[Federal Register Volume 61, Number 100 (Wednesday, May 22, 1996)]
[Notices]
[Pages 25662-25664]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-12823]
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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 procedures for disbursement of $48,307.13 of crude oil
overcharge funds obtained by the DOE from Texas American Oil
Corporation (Texas American), Case No. VEF-0019. The OHA has determined
that these funds, plus accrued interest, be distributed as direct
restitution to individual claimants who were injured by crude oil
overcharges.
FOR FURTHER INFORMATION CONTACT: Richard W. Dugan, Associate Director,
Office of Hearings and Appeals, 1000 Independence Ave., SW., Washington
DC 20585-0107, Telephone No. (202) 426-1575.
SUPPLEMENTARY INFORMATION: In accordance with 10 CFR Sec. 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 formulated to distribute $48,307.13 (plus accrued interest)
remitted to the DOE by the trustee-in-bankruptcy for Texas American.
The DOE is currently holding these funds in an interest-bearing escrow
account pending distribution.
The OHA will allocate all of the crude oil overcharge funds
obtained from Texas American for individual claimants. This is in
accordance with Texas American Oil Corp. v. DOE, 44 F.3d 1557 (Fed.
Cir. 1995) (en banc), in which the United States Court of Appeals for
the Federal Circuit held that the DOE's claim in the Texas American
bankruptcy proceeding on behalf of individual claimants should have a
higher priority than its claim on behalf of the states and federal
government. Pursuant to that decision, the bankruptcy court distributed
to the DOE an amount equivalent to only 20 percent of its liquidated
claim in the Texas American bankruptcy proceeding, since under the
DOE's Modified Statement of Restitutionary Policy in Crude Oil Cases,
51 FR 27899 (August 4, 1986), a maximum of 20 per cent of the crude oil
overcharge funds remitted to the DOE are reserved for injured
purchasers of refined petroleum products.
Refunds to eligible purchasers will be based on the volume of
products that they purchased during the price control period. The
volumetric refund amount is $0.0016 per gallon. Because the June 30,
1995 deadline for crude oil refund applications has passed, no new
applications for refund will be accepted in this proceeding. As we
state in the Decision, the Texas American funds will be added to the
general crude oil overcharge pool for direct restitution to claimants
that have filed timely applications.
Dated: May 14, 1996.
George B. Breznay,
Director, Office of Hearings and Appeals.
Decision and Order of the Department of Energy
Implementation of Special Refund Procedures
May 14, 1996.
Name of Case: Texas American Oil Corporation.
Date of Filing: September 1, 1995.
Case Number: VEF-0019.
On March 14, 1996, the Office of Hearings and Appeals (OHA) of the
Department of Energy (DOE) issued a Proposed Decision and Order (PDO)
which tentatively established refund procedures for the distribution of
crude oil overcharge funds obtained from Texas American Oil Corporation
(Texas American). Texas American Oil Co., Case No. VEF-0019, 61 Fed.
Reg. 13170 (March 26, 1996). After a review of the comments received,
the DOE has determined that the procedures set forth in the Proposed
Decision and Order should be adopted.
I. Background
On September 19, 1988, the OHA issued a Remedial Order (RO) that
found that Texas American had violated 10 CFR Sec. 211.67(e)(2) by
receiving excessive small refiner bias benefits under the DOE's
Entitlements Program.
[[Page 25663]]
Texas American Oil Corp., 17 DOE para. 83,017 (1988). However, Texas
American had filed a petition in bankruptcy on July 2, 1987, and its
bankruptcy proceeding was still pending when the RO was issued. The
trustee-in-bankruptcy approved the DOE's claim in the amount of
$241,535.67, but classified it as a non-pecuniary loss in accordance
with Section 726(a)(4) of the Bankruptcy Code and Class 9 of the Plan
of Liquidation.1 Since Class 9 claims were inferior to Class 7
claims, and there were insufficient assets to satisfy any Class 9
claim, or to satisfy fully the Class 7 claims, the effect of the
trustee's determination was to preclude the DOE from receiving any
compensation from Texas American's estate.
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\1\ Section 726(a)(4) places non-pecuniary loss claims in the
fourth priority in the distribution of a bankrupt estate:
11 U.S.C. Sec. 726. Distribution of property of the estate
* * * * *
(a)(4) fourth, in payment of any allowed claim, whether secured
or unsecured, for any fine, penalty, or forfeiture, or for multiple,
exemplary, or punitive damages, arising before the earlier of the
order for relief or the appointment of a trustee, to the extent that
such fine, penalty, forfeiture, or damages are not compensation for
actual pecuniary loss suffered by the holder of such claim[.]
Class 7 (Unsecured Claims) consisted of allowed claims of
unsecured creditors, while Class 9 (Non-Pecuniary Loss) consisted of
``Allowed Claims for any fine, penalty, or forfeiture, or for
multiple, exemplary, or punitive damages, as further described in 11
U.S.C. Sec. 726(a)(4).'' Texas American Bankruptcy Committee Plan of
Liquidation Secs. 3.07, 3.09.
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The DOE argued before the Bankruptcy Court that the trustee's
determination was erroneous on the grounds that its claim was for
restitution and therefore was a Class 7 claim. The Bankruptcy Court,
however, rejected the DOE's position and held that Class 9 was the
proper classification since the DOE's claim was not for actual
pecuniary loss suffered by the holder of the claim. In re Texas
American Oil Corp., No. 387-33522-SAF-11 (Bankr. N.D. Tex. Mar. 5,
1992). This decision was reversed by the U.S. District Court which,
relying on a prior decision of the Temporary Emergency Court of Appeals
(TECA), held that a DOE claim under Section 209 of the Economic
Stabilization of 1970 (ESA), 12 U.S.C. Sec. 1904 note, was properly
placed in the same class and priority as the general unsecured claims
of other creditors. Texas American Oil Corp. v. DOE, No. 3:92-CV-1146-G
(N.D. Tex. Sept. 14, 1992) (citing DOE v. West Texas Marketing Corp.,
763 F.2d 1411 (Temp. Emer. Ct. App. 1985) (West Texas)). This decision
was in turn reversed by the United States Court of Appeals for the
Federal Circuit, which held that the DOE's claim in the Texas American
bankruptcy proceeding should be bifurcated, with the portion claimed on
behalf of individual persons who suffered actual injury to be
classified in Class 7 of the Plan of Liquidation and the portion to be
paid to the federal and state governments to be classified in Class 9.
Texas American Oil Corp. v. DOE, 44 F.3rd 1557 (Fed. Cir. 1995)(en
banc). On remand, the Bankruptcy Court implemented the Federal
Circuit's decision by distributing the 20 percent of DOE's liquidated
claim ($48,307.13) that fell within Class 7 to DOE and the remaining 80
percent ($193,228.53) to the other Class 7 creditors. In re Texas
American Oil Corp., No. 387-33522-SAF-11 (Bankr. N.D. Tex. April 12,
1995). The funds that the DOE received from Texas American were
deposited in an interest-bearing escrow account maintained by the
Department of the Treasury.2
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\2\ As of March 31, 1996, the account contained $50,815.65,
consisting of $48,307.13 principal and $2,508.52 interest.
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In accordance with 10 CFR Part 205, Subpart V, on September 1,
1995, the Office of General Counsel, Regulatory Litigation (OGC)
(formerly the Economic Regulatory Administration) filed a Petition for
the Implementation of Special Refund Procedures that requested OHA to
formulate and implement procedures to distribute the Texas American
funds. On January 16, 1996, we issued a Proposed Decision and Order
that tentatively established refund procedures for the distribution of
crude oil overcharge funds obtained from Texas American and four other
firms. Brio Petroleum, Inc., Case Nos. VEF-0017 et al., 61 FR 1919
(January 24, 1996). In accordance with the Modified Statement of
Restitutionary Policy in Crude Oil Cases (MSRP), 51 FR 27899 (August 4,
1986), that the DOE issued in connection with the Final Settlement
Agreement approved in In re The Department of Energy Stripper Well
Exemption Litigation, 653 F. Supp. 108 (D. Kan. 1986), the January 16
Proposed Decision proposed that 40 percent of the funds be disbursed to
the federal government, another 40 percent be disbursed to the states,
and the remaining 20 percent be reserved for applicants who file claims
showing that they were injured by crude oil overcharges. However, we
subsequently determined that the circumstances under which the DOE
obtained the Texas American funds required that the funds be disbursed
in a manner different than that set forth in the Proposed Decision.
Accordingly, we issued the March 14, 1996 PDO, in which we tentatively
determined that all of the funds received from Texas American be
allocated to individual claimants. On April 24, 1996, we received
comments on behalf of 14 designated states (the States). In their
comments, the States disagreed with the refund procedures set forth in
the PDO, but asserted that they would not formally object to them in
view of the small amount of money involved. Instead, they reserved
their right to object to any future proposed distributions of crude oil
funds solely to individual claimants.
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. Sec. 4501 et seq.
See also Office of Enforcement, 9 DOE para. 82,508 (1981); Office of
Enforcement, 8 DOE para. 82,597 (1981).
III. Refund Procedures
Since the States have not formally objected to the proposed refund
procedures, it is not necessary for us to respond to the specific
arguments that they raise. We do, however, disagree with the States'
position that the decisions of the Federal Circuit and the Bankruptcy
Court (on remand) do not affect the manner in which we must distribute
the crude oil funds in the present case.3 Thus, we shall
distribute the funds received from Texas American (and accrued interest
on those funds) solely to individual claimants in the DOE's crude oil
refund proceeding. In our view, which we believe to be correct, this
distribution scheme is required by the unique circumstances under which
these funds were obtained
[[Page 25664]]
by the DOE. While the Texas American v. DOE decision is contrary to the
position of the DOE that had been upheld in the West Texas case,4
we are constrained by the Federal Circuit's decision. The clear import
of that determination is that we must use the funds received from Texas
American solely for direct restitutionary purposes. Moreover, as
indicated above, the Bankruptcy Court, in accordance with the Federal
Circuit's determination, distributed to the DOE only 20 percent of its
liquidated claim in the Texas American bankruptcy proceeding. This
percentage is equivalent to the portion of crude oil overcharge funds
that we have consistently reserved for individual claimants under the
MSRP. We therefore decline to modify our proposed allocation of the
Texas American funds in response to the States' comments.
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\3\ We also do not accept the States' attempt to blur the
distinction between recipients of direct and indirect restitution.
It is true that, prior to the Federal Circuit decision, it was the
DOE's consistent position that both types of recipients should be
treated the same for purpose of distributing funds from bankrupt
estates. Nevertheless, our prior Decisions make it clear that,
unlike the beneficiaries of indirect restitution, individual
claimants cannot receive direct refunds without a finding of injury,
though that finding may be based on a presumption of injury. See 10
C.F.R. Sec. 205.282(e) (``[T]he standards for evaluation of
individual claims may be based upon appropriate presumptions''). See
also Ernest A. Allerkamp, 17 DOE para. 85,079 at 88,175-76 (1988);
City of Columbus, Georgia, 16 DOE para. 85,550 (1987).
\4\ The Federal Circuit in Texas American v. DOE ascribed its
unwillingness to follow the West Texas decision to judicial,
statutory, and related policy changes that had occurred since the
issuance of that decision. The Federal Circuit also specifically
overruled TECA's ruling that a DOE bankruptcy claim under the ESA to
be paid to the federal and state governments on behalf of their
citizens was for restitution and not for a penalty.
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Except for the manner in which the funds will be allocated, we
shall follow the procedures set forth in prior refund proceedings
involving crude oil overcharge funds. Thus, claimants will be required
to (i) document their purchase volumes of petroleum products during the
August 19, 1973-January 27, 1981 crude oil price control period, and
(ii) 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 will be presumed to
have been injured by Texas American's crude oil overcharges. In order
to receive a refund, end-users will not need to submit any further
evidence of injury beyond the volume of petroleum products purchased
during the price control period. We shall base refunds to claimants on
a volumetric amount that is currently $0.0016 per gallon. See 60 FR
15562 (March 24, 1995).
A party that has already submitted a claim in the DOE crude oil
proceeding need not file another claim in order to obtain its
appropriate restitutionary share of crude oil funds. Moreover, because
the June 30, 1995 deadline for crude oil refund applications has
passed, we shall not accept any new applications. See Western Asphalt
Service, 25 DOE para. 85,047 (1995). Instead, these funds will be added
to the general crude oil overcharge pool used for direct restitution.
Finally, an applicant who has executed and submitted a valid waiver
pursuant to one of the escrows established by the Final Stripper Well
Settlement Agreement will be considered to have waived its rights to
apply for a crude oil refund under Subpart V. See, e.g., Mid-America
Dairymen, Inc., v. Herrington, 878 F.2d 1448 (Temp Emer. Ct. App.
1989); see also Hoechst Celanese Chemical, 25 DOE para. 85,066 (1996).
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 $48,307.13 obtained from Texas American Oil
Corporation, COTS No. N00S90460, plus accrued interest, into the
subaccount denominated ``Crude Tracking-Claimants 4,'' Number
999DOE010Z.
(2) This is a final Order of the Department of Energy.
[FR Doc. 96-12823 Filed 5-21-96; 8:45 am]
BILLING CODE 6450-01-P
