[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