[Federal Register Volume 59, Number 50 (Tuesday, March 15, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-5991]
[[Page Unknown]]
[Federal Register: March 15, 1994]
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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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SUMMARY: The Office of Hearings and Appeals (OHA) of the Department of
Energy (DOE) announces the proposed procedures for disbursement of a
total of $38,214.98, plus accrued interest, in refined petroleum
overcharges obtained by the DOE under the terms of a Remedial Order
issued to County Fuel Company, Inc., Case No. LEF-0061. 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).
DATE AND ADDRESS: Comments must be filed in duplicate on or before
April 14, 1994 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-
0061.
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
$38,214.98, plus accrued interest, obtained by the DOE under the terms
of a Remedial Order that the DOE issued to County Fuel Company, Inc.,
on May 7, 1984. Under the Remedial Order, County Fuel Company, Inc.,
was found to have violated the federal petroleum price and allocation
regulations involving the sale of motor gasoline during the relevant
audit period.
The OHA has proposed to distribute the Remedial Order fund in a two
stage refund proceeding. Purchasers of motor gasoline from County Fuel
Company, Inc., 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 motor gasoline they purchased from
County Fuel Company, Inc., 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: March 8, 1994.
George B. Breznay,
Director, Office of Hearings and Appeals.
Proposed Decision and Order of the Department of Energy
Implementation of Special Refund Procedures
March 8, 1994.
Name of Petitioner: County Fuel Company, Inc.
Date of Filing: March 6, 1990.
Case Number: LEF-0061.
On March 6, 1990, 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 the
settlement of enforcement proceedings involving County Fuel Company,
Inc. (County), 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 County refund applications
is authorized.
I. Background
County was a ``reseller-retailer'' of refined petroleum products
as that term was defined in 10 CFR 212.31 and was located in
Baltimore, Maryland. On May 24, 1982, the DOE issued a Proposed
Remedial Order (PRO) to County alleging that the firm violated the
Mandatory Petroleum Price Regulations by overcharging its retail
customers in its sales of motor gasoline at the wholesale and retail
levels between March 1, 1979, through March 18, 1980. The PRO
ordered County to refund the full amount of the alleged violations,
$197,305.49, plus interest, to the United States Treasury.
County filed a Statement of Objections to the PRO on August 23,
1982. On October 12, 1982, the ERA filed its Response to County's
Statement of Objections. As requested by County, a hearing for the
purpose of oral argument was held on December 22, 1983. In the final
Remedial Order issued on May 7, 1984, County's Statement of
Objections was denied, and the PRO was issued as a final Remedial
Order with one modification. The Remedial Order directed that the
overcharges, plus interest, be remitted to the DOE for deposit into
an interest-bearing escrow account pending ultimate distribution
through a special refund proceeding. County Fuel Company, Inc., 12
DOE 83,007 (1984).
The Remedial Order was affirmed by the Federal Energy Regulatory
Commission on August 23, 1985. County Fuel Company, Inc., 32 FERC
61,301 (1985). The Temporary Emergency Court of Appeals (TECA)
affirmed the decision on August 12, 1987. County Fuel Company, Inc.
v. Department of Energy, 3 Fed. Energy Guidelines 26,588 (Temp.
Emer. Ct. App. 1987).
However, County had filed for bankruptcy on July 6, 1981.
Following the TECA decision, the DOE's claim as an unsecured
creditor was allowed by the bankruptcy court in the amount of
$254,766.49, including interest. In re: County Fuel Company, Inc.,
No. 81-2-2208-L (D. Md. 1986). Under the Second Amended Plan of
Reorganization, unsecured creditors were paid 15 percent of the
allowed claim in cash or 100 percent of the claim in common stock.
On August 25, 1988, County delivered a check in the amount of
$38,214.98 to the DOE, representing 15 percent of the allowed claim.
The ERA accepted this amount in lieu of payment in common stock.
Interest in the amount of $13,770.57 has accrued as of January 31,
1994, making available a total of $51,985.55 (the County Remedial
Order Fund) for distribution through Subpart V.
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 CFR 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, 9 DOE 82,597 (1981). We have
considered the ERA's petition that we implement a Subpart V
proceeding with respect to the County remedial 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 County refined products during the remedial 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 County motor gasoline
during the remedial order period. If the product was not purchased
directly from County, the claimant must establish that the product
originated with County. 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
County'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.1 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 County. 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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\1\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 CFR 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 County's sales of motor gasoline
during the remedial order period. In accordance with this
presumption, refunds will be made on a pro-rata or volumetric
basis.2 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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\2\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 County'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 County'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 County remedial 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 remedial order fund is equal to the number of gallons
purchased from the remedial order firm during the applicable
remedial order period times the per gallon refund amount. In the
present case, the per gallon refund amount is $0.0214. We derived
this figure by dividing the remedial order fund, $51,985.55, by
2,431,180 gallons, the approximate number of gallons of covered
refined products which County sold from March 1, 1979, through March
18, 1980. 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.\3\
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\3\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 678 gallons
of motor gasoline from County 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
County motor gasoline whose business is unrelated to the petroleum
industry was injured by the alleged overcharges settled by the
remedial 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 remedial 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 County
motor gasoline need only document their purchase volumes from County
during the remedial 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.4
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\4\A cooperative's purchases of County 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 County 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 County products it purchased
during the remedial 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.5
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\5\In order to qualify for a refund under the small claims
presumption, a refiner, reseller, or retailer must have purchased
less than 584,171 gallons of County motor gasoline during the
remedial order period.
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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
$20,000,6 whichever is larger.7 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 County motor gasoline
during the remedial 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.8
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\6\In most prior proceedings, we have used a $40,000 mid-level
claim presumption. However, due to the small size of the County
Remedial Order Fund, this amount would be impractical.
\7\That is, claimants who purchased more than 584,171 gallons of
County motor gasoline during the remedial order period (mid-level
claimants) may elect to utilize this presumption.
\8\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
County. 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 County 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 County.9
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\9\In 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 County's alleged failure
to furnish motor gasoline that it was obliged to supply under the
DOE allocation regulations that became effective in January 1974.
See 10 CFR 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 remedial order firm and the likelihood that the remedial
order firm failed to furnish motor gasoline 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 County 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 County. In determining the
amount of an allocation refund, we will utilize any information that
may be available regarding the portion of the County remedial order
amount that the agency attributed to allocation violations in
general and to the specific allocation violation alleged by the
claimants. Finally, since the County Remedial Order Fund is less
than County's potential liability in the proceedings, we will pro
rate those allocation refunds that would otherwise be
disproportionately large in relation to the remedial 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 four energy conservation programs. The
Secretary has delegated these responsibilities to the OHA, and any
funds in the County remedial 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 payments remitted to the Department of Energy by County Fuel
Company, Inc., pursuant to the remedial order issued on May 7, 1984,
will be distributed in accordance with the foregoing Decision.
[FR Doc. 94-5991 Filed 3-14-94; 8:45 am]
BILLING CODE 6450-01-P
