Proposed Implementation of Special Refund Procedures

AGENCY:

Office of Hearings and Appeals, Department of Energy.

ACTION:

Notice of proposed implementation of special refund procedures.

SUMMARY:

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

DATE AND ADDRESS:

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

FOR FURTHER INFORMATION CONTACT:

Dawn L. Goldstein, Staff Attorney, Office of Hearings and Appeals, 1000 Independence Ave. SW, Washington, DC 20585-0107; (202) 426-1527, Dawn.Goldstein@hq.doe.gov.

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 $1,368,143.60, plus accrued interest, obtained by the DOE under the terms of Remedial Orders and Consent Orders regarding Bi-Petro Refining Company, Inc., et al. Under the Remedial Orders, companies were found to have violated the Federal petroleum price and allocation regulations involving the sale of refined petroleum products during the relevant audit periods. The Consent Orders resolved alleged violations of these regulations.

The OHA has proposed to distribute the funds in a two-stage refund proceeding. Purchasers of certain covered petroleum products from any one of the firms considered in the proceeding will have an opportunity to submit refund applications in the first stage. Refunds will be granted to applicants who satisfactorily demonstrate they were injured by the pricing violations and who document the volume of certain refined petroleum products they purchased from one of the firms during the relevant audit periods. In the event that money remains after all first-stage claims have been disposed of, the remaining funds will be disbursed in accordance with the provisions of 15 U.S.C. § 4501, the Petroleum Overcharge Distribution and Restitution Act of 1986 (PODRA).

Any member of the public may submit written comments regarding the proposed refund procedures. Commenting parties are requested to forward two copies of their submissions, within 30 days of publication of this notice in the Federal Register, to the address set forth at the beginning of this notice. Comments so received, will be made available for public inspection between the hours of 9 a.m. and 5 p.m., Monday through Friday, except Federal Holidays, in the Public Reference Room of the Office of Hearings and Appeals, 950 L'Enfant Plaza, Washington, D.C.

PROPOSED DECISION AND ORDER

January 21, 2000.

Department of Energy; Washington, DC 20585.

Implementation of Special Refund Procedures

Names of Firms: Bi-Petro Refining Co., Inc., et al.

Dates of Filing: October 19, 1999, et al.

Case Numbers: VEF-0035, et al.

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

I. Proposed Refund Procedures

A. Eligibility for Refunds

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

B. Calculation of Refund Amount

We propose adopting a volumetric method to apportion these funds. Under this volumetric refund approach, a claimant's allocable share of the Remedial Order and Consent Order funds is equal to the number of gallons of certain covered petroleum products purchased during the time period specified in the Appendix, multiplied by a per gallon refund amount. In the interest of the expeditious distribution of the collected funds, as it is near the end of our Subpart V refund proceedings, and based upon our previous experience in these refined product Subpart V proceedings, we have set the per gallon refund amount at $.0004 per gallon. This figure will be reduced by the collection percentage, to obtain the volumetric. If the collection percentage is 100 percent or greater, the volumetric will not be reduced.

Thus, under the volumetric approach and using the information listed in the Appendix, an eligible claimant will receive a refund equal to the number of gallons of certain covered petroleum products that it purchased from one of the nine firms during the relevant period, multiplied by the volumetric for each firm.

As in previous cases, we will establish a minimum amount of $15 for refund claims. E.g., Uban Oil Co., 9 DOE ¶ 82,541 at 85,225 (1982). Because we are nearing the end of our Subpart V proceedings, we will also set a deadline to submit applications of six months from the publication date of our final Implementation Order in the Federal Register.

C. Showing of Injury

We propose that each claimant will be required to document its purchases of the relevant covered petroleum products from the firms at issue during the relevant period. In addition, we propose that in order to receive a refund, an applicant generally must demonstrate through the submission of detailed evidence that it did not pass on the alleged overcharges to its customers. See, e.g., Office of Enforcement, 8 DOE ¶ 82,597 at 85,396-97 (1981).

However, as we have done in many prior refund cases, we propose to adopt specific injury presumptions that will simplify and streamline the refund process for some categories of customers: small claims, end-users, consignees, regulated firms and cooperatives. These presumptions will excuse members of certain applicant categories from proving that they were injured by the firms’ alleged overcharges, and are discussed below.

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

We propose to adopt a presumption, as we have in many previous cases, that resellers seeking small refunds were injured by these firms' pricing practices. See, e.g., E.D.G., Inc., 17 DOE ¶ 85,679 (1988). We recognize that the cost to the applicant of gathering evidence of injury to support a small refund claim could exceed the expected refund. Consequently, without simplified procedures, some injured parties would be denied an opportunity to obtain a refund. Therefore, we are proposing a small claims threshold of $10,000. See Enron Corp., 21 DOE ¶ 85,323 at 88,957 (1991).

Accordingly, under the proposed small claims presumption in this proceeding, a claimant who claims a refund of $10,000 or less will not be required to submit any evidence of injury beyond establishing that it is one of the eligible customers that purchased covered petroleum products from one of the nine firms. We propose that a reseller applicant must follow the procedures that are outlined below if the applicant is seeking a refund in excess of $10,000.

E. Medium-Range Presumption

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

F. Reseller Applicants Seeking Larger Refunds

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

G. End-Users

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

H. Regulated Firms and Cooperatives

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

I. Indirect Purchasers

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

J. Spot Purchasers

We propose to adopt the rebuttable presumption that a claimant who made only spot purchases from one of the firms was not injured as a result of those purchases. A claimant is a spot purchaser if it made only sporadic purchases of significant volumes of covered petroleum products from one of the firms. Accordingly, a spot purchaser claimant must submit specific and detailed evidence to rebut the spot purchaser presumption and to establish the extent to which it was injured as a result of its spot purchases from one of these firms. E.g., Office of Enforcement, 8 DOE ¶ 82,597 at 85,396-97 (1981).

K. Applicants Seeking Refunds Based on Allocation Claims

We also recognize that we may receive claims alleging these firms' failure to furnish petroleum products that they were obliged to supply under the DOE allocation regulations that became effective in January 1974. See 10 CFR Part 211. Any such application will be evaluated with reference to the standards we set forth in Subpart V implementation decisions such as Office of Special Counsel, 10 DOE ¶ 85,048 at 88,220 (1982), and refund application cases such as Mobil Oil Corp./Reynolds 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 predecessor's) treatment of complaints made to it by the claimant. We will also look at any affirmative defenses that the firm may have had to the alleged allocation violation. In assessing an allocation claimant's injury, we will evaluate the effect of the alleged allocation violation on its entire business operations with particular reference to the amount of product that it received from suppliers other than the firm at issue. In determining the amount of an allocation refund, we will utilize any information that may be available regarding the amount of the firm's allocation violations in general and regarding the specific allocation violation alleged by the claimants. We will also pro rate any allocation refunds that would otherwise be disproportionately large in relation to the funds collected. Cf. Amtel, Inc./Whitco, Inc., 19 DOE ¶ 85,319 (1989).

L. Consignees

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

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

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

III. Conclusion

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

It Is Therefore Ordered That:

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