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, 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 $144,864.85, plus accrued interest, in refined petroleum

overcharges obtained by the DOE under the terms of a Consent Order

issued to N. C. Ginther Company, Case No. LEF-0060. The OHA has

tentatively determined that the funds will be distributed in accordance

with the provision of 10 CFR part 205, subpart V and 15 U.S.C. 4501,

the Petroleum Overcharge Distribution and Restitution Act (PODRA).

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-0060.

FOR FURTHER INFORMATION CONTACT: Janet R. H. Fishman, Staff Attorney,

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

Washington, DC 20585, (202) 586-2400.

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 sets forth the procedures that the DOE

has tentatively formulated to distribute to eligible claimants

$144,864.85, plus accrued interest, obtained by the DOE under the terms

of a Consent Order that the DOE and N. C. Ginther Company agreed to on

March 25, 1983. Under the Consent Order, all civil and administrative

claims and disputes between N. C. Ginther Company and the DOE were

settled concerning Ginther's compliance with the federal petroleum

price and allocation regulations with respect to all sales of natural

gas liquids and natural gas liquid products by Ginther during the

consent order period.

The OHA has proposed to distribute the Consent Order fund in a two

stage refund proceeding. Purchasers of propane, butane, and natural

gasoline from N. C. Ginther Company will have an opportunity to submit

refund applications in the first stage. Refunds will be granted to

applicants who satisfactorily demonstrate they were injured by the

pricing violations and who document the volume of propane, butane, and

natural gasoline they purchased from N. C. Ginther Company during the

relevant audit period. In the event that money remains after all first

stage claims have been disposed of, the remaining funds will be

disbursed in accordance with the provisions of 15 U.S.C. 4501, the

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

Any member of the public may submit written comments regarding the

proposed refund procedures. Commenting parties are requested to forward

two copies of their submissions, within 30 days of publication of this

notice in the Federal Register, to the address set forth at the

beginning of this notice. Comments so received, will be made 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

1E-234, 1000 Independence Avenue SW., Washington, DC 20585.

Dated: April 14, 1994.

George B. Breznay,

Director, Office of Hearings and Appeals.

Name of Petitioner: N. C. Ginther Company

Date of Filing: July 20, 1993

Case Number: LEF-0060

On July 20, 1993, the Economic Regulatory Administration (ERA) of

the Department of Energy (DOE) filed a petition with the Office of

Hearings and Appeals (OHA), requesting that the OHA formulate and

implement procedures for distributing funds obtained through a Consent

Order between ERA and N.C. Ginther Company (Ginther), pursuant to 10

CFR part 205, subpart V. This Proposed Decision sets forth the OHA's

tentative plan for distributing these funds to qualified refund

applicants. Since the procedures set forth in this Decision are in

proposed form, no refund applications should be filed at this time. A

final determination will be issued at a later date announcing that the

filing of Ginther refund applications is authorized.

I. Background

Ginther was a ``gas plant operator'' (as defined in 10 CFR

Sec. 212.162) and its sales were subject to DOE price regulations.

During the period covered by the Consent Order, Ginther sold propane,

butane, and natural gasoline (natural gas liquids products). An ERA

audit of Ginther's records revealed possible violations of the

Mandatory Petroleum Price Regulations, 10 CFR part 212 subparts E and

K, in specified transactions during the period September 1, 1973,

through March 31, 1977 (the consent order period).\1\ Consequently, the

ERA issued a Notice of Probable Violation (NOPV) to Ginther on December

31, 1980, alleging pricing violations in the sale of propane, butane,

and natural gasoline during the audit period. On March 25, 1983,

Ginther and the DOE entered into a Consent Order. The Consent Order

refers to the ERA's allegations of regulatory violations. It also

includes Ginther's denials that any such violations occurred.

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\1\Ginther owned all or a portion of four gas processing plants

for various lengths of time during the audit period. In addition,

Ginther owned and operated Ginther Energy Marketing Company and A &

V Gas Service, Inc. In accordance with the definition of a firm in

10 CFR 212.31, the four gas processing plants, Ginther Energy

Marketing Company, and A & V Gas Service, Inc., constitute one firm

and were regarded as such by ERA in the audit. Notice of Probable

Violation issued to N.C. Ginther dated December 31, 1980.

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Under the terms of the Consent Order, Ginther was required to

refund the sum of $175,000, including interest through January 31,

1983, in 36 monthly installments beginning thirty days after the

effective date of the Consent Order. There is a total of $144,864.85,

plus accrued interest, available for restitution. This Decision

concerns the distribution of all funds in the Ginther escrow account,

including any which may be received after the date of this

determination.

II. Jurisdiction

The procedural regulations of the DOE set forth general guidelines

by which the Office of Hearings and Appeals may formulate and implement

a plan of distribution for funds received as a result of an enforcement

proceeding. 10 C.F.R. Part 205, Subpart V. It is the DOE policy to use

the Subpart V process to distribute such funds. For a more detailed

discussion of Subpart V and the authority of the Office of Hearings and

Appeals to fashion procedures to distribute refunds obtained as part of

settlement agreements, see Office of Enforcement, 9 DOE 82,553 (1982);

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 Ginther 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.

II. Proposed Refund Procedures

We propose to implement a two-stage refund process by which

purchasers of Ginther natural gas liquids (NGL) products during the

consent order period may submit Applications for Refund in this initial

stage. 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 public utilities and

cooperatives; and (iii) refiners, resellers, and retailers

(collectively ``resellers'').

A. First Stage Refund Procedures

In order to receive a refund, each claimant will be required to

submit a schedule of its monthly purchases of Ginther NGL products

during the consent order period. If the product was not purchased

directly from Ginther, the claimant must establish that the product

originated with Ginther. Additionally, a reseller 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 Ginther's

alleged overcharges. This showing will generally consist of two

distinct elements. First, a reseller claimant will be required to show

that it had ``banks'' of unrecouped increased product costs in excess

of the refund claimed.\2\ Second, because a showing of banked costs

alone is not sufficient to establish injury, a claimant must provide

evidence that market conditions precluded it from increasing its prices

to pass through the additional costs associated with the alleged

overcharges. See Vickers Energy Corp./Hutchens Oil Co., 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 Ginther. See National Helium Co./Atlantic Richfield Co., 11 DOE

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

Energy, 618 F. Supp. 1199 (D. Del. 1985).

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\2\Claimants who have previously relied upon their banked costs

in order to obtain refunds in other special refund proceedings

should subtract those refunds from the cumulative banked costs

submitted in this proceeding. See Husky Oil Co./Metro Oil Products,

Inc., 16 DOE 85,090 at 88,179 (1987). Additionally, a claimant may

not receive a refund for any month in which it has a negative

cumulative bank (for that product) or for any preceding month. See

Standard Oil (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 allow approximations

of those banks prepared by the applicant. 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. Sec. 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 alleged overcharges

were dispersed equally in all of Ginther's sales of NGL products during

the consent order period. In accordance with this presumption, refunds

will be made on a pro-rata or volumetric basis.\3\ 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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\3\Because we realize that the impact on an individual claimant

may have been greater than the volumetric refund amount, we will

allow any purchaser to file a refund application based upon a claim

that it suffered a disproportionate share of Ginther's alleged

overcharges. See, e.g., Standard Oil (Indiana)/Army and Air Force

Exchange Service, 12 DOE 85,015 (1984). Such an application will be

granted only if an applicant makes a persuasive showing that: (1) it

was ``overcharged'' by a specific amount, (2) it sustained a

disproportionate share of Ginther's alleged overcharges, and (3) it

was injured by those overcharges. See MCO Holdings, Inc., MGPC,

Inc./Little America Refining Co., 19 DOE 85,560 (1989); Marathon

Petroleum Co./Red Diamond Oil Co., 19 DOE 85,543 (1989); Getty Oil

Co./Atchison, Topeka & Santa Fe Railroad Co., 18 DOE 85,107 (1988).

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

refund above the volumetric refund level. In computing the

appropriate refunds of this type, we will prorate the refund amount

by the ratio of the Ginther consent order amount as compared to the

aggregate overcharge amount alleged by the ERA. Amtel, Inc./Whitco,

Inc., 19 DOE 85,319 (1989) (Amtel/Whitco).

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

the consent order fund is equal to the number of gallons purchased from

the consent order firm during the applicable consent order period times

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

refund amount is $0.0057. We derived this figure by dividing the

consent order fund, $144,864.85, by 25,312,920 gallons, the approximate

number of gallons of covered refined products which Ginther sold from

September 1973 through March 1977. A firm that establishes its

entitlement to a refund will receive all or a portion of its allocable

share plus a pro-rata share of the accrued interest.\4\

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\4\As in previous cases, we propose to establish a minimum

refund amount of $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).

Accordingly, an applicant must have purchased at least 2,544 gallons

of NGL products from Ginther in order for its claim to be

considered.

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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. These presumptions are intended to ease what

would be a time-consuming and potentially expensive process if an

applicant were forced to demonstrate that they absorbed the alleged

overcharges.

2. End-Users

In accordance with prior Subpart V proceedings, we propose to adopt

the presumption that an end-user or ultimate consumer of Ginther NGL

products whose business is unrelated to the petroleum industry was

injured by the alleged overcharges settled by the consent 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

consent order period and were not required to keep records which

justified selling price increases by reference to cost increases.

Consequently, analysis of the impact of the alleged 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 Ginther NGL products need only document

their purchase volumes from Ginther during the consent order period to

make a sufficient showing that they were injured by the alleged

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 overcharge 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 alleged 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.\5\

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\5\A cooperative's purchases of Ginther products 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. Refiners, Resellers, and Retailers

a. Small Claims Presumption

We propose to adopt a ``small claims'' presumption that a firm

which resold Ginther products and requests a relatively small refund

was injured by the alleged overcharges. Under the small claims

presumption, a refiner, 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 Ginther

products it purchased during the consent order period. 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 even 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 because it allows the OHA to

process the large number of routine refund claims in an efficient

manner.6

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\6\In order to qualify for a refund under the small claims

presumption, a refiner, reseller, or retailer must have purchased

less than 877,280 gallons of Ginther products during the consent

order period. However, an applicant, who has purchased more than

877,280 gallons of Ginther products during the consent order period,

may elect to limit its refund to the small claims presumption.

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b. Mid-Level Claim Presumption

In addition, a refiner, 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, up to $20,000,7 whichever is larger.8 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 alleged 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 Ginther

NGL products during the consent order period in order to be eligible to

receive a refund of 40 percent of its total allocable share, up to

$20,000, or $5,000, whichever is greater.9

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\7\In most prior proceedings, we have used a $40,000 mid-level

claim presumption. However, due to the small size of the Ginther

consent order fund and the rather small volumetric figure, this

amount would be impractical.

\8\That is, claimants who purchased more than 877,281 gallons of

Ginther products during the consent order period (mid-level

claimants) may elect to utilize this presumption.

\9\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 alleged overcharges, or that it is eligible for a refund

of less than the applicable presumption-level refund, may not then

be eligible for a presumption-based refund. Instead, such a claimant

may receive a refund which reflects the level of injury established

in its application. No refund will be approved if its submission

indicates that it was not injured as a result of its purchases from

Ginther. See Exxon, 17 DOE at 89,150 n.10.

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c. Spot Purchasers

We propose to adopt a rebuttable presumption that a reseller that

made only spot purchases from Ginther 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 market in

which they made 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., Vickers, 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

Ginther.10

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\1\0In prior proceedings, we have stated that refunds will be

approved for spot purchasers who demonstrate 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.

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B. Allocation Claims

We may also receive claims based upon Ginther's alleged failure to

furnish products that it was obliged to supply under the DOE allocation

regulations that became effective in January 1974. See 10 C.F.R. Part

211. Any such applications will be evaluated with reference to the

standards set forth in Subpart V implementation cases such as Office of

Special Counsel, 10 DOE 85,048, at 88,220 (1982), and refund

application cases such as Mobil Oil Corp./Reynolds Industries, Inc., 17

DOE 85,608 (1988); Marathon Petroleum Co./Research Fuels, Inc., 19 DOE

85,575 (1989) (Marathon/RFI), aff'd sub nom. Research Fuels, Inc. v.

Department of Energy, No. CA3-89-2983G (N.D. Tex. 1990), aff'd, 977

F.2d 601 (Temp. Emer. Ct. App. 1992). These standards generally require

an allocation claimant to demonstrate the existence of a supplier/

purchaser relationship with the consent order firm and the likelihood

that the consent order firm failed to furnish NGL products that it was

obliged to supply to the claimant under 10 CFR part 211. In addition,

the claimant should provide evidence that it had contemporaneously

notified the DOE or otherwise sought redress from the alleged

allocation violation. Finally, the claimant must establish that it was

injured and document the extent of the injury.

In our evaluation of whether allocation claims meet these

standards, we will consider various factors. For example, we will seek

to obtain as much information as possible about the agency's treatment

of complaints made to it by the claimant. We will also look at any

affirmative defenses that Ginther may have had to the alleged

allocation violation. See Marathon/RFI, 19 DOE 85,575. In assessing an

allocation claimant's injury, we will evaluate the effect of the

alleged allocation violation on its entire business operations with

particular reference to the amount of product that it received from

suppliers other than Ginther. In determining the amount of an

allocation refund, we will utilize any information that may be

available regarding the portion of the Ginther consent order amount

that the agency attributed to allocation violations in general and to

the specific allocation violation alleged by the claimants. Finally,

since the Ginther consent order fund is less than Ginther's potential

liability in the proceedings, we will pro rate those allocation refunds

that would otherwise be disproportionately large in relation to the

consent order fund. Cf. Amtel/Whitco, 19 DOE 85,319.

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. 4501-07. 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 energy

conservation programs. The Secretary has delegated these

responsibilities to the OHA, and any funds in the Ginther consent order

escrow account that the OHA determines will not be needed to effect

direct restitution to injured customers will be distributed in

accordance with the provisions of PODRA.

It Is Therefore Ordered That:

The amount available to the Department of Energy for restitution

pursuant to the consent order entered into on March 25, 1983, by N. C.

Ginther Company and the Department of Energy will be distributed in

accordance with the foregoing Decision.

[FR Doc. 94-9661 Filed 4-20-94; 8:45 am]

BILLING CODE 6450-01-P