Case No. RF354-00006

October 6, 1997

DECISION AND ORDER

OF THE DEPARTMENT OF ENERGY

Application for Refund

Name of Petitioner: Vessels Gas Processing Company/

Petroleum Trading & Transport

Date of Filing: May 16, 1996

Case Number: RF354-00006

On December 21, 1995, the Office of Hearings and Appeals (OHA) of the Department of Energy (DOE) issued a Decision and Order instituting special refund procedures for distribution of a fund obtained by the DOE through a Consent Order entered into with Vessels Gas Processing Company (Vessels) of Colorado.(1) See Vessels Gas Processing Company, 25 DOE ¶ 85,085 (1995)(Vessels). The Consent Order settled an enforcement proceeding initiated when the DOE’s Economic Regulatory Administration (ERA) performed an audit of Vessel’s business records. Under the terms of the Consent Order, Vessels agreed to remit $1,564,222.74 to the DOE in order to settle all claims and disputes between Vessels and DOE regarding Vessel’s compliance with DOE price regulations in sales of Natural Gas Liquids (NGLs) and Natural Gas Liquid Products (NGLPs) during the period from September 1, 1973 through December 31, 1977 at the firm’s Irondale gas plant and April 1, 1975 through December 31, 1977 at its Brighton gas plant.

This determination involves an Application for Refund in the Vessels refund proceeding filed on behalf of Petroleum Trading & Transport (PT&T), a natural gas liquid products reseller located in Tulsa, Oklahoma.

In Vessels, the DOE established procedures for the distribution of the funds held in the Vessels escrow account. Applicants for refunds from that account must certify that they purchased NGLs or NGLPs from Vessels during the audit period from one of the two Vessels gas plants. Vessels requires applicants to demonstrate that they were injured by Vessels’ pricing practices in order to receive a refund. In order to establish injury an applicant must show that the Vessels overcharges were absorbed by the applicant rather than simply passed along to the applicant’s customers. However, Vessels also provides that certain claimants need not submit a detailed demonstration of injury if they fall into one of four categories of purchaser for whom a presumption of injury has been established. Of relevance to this case is the exempted category created for product resellers whose refund claim exceeds $10,000 but who elect to accept a refund of $10,000 or 60 percent of their allocable share up to $50,000, whichever is larger. Under the terms established in Vessels such claimants need only document their purchase volume claim in order to qualify for a refund under an injury presumption established for medium-range claimants. This presumption was established to acknowledge that in the case of certain larger claimants, the assembly and presentation of detailed injury demonstrations may prove to be an unreasonable burden due to the passage of time and unavailability of detailed pricing data. The 60 percent portion reflects the experience of this Office in numerous NGL proceedings and represents a reasonable assessment of actual injury incurred by these claimants as a result of absorbed product overcharges.

In order to distribute the funds in the Vessels escrow account, the OHA determined that refunds should be calculated on a volumetric basis. The volumetric methodology assigns a uniform, per-gallon refund amount to all purchases of covered products made from either gas plant during the Consent Order period. This methodology assumes that the Vessels overcharges were dispersed equally over all gallons of price-controlled NGLs/NGLPs marketed by Vessels during the audit period, a reasonable assumption because DOE price regulations generally required regulated firms to account for increased product costs on a firm-wide basis when establishing product prices. The volumetric factor of $0.0261 per gallon was computed by dividing $1,564,222.74 by 59,913,647 gallons, the approximate number of gallons of price-controlled NGLs and NGLPs Vessels sold to its customers during the audit period from the two gas plants ($1,564,222.74/59,913,647 gallons = $0.0261 per gallon).(2) A claimant’s “allocable share” (or, “volumetric share”) is equal to $0.0261 per gallon multiplied by the combined volume of NGLs and NGLPs purchased by the claimant from the two gas plants during the audit period.

PT&T, a NGLP reseller, has satisfied the criteria established in Vessels by the submission of copies of Vessels product invoices which document the applicant’s claimed purchases. PT&T’s documented purchase volume claim is for 1,180,243 gallons of propane, butane and natural gasoline lifted from the Vessels Irondale and Brighton gas plants during the respective audit periods. Applying the volumetric factor to this purchase volume generates an allocable share of $30,804 (1,180,243 gallons x $0.0261/gallon). In accordance with the criteria established for medium-range claims, PT&T is therefore entitled to a principal refund of $18,483 ($30,804 x 60 percent). PT&T is also entitled to accrued interest of $10,742, bringing its total refund to $29,225 ($18,483 principal plus $10,742 interest).

Although we have carefully scrutinized the PT&T refund claim and purchase volume documentation, the determination reached in this Decision and Order is based on the presumed validity of the presentations made in the Petroleum Trading & Transport Application for Refund. If the factual basis underlying our determination in this Decision is later shown to be inaccurate, this Office has the authority to order appropriate remedial action, including rescission or reduction of the refund ordered.

It Is Therefore Ordered That:

(1) The Application for Refund filed on behalf of Petroleum Trading & Transport (Case No. RF354-00006) is hereby granted as set forth in Paragraph (2) below.

(2) The Director of Special Accounts and Payroll, Office of the Controller, of the Department of Energy shall take appropriate action to disburse a total of $29,225 ($18,483 principal and $10,742 interest) from the DOE deposit fund escrow account maintained at the Department of the Treasury and funded by Vessels Gas Processing Company, Consent Order No. 740V01387W, to:

Petroleum Trading & Transport

OR Energy Refunds, Inc.

31 Small Lane

Hardin, Kentucky 42048

(3) The determination made in this Decision and Order is based upon the presumed validity of statements and documentary material submitted by the applicant. This determination may be revoked or modified at any time upon a determination that the factual basis underlying the applicant’s Application for Refund is incorrect.

(4) This is a final order of the Department of Energy.

George B. Breznay

Director

Office of Hearings and Appeals

Date: October 6, 1997

(1)In this proceeding “Vessels” refers to Vessels Gas Processing Company (VGPC) and Vessels Gas Processing, Limited (VGPL). In addition, “Vessels” refers 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.

(2)On August 13, 1997, the DOE issued a Supplemental Decision and Order increasing the per gallon volumetric factor for the Vessels refund proceeding from $0.0185 to $0.0261. The modification was necessary because of an error OHA made in its initial calculation of the volumetric factor in Vessels. See Vessels Gas Processing Company, 26 DOE ¶ 85,052 (1997).