[Federal Register Volume 66, Number 135 (Friday, July 13, 2001)]
[Notices]
[Pages 36764-36767]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-17439]


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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 the disbursement of 
$6,672,934, plus accrued interest, in refined petroleum overcharges 
obtained by the DOE pursuant to a remedial order OHA issued to Hudson 
Oil Company, Inc., Case No. VEF-0011. The OHA has tentatively 
determined that the funds will be distributed in accordance with the 
provisions of 10 CFR Part 205, Subpart V.

DATES: Comments must be filed in duplicate on or before August 13, 
2001.

ADDRESSES: Comments 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 No. VEF-
0011.

FOR FURTHER INFORMATION CONTACT: Richard A. Cronin, Jr. Assistant 
Director, Office of Hearings and Appeals, 1000 Independence Ave., SW.,

[[Page 36765]]

Washington, DC 20585-0107, (202) 287-1562, [email protected].

SUPPLEMENTARY INFORMATION: In accordance with 10 CFR 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 
$6,672,934, plus accrued interest, obtained by the DOE pursuant to a 
Remedial Order OHA issued to Hudson Oil Company, Inc. (Hudson) and 
Hudson Refining Company, Inc. (Hudson Refining), on March 15, 1985. 
Under the Remedial Order, Hudson and Hudson Refining were found to have 
violated the federal petroleum price regulations involving the sale of 
refined petroleum products during the relevant audit periods.
    The OHA has proposed to distribute the Remedial Order funds in a 
refund proceeding described in the Proposed Decision and Order. 
Purchasers of motor gasoline from Hudson, Hudson Refining or its 
affiliated firms will have the opportunity to submit refund 
applications. Refunds will be granted to applicants who satisfactory 
demonstrate that they were injured by the pricing violations and who 
document the volume of refined petroleum products they purchased from 
one of the Hudson-affiliated firms during the relevant audit period.
    Any member of the public may submit written comments regarding the 
proposed refund procedures. Commenting parties are requested to forward 
two copies of their submission, within 30 days of the 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 1 p.m. and 5 p.m., Monday 
through Friday, except Federal Holidays, in Room 7132 ( the public 
reference room), 950 L'Enfant Plaza, Washington, DC.

    Dated: July 5, 2001.
George Breznay,
Director, Office of Hearings and Appeals.

Department of Energy,
Washington, DC, July 5, 2001.

Proposed Decision and Order of the Department of Energy

Implementation of Special Refund Procedures

Name of Firm: Hudson Oil Company, Inc.
Date of Filing: March 20, 1995
Case Number: VEF-0011

    On March 20, 1995, the Economic Regulatory Administration (ERA) 
of the Department of Energy (DOE) filed a Petition for the 
Implementation of Special Refund Procedures with the Office of 
Hearings and Appeals (OHA), to distribute the funds received 
pursuant to an OHA Remedial Order issued to Hudson Oil Company, Inc. 
(Hudson) and Hudson Refining Company, Inc. (Hudson Refining). See 
Hudson Oil Company, Inc., 12 DOE para. 83,035 (1985). In accordance 
with the provisions of the procedural regulations at 10 CFR Part 
205, Subpart V (Subpart V), the ERA requests in its Petition that 
the OHA establish special procedures to make refunds in order to 
remedy the effects of regulatory violations set forth in the 
Remedial Order.

I. Background

    ERA audits of Hudson, a retailer with headquarters in Kansas 
City, Kansas and Hudson Refining, a refiner located in Cushing, 
Oklahoma, revealed possible violations of the Mandatory Petroleum 
Price Regulations in Hudson's sales of gasoline during the period of 
price controls.\1\ Subsequently, ERA issued a proposed remedial 
order (PRO) alleging that Hudson and its affiliated firms had 
violated the petroleum price regulations. Hudson challenged the PRO 
before OHA. In our March 15, 1985 Remedial Order, we found that 
Hudson had violated the price regulations and had overcharged its 
motor gasoline customers by $10,670,000 during the period June 1979 
through August 1979 (refund period). See Hudson, 12 DOE at 86,479. 
Hudson and its affiliates were found to be jointly and severally 
liable for the overcharge amount.\2\ Id. at 86,481. On March 20, 
1995, the Office of General Counsel filed a Petition for the 
Implementation of Special Refund Proceeding for the $6,672,934 in 
funds Hudson has remitted to the DOE.\3\
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    \1\ Hudson and its affiliates operated a widespread retail 
operation. While information in the available files is incomplete, 
Hudson gasoline may have been sold by retailers in Virginia, 
Florida, Pennsylvania, Maryland, New York, West Virginia and 
Georgia.
    \2\ The Remedial Order references Hudson Van Oil Company, Hudson 
Van Oil Company of Kansas City, Inc., Hudson Van Oil Company of 
Florida, Inc., Hudson Van Oil Company of California, Inc., Hudson 
Stations, Inc., Wind Stations, Inc., News, Inc. and Hudson 
Petroleum, Inc. as Hudson affiliates covered in ERA's PRO. See 
Hudson, 12 DOE at 86,483 n.1.
    \3\ Hudson and Hudson Refining filed for bankruptcy in 1984. In 
addition to the March 1985 Remedial Order discussed above OHA issued 
another Remedial Order to Hudson on July 1, 1985, finding that 
Hudson had violated the price regulations concerning sales of crude 
oil and was liable for overcharges of $6,380,506. See Hudson Oil 
Company, 13 DOE para. 83,022 (1985). ERA's petition requests that we 
institute a refund proceeding covering both Remedial Orders. 
However, since Husdon has failed to remit sufficient money to fully 
comply with the March 1985 Remedial Order, and this Remedial Order 
was first in time, we will institute a refund proceeding that covers 
only Hudson's violation of price regulations concerning its sales of 
motor gasoline detailed in the March 1985 Remedial Order.
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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 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 Office of Enforcement, 9 DOE para. 82,508 (1981), and 
Office of Enforcement, 8 DOE para. 82,597 (1981) (Vickers).

III. Refund Procedures

A. Proposed Standards for the Evaluation of Claims

    This section sets forth our proposals for the standards to be 
used in evaluating refund claims in the Hudson refund proceeding. 
From our experience with Subpart V proceedings, we expect that 
refund applicants will fall into the following categories: (i) end-
users; (ii) regulated entities, such as public utilities and 
cooperatives; (iii) refiners, resellers and retailers (collectively 
referred to as ``resellers'') and (iv) consignees.
    In order to receive a refund, each claimant will be required to 
submit a schedule of its gasoline purchases from Hudson during the 
refund period. If the gasoline was not purchased directly from 
Hudson, the claimant must establish that the gasoline originated 
from Hudson.\4\
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    \4\ Indirect purchasers who establish that their gasoline 
purchases originated with Hudson will be eligible for a refund 
unless the direct purchaser has filed a refund claim and established 
that it did not pass through the Hudson overcharges to its 
customers. See Texaco, 20 DOE ] 85,147 at 88,319 n. 39 (1990) 
(Texaco). As a result, applications from indirect purchasers will 
generally be considered only after evaluating the applications of 
their suppliers.
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    In addition, a reseller, except one who chooses to utilize the 
injury presumptions set forth below, will be required to make a 
detailed showing that it was injured by Hudson's regulatory 
violations. This showing will consist of two distinct elements. 
First, a reseller claimant will be required to show, through 
credible, firm-specific data, that it had ``banks'' of unrecouped 
increased product costs beginning in June 1979 through August 1979. 
In addition, such a claimant must demonstrate that market conditions 
would not have allowed those costs to be passed through to its 
customers. This showing may be made in a comparative disadvantage 
analysis, which compares the price paid by the applicant with the 
average price paid for the same product at the relevant level of 
distribution. See, e.g., Enron Corp./MAPCO, Inc., 27 DOE para. 
85,018 (1998).
    A claimant who attempts to make a detailed showing of injury in 
order to obtain 100 percent of its allocable share but, instead, 
provides evidence that leads us to conclude that it passed through 
all of the overcharges, or is eligible for a refund of less than the 
applicable presumption-level amount, will not then be eligible for a 
presumption-based refund. Instead, such a claimant will receive a 
refund which reflects the level of injury established in its 
Application. No refund will be approved if its submission indicates 
that it was not injured as a result of its gasoline purchases from 
Hudson.

[[Page 36766]]

1. Presumptions for Claims Based Upon Hudson Gasoline Purchases

    Our general practice is to grant refund on a pro-rata or 
volumetric basis. In order to calculate the volumetric refund 
amount, the OHA divides the amount of money available for direct 
restitution by the number of gallons sold by the firm during the 
period covered by the consent order.
    Based on the available ERA workpapers, we estimate that during 
the period June 1979 through August 1979 Hudson sold 80,207,000 
gallons of gasoline. See Schedule II-Q--Summary of allowable cost 
recoveries at 3. Dividing the recovered overcharge amount of 
$6,672,934 by this estimated number of gallons sold by Hudson 
results in a volumetric refund amount (or allocable share) of 
$0.0832 per gallon. In addition, each successful applicant is 
entitled to receive a proportionate share of accrued interest.\5\
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    \5\ In addition, we propose, as in previous cases, that the 
minimum refund amount that will be paid to an claimant is $15.00. We 
have found through our experience that the cost of processing claims 
for less than $15.00 outweighs the benefits of restitution in these 
cases. See, e.g., Texaco, 20 DOE at 88,320 n. 43.
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    In order to expedite the processing of applications in this 
proceeding and to ensure that refund claims are evaluated in the 
most efficient and equitable manner possible, we propose to use the 
following presumptions in addition to the volumetric presumption 
described above.

a. End-Users

    End-Users of Hudson gasoline, i.e., consumers, whose use of the 
gasoline was unrelated to the petroleum business are presumed 
injured and need only document their purchase volumes from Hudson 
during the refund period to be eligible to receive a full allocable 
share.

b. Refiners, Resellers and Retailers Seeking Refunds of $10,000 or Less

    Reseller claimants whose allocable share is $10,000 or less, 
i.e. who purchased 120,192 gallons or less of Hudson gasoline during 
the refund period will be presumed injured and therefore need not 
provide a further demonstration of injury, besides documentation of 
their volumes, to receive its full allocable share.

c. Medium-Range Refiners, Reseller and Retailer Claimants

    In lieu of making a detailed showing of injury, a reseller 
claimant whose allocable share 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.\6\ An applicant in this group will only be 
required to provide documentation of its purchase volumes of Hudson 
gasoline during the refund period in order to receive a refund of 40 
percent of its total volumetric share, or $10,000, whichever is 
greater.
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    \6\ That is, claimants who purchased between 120,192 gallons and 
1,502,404 gallons of Hudson gasoline during the refund period may 
elect to utilize the presumption. Claimants who purchased more than 
1,502,404 gallons from Hudson may elect to limit their claims to 
$50,000.
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d. Regulated Firms and Cooperatives

    We have determined that, in order to receive a full volumetric 
refund, a claimant whose prices for goods and services are regulated 
by a governmental agency, e.g., a public utility, or by the terms of 
a cooperative agreement, needs only to submit documentation of 
Hudson gasoline used by itself or, in the case of a cooperative, 
sold to its members. However, a regulated firm or cooperative whose 
allocable share is greater that $10,000 will also be required to 
certify that it will pass through any refund received to its 
customers or member-customers, provide us with a full explanation of 
how it plans to accomplish that restitution, and certify that it 
will notify the appropriate regulatory body or membership group of 
the receipt of the refund.

e. Spot Purchasers

    We propose creation of a rebuttable presumption that a reseller 
that made only irregular or sporadic, i.e., spot, gasoline purchases 
from Hudson did not suffer injury as a result of those purchases. 
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 of Hudson gasoline. In prior proceedings, we have stated 
that refunds will be approved for spot purchasers who demonstrate 
that (i) they made the spot purchases for the purpose of ensuring a 
supply for their base period customers rather than in anticipation 
of financial advantage as a result of those purchases, and (ii) they 
were forced by market conditions to resell the product at a loss 
that was not sufficiently recouped through draw down of banks. See 
Texaco, 20 DOE at 88,320-21.

f. Consignees

    Finally, as in previous cases, we will presume that consignees 
of Hudson gasoline, if any exist, were not injured by the Hudson 
overcharges. See Atlantic Richfield Company, 17 DOE para. 85,069 at 
88,153 (1988). A consignee agent is an entity that distributed its 
products pursuant to an agreement whereby its supplier established 
the prices to be paid and charged by the consignee and compensated 
the consignee with a fixed commission based upon the volume of 
products distributed. This presumption may be rebutted by showing 
that the consignee's sales volumes and corresponding commission 
declined due to the alleged uncompetitiveness of Hudson's gasoline 
pricing practices. See Gulf Oil Corporation/C.F. Canter Oil Company, 
13 DOE para. 85,388 at 88,962 (1986).

B. Refund Application Requirements

    To apply for a refund from the Hudson monies paid to the DOE, a 
claimant should submit an Application for Refund containing the 
following information:
    (1) Identifying information including the claimant's name, 
current business address, business address during the refund period, 
taxpayer identification number, a statement indicating whether the 
claimant is an individual, corporation, partnership, sole 
proprietorship, or other business entity, the name, title, and 
telephone number of a person to contact for additional information, 
and the name and address of the person who should receive any refund 
check.\7\
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    \7\ Under the Privacy Act of 1974, the submission of a social 
security number by an individual applicant is voluntary. An 
applicant that does not submit a social security number must submit 
an employer identification number if one exists. This information 
will be used in processing refund applications, and is requested 
pursuant to our authority under the regulations codified at 10 CFR 
Part 205, Subpart V. The information may be shared with other 
Federal agencies for statistical, auditing or archiving purposes, 
and with law enforcement agencies when they are investigating a 
potential violation of civil or criminal law. Unless an applicant 
claims confidentiality, this information will be available to the 
public in the Public Reference Room of the Office of Hearings and 
Appeals.
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    (2) A monthly purchase schedule covering the refund period. The 
applicant should specify the source of this gallonage information. 
In calculating its purchase volumes, an applicant should use actual 
records from the refund period, if available. If these records are 
not available, the applicant may submit estimates of its Hudson 
gasoline purchases, but the estimation method must be reasonable and 
must be explained;
    (3) A statement whether the applicant or a related firm has 
filed, or has authorized any individual to file on its behalf, any 
other application in the Hudson refund proceeding. If so, an 
explanation of the circumstances of the other filing or 
authorization should be submitted;
    (4) If the applicant is or was in any way affiliated with 
Hudson, it should explain this affiliation, including the time 
period in which it was affiliated; \8\
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    \8\ As in other refund proceedings involving alleged refined 
product violations, the DOE will presume that affiliates of Hudson 
were not injured by the firm's overcharges. See, e.g., Marathon 
Petroleum Co./EMRO Propane Co., 15 DOE para. 85,288 (1987). This is 
because Hudson presumably would not have sold petroleum products to 
an affiliate if such a sale would have placed the purchaser at a 
competitive disadvantage. See Marathon Petroleum Co./Pilot Oil 
Corp., 16 DOE para. 85,611 (1987), amended claim denied, 17 DOE 
para. 85,291 (1988), reconsideration denied, 20 DOE para. 85,236 
(1990). Furthermore, if an affiliate of Hudson were granted a 
refund, Hudson would be indirectly compensated from a remedial order 
fund remitted to settle its own alleged violations.
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    (5) The statement listed below signed by the individual 
applicant or a responsible official of the firm filing the refund 
application:
    I swear (or affirm) that the information contained in this 
application and its attachments is true to the best of my knowledge 
and belief. I understand that anyone who is convicted of providing 
false information to the federal government may be subject to a 
fine, a jail sentence, or both, pursuant to 18 U.S.C. 1001. I 
understand that the information contained in this application is 
subject to public disclosure. I have enclosed a duplicate of this 
entire application which will be placed in the OHA Public Reference 
Room.
    All applications should be either typed or printed and clearly 
labeled with Hudson Oil Company, Inc. and Case No. VEF-0011. Each 
applicant must submit an original and one

[[Page 36767]]

copy of the application. If the applicant believes that any of the 
information in its application is confidential and does not wish for 
that information to be publicly disclosed, it must submit an 
original application, clearly designated ``confidential,'' 
containing the confidential information, and two copies of the 
application with the confidential information deleted. All refund 
applications should be postmarked on or before October 31, 2001, and 
sent to:

Office of Hearings and Appeals, Department of Energy, 1000 
Independence Ave., SW., Washington, DC 20585

    We will adopt the standard OHA procedures relating to refund 
applications filed on behalf of applicants by ``representatives,'' 
including refund filing services, consulting firms, accountants, and 
attorneys. See, e.g., Texaco; Starks Shell Service, 23 DOE para. 
85,017 (1993); Shell Oil Co., 18 DOE para. 85,492 (1989). We will 
also require strict compliance with the filing requirements as 
specified in 10 CFR 205.283, particularly the requirement that 
applications and the accompanying certification statement be signed 
by the applicant. The OHA reiterates its policy to scrutinize 
applications filed by filing services closely. Applications 
submitted by a filing service should contain all of the information 
indicated above.
    Additionally, the OHA reserves the authority to require 
additional information to be submitted before granting any 
particular refund in the Hudson proceeding.

C. Impact of the Petroleum Overcharge Distribution and Restitution 
Act of 1986 (PODRA) Amendments on Hudson Refund Claims

    The Interior and Related Agencies Appropriations Act for FY 1999 
amended certain provisions of the Petroleum Overcharge and 
Distribution and Restitution Act of 1986 (PODRA). These amendments 
extinguished rights that refund applicants had under PODRA to 
refunds for overcharges on the purchases of refined petroleum 
products. They also identified and appropriated a substantial 
portion of the funds being held by the DOE to pay refund claims 
(including the funds paid by Hudson). Congress specified that these 
funds were to be used to fund other DOE programs. As a result, the 
petroleum overcharge escrow accounts in the refined product area 
contain substantially less money than before. In fact they may not 
contain sufficient funds to pay in full all pending and future 
refund claims (including those in litigation) if they should all be 
found to be meritorious. See Enron Corp./Shelia S. Brown, 27 DOE 
para. 85,036 at 88,244 (2000) (Brown). Congress directed OHA to 
``assure the amount remaining in escrow to satisfy refined petroleum 
product claims for direct restitution is allocated equitably among 
all claimants.''Omnibus Consolidated and Emergency Supplemental 
Appropriation Act, 1999, Pub. L. No. 105-277 Sec. 337, 112 Stat 
2681, 2681-295 (1998) (language added to PODRA); Brown, 27 DOE at 
88,244. In view of this Congressional directive and the limited 
amount of funds available, it may become necessary to prorate the 
funds available among the meritorious Hudson claims. However, it 
could be several years before we know the full value of the 
meritorious claims and the precise total amount available for 
distribution. It will be some time before we are able to determine 
the amount that is available for distribution for each claimant.
    We therefore propose the following mechanism. All successful 
small claimants (refunds under $10,000) will be paid in full. To 
require small claimants to wait several more years for their refunds 
would constitute an inordinate burden and would be inequitable. See 
Brown, 27 DOE at 88,244. For all others granted refunds, including 
reseller claimants who have elected to take presumption refunds, we 
propose to immediately pay the larger of $10,000 or 50 percent of 
the refund granted. Once the other pending refund claims have been 
resolved, the remainder of these Hudson claims will be paid to the 
extent that it is possible through an equitable distribution of the 
funds remaining in the petroleum overcharge escrow account.
    It Is Therefore Ordered That:
    The payments remitted to the Department of Energy by Hudson Oil 
Company, Inc., pursuant to the remedial order issued on March 15, 
1985, will be distributed in accordance with the forgoing Decision.

[FR Doc. 01-17439 Filed 7-12-01; 8:45 am]
BILLING CODE 6450-01-P