Proposed Implementation of Special Refund Procedures

DEPARTMENT OF ENERGY

Proposed Implementation of Special Refund Procedures

AGENCY: Office of Hearings and Appeals Department of Energy.

ACTION: Notice of proposed implementation of special refund procedures.

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SUMMARY: The Office of Hearings and Appeals (OHA) of the Department of

Energy (DOE) announces the proposed procedures for disbursement of

$18,853.02, plus accrued interest, in alleged crude oil overcharges

obtained by the DOE under the terms of a Remedial Order entered into

with Petroleum Carrier Company, Inc., Max B. Penn, and Rodney

Siegfried, Case No. LEF-0119. The OHA has tentatively determined that

the funds obtained through this Remedial Order, plus accrued interest,

will be distributed in accordance with the DOE's Modified Statement of

Restitutionary Policy Concerning Crude Oil Overcharges.

DATES AND ADDRESSES: Comments must be filed in duplicate within 30 days

of publication of this notice in the Federal Register, and should be

addressed to the Office of Hearings and Appeals, Department of Energy,

1000 Independence Avenue, SW., Washington, DC 20585. All comments

should display a reference to case number LEF-0119.

FOR FURTHER INFORMATION CONTACT: Richard T. Tedrow, Deputy Director

Office of Hearings and Appeals, 1000 Independence Avenue SW.,

Washington, DC 20585 (202) 586-8018.

SUPPLEMENTARY INFORMATION: In accordance with 10 CFR 205.282(b), notice

is hereby given of the issuance of the Proposed Decision and Order set

out below. The Proposed Decision and Order sets forth the procedures

that the DOE has tentatively formulated to distribute to eligible

claimants $18,853.02, plus accrued interest, obtained by the DOE under

the terms of a Remedial Order entered into with Petroleum Carrier

Company, Inc., Max B. Penn, and Rodney Siegfried on June 26, 1987. The

funds were paid towards the settlement of alleged violations of the DOE

price and allocation regulations involving the sale of crude oil during

the period June 1974 through December 1977.

The OHA has proposed to distribute the Remedial Order funds in

accordance with the DOE's Modified Statement of Restitutionary Policy

Concerning Crude Oil Overcharges, 51 FR 27899 (August 4, 1986) (the

MSRP). Under the MSRP, crude oil overcharge monies are divided between

the federal government, the states, and injured purchasers of refined

petroleum products. Refunds to the states would be distributed in

proportion to each state's consumption of petroleum products during the

price control period. Refunds to eligible purchasers would be based on

the number of gallons of petroleum products which they purchased and

the degree to which they can demonstrate injury.

Any member of the public may submit written comments regarding the

proposed refund procedures. Commenting parties are requested to provide

two copies of their submissions. Comments must be submitted within 30

days of publication of this notice in the Federal Register and should

be sent to the address set forth at the beginning of this notice. All

comments received in this proceeding will be available for public

inspection between the hours of 1 p.m. and 5 p.m., Monday through

Friday, except federal holidays, in the Public Reference Room of the

Office of Hearings and Appeals, located in Room 1E-234, 1000

Independence Avenue, SW., Washington, DC 20585.

Date: May 13, 1994.

George B. Breznay,

Director, Office of Hearings and Appeals.

Implementation of Special Refund Procedures

Names of Firms: Petroleum Carrier Company, Inc., Max B. Penn, Rodney

Siegfried

Date of Filing: December 7, 1993

Case Number: LEF-0119

Under the procedural regulations of the Department of Energy (DOE),

the Economic Regulatory Administration (ERA) may request that the

Office of Hearings and Appeals (OHA) formulate and implement special

refund procedures. 10 CFR 205.281. These procedures are used to refund

monies to those injured by actual or alleged violations of the DOE

price regulations.

In this Decision and Order, we consider a Petition for

Implementation of Special Refund Procedures filed by the ERA on

December 7, 1993, for crude oil overcharge funds. The funds at issue in

this petition were obtained from Petroleum Carrier Company, Inc., Max

B. Penn, and Rodney Siegfried (hereinafter collectively referred to as

``PCCI''). This Office issued a Remedial Order to PCCI finding

violations of the crude oil pricing regulations during the period from

June 1974 through December 1977. Petroleum Carrier Company, Inc., 16

DOE  83,009 (1987). That Order required PCCI to remit $2,569,093

($1,163,865.17 resulting from crude oil violations, plus $1,405,227.83

in interest accrued through March 31, 1984) to the DOE. The DOE

received $18,853.02 on December 6, 1993.* This Decision and Order

establishes the OHA's procedures to distribute those funds, as well as

the remainder of the settlement when it is remitted.

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\*\No additional monies are expected.

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The general guidelines which the OHA may use to formulate and

implement a plan to distribute refunds are set forth in 10 CFR part

205, subpart V. The subpart V process may be used in situations where

the DOE cannot readily identify the persons who may have been injured

as a result of actual or alleged violations of the regulations or

ascertain the amount of the refund each person should receive. For a

more detailed discussion of Subpart V and the authority of the OHA to

fashion procedures to distribute refunds, see Office of Enforcement, 9

DOE  82,508 (1981), and Office of Enforcement, 8 DOE  82,597 (1981).

We have considered the ERA's request to implement Subpart V procedures

with respect to the monies received from PCCI and have determined that

such procedures are appropriate.

I. Background

On July 28, 1986, the DOE issued a Statement of Modified

Restitutionary Policy in Crude Oil Cases, 51 FR 27899 (August 4, 1986)

(the SMRP). The SMRP, issued as a result of a court-approved Settlement

Agreement In re: The Department of Energy Stripper Well Exemption

Litigation, M.D.L. No. 378 (D. Kan. 1986), reprinted in 6 Federal

Energy Guidelines  90,501 (the Stripper Well Agreement), provides that

crude oil overcharge funds will be divided among the states, the

federal government, and injured purchasers of refined petroleum

products. Eighty percent of the funds, and any monies remaining after

all valid claims are paid, are to be disbursed equally to the states

and federal government for indirect restitution.

Shortly after the issuance of the SMRP, the OHA issued an Order

that announced its intention to apply the Modified Policy in all

Subpart V proceedings involving alleged crude oil violations. Order

Implementing the Modified Statement of Restitutionary Policy Concerning

Crude Oil Overcharges, 51 FR 29689 (August 20, 1986). In that Order,

the OHA solicited comments concerning the appropriate procedures to

follow in processing refund applications in crude oil refund

proceedings. On April 6, 1987, the OHA issued a Notice analyzing the

numerous comments and setting forth generalized procedures to assist

claimants that file refund applications for crude oil monies under the

Subpart V regulations. 52 Fed. Reg. 11737 (April 10, 1987) (the April

10 Notice).

The OHA has applied these procedures in numerous cases since the

April 10 Notice, e.g., New York Petroleum, Inc., 18 DOE  85,435 (1988)

(New York Petroleum); Shell Oil Co., 17 DOE  85,204 (1988); Ernest A.

Allerkamp, 17 DOE  85,079 (1988) (Allerkamp), and the procedures have

been approved by the United States District Court for the District of

Kansas as well as the Temporary Emergency Court of Appeals (TECA).

Various States filed a Motion with the Kansas District Court, claiming

that the OHA violated the Stripper Well Agreement by employing

presumptions of injury for end-users and by improperly calculating the

refund amount to be used in those proceedings. In re: The Department of

Energy Stripper Well Exemption Litigation, 671 F. Supp. 1318 (D. Kan.

1987), aff'd, 857 F. 2d 1481 (Temp. Emer. Ct. App. 1988). On August 17,

1987, Judge Theis issued an Opinion and Order denying the States'

Motion in its entirety. The court concluded that the Stripper Well

Agreement ``does not bar [the] OHA from permitting claimants to employ

reasonable presumptions in affirmatively demonstrating injury entitling

them to a refund.'' Id. at 1323. The court also ruled that, as

specified in the April 10 Notice, the OHA could calculate refunds based

on a portion of the M.D.L. 378 overcharges. Id. at 1323-24.

II. The Proposed Refund Procedures

A. Refund Claims

We now propose to apply the procedures discussed in the April 10

Notice to the crude oil Subpart V proceeding that is the subject of the

present determination. As noted above, $18,853.02 of an alleged crude

oil violation, plus interest, is covered by this proposed Decision. We

have decided to reserve the full twenty percent of the alleged crude

oil violation amount, or $3,770.60, plus interest, for direct refunds

to claimants, in order to ensure that sufficient funds will be

available for refunds to injured parties.

The process which the OHA will use to evaluate claims based on

alleged crude oil violations will be modeled after the process the OHA

has used in Subpart V proceedings to evaluate claims based upon alleged

overcharges involving refined products. E.g., Mountain Fuel Supply Co.,

14 DOE  85,475 (1986) (Mountain Fuel). As in non-crude oil cases,

applicants will be required to document their purchase volumes of

covered products and prove that they were injured as a result of the

alleged violations. Generally, a covered product is any product that

was either covered by the Emergency Petroleum Allocation Act of 1973,

15 U.S.C. Secs. 751-760, or if the product was purchased from a crude

oil refinery or originated in a crude oil refinery. See Great Salt Lake

Minerals & Chem. Corp., 23 DOE  88,118, at 88,305 (1993). Applicants

who were end-users or ultimate consumers of petroleum products, whose

businesses are unrelated to the petroleum industry, and who were not

subject to the DOE price regulations are presumed to have been injured

by any alleged crude oil overcharges. In order to receive a refund,

end-users need not submit any further evidence of injury beyond the

volume of petroleum products purchased during the period of price

controls. E.g., A. Tarricone, Inc., 15 DOE  85,495, at 88,893-96

(1987). However, the end-user presumption of injury can be rebutted by

evidence which establishes that the specific end-user in question was

not injured by the crude oil overcharges. E.g., Berry Holding Co., 16

DOE  85,405, at 88,797 (1987). If an interested party submits evidence

that is sufficient to cast serious doubt on the end-user presumption,

the applicant will be required to produce further evidence of injury.

E.g., New York Petroleum, 18 DOE at 88,701-03.

Reseller and retailer claimants must submit detailed evidence of

injury and may not rely on the presumptions of injury utilized in

refund cases involving refined petroleum products. They can, however,

use econometric evidence of the type employed in the Report by the

Office of Hearings and Appeals to the United States District Court for

the District of Kansas, In Re: The Department of Energy Stripper Well

Exemption Litigation, reprinted in 6 Fed. Energy Guidelines  90,507

(1986). Applicants who executed and submitted a valid waiver pursuant

to one of the escrows established in the Stripper Well Agreement have

waived their rights to apply for crude oil refunds under Subpart V.

Mid-America Dairyman, Inc. v. Herrington, 878 F. 2d 1448 (Temp. Emer.

Ct. App. 1989); accord Boise Cascade Corp., 18 DOE  85,970 (1989).

Refunds to eligible claimants who purchased refined products will

be calculated on the basis of a volumetric refund amount derived by

dividing the alleged crude oil violation amounts involved in this

determination ($18,853.02) by the total consumption of petroleum

products in the United States during the period of price controls

(2,020,997,335,000 gallons). Mountain Fuel, 14 DOE at 88,868 n.4.

As we stated in previous Decisions, a crude oil refund applicant

will be required to submit only one application for crude oil

overcharge funds. E.g., Allerkamp, 17 DOE at 88,176. Any party that has

previously submitted a refund application in the crude oil refund

proceedings need not file another application. That previously filed

application will be deemed to be filed in all crude oil proceedings as

the procedures are finalized. The DOE has established June 30, 1994, as

the final deadline for filing an Application for Refund from the crude

oil funds. See 58 F.R. 26,318 (May 3, 1993). It is the policy of the

DOE to pay all crude oil refund claims filed within this deadline at

the rate of $0.0008 per gallon. However, while we anticipate that

applicants that filed their claims within the original June 30, 1988

deadline will receive a supplemental refund payment, we will decide in

the future whether claimants that filed later Applications should

receive additional refunds. E.g., Seneca Oil Co., 21 DOE  85,327

(1991). Notice of any additional amounts available in the future will

be published in the Federal Register.

B. Payments to the States and Federal Government

Under the terms of the SMRP, we propose that the remaining eighty

percent of the alleged crude oil violation amounts subject to this

Decision, or $15,082.42, plus interest, should be disbursed in equal

shares to the states and federal government for indirect restitution.

The share or ratio of the funds which each state will receive is

contained in Exhibit H of the Stripper Well Agreement. When disbursed,

these funds will be subject to the same limitations and reporting

requirements as all other crude oil monies received by the states under

the Stripper Well Agreement.

It Is Therefore Ordered That:

The refund amount remitted to the Department of Energy by Petroleum

Carrier Company, Inc., Max B. Penn, and Rodney Siegfried pursuant to

the Remedial Order executed on June 26, 1987 will be distributed in

accordance with the foregoing Decision.

[FR Doc. 94-12423 Filed 5-19-94; 8:45 am]

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