Chalk one up for the permanent government; the bureaucracy took on Reagan and big oil - and won.

• Author: Jaroslovsky, Rich
• Position: Exxon Corp.

Chalk One Up for the Permanent Government

On February 27, 1986, the computers linking the nation's banking system glowed as a series of electronic impulses darted back and forth between accounts representing Exxon Corporation, the world's largest oil company, and the U.S. Treasury. When the electrons finished their little dance, the government's coffers had swollen by $2.1 billion. And Exxon had paid the largest civil regulatory judgment ever awarded against an American corporation.

That $2.1 billion was the climax--though hardly the end--of a long shadow war between the government and the nation's oil industry, a struggle in which the government tried to track down and prosecute violations of the federal price controls on crude oil and petroleum products that were in effect from 1973 until Ronald Reagan ended them in 1981. These overcharge cases generated blizzards of publicity when they were filed during the Carter administration in the days of $40-a-barrel oil and blocks-long gasoline lines. At the time, oil companies and conservative ideologues claimed that the charges were vastly overblown and, in any event, would never stand up in court. Today, the companies are a good deal poorer, and the critics a good deal quieter.

For a comparatively minuscule federal investment, the program has achieved spectacular success, having so far generated some $6 billion in refunds to customers, payments to the government, and other forms of restitution. Proceeds have gone to schools and hospitals, to poor people and budget-slashed state governments, and even to help whittle down the federal deficit. Yet this triumph has gotten no huzzahs from the White House spokesman, no mention in Reagan Rotary Club speeches, no lavish press conference. In fact, the program's success must gall this administration, since it flies in the face of every cherished conservative belief about the role of government in the regulation of the marketplace. Moreover, it is a program the Reagan administration did its best to gut.

The oil-overcharge program provides a classic Washington tale about the inertial forces of government--how a program accumulates enough momentum to keep going even after the people who set it in motion have left. White House officials are forever arguing, usually with justification, that permanent Washington--the "iron triangle' of interest groups, Congress, and the bureaucracy--thwarts presidential initiatives and paralyzes the political system. On occasion, though, as the oil-overcharge program shows, the iron triangle also strikes gold.

These days, with gasoline relatively cheap and oil company profits in the doldrums, it may seem uncharitable--and, the oil companies would argue, counterproductive--to force Exxon, Mobil, et al. to cough up. On the other hand, the overcharging cases provide evidence that they were less than charitable back in the days when OPEC was riding high and the blue-eyed Arabs hitched up and tagged along. Some might call it just deserts.

The regulations on the price and supply of petroleum products that spawned the overcharge cases originated with Richard Nixon's temporary wage and price controls. Although controls were soon lifted on most other goods and services, they became an all-but-permanent part of the nation's energy policy after the Arab oil embargo. The regulations were added to and modified as the energy picture changed, and problems and inconsistencies were often addressed by band-aid changes. As the rules became more complex, they became harder to enforce. By the time the Carter administration took office in 1977, they had developed into an almost impenetrable maze.

To streamline the process, the administration appointed a special counsel in the new Energy Department to investigate and prosecute violations by the country's 35 biggest oil refiners. Carter aides hoped to find a high-powered, prestigious figure to fill the job, but no one they approached seemed interested. The post ultimately fell to Paul Bloom, then a little-known, 38-year-old lawyer in the Energy Department.

"Paul Laurence Bloom loves to affect the part of a none-too-bright country lawyer lost among the city slickers,' The New York Times commented a few years later. But few of those he made miserable in the oil companies, the Justice Department, and his own Energy Department were convinced by the pose.

Bloom inherited a program that was demoralized and all but dysfunctional. For example, one team auditing Mobil had been allowed to remain in New York even though the company's oil operations had moved to Houston. Bloom moved quickly to reorganize and expand. The Mobil team was dispatched, kicking and screaming, to Houston. He added hundreds of new auditors and lawyers, and won the right to draft--or dragoon--personnel from various...