[Federal Register: May 21, 2004 (Volume 69, Number 99)]
[Notices]
[Page 29300-29304]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21my04-83]
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DEPARTMENT OF ENERGY
Final Procedures for Distribution of Remaining Crude Oil
Overcharge Refunds
AGENCY: Office of Hearings and Appeals, Department of Energy.
ACTION: Notice of final procedures for distribution of remaining crude
oil overcharge refunds.
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SUMMARY: This document provides the text of procedures that will govern
the final round of payments to successful claimants in the crude oil
overcharge refund proceeding by the Department of Energy (DOE) Office
of Hearings and Appeals (OHA). Two important issues addressed are the
computation of the per-gallon ``volumetric'' refund amount, and the
mechanics of the refund application process.
DATES: All required information must be submitted between July 1 and
December 31, 2004.
ADDRESSES: Inquiries should be submitted electronically to
crudeoilrefunds@hq.doe.gov.
FOR FURTHER INFORMATION CONTACT: Tami L. Kelly, Secretary, or Thomas O.
Mann, Deputy Director, Office of Hearings and Appeals, Department of
Energy; telephone: 202-287-1449, e-mail:
tami.kelly@hq.doe.gov, thomas.mann@hq.doe.gov.
SUPPLEMENTARY INFORMATION:
I. Introduction
OHA published a notice of proposed procedures for final crude oil
refunds in
[[Page 29301]]
the Federal Register on November 12, 2003, and requested comments from
interested parties (``the November 12 notice''). 68 FR 64098. The
November 12 notice recounted the history of the federal regulations
governing the pricing and allocation of domestic crude oil and refined
petroleum products during the period August 1973 through January 1981
(``the controls period''), and the 1986 Stripper Well settlement
agreement that formed the basis for DOE's modified restitutionary
policy for refunding crude oil overcharges. Acting under the Stripper
Well agreement, OHA distributed 80 percent in equal shares to the
States and the Federal government for indirect restitution, and
reserved 20 percent of the crude oil overcharges for direct restitution
to injured claimants (i.e. end-users of refined petroleum products), in
a refund proceeding conducted by OHA under the procedural regulations
in 10 CFR Part 205, Subpart V. The refund process was prolonged because
DOE continued to collect crude oil overcharge funds into the 21st
century. In a series of initial and supplemental refund payments, OHA
has paid successful claimants at the cumulative ``volumetric'' rate of
$0.0016 per gallon. Those initial and supplemental refund claims have
now been resolved, and OHA intends to distribute all remaining crude
oil overcharge funds held by DOE for successful claimants ``insofar as
practicable.'' Consolidated Edison Company of New York v. Abraham, No.
CIV.A.1:01CV00548 (D.D.C. May 9, 2003) (Westlaw, 2003 WL 21692698),
aff'd, No. 03-1498 (Fed. Cir. Feb. 9, 2004).
In order to distribute the entire amount of the 20 percent reserve,
OHA proposed to use an electronic verification and application process,
and to pay refunds through electronic fund transfers. The November 12
notice proposed to calculate the volumetric refund amount at the outset
by dividing the money in the reserve, then $262 million (``the
numerator''), by the number of gallons of refined petroleum products
purchased during the controls period by successful claimants, then
estimated at 390 billion gallons (``the denominator''), yielding a
volumetric refund amount of $0.00067 per gallon. The November 12 notice
proposed to send direct notice of the final refund distribution only to
claimants who would be eligible to receive refunds greater than $250.
While they would not receive notice of the final refund payment, the
November 12 notice proposed that successful claimants eligible for
refunds below $250 would still be permitted to file claims. Although
filing services had represented many claimants, we proposed to send
final payments directly to claimants. We also proposed to limit the
application period for final refunds to 180 days, and indicated that we
would not permit claimants to revisit their purchase volume figures
established earlier. Finally, we stated that any money left unclaimed
after the final round of crude oil refunds would be divided equally
between the States and the Federal government, as prescribed in the
Stripper Well agreement.
II. Summary and Response to Comments on Proposed Final Refund
Procedures
DOE received nine comments in response to the November 12 notice,
submitted by law firms, trade associations, filing services that
represent successful claimants, the National Association of State
Energy Officials, and a state energy office. This section of the
Supplementary Information summarizes the issues raised in the comments,
and gives DOE's response, as follows:
Comment: Two commenters addressed several issues concerning the
calculation of the volumetric refund amount. They contend that the
November 12 notice underestimates the number of dollars that should be
in the numerator, and overestimates the number of gallons that should
be in the denominator. They urge OHA to include in the numerator the
$9.5 million currently in the Citronelle end users account, any funds
returned to the reserve for claimants as a result of refund awards
already made and later rescinded (``returned funds''), and all other
crude oil overcharge monies held by DOE that are arguably subject to
the Stripper Well agreement, in addition to the money in the reserve
for claimants. They contend OHA should consider the time value of
money, pointing out that the money in the reserve has now grown to $264
million, and interest will continue to accrue on those funds until the
refund process is completed. They also call on OHA to determine the
volume figure in the volumetric denominator more precisely, by
excluding all gallons that ultimately prove to be ineligible for final
refunds for any reason, including failure to seek the supplemental
refunds authorized in 1995 or the final refunds authorized in this
notice, and any downward adjustments in contested claims that reduce
the number of gallons approved by OHA as the basis for granting
refunds. These commenters argue that to account for these factors, OHA
should defer the calculation of the volumetric refund amount until the
final application period closes, and all claims submitted have been
reviewed. In this way, the number of dollars in the numerator will be
maximized to include all crude oil overcharge funds payable to
claimants plus accrued interest, and the number of gallons in the
denominator will be minimized to exclude all ineligible gallons. Both
adjustments will increase the volumetric amount, and help to accomplish
the goal of distributing the entire amount of overcharges reserved for
successful crude oil refund claimants ``insofar as practicable.'' These
commenters further contend that if the volumetric is calculated
according to the proposed method, it would leave a substantial portion
of the crude oil overcharges undistributed to the end user claimants
for whom the funds are held by DOE, and therefore divert those funds
for indirect restitution to the States and Federal government. That
result, they contend, would frustrate the effectuation of the objective
of DOE's Subpart V crude oil refund proceeding, and the holding of the
Consolidated Edison case. The commenters maintain the more accurate
calculation of the volumetric would justify the minimal delay entailed.
Finally, to the extent there remain undistributed funds at the
conclusion of a final refund payment to all qualified end user
claimants, one commenter urges OHA to calculate a ``supplemental final
volumetric,'' which would be used to make a closeout payment to
claimants who are entitled to receive $250 or more.
Response: We believe these comments have merit, and that OHA should
adopt the method they advocate for calculating the volumetric refund
amount. As explained below, however, we do not plan to make the
suggested closeout payment.
We agree with the commenters that the money in the Citronelle end
users account (currently $9.5 million) should be included in the final
distribution of crude oil overcharge funds. DOE was a party to the
Citronelle settlement agreement, which directs the Department to
transfer those funds to the Subpart V crude oil refund proceeding. It
is already DOE's practice that ``returned funds'' (recovered from
refund awards that were subsequently reduced for any reason) are
deposited into the claimants reserve and they will be included in the
final distribution. In addition to the Citronelle end users account,
DOE is holding a small amount of other crude oil overcharge funds, and
these moneys, which total approximately $1 million at this time,
[[Page 29302]]
will also be included in the final distribution.
Concerning the timing of the volumetric calculation, the goal of
this proceeding is to distribute the entire amount of crude oil
overcharge funds held by DOE to end user claimants. By its nature, the
task presents a moving target, where the amount of money in the
volumetric numerator will increase as funds are added and interest
accrues, and the number of gallons in the volumetric denominator will
decrease as claimants fail to come forward or for any other reason fail
to present an adequate application. OHA can estimate the volumetric as
$0.00072 at this time, by dividing the dollars currently available for
distribution, $275 million, by the approved gallons currently eligible
for refunds, 382 billion. Under the most optimistic scenario, even with
an electronic verification and application process, OHA will not know
the value of the volumetric denominator before the 180 day application
period is closed. Thus, we will delay the final volumetric calculation
until the close of the application period. This will make the
distribution of refunds more cost-effective, and eliminate the need for
the proposed closeout payment. The only disadvantage of using a last-
minute volumetric refund calculation is a delay in the disbursements of
payments until the close of the application period. In the past, OHA
announced the volumetric amount when opening the application period for
a round of crude oil refunds and began disbursing payments immediately.
The prior supplemental refund payments were viewed in the context of an
ongoing process, as DOE continued to recover additional overcharges.
See Crude Oil Supplemental Refund Distribution, 18 DOE ] 85,878 (1989);
Issuance of Supplemental Refund Checks in Special Refund Proceeding
Involving Crude Oil Overcharge Refunds, 60 FR 15562 (1995). This time,
however, our goal is different. We are now concluding the refund
process, and we fully intend to distribute all of the reserved funds to
claimants ``insofar as practicable.'' With this goal in mind, we agree
that the efficiency to be gained by calculating the volumetric after
the close of the application period is worth the minimal delay. Any
money remaining after the final refund payments will be divided equally
between the States and the Federal government.
Comment: Several commenters addressed the proposal in the November
12 notice to pay final refunds directly to claimants that are
represented by ``filing services,'' stating that this would constitute
an unwarranted departure from OHA's longstanding practice in the
Subpart V crude oil refund proceeding. In the absence of specific
problems, according to the commenters, there is no reason for OHA not
to continue the settled practice of honoring the contracts between
filing services and their clients. If there is a history of problems
with specific filing services, the commenters urged OHA to impose
appropriate conditions on those filing services alone, such as
requiring that a filing service post a performance bond, or establish
an escrow account. These commenters maintain that filing services are
necessary to an efficient refund process, and that cutting them out of
the historic distribution chain at this late stage would delay rather
than expedite the conclusion of the refund process. Several commenters
also pointed out that some ``filing services'' are attorneys who are
subject to the canons of ethics and regulation including disciplinary
sanctions by their respective State bars. With respect to non-attorney
filing services, several commenters pointed to the services filing
services rendered to refund claimants, and their track record over the
long history of the crude oil refund proceeding. Several commenters
urged OHA to accept claim verifications from all representatives who
already have powers of attorney on file.
Response: These comments raise meritorious issues. It is true, as
the commenters point out, that both attorney and non-attorney filing
services made it possible for many claimants to obtain refunds who
would not have otherwise received them. Filing services served their
clients by maintaining contact with OHA and helping to resolve
questions about claimants' eligibility for refunds. On balance, OHA
will again need to rely on the filing services in order to reach as
many claimants as possible in the final refund distribution. The filing
services will in turn have an incentive to contact their clients,
verify their claims, and submit updated information to OHA.
We also agree with the commenters that there is no reason to
sanction all filing services merely because OHA experienced problems
with some of them during prior rounds of the refund process. We will
therefore continue the practice of paying refunds to most of the filing
services we paid in the last distribution, including attorneys and non-
attorneys, provided that each filing service submits a current ``Escrow
Certification'' to OHA and certifies that it has provided notice of the
final refund payment to all of its clients. The Escrow Certification
which OHA has previously required filing services to submit states that
(1) The filing service has established an escrow account for the
purpose of depositing refund payments (electronic fund transfers or
checks) received on behalf of its clients, (2) it is the filing
service's normal business practice to deposit all refund payments into
the escrow account within two business days, (3) it is the filing
service's normal business practice to disburse all refunds to clients
(less commissions or fees) within 30 calendar days of receiving those
funds, and (4) the filing service agrees to make records for its escrow
account available to OHA on request. We will again use that form of
certification. In cases where there has been a history of problems with
a specific filing service, OHA may determine to pay that service's
claimants directly or may require additional measures to ensure that
refunds reach the claimants who are entitled to receive them. Because
each filing service is different, and the contracts with their clients
vary, it is impossible to structure a uniform approach, and OHA will
deal with filing services individually.
Comment: Several commenters generally supported the proposals to
expedite the final stages of the refund process by using electronic
filings and strict time limits, noting that substantial delays have
occurred in the past. They also urged DOE to make sufficient resources
available so that OHA could process the applications quickly. One
commenter urged OHA to consider accelerating the process, and suggested
shortening the proposed 180-day filing period.
Response: While the task OHA undertook in fashioning the crude oil
refund process--reaching injured claimants across the United States--
has been enormous, we acknowledge that there have been substantial
delays. For that reason, we are designing a process for the final
refund distribution that will operate with maximum efficiency. As
described in the November 12 notice, eligibility for final refunds is
limited to successful claimants who received prior refunds. No new
parties are permitted to apply for refunds. No changes will be made in
the purchase volumes previously approved by OHA. The time for filing an
application for the final refund will be strictly limited to 180 days.
The choice of this time period represents a careful balancing of
fairness versus expediency. We need to allow sufficient time for
eligible claimants to learn the refund is available, to verify their
claims, and update their information in OHA's database. In our view,
180 days is a reasonable length of time to accomplish this objective.
[[Page 29303]]
However, we believe that a shorter time would not be fair to smaller
claimants, who might not learn about the refund availability as soon as
larger applicants who have corporate or government officials, lawyers,
or filing services representing their interests.
Comment: One commenter, a trade association that estimates few of
its members' claims would exceed $100, challenged the proposal not to
send direct mail notice of the final refund to claimants who would
receive less than $250. This commenter asserts that OHA ``provides
little justification for the $250 cut-off'' in the November 12 notice,
and advocates using the same $50 cut-off that OHA used for the
supplemental refund authorized in 1995. See Issuance of Supplemental
Refund Checks in Special Refund Proceeding Involving Crude Oil
Overcharge Refunds, 60 FR 15562 (1995). The commenter argues that the
marginal cost to DOE of giving notice to smaller claimants cannot be so
high as to justify cutting them out of the information chain and
consequently reducing the chance they will learn of the refund
availability, and urges OHA to ``reexamine its assumptions.''
Response: After considering this comment, we have decided to adopt
a $200 cut-off level for giving direct notice to claimants eligible to
receive final refunds. Using the $50 cut-off advocated by the commenter
instead of the $200 cut-off level would mean mailing out notice to
nearly 29,000 additional claimants, and the cumulative amount of
refunds these claimants could receive represents only 1.1 percent of
the total fund available. For these reasons, we believe adopting the
$200 cut-off level strikes a reasonable balance that will still enable
OHA to notify a large number of claimants eligible to receive virtually
all of the money while avoiding an undue administrative burden. OHA's
current database contains only purchase volume information for each
claimant. The $200 refund amount must therefore be expressed as a
gallon figure; at the estimated volumetric of $0.00072 per gallon, a
refund of $200 translates to a cut-off volume of 280,000 gallons. Thus,
claimants who purchased less than 280,000 gallons of refined petroleum
products during the controls period will not receive direct notice of
the final refund. Direct mail notice notwithstanding, all valid, timely
claims will be considered.
In addition to publishing this notice in the Federal Register, OHA
will publicize the commencement of the claims proceeding with a press
release, and we will attempt to communicate with associations or
organizations that represent entities who are likely to be claimants to
alert them to the proceeding. We will not adopt a processing cut-off
for small claimants, even though Section 205.286(b) of the Subpart V
regulations would permit that action. Finally, we note that this
commenter can obviate its specific concerns by taking responsibility
for alerting the claimants it represents to the coming opportunity to
obtain a final crude oil refund payment.
Comment: One commenter, a State energy office, urged OHA to eschew
the proposed refund process altogether, and give all of the crude oil
overcharges reserved for claimants to the States for indirect
restitution. Under the terms of the Stripper Well settlement, the
Petroleum Overcharge Distribution and Restitution Act of 1986
(``PODRA''), DOE's Modified Statement of Restitutionary Policy, and a
long line of decisions by OHA and the Federal courts, DOE is obliged to
make a final distribution of the entire amount of funds reserved for
successful crude oil refund claimants ``insofar as practicable.''
Accordingly, we must reject that commenter's suggestion, which would
contravene the legal and policy underpinnings of the crude oil refund
proceeding. Policy consideration and binding precedent dictate that the
specific funds at stake be used first for direct restitution to
claimants. However, if there remains any unclaimed money at the end of
the refund process, we will divide it equally between the States and
the Federal government, for indirect restitution under the terms of the
Stripper Well settlement agreement.
Comment: One commenter, an attorney who has pending lawsuits
against DOE and against claimants whom he does not represent, including
one or more civil actions in which he seeks a fee from the funds held
for claimants by DOE to compensate him for his purported role in
bringing about the final crude oil refund distribution, asserted that
DOE should deduct any fee awarded to him before disbursing any refunds
to claimants.
Response: Recent Federal court decisions have rejected a similar
fee claim advanced by this same commenter. The United States Court of
Appeals for the D.C. Circuit held that since the Federal government has
not waived its sovereign immunity, it could not order DOE to pay a fee
from crude oil overcharge funds in its possession to this commenter
under the common fund doctrine for helping third parties recover money
from a government-created escrow account held in the United States
Treasury. Kalodner v. Abraham, Civil Action No. 97-2013 (RWR) (D.D.C.
July 30, 2001), 3 CCH Fed. Energy Guidelines ] 26,739, aff'd, 310 F.3d
767 (D.C. Cir. 2002). As the Court of Appeals noted, the sine qua non
of Federal sovereign immunity is the Federal government's possession of
the money in question; nothing more is needed. The D.C. Circuit
affirmed the District Court, whose decision also noted that the OHA
refund process is a by-product of a public enforcement action
undertaken by DOE under the Economic Stabilization Act of 1970
(``ESA''), and the Emergency Petroleum Allocation Act of 1973
(``EPAA''), as amended. Under those statutes, there also existed a
parallel private right of action for overcharges made in violation of
Federal oil price controls. It is only through a private right of
action for recovery of overcharges that a plaintiff could be awarded
legal fees from a private party defendant. The commenter has never
represented any of the private parties from whom he now seeks a fee
from the escrow account held in the Treasury for crude oil claimants,
and he never filed a private overcharge action on their behalf.
Furthermore, nothing in the agency's applicable Subpart V regulations,
10 CFR Part 205, Subpart V, nor in any of the many refund cases decided
after the promulgation of these regulations in 1979, authorizes an
attorney's fee award refund in these circumstances. Thus, there appears
to be no basis whatsoever for DOE to pay a fee to this commenter, and
no need to consider deducting any amount for a fee before disbursing
refunds to claimants.
III. The Effect of Utility Deregulation on Eligibility To Receive
Refunds
Utilities received many of the largest crude oil refunds. Although
OHA received no written comments concerning the impact of changes in
the utility industry that have occurred since 1987, the matter deserves
special mention here. As OHA stated in the Notice Explaining Procedures
for Processing Refund Applications in Crude Oil Refund Proceedings
Under 10 CFR Part 205, Subpart V, 52 FR 11737 at 11742; 7 DOE (CCH) ]
90,512 (April 10, 1987) (the 1987 Notice), crude oil refunds to
utilities are conditioned on each utility's certification that it will
notify the applicable State regulatory body and pass through the
entirety of the refund to its retail customers. This requirement is
premised on the notion that regulated utilities were not themselves
injured by crude oil overcharges, since they historically passed on
these overcharges to their customers through regulatory fuel adjustment
cost mechanisms in the form of higher rates for electricity. Since
[[Page 29304]]
1987, changes have occurred. Some States have enacted various types of
deregulation schemes, which in turn led to the disintegration of many
firms in the public utility industry. As a result, the same regulatory
mechanisms that were previously available to effectuate restitution to
overcharged utility customers may no longer be available. In such
instances OHA may require a modified certification from the utility
claimant. The revised certification will eliminate the reference to a
governmental regulatory body while retaining the requirement that the
utility pass the refund through to its retail customers on a dollar-
for-dollar basis.
IV. Final Refund Procedures
Based on our discussion of the comments above, OHA will adopt the
following final refund procedures. As explained in the November 12
notice, we must verify the accuracy of information in the OHA crude oil
database before disbursing final refunds to individual claimants. OHA
will send notice to all claimants (or their representatives of record)
who purchased at least 280,000 gallons of refined petroleum products
during the controls period and therefore are eligible to receive
refunds exceeding $200 based on an estimated per-gallon volumetric
amount of $0.00072. This will include the 34,000 largest claimants. The
orders authorizing prior crude oil refund payments required claimants
to notify OHA when their addresses change, and notice will be sent to
the last known address in OHA's crude oil database. The notice will
advise the claimant of the availability of the final crude oil refund
payment, and show the information that is in the OHA database,
including name, address, and a contact person. A unique PIN number will
be assigned to each claimant. A claimant must use that PIN in order to
verify the information in the database. The claimant must indicate
whether the applicant shown in the OHA database should receive the
refund, or whether the refund cannot be paid to the listed applicant
for any reason, e.g., due to death, divorce, bankruptcy or dissolution
of a business.
For the final crude oil refund distribution, we will not mail
direct notice to claimants who purchased less than 280,000 gallons of
refined petroleum products during the controls period. We continue to
believe that the cost and administrative burden of mailing information
to these claimants is not justified given the small amount of the
refunds. As with the 1995 supplemental refund payment, however, we will
accept applications from all successful claimants who are eligible to
receive additional refunds, as long as they are filed within the 180-
day application period. DOE prefers to make payments by electronic
direct deposit, and strongly encourages claimants to choose this method
for their final refunds. Many checks issued to claimants during the
crude oil refund process were lost, and direct deposit offers a more
secure payment method than a paper check. Claimants who choose direct
deposit must submit the bank name, city and State, ABA routing number,
account number, and the name on the checking or savings account to
receive their refund payment. If the direct deposit information is not
provided, DOE will issue a check.
This information must be submitted to OHA between July 1 and
December 31, 2004. It may be submitted by filling out and mailing the
suggested format on the back of the notice using the enclosed postage-
paid envelope, or by submitting the information via OHA's Web site at
http://www.oha.doe.gov/2004supp/refunds.asp.
We ask claimants to provide their Employer Identification Number
(for businesses) or Social Security Number (for individuals) because
the Internal Revenue Service (IRS) requires that DOE report refund
payments on IRS Form 1099-MISC. Claimants should submit this number
even if they have previously provided it to our office. By law,
individual claimants are not required to disclose their Social Security
Numbers. However, if an individual does not report their Social
Security number to us, we will direct that 31 percent of the amount of
the final refund check be withheld and forwarded to the IRS as back-up
withholding.
Unless we receive the information we have requested from each
claimant on or before December 31, 2004, the claimant will forfeit all
rights to the final crude oil refund. OHA is adopting the strict 180-
day application deadline proposed in the November 12 notice. No
extensions of time will be granted, and no late applications will be
accepted. Additional limitations will be necessary in the final round
of crude refunds. All successful claimants have already had extensive
opportunities over many years to establish their respective purchase
volumes of refined petroleum products, which form the bases for their
respective refunds. There will be no further opportunities to revise
volumes during the final distribution. No new applications will be
accepted--the final crude oil refund payment is available only to
successful claimants.
OHA establishes the following timeline for the final stages of the
refund process: Mailing of written notice to all of the approximately
34,000 claimants eligible for refunds over $200 (based on a purchase
volume exceeding 280,000 gallons and an estimated volumetric of
$0.00072) will be completed by June 30, 2004. The period for claimants
to submit crude oil refund application information (or verify the
extant information in OHA's database) will run from July 1, 2004
through the December 31, 2004 deadline. OHA will issue a Federal
Register notice setting forth the calculation of the final volumetric
refund amount by January 31, 2005. OHA will begin paying refunds by
February 1, 2005. OHA anticipates it will complete the payment of
refunds by December 31, 2005. Any unclaimed funds will be divided
equally between the States and the Federal government.
Issued in Washington, DC, on May 13, 2004.
George B. Breznay,
Director, Office of Hearings and Appeals.
[FR Doc. 04-11524 Filed 5-20-04; 8:45 am]
BILLING CODE 6450-01-P