Wednesday with Avrom – Pull it Together!

In a prior post, Avrom taught us that ideas unfold in their own time. We need the space and time to understand the challenge, sit with it, analyze it, and trust that we will have a flash of insight. But what happens when the insight doesn’t come, and a solution appears impossible?

Here is an incredible story from Avrom and actionable insights you will want to add to your toolkit.

In 1973, due to American support of Israel in its war with Egypt and Syria Arab, oil producers cut off oil exports to the U.S. This caused oil prices to soar from $3 to nearly $12 a barrel and shed light on America’s dependency on Middle Eastern oil.

Numerous attempted legislative solutions were enacted. For instance, legislation capped the price at which U.S. oil companies (referred to as “Big Oil”) could sell “old” oil – that is, oil discovered from domestic wells before a certain year. However, “new” domestic oil could sell at market rates. This was intended to depress prices without disincentivizing new domestic drilling operations. Not surprisingly, Big Oil preferred to sell new oil at the higher market rate and pulled much of the old oil from the market. The U.S. Department of Energy (DOE) fought many times with Big Oil on the matter of what oil was truly “new”.

Moreover, legislation exempted from price controls wells that produced 10 barrels a day or less, known as “stripper wells”. Litigation ensued as the DOE and Big Oil battled over the classification of several thousand oil wells from 1973-1981, seeking to deny stripper well status. Appreciating this would be protracted and contentious for years to come, a federal judge in Kansas (we will call him Judge T) granted stripper well status to the wells in questions allowing Big Oil to charge market rates. Judge T was overruled and as the litigation continued the rules got even more complex (the difference between the capped rate and market rate was required to be placed in escrow, which by 1986 had ballooned to $1.4 billion and involved 40,000 claimants).

Additionally, special privileges were given to subsidize independent and small U.S. refineries. A Robin Hood type program was implemented requiring “advantaged” refineries to pay “disadvantaged” refineries, which also created its share of litigation.

In 1981, President Reagan terminated pricing and allocation controls. Over the next few years complex, multi-party litigation ensued. Big Oil was fighting Big Oil and together fighting the 50 states, which were fighting among themselves; meanwhile, the Federal government was fighting on all fronts. Collectively, approximately $4 billion (equivalent to $10 billion today) was embroiled in this intractable web of litigation.

At this time, Avrom was a senior lawyer in the DOE. He was on the front-line of all the litigation and understood how deeply the parties despised each other. He also realized that each of the lawsuits individually had little chance of being resolved. But Avrom had a hunch; if he could consolidate all the cases and look at certain factors holistically, he might be able to get the various parties to agree to a settlement.

Avrom knew that Judge T was vacationing in Miami and more than anything wanted to clear these cases from his docket so he could relax at the beach. Avrom flew down to Miami and met Judge T for coffee and explained his plan. The Judge was ecstatic and believed they had a chance. He said to Avrom, “You work on Big Oil and the States and I will handle Congress.” “Deal!” Judge T then let out a sigh of relief and said to Avrom, “Bless you my son!”

Over the next 8 months Judge T and Avrom traveled the country, managed big egos and delicate compromises. Eventually, the plan gained traction and coalesced in an omnibus settlement. The monumental settlement, which was the largest civil settlement at the time, was approved in July of 1986 by Judge T in Kansas.

As a mentor of mine used to say, “If you’re wrestling an alligator, it’s better to be on top.” No one at the DOE told Avrom to fight this alligator but he saw an interesting problem the resolution of which would both be professionally fulfilling and help provide much needed funds earmarked for the citizenry of the states that were parties to the litigation. If he did nothing, the litigation would go on for years. Avrom wrestled the alligator and came out on top, but, other than Judge T and a handful of lawyers, Avrom never told anyone else about the instrumental role he played, until now.

Here’s the lesson – sometimes the solution to a multi-faceted problem is not linear and must be approached holistically. A solution to each sub-issue may be impossible, but a holistic solution may solve global issues and mitigate the impact or the relevance of smaller ones. Counterintuitively, the holistic solution may be palatable to all even though the individual solutions would be palatable to none.

When you a hit brick wall, think broadly, bravely and boldly. Consider how multiple problems, even seemingly unrelated ones, can be added to the mix!

This is part 13 in the Wednesday with Avrom series, please check out more here.