[Federal Register Volume 66, Number 143 (Wednesday, July 25, 2001)]
[Notices]
[Pages 38670-38673]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-18538]


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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 
$528,941, plus accrued interest, in crude oil and refined petroleum 
overcharges obtained by the DOE pursuant to consent orders signed by 
Intercoastal Oil Corporation, Case No. LEF-0057, and Gulf States Oil & 
Refining, Case No. LEF-0073. The OHA has tentatively determined that 
the funds will be distributed in accordance with the provisions of 10 
CFR Part 205, Subpart V.

DATE AND ADDRESSES. Comments must be filed in duplicate within 30 days 
of publication of this notice in the Federal Register 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. LEF-0057 or LEF-0073.

FOR FURTHER INFORMATION CONTACT: Richard A. Cronin, Jr., Assistant 
Director, Office of Hearings and Appeals, 1000 Independence Ave., SW., 
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 
$528,941, plus accrued interest, obtained by the DOE pursuant to 
Consent Orders entered into with Intercoastal Oil Corporation 
(Intercoastal) and Gulf States Oil & Refining (Gulf States). Under the 
Consent Orders, Intercoastal and Gulf States resolved all allegations 
concerning violations of the federal petroleum price regulations 
involving the sale of refined petroleum products and crude oil during 
the relevant audit periods.
    The OHA has proposed to distribute one-half of the Consent Order 
funds in a refund proceeding described in the Proposed Decision and 
Order to provide restitution for those parties injured by 
Intercoastal's or Gulf States' alleged violations of pricing 
regulations for refined petroleum products. Purchasers of refined 
petroleum products from Intercoastal or Gulf States will have the 
opportunity to submit refund applications. Refunds will be granted to 
applicants who satisfactorily demonstrate that they were injured by the 
pricing violations and who document the volume of refined petroleum 
products they purchased from one of the firms during the relevant 
consent order period.
    The remaining one-half of the Consent Order funds will be 
distributed in the currently-existing crude oil refund proceeding 
described in the Proposed Decision and Order. Because the deadline for 
filing crude oil refund applications has passed, no new applications 
for refund for the alleged crude oil pricing violations of Intercoastal 
and Gulf States will be accepted for these funds.
    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 16, 2001.
George B. Breznay,
Director, Office of Hearings and Appeals.
Names of Firms: Intercoastal Oil Corporation, Gulf States Oil & 
Refining

Dates of Filing: July 20, 1993, July 20, 1993

Case Numbers: LEF-0057, LEF-0073

    The Office of General Counsel (OGC) of the Department of Energy 
(DOE) filed a Petition requesting that the Office of Hearings and 
Appeals (OHA) formulate and implement Subpart V special refund 
proceedings. Under the procedural regulations of the DOE, special 
refund proceedings may be implemented to refund monies to persons 
injured by violations of the DOE

[[Page 38671]]

petroleum price regulations, provided DOE is unable to readily identify 
such persons or to ascertain the amount of any refund. 10 CFR 
Sec. 205.280. We have considered OGC's request to formulate refund 
procedures for the disbursement of monies remitted by Intercoastal Oil 
Corporation (Intercoastal) and Gulf States Oil & Refining (Gulf States) 
pursuant to Consent Orders (the Consent Orders) the firms have entered 
into with the DOE and have determined that such procedures are 
appropriate.
    Under the terms of the Consent Orders, a total of $528,941 has been 
remitted to DOE to remedy pricing violations which occurred during the 
relevant audit periods.\1\ These funds are being held in an escrow 
account established with the United States Treasury pending a 
determination of their proper distribution. This Decision sets forth 
OHA's proposed plan to distribute those funds. The specific application 
requirements we propose appear in Section III of this Decision.
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    \1\ Pursuant to the Consent Orders, Gulf States remitted 
$500,000 to DOE and Intercoastal has remitted $28,941.
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I. Background

    Gulf States, a firm with its home office in Houston, Texas, was a 
refiner during the period of price controls, August 13, 1973 through 
January 27, 1981. During this period, Intercoastal, a California 
corporation, was a reseller of crude oil and refined petroleum 
products. Economic Regulatory Administration audits of Intercoastal and 
Gulf States revealed possible violations of the Mandatory Petroleum 
Price Regulations (MPPR). Subsequently, each firm entered into a 
Consent Order to settle its disputes with the DOE concerning sales of 
crude oil and refined petroleum products. Pursuant to these Consent 
Orders, the firms agreed to pay to the DOE specified amounts in 
settlement of their potential liability with respect to sales to their 
customers during the settlement periods. The settlement period 
referenced in the Intercoastal Consent Order is the period October 25, 
1973 through January 17, 1981.\2\ For the Gulf States Consent Order the 
settlement period is August 19, 1973 through January 27, 1981.
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    \2\ The Intercoastal Consent Order resolves all possible 
violations of the petroleum price regulations for the period August 
19, 1973 through January 27, 1981. However, the consent order goes 
on to state that Intercoastal was active as a reseller of crude oil 
and refined petroleum products from October 25, 1973 through January 
27, 1981. See Consent Order with Intercoastal Oil Corporation, Case 
No. HRO-0083 (January 25, 1983) at para. 301.
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II. Jurisdiction and Authority

    The general guidelines that govern OHA's ability to formulate and 
implement a plan to distribute refunds are set forth at 10 CFR Part 
205, Subpart V. These procedures apply in situations where the DOE 
cannot readily identify the persons who were injured as a result of 
actual or alleged violations of the regulations or ascertain the amount 
of the refund each person should receive. 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).

III. Refund Procedures

A. Allocation of Consent Order Funds

    Both firms sold crude oil and refined petroleum products. We have 
been unable to discover factual information concerning the actual 
amounts of the alleged pricing violations or the distribution of the 
violations between either firm's sales of crude oil and refined 
petroleum products. Under the circumstances, i.e., with no factual 
basis for a decision as to allocation of the consent order funds 
between crude oil and refined products, we propose that one-half of the 
Intercoastal and Gulf States consent order funds ($264,471 total plus 
accrued interest) be allocated for restitution for parties injured by 
Intercoastal's and Gulf States' alleged violations of the pricing 
regulations for crude oil. The remaining portion of each of the sums 
remitted by Intercoastal and Gulf States ($264,470 total plus interest) 
will be allocated for restitution for those parties injured by the 
firms' alleged violations of the pricing regulations for refined 
petroleum products.

B. Refined Petroleum Product Refund Procedures

1. Application Requirements
    In cases where the ERA is unable to identify parties injured by the 
alleged overcharges or the specific amounts to which they may be 
entitled, we normally implement a two-stage refund procedure. In the 
first stage, those who bought refined petroleum products from the 
consenting firms may apply for refunds, which are typically calculated 
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.
    In the present case, however, we lack much of the information that 
we normally use to provide direct restitution to injured customers of 
the consenting firms. In particular, we have been unable to obtain any 
information on the volumes of the relevant petroleum products sold by 
the consenting firms during the settlement period. Nor do we have any 
information concerning the customers of these firms. Based on the 
present state of the record in these cases, it would be difficult to 
implement a volumetric refund process. Nevertheless, we will accept any 
refund claims submitted by persons who purchased refined petroleum 
products from Intercoastal or Gulf States during the settlement periods 
discussed above. We will work with those claimants to develop 
additional information that would enable us to determine who should 
receive refunds and in what amounts.\3\
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    \3\ Applications for Refund from will be accepted only for 
refined product pricing violations. With regard to crude oil pricing 
violations the deadline for filing applications for refund has 
passed. See infra.
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    To apply for a refund from the Intercoastal or Gulf States Consent 
Order funds, 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.\4\
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    \4\ 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 Petroleum Overcharge 
Distribution and Restitution Act of 1986 and 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 gallonage purchase schedule covering the relevant 
consent order 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

[[Page 38672]]

estimates of its refined petroleum product 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 that refund proceeding. If so, an explanation of the 
circumstances of the other filing or authorization must be submitted;
    (4) If the applicant is or was in any way affiliated with the 
consenting firm, it must explain this affiliation, including the time 
period in which it was affiliated;\5\
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    \5\ As in other refund proceedings involving alleged refined 
product violations, the DOE will presume that affiliates of a 
consenting firm 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 the consenting firm 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 
the consenting firm were granted a refund, the consenting firm would 
be indirectly compensated from a Consent 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. Sec. 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 the name and case number of the relevant firm 
(Intercoastal Oil Corporation, Case No. LEF-0057 or Gulf States Oil & 
Refining, Case No. LEF-0073). Each applicant must submit an original 
and one 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 
sent to the address below: Office of Hearings and Appeals, Department 
of Energy, 1000 Independence Ave., SW., Washington, DC 20585-0107.
    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., Starks Shell Service, 23 DOE para. 85,017 (1993); 
Texaco Inc., 20 DOE para. 85,147 (1990) (Texaco); Shell Oil Co., 18 DOE 
para. 85,492 (1989). We will also require strict compliance with the 
filing requirements as specified in 10 CFR Sec. 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.
    Finally, the OHA reserves the authority to require additional 
information from an applicant before granting any refund in these 
proceedings.
2. Allocation Claims
    We may receive claims based upon Intercoastal's or Gulf States's 
failure to furnish petroleum products that they were obliged to supply 
under the DOE allocation regulations that became effective in January 
1974. See 10 C.F.R. Part 211. Any such application will be evaluated 
with reference to the standards set forth in Texaco (and cases cited 
therein). See Texaco, 20 DOE at 88,321.
3. Impact of the Petroleum Overcharge Distribution and Restitution Act 
of 1986 (PODRA) Amendments on Intercoastal and Gulf States Refined 
Product 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 
Intercoastal and Gulf States). 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. 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 for the meritorious claimants 
in the Intercoastal and Gulf States refund proceedings. 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 other 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 the Intercoastal and Gulf States claims will be paid to 
claimants to the extent that it is possible through an equitable 
distribution of the funds remaining in the petroleum overcharge escrow 
account.

C. Refund Procedures for Crude Oil Pricing Violations

    With regard to the portion of the consent order funds arising from 
alleged pricing violations of crude oil ($264,471 plus accrued 
interest), we propose that the funds should be distributed in 
accordance with the DOE's Modified Statement of Restitutionary Policy 
in Crude Oil Cases, (MSRP), see 51 FR 27899 (August 4, 1986). Pursuant 
to the MSRP, OHA proposed to reserve 20 percent of those funds for 
direct refunds to applicants who claim that they were injured by the 
crude oil violations. We stated that the remaining 80 percent of the 
funds would be distributed to the states and federal government for 
indirect restitution. We propose to

[[Page 38673]]

distribute the funds obtained from the two firms in accordance with the 
MSRP, which was issued as a result of the Settlement Agreement approved 
by the court in The Department of Energy Stripper Well Exemption 
Litigation, 653 F. Supp. 108 (D. Kan. 1986). Shortly after the issuance 
of the MSRP, the OHA issued an Order that announced that this policy 
would be applied in all Subpart V proceedings involving alleged crude 
oil violations. See Order Implementing the MSRP, 51 Fed. Reg. 29,689 
(August 20, 1986) (the August 1986 Order).
    Under the MSRP, 40 percent of crude oil overcharge funds will be 
disbursed to the federal government, another 40 percent to the states, 
and up to 20 percent may initially be reserved for the payment of 
claims to injured parties. The MSRP also specified that any funds 
remaining after all valid claims by injured purchasers are paid will be 
disbursed to the federal government and the states in equal amounts.
    In April 1987, the OHA issued a Notice analyzing the numerous 
comments received in response to the August 1986 Order. 52 Fed. Reg. 
11,737 (April 10, 1987) (April 10 Notice). This Notice provided 
guidance to claimants that anticipated filing refund applications for 
crude oil monies under the Subpart V regulations. In general, we stated 
that all claimants would be required to (1) document their purchase 
volumes of petroleum products during the August 19, 1973 through 
January 27, 1981 crude oil price control period, and (2) 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 would be presumed to have been 
injured by any alleged crude oil overcharges. In order to receive a 
refund, end-users would not need to submit any further evidence of 
injury beyond the volume of petroleum products purchased during the 
period of price controls. See City of Columbus Georgia, 16 DOE para. 
85,550 (1987).
1. Individual Refund Claims
    The amount of money attributed for restitution of crude oil pricing 
violations is $264,471 plus accrued interest. In accordance with the 
MSRP, we shall initially reserve 20 percent of those funds ($52,894 
plus accrued interest) for direct refunds to applicants who claim that 
they were injured by crude oil overcharges. We shall base refunds on a 
volumetric amount which has been calculated in accordance with the 
methodology described in the April 10 Notice. That volumetric refund 
amount is currently $0.0016 per gallon. See 57 FR 15562 (March 24, 
1995).
    The filing deadline for refund applications in the crude oil refund 
proceeding was June 30, 1994. This was subsequently changed to June 30, 
1995. See Filing Deadline Notice, 60 FR 19914 (April 20, 1995); see 
also DMLP PDO, 60 FR 32004, 32007 (June 19, 1995). Because the June 30, 
1995, deadline for crude oil refund applications has passed, no new 
applications for restitution from purchasers of refined petroleum 
products for the alleged crude oil pricing violations of Intercoastal 
and Gulf States will be accepted for these funds. Instead, these funds 
will be added to the general crude oil overcharge pool used for direct 
restitution.
2. Payments to the States and Federal Government
    Under the terms of the MSRP, the remaining 80 percent of the crude 
oil violation amounts subject to this Decision, or $ 211,577 plus 
accrued interest, should be disbursed in equal shares to the states and 
federal government, for indirect restitution. Refunds to the states 
will be in proportion to the consumption of petroleum products in each 
state during the period of price controls. 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 
Agreement.
    Accordingly, we will direct the DOE's Office of the Controller to 
transfer one-half of that amount, or $105,788 plus interest, into an 
interest bearing subaccount for the states, and one-half or $105,789 
plus interest, into an interest bearing subaccount for the federal 
government.
    It is therefore ordered That:
    The payments remitted to the Department of Energy by Intercoastal 
Oil Corporation and Gulf States Oil & Refining, pursuant to consent 
orders signed on January 25, 1983 and February 1, 1983 respectively, 
will be distributed in accordance with the forgoing Decision.

[FR Doc. 01-18538 Filed 7-24-01; 8:45 am]
BILLING CODE 6450-01-P