[Federal Register Volume 60, Number 198 (Friday, October 13, 1995)]
[Notices]
[Pages 53369-53371]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-25324]



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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 $1,564,222.74 
(plus accrued interest) collected pursuant to a consent order with 
Vessels Gas Processing Company. The funds will be distributed in 
accordance with the DOE's special refund procedures, 10 CFR Part 205, 
Subpart V.

DATES AND ADDRESSES: Comments must be filed in duplicate on or before 
November 13, 1995 and should be addressed to: Office of Hearings and 
Appeals, Department of Energy, 1000 Independence Avenue, SW., 
Washington, DC 20585. All comments should conspicuously display 
reference to Case Number VEF-0007.

FOR FURTHER INFORMATION CONTACT:
Richard W. Dugan, Associate Director, Jessica Hately, Staff Analyst, 
1000 Independence Avenue, SW., Washington, D.C. 20585 (202) 586-2860 
(Dugan), (202) 586-4921 (Hately).

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 order with Vessels Gas Processing Company (Vessels). The 
consent order settled possible pricing violations with respect to 
Vessels' sales of natural gas liquids and natural gas liquid products. 
The DOE has collected $1,564,222.74 and is holding the money in an 
interest-bearing escrow account 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, SW., Washington, DC 20585.

    Dated: September 28, 1995.
George B. Breznay,
Director, Office of Hearings and Appeals.

Proposed Decision and Order of the Department of Energy

Special Refund Procedures

Name of Firm: Vessels Gas Processing Company
Date of Filing: February 27, 1995
Case Number: VEF-0007
September 28, 1995.
    In accordance with the procedural regulations of the Department 
of Energy (DOE), 10 CFR Part 205, Subpart V, the Regulatory 
Litigation branch of the Office of General Counsel (OGC) (formerly 
the Economic Regulatory Administration (ERA)) filed a Petition for 
the Implementation of Special Refund Procedures with the Office of 
Hearings and Appeals (OHA) on February 27, 1995. The petition 
requests that the OHA formulate and implement procedures for the 
distribution of funds received pursuant to a Consent Order entered 
into by the DOE and Vessels Gas Processing Company (Vessels) of 
Colorado.\1\

    \1\ For the sake of convenience and clarity, ``Vessels'' will 
refer to Vessels Gas Processing Company (VGPC) and Vessels Gas 
Process, Limited (VGPL) in this Decision and Order. In addition, 
``Vessels'' will refer to the operations of Halliburton Resource 
Management (HRM) at the Irondale and Brighton plants on behalf of 
VGPC and VGPL. Vessels operated under a contract with HRM, a 
division of Halliburton Company (Halliburton). Under that agreement, 
the natural gas owned by Vessels was processed and sold at three 
plants owned and operated by HRM. HRM was paid or retained a service 
fee from the sales proceeds. On February 25, 1983, Vessels filed, in 
conjunction with a ``Preliminary Statement of Objections'' to the 
Proposed Remedial Order issued to it on November 5, 1982, a ``Motion 
to Join Hallliburton Company and Hold it Jointly Liable for Any 
Overcharges that are Proven.'' On May 25, 1983, the OHA gave leave 
to amend the PRO to join Halliburton. Vessels Gas Processing Co., 11 
DOE para.82,509 (1983).
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I. Background

    Vessels was a ``refiner'' of natural gas liquids (NGLs) and 
natural gas liquid products (NGLPs), which were included within the 
definitions of ``covered products'' in 6 C.F.R. 150.352 and in the 
price regulations promulgated pursuant to the Emergency Petroleum 
Allocation Act of 1973, Pub. L. No. 93-159. Accordingly, during the 
period from August 19, 1973 through January 28, 1981, Vessels was 
subject to price rules set forth in 10 CFR Part 212, Subpart K, and 
antecedent regulations at 6 CFR 150.1 et seq. An ERA audit of 
Vessels' business records at the Irondale and Brighton locations 
revealed possible pricing violations with respect to the firm's 
sales of NGIs and NGLPs at the Irondale plant during the audit 
period from September 1, 1973 through December 31, 1977 and at the 
Brighton plant from April 1, 1975 through December 31, 1977.\2\ 
Subsequently, on October 7, 1986, the DOE issued a Remedial Order to 
Vessels, finding that the firm had overcharged its customers and 
requiring it to remit to the DOE $1,571,671.40, plus interest. 
Vessels Gas Processing Co., 15 DOE para.83,002 (1986). Vessels 
appealed the Remedial Order to the Federal Energy Regulatory 
Commission (FERC) (Case No. R087-3-000). While the Appeal was 
pending, Vessels and the DOE entered into a Consent Order on 
December 17, 1987, in order to settle all claims and disputes 
between Vessels and the DOE regarding the firm's compliance with 
price regulations in sales of NGLs and NGLPs during the audit 
period. In that Order, Vessels agreed to remit a total of 
$1,500,000, plus installment interest, to the DOE for distribution 
to the firm's customers. The Consent Order became final on February 
16, 1988. Vessels has made payments totalling 

[[Page 53370]]
$1,564,222.74 to the DOE.\3\ These funds, plus accrued interest, are 
presently in a DOE escrow account maintained by the Department of 
the Treasury.

    \2\ The discrepancy in dates between the two plants is due to 
the fact that the Brighton plant was not fully operational until 
April 1975.
    \3\ Vessels' appeal to FERC was dismissed on February 26, 1988. 
Vessels Gas Processing Co., 42 FERC para.63,023 (1988). The firm's 
final payment under the Consent Order was received by the DOE on 
October 12, 1994.
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II. Jurisdiction

    The procedural regulations of the DOE set forth general 
guidelines by which the OHA may formulate and implement a plan of 
distribution for funds received as a result of an enforcement 
proceeding. 10 C.F.R. 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 a 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 
record in the present case, we have concluded that a Subpart V 
proceeding is an appropriate mechanism for distributing the Vessels 
consent order fund. We therefore propose to grant OGC's petition and 
assume jurisdiction over distribution of the fund.

III. Proposed Refund Procedures

A. Refund Claimants

    Refund monies will be distributed to those parties which were 
injured in their transactions with Vessels during the audit period 
that were covered by the Consent Order.\4\ We have limited 
information on Vessels' customers and the number of gallons 
purchased by each customer. From company records available to this 
Office, we have compiled a partial list of Vessels' customers. They 
are as follows:

    \4\ For the reason set forth in footnote 1 this includes firms 
that purchased NGLs and NGLPs from HRM that originated with Vessels. 
Since ethane, an NGLP, was decontrolled effective April 1, 1974, 
Vessels' customers would not have been injured by purchases of 
ethane on or after that date. They are thus not eligible for refunds 
for ethane purchases made after March 31, 1974.

Farmland Industries, Inc.
Littleton Gas Co.
California Liquid Gas Co.
Hytrans, Inc.
UPG, Inc.\5\

    \5\ In comments submitted in response to the Notice of the 
Proposed Consent Order in the December 28, 1987 Federal Register, 
Enron Corp. requested that it be specifically named as a payee in 
the Consent Order. Enron contended that UPG, Inc. was the principal 
customer of NGLs of Vessels, and that Enron, as UPG's successor in 
interest, is therefore eligible for a refund in this proceeding. ERA 
determined in its response to Enron's comments that it was OHA's 
prerogative to name Enron as a payee in its Implementation Order. 
The review and analysis of the written comments did not provide any 
information that would support the modification or rejection of the 
proposed Consent Order with Vessels and Halliburton. Therefore, the 
Consent Order was issued without modification. While this Office is 
aware that UPG is affiliated with Enron, we have no detailed correct 
information regarding the exact nature of their corporate 
relationship. Accordingly, we will not name Enron as a payee in this 
Decision. However Enron is invited to submit to this Office an 
Application for Refund, in which it provides substantial 
documentation to support its contention that it is entitled to a 
refund for UPG's purchases.
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    These customers, and any additional customers, will be required 
to submit a monthly schedule of the number of gallons of NGLs and 
NGLPs purchased from September 1, 1973 through December 31, 1977 and 
documentation that these products were purchased from either the 
Irondale or Brighton plants. Indirect purchasers of Vessels' 
products may be eligible for a refund if the reseller from whom they 
purchased the products passed through Vessels' alleged overcharges 
to its own customers. Indirect purchasers must identify the reseller 
from whom they made the purchases, and establish the basis for their 
belief the products originated from either the Irondale or Brighton 
plant. Affiliates of Vessels will be eligible to apply for a refund 
in this proceeding.\6\

    \6\ As in other refund proceedings involving alleged refined 
products violations, we will presume that affiliates of the Consent 
Order firm were not injured by the firm's overcharges. See, e.g., 
Marathon Petroleum Co./EMRO Propane Co., 15 DOE para. 85,288 (1987). 
This is because the Remedial Order firm presumably would not have 
sold petroleum products to an affiliate if such a sale would have 
placed the purchaser at a competitive disadvantage. See Marathon 
Petroleum Co./Pilot Oil Corp., 16 DOE para. 85,611 (1987), amended 
claim denied, 17 DOE para. 85,291 (1988), reconsideration denied, 20 
DOE para. 85,236 (1990). Furthermore, if an affiliate of the Consent 
Order firm were granted a refund, that Consent Order firm would be 
indirectly compensated from a Consent Order fund remitted to settle 
its own alleged violations. See, Propane Industrial, Inc. v. DOE, 
985 F.2d 586 (Temp. Emer. Ct. App. 1993) (Refund to affiliate would 
be ``unjust enrichment'').
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B. Calculation of Refund Amounts

    We propose to use a volumetric methodology to distribute the 
consent order funds to Vessels' customers. The volumetric refund 
presumption assumes that the alleged overcharges by a firm were 
dispersed 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.\7\

    \7\ However this presumption is rebuttable. A 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 para. 85,054 (1984); see also Amtel, 
Inc./Whitco, Inc., 19 DOE para. 85,319 (1989) (Amtel.) In computing 
the appropriate refund in such a case, we will prorate the alleged 
overcharge amount by the ratio of the Vessels settlement amount to 
the aggregate overcharge amount determined by the Vessels Remedial 
Order. See Amtel.
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    Under the volumetric approach we plan to adopt, a claimant's 
``allocable share'' (or ``volumetric share'') of the Vessels fund is 
equal to the number of gallons of NGLs and NGLPs purchased from 
Vessels from September 1, 1973 through December 31, 1977, multiplied 
by a volumetric refund amount of $0.0185 per gallon.\8\

    \8\ The volumetric factor was computed by dividing $1,564,222.74 
by 84,689,877 (the approximate number of gallons of NGLPs Vessels 
sold to its customers during the audit period). The latter figure 
was obtained from records submitted to this Office by Vessels.
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    Each successful claimant will also receive a pro rata share of 
the interest accrued on the consent order funds between the date the 
funds were placed in the Vessels escrow account and the date the 
applicant's refund is disbursed.

C. Presumptions of Injury

    In addition to the volumetric presumption, we propose to adopt a 
number of additional presumptions regarding injury for claimants in 
each category listed below. These presumptions will simplify the 
refund process and will help ensure that refund claims are evaluated 
in the most efficient and equitable manner possible.

A. End-Users

    End-users of Vessels products, i.e., consumers, whose use of 
NGLs or NGLPs was unrelated to the petroleum business, are presumed 
injured and need only document their purchase volumes from Vessels 
during the consent order period to be eligible to receive their full 
allocable share.

b. Refiners, Resellers, and Retailers Seeking Refunds of $10,000 or 
Less

    Reseller claimants (including refiners and retailers), whose 
allocable share is $10,000 or less, i.e., who purchased 540,540 
gallons or less of Vessels's products during the consent order 
period, will be presumed injured and therefore need not provide a 
further demonstration of injury, besides documentation of their 
purchase volumes, to receive their full allocable share. See, e.g., 
E.D.G., Inc., 17 DOE para. 85,679 (1988). We recognize that the cost 
to the applicant of gathering evidence of injury to support a small 
refund claim could exceed the expected refund. Consequently, without 
simplified procedures, some injured parties would be denied an 
opportunity to obtain a refund.

c. Medium-Range Refiner, Reseller, and Retailer Claimants

    In lieu of making a detailed showing of injury (see part III D, 
below), a reseller claimant whose allocable share exceeds $10,000 
may elect to receive a refund under the medium-range presumption of 
injury. Under this presumption, a claimant would receive as its 
refund the larger of $10,000 or 60 percent of its allocable share up 
to $50,000.\9\ The use of this presumption reflects our conviction 
that these claimants were likely to have experienced some injury as 
a result of the alleged overcharges. In other proceedings involving 
NGLs and NGLPs, we have determined that a 60 percent presumption for 
the medium-range purchasers of NGLs and NGLPs accurately reflected 
the amount of their injury as a result of their purchases of those 
products. See Sauvage Gas Co., 17 DOE para. 85,304 (1988); Suburban 
Propane Gas Co., 16 DOE 

[[Page 53371]]
para. 85,382 (1987). Such an applicant will be required only to provide 
documentation of its purchase volumes of Vessels' products during 
the consent order period in order to be eligible to receive a 
medium-range refund.

    \9\ That is, reseller claimants who purchased in excess of 
540,540 gallons of Vessels product during the consent order period 
may elect to utilize this presumption.
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d. Regulated Firms and Cooperatives

    We have determined that, in order to receive a full volumetric 
refund, a claimant whose prices for goods and services are regulated 
by a governmental agency, e.g., a public utility, or by the terms of 
a cooperative agreement, needs only to submit documentation of its 
purchases of products used by itself or, in the case of a 
cooperative, sold to its members. However, a regulated firm or 
cooperative whose allocable share is greater than $10,000 will also 
be required to certify that it will pass any refund through to its 
customers or member-customers, provide us with a full explanation of 
how it plans to accomplish the restitution, and certify that it will 
notify the appropriate regulatory body or membership group of the 
receipt of the refund.\10\

    \10\ A cooperative's sales to non-members will be treated in the 
same manner as sales by other resellers. See Total Petroleum/Farmers 
Petroleum Cooperative, 19 DOE para. 85,215 (1989).
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e. Spot Purchasers.

    As in prior Subpart V proceedings, we propose to adopt a 
rebuttable presumption that a reseller that made only irregular or 
sporadic, i.e., spot purchases from Vessels did not suffer injury as 
a result of those purchases. Accordingly, a spot purchaser claimant 
must submit specific and detailed evidence to rebut the spot 
purchaser presumption and to establish the extent to which it was 
injured as a result of its spot purchases from Vessels. In prior 
proceedings we have stated that refunds will be approved for spot 
purchasers who demonstrate that (i) they made the spot purchases for 
the purpose of ensuring a supply for their base period customers 
rather than in anticipation of financial advantage as a result of 
those purchases, and (ii) they were forced by market conditions to 
resell the product at a loss that was not subsequently recouped 
through the draw down of banks. See Quaker State Oil Refining Corp./
Certified Gasoline Co., 14 DOE para. 85,465 (1986).

D. Showings of Injury

    As in prior refund proceedings, claimants who are medium-range 
resellers (including retailers and refiners) will be afforded the 
opportunity to prove injury in order to receive a refund equal to 
their full allocable share. These claimants will be required to 
demonstrate that during the audit period they would have maintained 
their prices for the NGLs and NGLPs purchased from Vessels at the 
same level had the alleged overcharges not occurred. While there are 
a variety of ways to make this showing, a reseller would generally 
demonstrate that, at the time it purchased the product from Vessels, 
market conditions would not permit it to pass through to its 
customers the additional costs associated with the alleged 
overcharges. See Atlantic Richfield Co./Odessa L.P.G. Transport, 21 
DOE para. 85,384 (1991); Guld Oil Corp./Anderson & Watkins, Inc., 21 
DOE para. 85,380 (1991). In addition, the reseller will be required 
to show that it had a ``bank'' of unrecovered costs in order to 
demonstrate that it did not recover the increased costs associated 
with the alleged overcharges by increasing its own prices. The 
maintenance of a bank does not, however, automatically establish 
injury. See Tenneco Oil Co./Chevron U.S.A., Inc., 10 DOE para. 
85,014 (1982).

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. In addition to publishing copies 
of the proposed and final Decisions in the Federal Register, copies 
will be provided to the Vessels' customers for whom we have 
addresses.
    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. 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 Vessels 
escrow account the OHA determines will not be needed to effect 
direct restitution to injured Vessels customers will be distributed 
in accordance with the provisions of PODRA.
    It Is Therefore Ordered That:
    The refund amount remitted to the Department of Energy by 
Vessels Gas Processing Company pursuant to the Consent Order 
executed on December 17, 1987 will be distributed in accordance with 
the forgoing Decision.

[FR Doc. 95-25324 Filed 10-12-95; 8:45 am]
BILLING CODE 6450-01-M