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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DEPARTMENT OF ENERGY

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

Energy (DOE) announces the proposed procedures for disbursement of a

total of $10,700,000, plus accrued interest, in alleged crude oil

overcharges obtained pursuant to a Consent Order entered into with

Murphy Oil Corp., Murphy Oil USA, Inc., and Murphy Exploration and

Production Co., Case No. VEF-0003 (Murphy). The OHA has tentatively

determined that the funds obtained from Murphy, plus interest accrued,

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

Restitutionary Policy in Crude Oil Cases.

DATES AND ADDRESSES: Comments must be filed in duplicate on or before

January 18, 1995, 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 number VEF-0003.

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

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

Washington, DC 20585, (202) 586-2094.

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 a total of

$10,700,000, plus accrued interest, obtained by the DOE under the terms

of the Consent Order entered into with Murphy on July 15, 1994. These

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

petroleum price and allocation regulations that were in effect from

August 19, 1973, through January 28, 1981.

The OHA has proposed to distribute these funds in accordance with

the DOE's Modified Statement of Restitutionary Policy in Crude Oil

Cases, 51 FR 27,899 (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.

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: December 12, 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: Murphy Oil Corp. / Murphy Oil USA, Inc.

Date of Filing: October 25, 1994

Case Number: VEF-0003

December 12, 1994.

On October 25, 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 $10,700,000 remitted by Murphy Oil Corp., Murphy

Oil USA, Inc., and Murphy Exploration & Production Co. (collectively

referred to as ``Murphy''), pursuant to the Consent Order entered into

between Murphy and the DOE on July 15, 1994. In accordance with the

procedural regulations codified 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 alleged

regulatory violations which were resolved by the present Consent Order.

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

distribute these funds.

I. Background

Murphy is a major integrated refiner which produced and sold crude

oil and a full range of refined petroleum products during the period of

federal price controls. As such, it was subject to the federal

petroleum price and allocation regulations. During that time, the ERA

conducted an extensive audit of Murphy and issued an issue letter to

Murphy on September 29, 1976. ERA issued a Notice of Probable Violation

to Murphy on January 28, 1981. ERA issued a Proposed Remedial Order

(PRO) to Murphy on December 15, 1986, which Murphy contested before the

OHA.

On February 9, 1987, Murphy and the DOE entered into a Consent

Order which resolved disputes regarding Murphy's refined petroleum

product operations during the period the petroleum price and allocation

regulations were in effect. See Murphy Oil Corp., 17 DOE 85,782 (1987)

(the first Consent Order). The first Consent Order left the issue of

Murphy's alleged violations as a producer of crude oil unresolved.

Those issues were decided by the OHA on June 17, 1992 when the OHA

issued a modified version of ERA's PRO as a Remedial Order (RO). See

Murphy Oil Corp., 22 DOE 83,005 (1992). Murphy subsequently appealed

the OHA's determination to the Federal Energy Regulatory Commission

(FERC). On January 24, 1994 a FERC Administrative Law Judge issued a

Decision and Proposed Order (D&PO) which modified the RO. See Ocean

Drilling & Exploration Co., et al., 66 FERC 63,002 (1994).

On July 15, 1994, Murphy and the DOE entered into the present

Consent Order, the second between Murphy and the DOE. This second

Consent Order, which does not modify or affect the terms of the first

Consent Order, resolves all existing or potential civil and

administrative claims against Murphy for alleged violations of the

federal petroleum price and allocation regulations left unresolved by

the first Consent Order. Under the terms of this second Consent Order,

Murphy has remitted $10,700,000 to the DOE, and all outstanding or

potential claims by the DOE against Murphy have been extinguished.

These funds are being held in an interest-bearing escrow account

maintained at the Department of the Treasury pending a determination

regarding their proper distribution.

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 of distribution

for 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 The Petroleum Overcharge

Distribution and Restitution Act of 1986 (PODRA), 15 U.S.C. 4501-07;

Office of Enforcement, 9 DOE 82,508 (1981); 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 second Murphy Consent 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.

III. Proposed Refund Procedures

A. Crude Oil Refund Policy

We propose to distribute the Murphy funds in accordance with the

DOE's Modified Statement of Restitutionary Policy in Crude Oil Cases,

51 FR 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 overcharge funds will be remitted to the federal government,

another 40 percent to the states, and up to 20 percent may be initially

reserved for the payment of claims by 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 FR 29689 (August 20, 1986). This Order provided a period of 30

days for the 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 received pursuant to the Order

Implementing the MSRP. This Notice was published at 52 FR 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) prove that they were injured by the alleged

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

products whose businesses are unrelated to the petroleum industry will

be presumed to have been injured by the alleged crude oil overcharges

and need not submit any additional proof of injury beyond documentation

of their purchase volumes. See City of Columbus, Georgia, 16 DOE

85,550 (1987). Additionally, we stated that crude oil refunds would be

calculated on the basis of a per gallon (or ``volumetric'') refund

amount, which is obtained by dividing the 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., Texaco, Inc, 19 DOE 85,200 (1989); Shell Oil Co., 17 DOE 85,204

(1988) (Shell); Mountain Fuel Supply Co., 14 DOE 85,475 (1986)

(Mountain Fuel).

B. Refund Claims

We propose to adopt the DOE's standard crude oil refund procedures

to distribute the monies remitted by Murphy. We have chosen initially

to reserve 20 percent of the fund, plus accrued interest, for direct

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

available for injured parties. This reserve figure may later be reduced

if circumstances warrant.

The OHA will evaluate crude oil refund claims in a manner similar

to that used in Subpart V proceedings to evaluate claims based on

alleged refined product overcharges. See Mountain Fuel, 14 DOE at

88,869. Under these procedures, claimants will be required to document

their purchase volumes of petroleum products and prove they were

injured as a result of the alleged violations.

We will adopt a presumption that the alleged crude oil overcharges

were absorbed, rather than passed on, by applicants which were (1) end-

users of petroleum products, (2) unrelated to the petroleum industry,

and (3) not subject to the regulations promulgated under the Emergency

Petroleum Allocation Act of 1973 (EPAA), 15 U.S.C. 751-760h. In order

to receive a refund, end-user claimants need not submit any evidence of

injury beyond documentation of their purchase volumes. See Shell, 17

DOE at 88,406.

Petroleum retailer, reseller, and refiner applicants must submit

detailed evidence of injury, and they may not rely upon the injury

presumptions utilized in refined product cases. Id. These applicants,

however, may use econometric evidence of the type found in the OHA

Report on Stripper Well Overcharges, 6 Fed. Energy Guidelines 90,507

(1985). See also PODRA Sec. 3003(b)(2), 15 U.S.C. 4502(b)(2). If a

claimant has executed and submitted a valid waiver pursuant to one of

the escrows established by the Stripper Well Settlement Agreement, it

has waived its rights to file an application for Subpart V crude oil

refund monies. See Mid-America Dairymen v. Herrington, 878 F.2d 1448

(Temp. Emer. Ct. App.), 3 Fed. Energy Guidelines 26,617 (1989); In re:

Department of Energy Stripper Well Exemption Litigation, 707 F. Supp.

1267 (D. Kan.), 3 Fed Energy Guidelines 26,613 (1987).

As has been stated in prior Decisions, a crude oil refund applicant

will only be required to submit one application for its share of all

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

DOE 85,495 (1987). A party that has already submitted a claim to any

other crude oil refund proceeding implemented by the DOE need not file

another claim. The prior application will be deemed to be filed in all

crude oil refund proceedings finalized to date.

The DOE had previously established June 30, 1994 as the final

deadline for filing an Application for Refund from the crude oil funds.

See 58 FR 26318 (May 3, 1993). Although that date has passed, it has

been decided to re-open the crude proceeding. See 59 Fed. Reg. 55656

(November 8, 1994). The new closing date for this proceeding has been

tentatively set for June 3, 1996. Id. It is the policy of the DOE to

pay all crude oil refund claims at the rate of $.0008 per gallon. While

we anticipate that applicants that filed their claims before June 30,

1988 will receive a supplemental refund payment, we will decide in the

future whether claimants that filed later applications should receive

additional refunds. See, 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.

C. Payments to the Federal Government and the States

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

percent 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 the 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 funds remitted by Murphy Oil Corp., Murphy Oil USA, Inc., and

Murphy Exploration & Production Co. pursuant to the Consent Order

entered into with the DOE on July 15, 1994 will be distributed in

accordance with the foregoing Decision.

[FR Doc. 94-31132 Filed 12-16-94; 8:45 am]

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