[Federal Register Volume 59, Number 131 (Monday, July 11, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16707]
[[Page Unknown]]
[Federal Register: July 11, 1994]
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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 and
Solicitation of Comments.
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SUMMARY: The Office of Hearings and Appeals of the Department of Energy
solicits comments concerning the appropriate procedures to be followed
in refunding a total of $521,200.64 (plus accrued interest) in
settlement funds to members of the public. The funds are being held in
escrow pursuant to settlement agreements involving Western Asphalt
Service, Inc., Case No. LEF-0047; Gray Trucking Company, Case No. LEF-
0120; and William Valentine & Sons, Inc., Case No. LEF-0123.
DATES AND ADDRESSES: Comments must be filed 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 conspicuously display a reference to Case Nos. LEF-0047 et al.
FOR FURTHER INFORMATION CONTACT: Richard W. Dugan, Associate Director,
Office of Hearings and Appeals, 1000 Independence Avenue, SW.,
Washington, DC 20585, (202) 586-2860.
SUPPLEMENTARY INFORMATION: In accordance with Section 205.282(b) of the
procedural regulations of the Department of Energy, 10 C.F.R.
Sec. 205.282(b), notice is hereby given of the issuance of the Proposed
Decision and Order set forth below. The Proposed Decision relates to
settlement agreements entered into by the DOE and Western Asphalt
Service, Inc., Gray Trucking Company and William Valentine & Sons,
Inc., which settled alleged violations of the DOE price regulations
involving these firms' sales of crude oil during the period August 19,
1973 through January 27, 1981.
The Proposed Decision sets forth the procedures and standards that
the DOE has tentatively formulated to distribute funds remitted by
these firms and being held in escrow. The DOE has proposed to
distribute the funds in accordance with the DOE's Modified Statement of
Restitutionary Policy Concerning Crude Oil Overcharges, 51 FR 27899
(August 4, 1986) (the MSRP). Under the MSRP, crude oil overcharge
monies are divided between the federal government, the states, and
injured purchasers of refined petroleum products. Refunds to the states
would be distributed in proportion to each state's consumption of
petroleum products during the price control period. Refunds to eligible
purchasers would be based on the number of gallons of petroleum
products which they purchased and the degree to which they can
demonstrate injury.
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 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, S.W., Washington, D.C. 20585.
Dated: July 1, 1994.
George B. Breznay,
Director, Office of Hearings and Appeals.
Proposed Decision and Order of the Department of Energy
Implementation of Special Refund Procedures
Names of Firms: Western Asphalt Service, Inc., Gray Trucking
Company, William Valentine & Sons, Inc.
Dates of Filing: July 17, 1992; December 7, 1993; April 13, 1994.
Case Numbers: LEF-0047, LEF-0120, LEF-0123.
In accordance with the procedural regulations of the Department of
Energy (DOE), 10 C.F.R. Part 205, Subpart V, the Economic Regulatory
Administration (ERA) of the DOE filed three Petitions for the
Implementation of Special Refund Procedures with the Office of Hearings
and Appeals (OHA) on July 17, 1992, December 7, 1993 and April 13,
1994, respectively. The Petitions request that OHA formulate and
implement procedures for the distribution of funds received pursuant to
settlement agreements entered into by the DOE and Western Asphalt
Service, Inc. (Western), Gray Trucking Company (Gray) and William
Valentine & Sons, Inc. (Valentine).
I. Background
During the period of Federal petroleum price controls, Western was
engaged in crude oil refining and reselling.\1\ The firm was therefore
subject to regulations governing the pricing of crude oil set forth at
10 C.F.R. Parts 205, 210, 211, and 212 of the Mandatory Petroleum Price
and Allocation Regulations. As a result of an ERA audit of its
operations, a Proposed Remedial Order (PRO) was issued to Western on
April 4, 1984 pursuant to 10 C.F.R. Part 205, Subpart O (ERA Docket No.
940X00182). The PRO alleged violations of the pricing and certification
rules that applied to crude oil resellers. Essentially, the firm was
charged with selling price-controlled crude oil as uncontrolled
stripper well crude oil at unlawfully high prices in violation of the
provisions of 10 C.F.R. Part 212, Subpart L and 10 C.F.R. Sec. 212.131.
In another enforcement proceeding, on May 7, 1981, a Notice of Probable
Violation was issued to Western which alleged that the firm unlawfully
received Small Refiner Bias Entitlements (ERA Docket No. N00S90197) in
April and May 1977. These alleged violations of DOE crude oil
regulations by Western were settled by a Consent Order between the firm
and DOE on May 30, 1984. The PRO was therefore withdrawn and the NOPV
was rescinded. Western agreed to remit $300,000, plus interest, to the
DOE for deposit in an interest-bearing escrow account. Western has
complied with this obligation, remitting a total of $390,059.12 to the
DOE. In return, the DOE has released Western from any liability
regarding its failure to comply with the Federal petroleum price and
allocation regulations during the period August 19, 1973 through
January 27, 1981, with the sole exception of any potential violations
of the Entitlements Program after September 30, 1980.
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\1\Western Asphalt Service, Inc., W.F. Moore and Son, Inc., and
Gibson Oil and Refining Company, were all controlled by Wilfred
Paige van Loben Sels during the price controls period. Textual
references to ``Western'' in this Decision include all parties to
the consent order.
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Gray was also a crude oil reseller during the period of price
controls. On March 29, 1982, Gray and the DOE entered into a Consent
Order whereby Gray would remit $31,500, plus interest, to the DOE for
deposit in an interest-bearing escrow account. The DOE agreed not to
pursue its claim that, during the period March 1977 through January
1980, Gray overcharged its customers by charging unlawfully high prices
for crude oil in violation of 10 C.F.R. Part 212, Subparts F and L.
Despite its agreement with the terms of the Consent Order, Gray failed
to comply fully with its financial obligations to the DOE, and remitted
only $4,738.86 to the DOE. On October 15, 1985, the U.S. District Court
for the Northern District of Texas, Amarillo Division, granted the DOE
an Amended Judgment against Gray for an additional $34,625. However,
the Amended Judgment has not resulted in any additional payments to DOE
by Gray. ERA has petitioned that the $4,738.86, plus accrued interest,
obtained from Gray be distributed by OHA in accordance with the Subpart
V regulations.
Valentine was engaged in crude oil reclamation during the period
May 1979 through December 1980.\2\ Through an unincorporated
subsidiary, Big Muddy Oil Processors Inc. (Big Muddy), Valentine
obtained waste crude oil from oil spills, pipeline ruptures, waste oil
pits and oil tank bottoms. After numerous separation and filtering
processes, the waste oil was mixed with various blending agents
(naphthas, natural gasoline, natural gas by-products, etc.) and the
resulting product was sold as pipeline-quality crude oil. Big Muddy,
and by extension Valentine, was therefore a reseller of crude oil,
subject to the provisions of 10 C.F.R. Part 212, Subpart L, which
governed the resales of crude oil.
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\2\William Valentine and Sons, Inc., Valentine Construction,
Inc., Dale L. Valentine, Verna Valentine, and James L. Marchant are
collectively referred to as ``Valentine'' in the text. All are
parties to the Settlement Agreement which resolved DOE claims
against them.
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An ERA audit uncovered evidence that Valentine sold crude oil at
unlawfully high prices during the period May 1979 through December
1980. On December 2, 1987, OHA issued a Remedial Order to Valentine
directing the firm to refund $1,454,876 in overcharges, plus interest.
See William Valentine and Sons, Inc., 16 DOE 83,025 (1987). Valentine
appealed OHA's determination to the Federal Energy Regulatory
Commission (FERC). On March 23, 1989, FERC rejected Valentine's Appeal
of the Remedial Order and upheld OHA's findings. See William Valentine
and Sons, Inc., 46 FERC 61,252 (1989). Valentine appealed that
decision and, on January 24, 1990, the U.S. District Court for the
District of Wyoming ruled that Valentine's challenge to DOE's Remedial
Order and to FERC's ruling was without merit. At the same time, the
Court also approved a Settlement Agreement in which Valentine agreed to
remit to DOE no less than $108,739 plus interest. In return, DOE agreed
to deem Valentine in full compliance with the price control program and
to release all administrative and civil claims against the firm.
Valentine has paid $126,402.66 into an interest-bearing DOE escrow
account in compliance with the Settlement Agreement.
II. Jurisdiction and Authority
On July 28, 1986, the DOE issued a Modified Statement of
Restitutionary Policy Concerning Crude Oil Overcharges, 51 Fed. Reg.
27899 (August 4, 1986) (The MSRP). The MSRP, issued as a result of a
court-approved Settlement Agreement (the Stripper Well Agreement) in In
re: The Department of Energy Stripper Well Exemption Litigation, M.D.L.
No. 378 (D.Kan. 1986), provides that crude oil overcharge funds will be
divided among the states, the federal government, and injured
purchasers of refined petroleum products. Under the MSRP, up to twenty
percent of these crude oil overcharge funds will be reserved to satisfy
valid claims by injured purchasers of petroleum products. Eighty
percent of the funds, and any monies remaining after all valid claims
are paid, are to be disbursed equally to the states and federal
government for indirect restitution.
Shortly after the issuance of the MSRP, the OHA issued an Order
that announced its intention to apply the MSRP in all Subpart V
proceedings involving alleged crude oil violations. Order Implementing
the MSRP, 51 Fed. Reg. 29689 (August 20, 1986). In that Order, the OHA
solicited comments concerning the appropriate procedures to follow in
processing refund applications in crude oil refund proceedings. On
April 6, 1987, the OHA issued a Notice analyzing the numerous comments
and setting forth generalized procedures to assist claimants that file
refund applications for crude oil monies under the Subpart V
regulations. 52 Fed. Reg. 11737 (April 10, 1987) (the April Notice).
The OHA has applied these procedures in numerous cases since the
April Notice, e.g., New York Petroleum, Inc., 18 DOE 85,435 (1988)
(NYP); Shell Oil Co., 17 DOE 85,204 (1988); Ernest A. Allerkamp, 17
DOE 85,079 (1988) (Allerkamp), and the procedures have been approved
by the United States District Court for the District of Kansas as well
as the Temporary Emergency Court of Appeals. Various states filed a
Motion with the Kansas District Court, claiming that the OHA violated
the Stripper Well Agreement by employing presumptions of injury for
end-users and by improperly calculating the refund amount to be used in
those proceedings. On August 17, 1987, Judge Frank G. Theis issued an
Opinion and Order denying the States' Motion in its entirety. In re:
The Department of Energy Stripper Well Exemption Litigation, 671 F.
Supp. 1318 (D. Kan. 1987), aff'd, 857 F. 2d 1481 (Temp. Emer. Ct. App.
1988). Judge Theis concluded that the Stripper Well Agreement ``does
not bar [the] OHA from permitting claimants to employ reasonable
presumptions in affirmatively demonstrating injury entitling them to a
refund.'' Id. at 1323. He also ruled that, as specified in the April
Notice, the OHA could calculate refunds based on a portion of the
M.D.L. 378 overcharges. Id. at 1323-24.
The general guidelines which the OHA may use to formulate and
implement a plan to distribute refunds are set forth in 10 C.F.R. Part
205, Subpart V. The Subpart V process may be used in situations where
the DOE cannot readily identify the persons who may have been injured
as a result of actual or alleged violations of the regulations or
ascertain the amount of the refund each person should receive. For a
more detailed discussion of Subpart V and the authority of the OHA to
fashion procedures to distribute refunds, see Office of Enforcement, 9
DOE 82,508 (1981), and Office of Enforcement, 8 DOE 82,597 (1981).
After reviewing the records submitted in support of the three
Petitions, we have concluded that a Subpart V proceeding is an
appropriate mechanism for distributing the $521,200.64 in funds
obtained from Western, Gray and Valentine. We therefore propose to
grant the ERA's Petitions and assume jurisdiction over distribution of
the funds.
III. Proposed Refund Procedures
A. Refund Claims
We propose to apply the procedures discussed in the April Notice to
the crude oil Subpart V proceedings that are the subject of the present
determination. As noted above, the monies deposited with the DOE in
settlement of the alleged crude oil violations totalling $521,200.64,
plus accrued interest, are covered by this Proposed Decision. We have
decided to reserve the full twenty percent of the alleged crude oil
violation amount, or $104,240.13 plus interest, for direct refunds to
claimants, in order to insure that sufficient funds will be available
for refunds to injured parties.
The process which the OHA will use to evaluate claims based on
alleged crude oil violations will be modeled after the process the OHA
has used in Subpart V proceedings to evaluate claims based upon alleged
overcharges involving refined products. E.g., Mountain Fuel Supply Co.,
14 DOE 85,475 (1986). As in non-crude oil cases, applicants will be
required to document their purchase volumes of covered products and
prove that they were injured as a result of the alleged violations.
Generally, we will presume that an applicant incurred a crude oil
overcharge in the purchase of a product if the product was either
identified as a covered product in the Emergency Petroleum Allocation
Act of 1973, 15 U.S.C. Secs. 751-760, or if the product was purchased
from a crude oil refinery or originated in a crude oil refinery and was
purchased from a reseller. Notice of General Interest Concerning DOE's
Crude Oil Overcharge Refund Program, 57 Fed. Reg. 30731, 30732 (July
10, 1992); Great Lakes Carbon Corp., 22 DOE 85,248, at 88,662 (1993).
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 are presumed to have
been injured by any alleged crude oil overcharges. In order to receive
a refund, end-users need not submit any further evidence of injury
beyond the volume of petroleum products purchased during the period of
price controls. See, e.g., A. Tarricone, Inc., 15 DOE 85,495 at
88,893-96 (1987). However, the end-user presumption of injury can be
rebutted by evidence which establishes that the specific end-user in
question was not injured by the crude oil overcharges. See, e.g., Berry
Holding Co., 16 DOE 85,405 at 88,797 (1987). If an interested party
submits evidence that is sufficient to cast serious doubt on the end-
user presumption, the applicant will be required to produce further
evidence of injury. See, e.g., NYP, 18 DOE at 88,701-03.
Reseller and retailer claimants must submit detailed evidence of
injury, and may not rely on the presumption of injury utilized in
refund cases involving refined petroleum products. They may, however,
use econometric evidence of the type employed in the OHA Report to the
District Court in the Stripper Well Litigation, reprinted in 6 Fed.
Energy Guidelines 90,507.
Applicants who executed and submitted a valid waiver pursuant to
one of the escrows established in the Stripper Well Agreement have
waived their rights to apply for a crude oil refund under Subpart V.
Mid-America Dairyman Inc., v. Herrington, 878 F. 2d 1448 (Temp. Emer.
Ct. App. 1989); accord, Boise Cascade Corp., 18 DOE 85,970 (1989).
As we have stated in previous Decisions, a crude oil refund
applicant will only be required to submit one application for its share
of all available crude oil overcharge funds. E.g., Allerkamp, 17 DOE at
88,176. Any party that has previously submitted a refund Application in
the crude oil refund proceedings need not file another Application.
That previously filed Application will be deemed to be filed in all
crude oil refund proceedings as the procedures are finalized. The DOE
has established June 30, 1994 as the final deadline for filing an
Application for Refund from the crude oil funds. Anchor Gasoline Corp.,
22 DOE 85,071 (1992); 58 Fed. Reg. 26318 (May 3, 1993). It is the
policy of the DOE to pay all crude oil refund claims filed before June
30, 1994, at the rate of $0.0008 per gallon. However, while we
anticipate that applicants who filed their claims within the original
June 30, 1988 deadline will receive a supplemental refund payment, we
will decide in the future whether claimants that filed later
Applications should receive additional refunds. See, e.g., Seneca Oil
Co., 21 DOE 85,327 (1991). Notice of any additional amounts available
in the future will be published in the Federal Register.
B. Payments to the Federal Government and the States
Under the terms of the MSRP, the remaining eighty percent of the
alleged crude oil violation amounts subject to this Proposed Decision,
or $416,960.51, plus 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 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:
The refund amounts remitted to the Department of Energy by Western
Asphalt Service, Inc., W.F. Moore and Son, Inc., Gibson Oil and
Refining Co., and Wilfred Paige van Loben Sels, pursuant to the Consent
Order signed on May 30, 1984; by Gray Trucking Company pursuant to the
Consent Order signed on March 29, 1982; and by William Valentine and
Sons, Inc., Valentine Construction, Inc., Dale L. Valentine, Verna
Valentine, and James L. Marchant, pursuant to the Settlement Agreement
signed on January 24, 1990, will be distributed in accordance with the
foregoing Decision.
[FR Doc. 94-16707 Filed 7-8-94; 8:45 am]
BILLING CODE 6450-01-P
