[Federal Register Volume 65, Number 30 (Monday, February 14, 2000)]
[Notices]
[Pages 7386-7390]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-3347]


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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 (DOE) announces the proposed procedures for disbursement of 
$1,368,143.60, plus accrued interest, in refined petroleum overcharges 
obtained by the DOE under the terms of remedial and consent orders with 
respect to Bi-Petro Refining Company, Inc., et al., Case Nos. VEF-0035, 
et al. The OHA has tentatively determined that the funds will be 
distributed in accordance with the provisions of 10 CFR part 205, 
Subpart V and 15 U.S.C. Sec. 4501, the Petroleum Overcharge 
Distribution and Restitution Act (PODRA).

DATE AND ADDRESS:  
    Comments must be filed in duplicate on or before March 15, 2000 and 
should be addressed to the Office of Hearings and Appeals, Department 
of Energy, 1000 Independence Ave., SW, Washington, DC 20585-0107. All 
comments should display a reference to Case Nos. VEF-0035, et al.

FOR FURTHER INFORMATION CONTACT: Dawn L. Goldstein, Staff Attorney, 
Office of Hearings and Appeals, 1000 Independence Ave. SW, Washington, 
DC 20585-0107; (202) 426-1527, [email protected].

SUPPLEMENTARY INFORMATION:  In accordance with 10 CFR Sec. 205.282(b), 
notice is hereby given of the issuance of the Proposed Decision and 
Order set out below. The Proposed Decision sets forth the procedures 
that the DOE has tentatively formulated to distribute to eligible 
claimants $1,368,143.60, plus accrued interest, obtained by the DOE 
under the terms of Remedial Orders and Consent Orders regarding Bi-
Petro Refining Company, Inc., et al. Under the Remedial Orders, 
companies were found to have violated the Federal petroleum price and 
allocation regulations involving the sale of refined petroleum products 
during the relevant audit periods. The Consent Orders resolved alleged 
violations of these regulations.
    The OHA has proposed to distribute the funds in a two-stage refund 
proceeding. Purchasers of certain covered petroleum products from any 
one of the firms considered in the

[[Page 7387]]

proceeding will have an opportunity to submit refund applications in 
the first stage. Refunds will be granted to applicants who 
satisfactorily demonstrate they were injured by the pricing violations 
and who document the volume of certain refined petroleum products they 
purchased from one of the firms during the relevant audit periods. In 
the event that money remains after all first-stage claims have been 
disposed of, the remaining funds will be disbursed in accordance with 
the provisions of 15 U.S.C. Sec. 4501, the Petroleum Overcharge 
Distribution and Restitution Act of 1986 (PODRA).
    Any member of the public may submit written comments regarding the 
proposed refund procedures. Commenting parties are requested to forward 
two copies of their submissions, within 30 days of publication of this 
notice in the Federal Register, to the address set forth at the 
beginning of this notice. Comments so received, will be made available 
for public inspection between the hours of 9 a.m. and 5 p.m., Monday 
through Friday, except Federal Holidays, in the Public Reference Room 
of the Office of Hearings and Appeals, 950 L'Enfant Plaza, Washington, 
D.C.

    Dated: Date: January 21, 2000
George B. Breznay,
Director, Office of Hearings and Appeals.

PROPOSED DECISION AND ORDER

    January 21, 2000.

Department of Energy; Washington, DC 20585.

Implementation of Special Refund Procedures

    Names of Firms: Bi-Petro Refining Co., Inc., et al.
    Dates of Filing: October 19, 1999, et al.
    Case Numbers: VEF-0035, et al.
    On October 19, 1999, the Office of General Counsel (OGC) of the 
Department of Energy (DOE) filed a petition with the Office of 
Hearings and Appeals (OHA), requesting that the OHA formulate and 
implement procedures for distributing funds obtained through the 
payments resulting from Remedial Orders and Consent Orders (Remedial 
Order and Consent Order funds) regarding nine covered petroleum 
product refiners, retailers and resellers, pursuant to 10 CFR Part 
205, Subpart V. This Proposed Decision sets forth the OHA's 
tentative plan for distributing these funds to qualified refund 
applicants. Since the procedures set forth in this Decision are in 
proposed form, no refund applications should be filed at this time. 
A final determination will be issued at a later date announcing that 
the filing of refund applications is authorized.

I. Proposed Refund Procedures

A. Eligibility for Refunds

    To the extent possible, the amounts collected, plus accrued 
interest, will be distributed to purchasers of certain covered 
refined products described in the Appendix who can show that they 
were injured by these nine firms' pricing practices during the 
periods also described in the Appendix.

B. Calculation of Refund Amount

    We propose adopting a volumetric method to apportion these 
funds. Under this volumetric refund approach, a claimant's allocable 
share of the Remedial Order and Consent Order funds is equal to the 
number of gallons of certain covered petroleum products purchased 
during the time period specified in the Appendix, multiplied by a 
per gallon refund amount. In the interest of the expeditious 
distribution of the collected funds, as it is near the end of our 
Subpart V refund proceedings, and based upon our previous experience 
in these refined product Subpart V proceedings, we have set the per 
gallon refund amount at $.0004 per gallon.\1\ This figure will be 
reduced by the collection percentage, to obtain the volumetric. If 
the collection percentage is 100 percent or greater, the volumetric 
will not be reduced. \\
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    \1\ Nevertheless, we realize that the impact on an individual 
claimant may have been greater than the volumetric amount. We 
therefore propose that the volumetric presumption will be 
rebuttable, and we will allow a claimant to submit evidence 
detailing the specific overcharges that it incurred in order to be 
eligible for a larger refund. E.g., Standard Oil Co./Army and Air 
Force Exchange Service, 12 DOE para. 85,015 (1984). In addition, we 
note that we may need to lower the volumetric for a particular 
proceeding, if the volume claimed by applicants multiplied by the 
volumetric indicates that if all volume were claimed, the fund would 
be exhausted or insufficient to satisfy all claims. We may also need 
to lower a particular volumetric if it appears inappropriate, based 
on our experience in these cases.
    \2\ The collection percentage will be calculated by dividing the 
amount collected (with interest accrued by the DOE up to roughly the 
issuance of the final Implementation Order) by the amount the firm 
was either ordered to pay in a Remedial Order or agreed to pay in a 
Consent Order.
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    Thus, under the volumetric approach and using the information 
listed in the Appendix, an eligible claimant will receive a refund 
equal to the number of gallons of certain covered petroleum products 
that it purchased from one of the nine firms during the relevant 
period, multiplied by the volumetric for each firm.
    As in previous cases, we will establish a minimum amount of $15 
for refund claims. E.g., Uban Oil Co., 9 DOE para. 82,541 at 85,225 
(1982). Because we are nearing the end of our Subpart V proceedings, 
we will also set a deadline to submit applications of six months 
from the publication date of our final Implementation Order in the 
Federal Register.

C. Showing of Injury

    We propose that each claimant will be required to document its 
purchases of the relevant covered petroleum products from the firms 
at issue during the relevant period. In addition, we propose that in 
order to receive a refund, an applicant generally must demonstrate 
through the submission of detailed evidence that it did not pass on 
the alleged overcharges to its customers. See, e.g., Office of 
Enforcement, 8 DOE para. 82,597 at 85,396-97 (1981).
    However, as we have done in many prior refund cases, we propose 
to adopt specific injury presumptions that will simplify and 
streamline the refund process for some categories of customers: 
small claims, end-users, consignees, regulated firms and 
cooperatives. These presumptions will excuse members of certain 
applicant categories from proving that they were injured by the 
firms' alleged overcharges, and are discussed below.

D. Reseller Applicants Seeking Refunds of $10,000 or Less

    We propose to adopt a presumption, as we have in many previous 
cases, that resellers seeking small refunds were injured by these 
firms' pricing practices. 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. Therefore, we are proposing a small claims 
threshold of $10,000. See Enron Corp., 21 DOE para. 85,323 at 88,957 
(1991).
    Accordingly, under the proposed small claims presumption in this 
proceeding, a claimant who claims a refund of $10,000 or less will 
not be required to submit any evidence of injury beyond establishing 
that it is one of the eligible customers that purchased covered 
petroleum products from one of the nine firms. We propose that a 
reseller applicant must follow the procedures that are outlined 
below if the applicant is seeking a refund in excess of $10,000.

E. Medium-Range Presumption

    We propose that in lieu of making a detailed showing of injury, 
a reseller, retailer or refiner claimant whose allocable share of 
the collected funds for purchases of covered petroleum products from 
one of the nine firms exceeds $10,000 may elect to receive as its 
refund the larger of $10,000 or 40 percent of its allocable share up 
to $50,000. 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, we have 
determined that a 40 percent presumption for the medium-range 
purchasers reflected the amount of their injury as a result of their 
purchases of those products. Gulf Oil Corp., 16 DOE para. 85,381 
(1987). Accordingly, a claimant in this group will only be required 
to provide documentation of its purchase volumes of covered 
petroleum products from these firms in order to be eligible to 
receive a refund of 40 percent of its total allocable share up to 
$50,000.

F. Reseller Applicants Seeking Larger Refunds

    We propose that if a retailer, reseller or refiner claims an 
amount in excess of $10,000, and declines to accept the medium-range 
presumption, it will be required to provide a detailed demonstration 
of its injury. We propose that it will be required to demonstrate 
that it maintained a ``bank'' of

[[Page 7388]]

unrecovered product costs in order to show that it did not pass 
along the alleged overcharges to its own customers. In addition, we 
propose that a claimant must show that market conditions would not 
permit it to pass through those increased costs. See, e.g., Quintana 
Energy Corp., 21 DOE para. 85,032 at 88,117 (1991). If a reseller 
that is eligible for a refund in excess of $10,000 elects not to 
submit the cost bank and purchase price information described above, 
it may still apply either for the small claims refund of $10,000 or 
the medium-range presumption, whichever amount is more beneficial 
for the applicant.

G. End-Users

    We propose to adopt a presumption that end-users or ultimate 
consumers whose businesses are unrelated to the petroleum industry, 
were injured by these firms' alleged overcharges and are entitled to 
their full share of the monies collected from these firms. Unlike 
regulated firms in the petroleum industry, end-users were not 
subject to price controls during the relevant periods. Moreover, 
these unregulated firms were not required to keep records that 
justified selling price increases by reference to cost increases. 
Therefore, an analysis of the impact of the alleged overcharges on 
the final prices of non-petroleum goods and services would be beyond 
the scope of a special refund proceeding. See, e.g., American 
Pacific International, Inc., 14 DOE para. 85,158 at 88,294 (1986). 
We propose, therefore, that any applicant claiming to be an end-
user, need only establish that it was a customer of one of these 
firms or a successor thereto and that the nature of its business 
made it an ultimate consumer of the covered petroleum products that 
it purchased. If an applicant establishes those two facts, it will 
receive its full pro-rata share as its refund without making a 
detailed demonstration of injury.

H. Regulated Firms and Cooperatives

    We propose that regulated firms (such as public utilities) and 
agricultural cooperatives, which are required to pass on to their 
customers the benefit of any refund received, will be exempted from 
the requirement that they make a detailed showing of injury. 
Marathon Petroleum Co., 14 DOE para. 85,269 at 88,515 (1986); see 
also Office of Special Counsel, 9 DOE para. 82,538 at 85,203 (1982). 
We will require a regulated firm or cooperative to establish that it 
was a customer of one of the firms or a successor thereto. In 
addition, we will require each such claimant to certify that it will 
pass any refund received through to its customers, to provide us 
with a full explanation of the manner in which it plans to 
accomplish this restitution to its customers and to notify the 
appropriate regulatory or membership body of the receipt of the 
refund money. If a regulated firm or cooperative meets these 
requirements, it will receive a refund equal to its full pro-rata 
share. However, any public utility claiming a refund of $10,000 or 
less, or accepting the medium-range presumption of injury, will not 
be required to submit the above referenced certifications and 
explanation. A cooperative's sales of covered petroleum products to 
non-members will be treated in the same manner as sales by other 
resellers or retailers.

I. Indirect Purchasers

    We propose that firms which made indirect purchases of covered 
petroleum products from one of the firms during the relevant period 
may also apply for refunds. If an applicant did not purchase 
directly from one of the firms, but believes that the covered 
petroleum products it purchased from another firm were originally 
purchased from one of the firms at issue, the applicant must 
establish the basis for its belief and identify the reseller from 
whom the covered petroleum products were purchased. Indirect 
purchasers who either fall within a class of applicant whose injury 
is presumed, or who can prove injury, may be eligible for a refund 
if the reseller of one of the nine firms' products passed through 
these firms' alleged overcharges to its own customers. E.g., 
Dorchester Gas Corp., 14 DOE para. 85,240 at 88,451-52 (1986).

J. Spot Purchasers

    We propose to adopt the rebuttable presumption that a claimant 
who made only spot purchases from one of the firms was not injured 
as a result of those purchases. A claimant is a spot purchaser if it 
made only sporadic purchases of significant volumes of covered 
petroleum products from one of the firms. 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 one of 
these firms. E.g., Office of Enforcement, 8 DOE para. 82,597 at 
85,396-97 (1981).

K. Applicants Seeking Refunds Based on Allocation Claims

    We also recognize that we may receive claims alleging these 
firms' failure to furnish petroleum products that they were obliged 
to supply under the DOE allocation regulations that became effective 
in January 1974. See 10 CFR Part 211. Any such application will be 
evaluated with reference to the standards we set forth in Subpart V 
implementation decisions such as Office of Special Counsel, 10 DOE 
para. 85,048 at 88,220 (1982), and refund application cases such as 
Mobil Oil Corp./Reynolds Industries, Inc., 17 DOE para. 85,608 
(1988). These standards generally require an allocation claimant to 
demonstrate the existence of a supplier/purchaser relationship with 
the firm at issue and the likelihood that the firm at issue failed 
to furnish petroleum products that it was obliged to supply to the 
claimant under 10 CFR Part 211. In addition, the claimant should 
provide evidence that it sought redress from the alleged allocation 
violation. Finally, the claimant must establish that it was injured 
and document the extent of the injury.
    In our evaluation of whether allocation claims meet these 
standards, we will consider various factors. For example, we will 
seek to obtain as much information as possible about the DOE's (or 
its predecessor's) treatment of complaints made to it by the 
claimant. We will also look at any affirmative defenses that the 
firm may have had to the alleged allocation violation. In assessing 
an allocation claimant's injury, we will evaluate the effect of the 
alleged allocation violation on its entire business operations with 
particular reference to the amount of product that it received from 
suppliers other than the firm at issue. In determining the amount of 
an allocation refund, we will utilize any information that may be 
available regarding the amount of the firm's allocation violations 
in general and regarding the specific allocation violation alleged 
by the claimants. We will also pro rate any allocation refunds that 
would otherwise be disproportionately large in relation to the funds 
collected. Cf. Amtel, Inc./Whitco, Inc., 19 DOE para. 85,319 (1989).

L. Consignees

    We will adopt a rebuttable level of injury presumption of 10 
percent for all consignees of the instant firms during the relevant 
periods. See Gulf Oil Corp., 16 DOE para. 85,381 (1987). 
Accordingly, a consignee may elect to receive a refund based on 10 
percent of its total allocable share. Any consignee applicant will 
be free to rebut this presumption and prove a greater injury in 
order to receive a larger refund.

II. Distribution of the Remainder of the Firms' Consent Order Funds

    In the event that money remains after all refund claims from the 
collected monies have been analyzed, those funds in those accounts 
will be disbursed as indirect restitution in accordance with the 
provisions of the Petroleum Overcharge Distribution and Restitution 
Act of 1986 (PODRA), 15 U.S.C. 4501-4507 (1988). Pursuant to the 
PODRA, the excess funds will be distributed to state governments for 
use in energy conservation programs.

III. Conclusion

    Applications for Refund should not be filed at this time. 
Detailed procedures for filing Applications for Refund will be 
provided in a final Decision and Order. Before distributing any 
portion of the collected funds, we will publicize the distribution 
process, and provide an opportunity for any potential claimants to 
file a claim. Comments regarding the tentative distribution process 
set forth in this Proposed Order should be filed with the Office of 
Hearings and Appeals within 30 days of the publication of this 
Proposed Order in the Federal Register.

It Is Therefore Ordered That:

    The refund amounts remitted to the Department of Energy by the 
nine firms listed in the Appendix will be distributed in accordance 
with the foregoing decision.

[[Page 7389]]



                                                                                            Appendix
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                                                                                                                                                           Amounts
                                                  Consent                                                                   --------------------------------------------------------------------
 Name of firm, primary operating    OHA case       order                                                                                                       With
location or headquarters location      No.       tracking      Type of business      Covered products    Applicable dates*    Agreed to or      Actual       interest     Tentative   Tentative
                                                system No.                                                                       ordered        payment    through  11/  collection   volumetric
                                                  (COTS)                                                                                       principal       30/99     percentage
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South Central Terminal Co., Inc.,
 f/k/a Bi-Petro Refining Co.,
 Inc.
    P.O. Box 3245, Springfield,      VEF-0035    720S00565W  refiner.............  gasoline...........  July 1978-Dec. 1979     $236,242.00   $167,287.26   $215,743.30         91       0.00036
     IL 62708.
Don Rettig/Don's Shell
    1097 W. Tennyson Rd.,            VEF-0037    999K90058W  retailer............  gasoline...........  Aug. 1979-April            4,208.40      1,800.00      3,910.64         93       0.00037
     Hayward, CA 94544.                                                                                  1980.
Gugino's Exxon
    25th and Pine St., Niagara       VEF-0040    999K90074W  retailer............  gasoline...........  Aug.-Sept. 1979....        1,772.00        530.00       1,103.7         62       0.00025
     Falls, NY 14301.
J.D. Streett & Company, Inc.
    144 Weldon Parkway, M.D.         VEF-0042    720H00555W  reseller-retailer...  all covered          Aug. 1973-Jan. 1981      400,000.00    532,362.00    710,840.11        178   **** 0.0004
     Heights, MO 63043.                                                             products.                                                                                                  0
McWhirter Distributing Co., Inc.
    6633 Valjean Ave., Van Nuys,     VEF-0045    930H00291W  reseller-retailer...  gasoline...........  April-Sept. 1979...      128,171.06     26,840.00     29,227.86         23       0.00009
     CA 91406.
Charles B. Luna, formerly d/b/a/
 Ozark County Gas Co.
    P.O. Box 1339, Branson, MO       VEF-0046    720H00606W  reseller-retailer...  all covered          July 1977-Jan. 1981  *** 154,128.74     26,397.43     43,568.52         28       0.00011
     65616.                                                                         products.
Sherer Oil Company/Ringer Tri-
 State Oil Co.
    608 Central Ave., Johnstown,     VEF-0052    340H00496W  reseller-retailer...  gasoline...........  April-Sept. 1979...      387,465.05     96,921.55    149,547.63         39       0.00016
     PA 15902.
Swann Oil Company **
    111 Presidential Blvd., Bala-    VEF-0053    320H00222W  reseller-retailer...  heating oil,         Nov.-Dec. 1973.....    6,874,342.08    362,811.45    493,323.21          7       0.00003
     Cynwyd, PA 19004.                                                              residual fuel oil.
Vantage Petroleum Co.
    515 Johnson Ave., Bohemia, NY    VEF-0056    200H00026W  reseller-retailer...  gasoline...........  April-Aug. 1979....    2,049,481.61    153,193.91    207,375.84         10       0.00004
     11716.
                                                                                                                            --------------------------------------------
        Totals:..................  ..........  ............  ....................  ...................  ...................   10,235,810.94  1,368,143.60  1,854,640.85  ..........  ...........
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* Or until relevant decontrol date.
** Subsidiaries include: Swann Oil Co. of Allentown; Swann Oil of Georgia; L.A. Swann Oil Co. and Swann Oil Co. of Philadelphia.
*** The amount the applicant was originally ordered to pay was increased form $125,000.00 to $154,128.74.
**** As explained in the Decision since the collection percentage in this case is greater than 100 percent, the volumetric will not be reduced.


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[FR Doc. 00-3347 Filed 2-11-00; 8:45 am]
BILLING CODE 6450-01-P