[Federal Register Volume 61, Number 59 (Tuesday, March 26, 1996)]
[Notices]
[Pages 13170-13172]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7270]



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DEPARTMENT OF ENERGY
Office of Hearings and Appeals


Proposed 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 (OHA) of the Department of 
Energy announces revised proposed procedures for disbursement of 
$48,307.13 of crude oil overcharge funds obtained by the DOE from Texas 
American Oil Corporation (Texas American), Case No. VEF-0019. The OHA 
has determined that these funds, plus accrued interest, be distributed 
as direct restitution to individual claimants who were injured by crude 
oil overcharges.

DATES AND ADDRESSES: Comments must be filed in duplicate on or before 
April 25, 1996, and should be addressed to the Office of Hearings and 
Appeals, 1000 Independence Ave., SW, Washington, DC 20585-0107. All 
comments should conspicuously display a reference to Case No. VEF-0019.

FOR FURTHER INFORMATION CONTACT: Richard W. Dugan, Associate Director, 
Office of Hearings and Appeals, 1000 Independence Ave., SW, Washington, 
DC 20585-0107, Telephone No. (202) 586-2860.

SUPPLEMENTARY INFORMATION: In accordance with 10 C.F.R. 
Sec. 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 $48,307.13 (plus accrued interest) remitted to the DOE by 
Texas American. The DOE is currently holding these funds in an 
interest-bearing escrow account pending distribution.
    This Proposed Decision revises a portion of a previous Proposed 
Decision that was issued on January 16, 1996. See Brio Petroleum, Inc., 
Case Nos. VEF-0017 et al., 61 Fed. Reg. 1919 (January 24, 1996). In the 
January 16 Proposed Decision, the OHA proposed to distribute the funds 
obtained from Texas American and four other firms in accordance with 
the DOE's Modified Statement of Restitutionary Policy in Crude Oil 
Cases, 51 Fed. Reg. 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. In 
accordance with the MSRP, the January 16 Proposed Decision tentatively 
reserved 20 percent of the funds received from Texas American and the 
other four firms for direct restitution to injured claimants. In the 
present Proposed Decision, which involves only Texas American, the OHA 
has tentatively decided that all of the crude oil overcharge funds 
obtained from the bankrupt estate of Texas American should be reserved 
for individual claimants. This is in accordance with Texas American Oil 
Corp. v. DOE, 44 F.3d 1557 (Fed. Cir. 1995) (en banc), in which the 
United States Court of Appeals for the Federal Circuit held that the 
DOE's claim in the Texas American bankruptcy proceeding on behalf of 
individual claimants should have a higher priority than its claim on 
behalf of the states and federal government. Pursuant to that decision, 
the bankruptcy court distributed to the DOE an amount equivalent to 
only 20 percent of its claim in the Texas American bankruptcy 
proceeding.
    The remainder of the Proposed Decision is unchanged from the 
January 16 Proposed Decision. We propose that refunds to eligible 
purchasers be based on the volume of products that they purchased 
during the price control period and the extent to which they can 
demonstrate injury. The proposed volumetric refund amount is $0.0016 
per gallon.
    Because the June 30, 1995 deadline for crude oil refund 
applications has passed, we propose not to accept any new applications 
for refund in this proceeding. As we state in the Proposed Decision, 
the Texas American funds will be added to the general crude oil 
overcharge pool for direct restitution to claimants that have filed 
timely applications.
    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 in the beginning of this notice. All 
comments received in this proceeding 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 Ave., SW, Washington, DC 20585-0107.

    Dated: March 14, 1996.
Thomas O. Mann,
Acting Director, Office of Hearings and Appeals.

Proposed Decision and Order of the Department of Energy

Implementation of Special Refund Procedures

Name of Case: Texas American Oil Corporation
Date of Filing: September 1, 1995
Case Number: VEF-0019

    On January 16, 1996 the Office of Hearings and Appeals (OHA) of the 
Department of Energy (DOE) issued a Proposed Decision and Order (PDO) 
that tentatively established refund procedures for the distribution of 
crude oil overcharge funds obtained from Texas American Oil Corporation 
(Texas American) and four other firms. Brio Petroleum, Inc., Case Nos. 
VEF-0017 et al., 61 Fed. Reg. 1919 (January 24, 1996). In accordance 
with the DOE's Modified Statement of Restitutionary Policy in Crude Oil 
Cases (MSRP), 51 Fed. Reg. 27899 (August 4, 1989), the PDO proposed 
that 40 percent of the funds be disbursed to the federal government, 
another 40 percent be disbursed to the states, and the remaining 20 
percent be reserved for applicants who file claims showing that they 
were injured by crude oil overcharges. It has recently come to our 
attention that the circumstances under which the DOE obtained the Texas

[[Page 13171]]
American funds require that the funds be disbursed in a manner 
different than that proposed in the PDO. Accordingly, we are issuing a 
new PDO with respect to the Texas American funds.

Background

    On September 19, 1988, the OHA issued a Remedial Order (RO) that 
found that Texas American had violated 10 C.F.R. Sec. 211.67(e)(2) by 
receiving excessive small refiner bias benefits under the DOE's 
Entitlements Program. Texas American Oil Corp., 17 DOE para. 83, 017 
(1988). However, Texas American had filed a petition in bankruptcy on 
July 2, 1987, and its bankruptcy proceeding was still pending when the 
RO was issued. The trustee-in-bankruptcy approved the DOE's claim in 
the amount of $241,535.67, but classified it as a non-pecuniary loss in 
accordance with Section 726(a)(4) of the Bankruptcy Code and Class 9 of 
the Plan of Liquidation.\1\ Since Class 9 claims were inferior to Class 
7 claims, and there were insufficient assets to satisfy any Class 9 
claim, or to satisfy fully the Class 7 claims, the effect of the 
trustee's determination was to preclude the DOE from receiving any 
compensation from Texas American's estate.

    \1\ Section 726(a)(4) places non-pecuniary loss claims in the 
forth priority in the distribution of a bankrupt estate:
    11 U.S.C. Sec. 726. Distribution of property of the estate
          *        *        *        *        *
    (a)(4) forth, in payment of any allowed claim, whether secured 
or unsecured, for any fine, penalty, or forfeiture, or for multiple, 
exemplary, or punitive damages, arising before the earlier of the 
order for relief or the appointment of trustee, to the extent that 
such fine, penalty, forfeiture, or damages are not compensation for 
actual pecuniary loss suffered by the holder of such claim[.]
    Class 7 (Unsecured Claims) consisted of allowed claims of 
unsecured creditors, while Class 9 (Non-Pecuniary Loss) consisted of 
``Allowed Claims for any fine, penalty or forfeiture, or for 
multiple, exemplary, or punitive damages, as further described in 11 
U.S.C. Sec. 726(a)(4).'' Texas American Bankruptcy Committee Plan of 
Liquidation Secs. 3.07, 3.09.
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    The DOE argued before the Bankruptcy Court that the trustee's 
determination was erroneous on the grounds that its claim was for 
restitution and therefore was a Class 7 claim. The Bankruptcy Court, 
however, rejected the DOE's position and held that Class 9 was the 
proper classification since the DOE's claim was not for actual 
pecuniary loss suffered by the holder of the claim. In re Texas 
American Oil Corp., No. 387-33522-SAF-11 (Bankr. N.D. Tex. Mar. 5, 
1992). This decision was reversed by the U.S. District Court which, 
relying on a prior decision of the Temporary Emergency Court of Appeals 
(TECA), held that a DOE claim under Section 209 of the Economic 
Stabilization of 1970 (ESA), 12 U.S.C. Sec. 1904 note, was properly 
placed in the same class and priority as the general unsecured claims 
of other creditors. Texas American Oil Corp. v. DOE, No. 3:92-CV-1146-G 
(N.D. Tex. Sept. 14, 1992) (citing DOE v. West Texas Marketing Corp., 
763 F.2d 1411 (Temp. Emer. Ct. App. 1985) (West Texas)). This decision 
was in turn reversed by the United States Court of Appeals for the 
Federal Circuit, which held that the DOE's claim in the Texas American 
bankruptcy proceeding should be bifurcated, with the portion claimed on 
behalf of individual persons who suffered actual injury to be 
classified in Class 7 of the Plan of Liquidation and portion to be paid 
to the federal and statement governments to be classified in Class 9. 
Texas American Oil Corp. v. DOE, 44 F.3rd 1557 (Fed. Cir. 1995) (en 
banc). On remand, the Bankruptcy Court implemented the Federal 
Circuit's decision by distributing the 20 percent of DOE's liquidated 
claim ($48,307.13) that fell within Class 7 to DOE and the remaining 80 
percent ($193,228.53) to the other Class 7 creditors. In re Texas 
American Oil Corp., NO. 387-33522-SAF-11 (Bankr. N.D. Tex. April 12, 
1995). The funds that the DOE received from Texas American were 
deposited in an interest-bearing escrow account maintained by the 
Department of the Treasury.\2\

    \2\ As of February 29, 1996, the account contained $50,596.54, 
consisting of $48,307.13 principal and $2,289.41 interest.
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    In accordance with 10 C.F.R. Part 205, Subpart V, on September 1, 
1995, the Office of General Counsel, Regulatory Litigation (OGC) 
(formerly the Economic Regulatory Administration) filed a Petition for 
the Implementation of Special Refund Procedures that requested OHA to 
formulate and implement procedures to distribute the Texas American 
funds. In the PDO, we tentatively granted the petition, stating that we 
intended to implement a Subpart V proceeding to distribute the funds to 
individual claimants and state and federal governments in accordance 
with the MSRP. The following section of this Proposed Decision sets 
forth our revised tentative plan to distribute these funds.

Proposed Refund Procedures

    We propose to distribute the funds received from Texas American 
(and accrued interest on those funds) solely to individual claimants in 
the DOE's crude oil refund proceeding. This sui generis proposal 
results from the unique circumstances under which these funds were 
obtained. While the Texas American v. DOE decision is contrary to the 
position of the DOE that had been upheld in the West Texas case \3\ we 
are constrained by the Federal Circuit's decision to use the funds 
received from Texas American solely for direct restitutionary purposes. 
Moreover, as indicated above, the Texas American Bankruptcy Court, in 
accordance with the Federal Circuit's determination, distributed to the 
DOE only 20 percent of its liquidated claim, an amount equivalent to 
the portion of crude oil overcharge funds that we have consistently 
reserved for individual claimants under the MSRP.

    \3\ The Federal Circuit in Texas American v. Doe ascribed its 
unwillingness to follow the West Texas decision to judicial 
statutory, and related policy changes that had occurred since the 
issuance of that decision. The Federal Circuit also specifically 
overruled TECA's ruling that a DOE bankruptcy claim under the ESA to 
be paid to the federal and state governments on behalf of their 
citizen was for restitution and not for a penalty.
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    Except for the manner in which the funds will be allocated, we 
propose to follow the procedures set forth in the initial PDO and 
adopted in prior refund proceedings involving crude oil overcharge 
funds. Thus, claimants will be required to (i) document their purchase 
volumes of petroleum products during the August 19, 1973--January 27, 
1981 crude oil price control period, and (ii) 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 will be presumed to have been injured by Texas 
American's crude oil overcharges.
    In order to receive a refund, end-users will not need to submit any 
further evidence of injury beyond the volume of petroleum products 
purchased during the price control period. See City of Columbus, 
Georgia 16 DOE Sec. 85,550 (1987). We also proposed to base refunds to 
claimants on a volumetric amount that is currently $0.0016 per gallon. 
See 60 Fed. Reg. 15562 (March 24, 1995).
    An applicant who has executed and submitted a valid waiver pursuant 
to one of the escrows established by the Final Stripper Well Settlement 
Agreement will be considered to have waived its rights to apply for a 
crude oil refund under Subpart V. See, e.g., Mid-America Dairymen, 
Inc., v. Herrington, 878 F.2d 1448 (Temp Emer. Ct. App. 1989); see also 
Hoechst Celanese Chemical, 25 DOE para.85,066 (1996). Because the June 
30 1995 deadline for crude oil refund applications has

[[Page 13172]]
passed, we propose not to accept any new applications. See Western 
Asphalt Service, 25 DOE para.85,047 (1995). Instead, these funds will 
be added to the general crude oil overcharge pool used for direct 
restitution.
    Before taking the action proposed in this Proposed 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.
    It is therefore ordered that:
    The refund amount remitted to the Department of Energy by Texas 
American Oil Corporation pursuant to the Order of the United States 
Bankruptcy Court for the Northern District of Texas signed on April 12, 
1995, will be distributed in accordance with the foregoing Decision.

[FR Doc. 96-7270 Filed 3-25-96; 8:45 am]
BILLING CODE 6450-01-P