[Federal Register Volume 60, Number 153 (Wednesday, August 9, 1995)]
[Notices]
[Pages 40580-40584]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-19689]



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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 Proposed Implementation of Special Refund Procedures.

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SUMMARY: The Office of Hearings and Appeals of the Department of Energy 
announces proposed procedures for the disbursement of $592,001 (plus 
accrued interest) collected pursuant to a consent order with Macmillian 
Oil Company and $15,822 (plus accrued interest) collected pursuant to a 
consent order with Kenny Larson Oil Company. The funds will be 
distributed in accordance with the DOE's special refund procedures, 10 
C.F.R. Part 205, Subpart V.

DATE AND ADDRESS: Comments must be filed in duplicate within 30 days of 
the date of publication in the Federal Register and should be addressed 
to: Office of Hearings and Appeals, Department of Energy, 1000 
Independence Avenue, S.W., Washington, D.C. 20585. All comments 
concerning the Kenny Larson proceeding should conspicuously display 
reference to Case Number LEF-0046 and those concerning the Macmillian 
proceeding should display reference to Case Number VEF-0002.

FOR FURTHER INFORMATION CONTACT: Bryan F. MacPherson, Assistant 
Director, Office of Hearings and Appeals, Department of Energy, 1000 
Independence Avenue, S.W., Washington, D.C. 20585, (202) 586-5405.

SUPPLEMENTARY INFORMATION: In accordance with Section 205.282(b) of the 
procedural regulations of the Department of Energy (DOE), 10 CFR 
205.282(b), notice is hereby given of the issuance of the Proposed 
Decision and Order set out below. The Proposed Decision and Order sets 
forth the procedures that the DOE has tentatively formulated to 
distribute monies that have been collected by the DOE pursuant to a 
consent orders with Macmillian Oil Company (Macmillian) and Kenny 
Larson Oil Company (Larson). The consent order with Macmillian settled 
possible pricing violations with respect to Macmillian's sales of 
propane, No. 2 fuel oil and Nos. 5 and 6 residual fuel oil. The DOE has 
collected $592,001 from Macmillian. The consent order with Larson 
settled possible pricing violations with respect to Larson's sales of 
motor gasoline. The DOE has collected $15,822 from Larson. The DOE is 
holding the funds in interest-bearing escrow accounts pending 
distribution.
    Applications for Refund should not be filed at this time. 
Appropriate public notice will be given when the submission of claims 
is authorized. 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 the publication of this notice in the 
Federal Register and should be sent to the address provided at the 
beginning of the notice. All comments received will be available for 
public inspection between the hours of 1:00 p.m. and 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: August 2, 1995.
George B. Breznay,
Director, Office of Hearings and Appeals.
Proposed Decision and Order of the Department of Energy

Special Refund Procedures

August 2, 1995.
Name of Firms:
    Macmillan Oil Company
    Kenny Larson Oil Company
Dates of Filings:
    June 5, 1992
    October 18, 1994
Case Numbers:
    LEF-0046
    VEF-0002

    In accordance with the procedural regulations of the Department of 
Energy (DOE), 10 CFR Part 205, Subpart V, the Economic Regulatory 
Administration (ERA) of the DOE filed Petitions for the Implementation 
of Special Refund Procedures with the Office of Hearings and Appeals 
(OHA) on June 5, 1992 and on October 18, 1994. The petitions request 
that the OHA formulate and implement procedures for the distribution of 
funds received pursuant to consent orders entered into between the DOE 
and Kenny Larson Oil Company (Larson) of Oregon City, Oregon, and 
Macmillan Oil Company (Macmillan) of Des Moines, Iowa.

I. Background

    Larson and Macmillan were ``reseller-retailers'' as defined in 6 
CFR 150.352 and 10 CFR 212.31. During the period from August 1973 to 
January 28, 1981, these companies were subject to the Mandatory 
Petroleum Price Regulations, 10 CFR Part 212, Subpart F, and antecedent 
regulations at 6 CFR Part 150, Subpart L. An ERA audit of Larson's 
business records revealed possible pricing violations with respect to 
the firm's sales of motor gasoline during the period May through 

[[Page 40581]]
December 1979. An ERA audit of Macmillan's business records revealed 
possible pricing violations with respect to the firm's sales of 
propane, No. 2 fuel oil, and Nos. 5 and 6 residual fuel oil during the 
period November 1, 1973, through April 30, 1974. In order to settle all 
claims and disputes between these companies and the DOE regarding their 
compliance with the price regulations, the DOE entered into consent 
orders with Larson and Macmillan on September 21, 1981, and March 7, 
1988, respectively.
    In the Larson consent order, the firm agreed to remit a total of 
$7,415, approximately 38 percent of the amount of the overcharges 
alleged by the DOE, plus installment interest. Of the principal amount, 
$5,842 was to be remitted to the DOE, and $1,573 was to be paid 
directly to six of Larson's customers. Larson failed to comply with the 
Consent Order and remitted no funds to either the DOE or the six 
customers.1 On August 29, 1994, we granted Larson a refund of 
$15,822 in the Texaco special refund proceeding. Texaco Inc./Kenny 
Larson Oil Company, 24 DOE para. 85,081 (1994) (Texaco/Larson). At that 
time, Larson was in default in the amount of $26,168 ($7,415 principal 
plus $18,753 interest) in its obligations pursuant to the Consent 
Order. Accordingly, in Texaco/Larson, we determined that the Texaco 
refund should be used to fund Larson's consent order escrow account, in 
satisfaction of the firm's principal settlement amount and partial 
satisfaction of its debt for interest accrued. Accordingly, the $15,822 
Texaco refund was deposited into the Kenny Larson Oil Company escrow 
account maintained at the Department of the Treasury, Consent Order No. 
000H00439. This is the amount which is available for distribution in 
this proceeding.

    \1\ On October 13, 1983, ERA filed a Subpart V petition with 
respect to the Larson Consent Order (Case No. HEF-0104). However, 
because of Larson's failure to remit the settlement amount, that 
petition was dismissed without prejudice. See Memorandum from 
Richard T. Tedrow, OHA Deputy Director, to Rayburn Hanzlik, ERA 
Administrator (July 3, 1985).
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    On February 1, 1983, a Proposed Remedial Order was issued to 
Macmillan which alleged that the firm violated the price regulations 
with respect to its sales of propane, No. 2 fuel oil, and Nos. 5 and 6 
residual fuel oil. Macmillan contested the PRO before the OHA (Case No. 
HRO-0122). During the course of that proceeding, the ERA reduced the 
amount of the alleged overcharges from $383,268 to $333,853. See Letter 
from Ann C. Grover, Associate Solicitor, ERA, to Richard T. Tedrow, OHA 
Deputy Director (October 5, 1987). On March 7, 1988, Macmillan and DOE 
entered into a consent order that settled the PRO's allegations. 
Pursuant to the consent order obligation, Macmillan remitted a total 
amount of $592,001 (including pre-settlement interest) to the DOE in 
full satisfaction of the amount owed. The audit workpapers identify the 
customers that Macmillan allegedly overcharged.

II. Jurisdiction

    The procedural regulations of the DOE set forth general guidelines 
by which the OHA may formulate and implement plans of distribution for 
funds received as a result of enforcement proceedings. 10 CFR Part 205, 
Subpart V. It is 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 OHA to fashion procedures to distribute refunds 
obtained as part of settlement agreements, see Office of Enforcement, 9 
DOE para. 82,553 (1982); Office of Enforcement, 9 DOE para. 82,508 
(1981). After reviewing the records in the present cases, we have 
concluded that a Subpart V proceeding is an appropriate mechanism for 
distributing the Larson and Macmillan consent order funds. We therefore 
propose to grant the ERA's petitions and assume jurisdiction over 
distribution of the funds.
III. Proposed Refund Procedures

A. Refund Claimants

    In the first stage, refund monies will be distributed to those 
parties which were directly injured in transactions with Larson and 
Macmillan during the audit periods. We believe that the Larson and 
Macmillan customers who were adversely affected by the alleged 
overcharges are primarily those purchasers specifically identified in 
the consent orders and in the audit papers. In addition, customers who 
purchased motor gasoline from the three retail outlets operated by 
Larson were referred to as a class in the ERA audit files but could not 
be individually identified.2 These parties may also file for 
refunds in this proceeding.

    \2\ See Memorandum from Leslie Adams, Director of the Case 
Settlement Division, ERA, to Milton Lorenz, Special Counsel, ERA, 
Case No. HEF-0104 (June 24, 1982).
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    Based on the information we have about Larson's business, we expect 
that all applicants in the Larson proceeding and most applicants in the 
Macmillan proceeding will be ultimate consumers. As in many other 
refund proceedings, we are making a finding that end-users or ultimate 
consumers whose businesses are unrelated to the petroleum industry were 
injured by the alleged overcharges covered by the Consent Order. Unlike 
regulated firms in the petroleum industry, members of this group were 
generally not subject to price controls during the audit period and 
were not required to keep records which justified selling-price 
increases by reference to cost increases. See, e.g., Marion Corp., 12 
DOE para. 85,014 (1984); Thornton Oil Corp., 12 DOE para. 85,112 
(1984). For these reasons, an analysis of the impact of the increased 
cost of petroleum products on the final prices of non-petroleum goods 
and services would be beyond the scope of this special refund 
proceeding. See Office of Enforcement, 10 DOE para. 85,072 (1983); see 
also Texas Oil & Gas Corp., 12 DOE para. 85,069 at 88,209 (1984). We 
therefore propose that the end-users of Larson and Macmillan petroleum 
products named in the consent orders or workpapers be presumed injured 
by the alleged overcharges. Other end-user applicants in the Larson 
proceeding, if any, need only demonstrate that they purchased from 
Larson and document their purchase volumes to make a sufficient showing 
that they were injured by the alleged overcharges.3

    \3\ One of the named Larson customers (Portland General 
Electric) and three Macmillan customers (Iowa Power & Light, 
Atlantic Municipal Utilities, and Iowa South Utilities) are public 
utilities. As in other Subpart V proceedings, we will treat the 
utilities as end-users. Moreover, because each of their potential 
refunds is less than $5,000, we will not require them to submit the 
type of certification of pass-through required of public utilities 
that receive refunds in excess of the $5,000 small claims threshold. 
See, e.g., Placid Oil Co., 18 DOE para. 85,176 at 88,290 (1988).
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    We expect some of the applicants in the Macmillan proceeding to be 
resellers or retailers. With respect to such applicants, we shall adopt 
a small-claims threshold of $5,000. Reseller or retailer applicants 
seeking refunds of $5,000 or less will not be required to demonstrate 
that they were injured by Macmillan's alleged overcharges. In addition, 
one former customer of Macmillan, E.L. Bride, appears to be a reseller 
whose potential refund amount is $141,986. Consistent with prior cases, 
it will be able to obtain a refund of $50,000 without making a 
demonstration that it was injured by Macmillan's overcharges. In order 
to obtain a refund of its full overcharge amount, it would have to show 
that it was injured by the overcharges. See Gulf Oil Corporation, 16 
DOE para. 85,381 at 88,738 (1987); Marathon Petroleum Company, 14 DOE 
para. 85,269 at 88,510 (1986). 

[[Page 40582]]


B. Calculation of Refund Amounts

    As stated above, the audits which gave rise to the Macmillan 
Consent Order identified all of the customers allegedly overcharged 
during the audit period. In total, there are 66 identified customers 
who were allegedly overcharged by Macmillan during its refund period. 
The Larson audit identified six customers which account for 21.2 
percent of the alleged overcharges, while the remaining 78.8 percent of 
the alleged overcharges were attributed to Larson's sales to customers 
at its retail stations. With respect to the identified customers of 
Larson and Macmillan, we have determined that the use of the audit 
results to establish potential refunds on a firm-specific basis is more 
accurate than any other method to relate probable injury to refund 
amount.
    We shall therefore base the identified customers--potential refunds 
on the amount that each of these firms was allegedly overcharged, as 
determined by the ERA audit. Thus, the principal amount of each firm's 
maximum refund is 100 percent of the amount designated for that firm in 
the Consent Order plus a pro rata share of the interest that the DOE 
has collected on that amount. (For Larson, the latter is approximately 
45 percent of the interest that Larson actually owed at the time the 
money was placed in the escrow account.) The firms and their potential 
refund amounts are listed in the Appendices to this Decision.
    We propose to use a volumetric methodology to distribute that 
portion of the consent order fund attributable to transactions with 
members of Larson's retail class of purchaser. The volumetric refund 
presumption assumes that the alleged overcharges by a firm were spread 
equally over all gallons of product marketed by that firm. In the 
absence of better information, this assumption is sound because the DOE 
price regulations generally required a regulated firm to account for 
increased costs on a firm-wide basis in determining its prices. This 
presumption is rebuttable, however. A retail customer claimant which 
believes that it suffered a disproportionate share of the alleged 
overcharges may submit evidence proving this claim in order to receive 
a larger refund. See Sid Richardson Carbon and Gasoline Co./Siouxland 
Propane Co., 12 DOE 85,054 (1984).
    Under the volumetric methodology we plan to adopt for the Larson 
proceeding, a retail customer claimant will be eligible to receive a 
refund equal to the number of gallons of motor gasoline purchased from 
Larson from May through December 1979 multiplied by the volumetric 
factor. The volumetric factor for Larson is equal to $0.0123.4 We 
also propose to establish a minimum amount of $15 for refund claims. We 
have found that the cost of processing claims in which refunds are 
sought for amounts less than $15 outweighs the benefits of restitution 
in those situations. See, e.g., Uban Oil Co., 9 DOE para. 82,541 at 
82,225 (1982); see also 10 CFR 205.286(b). Therefore, a claimant must 
have purchased at least 1,220 ($15/$0.0123) gallons of Larson motor 
gasoline during the Larson audit period in order to be eligible for a 
refund.

    \4\ The volumetric factor was computed by dividing $12,467 (78.8 
percent of the $15,822 collected for the Larson escrow account) by 
1,016,250 (the approximate number of gallons of motor gasoline sold 
by Larson to its retail customers during the audit period). The 
latter figure was obtained using information provided by Larson and 
by its primary supplier, Texaco Inc.
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    In addition, each successful claimant will receive a pro rata share 
of the interest accrued on the consent order funds between the date the 
funds were placed in the Larson and Macmillan escrow accounts and the 
date the applicant's refund is disbursed.

IV. Conclusion

    Refund applications in this proceeding should not be filed until 
the issuance of a final Decision and Order. Detailed procedures for 
filing applications will be provided in the final Decision and Order. 
Before disposing of any of the funds received, we intend to publicize 
the distribution process and to provide an opportunity for any affected 
party to file a claim.
    Any funds that remain after all first-stage claims have been 
decided will be distributed in accordance with the provisions of the 
Petroleum Overcharge Distribution and Restitution Act of 1986 (PODRA), 
15 U.S.C. Sec. 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 four 
energy conservation programs. The Secretary has delegated these 
responsibilities to OHA. Any funds in the Larson and Macmillan escrow 
account that OHA determines will not be needed to effect direct 
restitution to injured Larson and Macmillan customers will be 
distributed in accordance with the provisions of PODRA.

It Is Therefore Ordered That

    (1) The refund amount remitted to the Department of Energy by Kenny 
Larson Oil Company pursuant to the September 21, 1981 Consent Order 
will be distributed in accordance with the foregoing Decision.
    (2) The refund amount remitted to the Department of Energy by 
Macmillan Oil Company pursuant to the March 7, 1988 Consent Order will 
be distributed in accordance with the foregoing Decision.

     Appendix A--Larson Customers and Their Potential Refund Amounts    
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                                           Consent             Potential
              Customer name                 order    Interest  principal
                                            amount  collected    refund 
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Schultz Sanitary Service.................     $416      $471        $887
B & C Towing.............................       96       109         205
D & A Supply.............................       91       101         192
Portland General Electric................      685       773       1,458
Larry Hepler.............................       93       109         202
Skig Nagal Farms.........................      192       219         411
Retail Customers.........................    5,842     6,625      12,467
                                          ------------------------------
Total....................................    7,415     8,407      15,822
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   Appendix B--Macmillan Customers and Their Potential Refund Amounts   
------------------------------------------------------------------------
                                                      Pre-     Potential
            Customer name              Overcharge  settlement    refund 
                                         amount     interest     amount 
------------------------------------------------------------------------
Ace Lines, Inc.......................       $223        $172        $395
Armstrong Rubber.....................     17,982      13,904      31,886
Associated Milk Producers............        635         491       1,126
Atlantic Municipal Utilities.........        694         537       1,231
Bankers Life.........................      2,068       1,599       3,667

[[Page 40583]]
                                                                        
Beaver Valley Canning................      4,922       3,806       8,728
Bell Watcher.........................      1,834       1,418       3,252
Bitucote Products....................         14          11          25
Boesen the Florist...................        285         220         505
Bookey Packing.......................        843         652       1,495
C&K Enterprises......................        360         278         638
Charles Krizan.......................        556         430         986
City of Pleasant Hill................          7           5          12
College Osteopath Medicine...........        222         172         394
Crees Enterprises....................      1,015         785       1,800
Crouse Cartage.......................        414         320         734
Dakota Oil Co........................        650         503       1,153
Dept. General Services...............      3,092       2,391       5,483
Des Moines Community College.........        411         318         729
Des Moines Independent Schools.......     10,035       7,759      17,794
E.L. Bride Company...................     80,066      61,920     141,986
Elview Construction..................      1,345       1,040       2,385
Equitable Life Insurance Co..........      4,736       3,662       8,398
Everds Bros..........................        213         165         378
Exco Industries......................        520         402         922
Fidelity Warehouse...................     $3,146       2,432       5,578
Firestone............................        196         152         348
Fort Dodge Transport.................        517         400         917
George A. Hormel & Co................     11,756       9,090      20,846
H. West Construction.................         25          19          44
Hotel Des Moines.....................        325         251         576
Hotel Ft. Des Moines.................      3,494       2,702       6,196
Howe Laundry.........................      1,093         845       1,938
Inland Mills.........................      2,565       1,983       4,548
Iowa Road Builders...................      4,379       3,386       7,765
Iowa South Utilities.................        409         316         725
Iowa Power and Light.................      4,352       3,365       7,717
Keck, Inc............................      1,071         828       1,899
Little Giant Crane...................        652         504       1,156
Local 334............................         99          77         176
Matt Construction....................        523         404         927
Maytag...............................     88,470      68,405     156,875
Meredith Publishing Co...............      2,721       2,104       4,825
National Gypsum......................        508         393         901
New Monroe Community Schools.........      2,111       1,632       3,743
Parker Oil Co........................        746         577       1,323
Pepsi Cola Bottlers..................        957         740       1,697
Ralston Purina.......................      1,281         990       2,271
Savory Hotel.........................      3,617       2,797       6,414
Sendler Stone Products...............        193         149         342
Shaver Oil Co........................        582         450       1,032
Stark Heating........................        761         588       1,349
State of Iowa Bldg...................        183         141         324
State of Iowa........................      1,222         945       2,167
Swift & Co...........................      1,766       1,365       3,131
Swift Edible Oil Co..................      8,054       6,227      14,281
Target Ready Mix.....................     18,175      14,053      32,228
Univ of N. Iowa......................      4,519       3,494       8,013
Univ of Iowa.........................     21,616      16,713      38,329
VA Hospital..........................         12           9          21
Veterans Memorial Auditorium.........      1,009         780       1,789
West Towers..........................      3,406       2,634       6,040
Western Electric.....................        952         736       1,688
Wilson & Co..........................      1,822       1,409       3,231
Younkers (Dan Thomas)................        407         315         722
[Illegible] Oil......................      1,019         788       1,807
                                      ----------------------------------
    Total............................    333,853     258,148     592,001
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[FR Doc. 95-19689 Filed 8-8-95; 8:45 am]
BILLING CODE 6450-01-P