[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