Proposed Implementation of Special Refund Procedures

DEPARTMENT OF ENERGY

Office of Hearings and Appeals

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

$870,000, plus accrued interest, in alleged crude oil overcharges

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

with Dane Energy Company, Case No. LEF-0122. The OHA has tentatively

determined that the funds obtained through this Consent 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 on or before

July 6, 1994, 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-0122.

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 $870,000, plus accrued interest, obtained by the DOE under

the terms of a Consent Order entered into with Dane Energy Company on

December 16, 1993. 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 December 1978 through

December 1980.

The OHA has proposed to distribute the Consent 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.

Dated: May 31, 1994.

George B. Breznay,

Director, Office of Hearings and Appeals.

Proposed Decision and Order of the Department of Energy

Implementation of Special Refund Procedures

Name of Firm: Dane Energy Company

Date of Filing: April 8, 1994

Case Number: LEF-0122

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 April

8, 1994, for crude oil overcharge funds. The funds at issue in this

petition were obtained from Dane Energy Company (Dane). This Office

issued a Remedial Order to Dane finding violations of the crude oil

pricing regulations during the period December 1978 through December

1980. Dane Energy Co., 22 DOE 83,007 (1992). That Order required Dane

to remit $8,361,227.88 to the DOE. Believing that it serves the public

interest for DOE to compromise its claims against Dane on an ability-

to-pay basis where, as here, the financial status of the covered party

can be satisfactorily determined, DOE agreed to enter into a Consent

Order, whereby Dane agreed to remit $870,000. The DOE received $870,000

on April 8, 1993. This Decision and Order establishes the OHA's

procedures to distribute those funds.

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 Dane 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 Fed. 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. The OHA then 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 FR 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. 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, $870,000 of an alleged crude oil

violation is covered by this proposed Decision. We have decided to

reserve the full twenty percent of the alleged crude oil violation

amount, or $174,000, 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 ($870,000) 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 $696,000, 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 Dane Energy Company pursuant to the Consent

Order executed on April 8, 1993 will be distributed in accordance with

the foregoing Decision.

[FR Doc. 94-13693 Filed 6-3-94; 8:45 am]

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