[Federal Register Volume 59, Number 203 (Friday, October 21, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-26190]


[[Page Unknown]]

[Federal Register: October 21, 1994]


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DEPARTMENT OF ENERGY
 

Implementation of Special Refund Procedures

AGENCY: Office of Hearings and Appeals, Department of Energy

ACTION: Notice of 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 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 determined that the funds will be distributed in accordance 
with DOE's Modified Statement of Restitutionary Policy in Crude Oil 
Cases.

FOR FURTHER INFORMATION CONTACT: Thomas L. Wieker, Deputy Director, 
Office of Hearings and Appeals, 1000 Independence Avenue, S.W., 
Washington, D.C. 20585, (202) 586-2400.

SUPPLEMENTARY INFORMATION: In accordance with 10 CFR 205.282(c), notice 
is hereby given of the issuance of the Decision and Order set out 
below. The Decision sets forth the procedures that DOE has 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 will 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.

    Because the June 30, 1994, deadline for crude oil refund 
applications has passed, no new applications from purchasers of refined 
petroleum products will be accepted for these funds. Instead, the share 
allocated to these purchasers will be added to the general crude oil 
overcharge pool used for direct restitution.

    Dated: October 14, 1994.

George B. Breznay,

Director, Office of Hearings and Appeals.

Decision and Order of the Department of Energy

Implementation of Special Refund Procedures

October 14, 1994.

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

    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.\1\
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    \1\The alleged violations referred to in this Decision involve 
the sales of both crude oil and refined petroleum products. Because 
most of Mt. Airy's overcharges relate to crude oil, OHA has 
determined that the interests of administrative efficiency would 
best be served by considering all monies received to be the result 
of crude oil violations.
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    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 plan to 
distribute those funds.

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 at 10 CFR Sec. 211.62. As such, Mt. 
Airy was subject to the jurisdiction of DOE.
    In accordance with the reporting requirements found at 10 CFR 
Sec. 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 these regulatory provisions 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 which found that Mt. Airy had improperly reported its 
crude oil receipts for the period beginning July 1977 and ending 
November 1977. ERA amended that Order on May 27, 1987 (the May 1987 
Order) to include additional entitlement reporting violations by Mt. 
Airy.
    The May 1987 Order states that Mt. Airy's violations resulted in 
its receipt of $2,059,649.94 in entitlements which it was not 
authorized to receive and directs Mt. Airy to refund the amount of 
its violation, plus interest. The Order 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 Order in proceedings before OHA. 
Nonetheless, without admitting any violations whatsoever, they 
agreed to enter into a Consent Order with DOE on November 14, 1990, 
(the November 1990 Order) to settle the violations.
    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 Crude Oil Refund Procedures

A. Crude Oil Refund Policy

    The monies remitted by Mt. Airy and its former shareholders will 
be distributed in accordance with DOE's Modified Statement of 
Restitutionary Policy in Crude Oil Cases (MSRP). See 51 Fed. Reg. 
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 Fed. Reg. 29689 (August 20, 1986) (the 
August 1986 Order).
    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 
any monies remaining after all valid claims by injured purchasers 
are paid will be disbursed to the federal government and the states 
in equal amounts. 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) 
for a more detailed discussion of the MSRP.
    On April 10, 1987, the OHA issued a Notice analyzing the 
numerous comments received in response to the August 1986 Order. 52 
Fed. Reg. 11737 (April 10, 1987) (the April 10 Notice). This Notice 
provided guidance to claimants that anticipated filing refund 
applications for crude oil monies under the Subpart V regulations. 
In general, we stated that all claimants would be required to (1) 
document their purchase volumes of petroleum products during the 
August 19, 1973 through January 27, 1981, crude oil price control 
period; 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 would be presumed to have been 
injured by the alleged crude oil overcharges and would not be 
required to submit proof of injury. See City of Columbus, Georgia, 
16 DOE 85,550 (1987).

B. The Proposed Decision and Order

    On June 3, 1994, OHA issued a Proposed Decision and Order (PDO) 
establishing tentative procedures to distribute the crude oil 
violation amount that had been obtained from Mt. Airy and its former 
shareholders. The amount of money covered by the PDO is 
$2,226,782.70, plus accrued interest. OHA tentatively concluded that 
the funds should be distributed in accordance with the MSRP and the 
April Notice. Pursuant to the MSRP, OHA proposed to reserve 20 
percent of these funds ($445,357.00) for direct refunds to 
applicants who claim that they were injured by the crude oil 
violations. We stated that the remaining 80 percent of the funds 
would be distributed to the states and the federal government for 
indirect restitution. After all valid claims have been paid, any 
remaining funds in the claim reserve would also be divided between 
the states and the federal government. The federal government's 
share ultimately would be deposited into the general fund of the 
Treasury.
    We provided a period of 30 days from the date of the PDO's 
publication in the Federal Register in which the public could submit 
comments regarding the tentative refund procedures. More than 30 
days have elapsed, and the OHA has received no comments concerning 
the proposed procedures.
    Under the terms of the MSRP, 80 percent of the crude oil 
violation amounts subject to this 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. Accordingly, we will direct the DOE's Office of the 
Controller to transfer one-half of that amount, or $890,713.00, plus 
interest, into an interest bearing subaccount for the states, and 
one-half, or $890,713.00, plus interest, into an interest bearing 
subaccount for the federal government. In accordance with previous 
practice, when the amount available for distribution to the states 
reaches $10 million, we will direct the DOE's Office of the 
Controller to make the appropriate disbursement to the individual 
states. 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.
    We must also determine the appropriate method for disbursing the 
20 percent of the fund available for direct restitution ($445,357). 
The application period for crude oil overcharge refunds ended on 
June 30, 1994. As we discussed in King Petroleum, Inc., Case No. 
LEF-0125, August 8, 1994 (Proposed Decision and Order), we will not 
hold a separate refund proceeding for monies that become available 
for direct restitution after the June 30, 1994 closing date. 59 Fed. 
Reg. 41755 (August 15, 1994). Therefore, the funds in this case 
($445,357) will be added to the general crude oil overcharge pool 
for direct restitution to those applicants who applied by the June 
30, 1994 deadline.
    It Is Therefore Ordered That:
    (1) The Director of Special Accounts and Payroll, Office of 
Departmental Accounting and Financial Systems Development, Office of 
the Controller, Department of Energy, shall take all steps necessary 
to transfer $2,226,782.70, plus accrued interest, from the Mt. Airy 
Refining Company escrow account Number 650X00286Z, as specified in 
Paragraphs (2), (3) and (4) of this Decision.
    (2) The Director of Special Accounts and Payroll shall transfer 
$890,713.00, plus accrued interest, of the funds referenced in 
Paragraph (1) above, into the subaccount denominated ``Crude 
Tracking-States,'' Number 999DOE003W.
    (3) The Director of Special Accounts and Payroll shall transfer 
$890,713.00, plus accrued interest, of the funds referenced in 
Paragraph (1) above, into the subaccount denominated ``Crude 
Tracking-Federal,'' Number 999DOE002W.
    (4) The Director of Special Accounts and Payroll shall transfer 
$445,357.00, plus accrued interest, of the funds referenced in 
Paragraph (1) above, into the subaccount denominated ``Crude 
Tracking-Claimants 4,'' Number 999DOE0010Z.
    (5) This is a final Order of the Department of Energy.

    Dated: October 14, 1994.
George B. Breznay,
Director, Office of Hearings and Appeals.
[FR Doc. 94-26190 Filed 10-20-94; 8:45 am]
BILLING CODE 6450-01-P