Question 16

16. Does absence from duty by a temporary employee, who is not subject to call but whose name is still carried on the rolls, constitute a break in service when considering the length of continuous service?

Since the act here under consideration relates to substitute postal employees it is assumed that your reference to "temporary employee” in this question has relation only to a substitute postal employee, and upon that assumption this question is for answering in the negative.

Question 17

17. In determining the total number of hours continuous service rendered by substitute employees, will each day's absence on leave with pay be considered the same as 8 hours' service?

This question is answered in the affirmative. See 39 U. S. C. 104; 19 Comp. Gen. 177; decision of March 31, 1944, B-5235, 23 Comp. Gen. 739. Compare 13 Comp. Gen. 295, 370, 444; 14 id. 761; 16 id. 757; 18 id. 191, 575; 20 id. 555; 21 id. 853.

Question 18

18. May a substitute post office clerk who has transferred to a position as substitute clerk in the Railway Mail Service at a higher hourly rate of compensation be given credit for the number of hours service rendered as a substitute post office clerk for the purpose of fixing his rate of compensation as a substitute clerk in the Railway Mail Service?

This question is answered in the negative. See answers to questions 10, 11, and 15.

Question 19

19. Does section 3 of this Act abrogate the administrative authority to credit substitute postal employees while they are in military service with the same average number of hours service during military service as the same substitutes served during the same period of time last preceding their entry into the military service, or for a longer period of prior service, in fixing the salary rate upon advancement to regulars! (See your decision (B-16546) 20 Comp. Gen. 789.) The rule stated in the decision of May 20, 1941, 20 Comp. Gen. 789, to which you refer, is as follows (quoting from the syllabus):

Since substitute postal employees do not always work full time, it would be improper to credit them, upon restoration to their civilian positions under the terms and conditions of the Selective Training and Service Act of 1940 or Public Resolution No. 96, approved August 27, 1940, as amended, with 8 hours a day for the time they were in the military service in fixing their salary rate upon advancement to regulars, but the Postmaster General may adopt a rule for crediting time in the military service based on the average number of hours' service during a period preceding the military service.

The proviso to section 3 of the act of March 24, 1944, authorizing pro rata credit for military service upon the basis of 2,448 hours for each year of such service is applicable in computing "Allowable service under the provisions of this Act" (quoting from the first part of section 3), which includes allowable service creditable to a substitute

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postal employee upon appointment to a regular position as provided by section 2 of this act. Accordingly, there is required the conclusion that the proviso to section 3 of the act of March 24, 1944, supersedes and renders inoperative the rule stated in the cited decision. This question is answered in the affirmative.

(B-40964)

SALES-ROYALTY CRUDE OIL UNDER FEDERAL LEASE-EFFECT OF GOVERNMENT PRICE-FIXING ORDERS

It would be unlawful as a violation of section 4 (a) of the Emergency Price Control Act of 1942 for the United States to demand or receive for royalty oil delivered after the effective date of an applicable price regulation, issued pursuant to said act, any amount in excess of the maximum price fixed by said regulation, even though such oil were delivered pursuant to a contract which had been consummated prior to the effective date of the regulation and which provided for the payment of a higher price than that fixed by said regulation.

Where a maximum price regulation, issued pursuant to the Emergency Price Control Act of 1942, establishes a price for the sale of a commodity below that fixed under an existing contract, affirmative action should be taken to amend the contract to provide for a price which will not violate the applicable price maximums; otherwise there no longer would be any binding legal obligation upon the parties under the contract-or, at least, the regulation would have the effect of temporarily suspending the obligation of the parties and such amendment should provide for reversion to the original contract price in the event the maximum price ceases to be effective prior to the termination of the contract.

Comptroller General Warren to the Secretary of the Interior, April 14, 1944: I have your letter of March 23, 1944, as follows:

On June 22, 1942, four separate agreements were entered into by and between the United States and the Perry Petroleum Company for the sale and purchase of royalty crude oil accruing to the Government under Federal oil and gas leases in the Lance Creek field, Wyoming. These agreements, the originals of which are transmitted herewith, are as follows:

I-Sec. No. 366, for a period of 5 years beginning April 1, 1944, covering all royalty oil accruing under leases Cheyenne 036996 (a) and (b), 037094 (except as to the NW4NE1⁄44 sec. 33, T. 36 N., R. 66 W.), and 063018.

I-Sec. No. 367, for a period of 5 years beginning April 1, 1944, covering all royalty oil accruing under leases Cheyenne 037093, 037094 (as to the NWNE1⁄4 sec. 33, T. 36 N., R. 66 W.), 063019, 058838 (a), 058885, and 060079.

I-Sec. No. 368, for a period of 5 years beginning April 1, 1944, covering all royalty oil accruing under leases Cheyenne 036289 (a) and (b), 037069, and 037066.

I-Sec. No. 369, for a period of 5 years beginning April 1, 1944, covering all royalty oil accruing under leases Cheyenne 036290 (a) and (b), and 036291 (a) and (b). The four agreements are identical except for the leases from which royalty oil accruals are sold. Article IX of each agreement provides that the Secretary of the Interior specifically reserves the right to cancel the agreement for any reason deemed sufficient in his discretion at any time more than 90 days prior to April 1, 1944. On December 31, 1943, the Department determined that the option to cancel should not be exercised. Thereafter, as required by Article XI of the agreements, the Perry Petroleum Company submitted acceptable surety bonds in the amount of $40,000.

Article II, sec. 8 of MPR 436, 8 F.R., p. 11370, provides in part, as follows:

"MAXIMUM PRICES FOR CRUDE PETROLEUM

Note: How to determine maximum prices. To determine the maximum price for crude petroleum, first examine section 8 to see whether a specific price has been established for the particular field. If no price has been established for the particular field, then the formula in section 9 shall be used to determine the maximum price.

Sec. 8. Specific prices. The following specific prices shall be the maximum prices for the items named at the points enumerated below. If a contract was in effect on October 1, 1941, for the given pool applicable to such production or for the purchase of crude petroleum at a point other than at the receiving tank at a price in excess of such posted price, and if a specific maximum price has been established for crude petroleum produced at such pool under section 8 then the maximum price at the receiving tank or at such other point for the production covered by the contract, or any renewal of such contract, or a new contract between the same buyer and seller concerning the same production, shall be the sum of the contract price and the difference between the specific price as set out in this section 8 and the highest posted price as of October 1, 1941.

Illustration: A contract for the purchase of crude petroleum was in effect on October 1, 1941 at 25¢ per barrel above the posted price, which posted price was $1.00 per barrel, and a specific price for the pool is established at $1.10 per barrel. The maximum price will be the sum of the contract price and the difference between the specific price and the posted price. The difference between the specific price (1.10) and the posted price (1.00) is .10, therefore the maximum price would be 10 plus the contract price ($1.25) or $1.35.

Where contracts of the type described above were in effect on October 1, 1941, duly authenticated copies of such contracts shall be filed by the purchaser with the Petroleum Branch of the Office of Price Administration at Washington, D. C. within thirty days after August 19, 1943, unless copies of said contracts have heretofore been filed with the Office of Price Administration."

As of August 19, 1943 (see the last paragraph of the quotation from Article II, sec. 8 of MPR 436, supra), no specific price had been established for the Lance Creek field by the Office of Price Administration. However, as the agreements were considered to be in effect as of October 1, 1941, even though deliveries thereunder are not to commence until April 1, 1944, it was deemed quite probable that a specific price would be established for the Lance Creek field pursuant to Article II, sec. 8 (m) of MPR 436 prior to the commencement of deliveries. Consequently, in order to preserve the price structure established by the agreements under the then existing provisions of MPR 436, the Acting Director of the Geological Survey, by a letter to the Petroleum Branch of the Office of Price Administration dated September 16, 1943, transmitted authenticated copies of the agreements for filing, stating in part, as follows:

"Although the agreements were not reduced to formal writing until June 1942, this office takes the position that they are evidence of contracts actually in existence prior to October 1, 1941, for the following reasons: The advertisement and specifications for bids on the Lance Creek royalty crude petroleum were issued on July 28, 1941; the bids received pursuant to the advertisement were opened on August 20, 1941; and the bid of the Perry Petroleum Company was accepted in behalf of the United States by the Assistant Secretary of the Interior on August 26, 1941

"The enclosed documents are believed to fall clearly within one of the categories described in article II, section 8, of MPR 436; i. e., as being contracts that were in effect on October 1, 1941, for the purchase of crude petroleum at the receiving tank at a price in excess of the highest posted price as of October 1, 1941, for the given pool applicable to the production involved under said contracts. It is noted that the above-quoted provision requires the 'purchaser' to file contracts with your office. However, this office has not been informed that authenticated copies of the agreements in question have been filed by the Perry Petroleum Company. Therefore, the enclosed agreements are submitted with the request that they be treated as having been filed in compliance with section 8 of MPR 436, supra, and that the price stipulated to be paid for the crude petroleum sold thereunder be recognized as a maximum price established pursuant to said regulation." Article II, sec. 9 of MPR 436. 8 F. R., p. 11373, provides in part, as follows: "Sec. 9. Formula for determining maximum prices. (a) The maximum price at the receiving tank for crude petroleum from any given pool shall be the posted purchase price as of October 1, 1941 for such pool.

"(b) Where on October 1, 1941, there was for any given pool no posted purchase price, or more than one posted purchase price, the maximum price for a particular producer at the receiving tank for crude petroleum from such pool shall be the price paid for crude petroleum at any receiving tank of the same producer as of October 1, 1941 unless this price is below the highest of the posted purchase prices, if any, and in that case, the maximum price shall be the highest posted purchase price: Provided, however, That a price paid pursuant to a contract in effect on October 1, 1941 and entered into prior to that date, shall not be considered in determining the maximum price for crude petroleum unless the contract price reflected current market conditions on or about October 1, 1941."

At the time the agreements were filed with the Office of Price Administration, Article II, sec. 9 (c) of MPR 436, 8 F. R., p. 11373, provided as follows:

"(c) Where a contract was in effect on October 1, 1941 for the purchase of crude petroleum at the receiving tank at a price in excess of the highest posted purchase price for the given pool applicable to such production, such contract price shall be the maximum price at the receiving tank for the production covered by the contract, or any renewal of such contract, or a new contract between the same buyer and seller concerning the same production."

Article VI of each of the agreements in question reads in part, as follows: "The GOVERNMENT agrees to accept and the PURCHASER agrees to pay for said royalty oil a price of eight cents (84) per barrel over the price per barrel regularly posted by the major purchasers of crude oil in the Mid-Continent area for oil of 40° A. P. I. gravity; provided, that if at any time during the term of this agreement the posted field price for Lance Creek crude oil should be higher than the price hereinbefore agreed upon, the PURCHASER agrees to pay such higher posted field price."

It was naturally assumed that pursuant to the above-quoted provision of MPR 436 the maximum permissible price which could be charged the purchaser under the agreements was the price stipulated in said agreements; i. e., a price of 8 per barrel over the Mid-Continent posted field price of $1.25 per barrel for crude oil of 40° A. P. I. gravity, or $1.33 per barrel.

However, effective January 29, 1944, Article II, sec. 9 (c) of MPR 436 was amended by MPR, Amendment 7, 9 F. R., p. 945, as follows:

"Section 9 (c) is amended to read as follows:

"(c) Where a contract was in effect on October 1, 1941, for the purchase of crude petroleum at the receiving tank at a price in excess of the highest posted purchase price for the given pool applicable to such production and deliveries were made prior to or within sixty days after October 1, 1941, in accordance with such contract, then the price actually charged on October 1, 1941 or on the first delivery after October 1, 1941 shall be the maximum price for the production covered by the contract.'

"This amendment shall become effective January 29, 1944."

And effective February 12, 1944, Article II, sec. 8 (m) of MPR 436 was amended by MPR 436. Amendment 8, 9 F. R., p. 1532, as follows:

"Section 8 (m) (2) is added to read as follows:

"(2) Lance Creek Field and Salt Creek Field. The maximum price at the receiving tank for crude petroleum produced in Lance Creek Field, Niobrara County, Wyoming, and the Salt Creek Field, Natrona County, Wyoming, except crude petroleum produced from the Tensleep Sand, shall be as follows:

"This amendment shall become effective February 12, 1944."

Were it not for the amendment to section 9 (c), Article II of MPR 436, supra, it would appear that section 8 of Article II could have been construed as authorizing a maximum price of $1.46 per barrel, as between the United States and

Perry Petroleum Company, thus permitting, in the absence of further agreement between the parties, the sale of the royalty oil at the originally agreed upon price of $1.33 per barrel or permitting, if otherwise legally feasible and mutually agreeable to the parties thereto, an amendment of the agreements to provide for a maximum price of $1.46 per barrel. Under the original provisions of section 9 (c) the agreements would have fallen into the category of contracts in effect as of October 1, 1941, and the price stipulated in the agreements would have been controlling even though deliveries were not to take place until April 1, 1944. Using the illustration given in section 8, the agreements are for the purchase of crude petroleum at 21 cents per barrel above the posted price, which posted price is $1.12 per barrel. The specific applicable price for the pool has since been established at $1.25 per barrel. The maximum price would have been the sum of the contract price and the difference between the specific price and the posted price. The difference between the specific price ($1.25) and the posted price ($1.12) is 13 cents, therefore the maximum price would have been 13 cents plus the contract price ($1.33) or $1.46.

Section 9 (c), as amended, clearly appears to affecct the price provivsions of the agreements discussed above, with the exception of Agreement I, Sec. No. 366, which the Department believes, for reasons hereinafter stated, does not fall within its purview. Consequently, it would seem that the specific price established in section 8 (m) (2) now governs as to the agreements other than I, Sec. No. 366, and that $1.25 per barrel is the maximum price for which the Government's royalty crude oil may be sold thereunder. The following questions, therefore, are presented for your decision:

1 (a). Are the prices stipulated in Agreements I, Sec. Nos. 367, 368, and 369, adjustable without specific amendment between the parties to a price of $1.25 per barrel for the period that maximum price control remains in effect?

(b) If so, may the original contract prices be applied for the unexpired period of the agreements in the event that price control ceases to be effective prior to the termination of said agreements?

2. If the prices stipulated in these agreements are held not to be adjustable, as indicated above, may the agreements be amended by the parties, if the purchaser is agreeable to such amendment, to provide for a price of $1.25 per barrel during the period price control remains in effect, with provision for reversion to the original contract price in the event the maximum price ceases to be effective prior to the termination of the agreements?

Under the provisions of section 4 (a) of the Emergency Price Control Act of 1942, 56 Stat. 28; 50 U. S. C., Append., sec. 904 (a), it is unlawful for a personwhich term under section 302 (h) of the Act includes the United States-to sell or deliver, under any contract theretofore or thereafter entered into, any commodity at a price in excess of the maximum price established therefor under the Act. In this connection, see 22 Comp. Gen. 484, and 21 Comp. Gen. 1046. Article XV of the agreements provides:

"It is understood and agreed by and between the GOVERNMENT and the PURCHASER that this agreement shall be subject to all war or emergency laws of Congress now or hereafter enacted and to all valid orders, rules, and regulations issued pursuant to such laws, anything in Article XIV to the contrary notwithstanding."

The Department is of the opinion that under the provisions of section 4 (a) of the Emergency Price Control Act of 1942, supra, and of Article XV of the agreements, said instruments-I-Sec. Nos. 367, 368, and 369-should be construed as having been amended by agreement between the parties and through operation of law and that payments may be accepted at $1.25 per barrel without express amendment or supplemental agreement. It is, therefore, proposed to make deliveries of royalty crude oil to, and bill the contractor at $1.25 per barrel under Agreements I-Sec. Nos. 367, 368, and 369, commencing April 1, 1944.1 It is also the opinion of the Department that should the maximum prices now established for the Lance Creek field cease to be effective before these agreements expire, the prices stipulated therein may be applied for their unexpired term.

With respect to Agreement I-Sec. No. 366, however, the Department is of the opinion that the contract price stipulated therein is a permissible price under the provisions of MPR 436. It will be observed that Article II, section 8 of MPR

A relatively small portion of the Government's Lance Creek royalty oil is less than 40° A. P. I. gravity. Under the construction which the Department proposes to place on these agreements the price which would be charged for such oil would be the Ò. P. A. specific applicable maximum price based on gravity.