[Federal Register Volume 59, Number 77 (Thursday, April 21, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-9661]


[[Page Unknown]]

[Federal Register: April 21, 1994]


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DEPARTMENT OF ENERGY
Office of Hearings and Appeals

 

Proposed Implementation of Special Refund Procedures

AGENCY: Office of Hearings and Appeals, 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 $144,864.85, plus accrued interest, in refined petroleum 
overcharges obtained by the DOE under the terms of a Consent Order 
issued to N. C. Ginther Company, Case No. LEF-0060. 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).

DATES AND ADDRESSES: Comments must be filed in duplicate 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 
display a reference to Case Number LEF-0060.

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 
$144,864.85, plus accrued interest, obtained by the DOE under the terms 
of a Consent Order that the DOE and N. C. Ginther Company agreed to on 
March 25, 1983. Under the Consent Order, all civil and administrative 
claims and disputes between N. C. Ginther Company and the DOE were 
settled concerning Ginther's compliance with the federal petroleum 
price and allocation regulations with respect to all sales of natural 
gas liquids and natural gas liquid products by Ginther during the 
consent order period.
    The OHA has proposed to distribute the Consent Order fund in a two 
stage refund proceeding. Purchasers of propane, butane, and natural 
gasoline from N. C. Ginther Company 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 propane, butane, and 
natural gasoline they purchased from N. C. Ginther Company 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: April 14, 1994.
George B. Breznay,
Director, Office of Hearings and Appeals.

Name of Petitioner: N. C. Ginther Company
Date of Filing: July 20, 1993
Case Number: LEF-0060
    On July 20, 1993, 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 a Consent 
Order between ERA and N.C. Ginther Company (Ginther), 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 Ginther refund applications is authorized.

I. Background

    Ginther was a ``gas plant operator'' (as defined in 10 CFR 
Sec. 212.162) and its sales were subject to DOE price regulations. 
During the period covered by the Consent Order, Ginther sold propane, 
butane, and natural gasoline (natural gas liquids products). An ERA 
audit of Ginther's records revealed possible violations of the 
Mandatory Petroleum Price Regulations, 10 CFR part 212 subparts E and 
K, in specified transactions during the period September 1, 1973, 
through March 31, 1977 (the consent order period).\1\ Consequently, the 
ERA issued a Notice of Probable Violation (NOPV) to Ginther on December 
31, 1980, alleging pricing violations in the sale of propane, butane, 
and natural gasoline during the audit period. On March 25, 1983, 
Ginther and the DOE entered into a Consent Order. The Consent Order 
refers to the ERA's allegations of regulatory violations. It also 
includes Ginther's denials that any such violations occurred.
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    \1\Ginther owned all or a portion of four gas processing plants 
for various lengths of time during the audit period. In addition, 
Ginther owned and operated Ginther Energy Marketing Company and A & 
V Gas Service, Inc. In accordance with the definition of a firm in 
10 CFR 212.31, the four gas processing plants, Ginther Energy 
Marketing Company, and A & V Gas Service, Inc., constitute one firm 
and were regarded as such by ERA in the audit. Notice of Probable 
Violation issued to N.C. Ginther dated December 31, 1980.
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    Under the terms of the Consent Order, Ginther was required to 
refund the sum of $175,000, including interest through January 31, 
1983, in 36 monthly installments beginning thirty days after the 
effective date of the Consent Order. There is a total of $144,864.85, 
plus accrued interest, available for restitution. This Decision 
concerns the distribution of all funds in the Ginther escrow account, 
including any which may be received after the date of this 
determination.

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 C.F.R. 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, 8 
DOE 82,597 (1981). We have considered the ERA's petition that we 
implement a Subpart V proceeding with respect to the Ginther consent 
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 Ginther natural gas liquids (NGL) products during the 
consent 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 Ginther NGL products 
during the consent order period. If the product was not purchased 
directly from Ginther, the claimant must establish that the product 
originated with Ginther. 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 Ginther'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.\2\ 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 Ginther. 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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    \2\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 C.F.R. 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 Ginther's sales of NGL products during 
the consent order period. In accordance with this presumption, refunds 
will be made on a pro-rata or volumetric basis.\3\ 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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    \3\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 Ginther'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 Ginther'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 Ginther consent 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 consent order fund is equal to the number of gallons purchased from 
the consent order firm during the applicable consent order period times 
the per gallon refund amount. In the present case, the per gallon 
refund amount is $0.0057. We derived this figure by dividing the 
consent order fund, $144,864.85, by 25,312,920 gallons, the approximate 
number of gallons of covered refined products which Ginther sold from 
September 1973 through March 1977. 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.\4\
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    \4\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 2,544 gallons 
of NGL products from Ginther 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 Ginther NGL 
products whose business is unrelated to the petroleum industry was 
injured by the alleged overcharges settled by the consent 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 
consent 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 Ginther NGL products need only document 
their purchase volumes from Ginther during the consent 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.\5\
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    \5\A cooperative's purchases of Ginther 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 Ginther 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 Ginther 
products it purchased during the consent 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.6
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    \6\In order to qualify for a refund under the small claims 
presumption, a refiner, reseller, or retailer must have purchased 
less than 877,280 gallons of Ginther products during the consent 
order period. However, an applicant, who has purchased more than 
877,280 gallons of Ginther products during the consent order period, 
may elect to limit its refund to the small claims presumption.
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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 $20,000,7 whichever is larger.8 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 Ginther 
NGL products during the consent 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.9
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    \7\In most prior proceedings, we have used a $40,000 mid-level 
claim presumption. However, due to the small size of the Ginther 
consent order fund and the rather small volumetric figure, this 
amount would be impractical.
    \8\That is, claimants who purchased more than 877,281 gallons of 
Ginther products during the consent order period (mid-level 
claimants) may elect to utilize this presumption.
    \9\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 
Ginther. 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 Ginther 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 
Ginther.10
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    \1\0In 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 Ginther's alleged failure to 
furnish products that it was obliged to supply under the DOE allocation 
regulations that became effective in January 1974. See 10 C.F.R. 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 consent order firm and the likelihood 
that the consent order firm failed to furnish NGL products 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 Ginther 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 Ginther. In determining the amount of an 
allocation refund, we will utilize any information that may be 
available regarding the portion of the Ginther consent order amount 
that the agency attributed to allocation violations in general and to 
the specific allocation violation alleged by the claimants. Finally, 
since the Ginther consent order fund is less than Ginther's potential 
liability in the proceedings, we will pro rate those allocation refunds 
that would otherwise be disproportionately large in relation to the 
consent 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 energy 
conservation programs. The Secretary has delegated these 
responsibilities to the OHA, and any funds in the Ginther consent 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 amount available to the Department of Energy for restitution 
pursuant to the consent order entered into on March 25, 1983, by N. C. 
Ginther Company and the Department of Energy will be distributed in 
accordance with the foregoing Decision.

[FR Doc. 94-9661 Filed 4-20-94; 8:45 am]
BILLING CODE 6450-01-P