[Federal Register Volume 60, Number 219 (Tuesday, November 14, 1995)]
[Notices]
[Pages 57237-57240]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28060]
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DEPARTMENT OF ENERGY
Office of Hearings and Appeals
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 announces the procedures for disbursement of $4,567,399.72 (plus
accrued interest) in alleged or adjudicated crude oil overcharges
obtained by the DOE from Malcolm M. Turner (Case No. VEF-0013), Revere
Petroleum Corporation et al. (Case No. VEF-0014), Granite Petroleum
Corporation (Case No. VEF-0015), and Dalco Petroleum Corporation (Case
No. VEF-0016). The OHA has determined that the funds obtained from
these firms, plus accrued interest, will be disbursed in accordance
with the DOE's Modified Statement of Restitutionary Policy in Crude Oil
Cases, 51 FR 27899 (August 4, 1986).
FOR FURTHER INFORMATION CONTACT: Richard W. Dugan, Associate Director,
Office of Hearings and Appeals, 1000 Independence Avenue SW.,
Washington, D.C. 20585, (202) 586-2860.
SUPPLEMENTARY INFORMATION: In accordance with 10 CFR 205.282(c), notice
is hereby given of the issuance of the Decision and Order set forth
below. The Decision and Order sets forth the procedures that the DOE
has tentatively formulated to distribute a total of $4,567,399.72, plus
accrued interest, remitted to the DOE by Malcolm M. Turner, Revere
Petroleum Corporation et al., Granite Petroleum Corporation and Dalco
Petroleum Corporation. The DOE is currently holding these funds in
interest bearing escrow accounts pending distribution.
The OHA will distribute these funds in accordance with the DOE's
Modified Statement of Restitutionary Policy in Crude Oil Cases, 51 FR
27899 (August 4, 1986) (the MSRP). Under the MSRP,
[[Page 57238]]
crude oil overhcarge monies are divided among the federal government,
the states, and injured purchasers of refined petroleum products.
Refunds to the states will be distributed in proportion to each state's
consumption of petroleum products during the price control period.
Refunds to eligible purchasers will be based on the volume of petroleum
products that they purchased and the extent to which they can
demonstrate injury.
Because the June 30, 1995, deadline for the crude oil refund
applications has passed, no new applications from purchasers of refined
petroleum products will be accepted for the 20 percent of these funds
allocated to individual claimants. Instead, that share of the funds
will be added to the general crude oil overcharge pool used for direct
restitution.
Dated: November 6, 1995.
George B. Breznay,
Director, Office of Hearings and Appeals.
November 6, 1995.
Decision and Order of the Department of Energy
Implementation of Special Refund Procedures
Names of Firms: Malcolm M. Turner, Revere Petroleum Corporation et
al. Granite Petroleum Corporation, Dalco Petroleum Corporation
Dates of Filing: April 10, 1995; April 10, 1995; April 10, 1995; May
2, 1995
Case Numbers: VEF-0013, VEF-0014, VEF-0015, VEF-0016
In accordance with the procedural regulations of the Department
of Energy (DOE), 10 CFR part 205, Subpart V, the Office of General
Counsel, Regulatory Litigation (OGC) (formerly the Economic
Regulatory Administration (ERA), Office of Enforcement Litigation),
filed four Petitions for the Implementation of Special Refund
Procedures with the Office of Hearings and Appeals (OHA) on April
10, 1995, and May 2, 1995. The Petitions request that OHA formulate
and implement procedures to distribute funds received by the DOE
from Malcolm M. Turner (Turner), Revere Petroleum Corporation
(Revere), Granite Petroleum Corporation (Granite), and Dalco
Petroleum Corporation (Dalco), pursuant to court-approved
settlements between the parties and the DOE, DOE consent orders or
remedial orders. This Decision and Order sets forth the OHA's plan
to distribute these funds.
I. Background
As indicated by the following summaries of the relevant
enforcement proceedings, all of the funds that are subject to this
Decision were obtained through enforcement actions involving alleged
or adjudicated crude oil overcharges.
A. Malcolm Turner
Turner, the sole Director and President of Bayport Refining Co.
(Bayport), was a reseller of crude oil during the period of
petroleum price controls and was subject to regulations governing
the pricing and allocation of crude oil set forth at 10 CFR Parts
211 and 212 of the Mandatory Petroleum Price and Allocation
Regulations. As the result of an ERA audit of Turner's and Bayport's
operations, the ERA issued a Proposed Remedial Order (PRO) on
September 20, 1984, alleging that they violated the provisions of 10
CFR Sec. 212.186, by charging prices for crude oil in excess of
actual purchase prices without providing any service or other
function traditionally and historically associated with the resale
of crude oil during the period from September 1978 through December
1980. According to the PRO, those transactions resulted in
overcharges amounting to $11,810,639.84. The PRO further alleged
that during the period from December 1979 through December 1980, the
Respondents violated the provisions of 10 CFR Sec. 212.131 by the
miscertification of crude oil. According to the PRO, those
transactions resulted in overcharges amounting to $12,554,371.74.
The OHA in large part affirmed the findings of the PRO and issued a
Remedial Order (RO) to the Respondents on February 16, 1989. Bayport
Refining Co., 18 DOE para. 83,007 (1989). The RO was upheld by the
Federal Energy Regulatory Commission (FERC) on October 4, 1993.
Bayport Refining Company and Malcolm M. Turner, 65 FERC para. 61,021
(1993). Turner appealed to the United States District Court for the
Northern District of Texas on March 31, 1994.\1\ In January 1995,
the court entered an Agreed Judgment resolving the issues addressed
by the RO against Turner. Pursuant to the Agreed Judgment, Turner
agreed to pay to the DOE the sum of $65,000. Turner has fulfilled
his financial obligation to the DOE. As of September 30, 1995, the
Bayport Consent Order fund contained $65,000 in principal plus
accrued interest.\2\
\1\ Bayport, which was dissolved in November 1982, did not
appeal the RO. While the matter was referred for enforcement of the
RO against Bayport, no funds were ever collected from the
corporation.
\2\ The funds submitted by Turner pursuant to the Agreed
Judgment are deposited in the Bayport Consent Order fund, No.
6A0X00329.
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B. Revere Petroleum Corp.
During the period of Federal petroleum price controls, Revere
was engaged in crude oil reselling.3 The firm was therefore
subject to regulations governing the pricing of crude oil set forth
at 10 CFR Parts 205, 210, 211, and 212 of the Mandatory Petroleum
Price and Allocation Regulations. As a result of an ERA
investigation of Revere's compliance with the price and allocation
regulations, the ERA issued a PRO to Revere on January 18, 1983.
However, on August 9, 1983, that PRO was amended by the ERA to
include additional violations of 10 CFR Sec. 212.186, alternative
violations of 10 CFR Sec. 212.183, and five additional parties as
co-respondents of the PRO.4 On May 29, 1992, the OHA issued the
Amended PRO, with modifications, as an RO. Revere Petroleum Corp.,
22 DOE para. 83,004 (1992). The RO found Revere liable for
violations of 10 CFR Sec. 212.186 in connection with its resales of
crude oil during the period April 1979 through March 1980. Revere
appealed to FERC (Case No. R092-4-00). However, subsequently, this
enforcement proceeding was settled when Revere and DOE entered into
a settlement on an ability-to-pay basis in order to resolve DOE's
claims against the firm. Revere agreed to pay the DOE the sum of
$50,000.00, plus a percentage of the proceeds of Revere's asset
liquidation. As of September 30, 1995, Revere and the other
respondents have paid to the DOE the sum of $1,310,140.13 in
satisfaction of their obligations.5 Although additional
revenues may be collected, no good reason exists to delay
implementing distribution of the current balance of the fund.
\3\ References to Revere in this Decision include Richard E.
Dobyns, President of Revere, during the price control period.
\4\ Those five individuals were James J. Cross, M. Kemp
McMillan, Gordon K. Walz, and Milton E. Walz, who entered into a
separate Consent Order with the DOE in December 1987, and John E.
Woolsey, who entered into a separate Consent Order with the DOE in
September 1986.
\5\ Revere and all of the named individuals except Woolsey have
satisfied their obligations to the DOE. Although Woolsey has made
substantial payments to the DOE, he is delinquent in his payments,
and the possibility exists that additional funds will be paid by
him.
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C. Granite Petroleum Corporation
Granite engaged in the reselling and marketing of crude oil
during the period of petroleum price controls. The firm was
therefore subject to regulations governing the pricing and
allocation of crude oil set forth at 10 CFR. Parts 211 and 212 of
the Mandatory Petroleum Price and Allocation Regulations. The ERA
conducted a detailed audit to determine Granite's compliance with
the federal petroleum price and allocation regulations during the
period from September 1, 1979 through January 27, 1981. As a result
of the audit, on March 4, 1983, the ERA issued a PRO to the firm
alleging violations of the crude oil price and allocation
regulations (Case No. 640X00447). In September 1983, Granite and the
DOE entered into a Consent Order which resolved a number of
outstanding enforcement issues involving Granite. Under the terms of
the settlement, Granite agreed to pay $200,000 in installment
payments to the DOE.6 As of September 30, 1995, Granite has
paid to the DOE the sum of $176,698.85. Granite is currently
delinquent in its payments to the DOE. Although we anticipate that
additional sums may be collected from Granite, no good reason exists
to forestall distribution of the current balance of the fund.
\6\ Granite Petroleum Corporation and John E. Woolsey, President
of Granite, are collectively referred to as Granite in the text.
Both were parties to the Consent Order.
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D. Dalco Petroleum Corporation
Dalco was a reseller of crude oil during the period of price
controls and was subject to regulations governing the pricing and
allocation of crude oil set forth at 10 CFR. Parts 211 and 212 of
the Mandatory Petroleum Price and Allocation Regulations.
[[Page 57239]]
As the result of an ERA audit, the ERA issued a PRO to Dalco on April
30, 1982, alleging that between March 1976 and September 1978, Dalco
violated the DOE mandatory petroleum price regulations which governed
the resale of domestic crude oil, pursuant to 10 CFR. Secs. 212.93,
212.10, 212.131, 205.202, 210.62(c), and 212.185, resulting in the
illegal receipt of revenues. After the issuance of the PRO, but before
a Statement of Objections was filed, Dalco filed for bankruptcy.\8\ In
August 1983, the Bankruptcy Court for the Northern District of Oklahoma
issued an injunction which stayed the enforcement proceeding against
the respondents. The bankruptcy court ultimately approved and allowed
the DOE's claims against Dalco and as of September 30, 1995, Dalco has
paid $3,015,560.74 to the DOE. Although the possibility exists that
additional revenues will be obtained by the DOE in the Dalco bankruptcy
proceeding, no reason exists to delay in implementing distribution of
the current balance of the funds.\9\
\8\ Zang, Porter and Dalco filed for bankruptcy on August 16,
1982, June 15, 1983, and July 20, 1983 respectively.
\9\ Porter has satisfied his obligations to the DOE under the
PRO. Additional funds may be collected from the Dalco and Zang
estates.
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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 of fund 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 et seq.; see also Office of Enforcement, 9
DOE para. 82,508 (1981), and Office of Enforcement, 8 DOE para.
82,597 (1981).
III. The Proposed Decision and Order
On September 13, 1995, OHA issued a Proposed Decision and Order
(PDO) setting forth the OHA's tentative plan to distribute these
funds. See 60 Fed. Reg. 48510 (September 19, 1995). OHA tentatively
concluded that the funds should be distributed in accordance with
the DOE's Modified Statement of Restitutionary Policy in Crude Oil
Cases (MSRP), 51 Fed. Reg. 27899 (August 4, 1986). Pursuant to the
MSRP, OHA proposed to reserve 20 percent of those funds for direct
refunds to applicants who claim that they were injured by the crude
oil violations. We stated that the remaining 80 percent of the funds
would be distributed to the states and federal government for
indirect restitution.
We provided a period of 30 days from the date of the PDO
publication in the Federal Register in which the public could submit
comments regarding the tentative refund procedures. More than 30
days have elapsed, and the OHA has received no comments concerning
the proposed procedures.
IV. The Refund Procedures
A. Crude Oil Refund Policy
We adopt the tentative determination of the Proposed Decision
and Order to distribute the monies remitted pursuant to the Turner,
Revere, Granite, and Dalco enforcement proceedings in accordance
with the MSRP, which was issued as a result of the Settlement
Agreement approved by the court in The Department of Energy Stripper
Well Exemption Litigation, 653 F. Supp. 108 (D. Kan. 1986). Shortly
after the issuance of the MSRP, the OHA issued an Order that
announced that this policy would be applied in all Subpart V
proceedings involving alleged crude oil violations. Order
Implementing the MSRP, 51 Fed. Reg. 29689 (August 20, 1986) (the
August 1986 Order).
Under the MSRP, 40 percent of crude oil overcharge funds will be
disbursed to the federal government, another 40 percent to the
states, and up to 20 percent may initially be reserved for the
payment of claims to injured parties. The MSRP also specified that
any funds remaining after all valid claims by injured purchasers are
paid will be disbursed to the federal government and the states in
equal amounts.
In April 1987, the OHA issued a Notice analyzing the numerous
comments received in response to the August 1986 Order. 52 Fed. Reg.
11737 (April 10, 1987) (April 10 Notice). This Notice provided
guidance to claimants that anticipated filing refund applications
for crude oil monies under the Subpart V regulations. In general, we
stated that 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.
Applicants who were end-users or ultimate consumers of petroleum
products, whose businesses are unrelated to the petroleum industry,
and who were not subject to the DOE price regulations would be
presumed to have been injured by any alleged crude oil overcharges.
In order to receive a refund, end-users would not need to submit any
further evidence of injury beyond the volume of petroleum products
purchased during the period of price controls. See City of Columbus
Georgia, DOE para. 85,550 (1987).
B. Refund Claims
The amount of money subject to this Decision is $4,567,399.72,
plus accrued interest. In accordance with the MSRP, we propose
initially to reserve 20 percent of those funds ($913,479.94 plus
accrued interest) for direct refunds to applicants who claim that
they were injured by crude oil overcharges. We propose to base
refunds to claimants on a volumetric amount which has been
calculated in accordance with the description in the April 10
Notice. That volumetric refund amount is currently $0.0016 per
gallon. See 60 Fed. Reg. 15562 (March 24, 1995).
Applicants who have executed and submitted a valid waiver
pursuant to one of the escrows established by the Stripper Well
Settlement Agreement have waived their rights to apply for a crude
oil refund under Subpart V. See Mid-America Dairyman Inc. v.
Herrington, 878 F.2d 1448, 3 Fed. Energy Guidelines para. 26,617
(Temp. Emer. Ct. App. 1989); In re Department of Energy Stripper
Well Exemption Litigation, 707 F. Supp. 1267, 3 Fed. Energy
Guidelines para. 26,613 (D. Kan. 1987). Because the June 30, 1995,
deadline for crude oil refund applications has passed, we will not
accept any new applications from purchasers of refined petroleum
products for these funds. See Western Asphalt Service, Inc., 25 DOE
para. 85,047 (1995). Instead, these funds will be added to the
general crude oil overcharge pool used for direct restitution.\10\
\10\ A crude oil refund applicant is only required to submit one
application for its share of all available crude oil overcharge
funds. See, e.g., Ernest A. Allerkamp, 17 DOE para. 85,079 at 88,176
(1988).
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C. Payments to the States and Federal Government
Under the terms of the MSRP, the remaining 80 percent of the
alleged crude oil violation amounts subject to this Decision, or
$3,653,919.78 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. 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 Agreement.
It Is Therefore Ordered That:
(1) The Director of Special Accounts and Payroll, Office of
Departmental Accounting and Financial Systems Development, Office of
the Controller of the Department of Energy shall take all steps
necessary to transfer the consent order funds shown in the Appendix
to this Decision and Order, plus all accrued interest from the
escrow accounts of the firms listed in the Appendix, pursuant to
Paragraphs (2), (3), and (4) of this Decision.
(2) The Director of Special Accounts and Payroll shall transfer
$1,826,959.89 plus any accrued interest, of the funds referenced in
Paragraph (1) above, into the subaccount denominated ``Crude
Tracking-States,'' Number 999DOE0003W.
(3) The Director of Special Accounts and Payroll shall transfer
$1,826,959.89 plus any accrued interest, of the funds referenced in
Paragraph (1) above, into the subaccount denominated ``Crude
Tracking-Federal,'' Number 999DOE002W.
(4) The Director of Special Accounts and Payroll shall transfer
$913,479.94 plus any accrued interest, of the funds referenced in
Paragraph (1) above, into the subaccount denominated ``Crude
Tracking-Claimants 4,'' Number 999DOE0010Z.
[[Page 57240]]
(5) This is a final Order of the Department of Energy.
George B. Breznay,
Director, Office of Hearings and Appeals.
Dated: November 6, 1995.
Appendix
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Case No. Firm ERA order No. Principal amount
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VEF-0013.................. Malcolm M. Turner (Bayport 6A0X00329 $65,000.00
Consent Order Fund).
VEF-0014.................. Revere Petroleum Corp. et al.... 6A0X00336W 1,310,140.13
VEF-0015.................. Granite Petroleum Corporation... 640X00447W 176,698.85
VEF-0016.................. Dalco Petroleum Corporation..... 6C0X00240W 3,015,560.74
Total............... ................................ ................................ 4,567,399.72
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[FR Doc. 95-28060 Filed 11-13-95; 8:45 am]
BILLING CODE 6450-01-P
