[Federal Register Volume 60, Number 219 (Tuesday, November 14, 1995)]
[Notices]
[Pages 57237-57240]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28060]



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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 implementation of special refund procedures.

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SUMMARY: The Office of Hearings and Appeals (OHA) of the Department of 
Energy announces the procedures for disbursement of $4,567,399.72 (plus 
accrued interest) in alleged or adjudicated crude oil overcharges 
obtained by the DOE from Malcolm M. Turner (Case No. VEF-0013), Revere 
Petroleum Corporation et al. (Case No. VEF-0014), Granite Petroleum 
Corporation (Case No. VEF-0015), and Dalco Petroleum Corporation (Case 
No. VEF-0016). The OHA has determined that the funds obtained from 
these firms, plus accrued interest, will be disbursed in accordance 
with the DOE's Modified Statement of Restitutionary Policy in Crude Oil 
Cases, 51 FR 27899 (August 4, 1986).

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

SUPPLEMENTARY INFORMATION: In accordance with 10 CFR 205.282(c), notice 
is hereby given of the issuance of the Decision and Order set forth 
below. The 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 M. Turner, Revere 
Petroleum Corporation et al., Granite Petroleum Corporation and Dalco 
Petroleum Corporation. The DOE is currently holding these funds in 
interest bearing escrow accounts pending distribution.
    The OHA will 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, 

[[Page 57238]]
crude oil overhcarge 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 the crude oil refund 
applications has passed, no new applications from purchasers of refined 
petroleum products will be accepted for the 20 percent of these funds 
allocated to individual claimants. Instead, that share of the funds 
will be added to the general crude oil overcharge pool used for direct 
restitution.

    Dated: November 6, 1995.
George B. Breznay,
Director, Office of Hearings and Appeals.
November 6, 1995.

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

    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 September 30, 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. 
6A0X00329.
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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 proceeds of Revere's asset 
liquidation. As of September 30, 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 September 30, 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 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.

[[Page 57239]]

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 September 30, 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\

    \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. 4501 et seq.; see also Office of Enforcement, 9 
DOE para. 82,508 (1981), and Office of Enforcement, 8 DOE para. 
82,597 (1981).

III. The Proposed Decision and Order

    On September 13, 1995, OHA issued a Proposed Decision and Order 
(PDO) setting forth the OHA's tentative plan to distribute these 
funds. See 60 Fed. Reg. 48510 (September 19, 1995). OHA tentatively 
concluded that the funds should be distributed in accordance with 
the DOE's Modified Statement of Restitutionary Policy in Crude Oil 
Cases (MSRP), 51 Fed. Reg. 27899 (August 4, 1986). Pursuant to the 
MSRP, OHA proposed to reserve 20 percent of those funds for direct 
refunds to applicants who claim that they were injured by the crude 
oil violations. We stated that the remaining 80 percent of the funds 
would be distributed to the states and federal government for 
indirect restitution.
    We provided a period of 30 days from the date of the PDO 
publication in the Federal Register in which the public could submit 
comments regarding the tentative refund procedures. More than 30 
days have elapsed, and the OHA has received no comments concerning 
the proposed procedures.

IV. The Refund Procedures

A. Crude Oil Refund Policy

    We adopt the tentative determination of the Proposed Decision 
and Order to distribute the monies remitted pursuant to the Turner, 
Revere, Granite, and Dalco enforcement proceedings in accordance 
with the MSRP, 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 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.
    In April 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) (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, DOE para. 85,550 (1987).

B. Refund Claims

    The amount of money subject to this 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 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. 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 will not 
accept any new applications from purchasers of refined petroleum 
products for these funds. See Western Asphalt Service, Inc., 25 DOE 
para. 85,047 (1995). Instead, these funds will be added to the 
general crude oil overcharge pool used for direct restitution.\10\

    \10\ 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).
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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 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 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:
    (1) The Director of Special Accounts and Payroll, Office of 
Departmental Accounting and Financial Systems Development, Office of 
the Controller of the Department of Energy shall take all steps 
necessary to transfer the consent order funds shown in the Appendix 
to this Decision and Order, plus all accrued interest from the 
escrow accounts of the firms listed in the Appendix, pursuant to 
Paragraphs (2), (3), and (4) of this Decision.
    (2) The Director of Special Accounts and Payroll shall transfer 
$1,826,959.89 plus any accrued interest, of the funds referenced in 
Paragraph (1) above, into the subaccount denominated ``Crude 
Tracking-States,'' Number 999DOE0003W.
    (3) The Director of Special Accounts and Payroll shall transfer 
$1,826,959.89 plus any accrued interest, of the funds referenced in 
Paragraph (1) above, into the subaccount denominated ``Crude 
Tracking-Federal,'' Number 999DOE002W.
    (4) The Director of Special Accounts and Payroll shall transfer 
$913,479.94 plus any accrued interest, of the funds referenced in 
Paragraph (1) above, into the subaccount denominated ``Crude 
Tracking-Claimants 4,'' Number 999DOE0010Z. 

[[Page 57240]]

    (5) This is a final Order of the Department of Energy.

George B. Breznay,
Director, Office of Hearings and Appeals.
    Dated: November 6, 1995.

                                                    Appendix                                                    
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         Case No.                         Firm                          ERA order No.           Principal amount
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VEF-0013..................  Malcolm M. Turner (Bayport        6A0X00329                               $65,000.00
                             Consent Order Fund).                                                               
VEF-0014..................  Revere Petroleum Corp. et al....  6A0X00336W                            1,310,140.13
VEF-0015..................  Granite Petroleum Corporation...  640X00447W                              176,698.85
VEF-0016..................  Dalco Petroleum Corporation.....  6C0X00240W                            3,015,560.74
      Total...............  ................................  ................................      4,567,399.72
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[FR Doc. 95-28060 Filed 11-13-95; 8:45 am]
BILLING CODE 6450-01-P