[Federal Register Volume 60, Number 117 (Monday, June 19, 1995)]
[Notices]
[Pages 32004-32007]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14915]



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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.

 [[Page 32005]] 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 announces the proposed procedures for disbursement of 
$34,551,984 (plus additional accrued interest) in alleged or 
adjudicated crude oil overcharges obtained by the DOE from Dorchester 
Master Limited Partnership (Case No. VEF-0005), Howell Corporation 
(Case No. VEF-0006), Placid Oil Company (Case No. VEF-0008), Eton 
Trading Corporation (Case No. VEF-0009) and Rodgers Hydrocarbon 
Corporation (Case No. VEF-0010). The OHA has determined that the funds 
obtained from these firms, plus accrued interest, will be distributed 
in accordance with the DOE's Modified Statement of Restitutionary 
Policy in Crude Oil Cases, 51 Fed. Reg. 27899 (August 4, 1986).

DATE AND ADDRESS:  Comments must be filed in duplicate within 30 days 
of publication in the Federal Register, and should be addressed to the 
Office of Hearings and Appeals, Department of Energy, 1000 Independence 
Avenue, S.W., Washington, D.C. 20585. All comments should conspicuously 
display a reference to Case Nos. VEF-0005 et al.

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

SUPPLEMENTARY INFORMATION: In accordance with 10 CFR Sec. 205.282(b), 
notice is hereby given of the issuance of the Proposed Decision and 
Order set forth below. The Proposed Decision and Order sets forth the 
procedures that the DOE has tentatively formulated to distribute a 
total of $34,551,984, plus additional accrued interest, remitted to the 
DOE by Dorchester Master Limited Partnership, Howell Corporation, 
Placid Oil Company, Eton Trading Corporation and Rodgers Hydrocarbon 
Corporation. The DOE is currently holding these funds in interest 
bearing escrow accounts pending distribution.
    The OHA proposes to distribute these funds in accordance with the 
DOE's Modified Statement of Restitutionary Policy in Crude Oil Cases, 
51 Fed. Reg. 27899 (August 4, 1986) (the MSRP). Under the MSRP, crude 
oil overcharge monies are divided among the federal government, the 
states, and injured purchasers of refined petroleum products. Refunds 
to the states will be distributed in proportion to each state's 
consumption of petroleum products during the price control period. 
Refunds to eligible purchasers will be based on the volume of petroleum 
products that they purchased and the extent to which they can 
demonstrate injury.
    The final deadline for the crude oil proceeding is June 30, 1995. 
As we state in the Proposed Decision, any party who has previously 
submitted a refund application in the crude oil refund proceeding 
should not file another Application for Refund. The previously filed 
crude oil application will be deemed filed in all crude oil proceedings 
as the proceedings are finalized.
    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 by the OHA will be available for public inspection 
between the hours of 1 p.m. to 5 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: June 12, 1995.
George B. Breznay,
Director, Office of Hearings and Appeals.
June 12, 1995.

Proposed Decision and Order of the Department of Energy; Implementation 
of Special Refund Procedures

Names of Firms:
    Dorchester Master Limited Partnership
    Howell Corporation
    Placid Oil Company
    Eton Trading Corporation
    Rodgers Hydrocarbon Corporation
Dates of Filing:
    February 27, 1995
    February 27, 1995
    February 28, 1995
    March 8, 1995
    March 8, 1995
Case Numbers:
    VEF-0005
    VEF-0006
    VEF-0008
    VEF-0009
    VEF-0010

    In accordance with the procedural regulations of the Department of 
Energy (DOE), 10 C.F.R. part 205, Subpart V, the Office of General 
Counsel, Regulatory Litigation (``OGC'') (formerly the Economic 
Regulatory Administration (ERA), Office of Enforcement Litigation), 
filed five Petitions for the Implementation of Special Refund 
Procedures with the Office of Hearings and Appeals (OHA) on February 
27, 1995, February 28, 1995, and March 8, 1995. The Petitions request 
that OHA formulate and implement procedures to distribute funds 
received by the DOE from Dorchester Master Limited Partnership (DMLP), 
Howell Corporation (Howell), Placid Oil Company (Placid), Eton Trading 
Corporation (Eton) and Rodgers Hydrocarbon Corporation, pursuant to DOE 
enforcement proceedings involving allegations of crude oil pricing and 
allocation violations by the firms. This Proposed Decision and Order 
sets forth the OHA's tentative plan to distribute these funds, which 
are being held in an interest-bearing escrow account maintained at the 
Department of the Treasury.

I. Background

A. Dorchester Master Limited Partnership

    During the period of petroleum price controls, the firms which now 
comprise DML\1\ were engaged in crude oil refining and reselling. The 
firms were therefore subject to regulations governing the pricing and 
allocation of crude oil set forth at 10 C.F.R. Parts 211 and 212 of the 
Mandatory Petroleum Price and Allocation Regulations. In an audit which 
covered the period from November 1, 1974 through August 1979 the ERA 
identified instances in which it believed that Dorchester's refinery 
subsidiary and reseller division engaged in the improper switching of 
crude oil certifications in violation of 10 C.F.R. Secs. 211.67 (the 
Crude Oil Entitlements Program) and 212.131(b). As a result of the ERA 
audit, a Proposed Remedial Order (PRO) was issued to Dorchester on 
March 19, 1982 (Case No. 6A0X00278). The OHA affirmed the findings of 
the PRO and issued a Remedial Order (RO) to Dorchester on March 11, 
1985. Dorchester Gas Corp., 12 DOE para. 83,034 (1985), appeal 
docketed, No. R085-12-000 (FERC April 22, 1985). As a result of another 
ERA audit, on March 9, 1983, a PRO [[Page 32006]] was issued to Doram 
and Damson, the other firms now comprising DMLP, alleging that during 
the period March 1980 through December 1980, they received illegal 
revenue by reselling crude oil at prices in excess of those permitted 
by applicable crude oil reseller price allocation regulations. An RO 
was issued to those two firms on March 12, 1987. Doram Energy, Inc., 15 
DOE para. 83,024 (1987), modified, 16 DOE para. 83,006 (1987), appeal 
docketed, No. R087-16-000 (FERC April 6, 1987).

    \1\ DMLP, a limited partnership formed in 1984, is the successor 
to Dorchester Gas Corporation (Dorchester) and includes Damson Oil 
Corporation (Damson), the general partner of DMLP, and Doram Energy, 
Inc. (Doram), a subsidiary of Damson. Therefore, DMLP will be used 
to refer collectively to Dorchester, Damson, and Doram, and their 
subsidiaries and affiliates. We will refer to the individual firms 
in some instances, since the audits originated with those firms 
during the period of price controls.
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    On April 4, 1988, a Consent Order was executed between DMLP and the 
DOE which resolved a number of outstanding issues involving DMLP. Under 
the terms of the settlement, DMLP would pay the DOE a maximum of $65 
million but no less than $11 million, plus installment interest, by 
July 1, 1997. The Consent Order states that the DOE has made no formal 
findings of violation by DMLP and that DMLP does not admit it has 
committed any regulatory violations. As of March 31, 1995, DMLP had 
paid the DOE the sum of $11,193,730,2 and it is current in its 
payments to DOE. Although we anticipate that additional revenues will 
be collected from DMLP, no good reason exists to forestall implementing 
procedures for distributing the current balance of the fund, which, 
with accrued interest, totals $13,165,527.

    \2\ Of that amount $5,198.52 came from Damson pursuant to its 
own bankruptcy proceeding.
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B. Howell Corporation

    During the price control period, Howell was a crude oil producer, 
refiner, and reseller. Howell was therefore subject to the Federal 
petroleum price and allocation regulations. In 1981, the ERA audited 
Howell's compliance with the crude oil Entitlements Program during the 
period January 1, 1978 through January 27, 1981. As a result of that 
audit, on June 24, 1988, a PRO was issued to the firm, alleging 
violations of the crude oil price and allocation regulations.3 On 
February 23, 1989, the DOE and Howell executed a Consent Order 
resolving the issues addressed in the PRO. Pursuant to the Consent 
Order, Howell agreed to pay the DOE $19,375,000 plus interest, with 
installment payments over seven years. As of March 31, 1995, Howell had 
paid the DOE $15,288,098, and it is current in its payments to the DOE. 
Although we anticipate that additional revenues will be collected from 
Howell, no good reason exists to forestall implementing procedures for 
distributing the current balance of the fund, which, with accrued 
interest, totals $18,527,540.43.

    \3\ The PRO alleged violations of 10 C.F.R. Secs. 211.66(b) and 
(h), 205.202, and 210.62(c), resulting from significant 
understatement of receipts of price-controlled crude oil. 
Specifically, ERA alleged that during the period April 1978 through 
December 1979, the Joint Venture consisting of Howell and Quintana 
Refinery Co. failed to correctly report the tier certifications 
associated with substantial volumes of its crude oil receipts at its 
Corpus Christi, Texas, refinery; and Howell Hydrocarbons, a Howell 
subsidiary, engaged in similar conduct during the period April 1978 
through November 1980 at its San Antonio, Texas, refinery. In 
addition, the ERA alleged that during the period April 1978 through 
December 1979, Howell Industries, another subsidiary, improperly 
charged prices for crude oil in excess of its actual purchase 
prices, in violation of 10 C.F.R. Secs. 212.186, 210.62(c) and 
205.202.
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C. Placid Oil Company

    Placid was a producer of crude oil during the period of price 
controls. On March 30, 1981, the ERA issued a PRO in which it alleged 
that during the period from September 1973 through May 1977, Placid 
overcharged its customers in sales of crude oil from several properties 
it operated. In addition, the PRO also alleged that Placid improperly 
calculated the average daily production for a number of properties and 
as a result erroneously certified crude oil production from these 
properties as exempt from price controls pursuant to the stripper well 
exemption. On February 11, 1985, the OHA issued an RO to Placid, 
affirming the ERA allegations concerning Placid's overcharges. Placid 
Oil Co., 12 DOE para. 83,030, modified, 13 DOE para. 83,007 (1985). 
Placid appealed the RO to the Federal Energy Regulatory Commission 
(FERC). On February 26, 1987, the FERC reversed and vacated the RO 
(Placid Oil Co., 38 FERC para. 61,199); however, on July 23, 1987, the 
FERC reversed itself in part, vacating portions of its previous Order 
(Placid Oil Co., 40 FERC para. 61,112). On March 18, 1988, the FERC 
issued an Order affirming the RO but modifying the violation amount. 
Placid Oil Co., 42 FERC para. 61,326 (1988). Subsequently, in a 
bankruptcy proceeding involving Placid, the U.S. Bankruptcy Court for 
the Northern District of Texas approved the DOE's claim of 
$1,196,728.09 against Placid. Placid has fulfilled its financial 
obligation to the DOE. As of March 31, 1995, the Placid settlement fund 
contained $1,691,930, including accrued interest.

D. Eton Trading Corporation

    Eton and its affiliate, Eton Enterprises, Inc., were resellers of 
crude oil during the period June 1980 through December 1980, and were 
subject to the crude oil reseller regulations set forth at 10 C.F.R. 
Part 212, Subpart L. As the result of an ERA audit of Eton's 
operations, on January 14, 1986, the ERA issued a PRO to the firm 
alleging that it had engaged in layered crude oil transactions in 
violation of 10 C.F.R. Sec. 212.186. The PRO stated that those layered 
transactions resulted in overcharges amounting to $9,182,412.70. On 
March 17, 1986, Eton filed a Notice of Objection with this Office but 
waived its right to contest the determinations made in the PRO by 
failing to file a Statement of Objections in a timely manner. 
Accordingly, on December 5, 1986, the OHA issued the PRO as a final 
Remedial Order. Eton Trading Corp., 15 DOE para. 83,011 (1986). In July 
1986, Eton Trading Corporation and Eton Enterprises filed for 
bankruptcy. The DOE filed identical claims in the bankruptcy 
proceedings of the two firms. Final distributions have been made in the 
Eton Trading bankruptcy proceeding, but none has been made in the Eton 
Enterprise proceeding. As of March 31, 1995, the Eton settlement fund 
contained $1,106,788, including accrued interest. Although the 
possibility exists that additional revenues will be distributed to the 
DOE in the Eton Enterprise bankruptcy proceeding, no reason exists to 
delay implementing distribution of the current balance of the fund.
E. Rodgers Hydrocarbon Corporation

    Rodgers Hydrocarbon Corporation and Ray V. Rodgers, Jr. (referred 
to collectively as Rodgers), were crude oil resellers during the period 
of September 1977 through January 1980. On March 29, 1985, the ERA 
issued a PRO to Rodgers alleging that during that period, Rodgers 
failed to properly certify crude oil it sold as required by 10 C.F.R. 
Sec. 212.131(b). In addition, the ERA alleged that Rodgers failed to 
submit reports and maintain books and records in accordance with 10 
C.F.R. Sec. 212.187 (a) and (b).4 Rodgers filed a Statement of 
Objections to the PRO on August 26, 1985. After considering Rodgers' 
objections, certain provisions of the PRO were modified, and the PRO 
was issued as a final RO on July 20, 1989. Rodgers Hydrocarbon Corp., 
19 DOE para. 83,004 (1989). On December 4, 1989, Rodgers and the DOE 
executed a Consent Order resolving the issues addressed by the RO. 
Pursuant to the Consent Order, Rodgers agreed to pay the DOE $50,000 
plus interest, in two equal payments. Rodgers paid to the DOE the sum 
of $51,190 and has fulfilled its financial obligation to the DOE. As of 
March 31, 1995, the Rodgers escrow account contained $60,199.

    \4\ Crude oil resellers were required to file certain 
information on ERA-69 ``Crude Oil Reseller's Self-Reporting Forms.'' 
[[Page 32007]] 
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II. Jurisdiction and Authority

    The Subpart V regulations set forth general guidelines which may be 
used by the OHA in formulating and implementing a plan of distribution 
of funds received as a result of an enforcement proceeding. The DOE 
policy is to use the Subpart V process to distribute such funds. For a 
more detailed discussion of Subpart V and the authority of the OHA to 
fashion procedures to distribute refunds, see Petroleum Overcharge 
Distribution and Restitution Act of 1986, 15 U.S.C. 4501 et seq.; see 
also Office of Enforcement, 9 DOE para. 82,508 (1981), and Office of 
Enforcement, 8 DOE para. 82,597 (1981).
    We have considered the OGC's petitions that we implement Subpart V 
proceedings with respect to the DMLP, Howell, Placid, Eton and Rodgers 
funds and have determined that such proceedings are appropriate. This 
Proposed Decision and Order sets forth the OHA's tentative plan to 
distribute these funds. Before taking the actions proposed in this 
Decision, we intend to publicize our proposal and solicit comments from 
interested parties. Comments regarding the tentative distribution 
process set forth in this Proposed Decision and Order should be filed 
with the OHA within 30 days of its publication in the Federal Register.

III. Proposed Refund Procedures

A. Crude Oil Refund Policy

    We propose to distribute the monies received from DMLP, Howell, 
Placid, Eton and Rodgers in accordance with DOE's Modified Statement of 
Restitutionary Policy in Crude Oil Cases (MSRP), 51 Fed. Reg. 27899 
(August 4, 1986), which was issued as a result of the Settlement 
Agreement approved by the court in The Department of Energy Stripper 
Well Exemption Litigation, 653 F. Supp. 108 (D. Kan. 1986). Shortly 
after the issuance of the MSRP, the OHA issued an Order that announced 
that this policy would be applied 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 crude oil overcharge funds will be 
disbursed to the federal government, another 40 percent to the states, 
and up to 20 percent may initially be reserved for the payment of 
claims to injured parties. The MSRP also specified that any funds 
remaining after all valid claims by injured purchasers are paid will be 
disbursed to the federal government and the states in equal amounts.
    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). 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 that they were injured by the 
alleged crude oil overcharges. 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 would be presumed to have been injured by any 
alleged crude oil overcharges. In order to receive a refund, end-users 
would not need to submit any further evidence of injury beyond the 
volume of petroleum products purchased during the period of price 
controls. See City of Columbus Georgia, 16 DOE para. 85,550 (1987).
    The amount of money subject to this Proposed Decision is 
$34,551,984, plus additional accrued interest. In accordance with the 
MSRP, we propose initially to reserve 20 percent of those funds 
($6,910,397 plus additional accrued interest) for direct refunds to 
applicants who claim that they were injured by crude oil overcharges.
    We propose to evaluate claims in the DMLP, Howell, Placid, Eton and 
Rodgers crude oil refund proceedings in exactly the same manner as in 
other crude oil proceedings. As we stated in the April 10 Notice, 
claimants will generally be required to document their purchase volumes 
of petroleum products and prove that they were injured as a result of 
the alleged violations. We will also presume 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 Price and Allocation Act of 1973, 15 
U.S.C. 751-760. In order to receive a refund, such claimants need not 
submit any evidence of injury beyond documentation of their purchase 
volumes.
    We propose to base the refunds on a volumetric amount which has 
been calculated in accordance with the description in the April 10 
Notice. That volumetric refund amount is currently $0.0016 per gallon. 
See 57 Fed. Reg. 15562 (March 24, 1995).
    Applicants who have executed and submitted a valid waiver pursuant 
to one of the escrows established by the Stripper Well Settlement 
Agreement have waived their rights to apply for a crude oil refund 
under Subpart V and should not file a crude oil refund application. See 
Mid-America Dairyman Inc. v. Herrington, 878 F.2d 1448 (Temp. Emer. Ct. 
App.); 3 Fed. Energy Guidelines para. 26,617 (1989); In re Department 
of Energy Stripper Well Exemption Litigation, 707 F. Supp. 1267 (D. 
Kan.), 3 Fed. Energy Guidelines para. 26,613 (1987). The deadline for 
filing an Application for Refund is June 30, 1995. A crude oil refund 
applicant is only required to submit one application for its share of 
all available crude oil overcharge funds. See, e.g., Ernest A. 
Allerkamp, 17 DOE para. 85,079 at 88,176 (1988). Accordingly, any party 
that has previously submitted a refund Application in the crude oil 
refund proceeding need not file another Application.

C. Payments to the States and Federal Government

    Under the terms of the MSRP, the remaining 80 percent of the 
alleged crude oil violation amounts subject to this Proposed Decision, 
or $27,641,587 plus additional 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 which each state will 
receive is contained in Exhibit H of the Stripper Well Settlement 
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 Dorchester Master Limited Partnership, Howell 
Corporation, Placid Oil Company, Eton Trading Corporation and Rodgers 
Hydrocarbon Corporation pursuant to their respective Consent Orders or 
Bankruptcy Court Orders will be distributed in accordance with the 
foregoing Decision.

[FR Doc. 95-14915 Filed 6-16-95; 8:45 am]
BILLING CODE 6450-01-P