                                                     Septem ber 19, 1977


77-50    MEMORANDUM OPINION FOR THE
         DIRECTOR OF THE NAVY PETROLEUM
         AND OIL SHALE RESERVES, DEPARTMENT
         OF THE NAVY
         Transfer of Authority of the Secretary of the Navy
         to the Secretary of Energy—Naval Petroleum
         Reserve


   This is in response to your request for our opinion concerning the
effect of the Department of Energy Organization Act, Pub. L. No. 95-
91, 91 Stat. 565 upon § 9 of the contract between the United States,
acting through the Secretary of the Navy, and a major oil company.
   The purpose of the contract was to provide a unit plan o f develop­
ment and operation in producing petroleum from the lands owned by
the oil company and the Navy within the boundaries of Naval Petro­
leum Reserve No. 1. Section 9 of the contract in substance provides
that:
    (a) In the event the Operating Committee is unable to agree upon
    any matter arising in the performance of its functions, such matter
    shall be referred to the Secretary of the Navy for determination;
    and his decision in each instance shall be final and shall be binding
    upon Navy and the oil company.
    (b) In the event the Engineering Committee is unable to agree
    unanimously upon any matter subject to determination by it, said
    Committee shall notify both Navy and the oil company thereof and
    shall refer such matter to the Secretary of the Navy for determina­
    tion. Thereupon the Secretary of the Navy on his own initiative
    may, and upon the request of [the oil company] shall, submit the
    matter to an independent petroleum engineer, to be selected by
    him, for the purpose of securing an advisory report thereon from
    such engineer. The compensation and expenses of such engineer
    shall be borne by Navy and [the oil company] in the respective
    percentages then obtaining under Section 2, and a copy of such
    report shall be supplied to [the oil company]. After consideration
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     of the matter, the Secretary of the Navy shall render his decision
     thereon and such decision in each such instance shall be final and
     shall be binding upon Navy and [the oil company].
  Section 307 of the Act provides in part:
     There are hereby transferred to and vested in the Secretary all
     functions vested by chapter 641 o f title 10, United States Code, in
     the Secretary of the Navy as they relate to the administration of
     and jurisdiction over—
     (1) Naval Petroleum Reserve Numbered 1 (Elk Hills), located in
     Kern County, California, established by Executive order of the
     President, dated September 2, 1912. . . .
   The question you have asked is whether the Secretary of the Navy’s
role in determining disputes under § 9 of the Contract has devolved
upon the Secretary of Energy by reason of § 307 of the Act.
   The Secretary of the N avy acquired his authority over and his
responsibility for Naval Petroleum Reserve No. 1 by reason of the
statutory provisions now codified in Chapter 641 of Title 10, United
States Code. In the absence of that chapter, the Secretary of the Navy
would have no authority to undertake to settle disputes between the
United States and the oil company concerning the operation of Naval
Petroleum Reserve No. 1. Because the Secretary of the Navy’s role in
settling disputes under the Contract was vested in him by Chapter 641
of Title 10, United States Code (as well as by agreement of the parties),
and because the functions o f the Secretary of the Navy under Chapter
641 have now been transferred to the Secretary of Energy by operation
of law pursuant to § 307 o f the Act, the function of the Secretary of the
Navy under § 9 o f the Contract has also been transferred to the Secre­
tary of Energy.
  T he correctness of this conclusion can be more readily seen by
assuming that the contract provided that disputes were to be settled by,
for example, the Administrator of the Energy Research and Develop­
ment Administration, an Office that will terminate when its functions
are assumed by the Secretary of Energy. Act, §§ 301(a), 703. In such a
case, it would be beyond dispute that the function of settling disputes
under the hypothetical contract would vest in the Secretary of Energy.
Because the A ct provides in § 705(a) that all contracts in effect on the
date the A ct becomes effective shall remain in effect, it is clear that the
hypothetical contract would not terminate. It is equally clear that the
existence of the contract could not be a basis for continuing the other­
wise terminated Office of the Administrator. Because the Secretary of
the Navy has other duties in addition to those transferred to the
Secretary o f Energy, he will continue to hold his Office as Secretary of
the Navy; however, this does not support a different result with respect
to those of his functions transferred to the Secretary o f Energy than
would obtain in the hypothetical case above.
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   Accordingly, it is my opinion that § 307 of the Act transfers the
function of resolving disputes under the Contract from the Secretary of
the Navy to the Secretary of Energy when the Secretary of the Navy’s
other functions under Chapter 641, Title 10, United States Code, are
transferred.
                                         J o h n M. H a r m o n
                                       Assistant Attorney General
                                               Office o f Legal Counsel




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