[Federal Register Volume 59, Number 178 (Thursday, September 15, 1994)] [Unknown Section] [Page 0] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 94-22890] [[Page Unknown]] [Federal Register: September 15, 1994] ----------------------------------------------------------------------- DEPARTMENT OF ENERGY Economic Regulatory Administration Final Consent Order With Murphy Oil Corporation, Murphy Oil USA, Inc. and Murphy Exploration & Production Company AGENCY: Economic Regulatory Administration, DOE. ACTION: Final action on proposed consent order. ----------------------------------------------------------------------- SUMMARY: The Department of Energy (DOE) has determined that a proposed Consent Order between DOE and Murphy Oil Corporation, Murphy Oil USA, Inc. and Murphy Exploration & Production Company (Murphy), which was published for public comment in 59 FR 38169 (July 27, 1994), shall be made final. The Consent Order resolves matters relating to Murphy's compliance with the federal petroleum price and allocation regulations for the period January 1, 1973 through January 28, 1981. To resolve these matters, Murphy will pay to DOE $10,700,000. Following receipt of the settlement monies, the Economic Regulatory Administration (ERA) will petition DOE's Office of Hearings and Appeals (OHA) to implement Special Refund Procedures pursuant to 10 CFR Part 205, Subpart V. Those procedures provide persons who claim to have suffered injury from the alleged overcharges with the opportunity to submit claims for payment. FOR FURTHER INFORMATION CONTACT: Dorothy Hamid, Economic Regulatory Administration, Department of Energy, GC-44, 820 First Street, NE., Suite 810, Washington, DC 20585, (202) 523-3045. SUPPLEMENTAL INFORMATION: I. Introduction II. Comments Received III. Analysis of Comments IV. Decision I. Introduction On July 27, 1994, ERA published a Notice announcing a proposed Consent Order between DOE and Murphy, which would resolve matters relating to Murphy's compliance with the federal petroleum price and allocation regulations for the period January 1, 1973 through January 28, 1981. 59 FR 38169. That Notice summarized the proposed Consent Order, which requires Murphy to pay to DOE $10,700,000 within thirty (30) days of the effective date of the Consent Order. The July 27 Notice supplied information regarding Murphy's potential liability for violations of the regulations applicable to first sales of domestic crude oil (10 CFR Secs. 212.72-212.74), the regulations exempting from the price rules the sale of crude oil produced from ``stripper well'' properties (10 CFR Secs. 210.32 and 212.54), and the normal business practices rule (10 CFR Sec. 210.62(c)) in connection with Murphy's first sales of crude oil during the period September 1973 through December 1979. These matters were at issue in a Remedial Order (RO) that OHA issued to Murphy on June 17, 1992 (Murphy Oil Corp., 22 DOE 83,005 (1992)), as modified by a decision and proposed order (D&PO) issued by an Administrative Law Judge of the Federal Energy Regulatory Commission (FERC) on January 24, 1994. Ocean Drilling & Exploration Co., et al., 66 FERC 63,002 (1994). The D&PO is now pending before the Commission in Docket No. RO92-5-000. With interest, Murphy's current liability under the D&PO (including ERA's estimate of Murphy's liability for previously unaudited properties and unaudited time periods (yet to be adjudicated by OHA or FERC)) totals approximately $5.2 million. The Notice also enumerated the considerations which underlay ERA's preliminary view that the settlement is favorable to the government and in the public interest. The Notice solicited written comments from the public relating to the terms and conditions of the settlement and whether the settlement should be made final. II. Comments Received Written comments were received from three parties: Oryx Energy Company, successor to Sun Exploration and Production Company (Sun), a working interest owner on certain crude oil production properties operated by Murphy; the Controller of California (Controller), a participant in the Murphy/Ocean Drilling administrative enforcement litigation before OHA and FERC; and a group consisting of six utilities, fourteen transporting companies and five manufacturers (UTM). Sun objects to an ``implication'' it purportedly perceives in paragraph 503(b) of the proposed Consent Order, relating to DOE's promise not to sue any other person, ``presumably including Sun'', as a non-operating interest owner, for alleged crude oil pricing violations at Murphy-operated properties. Sun Comments at 1.1 The Controller and UTM raise concerns about what each perceives to be an impermissible compromise associated with DOE's claim for restitution of overcharges on that portion of Murphy's violations that pertained to production subject to federal royalties. --------------------------------------------------------------------------- \1\Paragraph 503(b) provides that: In addition, where Murphy was the operator of a property that produced crude oil, the DOE shall not initiate or prosecute any enforcement action against any person for noncompliance with the federal petroleum price and allocation regulations relative to such property operated by Murphy. --------------------------------------------------------------------------- III. Analysis of Comments A. Applicability of the Consent Order to a party other than Murphy Echoing allegations it has advanced in another forum,2 Sun asserts that DOE's promise in paragraph 503(b) of the proposed Consent Order not to sue others for overcharges caused by Murphy ``incorrectly implies'' that DOE predicates Murphy's liability upon the ``underlying liability of the other interest owners'', when in fact, as Sun acknowledges, DOE's position in the enforcement litigation is ``predicated solely upon Murphy's alleged misconduct in causing the overcharges.'' Sun Comments at 2. Sun urges DOE to delete the sentence from paragraph 503(b) of the proposed Consent Order (quoted in footnote 1) or, at a minimum, make clear that the quoted sentence does not apply to Sun and that the money DOE receives from Murphy is not attributable to resolving a liability that Sun might have to the DOE. Id. at 3-4. --------------------------------------------------------------------------- \2\Sun brought a civil action against the government in the United States District Court for the District of Delaware, Sun Company, Inc. v. United States, 594 F. Supp. 652 (D. Del. 1984). The District Court granted the government's motion for summary judgment in an unpublished opinion, Sun Company, Inc. v. United States, No. 83-204 (D. Del. Jan. 26, 1993), appeal docketed, No. 93-1542 (Fed. Cir. Sept. 2, 1993). --------------------------------------------------------------------------- Sun's objection misconstrues the effect and purpose of the proposed Consent Order. The proposed Consent Order ``constitutes a legally enforceable contractual undertaking that is binding on'' Murphy and DOE alone and resolves the liability of Murphy alone. (Paragraphs 501 and 701). The proposed Consent Order makes no findings concerning the relative rights of Murphy and other working interest owners (such as Sun) on properties where Murphy was the operator, and does not bind any of the working interest owners (such as Sun) who are not parties to its terms. Id. at paragraphs 302, 303, 501, 504. Furthermore, contrary to Sun's misperception, paragraph 503(b) does not ``impl[y]'' any basis of Murphy's alleged liability inconsistent with DOE's position in the Murphy/Ocean Drilling enforcement litigation. Thus, no modification or clarification of paragraph 503(b) is necessary. B. Settlement Pertaining to the Issue of Federal Royalty The Controller objects to any compromise of DOE's claim for restitution of overcharges paid to the federal government in the form of royalties, and dismisses the Ocean Drilling D&PO's proposed reduction of the overcharge in this regard as lacking ``any plausible merit.'' Controller's Comments at 1. The Controller also asserts that the Final Settlement Agreement in the Stripper Well Litigation precludes both DOE and Murphy from agreeing to any ``offset'' to restitution owed by Murphy. To the extent that the DOE feels compelled to accept some compromise on the royalty issue, the Controller maintains that the amount of any offset should come wholly from the federal share without any effect on the States' share. Id. UTM likewise believe that the D&PO erred on the federal royalty payment issue, and urge that ERA ``seek to recover such royalties on the reduced overcharges from the federal agencies to which they were paid.'' UTM Comments at 2. If ERA does not do so, UTM request that ERA specify the amount of the benefit which the federal agencies have received as their share of the overcharges as reduced by the ALJ and as their share of the overcharges recognized in the settlement. Id. at 2- 3. UTM believe that such calculations would be a necessary basis for an analysis by OHA of the proper distribution of the amount recovered from Murphy. Id. at 3.3 --------------------------------------------------------------------------- \3\Over and above the approximately $5.2 million that represents Murphy's current liability under the D&PO, ERA calculates the D&PO rejected an additional $68,270 in principal amount as overcharges attributable to payment of federal royalty. Interest on that sum through June 30, 1994, equals $273,528. --------------------------------------------------------------------------- As an initial matter, it is neither practical nor appropriate to quantify the portion of the $10.7 million proposed settlement sum that exceeds the $5.2 million in restitution under the D&PO that can be ascribed to the royalty payment issue. ERA's evaluation of the risks of continued litigation considered the federal royalty question in combination with risk related to many other issues specified in the July 27 Federal Register Notice. 59 FR at 38170. Any attempt to parse the settlement process's achievement of the $10.7 million amount in order to quantify the portion that could be ``attributable'' to this issue would constitute an unwarranted invasion of the content of the negotiations that preceded the proposed settlement. Such an outcome would discourage settlement activity and certainly would not advance the public interest. Second, neither the Final Settlement Agreement in In re Department of Energy Stripper Well Exemption Litigation, M.D.L. No. 378 (D. Kan.), nor the Petroleum Overcharge Distribution and Restitution Act of 1986 (PODRA), 15 U.S.C. 4501 et seq.,\4\ provides a guarantee that potential refund recipients such as the Controller or UTM be insulated from the effects of litigation risks associated with ERA's attempts to recover restitution in enforcement actions, whether such risk is realized in the course of litigation or the consideration of reasonable settlement. ERA's assessment of risk attributable to this issue is not at variance with PODRA or the Final Settlement Agreement in the Stripper Well litigation, and is completely consistent with ERA's authority to compromise claims pursuant to 10 CFR 205.199J. --------------------------------------------------------------------------- \4\The Final Settlement Agreement (effected in 1986) and the PODRA (enacted in 1986) post date both Murphy's payment of the federal royalties (September 1973-January 1981) and the initiation of ERA's formal enforcement proceedings through a Notice of Probable Violation on January 28, 1981. --------------------------------------------------------------------------- Finally, the concerns of the Controller and UTM about the settlement of the federal royalty issue appear to be premised on their disagreement with the conclusion expressed in the D&PO rather than the question of the reasonableness of the resolution proposed. ERA likewise continues to believe that its interpretation in the litigation of this issue (as well as all the other issues in the case) is meritorious, but recognizes that the adjudicated results can often be at odds with the arguments proffered in litigation. There could be no question that if the federal royalty issue were not settled and were eventually to be lost in litigation, the potential beneficiaries could have no further argument or claim to any portion of the sum not recovered. Absent consideration of compelling policy principles, a resolution by settlement should be based on the possible and probable litigation outcomes; the federal royalty issue is one of those disputes subject to a litigated outcome and therefore appropriate to consider for compromise settlement.5 --------------------------------------------------------------------------- \5\This is particularly so for a question such as the federal royalty issue, which comprises just over 6.5% of Murphy's current liability under the D&PO and approximately 3.2% of the $10,700,000 settlement amount. --------------------------------------------------------------------------- ERA has concluded that the comments of the Controller and UTM deal with matters more appropriately addressed within a proceeding pursuant to 10 CFR Part 205, Subpart V. ERA will not modify the proposed Consent Order in the manner advocated by the Controller of California and UTM. IV. Decision ERA has determined that it is in the best interest of the public to make the proposed Consent Order final without change. By this Notice, and pursuant to 10 CFR 205.199J, the proposed Consent Order between DOE and Murphy is made a final Order of the Department of Energy, effective on the date of publication of this Notice in the Federal Register. Issued in Washington, DC, on September 9, 1994. Robert R. Nordhaus, Acting Administrator, Economic Regulatory Administration, General Counsel. [FR Doc. 94-22890 Filed 9-14-94; 8:45 am] BILLING CODE 6450-01-P