[Federal Register Volume 60, Number 181 (Tuesday, September 19, 1995)]
[Notices]
[Pages 48510-48513]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23230]
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DEPARTMENT OF ENERGY
Office of Hearings and Appeals
Proposed Implementation of Special Refund Procedures
AGENCY: Office of Hearings and Appeals, DOE.
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
$4,567,399.72 (plus accrued interest) in alleged or adjudicated crude
oil overcharges obtained by the DOE from Malcolm Turner (Case No. VEF-
0013), Revere Petroleum Corporation (Case No. VEF-0014), Granite
Petroleum Corporation (Case No. VEF-0015), and Dalco Petroleum
Corporation (Case No. VEF-0016). The OHA has tentatively determined
that the funds obtained from these firms, plus accrued interest, 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 ADDRESSES: Comments must be filed in duplicate on or before
October 19, 1995, and should be addressed to the Office of Hearings and
Appeals, Department of Energy, 1000 Independence Avenue SW.,
Washington, D.C. 20585. All comments should conspicuously display a
reference to Case Nos. VEF-0013, et al.
FOR FURTHER INFORMATION CONTACT: Richard W. Dugan, Associate Director,
Office of Hearings and Appeals, 1000 Independence Avenue SW.,
[[Page 48511]]
Washington, D.C. 20585, (202) 586-2860.
SUPPLEMENTARY INFORMATION: In accordance with 10 C.F.R. 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 $4,567,399.72, plus accrued interest, remitted to the DOE by
Malcolm Turner, Revere Petroleum Corporation, Granite Petroleum
Corporation and Dalco Petroleum 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 FR 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.
Because the June 30, 1995, deadline for crude oil refund
applications has passed, we propose not to accept any new applications
from purchasers of refined petroleum products for these funds. 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 in these proceedings will be available for public
inspection between the hours of 1:00 p.m. 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 SW., Washington, D.C. 20585.
Dated: September 13, 1995.
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:
Malcolm M. Turner
Revere Petroleum Corporation et al.
Granite Petroleum Corporation
Dalco Petroleum Corporation
Dates of Filing:
April 10, 1995
April 10, 1995
April 10, 1995
May 2, 1995
Case Numbers:
VEF-0013
VEF-0014
VEF-0015
VEF-0016
September 13, 1995.
In accordance with the procedural regulations of the Department
of Energy (DOE), 10 CFR Part 205, Subpart V, the Office of General
Counsel, Regulatory Litigation (OGC) (formerly the Economic
Regulatory Administration (ERA), Office of Enforcement Litigation),
filed four Petitions for the Implementation of Special Refund
Procedures with the Office of Hearings and Appeals (OHA) on April
10, 1995, and May 2, 1995. The Petitions request that OHA formulate
and implement procedures to distribute funds received by the DOE
from Malcolm M. Turner (Turner), Revere Petroleum Corporation
(Revere), Granite Petroleum Corporation (Granite), and Dalco
Petroleum Corporation (Dalco), pursuant to court-approved
settlements between the parties and the DOE, DOE consent orders or
remedial orders. This Decision and Order sets forth the OHA's plan
to distribute these funds.
I. Background
As indicated by the following summaries of the relevant
enforcement proceedings, all of the funds that are subject to this
Decision were obtained through enforcement actions involving alleged
or adjudicated crude oil overcharges.
A. Malcolm Turner
Turner, the sole Director and President of Bayport Refining Co.
(Bayport), was a reseller of crude oil during the period of
petroleum price controls and was subject to regulations governing
the pricing and allocation of crude oil set forth at 10 CFR Parts
211 and 212 of the Mandatory Petroleum Price and Allocation
Regulations. As the result of an ERA audit of Turner's and Bayport's
operations, the ERA issued a Proposed Remedial Order (PRO) on
September 20, 1984, alleging that they violated the provisions of 10
CFR Sec. 212.186, by charging prices for crude oil in excess of
actual purchase prices without providing any service or other
function traditionally and historically associated with the resale
of crude oil during the period from September 1978 through December
1980. According to the PRO, those transactions resulted in
overcharges amounting to $11,810,639.84. The PRO further alleged
that during the period from December 1979 through December 1980, the
Respondents violated the provisions of 10 CFR Sec. 212.131 by the
miscertification of crude oil. According to the PRO, those
transactions resulted in overcharges amounting to $12,554,371.74.
The OHA in large part affirmed the findings of the PRO and issued a
Remedial Order (RO) to the Respondents on February 16, 1989. Bayport
Refining Co., 18 DOE para.83,007, (1989). The RO was upheld by the
Federal Energy Regulatory Commission (FERC) on October 4, 1993.
Bayport Refining Company and Malcolm M. Turner, 65 FERC para.61,021
(1993). Turner appealed to the United States District Court for the
Northern District of Texas on March 31, 1994.\1\ In January 1995,
the court entered an Agreed Judgment resolving the issues addressed
by the RO against Turner. Pursuant to the Agreed Judgment, Turner
agreed to pay to the DOE the sum of $65,000. Turner has fulfilled
his financial obligation to the DOE. As of May 31, 1995, the Bayport
Consent Order fund contained $65,000 in principal plus accrued
interest.\2\
\1\Bayport, which was dissolved in November 1982, did not appeal
the RO. While the matter was referred for enforcement of the RO
against Bayport, no funds were ever collected from the corporation.
\2\The funds submitted by Turner pursuant to the Agreed Judgment
are deposited in the Bayport Consent Order fund, No. 6AOX00329.
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B. Revere Petroleum Corp.
During the period of Federal petroleum price controls, Revere
was engaged in crude oil reselling.\3\ The firm was therefore
subject to regulations governing the pricing of crude oil set forth
at 10 CFR Parts 205, 210, 211, and 212 of the Mandatory Petroleum
Price and Allocation Regulations. As a result of an ERA
investigation of Revere's compliance with the price and allocation
regulations, the ERA issued a PRO to Revere on January 18, 1983.
However, on August 9, 1983, that PRO was amended by the ERA to
include additional violations of 10 CFR Sec. 212.186, alternative
violations of 10 CFR Sec. 212.183, and five additional parties as
co-respondents of the PRO.\4\ On May 29, 1992, the OHA issued the
Amended PRO, with modifications, as an RO. Revere Petroleum Corp.,
22 DOE para.83,004 (1992). The RO found Revere liable for violations
of 10 CFR Sec. 212.186 in connection with its resales of crude oil
during the period April 1979 through March 1980. Revere appealed to
FERC (Case No;. R092-4-00). However, subsequently, this enforcement
proceeding was settled when Revere and DOE entered into a settlement
on an ability-to-pay basis in order to resolve DOE's claims against
the firm. Revere agreed to pay the DOE the sum of $50,000.00, plus a
percentage of the
[[Page 48512]]
proceeds of Revere's asset liquidation. As of May 31, 1995, Revere and
the other respondents have paid to the DOE the sum of $1,310,140.13
in satisfaction of their obligations.\5\ Although additional
revenues may be collected, no good reason exists to delay
implementing distribution of the current balance of the fund.
\3\References to Revere in this Decision include Richard E.
Dobyns, President of Revere, during the price control period.
\4\Those five individuals were James J. Cross, M. Kemp McMillan,
Gordon K. Walz, and Milton E. Walz, who entered into a separate
Consent Order with the DOE in December 1987, and John E. Woolsey,
who entered into a separate Consent Order with the DOE in September
1986.
\5\Revere and all of the named individuals except Woolsey have
satisfied their obligations to the DOE. Although Woolsey has made
substantial payments to the DOE, he is delinquent in his payments,
and the possibility exists that additional funds will be paid by
him.
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C. Granite Petroleum Corporation
Granite engaged in the reselling and marketing of crude oil
during the period of petroleum price controls. The firm was
therefore subject to regulations governing the pricing and
allocation of crude oil set forth at 10 CFR Parts 211 and 212 of the
Mandatory Petroleum Price and Allocation Regulations. The ERA
conducted a detailed audit to determine Granite's compliance with
the federal petroleum price and allocation regulations during the
period from September 1, 1979 through January 27, 1981. As a result
of the audit, on March 4, 1983, the ERA issued a PRO to the firm
alleging violations of the crude oil price and allocation
regulations (Case No. 640X00447). In September 1983, Granite and the
DOE entered into a Consent Order which resolved a number of
outstanding enforcement issues involving Granite. Under the terms of
the settlement, Granite agreed to pay $200,000 in installment
payments to the DOE.\6\ As of May 31, 1995, Granite has paid to the
DOE the sum of $176,698.85. Granite is currently delinquent in its
payments to the DOE. Although we anticipate that additional sums may
be collected from Granite, no good reason exists to forestall
distribution of the current balance of the fund.
\6\Granite Petroleum Corporation and John E. Woolsey, President
of Granite, are collectively referred to as Granite in the text.
Both were parties to the Consent Order.
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D. Dalco Petroleum Corporation
Dalco\7\ was a reseller of crude oil during the period of price
controls and was subject to regulations governing the pricing and
allocation of crude oil set forth at 10 CFR Parts 211 and 212 of the
Mandatory Petroleum Price and Allocation Regulations. As the result
of an ERA audit, the ERA issued a PRO to Dalco on April 30, 1982,
alleging that between March 1976 and September 1978, Dalco violated
the DOE mandatory petroleum price regulations which governed the
resale of domestic crude oil, pursuant to 10 CFR Secs. 212.93,
212.10, 212.131, 205.202, 210.62(c), and 212.185, resulting in the
illegal receipt of revenues. After the issuance of the PRO, but
before a Statement of Objections was filed, Dalco filed for
bankruptcy.\8\ In August 1983, the Bankruptcy Court for the Northern
District of Oklahoma issued an injunction which stayed the
enforcement proceeding against the respondents. The bankruptcy court
ultimately approved and allowed the DOE's claims against Dalco and
as of May 31, 1995, Dalco has paid $3,015,560.74 to the DOE.
Although the possibility exists that additional revenues will be
obtained by the DOE in the Dalco bankruptcy proceeding, no reason
exists to delay in implementing distribution of the current balance
of the funds.\9\
\7\References to Dalco in this Decision include W. Darryl Zang
and Louis Porter, the firm's owners.
\8\Zang, Porter and Dalco filed for bankruptcy on August 16,
1982, June 15, 1983, and July 20, 1983 respectively.
\9\Porter has satisfied his obligations to the DOE under the
PRO. Additional funds may be collected from the Dalco and Zang
estates.
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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 fund 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. Secs. 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 Turner, Revere, Granite and Dalco
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 remitted pursuant to the
Turner, Revere, Granite, and Dalco enforcement proceedings in
accordance with DOE's Modified Statement of Restitutionary Policy in
Crude Oil Cases (MSRP), 51 FR 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. Order Implementing the MSRP, 51 FR 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.
In April 1987, the OHA issued a Notice analyzing the numerous
comments received in response to the August 1986 Order. 52 FR 11737
(April 10, 1987) (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 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
$4,567,399.72, plus accrued interest. In accordance with the MSRP,
we propose initially to reserve 20 percent of those funds
($913,479.94 plus accrued interest) for direct refunds to applicants
who claim that they were injured by crude oil overcharges. We
propose to base refunds to claimants 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 60 FR 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. See Mid-America Dairyman Inc. v.
Herrington, 878 F.2d 1448, 3 Fed. Energy Guidelines para.26,617
(Temp. Emer. Ct. App. 1989); In re Department of Energy Stripper
Well Exemption Litigation, 707 F. Supp. 1267, 3 Fed. Energy
Guidelines para.26,613 (D. Kan. 1987). Because the June 30, 1995,
deadline for crude oil refund applications has passed, we propose
not to accept any new applications from purchasers of refined
petroleum products for these funds. See Western Asphalt Service,
Inc., 25 DOE para.________, LEF-0047 (July 17, 1995). Instead, these
funds will be added to the general crude oil overcharge pool used
for direct restitution.\10\
\10\A crude oil refund application 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 Sec. 85,079 at 88,176
(1988).
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B. 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 $3,653,919.78 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
[[Page 48513]]
period of price controls. The share of 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
Malcolm M. Turner, Revere Petroleum Corporation, Granite Petroleum
Corporation, and Dalco Petroleum Corporation pursuant to their
respective settlement agreements or judgments will be distributed in
accordance with the foregoing Decision.
[FR Doc. 95-23230 Filed 9-18-95; 8:45 am]
BILLING CODE 6450-01-P