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 a

total of $338,267.85, plus accrued interest, in alleged crude oil

overcharges obtained by the DOE under the terms of the Consent Orders

entered into with King Petroleum, Inc., et al., Case No. LEF-0125

(King), and Billy Bridewell, William J. Cobb, et al., Case No. LEF-0126

(Bridewell). The OHA has tentatively determined that the funds obtained

from King and Bridewell, plus interest accrued, will be distributed in

accordance with the DOE's Modified Statement of Restitutionary Policy

Concerning Crude Oil Overcharges. Since the June 30, 1994, deadline for

filing crude oil refund applications has passed, no new applications

will be accepted for these funds.

DATE AND ADDRESSES: Comments must be filed in duplicate by September

14, 1994, and should be addressed to the Office of Hearings and

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

comments should be marked with the reference numbers LEF-0125 and LEF-

0126.

FOR FURTHER INFORMATION CONTACT: Thomas L. Wieker, Deputy Director,

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

Washington, DC 20585, (202) 586-2390.

SUPPLEMENTARY INFORMATION

In accordance with 10 C.F.R. 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 a total of $338,267.85, plus

accrued interest, obtained by the DOE under the terms of Consent Orders

entered into with King Petroleum, Inc., et al., and Billy Bridewell,

William J. Cobb, et al. These 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 of price controls.

The OHA has proposed to distribute these funds in accordance with

the DOE's Modified Statement of Restitutionary Policy Concerning Crude

Oil Overcharges, 51 Fed. Reg. 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 volume of

petroleum products they purchased and the degree to which they can

demonstrate injury. Because the June 30, 1994, deadline for crude oil

refund applications has passed, no new applications from purchasers of

refined petroleum products will be accepted for these funds. Instead,

the share allocated to these purchasers will be added to the general

crude oil overcharge pool used for direct restitution.

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 3 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: August 8, 1994.

George B. Breznay,

Director, Office of Hearings and Appeals.

August 8, 1994.

Proposed Decision and Order of the Department of Energy

Implementation of Special Refund Procedures

Names of Firms: King Petroleum, Inc., et al. Billy Bridewell,

William J. Cobb, et al.

Date of Filing: May 26, 1994.

Case Numbers: LEF-0125, LEF-0126.

On May 26, 1994, the Economic Regulatory Administration (ERA) of

the Department of Energy (DOE) filed a Petition for the

Implementation of Special Refund Procedures with the Office of

Hearings and Appeals (OHA), to distribute funds which King

Petroleum, Inc., et al. (King) and Billy Bridewell, William J. Cobb,

et al. (Bridewell) remitted to the DOE pursuant to Consent Orders

entered into by the parties and the DOE. King has remitted a total

of $1,245.04, while Bridewell has remitted a total of $337,022.85.

In accordance with the procedural regulations codified at 10

C.F.R. part 205, Subpart V (Subpart V), the ERA requests in its

petition that the OHA establish special refund procedures to remedy

the effects of alleged regulatory violations which were resolved by

these Consent Orders. This Proposed Decision and Order sets forth

the OHA's tentative plan to distribute these funds.

I. Jurisdiction and Authority

The Subpart V regulations set forth general guidelines which may

be used by the OHA in formulating and implementing a plan of

distribution of funds received as a result of an enforcement

proceeding. The DOE policy is to use the Subpart V process to

distribute such funds. For a more detailed discussion of Subpart V

and the authority of the OHA to fashion procedures to distribute

refunds, see Petroleum Overcharge Distribution and Restitution Act

of 1986, 15 U.S.C. Secs. 4501-07 (1988), Office of Enforcement, 9

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

We have considered the ERA's petition that we implement a

Subpart V proceeding with respect to the King and Bridewell Consent

Orders and have determined that such a proceeding is appropriate.

This Proposed Decision and Order sets forth the OHA's tentative plan

to distribute these funds.

II. Proposed Refund Procedures

A. Crude Oil Refund Policy

We propose to distribute the funds obtained from King and

Bridewell in accordance with the DOE's Modified Statement of

Restitutionary Policy in Crude Oil Cases, 51 Fed. Reg. 27899 (August

4, 1986) (the MSRP). The MSRP was issued as a result of a court-

approved Settlement Agreement. In re: The Department of Energy

Stripper Well Exemption Litigation, 653 F Supp. 108 (D. Kan.), 6

Fed. Energy Guidelines 90,509 (1986) (the Stripper Well Settlement

Agreement). The MSRP establishes that 40 percent of the crude oil

funds will be remitted to the Federal government, another 40 percent

to the states, and up to 20 percent may initially be reserved for

payment of claims to injured parties. The MSRP also specifies that

any monies remaining after all valid claims by injured purchasers

are paid be disbursed to the Federal government and the states in

equal amounts.

The OHA has utilized the MSRP in all Subpart V proceedings

involving alleged crude oil violations. See Order Implementing the

MSRP, 51 Fed. Reg. 29689 (August 20, 1986). This Order provided a

period of 30 days for filing of comments or objections to our

proposed use of the MSRP as the groundwork for evaluating claims in

crude oil refund proceedings. Following this period, the OHA issued

a Notice evaluating the numerous comments which it had received

pursuant to the Order Implementing the MSRP. This Notice was

published at 52 Fed. Reg. 11737 (April 10, 1987) (the April 10

Notice).

The April 10 Notice contained guidance to assist potential

claimants wishing to file refund applications for crude oil monies

under the Subpart V regulations. Generally, all claimants would be

required to (1) document their purchase volumes of petroleum

products during the August 19, 1973 through January 27, 1981, crude

oil price control period, and (2) show that they were injured by the

alleged crude oil overcharges. We also specified that end-users of

petroleum products whose businesses were unrelated to the petroleum

industry will be presumed to have been injured by the alleged crude

oil overcharges. End-users, therefore, need only submit

documentation of their purchase volumes. See City of Columbus,

Georgia, 16 DOE 85,550 (1987).

Additionally, we stated that we would evaluate crude oil refunds

on a per gallon (or volumetric) basis. We obtained the volumetric

figure by dividing the estimated crude oil refund pool by the total

consumption of petroleum products in the United States during the

crude oil price control period. The OHA has adopted the refund

procedures outlined in the April 10 Notice in numerous cases. See,

e.g., Shell Oil Co., 17 DOE 85,204 (1988); Mountain Fuel Supply

Co., 14 DOE 85,475 (1986). The volumetric payment rate is $.0008

per gallon of eligible refined petroleum product purchased during

the price control period.

B. Refund Claims

On May 3, 1993, the OHA issued a Notice which established June

30, 1994, as the final deadline for filing an Application for Refund

from all crude oil funds. See 58 Fed. Reg. 26,318 (May 3, 1993) (the

May 3 Notice). We noted at that time that the crude oil refund

proceeding was over seven years old, and that many crude oil

Implementation Orders inviting Applications for Refund had been

published in the Federal Register. Id. In fact, since August 1986,

there have been approximately 51 announcements published in the

Federal Register inviting applicants to file claims for crude oil

overcharge refunds.

We further stated in the May 3 Notice that we had, at that time,

received nearly 96,000 crude oil refund applications for the crude

oil overcharge funds. In view of these facts, we concluded that

``this refund proceeding has been well publicized and that those

firms, individuals, and organizations that have an interest in

filing for this type of refund have had a reasonable opportunity to

do so.'' Id. Therefore, for reasons of administrative efficiency and

in fairness to those Applicants who are awaiting the final

disbursement of crude oil funds, we determined that we would not

accept crude oil refund applications postmarked later than June 30,

1994. Id.

C. King and Bridewell

Subpart V regulations provide a 30 day period for submission of

comments after the issuance of a Proposed Decision and Order

implementing special refund proceedings. 10 C.F.R. Sec. 205.282(b).

Further, these regulations indicate that after the issuance of the

final Decision and Order implementing refund procedures, there

should be a period of 90 days in which refund applications may be

filed. 10 C.F.R. Sec. 205.283(b). Obviously, since the instant

Proposed Decision and Order will issue after the June 30, 1994,

filing deadline referred to above, we cannot both maintain that

deadline and adhere to the provisions of Section 205.282 and Section

205.283.

After reviewing the status of the crude oil overcharge refund

proceeding as a whole, the intent of the Subpart V regulations and

overall administrative considerations, we have decided that a

separate filing deadline beyond our June 30 deadline is not

advisable or appropriate in this case. As discussed below, we

tentatively decide that the funds remitted by King and Bridewell

should be included in the general crude oil refund proceeding for

which notice has been given for the last eight years. No separate

application may be made for these funds. Instead, we propose that

these funds become part of the larger pool of funds available for

disbursement in the crude oil proceeding. See, e.g., Seneca Oil Co.,

21 DOE 85,327 (1991).

It was never intended that this proceeding should continue

indefinitely. Over the course of the eight years this proceeding has

been in effect, we have received approximately 100,000 Applications

for Refund. As we noted in the May 3 Notice, the need for

administrative efficiency and finality require that we set a final

deadline.

We believe this decision is consistent with our regulations and

past practices. The Subpart V regulations state: ``In establishing

standards and procedures for implementing refund distributions, the

Office of Hearings and Appeals shall take into account the

desirability of distributing the refunds in an efficient and

equitable manner and resolving to the maximum extent practicable all

outstanding claims.'' 10 C.F.R. Sec. 205.282(e). As discussed above,

the crude oil refund proceeding has been well publicized and all

interested parties have had ample opportunity to apply. In addition,

it would impose an undue burden on those applicants who applied in a

timely fashion if we held this proceeding open until all outstanding

crude oil enforcement actions were resolved.

Our practice over the last several years has been to treat all

crude oil overcharge funds as part of one crude oil proceeding,

rather than as a multitude of separate small refund proceedings. We

have for many years refunded all crude oil claims at a rate of

$.0008 per gallon. This rate was established in 1989 by estimating

the funds likely to become available for injured persons during the

crude oil proceeding. Crude Oil Supplemental Refund Distribution, 18

DOE 85,878 (1989). We have also long maintained that an applicant

need only submit one application for its share of all available

crude oil overcharge funds. See, e.g., A. Tarricone, Inc., 15 DOE

85,495 (1987).

In reaching our determination in this case, we have given some

consideration to whether there are potential applicants who will now

be precluded from making refund claims from these funds and the

degree of harm they might experience if they were denied the right

to apply for a King and Bridewell refund.

As we pointed out above, we have received approximately 100,000

crude oil overcharge refund applications. Those who have previously

filed a crude oil overcharge refund application need not file

another claim in order to receive a portion of the Bridewell and

King fund. We think that most of those eligible to participate in

this refund program and who wish to do so have already filed

applications. Given that the crude oil overcharge refund proceeding

has been ongoing for approximately eight years, we tend to believe

that the number of potential applicants genuinely interested in

filing a claim, but who have not yet done so, is relatively small.

We also believe that the financial interests of these potential

applicants are very minimal, when compared with the overall interest

in bringing the crude oil overcharge refund proceeding to a close.

The total King and Bridewell funds of $338,268 results in a refund

of $.00000017 per gallon, or 17 cents per million gallons

consumed.1

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\1\This amount is derived by dividing the total alleged crude

oil violation amounts involved in this proceeding ($338,268) 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 Supply Co., 14 DOE 85,475 (1986).

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At this rate, even a very large applicant, one that consumed 100

million gallons, but which applied only in the King and Bridewell

proceeding, would receive a refund of merely $17. Yet, an applicant

of this size is extremely unusual. For example, of the 100,000 crude

oil overcharge claims that have been filed, only 552, or .5 percent,

are based on purchases of 100 million gallons or more. We would thus

expect that virtually no claimants would be interested in applying

for a refund in this King and Bridewell proceeding.

Furthermore, pursuant to the MSRP, we disburse 40 percent of the

funds available to the States and 40 percent to the Federal

Government. The funds made available to these governmental entitites

for indirect restitution are unaffected by our decision to accept no

new claims from injured parties. Thus, only 20 percent of the

$338,268 total King and Bridewell fund, or $67,654, is actually

available for payment to individual claimants by the OHA. Most of

that $67,654 would go to those that have already filed claims, since

refunds are disbursed on a pro rata basis. The funds actually

available for disbursement to any new King and Bridewell claimants

would be minimal indeed.

As indicated by the above discussion, we have concluded that due

to the small amount of the potential refund available, and the

limited number of potential additional claimants for these funds, it

would not be useful to provide for another application period.

We therefore tentatively conclude that the interests of equity

and efficiency underlying 10 C.F.R. Sec. 205.282(e) justify our

including the funds remitted by King and Bridewell in the general

crude oil refund proceeding instead of holding a separate refund

proceeding for these funds or extending the deadline for filing

crude oil refund applications indefinitely. Consequently, we

tentatively decide that 20% of the funds remitted by King and

Bridewell (plus appropriate accrued interest) should be added to the

general crude oil overcharge pool for direct restitution to those

applicants who applied before the June 30, 1994, crude oil refund

deadline.

D. Payments to the Federal Government and the States

Under the terms of the MSRP, we propose that the remaining 80%

of the alleged crude oil overcharge amounts subject to this Proposed

Decision, plus accrued interest, should be disbursed in equal shares

to the states and Federal government for indirect restitution.

Refunds to the states will be in proportion to the consumption of

petroleum products in each state during the period of price

controls. The share or ratio of the funds which each state will

receive is contained in Exhibit H of the Stripper Well Settlement

Agreement, 6 Fed. Energy Guidelines 90,509 at 90,687. 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 Settlement Agreement.

It Is Therefore Ordered That:

The refund amounts remitted to the Department of Energy by King

Petroleum, Inc., et al., Case No. LEF-0125, and Billy Bridewell,

William J. Cobb, et al., Case No. LEF-0126, will be distributed in

accordance with the foregoing Decision.

[FR Doc. 94-19921 Filed 8-12-94; 8:45 am]

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