settled, Final Settlement Agreement of M. D. L. No.
378 (D. Kan. 1986) (hereinafter Stripper Well). Both of those
lawsuits involved distribution of escrow accounts containing money



                                 p. 3622
Honorable Grant Jones
Honorable Clint Hackney
Page 2 (31-772)'




collected from oil companies because of violations of the Emergency
Petroleum Allocation Act, 15 U.S.C. §7193. Because of the difficulty
of identifying who actually paid the overcharges, the court in Exxon
and the settlement agreement in Stripper Well fashioned remedies
intended to approximate restitution. The bulk of the money involved
in Exxon and Stripper Well was awarded to the states to be used for
energy conservation programs. Under the terms of both the court order
in Exxon and the settlement agreement in Stripper Well the states have
discretion to determine how the money will be allocated among various
conservation programs. You ask sevfral questions about the proper
in-state distribution of that money.    The disposition of the Exxon
money raises more complex issues than the disposition of the Stripper
Well money, and we will address those issues first.

     In Exxon the district judge ordered that the escrow funds be
spent by the states in accordance with the terms of Section 155 of
Public Law No. 97-377, 96 Stat. 1830, 1919-20 (1982) (hereinafter
"section 155"). 561 F. Supp. at 856. Section 155, which Congress
enacted to distribute $200 million in petroleum overcharge funds that
had been in an escrow account for several years, provides:

             (a) It is the purpose of this section to
          provide the Secretary of Energy the exclusive
          authority for the disbursement of the designated
          petroleum violation escrow funds for limited
          restitutional purposes (1) which are reasonably
          expected to benefit the class of persons injured
          by such violations, and (2) which, based on
          information previously provided to Congress by the
          Secretary of Energy, are likely not to be, through
          procedures established by regulation, otherwise
          refunded to injured persons because the purchasers
          of the refined petroleum products cannot be
          reasonably identified or paid or because the
          amount of each purchaser's overcharge is too small
          to be capable of reasonable determination.



      1. Since we drafted this opinion, the legislature has enacted
and the governor has signed a bill that gives the governor's office
certain authority in regard to distribution of petroleum overcharge
funds. S.B. 33, 70th Leg., 2d C.S. ,(1987). The legislature also
appropriated oil overcharge funds for certain projects. S.B. 1. 70th
Leg., 2d C.S.. art. V, §81, at V-82 (1987). The appropriation and
delegation of authority to the governor's office are in accord with
the proper procedures under Texas law for.allocating and appropriating
the funds in question.




                                 p. 3623
    Honorable Grant Jones
    Honorable Clint Hacknev
    Page 3 (JM-772)       -




                (b) As soon as practicable, the Secretary of
             Energy   shall   disburse   designated   petroleum
             violation escrow funds to the Governors of the
             States in accordance with the formula set forth in
             subsection (d).

                (c) Amounts disbursed to the Governor of any
             state shall be used by the Governor as if such
             funds were received under one or more energy
             conservation programs.      The   Governor   shall
             identify to the Secretary within one year after
             the time of disbursement the energy conservation
             program or programs to which the funds are or will
             be applied. Funds disbursed under this section
             shall be used ,to supplement, and not supplant,
             funds otherwise available for such programs under
             Federal or State law.

                 (d) The disbursement by the Secretary of Energy
              to each State shall be based on the ratio,
              calculated by the Secretary, which--

                      (1) the volume of refined petroleum
                 products consumed within that State during the
                 period beginning September 1, 1973, and ending
                 January 28, 1981. bears to

                      (2) the volume of refined petroleum
                 products consumed within.all States during such
                 period.

              Calculations made by the Secretary of Energy under
              this subsection shall be based upon estimates by
              the    Secretary    from   reasonably    available
              iufomation.

                 (e) For purposes of this section--

                      (1) The term 'designated petroleum vio-
                 lation escrow funds' means amounts (not in
                 excess of $200,000,000) which are derived from
                 settlements from alleged petroleum pricing and
                 allocation violations generally resulting in
                 overcharges to purchasers of refined petroleum
                 products and held in trust accounts admin-
                 istered by the Department of Energy on December
                 17, 1982, and which--

P                             (A) are not likely to be required for




                                        p. 3624
Honorable Grant Jones
Bonorable Clint Hackney
Page 4 (JM-772)




                 satisfying claims of potential claimants
                 identified in the proceedings of the
                 Office of Hearings and Appeals initiated
                 prior to December 17. 1982, or identified
                 in judicial proceedings initiated prior to
                 such date; and

                      (B) the use of under this section
                 would be consistent with the remedial
                 order or consent order covering such
                 funds.

                  (2)   -fh= term    'energy   conservation
             programs' means--

                      (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 programs under part D of
                  title III of the Energy Policy and
                  Conservation Act (relating to primary and
                  supplemental State energy conservation
                  programs; 42 U.S.C. 6321 and following);

                       (C) the program under part G of title
                  III of Energy Policy and Conservation Act
                  (relating to energy conservation for
                  schools and hospitals; 42 U.S.C. 6371 and
                  following);

                       (D) 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).

                  (3) The term 'State' means each of the
             several States, the District of Columbia, the
             Commonwealth of Puerto Rico, and any territory
             or possession of the United States.

                  (4) The term 'Governor,' when used with
             respect to any States. means the Governor or
             the chief executive officer of that State.




                                 p. 3625
Honorable Grant Jones
Eonorable Clint Hackney
Page s (JM-772)




                  (5) The term 'refined petroleum product'
            mean*     gasoline,   kerosene,    distillates,
            (including Number 2 fuel oil), LPG (other than
            ethane), refined lubricating oils, diesel fuel,
            and residual fuel oil, but does not include
            refinery feedstocks.

            (f) 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.      (Emphasis
         added).

In short, section 155 orders the Secretary of Energy to disburse the
money to the states, and it directs the states to allocate the money
among the five energy conservation programs listed in section 155.
Because section 155 provides that the secretary shall disburse the
money to "the Governor" and that the money "shall be used by the
Governor," questions have arisen about the role Congress intended
governors to play in allocating section 155 money and, thus, Exxon
money. Two different interpretations of the references to governors
in section 155 have been suggested.

     One suggested interpretation is that Congress simply intended to
disburse the section 155 money to the states and to allow the states
to use their traditional decision-making processes to +termine how
the money would be distributed among the five programs.     The other
suggested interpretation of section 155.1s that the references to the
governor were intended to give a governor authority to determine how
the money would be allocated among the five conservation programs
listed in section 155, regardless of the role the governor plays in a
state's decision-making process under state law. For Texas there is



      2. You explain that in 1983 when Texas received money under
section 155. the governor did not exercise any authority in
determining how the section 155 money would be spent. Rather, you
explain, the Texas Energy and Natural Resources Advisory Counsel
(TENRAC) recommended to the legislature how the money should be dis-
tributed among the conservation programs listed in section 155. See
generally Acts 1979, 66th Leg., ch. 666, at 1545 (establishing TEN=
and authorizing TENRAC to recommend to the legislature and governor
policies and actions affecting energy and natural resources). You
state that the legislature appropriated the money in accordance with
TENRAC's recommendation. See Acts 1983, 68th Leg., ch. 1095, Art. V,
581, at 5729, 6233.      -




                             p. 3626
Honorable Grant Jones
Honorable Clint Hackney
Page 6 (JM-772)




an important difference between those two interpretations because
under Texas law the legislature, not the governor, has authority to
allocate and appropriate state funds. See Attorney General Opinion
C-530 (1965)(federal funds deposited InThe      state treasury become
state funds).    Before we address the question of the proper
interpretation of section 155, we will explain the role of the
legislature under state law in allocating and appropriating state
funds, including funds received from the federal government.

     As a general rule, money received by the state is to be deposited
in the state treasury. V.T.C.S. art. 4393-1, 14.004(a). Although
there are several exceptions to that rule, funds received from th3
federal government are generally not within any of those exceptions.



      3. Article 4393-l. section 4.003(b), sets out four exceptions
to the general rule that funds received by the state are to be
deposited in the state treasury. One of those exceptions is for
"funds held in trust or escrow for the benefit of a person or entity
other than a state agency." V.T.C.S. art. 4393-l. 54.003(b)(2). See
also Friedman v. American Surety Co. of New York, 151 S.W.2d 570, 580
(Tex. 1941). That exception is sometimes referred to as the "trust
fund" exception. In a different context, this office has referred to     ?
federal funds as "trust funds." Attorney General Opinion M-468 (1969)
stated that federal funds to be expended for a specific purpose are
held by the state in trust for the benefit of the programs being
administered and that interest earned on federal funds remains part of
the special fund or trust ,fund. Although most federal funds are
"trust funds" inasmuch as they may not be diverted, we do not think
that federal funds are, as a rule. within the "trust funds" exception
to article 4393-l. That exception is for money held in trust "for the
benefit of a person or entity other than a state agency." We do not
think that the the funds in question, or federal funds generally, are
held "for the benefit of a person or entity other than a state agency"
for purposes of that exception. The funds in question were awarded to
the state to be used for conservation programs. Some state agency
will administer the programs for which the funds are used. Although
those programs, like all activities of state government, are intended
to ultimately benefit individuals rather than agencies, the
individuals who will ultimately benefit are as yet unidentified. It
is the responsibility of the state to identify precisely how the funds
will be used and which individuals will benefit.             In those
circumstances, we think that funds that are intended for a progiram to
be administered by a state agency are funds held for the benefit of
state agency, for purposes of the trust fund exception set out in
article 4393-1, section 4.003(b)(2). _See Attorney General Opinion
                                                  (Footnote Continued)
                                                                         ?




                             'p. 3627
Honorable Grant Jones
Honorable Clint Hackney
Page 7 (JM-772)




See Attorney General Opinion E-120 (1973); see also General
Appropriations Act, Acts 1986, 69th Leg., 3d C.S., ch. 13, art. V, 520
at 594 (appropriating federal funds out of the state treasury). You
tell us that the Exxon and Stripper Well money received pursuant to
the court order in Exxon was in fact deposited in the treasury.

     Under the Texas Constitution no money can be withdrawn from the
state treasury except pursuant to an appropriation made by the
legislature. Tex. Const. art. VIII, 96; Bullock v. Calvert, 480
S.W.2d 367, 370 (Tex. 1972). This constitutional provision applies to
all funds in the treasury, including funds dedicated to a special
purpose. Attorney General Opinion V-412 (1947).

     Most federal funds, like the Stripper Well and Exxon funds, are
special funds and may not be diverted from the purpose for which they
were granted to the state. Attorney General Opinion M-468 (1969).
Because a state's discretion in the use of federal funds is often
severely restricted, the legislature's appropriation of federal funds
is usually largely Pro forma. For example, the 69th Legislature
appropriated federal funds received by the state in the 1986-87
biennium to the agencies that are to administer those funds:

             All funds received from the United States
          government by state agencies and institutions
          named in this Act are hereby appropriated to such
          agencies for the purposes for which the federal
          grant, allocation, aid, payment or reimbursement
          was made subject to the following:

             (1) Federal funds including unexpended balances
          shall be deposited to and expended from the
          specific program identified under each agency's


(Footnote Continued)
M-468 (1969)~(federal funds for a specific program are held in trust
for the benefit of the program). See also-Attorney General Opinion
JM-479 (1986) ("Service Charge Trust Fund" held by the Texas Surplus
Property Agency is a trust for the benefit of a state agency and not
within the "trust fund" exception to the State Funds Reform Act). Cf.
Attorney General Opinion IN-363 (1981) (fund for benefit of prison=
is to be held outside state treasury). Thus. we believe that the
money in question was properly placed in the state treasury. We also
note that the legislature has routinely appropriated federal funds out
of the treasury. See General Appropriations Act, Acts 1986, 69th
Leg., 3d C.S., ch. 13,art. V. 120 at 594. See also Attorney General
Opinion C-551 (1965)(discussing the appropriation of federal "trust"
funds).




                               p. 3628
Honorable Grant Jones
Honorable Clint Hackney
Page 8   (JM-77?)




          appropriation bill pattern.

             No federal funds may be expended for programs
          or activities other than those which have been
          reviewed by the Sixty-ninth Legislature and
          authorized by specific language in this Act or
          encompassed by an agency's program structure as
          established by this Act.

General Appropriations Act, Acts 1986, 69th Leg., 3d C.S., ch. 13,
art. V, $20 at 594 (emphasis added). See also S.B. 1. 70th Leg., 2d
C.S.. art. V, 921. at V-60 (1987); Acts 1983, 68th Leg., ch. 1095,
art. V, §20, at 6216; Acts 1981, 67th Leg., ch. 875, art. V, %18, at
3808. The first paragraph of the provision above would appear to
appropriate section 155 money--and thus Exxon settlement money--to the
governor's office since the governor's office is the institution that
is to receive 'section 155 money. The emphasized paragraph, however,
negates any such appropriation by prohibiting the expenditure of
federal funds for programs other than those reviewed by the 69th
Legislature and encompassed by an agency's program structure. The
program' structure for the governor's office under the 1986-87
appropriations act does not include the programs listed in section
155. Further, no general state statute currently in effect devolves
upon the governor's office the authority to administer a program
listed in section 155 such that the general appropriation of funds for
1986-87 could encompass these disbursements.         The legislation
discussed in footnote 1 does, of course, give the governor's office
authority to administer section 155 programs for the 1988-89 biennium.

     A corollary of the legislature's exclusive control over the
appropriation of state funds is its exclusive control over how state
funds are to be spent. Attorney General Opinion JM-256 (1984). Under
state law the governor has no power to make determinations about how
state money is to be distributed unless that power is expressly given
to him by constitutional or statutory grant.        Attorney General
Opinions H-120 (1973); M-910 (1971). See generally Tex. Const..art.
IV, 510. Thus, under Texas law the governor would have authority to
determine how the Exxon money is to be allocated only if the
legislature delegated that authority to him.

     With those aspects of Texas law in mind, we turn to the
interpretation of section 155. If. as it has been suggested. section
155 was intended to give governors the authority to allocate and
disburse the funds regardless of state law, a troublesome question
presents itself as to whether Texas may accept the funds even though
acceptance of the funds under the terms of the grant would require the
governor to take action that is beyond his powers under state law.
See Madden, The .Constitutional and Legal Foundations of Federal
Grants, in Federal Grant Law (M. Mason ed. 1982)(pointing out that




                              p. 3629
Honorable Grant Jones
Honorable Clint Hackney
Page 9 (JM-772)




courts have nenerallv considered federal grants to be inducements that
states are -free td refuse).     See also Brown, Federal Funds and
National Supremacy: The Role of State Legislatures in Federal Grant
Programs, 28 Am. U. L. Rev. 279 (1979).

     Several state courts have considered whether federal grant
programs are intended to increase the power of governors to set
priorities and allocate resources. In Opinion of the Justices, 381
A.2d 1204 (N.H. 1978). the court considered whether the state
legislature could designate the state health planning agency for
purposes of administering a federal grant program. The federal
legislation stated that the agency should be "selected by the
Governor." The New Rampshire court wrote:

            If this federal act precludes the legislature
         from creating the State health planning agency,
         the words, 'selected by the Governor,' must be
         read as, 'selected by the Governor notwithstanding
         State constitutional restrictions on his authority
         and to the exclusion of any legislative involve-
         ment in the process.' This, of course, presumes
         that the federal authorities, in drafting the
         National Health Planning and Resources Development
         Act of 1974, intended that the Governor of a State
         would select an agency~for designation on his own
         without any legislative involvement in the
         process. The legislative history does not justify
         such a conclusion. See [1974] U.S.Code Cong. 6
         Admin. News, pp. 7891-x

             The statutory scheme is clear -- the State must
          work out the details of its commitment to health
          planning, presumably in compliance with the State
          constitution, and then enter into agreement with
          the federal authorities. The thrust of both the
          Federal Act and its predecessors is that the State
          should construct its own administrative plan and
          designate its planning agency. Then the Governor,
          acting as the agent of the State, will apply for
          designation of that agency. The federal act does
          not confer on the Governor the right to disregard
          the State's constitutional processes in selecting
          the agency for the administration of the State
          health plan.

             .   .   .   .




                               p. 3630
Honorable Grant Jones
Honorable Clint Hackney
Page 10    (JMa772)




            If any doubt exists, the federal law should not
         be interpreted to infringe upon those powers of
         the States that are essential to their 'ability to
         function effectively in a federal system.’  Fry v.
         United States, 421 U.S. 542, 547 n.7, 95 S.Ct.
         1792, 1796, 44 L.Ed.2d 363 (1975); accord National
         League of Cities V. Usery, 426 U.S. 852, 96 S.Ct.
         2465. As stated by the Court some years earlier:

               In a dual system of government in which,
            under the Constitution. the states are
            sovereign . . . an unexpressed purpose to
            nullify a state's control over its officers
            and agents is not lightly to be attributed
            to Congress.

          Parker V. Brown, 317 U.S. 341, 351, 63 S.Ct. 307,
          313, 87 L.Ed. 315 (1943). Hence, we find no clear
          manifestation of congressional intent to override
          the constitutional powers of our legislature to
          determine which agency will be designated as the
          health planning office for New Hampshire. Shapp
          v. Sloan, 27 Pa. Cmwlth. at 326, 367 A.2d at 799.

381 A.2d at 1210-11. 'Because of the New Hampshire court's resolution
of that issue, the court did not have to reach another question
raised: whether an attempt by Congress to require the governor to
exercise certain powers would preclude New Hampshire's acceptance of
the federal funds in question. 381 A.2d at 1206.

         In Shapp v. Sloan, 391 A.2d 595 (Pa. 1978). appeal dism'd sub
nom. Thornburgh v. Casey. 440 U.S. 942 (1979). the Supreme Court of
Pennsvlvania
. __.._,   ~~~~~~~uoheld
                  ~.     the constitutionalitv of a state statute that
required that all federal funds received by the state be deposited in
the state's general fund and that also prohibited the ,expenditure of
federal funds except pursuant to a specific appropriation by the
state's general assembly. In response to the argument that federal
funds are intended to be used by the state executive branch without
legislative approval, the court wrote:

             Nothing in the federal legislation pursuant to
          which these funds are granted suggests that the       .
          same principles by which programs wholly state
          funded are operated are inapplicable to programs
          for which federal funds are supplied. That the
          executive agency or official must use federal
          monies within the program for which they were
          intended, and must provide an accounting to show
          that they were so used, does not lead to the




                                 p. 3631
    Honorable Grant Jones
    Honorable Clint Backnev
    Page 11   (JM-772)    -




              conclusion that the funds are under          that
              official's control and outside the control of the
              legislature.

    Shapp v. Sloan. 391 A.2d at 604. See also Anderson v. Regan, 425 N.
    E.Zd 792, 793-94 (N.Y. 1981) (under New York constitution federal
    funds are subject to appropriations process).

         A number of state courts have held that federal funds are outside
    their states' legislative appropriation processes. State ex rel. Sego
    v. Kirkpatrick, 524 P.2d 975, 986 (N.M. 1974) (under New Mexico law
    state legislature has no power to appropriate federal funds); MacManus
    v. Love, 499 P.2d 609, 610-11 (Colo. 1972) (under Colorado law federal
    funds are not subject to the power of the General Assembly to make
    appropriations).    These   decisions, however.     have   turned   on
    requirements of state law, not requirements of federal law. In a
    recent affirmation of the position that federal funds are not subject
    to the Colorado legislative appropriation process, the Colorado
    Supreme Court emphasized that its decision was based on state law and
    was not required by federal law:

                 As long as the funds are not diverted from
              their intended purposes and the terms and
C
              conditions prescribed by the congress -are not
              violated, there is no inconsistency between the
              provisions of the federal programs and state
              legislative administration of the funds.       The
              federal government has expressly given the states
              a wide discretion in dealing with these funds.
              That discretion is most logically exercised by the
              branch of state government which is constitution-
              ally empowered to exercise control over all
              expenditures.

                 . . . .

                 State courts have not felt constrained. by
              federal law to reach conclusions that uniformly
              grant state legislatures the power of appropria-
              tion over state funds. Congress has left the
              issue of state legislative appropriation of
              federal block grants for each state to determine.

    Colorado General Assembly v. Lamm. No. 85SA70, slip op; at 13 (Cola.
    June 1, 1987).

         At least one law review article has considered whether federal
    grant programs can enhance the powers of governors. Brown, Federal
    Funds and National Supremacy: The Role of State Legislatures .in




                                   p. 3632
Honorable Grant Jones
Honorable Clint Hackney
Page 12 (JR-772)




Federal Grant Programs, 28 Am. U. L. Rev. 279 (1979). Without
conclusively determining that a federal grant program can increase the
powers of -a governor; the author concluded that Opinion of the
Justices, 381 A.2d 1204 (N.H. 1978). applied the proper test in
requiring a, "clear manifestation of congressional intent" before it
would conclude that Congress intended to invade the traditional powers
of state legislatures. See also United States v. Bass, 404 U.S. 336,
349-50 (1971) (where statute is ambiguous, court assumes congressional
intent not to diminish state power); L. Tribe, American Constitutional
Law, 243-44, 304 (1978)(a rule like the clear statement requirement is
essential in determining whether Congress intended to exercise its
commerce power in full because "Congress must be prevented from
resorting to ambiguity as a cloak for its failure to accommodate the
competing interests bearing on the federal-state balance"); Bulletin
76-4 of the Advisory Commission on Intergovernmental Relations (Nov.
1976)(recommending that state legislatures include a:;a:ed;;zl aid in
appropriations bills).    Therefore. we conclude                proper
approach to use in interpreting section 155 is to determine whether
there is a clear manifestation of congressional intent to alter
states' traditional decision-making processes. We now address that
issue.

     Section 155 states that petroleum violation escrow funds are to
be disbursed to the governor of a state-and that the governor. is to
use those funds as if they were received under one or more of the five
energy conservation programs. It also states that the governor shall
identify to the Secretary of Energy the program or programs to which
the money will be applied. On its face. then, section 155 appears to
give the governor authority to determine how the money is to be
allocated among the five energy conservation programs. In Opinion of
the Justices and Shapp, however, such references to "governors* were
found to be inadequate to show a clear indication that Congress
intended to upset states' traditional decision-making processes.

     The Congressional Record shows that the purpose of section 155
was to distribute .$200 million in escrow .accounts that had been
collected since 1978 for oil overcharges to consumers. 149 Cong. Rec.
S15,115-16 (1982) (daily ed. Dec. 16, 1982) (statement of Senator
Warner). The issue that most concerned the House and the Senate was
how the money could be most fairly distributed among the states. See,
x,    149 Cong. Rec. at Sl5.131 (statements of Senator Ford). Neither
the House nor the Senate demonstrated any concern about whether or not
state legislatures played a role in allocating the funds once they had
been distributed to the states. In the discussions of section 155 in
both the House and the Senate, some members talked about the bill in
terms of distribution of the money to the states for allocation by the
states. Others talked in terms of distribution to the governors for
allocation by the. governors. There was no discussion; however, of
prohibiting legislatures from playing their traditional roles in




                                p. 3633
Honorable Grant Jones
Honorable Clint Hackney
Page 13   (JM-772)




decision-making. Because nothing in the statute and nothing in the
legislative history of the statute indicates that Congress intended to
increase the powers of governors in those states in which the
governor's powers were inadequate to allocate public money or that
Congress intended to limit the role of legislatures, we conclude that
Congress did not intend to confer on a governor the right to disregard
his state's constitutional process for appropriating and allocating
funds. Opinion of the Justices, 381 A.2d at 1210. Therefore, in
Texas the legislature must determine or delegate the authority to
determine how the Exxon money should be allocated among the five
conservation programs listed in section 155, and the legislature must
appropriate the e     money in order for it to be withdrawn from the
treasury. And, as indicated in footnote I, the legislature has now
done so. Because we interpret section 155 as not disrupting the
traditional state decision-making process, we need not address the
difficult issue of whether Texas may accept money under the condition
that the governor exercise powers he does not possess under state law.

      The same principles of Texas law governing allocation and
 appropriation of state funds are applicable to the money Texas
 receives pursuant to the Stripper Well settlement. The settlement
 requires that the money must be spent on energy programs. The
~settlement conditions applicable to the states include the following:

             f. State Use of Funds. Funds available for
          distribution to the States shall be allocated
          among them on the basis of historical consumption
          patterns of refined petroleum products in the
          United States during the Settlement Period in the
          proportions as set forth in Exhibit H hereto,
          provided that no funds shall be distributed to a
          State until such State has submitted the signed
          Letters of Assurance required by this Paragraph.
          The payment mechanism set forth herein shall be
          then exclusive means of achieving distribution of
          the funds. The Attorney General of each State
          shall deliver to the Governor of such State, for
          the Governor's execution, duplicate originals of a
          Letter of Assurance in the form set forth in
          Exhibit I to this Agreement. Within 20 days
          following the date of the Approval Order, the
          Attorney General shall deliver to the Clerk of the
          Court and to the Administrator of ERA, DOE, such
          Letters of Assurance signed by the Governor of
          such State.    At the same time, the Attorney
          General of each State shall designate in writing
          to the disbursing official of the M.D.L. 378
          Escrow whether disbursement shall be by check or
          by wire transfer, and if by wire transfer, shall




                               p. 3634
Honorable Grant Jones
Honorable Clint Hackney
Page 14   (JM-772)




         provide instructions for the transmittal of funds.
         Disbursement of all funds to such State thereafter
         shall be in the form designated by the Attorney
         General and made payable to 'The State of
                       t   Physical delivery of a check
         shall be made by the disbursing official to the
         Attorney General and in the case of a wire trans-
         fer, advance written notice of the date and amount
         of the wire transfer shall be delivered to the
         Attorney General prior to the sending of each wire
         transfer. Upon receipt of each check or wire
         transfer notice, the Attorney General shall
         deliver it promptly to the Governor of such State.
         As used in this Paragraph II.B.3.f. 'Attorney
         General' means the Attorney General of a State, or
         his or her duly authorized representative, and
         includes any other State official who intervened
         in M.D.L. 378 prior to the execution of the
         Memorandum of Understanding of January 24, 1986
         preceding this Agreement. In the case of any
         State where an official other than or in addition
         to the Attorney General intervened in M.D.L. 378
         prior to January 24; 1986, all references in this
         Paragraph II.B.3.f to the Attorney General shall
         mean the Attorney General jointly with such
         official. Such funds (including interest earned
         on the funds following their receipt by the
         States) will be utilized as follows:

                 I. Public Notice. Each State will give
            reasonable notice to the public that it has
            received the funds and will generally describe
            the types of restitutionary programs on which
            the State may expend the funds. Each State
            will conduct informal hearings at which the
            public may present its views concerning such
            expenditures.   Any   State which has held
            hearings with regard to the uses of Oil
            overcharge refunds during the two-year period
            preceding the date of the Approval Order will
            not be required to hold additional hearings.
            Legislative   hearings   in   accordance with
            appligable State procedures shall be sufficient
            to comply with the requirements of this subsec-
            tion.

                  ii. Restitutionary     Program.     Monies
             received by any State shall be utilized to fund
             one or more existing or new energy-related




                               p. 3635
Honorable Grant Jones
Honorable Clint Hackney
Page 15 (JM-772)




            programs which are designed to benefit, direct-
            ly or indirectly, consumers of petroleum
            products within the State. State governments
            are familiar with the particular energy needs
            of their citizens. . . . (Emphasis added.)

In re: The Department of Energy Stripper Well Exemption Litigation,
M.D.L. No. 378. Final Settlement Agreement at 8 (D. Kan. 1983). Under
that settlement "the state" is to-receive the money? The settlement
states that before a state receives funds the governor must sign
letters of assurance, to be provided by the state's attorney general,
that the money will be spent for approved programs. Otherwise, the
governor is not mentioned. There is no basis in the language of the
settlement for arguing that the settlement was intended to give the
governor any role in determining how the funds should be allocated,
much less a role that would be beyond his constitutional powers. It
is the role of the legislature to comply with the requirements of the
settlement in the allocation of the money, and to appropriate the
money in accordance with that allocation.

                              SUMMARY

             The   legislature, not    the   governor, has
          authority to     allocate and    appropriate oil
          overcharge funds distributed as a result .of two
          lawsuits. Section 155 of Public Law No. 97-377,
          96 Stat. 1830 (1982), was not intended to increase
          the role of the governor in allocating and
          appropriating funds received under that section.




                                          JIM     MATTOX
                                          Attorney General of Texas

MARY KELLER
Executive Assistant Attorney General

JUDGE ZOLLIE STKAKLFY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Sarah Woelk
Assistant Attorney General




                                p. 3636
