[Federal Register Volume 60, Number 153 (Wednesday, August 9, 1995)]
[Notices]
[Pages 40580-40584]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-19689]
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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 Proposed Implementation of Special Refund Procedures.
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SUMMARY: The Office of Hearings and Appeals of the Department of Energy
announces proposed procedures for the disbursement of $592,001 (plus
accrued interest) collected pursuant to a consent order with Macmillian
Oil Company and $15,822 (plus accrued interest) collected pursuant to a
consent order with Kenny Larson Oil Company. The funds will be
distributed in accordance with the DOE's special refund procedures, 10
C.F.R. Part 205, Subpart V.
DATE AND ADDRESS: Comments must be filed in duplicate within 30 days of
the date of publication in the Federal Register and should be addressed
to: Office of Hearings and Appeals, Department of Energy, 1000
Independence Avenue, S.W., Washington, D.C. 20585. All comments
concerning the Kenny Larson proceeding should conspicuously display
reference to Case Number LEF-0046 and those concerning the Macmillian
proceeding should display reference to Case Number VEF-0002.
FOR FURTHER INFORMATION CONTACT: Bryan F. MacPherson, Assistant
Director, Office of Hearings and Appeals, Department of Energy, 1000
Independence Avenue, S.W., Washington, D.C. 20585, (202) 586-5405.
SUPPLEMENTARY INFORMATION: In accordance with Section 205.282(b) of the
procedural regulations of the Department of Energy (DOE), 10 CFR
205.282(b), notice is hereby given of the issuance of the Proposed
Decision and Order set out below. The Proposed Decision and Order sets
forth the procedures that the DOE has tentatively formulated to
distribute monies that have been collected by the DOE pursuant to a
consent orders with Macmillian Oil Company (Macmillian) and Kenny
Larson Oil Company (Larson). The consent order with Macmillian settled
possible pricing violations with respect to Macmillian's sales of
propane, No. 2 fuel oil and Nos. 5 and 6 residual fuel oil. The DOE has
collected $592,001 from Macmillian. The consent order with Larson
settled possible pricing violations with respect to Larson's sales of
motor gasoline. The DOE has collected $15,822 from Larson. The DOE is
holding the funds in interest-bearing escrow accounts pending
distribution.
Applications for Refund should not be filed at this time.
Appropriate public notice will be given when the submission of claims
is authorized. 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 the publication of this notice in the
Federal Register and should be sent to the address provided at the
beginning of the notice. All comments received will be available for
public inspection between the hours of 1:00 p.m. and 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: August 2, 1995.
George B. Breznay,
Director, Office of Hearings and Appeals.
Proposed Decision and Order of the Department of Energy
Special Refund Procedures
August 2, 1995.
Name of Firms:
Macmillan Oil Company
Kenny Larson Oil Company
Dates of Filings:
June 5, 1992
October 18, 1994
Case Numbers:
LEF-0046
VEF-0002
In accordance with the procedural regulations of the Department of
Energy (DOE), 10 CFR Part 205, Subpart V, the Economic Regulatory
Administration (ERA) of the DOE filed Petitions for the Implementation
of Special Refund Procedures with the Office of Hearings and Appeals
(OHA) on June 5, 1992 and on October 18, 1994. The petitions request
that the OHA formulate and implement procedures for the distribution of
funds received pursuant to consent orders entered into between the DOE
and Kenny Larson Oil Company (Larson) of Oregon City, Oregon, and
Macmillan Oil Company (Macmillan) of Des Moines, Iowa.
I. Background
Larson and Macmillan were ``reseller-retailers'' as defined in 6
CFR 150.352 and 10 CFR 212.31. During the period from August 1973 to
January 28, 1981, these companies were subject to the Mandatory
Petroleum Price Regulations, 10 CFR Part 212, Subpart F, and antecedent
regulations at 6 CFR Part 150, Subpart L. An ERA audit of Larson's
business records revealed possible pricing violations with respect to
the firm's sales of motor gasoline during the period May through
[[Page 40581]]
December 1979. An ERA audit of Macmillan's business records revealed
possible pricing violations with respect to the firm's sales of
propane, No. 2 fuel oil, and Nos. 5 and 6 residual fuel oil during the
period November 1, 1973, through April 30, 1974. In order to settle all
claims and disputes between these companies and the DOE regarding their
compliance with the price regulations, the DOE entered into consent
orders with Larson and Macmillan on September 21, 1981, and March 7,
1988, respectively.
In the Larson consent order, the firm agreed to remit a total of
$7,415, approximately 38 percent of the amount of the overcharges
alleged by the DOE, plus installment interest. Of the principal amount,
$5,842 was to be remitted to the DOE, and $1,573 was to be paid
directly to six of Larson's customers. Larson failed to comply with the
Consent Order and remitted no funds to either the DOE or the six
customers.1 On August 29, 1994, we granted Larson a refund of
$15,822 in the Texaco special refund proceeding. Texaco Inc./Kenny
Larson Oil Company, 24 DOE para. 85,081 (1994) (Texaco/Larson). At that
time, Larson was in default in the amount of $26,168 ($7,415 principal
plus $18,753 interest) in its obligations pursuant to the Consent
Order. Accordingly, in Texaco/Larson, we determined that the Texaco
refund should be used to fund Larson's consent order escrow account, in
satisfaction of the firm's principal settlement amount and partial
satisfaction of its debt for interest accrued. Accordingly, the $15,822
Texaco refund was deposited into the Kenny Larson Oil Company escrow
account maintained at the Department of the Treasury, Consent Order No.
000H00439. This is the amount which is available for distribution in
this proceeding.
\1\ On October 13, 1983, ERA filed a Subpart V petition with
respect to the Larson Consent Order (Case No. HEF-0104). However,
because of Larson's failure to remit the settlement amount, that
petition was dismissed without prejudice. See Memorandum from
Richard T. Tedrow, OHA Deputy Director, to Rayburn Hanzlik, ERA
Administrator (July 3, 1985).
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On February 1, 1983, a Proposed Remedial Order was issued to
Macmillan which alleged that the firm violated the price regulations
with respect to its sales of propane, No. 2 fuel oil, and Nos. 5 and 6
residual fuel oil. Macmillan contested the PRO before the OHA (Case No.
HRO-0122). During the course of that proceeding, the ERA reduced the
amount of the alleged overcharges from $383,268 to $333,853. See Letter
from Ann C. Grover, Associate Solicitor, ERA, to Richard T. Tedrow, OHA
Deputy Director (October 5, 1987). On March 7, 1988, Macmillan and DOE
entered into a consent order that settled the PRO's allegations.
Pursuant to the consent order obligation, Macmillan remitted a total
amount of $592,001 (including pre-settlement interest) to the DOE in
full satisfaction of the amount owed. The audit workpapers identify the
customers that Macmillan allegedly overcharged.
II. Jurisdiction
The procedural regulations of the DOE set forth general guidelines
by which the OHA may formulate and implement plans of distribution for
funds received as a result of enforcement proceedings. 10 CFR Part 205,
Subpart V. It is 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 OHA to fashion procedures to distribute refunds
obtained as part of settlement agreements, see Office of Enforcement, 9
DOE para. 82,553 (1982); Office of Enforcement, 9 DOE para. 82,508
(1981). After reviewing the records in the present cases, we have
concluded that a Subpart V proceeding is an appropriate mechanism for
distributing the Larson and Macmillan consent order funds. We therefore
propose to grant the ERA's petitions and assume jurisdiction over
distribution of the funds.
III. Proposed Refund Procedures
A. Refund Claimants
In the first stage, refund monies will be distributed to those
parties which were directly injured in transactions with Larson and
Macmillan during the audit periods. We believe that the Larson and
Macmillan customers who were adversely affected by the alleged
overcharges are primarily those purchasers specifically identified in
the consent orders and in the audit papers. In addition, customers who
purchased motor gasoline from the three retail outlets operated by
Larson were referred to as a class in the ERA audit files but could not
be individually identified.2 These parties may also file for
refunds in this proceeding.
\2\ See Memorandum from Leslie Adams, Director of the Case
Settlement Division, ERA, to Milton Lorenz, Special Counsel, ERA,
Case No. HEF-0104 (June 24, 1982).
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Based on the information we have about Larson's business, we expect
that all applicants in the Larson proceeding and most applicants in the
Macmillan proceeding will be ultimate consumers. As in many other
refund proceedings, we are making a finding that end-users or ultimate
consumers whose businesses are unrelated to the petroleum industry were
injured by the alleged overcharges covered by the Consent Order. Unlike
regulated firms in the petroleum industry, members of this group were
generally not subject to price controls during the audit period and
were not required to keep records which justified selling-price
increases by reference to cost increases. See, e.g., Marion Corp., 12
DOE para. 85,014 (1984); Thornton Oil Corp., 12 DOE para. 85,112
(1984). For these reasons, an analysis of the impact of the increased
cost of petroleum products on the final prices of non-petroleum goods
and services would be beyond the scope of this special refund
proceeding. See Office of Enforcement, 10 DOE para. 85,072 (1983); see
also Texas Oil & Gas Corp., 12 DOE para. 85,069 at 88,209 (1984). We
therefore propose that the end-users of Larson and Macmillan petroleum
products named in the consent orders or workpapers be presumed injured
by the alleged overcharges. Other end-user applicants in the Larson
proceeding, if any, need only demonstrate that they purchased from
Larson and document their purchase volumes to make a sufficient showing
that they were injured by the alleged overcharges.3
\3\ One of the named Larson customers (Portland General
Electric) and three Macmillan customers (Iowa Power & Light,
Atlantic Municipal Utilities, and Iowa South Utilities) are public
utilities. As in other Subpart V proceedings, we will treat the
utilities as end-users. Moreover, because each of their potential
refunds is less than $5,000, we will not require them to submit the
type of certification of pass-through required of public utilities
that receive refunds in excess of the $5,000 small claims threshold.
See, e.g., Placid Oil Co., 18 DOE para. 85,176 at 88,290 (1988).
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We expect some of the applicants in the Macmillan proceeding to be
resellers or retailers. With respect to such applicants, we shall adopt
a small-claims threshold of $5,000. Reseller or retailer applicants
seeking refunds of $5,000 or less will not be required to demonstrate
that they were injured by Macmillan's alleged overcharges. In addition,
one former customer of Macmillan, E.L. Bride, appears to be a reseller
whose potential refund amount is $141,986. Consistent with prior cases,
it will be able to obtain a refund of $50,000 without making a
demonstration that it was injured by Macmillan's overcharges. In order
to obtain a refund of its full overcharge amount, it would have to show
that it was injured by the overcharges. See Gulf Oil Corporation, 16
DOE para. 85,381 at 88,738 (1987); Marathon Petroleum Company, 14 DOE
para. 85,269 at 88,510 (1986).
[[Page 40582]]
B. Calculation of Refund Amounts
As stated above, the audits which gave rise to the Macmillan
Consent Order identified all of the customers allegedly overcharged
during the audit period. In total, there are 66 identified customers
who were allegedly overcharged by Macmillan during its refund period.
The Larson audit identified six customers which account for 21.2
percent of the alleged overcharges, while the remaining 78.8 percent of
the alleged overcharges were attributed to Larson's sales to customers
at its retail stations. With respect to the identified customers of
Larson and Macmillan, we have determined that the use of the audit
results to establish potential refunds on a firm-specific basis is more
accurate than any other method to relate probable injury to refund
amount.
We shall therefore base the identified customers--potential refunds
on the amount that each of these firms was allegedly overcharged, as
determined by the ERA audit. Thus, the principal amount of each firm's
maximum refund is 100 percent of the amount designated for that firm in
the Consent Order plus a pro rata share of the interest that the DOE
has collected on that amount. (For Larson, the latter is approximately
45 percent of the interest that Larson actually owed at the time the
money was placed in the escrow account.) The firms and their potential
refund amounts are listed in the Appendices to this Decision.
We propose to use a volumetric methodology to distribute that
portion of the consent order fund attributable to transactions with
members of Larson's retail class of purchaser. The volumetric refund
presumption assumes that the alleged overcharges by a firm were spread
equally over all gallons of product marketed by that firm. In the
absence of better information, this assumption is sound because the DOE
price regulations generally required a regulated firm to account for
increased costs on a firm-wide basis in determining its prices. This
presumption is rebuttable, however. A retail customer claimant which
believes that it suffered a disproportionate share of the alleged
overcharges may submit evidence proving this claim in order to receive
a larger refund. See Sid Richardson Carbon and Gasoline Co./Siouxland
Propane Co., 12 DOE 85,054 (1984).
Under the volumetric methodology we plan to adopt for the Larson
proceeding, a retail customer claimant will be eligible to receive a
refund equal to the number of gallons of motor gasoline purchased from
Larson from May through December 1979 multiplied by the volumetric
factor. The volumetric factor for Larson is equal to $0.0123.4 We
also propose to establish a minimum amount of $15 for refund claims. We
have found that the cost of processing claims in which refunds are
sought for amounts less than $15 outweighs the benefits of restitution
in those situations. See, e.g., Uban Oil Co., 9 DOE para. 82,541 at
82,225 (1982); see also 10 CFR 205.286(b). Therefore, a claimant must
have purchased at least 1,220 ($15/$0.0123) gallons of Larson motor
gasoline during the Larson audit period in order to be eligible for a
refund.
\4\ The volumetric factor was computed by dividing $12,467 (78.8
percent of the $15,822 collected for the Larson escrow account) by
1,016,250 (the approximate number of gallons of motor gasoline sold
by Larson to its retail customers during the audit period). The
latter figure was obtained using information provided by Larson and
by its primary supplier, Texaco Inc.
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In addition, each successful claimant will receive a pro rata share
of the interest accrued on the consent order funds between the date the
funds were placed in the Larson and Macmillan escrow accounts and the
date the applicant's refund is disbursed.
IV. Conclusion
Refund applications in this proceeding should not be filed until
the issuance of a final Decision and Order. Detailed procedures for
filing applications will be provided in the final Decision and Order.
Before disposing of any of the funds received, we intend to publicize
the distribution process and to provide an opportunity for any affected
party to file a claim.
Any funds that remain after all first-stage claims have been
decided will be distributed in accordance with the provisions of the
Petroleum Overcharge Distribution and Restitution Act of 1986 (PODRA),
15 U.S.C. Sec. 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 OHA. Any funds in the Larson and Macmillan escrow
account that OHA determines will not be needed to effect direct
restitution to injured Larson and Macmillan customers will be
distributed in accordance with the provisions of PODRA.
It Is Therefore Ordered That
(1) The refund amount remitted to the Department of Energy by Kenny
Larson Oil Company pursuant to the September 21, 1981 Consent Order
will be distributed in accordance with the foregoing Decision.
(2) The refund amount remitted to the Department of Energy by
Macmillan Oil Company pursuant to the March 7, 1988 Consent Order will
be distributed in accordance with the foregoing Decision.
Appendix A--Larson Customers and Their Potential Refund Amounts
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Consent Potential
Customer name order Interest principal
amount collected refund
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Schultz Sanitary Service................. $416 $471 $887
B & C Towing............................. 96 109 205
D & A Supply............................. 91 101 192
Portland General Electric................ 685 773 1,458
Larry Hepler............................. 93 109 202
Skig Nagal Farms......................... 192 219 411
Retail Customers......................... 5,842 6,625 12,467
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Total.................................... 7,415 8,407 15,822
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Appendix B--Macmillan Customers and Their Potential Refund Amounts
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Pre- Potential
Customer name Overcharge settlement refund
amount interest amount
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Ace Lines, Inc....................... $223 $172 $395
Armstrong Rubber..................... 17,982 13,904 31,886
Associated Milk Producers............ 635 491 1,126
Atlantic Municipal Utilities......... 694 537 1,231
Bankers Life......................... 2,068 1,599 3,667
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Beaver Valley Canning................ 4,922 3,806 8,728
Bell Watcher......................... 1,834 1,418 3,252
Bitucote Products.................... 14 11 25
Boesen the Florist................... 285 220 505
Bookey Packing....................... 843 652 1,495
C&K Enterprises...................... 360 278 638
Charles Krizan....................... 556 430 986
City of Pleasant Hill................ 7 5 12
College Osteopath Medicine........... 222 172 394
Crees Enterprises.................... 1,015 785 1,800
Crouse Cartage....................... 414 320 734
Dakota Oil Co........................ 650 503 1,153
Dept. General Services............... 3,092 2,391 5,483
Des Moines Community College......... 411 318 729
Des Moines Independent Schools....... 10,035 7,759 17,794
E.L. Bride Company................... 80,066 61,920 141,986
Elview Construction.................. 1,345 1,040 2,385
Equitable Life Insurance Co.......... 4,736 3,662 8,398
Everds Bros.......................... 213 165 378
Exco Industries...................... 520 402 922
Fidelity Warehouse................... $3,146 2,432 5,578
Firestone............................ 196 152 348
Fort Dodge Transport................. 517 400 917
George A. Hormel & Co................ 11,756 9,090 20,846
H. West Construction................. 25 19 44
Hotel Des Moines..................... 325 251 576
Hotel Ft. Des Moines................. 3,494 2,702 6,196
Howe Laundry......................... 1,093 845 1,938
Inland Mills......................... 2,565 1,983 4,548
Iowa Road Builders................... 4,379 3,386 7,765
Iowa South Utilities................. 409 316 725
Iowa Power and Light................. 4,352 3,365 7,717
Keck, Inc............................ 1,071 828 1,899
Little Giant Crane................... 652 504 1,156
Local 334............................ 99 77 176
Matt Construction.................... 523 404 927
Maytag............................... 88,470 68,405 156,875
Meredith Publishing Co............... 2,721 2,104 4,825
National Gypsum...................... 508 393 901
New Monroe Community Schools......... 2,111 1,632 3,743
Parker Oil Co........................ 746 577 1,323
Pepsi Cola Bottlers.................. 957 740 1,697
Ralston Purina....................... 1,281 990 2,271
Savory Hotel......................... 3,617 2,797 6,414
Sendler Stone Products............... 193 149 342
Shaver Oil Co........................ 582 450 1,032
Stark Heating........................ 761 588 1,349
State of Iowa Bldg................... 183 141 324
State of Iowa........................ 1,222 945 2,167
Swift & Co........................... 1,766 1,365 3,131
Swift Edible Oil Co.................. 8,054 6,227 14,281
Target Ready Mix..................... 18,175 14,053 32,228
Univ of N. Iowa...................... 4,519 3,494 8,013
Univ of Iowa......................... 21,616 16,713 38,329
VA Hospital.......................... 12 9 21
Veterans Memorial Auditorium......... 1,009 780 1,789
West Towers.......................... 3,406 2,634 6,040
Western Electric..................... 952 736 1,688
Wilson & Co.......................... 1,822 1,409 3,231
Younkers (Dan Thomas)................ 407 315 722
[Illegible] Oil...................... 1,019 788 1,807
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Total............................ 333,853 258,148 592,001
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[FR Doc. 95-19689 Filed 8-8-95; 8:45 am]
BILLING CODE 6450-01-P
