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

$100,697.87, plus accrued interest, in refined petroleum product

violation amounts obtained by the DOE pursuant to a June 21, 1982

Remedial Order issued to Beacon Bay Enterprises, Inc. (Beacon Bay),

Case No. LEF-0074. The OHA has tentatively determined that the funds

obtained from Beacon Bay, plus accrued interest, will be distributed to

customers who purchased gasoline from Beacon Bay during the period

August 1, 1979 through March 31, 1980.

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-0074.

FOR FURTHER INFORMATION CONTACT: Thomas O. Mann, Deputy Director, Roger

Klurfeld, Assistant Director, Office of Hearings and Appeals, 1000

Independence Avenue, S.W. Washington, D.C. 20585, (202) 586-2094

(Mann); 586-2383 (Klurfeld).

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 $100,697.87, plus accrued interest, obtained by the DOE

pursuant to a June 21, 1982 Remedial Order. In the Remedial Order, the

DOE found that, during the period August 1, 1979 through March 31,

1980, Beacon Bay had sold motor gasoline at prices in excess of the

maximum lawful selling price, in violation of Federal petroleum price

regulations.

The OHA has tentatively determined to distribute the funds obtained

from Beacon Bay in two stages. In the first stage, we will accept

claims from identifiable purchasers of gasoline from Beacon Bay who may

have been injured by overcharges. The specific requirements which an

applicant must meet in order to receive a refund are set out in Section

IV of the Proposed Decision. Claimants who meet these specific

requirements will be eligible to receive refunds based on the number of

gallons of gasoline which they purchased from Beacon Bay.

If any funds remain after valid claims are paid in the first stage,

they may be used for indirect restitution in accordance with the

provisions of the Petroleum Overcharge Distribution and Restitution Act

of 1986 (PODRA), 15 U.S.C. 4501-07. Applications for Refund should not

be filed at this time. Appropriate public notice will be provided prior

to the acceptance of claims. 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 Ave., S.W., Washington, D.C. 20585.

Dated: August 19, 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: Beacon Bay Enterprises, Inc.

Date of Filing: July 20, 1993.

Case Number: LEF-0074.

On July 20, 1993, 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 the funds which Beacon Bay Enterprises, Inc.

(Beacon Bay) remitted to the DOE pursuant to a June 21, 1982 Remedial

Order. Beacon Bay has remitted $100,697.87 pursuant to the order, to

which $3,131.82 in interest has accrued as of July 31, 1994. In

accordance with the provisions of the procedural regulations at 10 CFR

part 205, subpart V (subpart V), the ERA requests in its Petition that

the OHA establish special procedures to make refunds in order to remedy

the effects of regulatory violations set forth in the Remedial Order.

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

distribute these funds.

I. Background

During the period relevant to this proceeding, Beacon Bay operated

11 retail service stations in Southern California. The ERA issued a

Proposed Remedial Order (PRO) to Beacon Bay on July 29, 1980. The PRO

alleged that, during the period August 1, 1979, through March 31, 1980,

Beacon Bay sold motor gasoline at prices in excess of the maximum

lawful selling price, in violation of Federal petroleum price

regulations. The DOE amended the PRO and issued a Final Remedial Order

on June 21, 1982, after considering Beacon Bay's objections to the PRO.

Beacon Bay Enterprises, 9 DOE  83,039 (1982). On August 23, 1982,

Beacon Bay appealed the DOE's Final Remedial Order to the Federal

Energy Regulatory Commission (FERC). The FERC issued a Proposed Order,

on November 15, 1982, Beacon Bay Enterprises, 21 FERC  62,295 (1982),

and an Order, on January 25, 1983, Beacon Bay Enterprises, 22 FERC 

61,059 (1983) the two of which affirmed and adopted the DOE's Final

Remedial Order. Beacon Bay has since remitted $100,697.87 to the DOE,

in compliance with the Remedial Order, which is now available (the

Beacon Bay Remedial Order fund) for distribution through Subpart V.

II. Jurisdiction and Authority

The Subpart V regulations set forth general guidelines which may be

used by the OHA in formulating and implementing a plan for the

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 et seq., Office of Enforcement, 9 DOE  82,508

(1981); Office of Enforcement, 8 DOE  82,597 (1981) (Vickers).

We have considered the ERA's Petition that we implement a Subpart V

proceeding with respect to the Beacon Bay Remedial Order fund and have

determined that such a proceeding is appropriate. This Proposed

Decision and Order sets forth the OHA's tentative plan to distribute

this fund. We intend to publicize our proposal and solicit comments

from interested parties before taking the actions proposed in this

Decision. Comments regarding the tentative distribution process set

forth in this Proposed Decision and Order should be filed with the OHA

within 30 days of its publication in the Federal Register.

III. Proposed Refund Procedures

We propose to implement a two-stage refund procedure for

distribution of the Beacon Bay Remedial Order fund. In the first stage,

purchasers of gasoline from Beacon Bay during the period covered by the

Remedial Order may submit Applications for Refund. From our experience

with Subpart V proceedings, we expect that potential applicants

generally will fall into the following categories: (i) end-users; (ii)

regulated entities, such as cooperatives; and (iii) resellers and

retailers.

A. Claims Based Upon Overcharges. In order to receive a refund,

each claimant will be required to submit a schedule of its monthly

purchases of gasoline from Beacon Bay during the period covered by the

Remedial Order--August 1979 through March 1980. If the gasoline was not

purchased directly from Beacon Bay, the claimant must establish that

the gasoline originated with Beacon Bay. Additionally, a reseller or

retailer claimant, except one who chooses to utilize the injury

presumptions set forth below, will be required to make a detailed

showing that it was injured by Beacon Bay's overcharges. This showing

will generally consist of two distinct elements. First, a reseller or

retailer claimant will be required to show that it had ``banks'' of

unrecouped increased product costs in excess of the refund

claimed.1 Second, because a showing of banked costs alone is not

sufficient to establish injury, a claimant must additionally provide

evidence that market conditions precluded it from increasing its prices

to pass through the additional costs associated with the overcharges.

See Vaqueros Energy Corp./Hutches Oil Co. Inc., 11 DOE  85,070 at

88,105 (1983). Such a showing could consist of a demonstration that a

firm suffered a competitive disadvantage as a result of its purchases

from Beacon Bay. See National Helium Co./Atlantic Richfield Corp., 11

DOE  85,257 (1984), aff'd sub nom. Atlantic Richfield Co. v. DOE, 618

F. Supp. 1199 (D. Del. 1985).

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\1\Claimants who have previously relied upon their banked costs

in order to obtain refunds in other special refund proceedings

should subtract those refunds from any cost banks submitted in this

refund proceeding. See Husky Oil Co./Metro Oil Products, Inc., 16

DOE  85,090, at 88,179 (1987). Additionally, a claimant attempting

to show injury may not receive a refund for any month in which it

has a negative accumulated cost bank(for gasoline) or for any prior

month. See Standard Oil Co. (Indiana)/Suburban Propane Gas Corp., 13

DOE  85,030, at 88,082 (1985). If a claimant no longer has records

showing its banked costs, the OHA may use its discretion to permit

the claimant to approximate those cost banks. See, e.g., Gulf Oil

Corp./Sturdy Oil Co., 15 DOE  85,187 (1986).

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Our experience also indicates that the use of certain presumptions

permits claimants to participate in the refund process without

incurring inordinate expense and ensures that refund claims are

evaluated in the most efficient manner possible. See, e.g., Marathon

Petroleum Co., 14 DOE  85,269 (1986) (Marathon). Presumptions in

refund cases are specifically authorized by the applicable Subpart V

regulations at 10 C.F.R. 205.282(e). Accordingly, we propose to adopt

the presumptions set forth below.

1. Calculation of Refunds. First, we will adopt a presumption that

the overcharges were dispersed equally in all of Beacon Bay's sales of

gasoline during the period covered by the Remedial Order. In accordance

with this presumption, refunds are made on a pro-rata or volumetric

basis.2 In the absence of better information, a volumetric refund

is appropriate because the DOE price regulations generally required a

regulated firm to account for increased costs on a firm-wide basis in

determining its prices.

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\2\If an individual claimant believes that it was injured by

more than its volumetric share, it may elect to forego this

presumption and file a refund application based upon a claim that it

suffered a disproportionate share of Beacon Bay's overcharges. See,

e.g., Mobil Oil Corp./Atchison, Topeka and Santa Fe Railroad Co., 20

DOE  85,788 (1990); Mobil Oil Corp./Marine Corps Exchange Service,

17 DOE  85,714 (1988). Such a claim will be granted if the claimant

makes a persuasive showing that it was ``overcharged'' by a specific

amount, and that it absorbed those overcharges. See Panhandle

Eastern Pipeline Co./Western Petroleum Co., 19 DOE  85,705 (1989).

To the degree that a claimant makes this showing, it will receive an

above-volumetric refund.

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Under the volumetric approach, a claimant's ``allocable share'' of

the Remedial Order fund is equal to the number of gallons purchased

from Beacon Bay during the period covered by the Remedial Order times

the per gallon refund amount. In the present case, the per gallon

refund amount is $0.0690. We derived this figure by dividing the amount

of the Remedial Order fund, $100,697.87, by 1,460,321 gallons, the

volume of gasoline which Beacon Bay sold from August 1, 1979, through

March 31, 1980. A claimant that establishes its eligibility for a

refund will receive all or a portion of its allocable share plus a pro-

rata share of the accrued interest.3

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\3\As in previous cases, we propose to establish a minimum

refund amount of $15. In this proceeding, any potential claimant

purchasing less than 211 gallons of gasoline from Beacon Bay would

have an allocable share of less than $15. We have found through our

experience that the cost of processing claims in which refunds for

amounts less than $15 are sought outweighs the benefits of

restitution in those instances. See Exxon Corp., 17 DOE  85,590, at

89,150 (1988) (Exxon).

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In addition to the volumetric presumption, we also propose to adopt

a number of presumptions regarding injury for claimants in each

category listed below.

2. End-Users. In accordance with prior Subpart V proceedings, we

propose to adopt the presumption that an end-user or ultimate consumer

of gasoline purchased from Beacon Bay whose business is unrelated to

the petroleum industry was injured by the overcharges resolved by the

Remedial Order. See, e.g., Texas Oil and Gas Corp., 12 DOE  85,069 at

88,209 (1984) (TOGCO). Unlike regulated firms in the petroleum

industry, members of this group generally were not subject to price

controls during the period covered by the Remedial Order, and were not

required to keep records which justified selling price increases by

reference to cost increases. Consequently, analysis of the impact of

the overcharges on the final prices of goods and services produced by

members of this group would be beyond the scope of the refund

proceeding. Id. We therefore propose that the end-users of gasoline

purchased from Beacon Bay need only document their purchase volumes

from Beacon Bay during the period covered by the Remedial Order to make

a sufficient showing that they were injured by the overcharges.

3. Regulated Firms and Cooperatives. We further propose that, in

order to receive a full volumetric refund, a claimant whose prices for

goods and services are regulated by a governmental agency, i.e. a

public utility, or an agricultural cooperative which is required by its

charter to pass through cost savings to its member-purchasers, need

only submit documentation of purchases used by itself or, in the case

of a cooperative, sold to its members. However, a regulated firm or a

cooperative will also be required to certify that it will pass any

refund received through to its customers or member-customers, provide

us with a full explanation of how it plans to accomplish the

restitution, and certify that it will notify the appropriate regulatory

body or membership group of the receipt of the refund. See Marathon, 14

DOE at 88,514-15. This requirement is based upon the presumption that,

with respect to a regulated firm, any overcharges would have been

routinely passed through to its customers. Similarly, any refunds

received should be passed through to its customers. With respect to a

cooperative, in general, the cooperative agreement which controls its

business operations would ensure that the overcharges, and similarly

refunds, would be passed through to its member-customers. Accordingly,

these firms will not be required to make a detailed demonstration of

injury.4

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\4\A cooperative's purchases of gasoline from Beacon Bay which

were resold to non-members will be treated in a manner consistent

with purchases made by other resellers. See Total Petroleum, Inc./

Farmers Petroleum Cooperative, Inc., 19 DOE  85,215 (1989).

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4. Resellers and Retailers. a. Small Claims Presumption. We propose

to adopt a ``small claims'' presumption that a firm which resold

gasoline purchased from Beacon Bay and requests a small refund was

injured by the overcharges. Under the small claims presumption, a

reseller or retailer seeking a refund of $5,000 or less, exclusive of

interest, will not be required to submit evidence of injury beyond

documentation of the volume of gasoline it purchased from Beacon Bay

during the period covered by the Remedial Order. See TOGCO, 12 DOE at

88,210. This presumption is based on the fact that there may be

considerable expense involved in gathering the types of data necessary

to support a detailed claim of injury; for small claims the expense

might possibly exceed the potential refund. Consequently, failure to

allow simplified refund procedures for small claims could deprive

injured parties of their opportunity to obtain a refund. Furthermore,

use of the small claims presumption is desirable in that it allows the

OHA to process the large number of routine refund claims expected in an

efficient manner.5

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\5\In order to qualify for a refund under the small claims

presumption, a reseller or retailer must have purchased less than

72,471 gallons of gasoline from Beacon Bay during the settlement

agreement period.

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b. Mid-Level Claim Presumption. In addition, a reseller or retailer

claimant whose allocable share of the refund pool exceeds $5,000,

excluding interest, may elect to receive as its refund either $5,000 or

40 percent of its allocable share.6 The use of this presumption

reflects our conviction that these larger, mid-level claimants were

likely to have experienced some injury as a result of the overcharges.

See Marathon, 14 DOE at 88,515. In some prior special refund

proceedings, we have performed detailed analyses in order to determine

product-specific levels of injury. See, e.g., Getty Oil Co., 15 DOE 

85,064 (1986). However, in Gulf Oil Corp., 16 DOE  85,381 at 88,737

(1987), we determined that based upon the available data, it was more

accurate and efficient to adopt a single presumptive level of injury of

40 percent for all mid-level claimants, regardless of the refined

product that they purchased, based upon the results of our analyses in

prior proceedings. We believe that approach generally to be sound, and

we therefore propose to adopt a 40 percent presumptive level of injury

for all mid-level claimants in this proceeding. Consequently, an

applicant in this group will only be required to provide documentation

of its purchase volumes of gasoline from Beacon Bay during the Remedial

Order period in order to be eligible to receive a refund of 40 percent

of its total allocable share or $5,000, whichever is greater.7

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\6\Under the mid-level presumption, a claimant which purchased

between 72,471 gallons and 181,177 gallons of gasoline from Beacon

Bay would be eligible to receive a principal refund, exclusive of

interest, of $5,000. A claimant purchasing more than 181,177 gallons

of petroleum products would be eligible for a principal refund equal

to 40 percent of its allocable share.

\7\A claimant who attempts to make a detailed showing of injury

in order to obtain 100 percent of its allocable share but, instead,

provides evidence that leads us to conclude that it passed through

all of the overcharges, or that it was injured in an amount less

than the presumed level refund, may not necessarily receive a full

presumption-based refund. Instead, such a claimant may receive a

refund which reflects the level of injury established in its

application.

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c. Spot Purchasers. We propose to adopt a rebuttable presumption

that a reseller or retailer that made only spot purchases from Beacon

Bay did not suffer injury as a result of those purchases. As we have

previously stated, spot purchasers generally had considerable

discretion as to the timing and location of their purchases, and

therefore would not have made spot market purchases from a firm at

increased prices unless they were able to pass through the full amount

of the firm's selling price to their own customers. See, e.g.,

Vaqueros, 8 DOE at 85,396-97. Accordingly, a spot purchaser claimant

must submit specific and detailed evidence to rebut the spot purchaser

presumption and to establish the extent to which it was injured as a

result of its spot purchases from Beacon Bay.8

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\8\In prior proceedings, we have stated that refunds will be

approved for spot purchasers who demonstrated that: (1) they made

the spot purchases for the purpose of ensuring a supply for their

base period customers rather than in anticipation of financial

advantage as a result of those purchases, and (2) they were forced

by market conditions to resell the product at a loss that was not

subsequently recouped through the draw down of banks. See, e.g.,

Texaco Inc., 20 DOE 85,147 at 88,321 (1990); Quaker State Oil

Refining Corp./Certified Gasoline Co., 14 DOE 85,465 (1986).

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B. Refund Applications Filed by Representatives. In addition, we

propose to adopt the following procedures relating to refund

applications filed on behalf of applicants by ``representatives,''

including refund filing services, consulting firms, accountants, and

attorneys. See Texaco Inc., 20 DOE 85,147 (1990). Each such filing

service shall, contemporaneously with its first filing in the Beacon

Bay proceeding, submit a statement indicating its qualifications for

representing refund applicants and containing a detailed description of

the solicitation practices and application procedures that it has used

and plans to use.9 This statement should contain the following

information:10

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\9\This statement should be submitted under separate cover and

reference the Beacon Bay refund proceeding, Case No. LEF-0074.

\1\0This information with regard to some filing services has

already been requested and received by this Office. Therefore, any

filing service that has had more than 10 Applications for Refund

approved before the issuance of this Proposed Decision and Order

need not submit this information if it has already done so in

another proceeding. Instead, such a filing service need only include

a copy of the previous submission(s) responsive to items (1)-(5) and

provide an update if its response to any of these questions has

changed since it first submitted its information. However, in light

of the importance of this information, it is prudent for all filing

services to review their practices and inform the OHA of any

alterations or improvements that may have been made.

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(1) A description of the procedures used to solicit refund

applications in the Beacon Bay proceeding and copies of any

solicitation materials mailed to prospective Beacon Bay applicants;

(2) A description of how the filing service obtains authorization

from its clients to act as their representative, including copies of

any type of authorization form signed by refund applicants;

(3) A description of how the filing service obtains and verifies

the information contained in refund applications;

(4) A description of the procedures used to forward refunds to its

clients;

(5) A description of the procedures used to prevent and check for

duplicate filings.

Upon receipt of this information, we may suggest alteration of a

filing service's procedures if they do not conform to the procedural

requirements of 10 C.F.R. Part 205 and this proceeding.

Second, we will require strict compliance with the filing

requirements as specified in 10 C.F.R. Sec. 205.283, particularly the

requirement that applications and the accompanying certification

statement be signed by the applicant.

Third, in any case where an application has been signed and dated

before the issuance of the final Decision and Order in this proceeding,

we will require a certification statement, signed and dated by the

applicant after the date of the issuance of the final Decision and

Order. This certification should state that the applicant has not filed

and will not file any other Application for Refund in the Beacon Bay

proceeding and that, after having been provided a copy of the final

Decision and Order, it still authorizes that filing service to

represent it.

Fourth, we will require from each representative a statement

certifying that it maintains a separate escrow account at a bank or

other financial institution for the deposit of all refunds received on

behalf of applicants, and that its normal business practice is to

deposit all Subpart V refund checks in that account within two business

days of receipt and to disburse refunds to applicants within 30

calendar days thereafter. Unless such certification is received by the

OHA, all refund checks approved will be made payable solely to the

applicant. Representatives who have not previously submitted an escrow

certification form to the OHA may obtain a copy of the appropriate form

by contacting:

Marcia B. Carlson, HG-13, Chief, Docket & Publications Branch, Office

of Hearings and Appeals, Department of Energy, Washington, D.C. 20585.

Finally, the OHA reiterates its policy to closely scrutinize

applications filed by filing services. Applications submitted by a

filing service should contain all of the information indicated in the

final Decision and Order in this proceeding.

C. Distribution of Funds Remaining After First Stage. We propose

that any funds that remain after all first stage claims have been

decided be distributed in accordance with the provisions of the

Petroleum Overcharge Distribution and Restitution Act of 1986 (PODRA),

15 U.S.C. Secs. 4501-07. The PODRA requires that the Secretary of

Energy determine annually the amount of oil overcharge funds that will

not be required to refund monies to injured parties in Subpart V

proceedings and make those funds available to state governments for use

in four energy conservation programs. The Secretary has delegated these

responsibilities to the OHA, and any funds in the Beacon Bay Remedial

Order fund that the OHA determines will not be needed to effect direct

restitution to injured customers will be distributed in accordance with

the provisions of the PODRA.

It Is Therefore Ordered That:

The refund amount remitted to the Department of Energy by Beacon

Bay Enterprises, Inc. pursuant to the Remedial Order issued on June 21,

1982, will be distributed in accordance with the foregoing Decision.

[FR Doc. 94-21373 Filed 8-28-94; 8:45 am]

BILLING CODE 6450-01-P