Implementation of Special Refund Procedures

AGENCY:

Office of Hearings and Appeals, Department of Energy.

ACTION:

Notice of Implementation of Special Refund Procedures.

SUMMARY:

The Office of Hearings and Appeals (OHA) of the Department of Energy (DOE) announces the procedures for disbursement of $1,369,404.60, 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. (Bi-Petro), Case Nos. VEF-0035, et al. The OHA has determined that the funds will be distributed in accordance with the provisions of 10 C.F.R. Part 205, Subpart V and 15 U.S.C. § 4501, the Petroleum Overcharge Distribution and Restitution Act (PODRA).

DATES AND ADDRESSES:

Applications for Refund must be filed in duplicate, addressed to Bi-Petro Refining Co., Inc., et al. Special Refund Proceeding and sent to the Office of Hearings and Appeals, Department of Energy, 1000 Independence Ave., S.W., Washington, DC, 20585-0107. All applications should display a reference to Case Nos. VEF-0035, et al. and be postmarked on or before September 30, 2000.

FOR FURTHER INFORMATION CONTACT:

Thomas L. Wieker, Deputy Director Office of Hearings and Appeals, 1000 Independence Ave., S.W., Washington, DC 20585-0107, (202) 426-1527.

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 $1,369,404.60, 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 will distribute the funds in a two-stage refund proceeding. Purchasers of certain covered petroleum products from any one of the firms considered in the proceeding 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 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. § 4501, the Petroleum Overcharge Distribution and Restitution Act of 1986 (PODRA).

Applications for Refund must be postmarked on or before September 30, 2000. Instructions for the completion of refund applications have been set forth in Section III of the Decision immediately following this notice. Refund applications should be mailed to the address listed at the beginning of this notice.

Unless labeled as “confidential”, all submissions must 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.

March 28, 2000.

Decision and Order

DEPARTMENT OF ENERGY

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 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 C.F.R. § 205.280. We have considered OGC's request to formulate refund procedures for the disbursement of monies remitted by Bi-Petro Refining Co., Inc. and eight other firms pursuant to Remedial Orders and Consent Orders (Remedial Order and Consent Order funds), and have determined that such procedures are appropriate. Each firm's name, case number and amount of money remitted to remedy its pricing violations has been set out in the Appendix immediately following this Decision.

Under the terms of the Remedial Orders and Consent Orders, a total of $1,369,404.60 has been remitted to DOE to remedy pricing violations which occurred during the relevant audit periods. 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.

I. 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 C.F.R. 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 ¶ 82,508 (1981) and Office of Enforcement, 8 DOE ¶ 82,597 (1981).

II. Background

On January 21, 2000, we issued a Proposed Decision and Order (PDO) establishing tentative procedures to distribute the funds that each firm remitted to DOE. We proposed implementing a two-stage refund proceeding and we stated that applicants who purchased certain covered petroleum products from any one of the retailers identified in the Appendix to the PDO would be provided an opportunity to submit refund applications in the first stage. In the event funds remained after all first stage claims had been considered, we stated that the remaining funds would be disbursed in the second stage in accordance with the provisions of the Petroleum Overcharge Distribution and Restitution Act of 1986 (15 U.S.C. § 4501) (PODRA).

We provided a 30-day period for the submission of comments concerning the proposed procedures. However, we have received no comments since the PDO was published in the Federal Register more than 30 days ago. The proposed procedures will therefore be adopted in the same form in which they were originally outlined. Immediately set forth below are the specific considerations that will guide our evaluation of refund applications during the first stage.

III. The First-Stage Refund Procedures

Refund applications submitted in these special refund proceedings will be evaluated in exactly the same manner as applications submitted in other refined product proceedings. In those proceedings, we have frequently chosen to adopt a number of rebuttable presumptions relating to pricing violations and injury. Such a policy reflects our belief that adoption of certain presumptions (1) permits applicants to participate in refund proceedings in larger numbers by avoiding the need to incur inordinate expense; and (2) facilitates our consideration of first stage refund applications. 10 C.F.R. § 205.282(e). For those reasons, we have adopted similar presumptions in the present proceeding.

A. Calculating the Refund

We have presumed that the pricing violations were dispersed equally throughout each firm's refined petroleum product sales during the relevant audit period. We therefore proposed that each applicant's potential refund should be calculated on a volumetric basis. Under the volumetric approach, refunds are calculated by multiplying the gallons of refined product each applicant purchased by the per gallon refund amount, multiplied by the percentage of funds DOE succeeded in collecting (volumetric). Applicants believing they were disproportionately overcharged by the pricing violations may present documentation which supports that claim. Those who succeed in showing they were disproportionately overcharged will be eligible to receive refunds calculated at a higher volumetric.

We have established a volumetric for each of the firms whose name appears in the Appendix accompanying this Decision. The precise volumetric for each firm can be found in the Appendix.

Each volumetric was obtained by multiplying $.0004 by the collection percentage. This percentage was calculated by dividing the amount collected (with interest accrued by the DOE as of the date of issuance of this 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.

B. Eligibility for a Refund

In order to be eligible to receive a refund in this proceeding, each applicant must (1) document the volume of certain petroleum products listed in the Appendix that it purchased during the relevant period; and (2) demonstrate that it was injured by the overcharges. The threshold requirement for any applicant is documenting the volume of product it purchased. This requirement is typically satisfied when the applicant successfully demonstrates ownership of the business for which the refund is sought and submits documentation which supports the volume claimed in its refund application.

The injury showing, however, is a potentially more difficult requirement for applicants to satisfy, especially those seeking smaller refund amounts. This is true because an applicant must demonstrate that it was forced to absorb the overcharges. Our cases have often stated that an applicant accomplishes this by demonstrating that it maintained a “bank” of unrecovered product costs and showing that market conditions would not permit them to pass through those increased costs. See, Quintana Energy Corp., 21 DOE ¶85,032 at 88,117 (1991).

We recognized that the cost to the applicant of gathering evidence of injury to support a relatively small refund claim could exceed the expected refund and thereby cause some injured parties to forego an opportunity to obtain a refund. In view of these difficulties, we proposed adopting a number of injury presumptions which simplify and streamline the refund process. The simplified procedures reduce the burden that would have been placed on this Office had we required detailed injury showings for relatively small refund applications.

C. Presumptions of Injury

Set forth below are the presumptions of injury that have been adopted for each class of applicant likely to submit refund applications in this proceeding. These presumptions are not unlike injury presumptions adopted by OHA in many other refined product proceedings. Each presumption turns on the category of applicant.

Small-claim Presumption

We have adopted a small claim presumption of injury for resellers, retailers and refiners whose claim is $10,000 or less. Such an applicant need only document the volume of certain covered petroleum products listed in the Appendix he or she purchased during the audit period from one or more of the firms named in the Appendix to be eligible to receive a full refund. See Enron Corporation, 21 DOE ¶ 85,323 at 88,957 (1991).

Medium Range Presumption

Medium range applicants; that is, applicants seeking refunds in excess of $10,000 but less than $50,000, are eligible to receive 40 percent of their allocable share without proving injury. Like small-claim applicants, these applicants will only be required to document the volume of certain covered petroleum products listed in the Appendix they purchased during the audit period from any one of the firms named in the Appendix to be eligible to receive a refund. See Shell, 17 DOE at 88,406.

End-user Presumption

We have presumed that end-users of petroleum products whose businesses were unrelated to the petroleum industry and were not subject to the regulations promulgated under the Emergency Petroleum Price and Allocation Act of 1973 (EPAA), 15 U.S.C. §§ 751-760h, were injured by each of the firm's pricing violations. Unlike regulated firms, end-users were not subject to price controls during the audit period. Moreover, these firms were not required to keep records that justified selling price increases by reference to cost increases. An analysis of the impact of the alleged overcharges on the final prices of non-petroleum goods and services is beyond the scope of a special refund proceeding. See American Pacific International, Inc., 14 DOE ¶85,158 at 88,294 (1986). End-users seeking refunds in this proceeding will therefore be presumed to have been injured. In order to receive a refund, end-user applicants need only document the volume of certain refined petroleum products they purchased during the relevant audit period from any of the nine firms whose name appears in the Appendix following this Decision. Meritorious applicants are eligible to receive their full allocable share. See Shell, 17 DOE at 88,406.

Refunds in Excess of $50,000 and Other Applicants

Applicants seeking refunds in excess of $50,000, excluding interest, will be required to submit detailed evidence of injury. These applicants must show that the overcharges were absorbed, not passed through to their customers. They will therefore be unable to rely upon injury presumptions utilized in many refined product refund cases. Id.

Regulated Firms and Cooperatives

Regulated firms (such as public utilities) and agricultural cooperatives, which are required to pass on to their customers the benefit of any refund received, are exempted from the requirement that they make a detailed showing of injury. Marathon Petroleum Co., 14 DOE ¶ 85,269 at 88,515 (1986); see also Office of Special Counsel, 9 DOE ¶ 82,538 at 85,203 (1982). We 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 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.

Indirect Purchasers

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 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 ¶ 85,240 at 88,451-52 (1986).

Spot Purchasers

We 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 ¶ 82,597 at 85,396-97 (1981).

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 ¶ 85,048 at 88,220 (1982), and refund application cases such as Mobil Oil Corp./Reynold Industries, Inc., 17 DOE ¶ 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 predecessors') 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 ¶ 85,319 (1989).

Consignees

We 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 ¶ 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.

D. How To Apply for a Refund

To apply for a refund from one or more of the firms' remitted funds, an applicant should submit an Application for Refund containing all of the following information:

(1) The applicant's name; the current name and address of the business for which the refund is sought; the name and address during the refund period of the business for which the refund is sought; the taxpayer identification number; a statement specifying whether the applicant 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. If the applicant operated under more than one name or under a different name during the price control period, the applicant should specify those names.

(2) The applicant should specify the source of its gallonage information. In calculating its purchase volumes, an applicant should use actual records from the relevant period of purchase, if available. If these records are not available, the applicant may submit estimates of its relevant refined petroleum product purchases, but the estimation methodology must be reasonable and must be explained.

(3) A statement indicating whether the applicant or a related firm has filed, or has been authorized to file on its behalf, any other application in this 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 the firm from whom it purchased covered petroleum products and consequently is filing its present application, the applicant should explain this affiliation, including the time period in which it was affiliated. If not, a statement that the applicant was not affiliated with that firm.

(5) The statement listed below, provided it has been signed by the 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 and correct 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 should clearly refer to the entity from whom it bought the relevant covered petroleum products and its respective case number as listed in the Appendix. 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 this information to be publicly disclosed, the applicant 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 no later than September 30, 2000, and sent to: Bi-Petro Refining Co, Inc., et al., VEF-0035, et al., Office of Hearings and Appeals, Department of Energy, 1000 Independence Avenue, S.W., Washington, D.C. 20585-0107.

E. Minimal Amount Requirement

Only claims for at least $15 will be processed. This minimum has been adopted in refined product refund proceedings because the cost of processing claims for refunds of less than $15 outweighs the benefits of restitution in those instances. See Mobil Oil Corporation, 13 DOE ¶ 85,339 (1985).

F. Additional Information

OHA reserves the authority to require additional information before granting any refund in these proceedings. Applications lacking the required information may be dismissed or denied.

G. Refund Applications filed by Representatives

OHA reiterates its policy to closely scrutinize applications filed by filing services. Applications submitted by a filing service should contain all of the information indicated in this final Decision and Order. Strict compliance with the filing requirement as specified in 10 C.F.R. § 205.283, particularly the requirement that applications and the accompanying certification statement be signed by the applicant, will be required.

H. Filing Deadline

The deadline for filing an Application for Refund is September 30, 2000. We are not anticipating extending this deadline for any reason.

IV. Second-Stage Refund Procedures

Any funds that remain after all first-stage claims have been decided will be distributed in accordance with the provisions of the Petroleum Overcharge Distribution and Restitution Act of 1986 (PODRA), 15 U.S.C. §§ 4501-07. PODRA requires that the Secretary of Energy determine annually the amount of oil overcharge funds that will not be required to refund monies to injured parties in Subpart V proceedings and make those funds available to state governments for use in four energy conservation programs. The Secretary has delegated these responsibilities to OHA, and any funds that OHA determines will not be needed to effect direct restitution to injured customers will be distributed in accordance with the provisions of PODRA.

It Is Therefore Ordered That: Applications for Refund from the funds remitted to the Department of Energy by any one of the firms named in the Appendix to this Decision may now be filed.