Case No. RK272-04618

December 15, 1997

DECISION AND ORDER

OF THE DEPARTMENT OF ENERGY

Supplemental Order

Names of Petitioners: Hudson River Management Corp.

Hudson River Management Corp. d/b/a Hudson River Inn & Conference Center

HS 3, Inc. d/b/a Hudson River Inn & Conference Center

Dates of Filing: October 3, 1995

November 12, 1997

November 12, 1997

Case Numbers: RK272-04618

RC272-00376

RJ272-00051

On January 20, 1995, the Office of Hearings and Appeals (OHA) of the Department of Energy (DOE) issued a Decision and Order granting a refund to Hudson River Inn & Conference Center (HRICC) in the Subpart V crude oil refund proceeding. Indiana Bell Telephone et al., Case Nos. RF272-93731 et al. In that Decision, HRICC (Case No. RF272-95023) was granted a refund of $76 based on purchases of 95,023 gallons of refined petroleum products between August 19, 1973, and January 27, 1981 (the crude oil price control period) and a per gallon volumetric refund amount of $0.0008. However, it was soon discovered that the latter part of HRICC’s case number, 95023, was mistakenly used as the approved purchase volume figure in the Appendix to that Decision and Order. On March 3, 1995, we therefore granted an additional refund of $2,314 based on additional purchases of 2,892,805 gallons of refined petroleum products during the crude oil price control period, also using a per gallon volumetric refund amount of $0.0008. Hudson River Inn & Conference Center, Case No. RA272-00067. Although these two checks were issued in the name of HRICC, it appears that a company called Hudson River Management Corp. (HRMC) actually received and negotiated the two checks. (1) Thus, the total refund that HRMC

received was $2,390, based on a total purchase of 2,987,828 gallons of refined petroleum products. Later, a company named HS 3, Inc. (HS 3) applied for and received a supplemental refund of $2,390 for the petroleum product purchases of HRICC, based upon the per gallon supplemental volumetric refund amount of $0.0008. Crude Oil Supplemental Refund Distribution, Case No. RB272-00061 (February 13, 1996).(2) HRMC has filed a competing application for a supplemental refund for the purchases of HRICC (Case No. RK272-04618), which is now pending before us.

In investigating this manner, we have discovered that neither HRMC nor HS 3 is eligible for a large portion of the refunds they received. The two firms have submitted not entirely consistent accounts of the various ownership transactions involving the HRICC property during and since the refund period. However, neither account indicates that either company or any affiliate owned or operated the HRICC property prior to September 1980. At that time, an affiliate of HS 3, Hudson River Conference Center, Inc. (HRCC), purchased the property.(3) It further appears that HRMC was hired by HRCC to manage HRICC. See Letter from Wesley LaBay, President, HRMC to Dawn Goldstein (October 6, 1997). Under OHA precedent, the right to receive a refund generally remains with the owner of the firm that purchased the refined petroleum products during the price control period. In prior cases, we have determined that the right to receive a refund can be transferred to a subsequent owner of the firm if: (i) the firm is a corporation, the entire capital stock of which was purchased by the subsequent owner; or (ii) the firm's assets were sold under an agreement that indicated, either explicitly or implicitly, that potential refunds were being transferred. See, e.g., Mrs. M.B. Troy, 23 DOE ¶ 85,049 (1993); Ward Transport, Inc., 26 DOE ¶ 85,027 (1997). Neither HRMC nor HS 3 has shown that it obtained the right to the refund from any of the firms that owned the HRICC property prior to September 1980. Therefore, neither of the circumstances described in our prior cases exists in this case. For this reason, we have determined that neither HS 3 nor HRMC is eligible for a refund based on the purchases of the owners of HRICC prior to September 1980.

Since HRMC received an erroneous original refund and HS 3 received an erroneous supplemental refund, we must rescind the pre-September 1980 purchase volume, 2,820,753 gallons, from each corporation’s approved purchase volume. See Pillsbury Company, 26 DOE ¶ 85,056 at 88,162 (1997) (generally “a firm that receives an erroneous refund is responsible for repaying it”), reconsideration granted, Case No. RR272-303 (October 1, 1997) (proper party received refund). The amount rescinded from each corporation in dollars is calculated by multiplying the rescinded purchase volume (2,820,753 gallons) by the volumetric refund amount of $0.0008 per gallon (the volumetric refund amount that HRMC and HS 3 each received). Thus, the amount being rescinded from each corporation, HRMC, and HS 3, is $2,257 (2,820,753 x $0.0008 = $2,257). In addition, since a supplemental refund has already been granted to the proper party, HS 3, in this case, we are denying HRMC’s supplemental crude oil refund application.(4)

It Is Therefore Ordered That:

(1) The Decision and Order issued by the DOE on January 20, 1995, Indiana Bell Telephone et al., Case Nos. RF272-93731 et al., is hereby modified with respect to Hudson River Inn & Conference Center (Case No. RF272-95023, redesignated RC272-00376).

(2) The Decision and Order issued by the DOE on March 3, 1995, Hudson River Inn & Conference Center, Case No. RA272-00067 is hereby modified (Case No. RF272-95023, redesignated RC272-00376).

(3) The Decision and Order issued by the DOE on February 13, 1996, Crude Oil Supplemental Refund Distribution, Case No. RB272-00061, is hereby modified with respect to HS 3, Inc. (Case No. RF272-95023, redesignated RJ272-00051).

(4) Hudson River Management Corporation shall remit the sum of $2,257 to the DOE within 30 days. The check shall be made payable to the "U.S. Department of Energy" and shall prominently display Case No. RC272-00376. The check shall be sent to:

Department of Energy

Office of the Controller

Cash Control Branch

P.O. Box 500

Germantown, MD 20874-0500

In the event that payment is not made within 30 days of the date of this Decision and Order, interest shall accrue on the amount due at the rate generally assessed by the Department of Energy on overdue receivables. Other charges generally assessed on overdue DOE receivables shall also apply.

(5) HS 3, Inc. shall remit the sum of $2,257 to the DOE within 30 days. The check shall be made payable to the "U.S. Department of Energy" and shall prominently display Case No. RJ272-00051. The check shall be sent to:

Department of Energy

Office of the Controller

Cash Control Branch

P.O. Box 500

Germantown, MD 20874-0500

In the event that payment is not made within 30 days of the date of this Decision and Order, interest shall accrue on the amount due at the rate generally assessed by the Department of Energy on overdue receivables. Other charges generally assessed on overdue DOE receivables shall also apply.

(6) The volume claim approved for Hudson River Inn & Conference Center, Case No. RF272-95023, shall be changed in the Office of Hearings and Appeals database from 2,987,828 gallons to 167,075 gallons.

(7) Upon notification by the Office of the Controller of the receipt of these funds, the Director of Special Accounts and Payroll, Office of the Departmental Accounting and Financial Systems Development, Office of the Controller of the Department of

Energy, shall deposit these funds into the deposit fund escrow account maintained at the Department of the Treasury denominated Crude Tracking - Claimants 4, Account Number 999DOE010Z.

(8) To facilitate the payment of future refunds, HS 3, Inc. shall notify the Office of Hearings and Appeals in the event that there is a change in its address, or if an address correction is necessary. Such notification shall be sent to:

Director of Management Information

Office of Hearings and Appeals

Department of Energy

1000 Independence Avenue, S.W.

Washington, D.C. 20585-0107

(9) The Application for Supplemental Refund filed by Hudson River Management Corp. (Case No. RK272-04618) is hereby denied.

(10) The determinations made in this Decision and Order are based upon the presumed validity of the statements and documentary material submitted by the applicants. This Decision and Order may be revoked or modified at any time upon a determination that the basis underlying a refund application is incorrect.

(11) This is a final Order of the Department of Energy.

George B. Breznay

Director

Office of Hearings and Appeals

Date: December 15, 1997

(1)We believe that HRMC received the original refund (in two checks as explained above) for the following reason. On the original refund application, the business name of the applicant firm during the refund period is listed as “Hudson River Mgt.” In addition, the Federal Identification Numbers listed on the original application and on HRMC’s application for supplemental refund, described infra, are identical.

(2)For information pertaining to the second supplemental distribution of Subpart V Crude Oil refund monies, see State of Montana, 25 DOE ¶ 85,059 (1995).

(3)HS 3 has informed this Office that HRCC was a partner of a company, Eagle Bay Associates (Eagle Bay), which may have had some type of ownership interest in the HRICC property a few months prior to September 1980. See Letter from Marcie Beyersdorf, Controller, HS 3, to Dawn Goldstein, Staff Attorney, OHA (November 12, 1997) (November 12 Submission). However, the document that Ms. Beyersdorf submitted with her letter does not show that HRCC had an ownership interest in the HRICC property prior to September 1980. See Easement Agreement between HRICC and Eagle Bay (July 20, 1981) (Attachment to November 12 Submission).

(4)We assume that, as the management company for the property, HRMC had authority to file the original crude oil application on HRCC’s behalf. Therefore, we are not ordering that the $133 for post-September 1980 petroleum purchases, which was granted to HRMC in the original refund, be rescinded and granted to HS 3.