[Federal Register Volume 59, Number 111 (Friday, June 10, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-14199]


[[Page Unknown]]

[Federal Register: June 10, 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, 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 the 
total amount of $2,226,782.70 in crude oil overcharges obtained by the 
DOE under the terms of a Consent Order that Mt. Airy Refining Company 
(Mt. Airy) and its former shareholders, William P. Boswell, W. Luke 
Boswell, Lindsay B. McLean, David P. Boswell, P. Wilson Boswell II and 
Ellen W. Boswell, entered into with DOE on November 14, 1990. Case No. 
LEF-0121. OHA has tentatively determined that the funds will be 
distributed in accordance with DOE's Modified Statement of 
Restitutionary Policy in Crude Oil Cases.

DATE AND ADDRESS: Comments must be filed in duplicate by July 11, 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-0121.

FOR FURTHER INFORMATION CONTACT: Kim L. Hargrove, 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 DOE has 
tentatively formulated to distribute the total amount of $2,226,782.70 
obtained under the terms of a Consent Order that DOE entered into with 
Mt. Airy Refining Company and its former shareholders on November 14, 
1990. The Consent Order settles claims by DOE that Mt. Airy had 
violated reporting provisions of the Mandatory Petroleum Allocation 
Regulations and the Administrative Procedures and Sanctions Regulations 
with regard to its sale of crude oil.
    OHA proposes to distribute the Mt. Airy Consent Order funds in 
accordance with DOE's Modified Statement of Restitutionary Policy in 
Crude Oil Cases (the MSRP). 51 FR 27899 (August 4, 1986). Under the 
MSRP, crude oil overcharge monies are divided between the Federal 
government, the states, and injured purchasers of refined petroleum 
products. Refunds to the states are distributed in proportion to each 
state's consumption of petroleum products during the price control 
period. Refunds to eligible purchasers are based on the total volume of 
petroleum products purchased and the degree to which they can 
demonstrate injury.
    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: June 3, 1994.
George B. Breznay,
Director, Office of Hearings and Appeals.

Proposed Decision and Order of the Department of Energy

Implementation of Special Refund Procedures

    Name of Firm: Mt. Airy Refining Company.
    Date of Filing: February 3, 1994.
    Case Number: LEF-0121.

    Dated: June 3, 1994.

    On February 3, 1994, the Economic Regulatory Administration 
(ERA) of the Department of Energy filed a Petition requesting that 
the Office of Hearings and Appeals (OHA) formulate and implement 
Subpart V special refund proceedings for crude oil overcharge funds. 
Under DOE procedural regulations, special refund proceedings may be 
implemented to refund monies to persons injured by violations of DOE 
petroleum price and allocation regulations, provided DOE is unable 
to readily identify such persons or ascertain the refund amount each 
person should receive. 10 CFR 205.280. We have considered ERA's 
request to formulate refund procedures for the disbursement of 
$2,226,782.70 remitted by Mt. Airy Refining Company (Mt. Airy) and 
its former shareholders, William P. Boswell, W. Luke Boswell, 
Lindsay B. McLean, David P. Boswell, P. Wilson Boswell II and Ellen 
W. Boswell, in connection with a Consent Order Mt. Airy and its 
former shareholders entered into with DOE and have determined that 
such procedures are appropriate.
    The Mt. Airy Consent Order funds were remitted to DOE to remedy 
the firm's alleged violation of the Mandatory Petroleum Allocation 
Regulations published at 10 CFR part 211 and the provisions of the 
Administrative Procedures and Sanctions Regulations set forth at 10 
CFR part 205. These funds are being held in an escrow account 
established with the United States Treasury pending a determination 
of their proper distribution. This Decision sets forth OHA's 
tentative plan to distribute those funds. The specific application 
requirements appear in Section III of this Decision. Because these 
procedures are set forth in proposed form, refund applications 
should not be filed at this time. Comments are solicited.

I. Jurisdiction and Authority

    The general guidelines that govern OHA's ability to formulate 
and implement a plan to distribute refunds are set forth at 10 CFR 
part 205, subpart V. These procedures apply in situations where DOE 
cannot readily identify persons injured as a result of actual or 
alleged violations of its regulations or ascertain the refund amount 
each person should receive. For a more detailed discussion of 
subpart V and OHA's authority to fashion procedures to distribute 
refunds see, Office of Enforcement, 9 DOE 82,508 (1981) and Office 
of Enforcement, 8 DOE 82,597 (1981).

II. Background

    Mt. Airy operated a refinery in Mt. Airy, Louisiana from the 
date of its incorporation under the laws of the state of Ohio in 
1977 until its dissolution on August 11, 1983. It was therefore a 
``refiner'' as that term has been defined in the federal petroleum 
price and allocation regulations. As such, Mt. Airy was subject to 
the jurisdiction of DOE.
    In accordance with the reporting requirements found at 10 CFR 
211.66(b)(h), Mt. Airy was required to submit a ``Refiners Monthly 
Report'' detailing its crude oil receipts, runs to stills and volume 
of crude oil processed. DOE reviewed Mt. Airy's compliance with 
those regulatory provisions, as well as provisions set forth at 
section 211.67, during the course of an audit of Mt. Airy's 
principal business operations. The audit was conducted during the 
period beginning on January 1, 1977 and ending on January 27, 1981. 
On July 25, 1986, ERA issued a Proposed Remedial Order (PRO) which 
found that Mt. Airy had improperly reported its crude oil receipts 
for the period beginning July 1977 and ending November 1977, by 
approximately 300,000 barrels of controlled crude oil.
    ERA amended that Proposed Remedial Order on May 27, 1987 (the 
May 1987 PRO) to include additional entitlement reporting violations 
by Mt. Airy. In its May 1987 PRO ERA found that Mt. Airy under 
reported its crude receipts by a total of (i) 1,018,905 barrels of 
controlled crude oil; or (ii) 718,905 barrels of controlled crude 
oil, in the event OHA found that Mt. Airy was not required to report 
the 300,000 barrels identified in the original PRO. The May 1987 PRO 
directs Mt. Airy to refund the amount of its violation, plus 
interest. The PRO further states that Mt. Airy shareholders were 
individually liable, to the extent that Mt. Airy's assets were 
distributed to them upon its dissolution in 1983, for refunding the 
violation amount.
    ERA found that shareholder liability in this case was predicated 
upon the ``trust fund doctrine'', which provides that stockholders 
who receive assets upon corporate dissolution hold those assets in 
trust for the payment of bona fide corporate debts incurred before 
dissolution. See Bayport, 18 DOE 83,007 at 86,058 (1989). Mt. Airy 
and its former shareholders vigorously contested the May 1987 PRO in 
proceedings before OHA. Nonetheless, without admitting any 
violations, they agreed to enter into a Consent Order with DOE to 
settle the alleged violations. The Consent Order was published in 
proposed form in the Federal Register on November 26, 1990 (the 
November 1990 Order). 55 FR 49104.1
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    \1\On January 17, 1991, ERA published a notice making the 
Proposed Consent Order a final DOE Order pursuant to 10 CFR 
205.199J. 56 FR 1804.
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    According to the November 1990 Order, Mt. Airy's alleged 
violations resulted in its receipt of $2,059,649.94 in entitlements 
which it was not authorized to receive. The maximum potential 
liability, with interest, was estimated by ERA as roughly $7.6 
million. Id. After assessing a number of factors, including the time 
and expense required to litigate fully every issue in order to 
obtain any recovery, ERA concluded that the resolution of the 
matters referred to in the Proposed Consent Order for the principal 
sum of $2,000,000 was both an appropriate settlement and in the 
public interest. Id.
    In accordance with the November 1990 Order, Mt. Airy and its 
former shareholders (1) paid the principal sum of two million 
dollars ($2,000,000.00), plus interest, in full and final settlement 
of all matters covered by the Order; and (2) agreed to retain (i) 
Mt. Airy's records evidencing sales volume data for each product 
subject to controls, during the period covered by the audit; and 
(ii) Mt. Airy's customers' names and addresses. The November 1990 
Order requires Mt. Airy to retain the records described above for a 
period of thirty (30) days following DOE's final distribution of the 
Mt. Airy Consent Order funds or January 1, 2000, whichever occurs 
earlier. Mt. Airy shall make such information available to DOE, if 
so requested.

III. The Proposed Refined Product Refund Procedures

A. Crude Oil Refund Policy

    The Mt. Airy Consent Order funds will be distributed in 
accordance with DOE's Modified Statement of Restitutionary Policy in 
Crude Oil Cases (MSRP). See 51 FR 27899 (August 4, 1986). This 
policy has been utilized in all subpart V proceedings involving 
alleged crude oil violations. See Order Implementing the MSRP, 51 FR 
29689 (August 20, 1986). Under the MSRP, 40 percent of the crude oil 
overcharge funds will be refunded to the Federal government, another 
40 percent to the states, and up to 20 percent may initially be 
reserved for the payment of claims by injured parties. The MSRP also 
specified that, after all valid claims by injured purchasers are 
paid, any remaining monies will be disbursed to the Federal 
government and to the states in equal amounts. For a more detailed 
discussion of the MSRP see, In re: The Department of Energy Stripper 
Well Exemption Litigation, 653 F. Supp. 108 (D. Kan.), 6 Fed. Energy 
Guidelines 90,509 (1986)(the Stripper Well Settlement Agreement).
    In its April 10, 1987 Notice, OHA stated that Subpart V 
claimants, anticipating filing refund applications for crude oil 
monies, would generally be required to (1) document the volume of 
petroleum products they purchased from August 19, 1973 to January 
27, 1981; and (2) prove they were injured by the alleged crude oil 
overcharges. End-users of petroleum products whose businesses are 
unrelated to the petroleum industry are presumed injured by the 
alleged crude oil overcharges and therefore need not submit 
additional proof of injury. End-users need only document the volume 
of their petroleum purchases in order to be eligible to receive a 
refund. See City of Columbus, Georgia, 16 DOE 85,550 (1987).

B. Refund Claims

    We propose that standard DOE procedures, as set forth in the 
MSRP, govern the distribution of the $2,226,782.70 in crude oil 
monies obtained from Mt. Airy. We have chosen initially to reserve 
20 percent of the fund ($445,357.00) for direct refunds to 
applicants. We propose that refund applications in the Mt. Airy 
proceeding be evaluated in exactly the same manner as refund 
applications submitted in other crude oil proceedings. Applicants 
generally will be required to document the volume of petroleum 
products they purchased and prove that they were injured as a result 
of the alleged violations. We will adopt a presumption that the 
alleged crude oil overcharges were absorbed rather than passed on, 
by applicants who were (1) end-users of petroleum products, (2) 
unrelated to the petroleum industry, and (3) not subject to the 
regulations promulgated under the Emergency Petroleum Allocation Act 
of 1973 (EPAA), 15 U.S.C. 751-760h. In order to receive a refund, 
end-user applicants need only document the volume of petroleum 
products they purchased. See Shell, 17 DOE 85,204 (1988). Petroleum 
retailer, reseller and refiner applicants will be required to submit 
detailed evidence of injury. They may not rely upon the injury 
presumptions utilized in some refined product refund cases. Id.
    As has been stated in prior Decisions, a crude oil refund 
applicant will only be required to submit one application for its 
share of all available crude oil overcharge funds. See e.g., A. 
Tarricone, Inc., 15 DOE 85,495 (1987). A party that has already 
submitted a claim in any other crude oil refund proceeding 
implemented by the DOE need not file another claim. The prior 
application will be deemed to be filed in all crude oil refund 
proceedings implemented by DOE. Any applicant who has executed and 
submitted a valid waiver, pursuant to one of the escrow accounts 
established by the Stripper Well Settlement Agreement, has waived 
his right to file an application for Subpart V crude oil refund 
monies. See Mid-America Dairymen v. Herrington, 878 F.2d 1448 (Temp. 
Emer. Ct. App.), 3 Fed. Energy Guidelines 26,617 (1989); In re: 
Department of Energy Stripper Well Exemption Litigation, 707 F. 
Supp. 11267 (D. Kan.), 3 Fed. Energy Guidelines 26,613 (1987).
    The current deadline for filing an Application for Refund is 
June 30, 1994. All crude oil refund claims filed before June 30, 
1994, will be paid at the rate of $.0008 per gallon. We anticipate, 
however, that applicants who filed their claims by June 30, 1988, 
will receive a supplemental refund payment. We will decide in the 
future whether applicants that filed applications after that date 
should receive additional refunds. Applicants may be required to 
submit additional information to support their claims for future 
amounts. Notice of any such additional amounts will be published in 
the Federal Register.

C. Payments to the States and Federal Government

    Under the terms of the MSRP, we propose that the remaining 80 
percent of the alleged crude oil violation amounts subject to this 
Proposed Decision or $1,781,426.00 in principal, plus accrued 
interest, should be disbursed in equal shares to the states and 
Federal government for indirect restitution. Refunds to the states 
will be in proportion to the consumption of petroleum products in 
each state during the period of price controls. The share or ratio 
of the funds allocated to each state is contained in Exhibit H of 
the Stripper Well Agreement. When disbursed, these funds will be 
subject to the same limitations and reporting requirements that 
apply to any other crude oil funds received by the states in 
accordance with the Stripper Well Agreement.
    It Is Therefore Ordered That:
    The $2,226,782.70 refund amount remitted to the Department of 
Energy by Mt. Airy and its former shareholders pursuant to the 
Consent Order finalized on January 17, 1991 will be distributed in 
accordance with the foregoing Decision.

[FR Doc. 94-14199 Filed 6-9-94; 8:45 am]
BILLING CODE 6450-01-P