[Federal Register Volume 61, Number 6 (Tuesday, January 9, 1996)]
[Pages 652-655]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-290]


Office of Hearings and Appeals

Implementation of Special Refund Procedures

AGENCY: Office of Hearings and Appeals, DOE.

ACTION: Notice of Implementation of Special Refund Procedures.


SUMMARY: The Office of Hearings and Appeals of the Department of Energy 
announces procedures for the disbursement of $1,564,222.74 (plus 
accrued interest) collected pursuant to a consent order with Vessels 
Gas Processing Company. The funds will be distributed in accordance 
with the DOE's special refund procedures, 10 CFR Part 205, Subpart V.

DATES AND ADDRESSES: Applications for Refund of a portion of the 
consent order must be filed in duplicate on or before April 8, 1996, 
and should be addressed to: Vessels Gas Processing Company Proceeding, 
Department of Energy, Office of Hearings and Appeals, 1000 Independence 
Ave., S.W., Washington, D.C. 20585-0107. All Applications should 
conspicuously display reference to Case Number VEF-0007.

FOR FURTHER INFORMATION CONTACT: Richard W. Dugan, Associate Director, 
1000 Independence Ave. S.W., Washington D.C. 20585-0107, (202) 586-

SUPPLEMENTARY INFORMATION: In accordance with the procedural 
regulations of the Department of Energy, 10 CFR 205.282 (c), notice is 
hereby given of the issuance of the Decision and Order set out below. 
The Decision and Order relates to a consent Order entered into by the 
DOE and Vessels Gas Processing Company (Vessels). The consent order 
settled possible pricing violations with respect to Vessels' sales of 
natural gas liquids (NGLs) and natural gas liquid products (NGLPs). The 
DOE has collected $1,564,222.74 and is holding the money in an 
interest-bearing escrow account pending distribution. On September 28, 
1995, the Office of Hearings and Appeals issued a Proposed Decision and 
Order which tentatively established refund procedures and solicited 
comments from interested parties concerning the proper distribution of 
the consent order fund. No comments were received.
    As the Decision and Order indicates, Applications for Refund from 
the Vessels' consent order fund may now be filed. Applications must be 
filed no later than 90 days from the date of publication of this 
Decision and Order. Applications will be accepted from customers who 
purchased NGLs and NGLPs from Vessels during the period September 1, 
1973 through December 31, 1977. The specific information required in 
and Application for Refund is set forth in the Decision and Order.

    Dated: December 21, 1995.
George B. Breznay,
Director, Office of Hearings and Appeals.

Special Refund Procedures

Name of Firm: Vessels Gas Processing Company
Date of Filing: February 27, 1995
Case Number: VEF-0007

    In accordance with the procedural regulations of the Department of 
Energy (DOE), 10 CFR Part 205, Subpart V, the Regulatory Litigation 
branch of the Office of General Counsel (OGC) (formerly the Economic 
Regulatory Administration (ERA)) filed a Petition for the 
Implementation of Special Refund Procedures with the Office of Hearings 
and Appeals (OHA) on February 27, 1995. The petition requests that the 
OHA formulate and implement procedures for the distribution of funds 
received pursuant to a Consent Order entered into by the DOE and 
Vessels Gas Processing Company (Vessels) of Colorado.1

    \1\ For the sake of convenience and clarity, ``Vessels'' will 
refer to Vessels Gas Processing Company (VGPC) and Vessels Gas 
Process, Limited (VGPL) in this Decision and Order. In addition, 
``Vessels'' will refer to the operations of Halliburton Resource 
Management (HRM) at the Irondale and Brighton plants on behalf of 
VGPC and VGPL. Vessels operated under a contract with HRM, a 
division of Halliburton Company (Halliburton). Under that agreement, 
the natural gas owned by Vessels was processed and sold at three 
plants owned and operated by HRM. HRM was paid or retained a service 
fee from the sales proceeds. On February 25, 1983, Vessels filed, in 
conjunction with a ``Preliminary Statement of Objections'' to the 
Proposed Remedial Order issued to it on November 5, 1982, a ``Motion 
to Join Halliburton Company and Hold it Jointly Liable for Any 
Overcharges that are Proven.'' On May 25, 1983, the OHA gave leave 
to amend the PRO to join Halliburton. Vessels Gas Processing Co., 11 
DOE para. 82,509 (1983).

I. Background

    Vessels was a ``refiner'' of natural gas liquids (NGLs) and natural 
gas liquid products (NGLPs), which were included within the definitions 
of ``covered products'' in 6 CFR 150.352 and in the price regulations 
promulgated pursuant to the Emergency Petroleum Allocation Act of 1973, 
Public Law 93-159. Accordingly, during the period from August 19, 1973 
through January 28, 1981, Vessels was subject to price rules set forth 
in 10 CFR Part 212, Subpart K, and antecedent regulations at 6 CFR 
150.1 et seq. An ERA audit of Vessels' business records at the Irondale 
and Brighton locations revealed possible pricing violations with 
respect to the firm's sales of NGLs and NGLPs at the Irondale plant 
during the audit period from September 1, 1973 through December 31, 
1977 and at the Brighton plant from April 1, 1975 through December 31, 
1977.2 Subsequently, on October 7, 1986, the DOE issued a Remedial 
Order to Vessels, finding that the firm had overcharged its customers 
and requiring it to remit to the DOE $1,571,671.40, plus interest. 
Vessels Gas Processing Co., 15 DOE para. 83,002 (1986). Vessels 
appealed the Remedial Order to the Federal Energy Regulatory Commission 
(FERC) (Case No. R087-3-000). While the Appeal was pending, Vessels and 
the DOE entered into a Consent Order on December 17, 1987, in order to 
settle all claims and disputes between Vessels and the DOE regarding 
the firm's compliance with price regulations in sales of NGLs and NGLPs 
during the audit period. In that Order, Vessels agreed to remit a total 
of $1,500,000, plus installment interest, to the DOE for distribution 
to the firm's customers. The Consent Order became final on February 16, 
1988. Vessels has made payments totalling $1,564,222.74 to the 
DOE.3 These funds, plus accrued interest, are presently in a DOE 
escrow account maintained by the Department of the Treasury.

    \2\ The discrepancy in dates between the two plants is due to 
the fact that the Brighton plant was not fully operational until 
April 1975.
    \3\ Vessels' appeal to FERC was dismissed on February 26, 1988. 
Vessels Gas Processing Co., 42 FERC para. 63,023 (1988). The firm's 
final payment under the Consent Order was received by the DOE on 
October 12, 1994.

II. Jurisdiction

    The procedural regulations of the DOE set forth general guidelines 
by which the OHA may formulate and implement a plan of distribution for 
funds received as a result of an enforcement proceeding. 10 CFR Part 
205, Subpart V. It is DOE policy 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 
obtained as a part of settlement agreements, see Office of Enforcement, 
9 DOE para. 82,553 (1982); Office of Enforcement, 9 DOE para. 82,508 
(1981). After reviewing the record in the present case, we have 
concluded that a Subpart V proceeding is an appropriate 

[[Page 653]]
mechanism for distributing the Vessels consent order fund. We therefore 
shall grant OGC's petition and assume jurisdiction over distribution of 
the fund.

III. Refund Procedures

    On September 28, 1995, OHA issued a Proposed Decision and Order 
(PDO) establishing tentative procedures to distribute the Vessels 
settlement fund. That PDO was published in the Federal Register and a 
30-day period was provided for the submission of comments regarding our 
proposed refund plan. See 60 Fed. Reg. 53369 (October 13, 1995). More 
than 30 days have elapsed and the OHA has received no comments 
concerning the proposed procedures for the distribution of the Vessels 
settlement fund. Consequently, the procedures will be adopted as 

A. Refund Claimants

    Refund monies will be distributed to those parties which were 
injured in their transactions with Vessels during the audit period that 
were covered by the Consent Order.\4\ We have limited information on 
Vessels' customers and the number of gallons purchased by each 
customer. From company records available to this Office, we have 
compiled a partial list of Vessels' customers. They are as follows: 
Farmland Industries, Inc., Littleton Gas Co., California Liquid Gas 
Co., Hytrans, Inc., UPG, Inc.\5\

    \4\ For the reason set forth in footnote 1 this includes firms 
that purchased NGLs and NGLPs from HRM that originated with Vessels. 
Since ethane, an NGLP, was decontrolled effective April 1, 1974, 
Vessels' customers would not have been injured by purchases of 
ethane on or after that date. They are thus not eligible for refunds 
for ethane purchases made after March 31, 1974.
    \5\ In comments submitted in response to the Notice of the 
Proposed Consent Order in the December 28, 1987 Federal Register, 
Enron Corp. requested that it be specifically named as a payee in 
the Consent Order. Enron contended that UPG, Inc. was the principal 
customer of Vessels' NGLs, and that Enron, as UPG's successor in 
interest, is therefore eligible for a refund in this proceeding. ERA 
determined in its response to Enron's comments that it was OHA's 
prerogative to name Enron as a payee in its Implementation Order. 
The review and analysis of the written comments did not provide any 
information that would support the modification or rejection of the 
proposed Consent Order with Vessels and Halliburton. Therefore, the 
Consent Order was issued without modification. While this Office is 
aware that UPG is affiliated with Enron, we have no detailed 
information regarding the exact nature of their corporate 
relationship. Accordingly, we will not name Enron as a payee in this 
Decision. However Enron is invited to submit to this Office an 
Application for Refund, in which it provides documentation to 
support its contention that it is entitled to a refund for UPG's 

    These customers, and any additional customers, will be required to 
submit a monthly schedule of the number of gallons of NGLs and NGLPs 
purchased from September 1, 1973 through December 31, 1977 and 
documentation that these products were purchased from either the 
Irondale or Brighton plants. Indirect purchasers of Vessels' products 
may be eligible for a refund if the reseller from whom they purchased 
the products passed through Vessels' alleged overcharges to its own 
customers. Indirect purchasers must identify the reseller from whom 
they made the purchases, and establish the basis for their belief the 
products originated from either the Irondale or Brighton plant. 
Affiliates of Vessels will be ineligible to apply for a refund in this 

    \6\ As in other refund proceedings involving alleged refined 
products violations, we will presume that affiliates of the Consent 
Order firm 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 the Consent Order firm 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 the Consent 
Order firm were granted a refund, that Consent Order firm would be 
indirectly compensated from the Consent Order fund remitted to 
settle its own alleged violations. See Propane Industrial, Inc. v. 
DOE, 985 F.2d 586 (Temp. Emer. Ct. App. 1993) (refund to affiliate 
would be ``unjust enrichment'').

B. Calculation of Refund Amounts

    We shall use a volumetric methodology to distribute the consent 
order funds to Vessels' customers. The volumetric refund presumption 
assumes that the alleged overcharges by a firm were dispersed equally 
over all gallons of product marketed by that firm. In the absence of 
better information, this assumption is sound because the DOE price 
regulations generally required a regulated firm to account for 
increased costs on a firm-wide basis in determining its prices.\7\

    \7\ However this presumption is rebuttable. A claimant which 
believes that it suffered a disproportionate share of the alleged 
overcharges may submit evidence proving this claim in order to 
receive a larger refund. See Sid Richardson Carbon and Gasoline Co./
Siouxland Propane Co., 12 DOE para. 85,054 (1984); see also Amtel, 
Inc./Whitco, Inc., 19 DOE para. 85,319 (1989) (Amtel). In computing 
the appropriate refund in such a case, we will prorate the alleged 
overcharge amount by the ratio of the Vessels settlement amount to 
the aggregate overcharge amount determined by the Vessels Remedial 
Order. See Amtel.

    Under the volumetric approach we are adopting in this proceeding, a 
claimant's ``allocable share'' (or ``volumetric share'') of the Vessels 
fund is equal to the number of gallons of NGLs and NGLPs purchased from 
Vessels from September 1, 1973 through December 31, 1977, multiplied by 
a volumetric refund amount of $0.0185 per gallon.\8\

    \8\ The volumetric factor was computed by dividing $1,564,222.74 
by 84,689,877 (the approximate number of gallons of NGLs and NGLPs 
Vessels sold to its customers during the audit period). The latter 
figure was obtained from records submitted to this Office by 

    Each successful claimant will also receive a pro rata share of the 
interest accrued on the consent order funds between the date the funds 
were placed in the Vessels escrow account and the date the applicant's 
refund is disbursed.

C. Presumptions of Injury

    In addition to the volumetric presumption, we are adopting a number 
of presumptions regarding injury for claimants in each category listed 
below. These presumptions will simplify the refund process and will 
help ensure that refund claims are evaluated in the most efficient and 
equitable manner possible.
a. End-Users
    End-users of Vessels products, i.e., consumers, whose use of NGLs 
or NGLPs was unrelated to the petroleum business, are presumed injured 
and need only document their purchase volumes from Vessels during the 
consent order period to be eligible to receive their full allocable 
b. Refiners, Resellers, and Retailers Seeking Refunds of $10,000 or 
    Reseller claimants (including refiners and retailers), whose 
allocable share is $10,000 or less, i.e., who purchased 540,540 gallons 
or less of Vessels' products during the consent order period, will be 
presumed injured and therefore need not provide a further demonstration 
of injury, besides documentation of their purchase volumes, to receive 
their full allocable share. See, e.g., E.D.G., Inc., 17 DOE para. 
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.
c. Medium-Range Refiner, Reseller, and Retailer Claimants
    In lieu of making a detailed showing of injury (see part III D, 
below), a reseller claimant whose allocable share exceeds $10,000 may 
elect to receive a refund under the medium-range presumption of injury. 
Under this presumption, a claimant will receive as its refund the 
larger of $10,000 or 60 percent of its allocable share up to 

[[Page 654]]
$50,000.9 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 involving NGLs and 
NGLPs, we have determined that a 60 percent presumption for the medium-
range purchasers of NGLs and NGLPs accurately reflected the amount of 
their injury as a result of their purchases of those products. See 
Sauvage Gas Co., 17 DOE para. 85,304 (1988); Suburban Propane Gas Co., 
16 DOE para. 85,382 (1987). Such an applicant will be required only to 
provide documentation of its purchase volumes of Vessels' products 
during the consent order period in order to be eligible to receive a 
medium-range refund.

    \9\ That is, reseller claimants who purchased in excess of 
540,540 gallons of Vessels product during the consent order period 
may elect to utilize this presumption.

d. 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 its 
purchases of products 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 than $10,000 will also be required to 
certify that it will pass any refund through to its customers or 
member-customers, provide us with a full explanation of how it plans to 
accomplish the restitution, and certify that it will notify the 
appropriate regulatory body or membership group of the receipt of the 

    \10\ A cooperative's sales to non-members will be treated in the 
same manner as sales by other resellers. See Total Petroleum/Farmers 
Petroleum Cooperative, 19 DOE para. 85,215 (1989).

e. Spot Purchasers
    As in prior Subpart V proceedings, we are adopting a rebuttable 
presumption that a reseller that made only irregular or sporadic, i.e., 
spot, purchases from Vessels 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 from Vessels. 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 
subsequently recouped through the draw down of banks. See Quaker State 
Oil Refining Corp./Certified Gasoline Co., 14 DOE para. 85,465 (1986).

D. Showing of Injury

    As in prior refund proceedings, claimants who are medium-range 
resellers (including retailers and refiners) will be afforded the 
opportunity to prove injury in order to receive a refund equal to their 
full allocable share. These claimants will be required to demonstrate 
that during the audit period they would have maintained their prices 
for the NGLs and NGLPs purchased from Vessels at the same level had the 
alleged overcharges not occurred. While there are a variety of ways to 
make this showing, a reseller generally must demonstrate that, at the 
time it purchased the product from Vessels, market conditions would not 
permit it to pass through to its customers the additional costs 
associated with the alleged overcharges. See Atlantic Richfield Co./
Odessa L.P.G. Transport, 21 DOE para. 85,384 (1991); Gulf Oil Corp./
Anderson & Watkins, Inc., 21 DOE para. 85,380 (1991). In addition, the 
reseller will be required to show that it had a ``bank'' of unrecovered 
costs in order to demonstrate that it did not recover the increased 
costs associated with the alleged overcharges by increasing its own 
prices. The maintenance of a bank does not, however, automatically 
establish injury. See Tenneco Oil Co./Chevron U.S.A., Inc., 10 DOE 
para. 85,014 (1982).

E. Refund Application Requirements

    To apply for a refund from the Vessels Consent Order fund, a 
claimant should submit an Application for Refund containing all of 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 the person to 
contact for any additional information, and the name and address of the 
person who should receive any refund check.11 If the applicant 
operated under more than one name or under a different name during the 
price control period, the applicant should specify these names;

    \11\ Under the Privacy Act of 1974, the submission of a social 
security number by an individual applicant is voluntary. An 
applicant that does not wish to 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 Petroleum Overcharge 
Distribution and Restitution Act of 1986 and the regulations 
codified at 10 C.F.R. 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) The applicant's use of NGLs and NGLPs from Vessels: e.g., 
consumer (end-user), cooperative, or public utility;
    (3) A monthly purchase schedule covering the period from September 
1, 1973 through December 31, 1977. 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 purchases, but the estimation method must be 
reasonable, explained in detail, and supported by some documentation;
    (4) If the applicant is a regulated utility or cooperative, a 
certification that it will pass on the entirety of any refund received 
to its customers or customer-members, will notify its state utility 
commission, other regulatory agency, or membership body of the receipt 
of any refund, and a brief description as to how the refund will be 
passed along;
    (5) A statement as to whether the applicant or a related firm has 
filed, or has authorized any individual to file on its behalf, any 
other application in the Vessels refund proceeding. If so, an 
explanation of the circumstances of the other filing or authorization 
should be submitted;
    (6) If the applicant is or was in any way affiliated with Vessels, 
it should explain this affiliation, including the time period in which 
it was affiliated;
    (7) A statement as to whether the ownership of the applicant's firm 
changed during or since the refund period. If an ownership change 
occurred, the applicant should list the names, addresses, and telephone 
numbers of any prior or subsequent owners. The applicant should also 
provide copies of any relevant Purchase and Sale Agreements, if 
available. If such written documents are not available, the applicant 
should submit a description of the ownership change, including the year 
of the sale and the 

[[Page 655]]
type of sale (e.g., sale of corporate stock, sale of company assets);
    (8) A statement as to whether the applicant has ever been a party 
in a DOE enforcement action or a private Section 210 action. If so, an 
explanation of the case and copies of the relevant documents should 
also be provided;
    (9) The following statement signed by the individual applicant or a 
responsible official of the firm filing the refund application: 12

    \12\ We will not process applications signed by filing services 
or other representatives. In addition, the statement must be dated 
on or after the date of this Decision and Order. Any application 
signed and dated before the date of this Decision will be summarily 

    I swear (or affirm) that the information contained in this 
application and its attachments is true and correct 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 ``Vessels Special Refund Proceeding, Case No. VEF-0007.'' Each 
applicant must submit an original and one copy of the application. If 
the applicant believes that any of the information in its application 
is confidential and does not wish for this 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 no later than 90 days from 
the publication of this Decision and Order in the Federal Register, and 
sent to: Vessels Special Refund Proceeding, Office of Hearings and 
Appeals, Department of Energy, 1000 Independence Avenue, S.W., 
Washington, D.C. 20585-0107.
    In those cases where applications are filed by representatives, 
e.g., filing services or attorneys, we may request information from the 
representative regarding its solicitation practices and materials and 
the procedures it uses. Furthermore, each representative that requests 
that it be a payee of a refund check must file with the OHA if it has 
not already done so a statement certifying that it maintains a separate 
escrow account at a bank or other financial institution for the deposit 
of all refunds received on behalf of applicants, and that its normal 
business practice is to deposit all Subpart V refund checks in that 
account within two business days of receipt and to disburse refunds to 
applicants within 30 calendar days thereafter. Unless such 
certification is received by the OHA, all refund checks approved will 
be made payable solely to the applicants. Representatives who have not 
previously submitted an escrow account certification form to the OHA 
may obtain a copy of the appropriate form by contacting: Marcia B. 
Carlson, HG-13, Chief, Docket & Publications Division, Office of 
Hearings and Appeals, Department of Energy, Washington, D.C. 20585-

F. Distribution of Funds Remaining After First Stage

    Any funds that remain after all first-stage claims have been 
decided will be distributed in accordance with the provisions of the 
Petroleum Overcharge Distribution and Restitution Act of 1986 (PODRA), 
15 U.S.C. 4501-07. PODRA requires that the Secretary of Energy 
determine annually the amount of oil overcharge funds that will not be 
required to refund monies to injured parties in Subpart V proceedings 
and make those funds available to state governments for use in four 
energy conservation programs. The Secretary has delegated these 
responsibilities to OHA. Any funds in the Vessels escrow account the 
OHA determines will not be needed to effect direct restitution to 
injured Vessels customers will be distributed in accordance with the 
provisions of PODRA.
    It is therefore ordered That:
    (1) Applications for Refund from the funds remitted to the 
Department of Energy by Vessels Gas Processing Company pursuant to the 
Consent Order that became final on February 16, 1988 may now be filed.
    (2) All Applications for Refund must be postmarked no later than 90 
days after publication of this Decision and Order in the Federal 

    Date: December 21, 1995.
George B. Breznay,
Director, Office of Hearings and Appeals.
[FR Doc. 96-290 Filed 1-8-96; 8:45 am]