Refunds Resulting From Btu Measurement Adjustments; Commission Action

DEPARTMENT OF ENERGY

[Docket No. RM84-6-038]

Refunds Resulting From Btu Measurement Adjustments; Commission

Action

December 27, 1993.

Take notice that for the reasons set forth below, the Federal

Energy Regulatory Commission (Commission) is ceasing further efforts to

recover overdue Btu refunds that are due in 147 cases where the first

seller is in bankruptcy proceedings under Chapter 7 or Chapter 11 of

the Bankruptcy Code.1 The Commission believes that further efforts

are not warranted because they are not likely to result in any

additional recovery, and the Commission's resources are better utilized

in other areas. The Commission emphasizes, however, that by this action

it is not waiving or extinguishing the Btu refund obligation required

to be paid by any bankruptcy court order.

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\1\The bankruptcy code is contained in Title 11 of the U.S.

Code. The first sellers are listed on Appendix A. Since some first

sellers owe refunds to more than one pipeline, the number of first

sellers is less than the number of cases.

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Background

In 1983, the United States Court of Appeals for the District of

Columbia Circuit vacated the Commission's regulations which permitted

first sellers to measure the Btu content of natural gas based on the

condition of the gas as actually delivered (the ``dry rule'') and

required maximum lawful prices under the Natural Gas Policy Act of 1978

(NGPA) to be calculated by measuring the Btu content under the ``wet''

rule that had been in effect under the Natural Gas Act.2

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\2\Interstate Natural Gas Association of America v. Federal

Energy Regulatory Commission 16 F.2d 1 (D.C. Cir. 1983), cert.

denied, 465 U.S. 1108 (1984).

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Order No. 399, et seq.,3 which implemented the court's

decision, required first sellers to refund all overcharges resulting

from the use of the ``dry rule'' by November 5, 1986. In addition,

interstate and intrastate pipelines were required to file reports

identifying first sellers who had not paid their Btu refunds,4 and

interstate pipelines were required to flow the Btu refunds through to

their customers.5

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\3\Order No. 399, 49 FR 37735 (Sept. 26, 1984), FERC Stats. &

Regs. [Regulations Preambles 1982-1985] 30,597 (Sept. 20, 1984);

Order No. 399-A, 49 FR 46353 (Nov. 26, 1984), FERC Stats. & Regs.

[Regulations Preambles 1982-1985] 30,612 (Nov. 20, 1984); Order No.

399-B, 50 FR 30141 (July 24, 1985), FERC Stats. & Regs. [Regulation

Preambles 1982-1985], 30,651 (July 18, 1985).

\4\Pipelines were required to file the reports by December 18,

1984, June 17, 1985, and January 5, 1987.

\5\The Commission held that the state regulatory agency that

regulates an intrastate pipeline may determine the disposition of

Btu refunds received by those pipelines.

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More than $1 billion of Btu overcharges have been refunded to

customers pursuant to Order No. 399, et seq. The pipelines' refund

reports initially showed 5,610 cases totalling over $140 million where

the Btu refunds had not been paid. Staff's efforts pursuing payment of

outstanding Btu refund obligations reduced the number of pending Btu

refund cases to 560 and the total of unpaid Btu refunds to

approximately $9.8 million. These numbers do not include 553 cases

where the Commission previously determined to cease further collection

efforts because such efforts were not likely to result in payment of

the Btu refund.6

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\6\See Notices published in the Federal Register on August 6,

1990 (55 FR 32,028), February 14, 1991 (56 FR 6,000), and June 16,

1992 (57 FR 26,836). These cases consisted of 467 cases where staff

could not locate the first seller; 28 cases where the first seller

filed for bankruptcy under Chapter 11 and the debt was less than

$2,000; and 58 cases where the first seller's assets had been

liquidated under Chapter 7. The notices emphasized that if the first

sellers were subsequently located, the cases would be reactivated.

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Discussion

As a result of its efforts pursuing the payment of outstanding Btu

refund obligations, the Commission has determined that the first

sellers in the 147 cases listed on Appendix A are in bankruptcy

proceedings under Chapter 7 or Chapter 11 of the Bankruptcy Code. The

refund obligation in these cases range from $112.61 to $709,463.38, and

totals $3,533,636.05. The Commission does not know the actual

disposition of the bankruptcy proceedings of the first sellers listed

on Appendix A. However, such knowledge is not necessary for the action

that the Commission is now taking. Most of the bankruptcy proceedings

were filed more than 4 years ago, and the Btu refund obligation will

have been treated in those proceedings in accordance with the

applicable provisions of the Bankruptcy Code. Accordingly, the

Commission believes that no purpose would be served by the Commission

continuing to process these cases. Therefore, the Commission will not

expend any further staff resources on these cases, and they will be

considered closed. This action, however, does not waive or extinguish

the payment of any Btu refund obligation that is required to be paid by

any order of the bankruptcy court.

The dollar range in these cases follows:

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No. of Refund

Dollar range cases obligation

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$100,001-$710,000.............................. 8 $1,761,854.11

50,001-100,000................................. 9 637,526.63

25,001-50,000.................................. 13 480,179.61

2,001-25,000................................... 80 631,442.18

100-2,000...................................... 37 22,633.52

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By direction of the Commission.

Lois D. Cashell,

Secretary.

Appendix A--First Sellers That Filed Chapter 7 or 11 Bankruptcy

A. Rex Jasper Jr.

Alan J. Antweil

Amarex Inc.

Ambra Oil & Gas Co.

Amcole Energy Corp.

American Public Energy Co.

Amquest Corp.

Arapaho Petroleum Inc.

Arrowhead Energy Co.

Bridge Oil (USA) Inc. (pred: Nucorp Energy Inc.)

Cayman Production Co.*

Clerk U.S. Bankruptcy Court of DC Reg. Bank 83-B-O

Damar

Delta Energy Resources

Eads Exploration Inc.

Earth Energy Resources 19

Earth Energy Resources Inc.

Energy Resources Oil

Enico Pipeline

Equipment Inc.

Fritz, J.F. (Payee Erin Baker, Trustee)

Frontier Exploration Inc.

G. Murrell (A/C Allied Bank of TX)

George Schurman

Great Western Resources

Herbert E. Russell

Heston Oil Co.

Ike Lovelady

Johnson Oil & Gas Corp.

L & L Operating Co.

League Minerals

Lingen Oil & Gas Inc.

Magic Circle Energy Corp.

Majestic Energy Corp.

Marine Contractors & Supply Inc.

Marion Corp.

McMurrey Petroleum Inc.

Mgf Mansfield Inc.

Mgf Oil Corp.

Milton Wessels/Constructive Trust/Uriah Exploration

Monterrey Petroleum

Morris R. Antweil

O'Connor & Young Drilling & Chapman Drilling

Ohio Partners Oil Co.

Originala Petroleum

Owen, J.P. & Co. Inc.

Partners Oil Co.

Pecos Irrigation Co.

Petromark Resources Co.

Pickard Oil Co. & J.W. Kirk Inc.

Placid Oil Co.

Pontchartrain Oil & Gas Corp. #2

Ports of Call Oil Co.

Quintex Petroleum Corp.

R. N. Hillin d/b/a Hillin Production Co.

Ramsey Property Mgmts, Inc. (Champion Reserve-CRI)

Resources Investment Corp.

Richland Resources Corp.

Robinson Brothers

Robinson Brothers Drilling Inc.

Royce Lawson*

S & J Operating Co.

Seneca Oil Co.

Smith Petroleum Co.

Stockton Oil and Gas

Taylor Operating Co.

Tex-OK Petroleum Inc.

Texas General Petroleum Corp.

Texas General Resources Inc.

Tomlinson Oil Co. Inc.

Tondu Energy Corp.*

Trans-Western Exploration Inc. (A/C MBank Dallas N)

Transcontinental Oil Corp. (C/O Paul v. Degenhart)

William W. Hamilton (Attn: Brett Martin)

Winter Hawk Ltd.

*Filed Chapter 7 Bankruptcy.

[FR Doc. 93-32043 Filed 12-30-93; 8:45 am]

BILLING CODE 6717-01-P