[Federal Register Volume 61, Number 29 (Monday, February 12, 1996)]
[Notices]
[Pages 5395-5397]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-3057]
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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 $275,000,000 (plus
interest) in alleged overcharges remitted or to be remitted to the DOE
by Occidental Petroleum Corporation and its wholly owned subsidiary OXY
USA, Inc., Case No. VEF-0030. The OHA has determined that these funds
should be distributed 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: Thomas L. Wieker, Deputy Director,
Janet N. Freimuth, Deputy Assistant Director, Office of Hearings and
Appeals, 1000 Independence Avenue, SW., Washington, DC 20585-0107 (202)
586-2390 [Wieker]; (202) 586-2400 [Freimuth].
SUPPLEMENTARY INFORMATION: In accordance with 10 C.F.R. 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 formulated to distribute a total of $275,000,000 plus interest,
remitted or to be remitted to the DOE, by Occidental Petroleum
Corporation. The DOE is currently holding $100,000,000, plus accrued
interest, of these funds in an interest bearing escrow account pending
distribution. The DOE will receive additional annual payments of
$35,000,000 plus interest during the years 1996 through 2000.
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, 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 will not accept any new applications from
purchasers of refined petroleum products for these funds. As we state
in the Decision, any party who has previously submitted a refund
application in the crude oil refund proceeding should not file another
Application for Refund. Any party whose crude oil application is
approved will share in all crude oil overcharge funds.
Dated: January 31, 1996.
George B. Breznay,
Director, Office of Hearings and Appeals.
DECISION AND ORDER OF THE DEPARTMENT OF ENERGY
Implementation Order
Name of Case: OXY USA, Inc.
Date of Filing: September 18, 1995.
Case Number: VEF-0030.
On December 1, 1995, the Office of Hearings and Appeals (OHA) of
the Department of Energy (DOE) issued a Proposed Decision and Order
which tentatively established refund procedures for the distribution
of the Occidental Petroleum Corporation (Occidental) consent order
funds. After a review of the comments received, the DOE has
determined that the procedures set forth in the Proposed Decision
and Order should be adopted.
I. Background
A. The Occidental Enforcement Proceeding
The Occidental consent order concerned reciprocal crude oil
transactions between Cities Service Corporation (Cities) and various
crude oil resellers.1 In those transactions, Cities sold price-
controlled crude oil in its refinery inventory in exchange for
deeply discounted exempt crude oil. Cities reported the exempt crude
oil to the DOE Entitlements Program, thereby significantly reducing
its entitlements obligations.
\1\ Occidental's wholly-owned subsidiary OXY USA, Inc. (OXY) was
formerly Cities Service Oil and Gas Corporation, which in turn was a
successor in interest to Cities. Unless otherwise indicated, the
firms collectively are referred to as Occidental.
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In 1985, the DOE's Economic Regulatory Administration, now the
DOE's Office of General Counsel, Regulatory Litigation (OGC), issued
a Proposed Remedial Order (PRO) to the firm. In 1988, the DOE issued
a Remedial Order (RO) holding that the transactions violated the
price regulations and that the violation amount of $264 million,
plus interest, should be remitted to the DOE. Cities Service Oil and
Gas Corp., 17 DOE para. 83,021 (1988). The 1988 RO also remanded the
issue of whether the transactions violated other regulations.
Subsequently, the Federal Energy Regulatory Commission (FERC)
reversed the 1988 RO, except for the remand provision. Cities
Service Oil and Gas Corp., 65 FERC para. 61,403 (1993),
reconsideration denied, 66 FERC para. 61,222 (1994). A group of
utilities, transporters, and manufacturers (the UTM) and a group of
states appealed to federal district court, which dismissed their
appeals for lack of standing. Alabama v. FERC, 3 Fed. Energy
Guidelines para. 26,693 (CCH) (D.D.C. June 8, 1995). The UTM had
noticed an appeal at the time of the execution of the proposed
consent order.
In 1992, pursuant to the remand provision of the 1988 RO, the
OGC issued a Revised Proposed Remedial Order (RPRO), specifying an
alternate liability of $254 million, plus interest, on the ground
that the reporting of the transactions, except those in January
1981, violated the entitlements reporting requirements. The firm
filed objections to the RPRO with the OHA, which were ready for oral
argument at the time of execution of the consent order. OXY USA,
Inc., Case No. LRO-0003 (dismissed August 30, 1995).
B. The Occidental Consent Order
On June 27, 1995, the DOE issued the consent order in proposed
form. The DOE published notice of the proposed consent order and of
the opportunity to file
[[Page 5396]]
comments. See 60 FR 35186 (July 6, 1995). Following the comment period,
the DOE issued the proposed consent order as a final order, pursuant
to 10 C.F.R. 205.199J. The DOE then published notice of the final
consent order. See 60 FR 43130 (August 18, 1995).
The Consent Order requires that Occidental remit a total of $275
million to the DOE. The Consent Order requires an initial payment of
$100 million and then five annual payments of $35 million plus
accrued interest. On September 15, 1995, Occidental remitted its
initial $100 million payment. On September 18, 1995, the OGC filed
the Petition for Implementation of Special Refund Procedures.
C. The Petition for Implementation of Special Refund Procedures
The OGC filed its Petition pursuant to 10 C.F.R. Part 205,
Subpart V. In the Petition, the OGC requests that the OHA establish
special refund procedures to remedy the effects of the alleged
regulatory violations which were resolved by the Consent Order.
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 funds 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. Sec. 4501 et seq.; see also Office of
Enforcement, 9 DOE para. 82,508 (1981); Office of Enforcement, 8 DOE
para. 82,597 (1981).
III. The DOE's Modified Statement of Restitutionary Policy in Crude
Oil Cases
In July 1986, the DOE issued its Modified Statement of
Restitutionary Policy in Crude Oil Cases (MSRP). See 51 Fed. Reg.
27899 (August 4, 1986). The MSRP was issued in conjunction with the
Stripper Well Settlement Agreement. See In re: The Department of
Energy Stripper Well Exemption Litigation, 653 F. Supp. 108 (D. Kan.
1986). Under the MSRP, up to 20 percent of crude oil overcharge
funds may be reserved for direct restitution to injured purchasers,
with the remainder divided equally between the states and the
federal government. Any funds remaining after all valid claims by
injured purchasers are paid are disbursed to the states and the
federal government in equal amounts.
In August 1986, shortly after the issuance of the MSRP, the OHA
issued an Order that announced that the MSRP would be applied in all
Subpart V proceedings involving alleged crude oil violations. See
Order Implementing the MSRP, 51 Fed. Reg. 29689 (August 20, 1986)
(the August 1986 Order).
In April 1987, the OHA issued a Notice analyzing the numerous
comments received in response to the August 1986 Order. See 52 Fed.
Reg. 11737 (April 10, 1987). This Notice provided guidance to
claimants that anticipated filing refund applications for crude oil
funds under the Subpart V regulations. A crude oil refund applicant
was only required to submit one application for its share of crude
oil overcharge funds.
Consistent with the foregoing, the OHA accepted refund
applications from 1987 until the June 30, 1995 deadline. See 60 Fed.
Reg. 19914 (April 20, 1995). Applicants who filed before the
deadline and whose applications are approved will share in the crude
oil overcharge funds. Approved applicants are currently receiving
$.0016 per gallon of purchased refined product.
IV. The Proposed Decision and Order
The Proposed Decision and Order tentatively determined that the
consent order funds should be distributed pursuant to the MSRP,
because the consent order funds were crude oil overcharge funds and,
therefore, governed by the MSRP. The Proposed Decision and Order
tentatively determined that the consent order funds were crude oil
funds because the consent order settled specific crude oil
overcharge proceedings and because the consent order and notice
thereof indicated that the settlement amount was specifically
related to the settled proceedings.
Based on the foregoing, the Proposed Decision and Order
tentatively determined that 20 percent of the funds should be
reserved for direct restitution through the OHA's Subpart V process
and the remaining 80 percent should be divided equally between the
states and the federal government.
V. Comments Received
The UTM filed comments in opposition to the proposed
distribution. Although the UTM do not challenge our tentative
determination that the Occidental consent order funds are crude oil
overcharge funds, the UTM oppose the 20-40-40 distribution provided
for in the MSRP and our Proposed Decision and Order.
The UTM contend that 100 percent of the Occidental consent order
funds should be reserved for Subpart V claimants. Under this theory,
neither the states nor the federal government would receive a share
of the consent order funds. Alternatively, the UTM contend that 60
percent of the Occidental consent order funds should be reserved for
Subpart V claimants: the 20 percent ordinarily reserved for such
claimants, as well as the federal government's 40 percent share.
Two groups of states also filed comments. Both groups oppose the
UTM's request and, instead, support adoption of the procedures set
forth in the Proposed Decision and Order.
VI. Analysis
A. The UTM's Contention that Subpart V Claimants are Entitled to
100 Percent of the Occidental Consent Order Funds
The UTM's contention that Subpart V claimants are entitled to
100 percent of the Occidental consent order funds is based on their
contention that Subpart V claimants are entitled to more than 20
percent of all crude oil overcharge funds. The UTM maintain that the
OHA is required to reserve 31-32 percent of all crude oil overcharge
funds for the Subpart V process in order to give Subpart V claimants
``full parity'' with entities that received a refund pursuant to the
Stripper Well Settlement Agreement. Because the OHA has consistently
reserved 20 percent for Subpart V claimants, the UTM contend that a
reserve of 100 percent of the Occidental consent order funds for
Subpart V claimants is necessary to make up for the alleged
shortfall.
As indicated above, two groups of States oppose the UTM's
contention. The States argue that the UTM's contention is
inconsistent with the express terms of the Stripper Well Settlement
Agreement and the DOE's MSRP. The States note that the UTM's claimed
right to ``full parity'' is currently the subject of a pending court
proceeding against the DOE. The States contend that the issue should
be resolved in that forum. In the meantime, the States contend, in
the absence of a court order to the contrary, the DOE should
continue to distribute crude oil overcharge funds in the manner
specified in the Stripper Well Settlement Agreement and the MSRP.
We agree with the States' position. The UTM do not dispute that
the DOE's distribution of crude oil overcharge funds, including the
distribution to Subpart V claimants, is governed by the Stripper
Well Settlement Agreement. The UTM also do not dispute that a
provision in the agreement provides that the reserve for Subpart V
claimants ``shall not exceed 20 percent'' of the crude oil
overcharge funds at issue.2 The DOE, like the other signatories
to the Stripper Well Settlement Agreement, is bound by its terms.
The DOE incorporated this limitation in its MSRP and has uniformly
applied it. Accordingly, the maximum that the DOE may reserve for
Subpart V claimants is 20 percent of crude oil overcharge funds.
\2\ See Stripper Well Settlement Agreement, 6 Fed. Energy
Guidelines (CCH) para. 90,509 at 90,655 (Part IV.B.6) (``IV. Other
Alleged Crude Oil Violation Proceedings,'' ``B. Pending and Future
Proceedings,'' ``6. Future Subpart V Proceedings.'')
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B. The UTM's Contention that Subpart V Claimants are Entitled to
60 Percent of the Occidental Consent Order Funds
In support of their alternative contention that 60 percent of
the Occidental consent order funds should be reserved for Subpart V
claimants, the UTM argue that Subpart V claimants are entitled not
only to their maximum 20 percent but also to the federal government
share. The UTM alleged that the DOE, FERC and the Department of
Justice took actions which undermined the success of the Occidental
enforcement proceeding. Based on this allegation, the UTM contend
that the federal government should forfeit its share.
As indicated above, the distribution of crude oil overcharge
funds is governed by the Stripper Well Settlement Agreement, which
provides for a maximum reserve of 20 percent for Subpart V
claimants. Moreover, the UTM's claimed entitlement is inconsistent
with the Economic Stabilization Act of 1970 (formerly 12 U.S.C.
Sec. 1094 note), which provided separate statutory authority for
public (Section 209) and private (Section 210) enforcement actions.
The courts have consistently held that a private party's interest in
some ultimate restitutionary benefit does not confer a legal right
to intervene in a Section 209 public proceeding. See, e.g., Alabama
v. FERC, 3 Fed. Energy
[[Page 5397]]
Guidelines para. 26,693 (D.D.C. June 8, 1995). In fact, in the case
just cited, the UTM had attempted to appeal the 1993 Order that FERC
issued to Occidental; the federal district court granted the DOE's
motion to dismiss for lack of standing. Accordingly, the UTM, having
declined to pursue their own private action pursuant to Section 210,
have no right to complain about the government's enforcement
efforts, let alone seek the federal government's share of the funds
resulting from those efforts.
VII. Final Refund Procedures
Because we have determined that 100 percent of the consent order
funds are crude oil funds, the funds will be distributed according
to the Stripper Well Settlement Agreement and the MSRP. We have
reserved the full 20 percent ($55 million), plus accrued interest,
for direct restitution to injured purchasers of crude oil and
refined petroleum products. The remaining 80 percent ($220 million)
will be distributed in equal shares to the states and the federal
government.
As indicated above, the funds reserved for direct restitution to
injured purchasers will be available for distribution through OHA's
Subpart V crude oil overcharge refund proceeding. We have previously
discussed the application requirements and standards that apply in
that proceeding. Because the deadline for the filing of applications
has now passed, we do not believe that it is necessary to reiterate
those matters. In accordance with the MSRP, any funds remaining
after the conclusion of the Subpart V crude oil overcharge refund
proceeding will be distributed to the states and the federal
government in equal shares.
With respect to the funds made available to the states for
indirect restitution, we note that 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 Settlement Agreement.
Based on the foregoing, we have determined that the $100 million
initial payment made by Occidental be distributed as follows: $20
million, plus accrued interest, to the DOE interest-bearing escrow
account for crude oil claimants, $40 million, plus accrued interest,
to the DOE interest-bearing escrow account for the states, and $40
million, plus accrued interest, to the DOE interest-bearing escrow
account for the federal government. We have further determined that,
upon remittance to the DOE, Occidental's subsequent five annual
payments of $35 million, plus accrued interest, be distributed to
the same accounts in the same proportions.
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 remitted by Occidental
Petroleum Corporation, plus accrued interest, pursuant to Paragraphs
(2), (3), (4), and (5) of this Decision and Order.
(2) The Director of Special Accounts and Payroll shall transfer
$40 million, plus any accrued interest, of the funds referenced in
Paragraph (1) above, into the subaccount denominated ``Crude
Tracking-States,'' Number 999DOE003W.
(3) The Director of Special Accounts and Payroll shall transfer
$40 million, 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
$20 million, plus any accrued interest, of the funds referenced in
Paragraph (1) above, into the subaccount denominated ``Crude
Tracking-Claimants 4,'' Number 999DOE010Z.
(5) Upon each future receipt of funds referenced in Paragraph
(1) above, the Director of Special Accounts and Payroll shall
transfer 40 percent, plus any accrued interest, to each of the
subaccounts specified in Paragraphs (2) and (3) above, and 20
percent to the subaccount specified in Paragraph (4) above.
(6) This is a final Order of the Department of Energy.
Dated: January 31, 1996.
George B. Breznay,
Director, Office of Hearings and Appeals.
[FR Doc. 96-3057 Filed 2-9-96; 8:45 am]
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