[Federal Register Volume 61, Number 100 (Wednesday, May 22, 1996)]
[Notices]
[Pages 25662-25664]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-12823]



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DEPARTMENT OF ENERGY
Office of Hearings and Appeals


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 announces procedures for disbursement of $48,307.13 of crude oil 
overcharge funds obtained by the DOE from Texas American Oil 
Corporation (Texas American), Case No. VEF-0019. The OHA has determined 
that these funds, plus accrued interest, be distributed as direct 
restitution to individual claimants who were injured by crude oil 
overcharges.

FOR FURTHER INFORMATION CONTACT: Richard W. Dugan, Associate Director, 
Office of Hearings and Appeals, 1000 Independence Ave., SW., Washington 
DC 20585-0107, Telephone No. (202) 426-1575.

SUPPLEMENTARY INFORMATION: In accordance with 10 CFR Sec. 205.282(c), 
notice is hereby given of the issuance of the Decision and Order set 
forth below. The Decision and Order sets forth the procedures that the 
DOE has formulated to distribute $48,307.13 (plus accrued interest) 
remitted to the DOE by the trustee-in-bankruptcy for Texas American. 
The DOE is currently holding these funds in an interest-bearing escrow 
account pending distribution.
    The OHA will allocate all of the crude oil overcharge funds 
obtained from Texas American for individual claimants. This is in 
accordance with Texas American Oil Corp. v. DOE, 44 F.3d 1557 (Fed. 
Cir. 1995) (en banc), in which the United States Court of Appeals for 
the Federal Circuit held that the DOE's claim in the Texas American 
bankruptcy proceeding on behalf of individual claimants should have a 
higher priority than its claim on behalf of the states and federal 
government. Pursuant to that decision, the bankruptcy court distributed 
to the DOE an amount equivalent to only 20 percent of its liquidated 
claim in the Texas American bankruptcy proceeding, since under the 
DOE's Modified Statement of Restitutionary Policy in Crude Oil Cases, 
51 FR 27899 (August 4, 1986), a maximum of 20 per cent of the crude oil 
overcharge funds remitted to the DOE are reserved for injured 
purchasers of refined petroleum products.
    Refunds to eligible purchasers will be based on the volume of 
products that they purchased during the price control period. The 
volumetric refund amount is $0.0016 per gallon. Because the June 30, 
1995 deadline for crude oil refund applications has passed, no new 
applications for refund will be accepted in this proceeding. As we 
state in the Decision, the Texas American funds will be added to the 
general crude oil overcharge pool for direct restitution to claimants 
that have filed timely applications.

    Dated: May 14, 1996.
George B. Breznay,
Director, Office of Hearings and Appeals.

Decision and Order of the Department of Energy

Implementation of Special Refund Procedures

May 14, 1996.
    Name of Case: Texas American Oil Corporation.
    Date of Filing: September 1, 1995.
    Case Number: VEF-0019.
    On March 14, 1996, the Office of Hearings and Appeals (OHA) of the 
Department of Energy (DOE) issued a Proposed Decision and Order (PDO) 
which tentatively established refund procedures for the distribution of 
crude oil overcharge funds obtained from Texas American Oil Corporation 
(Texas American). Texas American Oil Co., Case No. VEF-0019, 61 Fed. 
Reg. 13170 (March 26, 1996). After a review of the comments received, 
the DOE has determined that the procedures set forth in the Proposed 
Decision and Order should be adopted.

I. Background

    On September 19, 1988, the OHA issued a Remedial Order (RO) that 
found that Texas American had violated 10 CFR Sec. 211.67(e)(2) by 
receiving excessive small refiner bias benefits under the DOE's 
Entitlements Program.

[[Page 25663]]

Texas American Oil Corp., 17 DOE para. 83,017 (1988). However, Texas 
American had filed a petition in bankruptcy on July 2, 1987, and its 
bankruptcy proceeding was still pending when the RO was issued. The 
trustee-in-bankruptcy approved the DOE's claim in the amount of 
$241,535.67, but classified it as a non-pecuniary loss in accordance 
with Section 726(a)(4) of the Bankruptcy Code and Class 9 of the Plan 
of Liquidation.<SUP>1 Since Class 9 claims were inferior to Class 7 
claims, and there were insufficient assets to satisfy any Class 9 
claim, or to satisfy fully the Class 7 claims, the effect of the 
trustee's determination was to preclude the DOE from receiving any 
compensation from Texas American's estate.
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    \1\ Section 726(a)(4) places non-pecuniary loss claims in the 
fourth priority in the distribution of a bankrupt estate:
    11 U.S.C. Sec. 726. Distribution of property of the estate
    *        *        *        *        *
    (a)(4) fourth, in payment of any allowed claim, whether secured 
or unsecured, for any fine, penalty, or forfeiture, or for multiple, 
exemplary, or punitive damages, arising before the earlier of the 
order for relief or the appointment of a trustee, to the extent that 
such fine, penalty, forfeiture, or damages are not compensation for 
actual pecuniary loss suffered by the holder of such claim[.]
    Class 7 (Unsecured Claims) consisted of allowed claims of 
unsecured creditors, while Class 9 (Non-Pecuniary Loss) consisted of 
``Allowed Claims for any fine, penalty, or forfeiture, or for 
multiple, exemplary, or punitive damages, as further described in 11 
U.S.C. Sec. 726(a)(4).'' Texas American Bankruptcy Committee Plan of 
Liquidation Secs. 3.07, 3.09.
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    The DOE argued before the Bankruptcy Court that the trustee's 
determination was erroneous on the grounds that its claim was for 
restitution and therefore was a Class 7 claim. The Bankruptcy Court, 
however, rejected the DOE's position and held that Class 9 was the 
proper classification since the DOE's claim was not for actual 
pecuniary loss suffered by the holder of the claim. In re Texas 
American Oil Corp., No. 387-33522-SAF-11 (Bankr. N.D. Tex. Mar. 5, 
1992). This decision was reversed by the U.S. District Court which, 
relying on a prior decision of the Temporary Emergency Court of Appeals 
(TECA), held that a DOE claim under Section 209 of the Economic 
Stabilization of 1970 (ESA), 12 U.S.C. Sec. 1904 note, was properly 
placed in the same class and priority as the general unsecured claims 
of other creditors. Texas American Oil Corp. v. DOE, No. 3:92-CV-1146-G 
(N.D. Tex. Sept. 14, 1992) (citing DOE v. West Texas Marketing Corp., 
763 F.2d 1411 (Temp. Emer. Ct. App. 1985) (West Texas)). This decision 
was in turn reversed by the United States Court of Appeals for the 
Federal Circuit, which held that the DOE's claim in the Texas American 
bankruptcy proceeding should be bifurcated, with the portion claimed on 
behalf of individual persons who suffered actual injury to be 
classified in Class 7 of the Plan of Liquidation and the portion to be 
paid to the federal and state governments to be classified in Class 9. 
Texas American Oil Corp. v. DOE, 44 F.3rd 1557 (Fed. Cir. 1995)(en 
banc). On remand, the Bankruptcy Court implemented the Federal 
Circuit's decision by distributing the 20 percent of DOE's liquidated 
claim ($48,307.13) that fell within Class 7 to DOE and the remaining 80 
percent ($193,228.53) to the other Class 7 creditors. In re Texas 
American Oil Corp., No. 387-33522-SAF-11 (Bankr. N.D. Tex. April 12, 
1995). The funds that the DOE received from Texas American were 
deposited in an interest-bearing escrow account maintained by the 
Department of the Treasury.<SUP>2
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    \2\ As of March 31, 1996, the account contained $50,815.65, 
consisting of $48,307.13 principal and $2,508.52 interest.
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    In accordance with 10 CFR Part 205, Subpart V, on September 1, 
1995, the Office of General Counsel, Regulatory Litigation (OGC) 
(formerly the Economic Regulatory Administration) filed a Petition for 
the Implementation of Special Refund Procedures that requested OHA to 
formulate and implement procedures to distribute the Texas American 
funds. On January 16, 1996, we issued a Proposed Decision and Order 
that tentatively established refund procedures for the distribution of 
crude oil overcharge funds obtained from Texas American and four other 
firms. Brio Petroleum, Inc., Case Nos. VEF-0017 et al., 61 FR 1919 
(January 24, 1996). In accordance with the Modified Statement of 
Restitutionary Policy in Crude Oil Cases (MSRP), 51 FR 27899 (August 4, 
1986), that the DOE issued in connection with the Final Settlement 
Agreement approved in In re The Department of Energy Stripper Well 
Exemption Litigation, 653 F. Supp. 108 (D. Kan. 1986), the January 16 
Proposed Decision proposed that 40 percent of the funds be disbursed to 
the federal government, another 40 percent be disbursed to the states, 
and the remaining 20 percent be reserved for applicants who file claims 
showing that they were injured by crude oil overcharges. However, we 
subsequently determined that the circumstances under which the DOE 
obtained the Texas American funds required that the funds be disbursed 
in a manner different than that set forth in the Proposed Decision. 
Accordingly, we issued the March 14, 1996 PDO, in which we tentatively 
determined that all of the funds received from Texas American be 
allocated to individual claimants. On April 24, 1996, we received 
comments on behalf of 14 designated states (the States). In their 
comments, the States disagreed with the refund procedures set forth in 
the PDO, but asserted that they would not formally object to them in 
view of the small amount of money involved. Instead, they reserved 
their right to object to any future proposed distributions of crude oil 
funds solely to individual claimants.

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. Sec. 4501 et seq. 
See also Office of Enforcement, 9 DOE para. 82,508 (1981); Office of 
Enforcement, 8 DOE para. 82,597 (1981).

III. Refund Procedures

    Since the States have not formally objected to the proposed refund 
procedures, it is not necessary for us to respond to the specific 
arguments that they raise. We do, however, disagree with the States' 
position that the decisions of the Federal Circuit and the Bankruptcy 
Court (on remand) do not affect the manner in which we must distribute 
the crude oil funds in the present case.<SUP>3 Thus, we shall 
distribute the funds received from Texas American (and accrued interest 
on those funds) solely to individual claimants in the DOE's crude oil 
refund proceeding. In our view, which we believe to be correct, this 
distribution scheme is required by the unique circumstances under which 
these funds were obtained

[[Page 25664]]

by the DOE. While the Texas American v. DOE decision is contrary to the 
position of the DOE that had been upheld in the West Texas case,<SUP>4 
we are constrained by the Federal Circuit's decision. The clear import 
of that determination is that we must use the funds received from Texas 
American solely for direct restitutionary purposes. Moreover, as 
indicated above, the Bankruptcy Court, in accordance with the Federal 
Circuit's determination, distributed to the DOE only 20 percent of its 
liquidated claim in the Texas American bankruptcy proceeding. This 
percentage is equivalent to the portion of crude oil overcharge funds 
that we have consistently reserved for individual claimants under the 
MSRP. We therefore decline to modify our proposed allocation of the 
Texas American funds in response to the States' comments.
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    \3\ We also do not accept the States' attempt to blur the 
distinction between recipients of direct and indirect restitution. 
It is true that, prior to the Federal Circuit decision, it was the 
DOE's consistent position that both types of recipients should be 
treated the same for purpose of distributing funds from bankrupt 
estates. Nevertheless, our prior Decisions make it clear that, 
unlike the beneficiaries of indirect restitution, individual 
claimants cannot receive direct refunds without a finding of injury, 
though that finding may be based on a presumption of injury. See 10 
C.F.R. Sec. 205.282(e) (``[T]he standards for evaluation of 
individual claims may be based upon appropriate presumptions''). See 
also Ernest A. Allerkamp, 17 DOE para. 85,079 at 88,175-76 (1988); 
City of Columbus, Georgia, 16 DOE para. 85,550 (1987).
    \4\ The Federal Circuit in Texas American v. DOE ascribed its 
unwillingness to follow the West Texas decision to judicial, 
statutory, and related policy changes that had occurred since the 
issuance of that decision. The Federal Circuit also specifically 
overruled TECA's ruling that a DOE bankruptcy claim under the ESA to 
be paid to the federal and state governments on behalf of their 
citizens was for restitution and not for a penalty.
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    Except for the manner in which the funds will be allocated, we 
shall follow the procedures set forth in prior refund proceedings 
involving crude oil overcharge funds. Thus, claimants will be required 
to (i) document their purchase volumes of petroleum products during the 
August 19, 1973-January 27, 1981 crude oil price control period, and 
(ii) 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 will be presumed to 
have been injured by Texas American's crude oil overcharges. In order 
to receive a refund, end-users will not need to submit any further 
evidence of injury beyond the volume of petroleum products purchased 
during the price control period. We shall base refunds to claimants on 
a volumetric amount that is currently $0.0016 per gallon. See 60 FR 
15562 (March 24, 1995).
    A party that has already submitted a claim in the DOE crude oil 
proceeding need not file another claim in order to obtain its 
appropriate restitutionary share of crude oil funds. Moreover, because 
the June 30, 1995 deadline for crude oil refund applications has 
passed, we shall not accept any new applications. See Western Asphalt 
Service, 25 DOE para. 85,047 (1995). Instead, these funds will be added 
to the general crude oil overcharge pool used for direct restitution. 
Finally, an applicant who has executed and submitted a valid waiver 
pursuant to one of the escrows established by the Final Stripper Well 
Settlement Agreement will be considered to have waived its rights to 
apply for a crude oil refund under Subpart V. See, e.g., Mid-America 
Dairymen, Inc., v. Herrington, 878 F.2d 1448 (Temp Emer. Ct. App. 
1989); see also Hoechst Celanese Chemical, 25 DOE para. 85,066 (1996).
    It Is Therefore Ordered That:
    (1) The Director of Special Accounts and Payroll, Office of 
Departmental Accounting and Financial Systems Development, Office of 
the Controller of the Department of Energy shall take all steps 
necessary to transfer the $48,307.13 obtained from Texas American Oil 
Corporation, COTS No. N00S90460, plus accrued interest, into the 
subaccount denominated ``Crude Tracking-Claimants 4,'' Number 
999DOE010Z.
    (2) This is a final Order of the Department of Energy.

[FR Doc. 96-12823 Filed 5-21-96; 8:45 am]
BILLING CODE 6450-01-P