[Federal Register Volume 60, Number 244 (Wednesday, December 20, 1995)]
[Notices]
[Pages 65650-65652]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30960]



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[[Page 65651]]


DEPARTMENT OF ENERGY
Office of Hearings and Appeals


Proposed Implementation of Special Refund Procedures

AGENCY: Office of Hearings and Appeals; Department of Energy.

ACTION: Notice of proposed implementation of special refund procedures.

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SUMMARY: The Office of Hearings and Appeals (OHA) of the Department of 
Energy announces the proposed procedures for disbursement of 
$275,000,000 (plus interest) in alleged overcharges remitted or to be 
remitted to the DOE by Occidental Petroleum Corporation and its wholly 
owned subsidiary OXY USA, Inc., Case No. VEF-0030. The OHA has 
tentatively determined that these funds should be distributed in 
accordance with the DOE's Modified Statement of Restitutionary Policy 
in Crude Oil Cases, 51 Fed. Reg. 27899 (August 4, 1986).

DATES AND ADDRESSES: Comments must be filed in duplicate by January 19, 
1996, and should be addressed to the Office of Hearings and Appeals, 
Department of Energy, 1000 Independence Avenue, SW., Washington, DC 
20585-0107. All comments should conspicuously display a reference to 
Case No. VEF-0030.

FOR FURTHER INFORMATION CONTACT: Thomas L. Wieker, Deputy Director, 
Janet N. Freimuth, Deputy Assistant Director, Office of Hearings and 
Appeals, 1000 Independence Avenue, SW., Washington, DC 20585-0107, 
(202) 586-2390 [Wieker]; (202) 586-2400 [Freimuth].

SUPPLEMENTARY INFORMATION: In accordance with 10 CFR 205.282(b), notice 
is hereby given of the issuance of the Proposed Decision and Order set 
forth below. The Proposed Decision and Order sets forth the procedures 
that the DOE has tentatively formulated to distribute a total of 
$275,000,000 plus interest, remitted or to be remitted to the DOE by 
Occidental Petroleum Corporation. The DOE is currently holding 
$100,000,000, plus accrued interest, of these funds in an interest 
bearing escrow account pending distribution. The DOE will receive 
additional annual payments of $35,000,000 plus interest during the 
years 1996 through 2000.
    The OHA proposes to distribute these funds in accordance with the 
DOE's Modified Statement of Restitutionary Policy in Crude Oil Cases, 
51 FR 27899 (August 4, 1986) (the MSRP). Under the MSRP, crude oil 
overcharge monies are divided among the federal government, the states, 
and injured purchasers of refined petroleum products. Refunds to the 
states will be distributed in proportion to each state's consumption of 
petroleum products during the price control period. Refunds to eligible 
purchasers will be based on the volume of petroleum products that they 
purchased and the extent to which they can demonstrate injury.
    Because the June 30, 1995 deadline for crude oil refund 
applications has passed, we will not accept any new applications from 
purchasers of refined petroleum products for these funds. As we state 
in the Proposed Decision, any party who has previously submitted a 
refund application in the crude oil refund proceeding should not file 
another Application for Refund. Any party whose crude oil application 
is approved will share in all crude oil overcharge funds.
    Any member of the public may submit written comments regarding the 
proposed refund procedures. Commenting parties are requested to submit 
two copies of their comments. Comments should be submitted within 30 
days of publication of this notice in the Federal Register, and should 
be sent to the address set forth at the beginning of this notice. All 
comments received in these proceedings will be available for public 
inspection between the hours of 1:00 p.m. to 5:00 p.m., Monday through 
Friday, except federal holidays, in the Public Reference Room of the 
Office of Hearings and Appeals, located in Room 1E-234, 1000 
Independence Avenue, SW., Washington, DC 20585-0107.

    Dated: December 1, 1995.
George B. Breznay,
Director, Office of Hearings and Appeals.

Proposed Decision and Order of the Department of Energy

Implementation Order

Name of Case: OXY USA, Inc.
Date of Filing: September 18, 1995
Case Number: VEF-0030

    The Office of General Counsel, Regulatory Litigation (OGC), 
formerly the Economic Regulatory Administration (ERA), filed a 
Petition for Implementation of Special Refund Procedures with the 
Office of Hearings and Appeals (OHA) of the Department of Energy 
(DOE). The Petition concerns funds remitted to the DOE pursuant to a 
Consent Order executed by the DOE and Occidental Petroleum 
Corporation (Occidental), including its wholly-owned subsidiary, OXY 
USA, Inc. (OXY). OXY was formerly Cities Service Oil and Gas 
Corporation, which in turn was a successor in interest to Cities 
Service Corporation (Cities). Unless otherwise indicated, the firms 
collectively are referred to as Occidental.
    Pursuant to the Consent Order, Occidental agreed to remit $100 
million within 30 days of the Consent Order and then to make five 
annual payments of $35 million plus interest. On September 17, 1995, 
OXY remitted $100 million to the DOE.
    In accordance with procedural regulations codified at 10 C.F.R. 
Part 205, Subpart V (Subpart V), the OGC requests that the OHA 
establish special refund procedures to remedy the effects of the 
alleged regulatory violations which were resolved by the Consent 
Order. This Decision and Order sets forth the OHA's proposed 
procedures for distributing the consent order funds.

I. Background

    The Consent Order at issue was executed on June 27, 1995 in 
proposed form. The DOE published notice of the Proposed Consent 
Order and the opportunity to file comments. See 60 FR 35186 (July 6, 
1995). Following the comment period, the DOE issued the Proposed 
Consent Order as a final order, pursuant to 10 C.F.R. 205.199J. See 
60 FR 43130 (August 18, 1995).
    The Consent Order covers the period October 1, 1979 through 
January 27, 1981 and reflects the resolution of enforcement 
proceedings related to 91 reciprocal crude oil transactions engaged 
in by Cities during that period. In those transactions, Cities sold 
price-controlled crude oil in its refinery inventory in exchange for 
deeply discounted exempt crude oil.
    In 1988, the DOE issued a Remedial Order (RO) holding that the 
transactions violated the price regulations and that the violation 
amount of $264 million, plus interest, should be remitted to the 
DOE. Cities Service Oil and Gas Corp., 17 DOE para. 83,021 (1988). 
The 1988 RO also remanded the issue of whether the transactions 
violated other regulations.
    In 1992, the OGC issued a Revised Proposed Remedial Order 
(RPRO), specifying an alternate liability of $254 million, plus 
interest, on the ground that 83 of the transactions violated the 
entitlements reporting requirements. OXY filed objections to the 
RPRO with the OHA. OXY USA, Inc., Case No. LRO-0003 (dismissed 
August 30, 1995). The case was ready for oral argument at the time 
of the June 27, 1995 execution of the Proposed Consent Order.
    During the pendency of the OHA proceeding on the RPRO, the 
Federal Energy Regulatory Commission (FERC) reversed the 1988 RO. 
Cities Service Oil and Gas Corp., 65 FERC para. 61,403 (1993), 
reconsideration denied, 66 FERC para. 61,222 (1994). After FERC's 
denial of reconsideration motions filed by the DOE and intervenor 
parties, intervenor parties appealed to federal district court, 
which dismissed their appeals for lack of standing. Alabama v. FERC, 
3 Fed. Energy Guidelines para. 26,693 (D.D.C. June 8, 1995). One of 
the intervenors had noticed an appeal at the time of the June 27, 
1995 execution of the Proposed Consent Order. See 60 FR 35187 note 
2.
    Although the Consent Order resulted from the enforcement 
proceeding involving the 91 reciprocal crude oil transactions, the 
Consent Order is global. The Consent Order provides that it settles 
all pending and potential civil and administrative claims against 
Occidental 

[[Page 65652]]
under the federal petroleum price and allocation regulations during the 
consent order period. Thus, the Consent Order settles not only 
issues related to the 91 reciprocal transactions but also any other 
potential liability of Occidental with respect to its compliance 
with the federal price and allocation regulations during the consent 
order period .

II. 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 Petroleum Overcharge Distribution and Restitution Act 
of 1986, 15 U.S.C. 4501 et seq.; see also Office of Enforcement, 9 
DOE para. 82,508 (1981); Office of Enforcement, 8 DOE para. 82,597 
(1981).

III. Proposed Refund Procedures

A. The DOE's Modified Statement of Restitutionary Policy

    The distribution of crude oil overcharge funds is governed by 
the DOE's July 1986 Modified Statement of Restitutionary Policy in 
Crude Oil Cases (MSRP). See 51 Fed. Reg. 27899 (August 4, 1986). The 
MSRP was issued in conjunction with the Stripper Well Settlement 
Agreement. See In re: The Department of Energy Stripper Well 
Exemption Litigation. 653 F. Supp. 108 (D. Kan. 1986).
    Under the MSRP, up to 20 percent of crude oil overcharge funds 
may be reserved for direct restitution to injured purchasers, with 
the remainder divided equally between the states and the federal 
government. The MSRP also specifies that any funds remaining after 
all valid claims by injured purchasers are paid be disbursed to the 
states and the federal government in equal amounts.
    In August 1986, shortly after the issuance of the MSRP, the OHA 
issued an Order that announced that the MSRP would be applied in all 
Subpart V proceedings involving alleged crude oil violations. See 
Order Implementing the MSRP, 51 FR 29689 (August 20, 1986) (the 
August 1986 Order). In response, parties filed comments.
    In April 1987, the OHA issued a Notice analyzing the numerous 
comments received in response to the August 1986 Order. See 52 FR 
11737 (April 10, 1987). This Notice provided guidance to claimants 
that anticipated filing refund applications for crude oil funds 
under the Subpart V regulations. A crude oil refund applicant was 
only required to submit one application for its share of crude oil 
overcharge funds.
    Consistent with the foregoing, the OHA accepted refund 
applications from 1987 until the June 30, 1995 deadline. See 60 FR 
19914 (April 20, 1995). Applicants who filed before the deadline and 
whose applications are approved will share in the crude oil 
overcharge funds. Approved applicants are currently receiving $.0016 
per gallon of purchased refined product.

B. Proposal To Distribute the OXY Consent Order Funds in Accordance 
With the MSRP

    We have tentatively determined that all of the consent order 
funds are crude oil funds and, therefore, should be distributed in 
accordance with the MSRP. Although the Consent Order was global, 
i.e., it settled any potential claims against Occidental, the 
Consent Order was the result of a pending enforcement proceeding 
related to OXY's reciprocal purchases and sales of crude oil and the 
reporting of the purchased crude oil to the DOE Entitlements 
Program. The Consent Order does not identify any potential refined 
product claims, let alone indicate that any such potential 
violations were taken into account in arriving at the settlement 
amount. In fact, a provision in the Consent Order refers to an 
apportionment of the principal portion of consent order funds as 
payments of the principal and interest sought by the agency based on 
the ratio of principal and interest sought in the RPRO.<SUP>1 In 
addition to the Consent Order itself, the Notice of Proposed Consent 
Order and the Petition for Implementation of Special Refund 
Procedures both support the conclusion that the consent order funds 
are crude oil funds. The Notice of Proposed Consent Order indicates 
that the settlement amount was determined by reference to the 
litigation concerning the reciprocal crude oil transactions. See 60 
FR at 35187 (Part II. Determination of Reasonable Settlement 
Amount). The Petition for Implementation of Special Refund 
Procedures states that the alleged violations underlying the Consent 
Order concern the improper reporting of crude oil certifications to 
the Entitlements Program, i.e., the claim in the RPRO. Petition at 
2. Under the foregoing circumstances, we have tentatively determined 
that 100 percent of the consent order funds are crude oil 
funds.<SUP>2

    \\\1\ Section 406 provides in full:
    Inasmuch as this Consent Order settles both the principal and 
interest portions of all claims made by the DOE against Occidental, 
the principal portion of the payments made pursuant to paragraphs 
402 through 404 shall be deemed to be a payment of principal and 
interest in the same ratio that the principal portion of the DOE's 
claim in the proceeding styled In the Matter of OXY USA Inc., Case 
No. LRO-0003, bears to the interest portion of the DOE's claim in 
that case as of the Effective Date.
    60 FR at 35189.
    \\\2\ See generally Mt. Airy Refining Co., 24 DOE para. 85,094 
at 88,305 n.1 (1994) (consent order funds considered crude oil funds 
where most of consent order funds related to crude oil violations); 
DeMenno-Kerdoon, 23 DOE para. 85,046 at 88,112 n.1 (1993) (global 
consent order funds considered crude oil funds where the funds were 
less than the crude oil violations alleged in PRO that was settled 
by the consent order).
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    Because we have tentatively determined that 100 percent of the 
consent order funds are crude oil funds, we propose to distribute 
the funds according to the MSRP. We propose to reserve initially the 
full 20 percent ($55 million), plus accrued interest, for direct 
restitution to injured purchasers of crude oil and refined petroleum 
products. We propose to distribute the remaining 80 percent ($220 
million) in equal shares to the states and the federal government.
    As indicated above, the funds reserved for direct restitution to 
injured purchasers will be available for distribution through OHA's 
Subpart V crude oil overcharge refund proceeding. We have previously 
discussed the application requirements and standards that apply in 
that proceeding. Because the deadline for the filing of applications 
has now passed, we do not believe that it is necessary to reiterate 
those matters. In accordance with the MSRP, we propose that any 
funds remaining after the conclusion of the Subpart V crude oil 
overcharge refund proceeding be disbursed to the states and the 
federal government in equal shares.
    With respect to the funds made available to the states for 
indirect restitution, we note that 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 Settlement Agreement. Based on the foregoing, we propose that 
the $100 million initial payment made by Occidental be disbursed as 
follows: $20 million, plus accrued interest, to the DOE interest-
bearing escrow account for crude oil claimants, $40 million, plus 
accrued interest, to the DOE interest-bearing escrow account for the 
states, and $40 million, plus accrued interest, to the DOE interest-
bearing escrow account for the federal government. We propose that, 
upon remittance to the DOE, Occidental's subsequent five annual 
payments of $35 million, plus accrued interest, be distributed to 
the same accounts in the same proportions.
    It is therefore ordered That:
    The consent order funds remitted by Occidental Petroleum 
Corporation will be distributed in accordance with the foregoing 
Decision.

[FR Doc. 95-30960 Filed 12-19-95; 8:45 am]
BILLING CODE 6450-01-P