Proposed Consent Order with Murphy Oil Corporation, Murphy Oil USA, Inc. and Murphy Exploration & Production Company

DEPARTMENT OF ENERGY

Economic Regulatory Administration

Proposed Consent Order with Murphy Oil Corporation, Murphy Oil

USA, Inc. and Murphy Exploration & Production Company

AGENCY: Economic Regulatory Administration, DOE.

ACTION: Notice of proposed consent order and opportunity for public

comment.

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SUMMARY: The Economic Regulatory Administration (ERA) announces a

proposed Consent Order between the Department of Energy (DOE) and

Murphy Oil Corporation, Murphy Oil USA, Inc. and Murphy Exploration &

Production Company (Murphy). The agreement proposes to resolve matters

relating to Murphy's compliance with the federal petroleum price and

allocation regulations for the period January 1, 1973 through January

28, 1981. If this Consent Order is approved, Murphy will pay

$10,700,000.00 to DOE. To distribute these monies, DOE's Office of

Hearings and Appeals will be petitioned to implement Special Refund

Procedures pursuant to 10 CFR Part 205, Subpart V, in which proceedings

any persons who claim to have suffered injury from the alleged

overcharges would have the opportunity to submit claims for payment.

Pursuant to 10 CFR Sec. 205.199J, ERA will receive written comments

on the proposed Consent Order and will consider all comments received

from the public in determining whether to accept the settlement and

issue a final Order, renegotiate the agreement and issue a modified

agreement as a final Order, or reject the settlement. DOE's final

decision will be published in the Federal Register, along with an

analysis of significant written comments in response to this notice, as

well as any other considerations that were relevant to the final

decision.

DATES: Comments must be received by August 26, 1994.

ADDRESSES: Interested parties are invited to submit written comments

concerning this proposed Consent Order to: Murphy Consent Order

Comments, U.S. Department of Energy, Economic Regulatory

Administration, GC-44, 820 First Street, N.E., Suite 810, Washington,

D.C. 20585. Any information or data considered confidential by the

person submitting it must be identified as such in accordance with the

provisions of 10 CFR Sec. 205.9(f).

FOR FURTHER INFORMATION CONTACT: Dorothy Hamid, Economic Regulatory

Administration, Department of Energy, 820 First Street, N.E., Suite

810, Washington, D.C. 20585, (202) 523-3045.

SUPPLEMENTARY INFORMATION: Murphy is a petroleum refiner and a producer

subject to the audit jurisdiction of ERA to determine compliance with

the federal petroleum price and allocation regulations. During the

period covered by the proposed Consent Order, January 1, 1973 through

January 28, 1981, Murphy engaged in, among other things, the

production, sale and refining of crude oil. On February 9, 1987, Murphy

and DOE entered into a Consent Order (hereinafter the 1987 Consent

Order) that settled, with certain specific exceptions, all claims and

disputes against Murphy by DOE for the period January 1, 1973 through

January 28, 1981. The 1987 Consent Order specifically excepted, among

other things, issues or claims then pending or arising out of first

sales of crude oil produced and sold from properties operated by

Murphy.

As a result of DOE's investigation of Murphy's compliance with the

federal petroleum price and allocation regulations during the period

covered by the proposed Consent Order, ERA issued a Proposed Remedial

Order (PRO) to Murphy on December 15, 1986. On June 17, 1992, DOE's

Office of Hearings and Appeals (OHA) modified the PRO and issued it as

a Remedial Order (RO) to Murphy. Murphy Oil Corp., 22 DOE  83,005

(1992). The RO finds Murphy liable to make restitution of

$13,366,664.60, plus interest to the date of restitution, for

violations of the regulations applicable to first sales of domestic

crude oil (10 CFR Secs. 212.72-212.74), the regulations exempting from

the price rules the sale of crude oil produced from ``stripper well''

properties (10 CFR Secs. 210.32 and 212.54), and the normal business

practices rule (10 CFR Sec. 210.62(c)) in connection with Murphy's

first sales of crude oil during the period September 1973 through

December 1979. With interest, Murphy's current liability under the RO

would total $67.6 million through June 1994. Murphy appealed that RO to

the Federal Energy Regulatory Commission (FERC).

The RO also remands for further proceedings claims against Murphy

pertaining to Murphy's operation of properties for which the PRO found

violations during the year 1979, as well as certain crude oil

properties not included within ERA's investigation of Murphy or within

the PRO.

On January 24, 1994, a FERC Administrative Law Judge issued a

decision and proposed order (D&PO) that modified the RO and directed

recalculation of the amount of restitution. Ocean Drilling &

Exploration Co., et al., 66 FERC 63,002 (1994). The D&PO is now

pending before the Commission in Docket No. RO92-5-000. With interest,

Murphy's current liability under the D&PO (including ERA's estimate of

Murphy's liability for previously unaudited properties and unaudited

time periods (yet to be adjudicated by OHA or FERC)) totals

approximately $5.2 million.

ERA has preliminarily agreed to the proposed $10,700,000 settlement

as resolution of Murphy's liability for DOE regulatory violations for

the period covered by the proposed Consent Order. ERA has made this

tentative determination after an assessment of the risks of the current

matters in litigation. Among other things, ERA has considered the risk

pertaining to the following issues that Murphy has raised in its

defense: whether Murphy properly applied the definition of ``property''

to certain of its offshore and onshore producing premises in the period

September 1973 through August 1976; whether the largest of Murphy's

offshore producing premises qualified as multiple DOE ``properties''

under DOE Rulings 1977-1 and 1977-2; whether Murphy charged prices in

excess of the appropriate ceiling prices for crude oil produced from

offshore and onshore properties that it operated; whether Murphy should

be liable for 100% of the overcharges associated with sales of crude

oil that had been taken ``in kind'' from Murphy-operated properties and

sold by working interest owners; and whether Murphy should be liable

for 100% of the overcharges associated with certain sales of crude oil

from Murphy-operated properties as to which the federal government

received a royalty interest. ERA has also considered the time and

expense that would be required for the government to litigate every

issue fully. Based on these factors, ERA has tentatively concluded that

the resolution of its claims against Murphy for $10,700,000 is an

appropriate settlement and in the public interest. Except as

specifically excluded, all pending and potential civil and

administrative disputes, claims and causes of action, whether or not

heretofore asserted, between the DOE and Murphy relating to Murphy's

compliance with the federal petroleum price and allocation regulations

are resolved and extinguished by this Consent Order. Murphy and DOE

mutually release each other from the claims arising under the subject

matter covered by the proposed Consent Order.

Under the terms of the proposed Consent Order, Murphy is required

to pay the sum of $10,700,000 within thirty (30) days of the effective

date of the Consent Order and shall maintain records as are necessary

to demonstrate compliance with the terms of this Consent Order.

If the settlement is not made final by the one hundred fiftieth

(150th) day following execution, Murphy may withdraw from the proposed

agreement.

Submission of Written Comments:

The proposed Consent Order cannot be made effective until the

conclusion of the public review process, of which this Notice is a

part.

All comments received by the thirtieth (30th) day following

publication of this Notice in the Federal Register will be considered

before determining whether to adopt the proposed Consent Order as a

final Order. Any modifications of the proposed Consent Order which

significantly alter its terms or impact will be published for

additional comments. If, after considering the comments it has

received, ERA determines to issue the proposed Consent Order as a final

Order, the proposed Order will be made final and effective by

publication of a Notice in the Federal Register.

Issued in Washington, D.C., on July 21, 1994.

Robert R. Nordhaus,

Acting Administrator, Economic Regulatory Administration, General

Counsel.

[FR Doc. 94-18291 Filed 7-26-94; 8:45 am]

BILLING CODE 6450-01-P