05-19589. Proposed Procedures for Distribution of Remaining Crude Oil Overcharge Refunds

AGENCY:

Office of Hearings and Appeals, Department of Energy.

ACTION:

Notice of proposed procedures for distribution of remaining crude oil overcharge refunds and opportunity for comment.

SUMMARY:

In a May 21, 2004 Notice, the Department of Energy (DOE) Office of Hearings and Appeals (OHA) announced procedures for making one final round of refund payments in this proceeding. However, there is ongoing litigation that could affect the amount of crude oil monies available for distribution, thus making it unworkable at this point to have a single, last round of payments that would exhaust the remaining crude oil refund monies. We instead propose here to issue partial refunds amounting to approximately 90% of the money due each eligible claimant.

DATES:

Comments must be filed in duplicate within 30 days of publication of this Notice in the Federal Register.

ADDRESSES:

Comments should be addressed to: Crude Oil Refund Proceeding, Office of Hearings and Appeals, Department of Energy, Washington, DC 20585-1615, and submitted electronically to [e-mail].

FOR FURTHER INFORMATION CONTACT:

Steven Goering, Staff Attorney, or Richard Cronin, Assistant Director, Office of Hearings and Appeals, Department of Energy; telephone: [phone], e-mail: [e-mail], [e-mail].

SUPPLEMENTARY INFORMATION:

OHA published a Notice of final procedures for final crude oil refunds in the Federal Register on May 21, 2004. 69 FR 29300. In the May 21 notice, we explained that we would be sending notice to all claimants (or their representatives of record) who purchased more than 280,000 gallons of eligible petroleum products during the relevant period. We also stated that claimants would be required, no later than December 31, 2004, to submit verification of the information in our database. Shortly after issuing the May 21 Notice, we sent notice to claimants and received 30,873 timely submissions.

In the May 21 notice, we set forth a plan to make one final round of refund payments, with the intent “to distribute all of the reserved funds to claimants ‘insofar as practicable.’ ” 69 FR at 29302. We rejected a proposal by a representative of a few large claimants that would have required two disbursements, the second a “closeout payment” available only to clients of that representative and other large claimants. Id.

Since that time, events and proliferating litigation affecting the windup of this crude oil refund proceeding have precluded the Department from proceeding with the calculation of the per-gallon “volumetric” refund amount that is necessary to a single, final payment of refunds to all qualified applicants. Calculating the volumetric amount requires two fixed numbers: (1) The amount of funds available for distribution (“the numerator”), which is divided by (2) the number of gallons of eligible petroleum products purchased during the controls period by eligible claimants (“the denominator”). However, as explained below, the increasing litigation that has been brought to bear on the proceeding may affect both the numerator and the denominator of the volumetric calculation. As a result, the plan to make a single, final round of refunds to eligible persons is unworkable.

Among matters affecting our ability to proceed with the calculation of a final volumetric and proceed with a final distribution is a decision on January 26, 2005, by the United States District Court for the District of Columbia. In Consolidated Edison Co. v. Abraham, Civil Action No. 03-1991, in which the Court awarded plaintiffs attorney's fees in the “amount of thirty percent (30%) of the fund derived from the amount of the increase in the per million-gallon distribution over the $670 [per million gallons] initially proposed by DOE.” Consolidated Edison v. Abraham, Civil Action No. 03-1991, slip op. at 12 (January 26, 2005). Under this decision, a significant amount of the crude oil refund monies—approximately $10 million—would be paid directly to plaintiffs' counsel and not be available for distribution to individual claimants. The Department has filed Notices of Appeal regarding this decision, and plaintiffs have filed appeals of the order insofar as it denied the full amount of attorney's fees they sought, which would have amounted to 10% of the entire “Subpart V” crude oil fund, i.e., about $28 million. See D.C. Cir. Docket Nos. 05-5089, 05-5090, 05-5223, and Fed. Cir. Docket Nos. 05-1309, 05-1310, 05-1450.

The same Consolidated Edison plaintiffs have also filed actions challenging several outstanding OHA Decisions granting refunds. For example, plaintiffs are challenging the crude oil refunds granted to the Defense Logistics Agency and other federal and state agencies. The district court dismissed this challenge and plaintiffs have appealed that decision to both the United States Court of Appeals for the Federal Circuit and the United States Court of Appeals for the D.C. Circuit. See D.C. Dist Ct. Dkt. No. 04-382, 2005 Lexis 5663 (March 31, 2005) (OHA Case No. RF272-00011) (Fed. Cir. Dkt. No. 05-1509 and Ct. App. D.C. Dkt. No. 05-5302). For other pending litigation instituted by the Consolidated Edison plaintiffs challenging OHA refund decisions, see Lubrizol Corporation v. Bodman, D.C. Dist Ct. Dkt. No. 05-1467 RWR (OHA Case No. RC272-00438); Hercules, Inc v. Bodman., Fed. Cir. No. 05-1442; D.C. Cir. No. 05-5201; Dist Ct. Dkt. 02-1507 (OHA Case No. RR272-00204); and Chesebrough-Pond's USA Co. v. Bodman, Energy Management ¶ 26,752, aff'd Fed. Cir. Dkt. No. 04-1615, 128 Fed. Apx. 153 (May 4, 2005), (OHA Case No. RF272-97101). The outcome of these cases affects the amount of money available for distribution to individual applicants. Also, a decision concerning a Motion for Reconsideration of OHA's denial of a refund in International Steel Group, Inc. D.C. D.Ct. # 05-1466, (OHA Case No. RR272-00321), is also in litigation. See Mittal Steel USA ISG, Inc. v. Bodman, D,C. Dkt. No. 05-1466. In that case, a reversal of OHA's decision would add 609,873,817 gallons (the number of gallons claimed on the application) to the denominator of the volumetric. Because of the potential impact of the pending litigation on both the numerator and denominator of the volumetric, it is not feasible to have one final distribution of the crude oil funds at this time.

Significant time that has elapsed since the deadline for refund claimants to submit verification information, such as present addresses and other locators. Our experience in previous crude oil refund rounds is that this verification information becomes quickly and increasingly obsolete. Insofar as it is able, OHA has resolved the issues barring the commencement of a final crude oil refund distribution and is in a position to propose—in lieu of the planned, single refund distribution—a partial crude oil refund distribution of the moneys that are not threatened by the litigation referenced above. That would encompass a vast majority of the funds on hand. While a partial refund increases the burden on the Department, OHA believes that the refund claimants deserve relief from the effects of the ongoing litigation. To make a round of partial crude oil refunds, OHA is issuing this notice announcing a provisional volumetric refund amount and defining that portion of the crude oil monies that would be reserved pending the resolution of the litigation. We ask interested parties to comment on the proposed refund procedure. Upon resolution of the aforementioned litigation, we would then consider procedures for another and final distribution of the remaining crude oil monies which would exhaust the crude oil fund.

Specifically, therefore, we are proposing to make refunds to all claimants based upon a volumetric calculated using a numerator of $252,000,000, i.e., approximately 90% of all available funds, and a denominator of 366,324,981,322 gallons, i.e., the number of gallons of eligible petroleum products purchased during the controls period by eligible claimants (365,715,107,505 gallons) plus the number of gallons claimed in the application denied by OHA that is currently the subject of pending litigation (609,873,817 gallons). This produces a volumetric refund of $0.00068 and distributes approximately 90% of the money due to over 99.75% of all eligible claimants.^[1]

However, prudence requires that we not distribute funds to those claimants whose refunds are currently being challenged by third parties in pending litigation. Upon the conclusion of litigation and a final upholding of our refund awards, we propose to promptly release the funds to the affected claimants. The following is a list of the individual claimants whose refunds we propose to handle in this fashion:

RF272-00011 DEFENSE LOGISTICS AGENCY

RF272-00350 WISCONSIN DEPT. TRANSPORTATION

RF272-00512 STATE OF WEST VIRGINIA

RF272-04416 STATE OF CONNECTICUT

RF272-08074 STATE OF CONNECTICUT

RF272-09853 WASHINGTON STATE PATROL

RF272-11717 WASHINGTON STATE DEPT. TRANS.

RF272-12181 NEBRASKA PUBLIC POWER DIST.

RF272-12588 STATE OF CONNECTICUT

RF272-17487 KENTUCKY DEPT. OF EDUCATION

RF272-18164 STATE OF NORTH DAKOTA

RF272-18963 STATE OF NEW MEXICO

RF272-19364 STATE OF MISSOURI

RF272-19386 STATE OF VERMONT

RF272-19457 STATE OF SOUTH DAKOTA

RF272-20947 LUBRIZOL CORPORATION

RF272-23229 DISTRICT OF COLUMBIA

RF272-23790 HERCULES, INC.

RF272-28260 WASHINGTON STATE FERRIES

RF272-35431 MARYLAND STATE AVIATION ADMIN.

RF272-44094 OHIO STATE HWY. PATROL

RF272-44344 STATE OF SOUTH CAROLINA

RF272-45477 ILLINOIS STATE TOLL HWY. AUTH.

RF272-49283 COMMONWEALTH OF KENTUCKY

RF272-49892 NEBRASKA ENERGY OFFICE

RF272-49898 STATE OF KANSAS

RF272-50638 WASHINGTON STATE DEPT OF TRANS

RF272-51829 WASHINGTON STATE PARKS & REC.

RF272-54955 U.S. POSTAL SERVICE

RF272-56597 STATE OF OKLAHOMA

RF272-59085 STATE OF UTAH, ENERGY OFFICE

RF272-59907 STATE OF COLORADO

RF272-60251 STATE OF WISCONSIN

RF272-61569 STATE OF MINNESOTA

RF272-61591 ARKANSAS HWY. & TRANS. DEPT.

RF272-62009 STATE OF NEW HAMPSHIRE

RF272-62522 STATE OF NEW YORK

RF272-63433 STATE OF DELAWARE

RF272-63623 MARYLAND STATE HWY. ADMIN.

RF272-63624 MARYLAND DEPT. GENERAL SERVICE

RF272-64195 STATE ARIZONA DEPT. OF TRANS.

RF272-64288 STATE OF ARKANSAS

RF272-64986 STATE OF FLORIDA

RF272-65199 STATE OF IOWA

RF272-65398 STATE OF NEVADA

RF272-65470 STATE OF MICHIGAN

RF272-65524 ILLINOIS DEPT. OF COMMERCE

RF272-65526 ALASKA DEPT OF TRANS & PUB FAC

RF272-66878 NEW YORK TRANSIT AUTHORITY

RF272-67007 COMMONWEALTH OF PENNSYLVANIA

RF272-67187 STATE OF INDIANA

RF272-67248 STATE OF CALIFORNIA

RF272-67313 STATE OF TEXAS

RF272-67507 STATE OF VERMONT DEPT. OF COR.

RF272-67509 STATE OF VERMONT—TRANSPORTTN

RF272-67586 STATE OF ALABAMA

RF272-68243 NEW JERSEY TRANSIT CORP.

RF272-68934 NEW YORK  STATE THRUWAY AUTH.

RF272-69744 STATE OF NEW JERSEY

RF272-69948 WEST VIRGINIA HWY. DEPT.

RF272-71331 STATE OF TENNESSEE

RF272-74169 STATE OF MAINE

RF272-75269 VIRGINIA DEPT. OF  STATE POLICE

RF272-87985 STATE OF MARYLAND

RF272-97101 CHESEBROUGH-POND’S USA CO.

RF272-98890 COMMONWEALTH OF VIRGINIA

RG272-00507 STATE OF OHIO

RK272-00147 STATE OF MONTANA

RK272-00362 STATE OF KANSAS

RK272-03404 WYOMING DEPT. OF TRANSPORTATN.

RK272-03418 STATE OF GEORGIA—ENERGY RES.

RK272-04041 STATE OF NORTH CAROLINA

RR272-00207 STATE OF TENNESSEE

OHA seeks comments on these proposed procedures. Interested parties should send comments to the address shown on the present Notice. After OHA considers the comments received, we will issue a final Notice that will explain how we will proceed with the refund process. The final Notice will be published in the Federal Register, and it will be available on the OHA Web site, http://www.oha.doe.gov/​.

Issued in Washington, DC on September 26, 2005.

George B. Breznay,

Director, Office of Hearings and Appeals.

Footnotes

1.  We arrive at the volumetric refund amount by rounding down to the fifth decimal place. Rounding down ensures that there will be sufficient funds to pay refunds at a given volumetric refund amount.