Special refund procedures; implementation,
[Federal Register: July 13, 2001 (Volume 66, Number 135)]
[Notices]
[Page 36764-36767]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13jy01-45]
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.
SUMMARY: The Office of Hearings and Appeals (OHA) of the Department of Energy (DOE) announces the proposed procedures for the disbursement of $6,672,934, plus accrued interest, in refined petroleum overcharges obtained by the DOE pursuant to a remedial order OHA issued to Hudson Oil Company, Inc., Case No. VEF-0011. The OHA has tentatively determined that the funds will be distributed in accordance with the provisions of 10 CFR Part 205, Subpart V.
DATES: Comments must be filedin duplicate on or before August 13, 2001.
ADDRESSES: Comments should be addressed to the Office of Hearings and Appeals, Department of Energy, 1000 Independence Ave., SW., Washington, DC 20585-0107. All comments should display a reference to Case No. VEF- 0011.
FOR FURTHER INFORMATION CONTACT: Richard A. Cronin, Jr. Assistant Director, Office of Hearings and Appeals, 1000 Independence Ave., SW.,
[[Page 36765]]
Washington, DC 20585-0107, (202) 287-1562, richard.cronin@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 $6,672,934, plus accrued interest, obtained by the DOE pursuant to a Remedial Order OHA issued to Hudson Oil Company, Inc. (Hudson) and Hudson Refining Company, Inc. (Hudson Refining), on March 15, 1985. Under the Remedial Order, Hudson and Hudson Refining were found to have violated the federal petroleum price regulations involving the sale of refined petroleum products during the relevant audit periods.
The OHA has proposed to distribute the Remedial Order funds in a refund proceeding described in the Proposed Decision and Order. Purchasers of motor gasoline from Hudson, Hudson Refining or its affiliated firms will have the opportunity to submit refund applications. Refunds will be granted to applicants who satisfactory demonstrate that they were injured by the pricing violations and who document the volume of refined petroleum products they purchased from one of the Hudson-affiliated firms during the relevant audit period.
Any member of the public may submit written comments regarding the proposed refund procedures. Commenting parties are requested to forward two copies of their submission, within 30 days of the publication of this notice in the Federal Register, to the address set forth at the beginning of this notice. Comments so received will be made available for public inspection between the hours of 1 p.m. and 5 p.m., Monday through Friday, except Federal Holidays, in Room 7132 ( the public reference room), 950 L'Enfant Plaza, Washington, DC.
Dated: July 5, 2001. George Breznay, Director, Office of Hearings and Appeals.
Department of Energy, Washington, DC, July 5, 2001.
Proposed Decision and Order of the Department of Energy
Implementation of Special Refund Procedures
Name of Firm: Hudson Oil Company, Inc. Date of Filing: March 20, 1995 Case Number: VEF-0011
On March 20, 1995, the Economic Regulatory Administration (ERA) of the Department of Energy (DOE) fileda Petition for the Implementation of Special Refund Procedures with the Office of Hearings and Appeals (OHA), to distribute the funds received pursuant to an OHA Remedial Order issued to Hudson Oil Company, Inc. (Hudson) and Hudson Refining Company, Inc. (Hudson Refining). See Hudson Oil Company, Inc., 12 DOE para. 83,035 (1985). In accordance with the provisions of the procedural regulations at 10 CFR Part 205, Subpart V (Subpart V), the ERA requests in its Petition that the OHA establish special procedures to make refunds in order to remedy the effects of regulatory violations set forth in the Remedial Order.
-
Background
ERA audits of Hudson, a retailer with headquarters in Kansas City, Kansas and Hudson Refining, a refiner located in Cushing, Oklahoma, revealed possible violations of the Mandatory Petroleum Price Regulations in Hudson's sales of gasoline during the period of price controls.\1\ Subsequently, ERA issued a proposed remedial order (PRO) alleging that Hudson and its affiliated firms had violated the petroleum price regulations. Hudson challenged the PRO before OHA. In our March 15, 1985 Remedial Order, we found that Hudson had violated the price regulations and had overcharged its motor gasoline customers by $10,670,000 during the period June 1979 through August 1979 (refund period). See Hudson, 12 DOE at 86,479. Hudson and its affiliates were found to be jointly and severally liable for the overcharge amount.\2\ Id. at 86,481. On March 20, 1995, the Office of General Counsel fileda Petition for the Implementation of Special Refund Proceeding for the $6,672,934 in funds Hudson has remitted to the DOE.\3\
\1\ Hudson and its affiliates operated a widespread retail operation. While information in the available files is incomplete, Hudson gasoline may have been sold by retailers in Virginia, Florida, Pennsylvania, Maryland, New York, West Virginia and Georgia.
\2\ The Remedial Order references Hudson Van Oil Company, Hudson Van Oil Company of Kansas City, Inc., Hudson Van Oil Company of Florida, Inc., Hudson Van Oil Company of California, Inc., Hudson Stations, Inc., Wind Stations, Inc., News, Inc. and Hudson Petroleum, Inc. as Hudson affiliates covered in ERA's PRO. See Hudson, 12 DOE at 86,483 n.1.
\3\ Hudson and Hudson Refining filedfor bankruptcy in 1984. In addition to the March 1985 Remedial Order discussed above OHA issued another Remedial Order to Hudson on July 1, 1985, finding that Hudson had violated the price regulations concerning sales of crude oil and was liable for overcharges of $6,380,506. See Hudson Oil Company, 13 DOE para. 83,022 (1985). ERA's petition requests that we institute a refund proceeding covering both Remedial Orders. However, since Husdon has failed to remit sufficient money to fully comply with the March 1985 Remedial Order, and this Remedial Order was first in time, we will institute a refund proceeding that covers only Hudson's violation of price regulations concerning its sales of motor gasoline detailed in the March 1985 Remedial Order.
-
Jurisdiction and Authority
The Subpart V regulations set forth general guidelines which may be used by the OHA in formulating and implementing a plan of distribution of funds received as a result of an enforcement proceeding. The DOE policy is to use the Subpart V process to distribute such funds. For a more detailed discussion of Subpart V and the authority of the OHA to fashion procedures to distribute refunds, see Office of Enforcement, 9 DOE para. 82,508 (1981), and Office of Enforcement, 8 DOE para. 82,597 (1981) (Vickers).
-
Refund Procedures
-
Proposed Standards for the Evaluation of Claims
This section sets forth our proposals for the standards to be used in evaluating refund claims in the Hudson refund proceeding. From our experience with Subpart V proceedings, we expect that refund applicants will fall into the following categories: (i) end- users; (ii) regulated entities, such as public utilities and cooperatives; (iii) refiners, resellers and retailers (collectively referred to as ``resellers'') and (iv) consignees.
In order to receive a refund, each claimant will be required to submit a schedule of its gasoline purchases from Hudson during the refund period. If the gasoline was not purchased directly from Hudson, the claimant must establish that the gasoline originated from Hudson.\4\
\4\ Indirect purchasers who establish that their gasoline purchases originated with Hudson will be eligible for a refund unless the direct purchaser has fileda refund claim and established that it did not pass through the Hudson overcharges to its customers. See Texaco, 20 DOE ] 85,147 at 88,319 n. 39 (1990) (Texaco). As a result, applications from indirect purchasers will generally be considered only after evaluating the applications of their suppliers.
In addition, a reseller, except one who chooses to utilize the injury presumptions set forth below, will be required to make a detailed showing that it was injured by Hudson's regulatory violations. This showing will consist of two distinct elements. First, a reseller claimant will be required to show, through credible, firm-specific data, that it had ``banks'' of unrecouped increased product costs beginning in June 1979 through August 1979. In addition, such a claimant must demonstrate that market conditions would not have allowed those costs to be passed through to its customers. This showing may be made in a comparative disadvantage analysis, which compares the price paid by the applicant with the average price paid for the same product at the relevant level of distribution. See, e.g., Enron Corp./MAPCO, Inc., 27 DOE para. 85,018 (1998).
A claimant who attempts to make a detailed showing of injury in order to obtain 100 percent of its allocable share but, instead, provides evidence that leads us to conclude that it passed through all of the overcharges, or is eligible for a refund of less than the applicable presumption-level amount, will not then be eligible for a presumption-based refund. Instead, such a claimant will receive a refund which reflects the level of injury established in its Application. No refund will be approved if its submission indicates that it was not injured as a result of its gasoline purchases from Hudson.
[[Page 36766]]
-
Presumptions for Claims Based Upon Hudson Gasoline Purchases
Our general practice is to grant refund on a pro-rata or volumetric basis. In order to calculate the volumetric refund amount, the OHA divides the amount of money available for direct restitution by the number of gallons sold by the firm during the period covered by the consent order.
Based on the available ERA workpapers, we estimate that during the period June 1979 through August 1979 Hudson sold 80,207,000 gallons of gasoline. See Schedule II-Q--Summary of allowable cost recoveries at 3. Dividing the recovered overcharge amount of $6,672,934 by this estimated number of gallons sold by Hudson results in a volumetric refund amount (or allocable share) of $0.0832 per gallon. In addition, each successful applicant is entitled to receive a proportionate share of accrued interest.\5\
\5\ In addition, we propose, as in previous cases, that the minimum refund amount that will be paid to an claimant is $15.00. We have found through our experience that the cost of processing claims for less than $15.00 outweighs the benefits of restitution in these cases. See, e.g., Texaco, 20 DOE at 88,320 n. 43.
In order to expedite the processing of applications in this proceeding and to ensure that refund claims are evaluated in the most efficient and equitable manner possible, we propose to use the following presumptions in addition to the volumetric presumption described above.
-
End-Users
End-Users of Hudson gasoline, i.e., consumers, whose use of the gasoline was unrelated to the petroleum business are presumed injured and need only document their purchase volumes from Hudson during the refund period to be eligible to receive a full allocable share.
-
Refiners, Resellers and Retailers Seeking Refunds of $10,000 or Less
Reseller claimants whose allocable share is $10,000 or less, i.e. who purchased 120,192 gallons or less of Hudson gasoline during the refund period will be presumed injured and therefore need not provide a further demonstration of injury, besides documentation of their volumes, to receive its full allocable share.
-
Medium-Range Refiners, Reseller and Retailer Claimants
In lieu of making a detailed showing of injury, a reseller claimant whose allocable share exceeds $10,000 may elect to receive as its refund the larger of $10,000 or 40 percent of its allocable share up to $50,000.\6\ An applicant in this group will only be required to provide documentation of its purchase volumes of Hudson gasoline during the refund period in order to receive a refund of 40 percent of its total volumetric share, or $10,000, whichever is greater.
\6\ That is, claimants who purchased between 120,192 gallons and 1,502,404 gallons of Hudson gasoline during the refund period may elect to utilize the presumption. Claimants who purchased more than 1,502,404 gallons from Hudson may elect to limit their claims to $50,000.
-
Regulated Firms and Cooperatives
We have determined that, in order to receive a full volumetric refund, a claimant whose prices for goods and services are regulated by a governmental agency, e.g., a public utility, or by the terms of a cooperative agreement, needs only to submit documentation of Hudson gasoline used by itself or, in the case of a cooperative, sold to its members. However, a regulated firm or cooperative whose allocable share is greater that $10,000 will also be required to certify that it will pass through any refund received to its customers or member-customers, provide us with a full explanation of how it plans to accomplish that restitution, and certify that it will notify the appropriate regulatory body or membership group of the receipt of the refund.
-
Spot Purchasers
We propose creation of a rebuttable presumption that a reseller that made only irregular or sporadic, i.e., spot, gasoline purchases from Hudson did not suffer injury as a result of those purchases. Accordingly, a spot purchaser claimant must submit specific and detailed evidence to rebut the spot purchaser presumption and to establish the extent to which it was injured as a result of its spot purchases of Hudson gasoline. In prior proceedings, we have stated that refunds will be approved for spot purchasers who demonstrate that (i) they made the spot purchases for the purpose of ensuring a supply for their base period customers rather than in anticipation of financial advantage as a result of those purchases, and (ii) they were forced by market conditions to resell the product at a loss that was not sufficiently recouped through draw down of banks. See Texaco, 20 DOE at 88,320-21.
-
Consignees
Finally, as in previous cases, we will presume that consignees of Hudson gasoline, if any exist, were not injured by the Hudson overcharges. See Atlantic Richfield Company, 17 DOE para. 85,069 at 88,153 (1988). A consignee agent is an entity that distributed its products pursuant to an agreement whereby its supplier established the prices to be paid and charged by the consignee and compensated the consignee with a fixed commission based upon the volume of products distributed. This presumption may be rebutted by showing that the consignee's sales volumes and corresponding commission declined due to the alleged uncompetitiveness of Hudson's gasoline pricing practices. See Gulf Oil Corporation/C.F. Canter Oil Company, 13 DOE para. 85,388 at 88,962 (1986).
-
-
Refund Application Requirements
To apply for a refund from the Hudson monies paid to the DOE, a claimant should submit an Application for Refund containing the following information:
(1) Identifying information including the claimant's name, current business address, business address during the refund period, taxpayer identification number, a statement indicating whether the claimant is an individual, corporation, partnership, sole proprietorship, or other business entity, the name, title, and telephone number of a person to contact for additional information, and the name and address of the person who should receive any refund check.\7\
\7\ Under the Privacy Act of 1974, the submission of a social security number by an individual applicant is voluntary. An applicant that does not submit a social security number must submit an employer identification number if one exists. This information will be used in processing refund applications, and is requested pursuant to our authority under the regulations codified at 10 CFR Part 205, Subpart V. The information may be shared with other Federal agencies for statistical, auditing or archiving purposes, and with law enforcement agencies when they are investigating a potential violation of civil or criminal law. Unless an applicant claims confidentiality, this information will be available to the public in the Public Reference Room of the Office of Hearings and Appeals.
(2) A monthly purchase schedule covering the refund period. The applicant should specify the source of this gallonage information. In calculating its purchase volumes, an applicant should use actual records from the refund period, if available. If these records are not available, the applicant may submit estimates of its Hudson gasoline purchases, but the estimation method must be reasonable and must be explained;
(3) A statement whether the applicant or a related firm has filed, or has authorized any individual to file on its behalf, any other application in the Hudson refund proceeding. If so, an explanation of the circumstances of the other filing or authorization should be submitted;
(4) If the applicant is or was in any way affiliated with Hudson, it should explain this affiliation, including the time period in which it was affiliated; \8\
\8\ As in other refund proceedings involving alleged refined product violations, the DOE will presume that affiliates of Hudson were not injured by the firm's overcharges. See, e.g., Marathon Petroleum Co./EMRO Propane Co., 15 DOE para. 85,288 (1987). This is because Hudson presumably would not have sold petroleum products to an affiliate if such a sale would have placed the purchaser at a competitive disadvantage. See Marathon Petroleum Co./Pilot Oil Corp., 16 DOE para. 85,611 (1987), amended claim denied, 17 DOE para. 85,291 (1988), reconsideration denied, 20 DOE para. 85,236 (1990). Furthermore, if an affiliate of Hudson were granted a refund, Hudson would be indirectly compensated from a remedial order fund remitted to settle its own alleged violations.
(5) The statement listed below signed by the individual applicant or a responsible official of the firm filing the refund application:
I swear (or affirm) that the information contained in this application and its attachments is true to the best of my knowledge and belief. I understand that anyone who is convicted of providing false information to the federal government may be subject to a fine, a jail sentence, or both, pursuant to 18 U.S.C. 1001. I understand that the information contained in this application is subject to public disclosure. I have enclosed a duplicate of this entire application which will be placed in the OHA Public Reference Room.
All applications should be either typed or printed and clearly labeled with Hudson Oil Company, Inc. and Case No. VEF-0011. Each applicant must submit an original and one
[[Page 36767]]
copy of the application. If the applicant believes that any of the information in its application is confidential and does not wish for that information to be publicly disclosed, it must submit an original application, clearly designated ``confidential,'' containing the confidential information, and two copies of the application with the confidential information deleted. All refund applications should be postmarked on or before October 31, 2001, and sent to:
Office of Hearings and Appeals, Department of Energy, 1000 Independence Ave., SW., Washington, DC 20585
We will adopt the standard OHA procedures relating to refund applications filedon behalf of applicants by ``representatives,'' including refund filing services, consulting firms, accountants, and attorneys. See, e.g., Texaco; Starks Shell Service, 23 DOE para. 85,017 (1993); Shell Oil Co., 18 DOE para. 85,492 (1989). We will also require strict compliance with the filing requirements as specified in 10 CFR 205.283, particularly the requirement that applications and the accompanying certification statement be signed by the applicant. The OHA reiterates its policy to scrutinize applications filedby filing services closely. Applications submitted by a filing service should contain all of the information indicated above.
Additionally, the OHA reserves the authority to require additional information to be submitted before granting any particular refund in the Hudson proceeding.
-
Impact of the Petroleum Overcharge Distribution and Restitution Act of 1986 (PODRA) Amendments on Hudson Refund Claims
The Interior and Related Agencies Appropriations Act for FY 1999 amended certain provisions of the Petroleum Overcharge and Distribution and Restitution Act of 1986 (PODRA). These amendments extinguished rights that refund applicants had under PODRA to refunds for overcharges on the purchases of refined petroleum products. They also identified and appropriated a substantial portion of the funds being held by the DOE to pay refund claims (including the funds paid by Hudson). Congress specified that these funds were to be used to fund other DOE programs. As a result, the petroleum overcharge escrow accounts in the refined product area contain substantially less money than before. In fact they may not contain sufficient funds to pay in full all pending and future refund claims (including those in litigation) if they should all be found to be meritorious. See Enron Corp./Shelia S. Brown, 27 DOE para. 85,036 at 88,244 (2000) (Brown). Congress directed OHA to ``assure the amount remaining in escrow to satisfy refined petroleum product claims for direct restitution is allocated equitably among all claimants.''Omnibus Consolidated and Emergency Supplemental Appropriation Act, 1999, Pub. L. No. 105-277 Sec. 337, 112 Stat 2681, 2681-295 (1998) (language added to PODRA); Brown, 27 DOE at 88,244. In view of this Congressional directive and the limited amount of funds available, it may become necessary to prorate the funds available among the meritorious Hudson claims. However, it could be several years before we know the full value of the meritorious claims and the precise total amount available for distribution. It will be some time before we are able to determine the amount that is available for distribution for each claimant.
We therefore propose the following mechanism. All successful small claimants (refunds under $10,000) will be paid in full. To require small claimants to wait several more years for their refunds would constitute an inordinate burden and would be inequitable. See Brown, 27 DOE at 88,244. For all others granted refunds, including reseller claimants who have elected to take presumption refunds, we propose to immediately pay the larger of $10,000 or 50 percent of the refund granted. Once the other pending refund claims have been resolved, the remainder of these Hudson claims will be paid to the extent that it is possible through an equitable distribution of the funds remaining in the petroleum overcharge escrow account.
It Is Therefore Ordered That:
The payments remitted to the Department of Energy by Hudson Oil Company, Inc., pursuant to the remedial order issued on March 15, 1985, will be distributed in accordance with the forgoing Decision.
[FR Doc. 01-17439Filed7-12-01; 8:45 am]
BILLING CODE 6450-01-P
-
