[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]
-----------------------------------------------------------------------
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.
-----------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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).
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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