[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]
BILLING CODE 6450-01-P