                                                       D ecem ber 14, 1977


77-69     MEMORANDUM OPINION FOR THE
          DIRECTOR OF THE NAVAL PETROLEUM
          AND OIL SHALE RESERVES, DEPARTMENT
          OF ENERGY

          Presidential Approval of Naval Petroleum Reserve
          Contract NOd 4219-2664


   This is in response to your request that this Office reconsider the
A ttorney General’s statement, drafted by this Office, that Presidential
approval of Naval Petroleum Reserve Contract NOd 4219-2664 was
required by 10 U.S.C. §7431(a) (Supp. 1976). That statement reads as
follows:
    [w]e are of the opinion that the Secretary of the Navy is author­
    ized to enter into Contract NOd 4219-2664, subject to consultation
    with Congress and the approval of the President, as required by 10
    U.S.C. § 7431(a) (Supp. 1976).
You have evidently understood this to mean that the statute required
Presidential approval of the contract in question.
   Section 7431(a) enumerates a number of types of contracts that re­
quire the approval of the President after consultation with Congress.
The common element of these transactions is that they involve the
possible diminution of the rights of the United States with respect to
ownership of the reserves, production, or sale of petroleum from the
reserves, or receipt of moneys due to the United States on account of
the reserves. Contract NOd 4219-2664 gives the consent of the United
States to the transfer of certain rights and liabilities under previous
contracts with Standard Oil Company of California (“Socal”) to a
wholly owned subsidiary. Socal guarantees the payment of all future
liabilities o f the subisidiary, the subsidiary assumes all of the existing
liabilities of Socal, and both agree that the United States is not liable
for any new costs, taxes, or expenses arising from the agreement.
Accordingly, the contract does not fall within the categories enumer­
ated by § 7431(a).

                                   278
   The statement meant the contract was authorized by law but that
Congress should be consulted and Presidential approval obtained to the
extent required by 10 U.S.C. § 7431(a) (Supp. 1976). Because this con­
tract is not within § 7431(a), the reference to action required by that
statute should be disregarded.
                                              L eon U lm an
                               Deputy Assistant Attorney General
                                              Office o f Legal Counsel




                                 279
