[Federal Register Volume 60, Number 244 (Wednesday, December 20, 1995)]
[Notices]
[Pages 65650-65652]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30960]
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[[Page 65651]]
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 announces the proposed procedures for disbursement of
$275,000,000 (plus interest) in alleged overcharges remitted or to be
remitted to the DOE by Occidental Petroleum Corporation and its wholly
owned subsidiary OXY USA, Inc., Case No. VEF-0030. The OHA has
tentatively determined that these funds should be distributed in
accordance with the DOE's Modified Statement of Restitutionary Policy
in Crude Oil Cases, 51 Fed. Reg. 27899 (August 4, 1986).
DATES AND ADDRESSES: Comments must be filed in duplicate by January 19,
1996, and should be addressed to the Office of Hearings and Appeals,
Department of Energy, 1000 Independence Avenue, SW., Washington, DC
20585-0107. All comments should conspicuously display a reference to
Case No. VEF-0030.
FOR FURTHER INFORMATION CONTACT: Thomas L. Wieker, Deputy Director,
Janet N. Freimuth, Deputy Assistant Director, Office of Hearings and
Appeals, 1000 Independence Avenue, SW., Washington, DC 20585-0107,
(202) 586-2390 [Wieker]; (202) 586-2400 [Freimuth].
SUPPLEMENTARY INFORMATION: In accordance with 10 CFR 205.282(b), notice
is hereby given of the issuance of the Proposed Decision and Order set
forth below. The Proposed Decision and Order sets forth the procedures
that the DOE has tentatively formulated to distribute a total of
$275,000,000 plus interest, remitted or to be remitted to the DOE by
Occidental Petroleum Corporation. The DOE is currently holding
$100,000,000, plus accrued interest, of these funds in an interest
bearing escrow account pending distribution. The DOE will receive
additional annual payments of $35,000,000 plus interest during the
years 1996 through 2000.
The OHA proposes to 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, crude oil
overcharge 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 crude oil refund
applications has passed, we will not accept any new applications from
purchasers of refined petroleum products for these funds. As we state
in the Proposed Decision, any party who has previously submitted a
refund application in the crude oil refund proceeding should not file
another Application for Refund. Any party whose crude oil application
is approved will share in all crude oil overcharge funds.
Any member of the public may submit written comments regarding the
proposed refund procedures. Commenting parties are requested to submit
two copies of their comments. Comments should 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 these proceedings will be available for public
inspection between the hours of 1:00 p.m. to 5:00 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 20585-0107.
Dated: December 1, 1995.
George B. Breznay,
Director, Office of Hearings and Appeals.
Proposed Decision and Order of the Department of Energy
Implementation Order
Name of Case: OXY USA, Inc.
Date of Filing: September 18, 1995
Case Number: VEF-0030
The Office of General Counsel, Regulatory Litigation (OGC),
formerly the Economic Regulatory Administration (ERA), filed a
Petition for Implementation of Special Refund Procedures with the
Office of Hearings and Appeals (OHA) of the Department of Energy
(DOE). The Petition concerns funds remitted to the DOE pursuant to a
Consent Order executed by the DOE and Occidental Petroleum
Corporation (Occidental), including its wholly-owned subsidiary, OXY
USA, Inc. (OXY). OXY was formerly Cities Service Oil and Gas
Corporation, which in turn was a successor in interest to Cities
Service Corporation (Cities). Unless otherwise indicated, the firms
collectively are referred to as Occidental.
Pursuant to the Consent Order, Occidental agreed to remit $100
million within 30 days of the Consent Order and then to make five
annual payments of $35 million plus interest. On September 17, 1995,
OXY remitted $100 million to the DOE.
In accordance with procedural regulations codified at 10 C.F.R.
Part 205, Subpart V (Subpart V), the OGC requests that the OHA
establish special refund procedures to remedy the effects of the
alleged regulatory violations which were resolved by the Consent
Order. This Decision and Order sets forth the OHA's proposed
procedures for distributing the consent order funds.
I. Background
The Consent Order at issue was executed on June 27, 1995 in
proposed form. The DOE published notice of the Proposed Consent
Order and the opportunity to file comments. See 60 FR 35186 (July 6,
1995). Following the comment period, the DOE issued the Proposed
Consent Order as a final order, pursuant to 10 C.F.R. 205.199J. See
60 FR 43130 (August 18, 1995).
The Consent Order covers the period October 1, 1979 through
January 27, 1981 and reflects the resolution of enforcement
proceedings related to 91 reciprocal crude oil transactions engaged
in by Cities during that period. In those transactions, Cities sold
price-controlled crude oil in its refinery inventory in exchange for
deeply discounted exempt crude oil.
In 1988, the DOE issued a Remedial Order (RO) holding that the
transactions violated the price regulations and that the violation
amount of $264 million, plus interest, should be remitted to the
DOE. Cities Service Oil and Gas Corp., 17 DOE para. 83,021 (1988).
The 1988 RO also remanded the issue of whether the transactions
violated other regulations.
In 1992, the OGC issued a Revised Proposed Remedial Order
(RPRO), specifying an alternate liability of $254 million, plus
interest, on the ground that 83 of the transactions violated the
entitlements reporting requirements. OXY filed objections to the
RPRO with the OHA. OXY USA, Inc., Case No. LRO-0003 (dismissed
August 30, 1995). The case was ready for oral argument at the time
of the June 27, 1995 execution of the Proposed Consent Order.
During the pendency of the OHA proceeding on the RPRO, the
Federal Energy Regulatory Commission (FERC) reversed the 1988 RO.
Cities Service Oil and Gas Corp., 65 FERC para. 61,403 (1993),
reconsideration denied, 66 FERC para. 61,222 (1994). After FERC's
denial of reconsideration motions filed by the DOE and intervenor
parties, intervenor parties appealed to federal district court,
which dismissed their appeals for lack of standing. Alabama v. FERC,
3 Fed. Energy Guidelines para. 26,693 (D.D.C. June 8, 1995). One of
the intervenors had noticed an appeal at the time of the June 27,
1995 execution of the Proposed Consent Order. See 60 FR 35187 note
2.
Although the Consent Order resulted from the enforcement
proceeding involving the 91 reciprocal crude oil transactions, the
Consent Order is global. The Consent Order provides that it settles
all pending and potential civil and administrative claims against
Occidental
[[Page 65652]]
under the federal petroleum price and allocation regulations during the
consent order period. Thus, the Consent Order settles not only
issues related to the 91 reciprocal transactions but also any other
potential liability of Occidental with respect to its compliance
with the federal price and allocation regulations during the consent
order period .
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 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 et seq.; see also Office of Enforcement, 9
DOE para. 82,508 (1981); Office of Enforcement, 8 DOE para. 82,597
(1981).
III. Proposed Refund Procedures
A. The DOE's Modified Statement of Restitutionary Policy
The distribution of crude oil overcharge funds is governed by
the DOE's July 1986 Modified Statement of Restitutionary Policy in
Crude Oil Cases (MSRP). See 51 Fed. Reg. 27899 (August 4, 1986). The
MSRP was issued in conjunction with the Stripper Well Settlement
Agreement. See In re: The Department of Energy Stripper Well
Exemption Litigation. 653 F. Supp. 108 (D. Kan. 1986).
Under the MSRP, up to 20 percent of crude oil overcharge funds
may be reserved for direct restitution to injured purchasers, with
the remainder divided equally between the states and the federal
government. The MSRP also specifies that any funds remaining after
all valid claims by injured purchasers are paid be disbursed to the
states and the federal government in equal amounts.
In August 1986, shortly after the issuance of the MSRP, the OHA
issued an Order that announced that the MSRP would be applied in all
Subpart V proceedings involving alleged crude oil violations. See
Order Implementing the MSRP, 51 FR 29689 (August 20, 1986) (the
August 1986 Order). In response, parties filed comments.
In April 1987, the OHA issued a Notice analyzing the numerous
comments received in response to the August 1986 Order. See 52 FR
11737 (April 10, 1987). This Notice provided guidance to claimants
that anticipated filing refund applications for crude oil funds
under the Subpart V regulations. A crude oil refund applicant was
only required to submit one application for its share of crude oil
overcharge funds.
Consistent with the foregoing, the OHA accepted refund
applications from 1987 until the June 30, 1995 deadline. See 60 FR
19914 (April 20, 1995). Applicants who filed before the deadline and
whose applications are approved will share in the crude oil
overcharge funds. Approved applicants are currently receiving $.0016
per gallon of purchased refined product.
B. Proposal To Distribute the OXY Consent Order Funds in Accordance
With the MSRP
We have tentatively determined that all of the consent order
funds are crude oil funds and, therefore, should be distributed in
accordance with the MSRP. Although the Consent Order was global,
i.e., it settled any potential claims against Occidental, the
Consent Order was the result of a pending enforcement proceeding
related to OXY's reciprocal purchases and sales of crude oil and the
reporting of the purchased crude oil to the DOE Entitlements
Program. The Consent Order does not identify any potential refined
product claims, let alone indicate that any such potential
violations were taken into account in arriving at the settlement
amount. In fact, a provision in the Consent Order refers to an
apportionment of the principal portion of consent order funds as
payments of the principal and interest sought by the agency based on
the ratio of principal and interest sought in the RPRO.1 In
addition to the Consent Order itself, the Notice of Proposed Consent
Order and the Petition for Implementation of Special Refund
Procedures both support the conclusion that the consent order funds
are crude oil funds. The Notice of Proposed Consent Order indicates
that the settlement amount was determined by reference to the
litigation concerning the reciprocal crude oil transactions. See 60
FR at 35187 (Part II. Determination of Reasonable Settlement
Amount). The Petition for Implementation of Special Refund
Procedures states that the alleged violations underlying the Consent
Order concern the improper reporting of crude oil certifications to
the Entitlements Program, i.e., the claim in the RPRO. Petition at
2. Under the foregoing circumstances, we have tentatively determined
that 100 percent of the consent order funds are crude oil
funds.2
\\\1\ Section 406 provides in full:
Inasmuch as this Consent Order settles both the principal and
interest portions of all claims made by the DOE against Occidental,
the principal portion of the payments made pursuant to paragraphs
402 through 404 shall be deemed to be a payment of principal and
interest in the same ratio that the principal portion of the DOE's
claim in the proceeding styled In the Matter of OXY USA Inc., Case
No. LRO-0003, bears to the interest portion of the DOE's claim in
that case as of the Effective Date.
60 FR at 35189.
\\\2\ See generally Mt. Airy Refining Co., 24 DOE para. 85,094
at 88,305 n.1 (1994) (consent order funds considered crude oil funds
where most of consent order funds related to crude oil violations);
DeMenno-Kerdoon, 23 DOE para. 85,046 at 88,112 n.1 (1993) (global
consent order funds considered crude oil funds where the funds were
less than the crude oil violations alleged in PRO that was settled
by the consent order).
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Because we have tentatively determined that 100 percent of the
consent order funds are crude oil funds, we propose to distribute
the funds according to the MSRP. We propose to reserve initially the
full 20 percent ($55 million), plus accrued interest, for direct
restitution to injured purchasers of crude oil and refined petroleum
products. We propose to distribute the remaining 80 percent ($220
million) in equal shares to the states and the federal government.
As indicated above, the funds reserved for direct restitution to
injured purchasers will be available for distribution through OHA's
Subpart V crude oil overcharge refund proceeding. We have previously
discussed the application requirements and standards that apply in
that proceeding. Because the deadline for the filing of applications
has now passed, we do not believe that it is necessary to reiterate
those matters. In accordance with the MSRP, we propose that any
funds remaining after the conclusion of the Subpart V crude oil
overcharge refund proceeding be disbursed to the states and the
federal government in equal shares.
With respect to the funds made available to the states for
indirect restitution, we note that 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 Settlement Agreement. Based on the foregoing, we propose that
the $100 million initial payment made by Occidental be disbursed as
follows: $20 million, plus accrued interest, to the DOE interest-
bearing escrow account for crude oil claimants, $40 million, plus
accrued interest, to the DOE interest-bearing escrow account for the
states, and $40 million, plus accrued interest, to the DOE interest-
bearing escrow account for the federal government. We propose that,
upon remittance to the DOE, Occidental's subsequent five annual
payments of $35 million, plus accrued interest, be distributed to
the same accounts in the same proportions.
It is therefore ordered That:
The consent order funds remitted by Occidental Petroleum
Corporation will be distributed in accordance with the foregoing
Decision.
[FR Doc. 95-30960 Filed 12-19-95; 8:45 am]
BILLING CODE 6450-01-P
