Implementation of Special Refund Procedures

DEPARTMENT OF ENERGY

Implementation of Special Refund Procedures

AGENCY: Office of Hearings and Appeals, Department of Energy.

ACTION: Notice of implementation of special refund procedures.

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

Energy (DOE) announces procedures for the disbursement of $17,816.72,

plus accrued interest, in crude oil price violation amounts obtained by

the DOE pursuant to a Remedial Order issued on April 3, 1980, to

Warwick Oil Corporation (Case No. LEF-0117). The OHA has determined

that the funds obtained from the remedial order firm, plus accrued

interest, will be distributed in accordance with the DOE's Modified

Statement of Restitutionary Policy in Crude Oil Cases. Accordingly, 40

percent of the funds will be remitted to the federal government,

another 40 percent to the states, and 20 percent will be initially

reserved for the payment of claims by injured parties.

DATE AND ADDRESS: Applications for Refund from the crude oil funds

should be clearly labeled ``Application for Crude Oil Refunds'' and

should be mailed to subpart V Crude Oil Overcharge Refunds, Office of

Hearings and Appeals, Department of Energy, 1000 Independence Avenue,

SW., Washington, DC 20585. Applications for Refund must be filed in

duplicate no later than June 30, 1994. Any party who has previously

filed an Application for Refund should not file another Application for

Refund from the present crude oil funds. The previously filed crude oil

application will be deemed filed in all crude oil proceedings as the

procedures are finalized.

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

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

Independence Avenue, SW., Washington, DC 20585, (202) 586-2094 (Mann);

586-2383 (Klurfeld).

SUPPLEMENTARY INFORMATION: In accordance with 10 CFR 205.282(c), notice

is hereby given of the issuance of the Decision and Order set out

below. The Decision and Order sets forth the procedures that the DOE

has formulated to distribute $17,816.72, plus accrued interest,

obtained by the DOE pursuant to a Remedial Order issued to Warwick Oil

Corporation (Warwick) on April 3, 1980. In the Remedial Order, the DOE

found that, during the period January 1976 through November 1977

Warwick charged prices for crude oil which exceeded the maximum prices

that the firm was permitted to charge under Federal petroleum price

regulations.

The OHA has determined to distribute the funds obtained from

Warwick in accordance with the DOE's Modified Statement of

Restitutionary Policy in Crude Oil Cases, 51 FR 27899 (August 4, 1986)

(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) (Stripper Well Settlement Agreement). In accordance with

the MSRP, the OHA has determined that 80 percent of the Warwick crude

oil overcharge amounts, plus accrued interest, will 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. 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.

Also under the terms of the MSRP, the DOE has determined that the

remaining 20 percent of the Warwick crude oil overcharge funds will be

initially reserved for the payment of claims by injured parties. The

specific requirements which an injured party must meet in order to

receive a refund are set out in section III of the Decision. Claimants

who meet these specific requirements will be eligible to receive their

share of all available crude oil overcharge funds based on the number

of gallons of covered petroleum products which they purchased during

the price control period.

Applications for Refund must be postmarked no later than June 30,

1994. As stated in the Decision, any party who has previously submitted

a refund application in the crude oil refund proceedings should not

file another application for refund in the crude oil proceedings. The

previously filed crude oil application will be deemed filed in all

crude oil proceedings as the procedures are finalized.

Dated: March 1, 1994.

George B. Breznay,

Director, Office of Hearings and Appeals.

Decision and Order of the Department of Energy

Implementation of Special Refund Procedures

March 1, 1994.

Name of Firm: Warwick Oil Corp.

Date of Filing: November 16, 1993.

Case Number: LEF-0117.

On November 16, 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 received pursuant to a

Remedial Order issued by the DOE to Warwick Oil Corporation (Warwick),

a crude oil producer. 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

described in the Remedial Order. This Decision and Order sets forth the

OHA's plan to distribute these remedial order funds.

I. Background

The DOE issued a Remedial Order to Warwick on April 3, 1980,

concluding that the firm had violated the Federal petroleum price

regulations in its sales of crude oil from the Hanks Company lease at

prices that exceeded maximum lawful prices. Warwick has since remitted

$17,816.72 in compliance with the Remedial Order, to which interest has

subsequently accrued. These funds continue to be held in an interest-

bearing escrow account maintained at the Department of the Treasury.

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. 4501-4507, Office of Enforcement, 9 DOE 82,508 (1981), and

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

We have considered the ERA's petition that we implement subpart V

proceedings with respect to the Warwick remedial order funds and have

determined that such proceedings are appropriate. This Decision and

Order sets forth the OHA's plan to distribute those funds.

III. Refund Procedures

On December 15, 1993, the OHA issued a Proposed Decision and Order

(PD&O) establishing tentative procedures to distribute the remedial

order funds. That PD&O was published in the Federal Register, and a 30-

day period was provided for the submission of comments regarding our

proposed refund plan. See 58 FR 67405 (December 21, 1993). More than 30

days have elapsed and the OHA has received no substantive comments

concerning the proposed procedures for the distribution of the remedial

order funds. Consequently, the procedures will be adopted as proposed.

A. Crude Oil Refund Policy

The funds obtained pursuant to the Warwick Remedial Order should

therefore be distributed in accordance with the DOE's Modified

Statement of Restitutionary Policy in Crude Oil Cases, 51 FR 27899

(August 4, 1986) (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) (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) (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, e.g., Shell Oil Co., 17 DOE 85,204

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

(Mountain Fuel).

B. Refund Claims

These standard crude oil refund procedures will be used to

distribute the monies in the Warwick Remedial Order fund. We have

chosen to initially 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 refunds 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 that they were injured as a

result of the violations.

We will adopt a presumption that the 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 some refined product refund cases. Id. These

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

the OHA Report on Stripper Well Overcharges, 6 Fed. Energy Guidelines

90,507 (1985). See also Petroleum Overcharge Distribution and

Restitution Act 3003(b)(2), 15 U.S.C. Sec. 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 85495 (1987). A party that has already submitted a claim in 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 has established

June 30, 1994, as the current deadline for filing an Application for

Refund from the crude oil funds. Quintana Energy Corp., 21 DOE 85,032

(1991). 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 have determined that the remaining

80 percent of the crude oil overcharge amounts subject to this

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:

(1) Applications for Refund from the crude oil overcharge funds

remitted by Warwick Oil Corporation may now be filed.

(2) All Applications submitted pursuant to Paragraph (1) above must

be filed in duplicate and postmarked no later than June 30, 1994.

(3) The Director of Special Accounts and Payroll, Office of

Departmental Accounting and Financial Systems Development, Office of

the Controller, Department of Energy, shall take all steps necessary to

transfer $17,816.72 (plus interest) from the Warwick Oil Corporation

subaccount (Account Number 640C00375Z), pursuant to Paragraphs (4),

(5), and (6) of this Decision.

(4) The Director of Special Accounts and Payroll shall transfer

$7,126.69 (plus interest) of the funds obtained pursuant to Paragraph

(3) above, into the subaccount denominated ``Crude Tracking-States,''

Number 999DOE003W.

(5) The Director of Special Accounts and Payroll shall transfer

$7,126.69 (plus interest) of the funds obtained pursuant to Paragraph

(3) above, into the subaccount denominated ``Crude Tracking-Federal,''

Number 999DOE002W.

(6) The Director of Special Accounts and Payroll shall transfer

$3,563.34 (plus interest) of the funds obtained pursuant to Paragraph

(3) above, into the subaccount denominated ``Crude Tracking-Claimants

4,'' Number 999DOE010Z.

Dated: March 1, 1994.

George B. Breznay,

Director, Office of Hearings and Appeals.

[FR Doc. 94-5311 Filed 3-7-94; 8:45 am]

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