[Federal Register Volume 66, Number 178 (Thursday, September 13, 2001)]
[Notices]
[Pages 47648-47650]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-22975]


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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 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 procedures for the disbursement of $528,941, 
plus accrued interest, in crude oil and refined petroleum product 
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 determined that the funds will 
be distributed in accordance with the provisions of 10 CFR part 205, 
subpart V and DOE's Modified Statement of Restitutionary Policy in 
Crude Oil Cases.

DATE AND ADDRESS: Applications for Refund should be addressed to the 
Office of Hearings and Appeals, Department of Energy, 1000 Independence 
Ave., SW, Washington, DC 20585-0107. All applications 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 Decision and Order set out 
below. The Decision sets forth the procedures that the DOE has 
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 will distribute one-half of the Consent Order funds in a 
refund proceeding described in the 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 accordance with the DOE's Modified Statement of 
Restitutionary Policy in Crude Oil Cases. 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.
    Applications should be postmarked by November 30, 2001. 
Applications 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: September 6, 2001.
George B. Breznay,
Director, Office of Hearings and Appeals.

Department of Energy, Washington, DC 20585

September 6, 2001.

Decision and Order, Department of Energy

Implementation of Special Refund Procedures

    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 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 plan to distribute those funds. The specific 
application requirements 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).
    On July 16, 2001, the OHA issued a Proposed Decision and Order 
(PD&O) establishing tentative procedures to distribute the Consent 
Order funds. That PD&O was published in the Federal Register, and a 
30-day period was provided for the submission of comments regarding 
our proposed refund plan. See 66 FR 38670 (July

[[Page 47649]]

25, 2001). More than 30 days have elapsed and OHA has received no 
comments concerning these proposed refund procedures. Consequently, 
the procedures will be adopted as proposed.

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, 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 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. 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 must be postmarked by November 30, 2001 and should be 
sent to the address below:

Office of Hearings and Appeals, Department of Energy, 1000 
Independence Ave., S.W., 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 
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 CFR 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

[[Page 47650]]

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. 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 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.
    In light of the above considerations, we will pay successful 
applicants using 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 will 
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), these funds will 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).\6\ Pursuant to the 
MSRP, OHA will distribute 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.
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    \6\ The MSRP 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 FR 29,689 (August 20, 1986) (the August 1986 Order).
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    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:
    (1) 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.
    (2) Applications for Refund in the Intercoastal Oil Corporation 
Refund Proceeding, Case No. LEF-0057, and the Gulf States Oil and 
Refining Refund Proceeding, Case No. LEF-0073, must be postmarked no 
later than November 30, 2001.

    Dated: September 6, 2001.
George B. Breznay,
Director, Office of Hearings and Appeals.
[FR Doc. 01-22975 Filed 9-12-01; 8:45 am]
BILLING CODE 6450-01-P