[Federal Register Volume 59, Number 131 (Monday, July 11, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16707]


[[Page Unknown]]

[Federal Register: July 11, 1994]


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DEPARTMENT OF ENERGY
Office of Hearings and Appeals

 

Implementation of Special Refund Procedures

AGENCY: Office of Hearings and Appeals, Department of Energy.

ACTION: Notice of Implementation of Special Refund Procedures and 
Solicitation of Comments.

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SUMMARY: The Office of Hearings and Appeals of the Department of Energy 
solicits comments concerning the appropriate procedures to be followed 
in refunding a total of $521,200.64 (plus accrued interest) in 
settlement funds to members of the public. The funds are being held in 
escrow pursuant to settlement agreements involving Western Asphalt 
Service, Inc., Case No. LEF-0047; Gray Trucking Company, Case No. LEF-
0120; and William Valentine & Sons, Inc., Case No. LEF-0123.

DATES AND ADDRESSES: Comments must be filed 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 conspicuously display a reference to Case Nos. LEF-0047 et al.

FOR FURTHER INFORMATION CONTACT: Richard W. Dugan, Associate Director, 
Office of Hearings and Appeals, 1000 Independence Avenue, SW., 
Washington, DC 20585, (202) 586-2860.

SUPPLEMENTARY INFORMATION: In accordance with Section 205.282(b) of the 
procedural regulations of the Department of Energy, 10 C.F.R. 
Sec. 205.282(b), notice is hereby given of the issuance of the Proposed 
Decision and Order set forth below. The Proposed Decision relates to 
settlement agreements entered into by the DOE and Western Asphalt 
Service, Inc., Gray Trucking Company and William Valentine & Sons, 
Inc., which settled alleged violations of the DOE price regulations 
involving these firms' sales of crude oil during the period August 19, 
1973 through January 27, 1981.
    The Proposed Decision sets forth the procedures and standards that 
the DOE has tentatively formulated to distribute funds remitted by 
these firms and being held in escrow. The DOE has proposed to 
distribute the funds in accordance with the DOE's Modified Statement of 
Restitutionary Policy Concerning Crude Oil Overcharges, 51 FR 27899 
(August 4, 1986) (the MSRP). 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 
would be distributed in proportion to each state's consumption of 
petroleum products during the price control period. Refunds to eligible 
purchasers would be based on the number of gallons of petroleum 
products which they 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 submit 
two copies of their comments. Comments should be submitted within 30 
days of publication of this notice in the Federal Register, and should 
be sent to the address set forth at the beginning of this notice. All 
comments received in these proceedings will be available for public 
inspection between the hours of 1:00 to 5:00 p.m., Monday through 
Friday, except federal holidays, in the Public Reference Room of the 
Office of Hearings and Appeals, located in Room 1E-234, 1000 
Independence Avenue, S.W., Washington, D.C. 20585.

    Dated: July 1, 1994.
George B. Breznay,
Director, Office of Hearings and Appeals.

Proposed Decision and Order of the Department of Energy

Implementation of Special Refund Procedures

    Names of Firms: Western Asphalt Service, Inc., Gray Trucking 
Company, William Valentine & Sons, Inc.
    Dates of Filing: July 17, 1992; December 7, 1993; April 13, 1994.
    Case Numbers: LEF-0047, LEF-0120, LEF-0123.
    In accordance with the procedural regulations of the Department of 
Energy (DOE), 10 C.F.R. Part 205, Subpart V, the Economic Regulatory 
Administration (ERA) of the DOE filed three Petitions for the 
Implementation of Special Refund Procedures with the Office of Hearings 
and Appeals (OHA) on July 17, 1992, December 7, 1993 and April 13, 
1994, respectively. The Petitions request that OHA formulate and 
implement procedures for the distribution of funds received pursuant to 
settlement agreements entered into by the DOE and Western Asphalt 
Service, Inc. (Western), Gray Trucking Company (Gray) and William 
Valentine & Sons, Inc. (Valentine).

I. Background

    During the period of Federal petroleum price controls, Western was 
engaged in crude oil refining and reselling.\1\ The firm was therefore 
subject to regulations governing the pricing of crude oil set forth at 
10 C.F.R. Parts 205, 210, 211, and 212 of the Mandatory Petroleum Price 
and Allocation Regulations. As a result of an ERA audit of its 
operations, a Proposed Remedial Order (PRO) was issued to Western on 
April 4, 1984 pursuant to 10 C.F.R. Part 205, Subpart O (ERA Docket No. 
940X00182). The PRO alleged violations of the pricing and certification 
rules that applied to crude oil resellers. Essentially, the firm was 
charged with selling price-controlled crude oil as uncontrolled 
stripper well crude oil at unlawfully high prices in violation of the 
provisions of 10 C.F.R. Part 212, Subpart L and 10 C.F.R. Sec. 212.131. 
In another enforcement proceeding, on May 7, 1981, a Notice of Probable 
Violation was issued to Western which alleged that the firm unlawfully 
received Small Refiner Bias Entitlements (ERA Docket No. N00S90197) in 
April and May 1977. These alleged violations of DOE crude oil 
regulations by Western were settled by a Consent Order between the firm 
and DOE on May 30, 1984. The PRO was therefore withdrawn and the NOPV 
was rescinded. Western agreed to remit $300,000, plus interest, to the 
DOE for deposit in an interest-bearing escrow account. Western has 
complied with this obligation, remitting a total of $390,059.12 to the 
DOE. In return, the DOE has released Western from any liability 
regarding its failure to comply with the Federal petroleum price and 
allocation regulations during the period August 19, 1973 through 
January 27, 1981, with the sole exception of any potential violations 
of the Entitlements Program after September 30, 1980.
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    \1\Western Asphalt Service, Inc., W.F. Moore and Son, Inc., and 
Gibson Oil and Refining Company, were all controlled by Wilfred 
Paige van Loben Sels during the price controls period. Textual 
references to ``Western'' in this Decision include all parties to 
the consent order.
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    Gray was also a crude oil reseller during the period of price 
controls. On March 29, 1982, Gray and the DOE entered into a Consent 
Order whereby Gray would remit $31,500, plus interest, to the DOE for 
deposit in an interest-bearing escrow account. The DOE agreed not to 
pursue its claim that, during the period March 1977 through January 
1980, Gray overcharged its customers by charging unlawfully high prices 
for crude oil in violation of 10 C.F.R. Part 212, Subparts F and L. 
Despite its agreement with the terms of the Consent Order, Gray failed 
to comply fully with its financial obligations to the DOE, and remitted 
only $4,738.86 to the DOE. On October 15, 1985, the U.S. District Court 
for the Northern District of Texas, Amarillo Division, granted the DOE 
an Amended Judgment against Gray for an additional $34,625. However, 
the Amended Judgment has not resulted in any additional payments to DOE 
by Gray. ERA has petitioned that the $4,738.86, plus accrued interest, 
obtained from Gray be distributed by OHA in accordance with the Subpart 
V regulations.
    Valentine was engaged in crude oil reclamation during the period 
May 1979 through December 1980.\2\ Through an unincorporated 
subsidiary, Big Muddy Oil Processors Inc. (Big Muddy), Valentine 
obtained waste crude oil from oil spills, pipeline ruptures, waste oil 
pits and oil tank bottoms. After numerous separation and filtering 
processes, the waste oil was mixed with various blending agents 
(naphthas, natural gasoline, natural gas by-products, etc.) and the 
resulting product was sold as pipeline-quality crude oil. Big Muddy, 
and by extension Valentine, was therefore a reseller of crude oil, 
subject to the provisions of 10 C.F.R. Part 212, Subpart L, which 
governed the resales of crude oil.
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    \2\William Valentine and Sons, Inc., Valentine Construction, 
Inc., Dale L. Valentine, Verna Valentine, and James L. Marchant are 
collectively referred to as ``Valentine'' in the text. All are 
parties to the Settlement Agreement which resolved DOE claims 
against them.
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    An ERA audit uncovered evidence that Valentine sold crude oil at 
unlawfully high prices during the period May 1979 through December 
1980. On December 2, 1987, OHA issued a Remedial Order to Valentine 
directing the firm to refund $1,454,876 in overcharges, plus interest. 
See William Valentine and Sons, Inc., 16 DOE 83,025 (1987). Valentine 
appealed OHA's determination to the Federal Energy Regulatory 
Commission (FERC). On March 23, 1989, FERC rejected Valentine's Appeal 
of the Remedial Order and upheld OHA's findings. See William Valentine 
and Sons, Inc., 46 FERC 61,252 (1989). Valentine appealed that 
decision and, on January 24, 1990, the U.S. District Court for the 
District of Wyoming ruled that Valentine's challenge to DOE's Remedial 
Order and to FERC's ruling was without merit. At the same time, the 
Court also approved a Settlement Agreement in which Valentine agreed to 
remit to DOE no less than $108,739 plus interest. In return, DOE agreed 
to deem Valentine in full compliance with the price control program and 
to release all administrative and civil claims against the firm. 
Valentine has paid $126,402.66 into an interest-bearing DOE escrow 
account in compliance with the Settlement Agreement.

II. Jurisdiction and Authority

    On July 28, 1986, the DOE issued a Modified Statement of 
Restitutionary Policy Concerning Crude Oil Overcharges, 51 Fed. Reg. 
27899 (August 4, 1986) (The MSRP). The MSRP, issued as a result of a 
court-approved Settlement Agreement (the Stripper Well Agreement) in In 
re: The Department of Energy Stripper Well Exemption Litigation, M.D.L. 
No. 378 (D.Kan. 1986), provides that crude oil overcharge funds will be 
divided among the states, the federal government, and injured 
purchasers of refined petroleum products. Under the MSRP, up to twenty 
percent of these crude oil overcharge funds will be reserved to satisfy 
valid claims by injured purchasers of petroleum products. Eighty 
percent of the funds, and any monies remaining after all valid claims 
are paid, are to be disbursed equally to the states and federal 
government for indirect restitution.
    Shortly after the issuance of the MSRP, the OHA issued an Order 
that announced its intention to apply the MSRP in all Subpart V 
proceedings involving alleged crude oil violations. Order Implementing 
the MSRP, 51 Fed. Reg. 29689 (August 20, 1986). In that Order, the OHA 
solicited comments concerning the appropriate procedures to follow in 
processing refund applications in crude oil refund proceedings. On 
April 6, 1987, the OHA issued a Notice analyzing the numerous comments 
and setting forth generalized procedures to assist claimants that file 
refund applications for crude oil monies under the Subpart V 
regulations. 52 Fed. Reg. 11737 (April 10, 1987) (the April Notice).
    The OHA has applied these procedures in numerous cases since the 
April Notice, e.g., New York Petroleum, Inc., 18 DOE 85,435 (1988) 
(NYP); Shell Oil Co., 17 DOE 85,204 (1988); Ernest A. Allerkamp, 17 
DOE 85,079 (1988) (Allerkamp), and the procedures have been approved 
by the United States District Court for the District of Kansas as well 
as the Temporary Emergency Court of Appeals. Various states filed a 
Motion with the Kansas District Court, claiming that the OHA violated 
the Stripper Well Agreement by employing presumptions of injury for 
end-users and by improperly calculating the refund amount to be used in 
those proceedings. On August 17, 1987, Judge Frank G. Theis issued an 
Opinion and Order denying the States' Motion in its entirety. In re: 
The Department of Energy Stripper Well Exemption Litigation, 671 F. 
Supp. 1318 (D. Kan. 1987), aff'd, 857 F. 2d 1481 (Temp. Emer. Ct. App. 
1988). Judge Theis concluded that the Stripper Well Agreement ``does 
not bar [the] OHA from permitting claimants to employ reasonable 
presumptions in affirmatively demonstrating injury entitling them to a 
refund.'' Id. at 1323. He also ruled that, as specified in the April 
Notice, the OHA could calculate refunds based on a portion of the 
M.D.L. 378 overcharges. Id. at 1323-24.
    The general guidelines which the OHA may use to formulate and 
implement a plan to distribute refunds are set forth in 10 C.F.R. Part 
205, Subpart V. The Subpart V process may be used in situations where 
the DOE cannot readily identify the persons who may have been injured 
as a result of actual or alleged violations of the regulations or 
ascertain the amount of the refund each person should receive. For a 
more detailed discussion of Subpart V and the authority of the OHA to 
fashion procedures to distribute refunds, see Office of Enforcement, 9 
DOE 82,508 (1981), and Office of Enforcement, 8 DOE 82,597 (1981). 
After reviewing the records submitted in support of the three 
Petitions, we have concluded that a Subpart V proceeding is an 
appropriate mechanism for distributing the $521,200.64 in funds 
obtained from Western, Gray and Valentine. We therefore propose to 
grant the ERA's Petitions and assume jurisdiction over distribution of 
the funds.

III. Proposed Refund Procedures

A. Refund Claims

    We propose to apply the procedures discussed in the April Notice to 
the crude oil Subpart V proceedings that are the subject of the present 
determination. As noted above, the monies deposited with the DOE in 
settlement of the alleged crude oil violations totalling $521,200.64, 
plus accrued interest, are covered by this Proposed Decision. We have 
decided to reserve the full twenty percent of the alleged crude oil 
violation amount, or $104,240.13 plus interest, for direct refunds to 
claimants, in order to insure that sufficient funds will be available 
for refunds to injured parties.
    The process which the OHA will use to evaluate claims based on 
alleged crude oil violations will be modeled after the process the OHA 
has used in Subpart V proceedings to evaluate claims based upon alleged 
overcharges involving refined products. E.g., Mountain Fuel Supply Co., 
14 DOE 85,475 (1986). As in non-crude oil cases, applicants will be 
required to document their purchase volumes of covered products and 
prove that they were injured as a result of the alleged violations. 
Generally, we will presume that an applicant incurred a crude oil 
overcharge in the purchase of a product if the product was either 
identified as a covered product in the Emergency Petroleum Allocation 
Act of 1973, 15 U.S.C. Secs. 751-760, or if the product was purchased 
from a crude oil refinery or originated in a crude oil refinery and was 
purchased from a reseller. Notice of General Interest Concerning DOE's 
Crude Oil Overcharge Refund Program, 57 Fed. Reg. 30731, 30732 (July 
10, 1992); Great Lakes Carbon Corp., 22 DOE 85,248, at 88,662 (1993). 
Applicants who were end-users or ultimate consumers of petroleum 
products, whose businesses are unrelated to the petroleum industry, and 
who were not subject to the DOE price regulations are presumed to have 
been injured by any alleged crude oil overcharges. In order to receive 
a refund, end-users need not submit any further evidence of injury 
beyond the volume of petroleum products purchased during the period of 
price controls. See, e.g., A. Tarricone, Inc., 15 DOE 85,495 at 
88,893-96 (1987). However, the end-user presumption of injury can be 
rebutted by evidence which establishes that the specific end-user in 
question was not injured by the crude oil overcharges. See, e.g., Berry 
Holding Co., 16 DOE 85,405 at 88,797 (1987). If an interested party 
submits evidence that is sufficient to cast serious doubt on the end-
user presumption, the applicant will be required to produce further 
evidence of injury. See, e.g., NYP, 18 DOE at 88,701-03.
    Reseller and retailer claimants must submit detailed evidence of 
injury, and may not rely on the presumption of injury utilized in 
refund cases involving refined petroleum products. They may, however, 
use econometric evidence of the type employed in the OHA Report to the 
District Court in the Stripper Well Litigation, reprinted in 6 Fed. 
Energy Guidelines 90,507.
    Applicants who executed and submitted a valid waiver pursuant to 
one of the escrows established in the Stripper Well Agreement have 
waived their rights to apply for a crude oil refund under Subpart V. 
Mid-America Dairyman Inc., v. Herrington, 878 F. 2d 1448 (Temp. Emer. 
Ct. App. 1989); accord, Boise Cascade Corp., 18 DOE 85,970 (1989).
    As we have stated in previous Decisions, a crude oil refund 
applicant will only be required to submit one application for its share 
of all available crude oil overcharge funds. E.g., Allerkamp, 17 DOE at 
88,176. Any party that has previously submitted a refund Application in 
the crude oil refund proceedings need not file another Application. 
That previously filed Application will be deemed to be filed in all 
crude oil refund proceedings as the procedures are finalized. The DOE 
has established June 30, 1994 as the final deadline for filing an 
Application for Refund from the crude oil funds. Anchor Gasoline Corp., 
22 DOE 85,071 (1992); 58 Fed. Reg. 26318 (May 3, 1993). It is the 
policy of the DOE to pay all crude oil refund claims filed before June 
30, 1994, at the rate of $0.0008 per gallon. However, while we 
anticipate that applicants who filed their claims within the original 
June 30, 1988 deadline will receive a supplemental refund payment, we 
will decide in the future whether claimants that filed later 
Applications should receive additional refunds. See, e.g., Seneca Oil 
Co., 21 DOE 85,327 (1991). Notice of any additional amounts available 
in the future will be published in the Federal Register.

B. Payments to the Federal Government and the States

    Under the terms of the MSRP, the remaining eighty percent of the 
alleged crude oil violation amounts subject to this Proposed Decision, 
or $416,960.51, plus 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 which each state will receive is contained in 
Exhibit H of the Stripper Well Agreement. When disbursed, these funds 
will be subject to the same limitations and reporting requirements as 
all other crude oil monies received by the states under the Stripper 
Well Agreement.
    It Is Therefore Ordered That:
    The refund amounts remitted to the Department of Energy by Western 
Asphalt Service, Inc., W.F. Moore and Son, Inc., Gibson Oil and 
Refining Co., and Wilfred Paige van Loben Sels, pursuant to the Consent 
Order signed on May 30, 1984; by Gray Trucking Company pursuant to the 
Consent Order signed on March 29, 1982; and by William Valentine and 
Sons, Inc., Valentine Construction, Inc., Dale L. Valentine, Verna 
Valentine, and James L. Marchant, pursuant to the Settlement Agreement 
signed on January 24, 1990, will be distributed in accordance with the 
foregoing Decision.

[FR Doc. 94-16707 Filed 7-8-94; 8:45 am]
BILLING CODE 6450-01-P