Case No. RF272-69326
July 8, 1997
DECISION AND ORDER
OF THE DEPARTMENT OF ENERGY
Application for Refund
Motion for Discovery
Name of Applicant: Chicago Milwaukee Corporation
Dates of Filing: June 30, 1988
November 14, 1988
Case Numbers: RF272-69326
RD272-69326
This Decision and Order will consider an Application for Refund filed by Chicago Milwaukee Corporation (CMC).(1)In its Application, CMC requests a refund from crude oil overcharge funds. These funds were made available for disbursement by the Office of Hearings and Appeals (OHA) of the Department of Energy (DOE) under 10 C.F.R. Part 205, Subpart V. As explained below, we will grant the Application in part.
Formerly, purchasers of refined petroleum products during the crude oil price control period could apply for a refund from crude oil overcharge funds.(2)51 Fed. Reg. 27899 (August 4, 1986). The DOE collected the crude oil overcharge funds through consent orders with certain firms that sold crude oil during the price control period. E.g., Berry Holding Co., 16 DOE ¶ 85,405 (1987); A. Tarricone, Inc., 15 DOE ¶ 85,495 (1987); Mountain Fuel Supply Co., 14 DOE ¶ 85,475 (1986). The refund procedures that we established for these funds specify that, in order to receive a refund, an applicant generally must: (1) document its purchase volumes; and (2) show that it was injured by alleged crude oil overcharges. An
applicant who was an end-user (ultimate consumer) of petroleum products, whose business was unrelated to the petroleum industry, and who was not subject to the price regulations of the DOE or its predecessors, is presumed to have absorbed rather than passed on alleged crude oil overcharges, and is therefore presumed to have been injured. 52 Fed. Reg. 11737 at 11743 (April 10, 1987).
The presumption of end-user injury is, however, rebuttable. If a party produces evidence of sufficient weight to rebut the presumption, we will require the applicant to provide evidence of injury. Berry at 88,797. A group of States and Territories of the United States (the States) has filed an objection to CMC's Application, attempting to rebut the presumption of injury.
The States argue that CMC suffered little or no injury because it could pass through most or all of its crude oil overcharges to its customers. The argument is based on an economic analysis of the railroad industry. The States do not provide any evidence about CMC's specific pricing practices during the price control period.
We find that the Objections are insufficient to rebut the presumption of end-user injury. A party may rebut an applicant's use of the presumption only by showing that the particular applicant passed through a specific amount of crude oil overcharges. W.H. Johns, Inc., 18 DOE ¶ 85,574 (1989); see also In re: the Department of Energy Stripper Well Exemption Litigation, 746 F. Supp. 1446 (1990) (Stripper Well). In contrast, "a description of the general economic climate of an industry presents no direct evidence that a specific applicant was able to pass through its increased energy costs to its customers, and is therefore insufficient to rebut the end-user presumption of injury." Parker Drilling Co., 20 DOE ¶ 85,480 at 89,099 (1990). The States have not given us evidence that CMC passed through any specific amount of crude oil overcharges. We will therefore deny the Objection and presume that CMC, as an end-user, was injured by crude oil overcharges.
The States have also submitted a Motion for Discovery. The States seek to discover, through interrogatories and the production of documents, CMC's petroleum costs and pricing policies during the price control period. Such general requests for information are inappropriate where the States have presented insufficient evidence to rebut the presumption of injury. Christian Haaland A/S, 17 DOE ¶ 85,439 (1988). The U.S. District Court for the District of Kansas has explained that "OHA's decision to forego discovery and other litigation methods is rational given the equitable nature of the Subpart V refund process." Stripper Well at 1450. We will therefore deny the States' Motion for Discovery.
CMC has a complex corporate history. During the price control period, CMC operated a freight and passenger railroad, the Chicago, Milwaukee, St. Paul, and Pacific, commonly known as the Milwaukee Road. In 1977, Milwaukee Road filed for bankruptcy, emerging in 1985 with its name changed to CMC Real Estate Corp. CMC Real Estate Corp., was liquidated into its parent, Chicago Milwaukee Corp., in November 1989. Chicago Milwaukee Corp., transferred the remaining real estate and associated assets and liabilities to its affiliate, CMC Heartland Partners in June 1990. For simplicity, CMC Real Estate Corp., Chicago Milwaukee Corp., and CMC Heartland Partners are referred to collectively in this Decision as CMC.(3)
CMCs Application is based on a claim of 670,348,962 gallons of petroleum products purchased by six subsidiaries that it owned during the price control period, but no longer owns. The largest part of the gallonage claim (666,455,186 gallons) is for fuel and lubricants purchased by Milwaukee Road.
In 1985, CMC sold the assets (though not the stock) of Milwaukee Road to Soo Line. Soo Line subsequently filed an application for Milwaukee Roads petroleum product purchases in the Stripper Well Rail and Water Transporter escrow refund proceeding. The Stripper Well refund proceedings were based on crude oil overcharges, but were distinct from the Subpart V crude oil overcharge refund proceeding.(4)The issue of whether CMC or Soo Line should receive a refund for crude oil overcharges incurred by Milwaukee Road was resolved in litigation in favor of Soo Line, and CMC is not currently seeking a refund for Milwaukee Roads purchases.(5)Consequently, we will subtract Milwaukee Roads gallonage from CMCs claim.
The next largest part of the gallonage claim (2,248,571 gallons) is due to purchases by Milwaukee Motor Transport Company, a trucking line. CMC sold the capital stock of Milwaukee Motor Transport, however, in February 1985.(6)
The crude oil overcharge refund procedures provide that the right to a refund generally remains with the owner of a firm during the price control period. Nevertheless, the right to a refund can be transferred to a subsequent owner of the firm if: (a) the firm is a corporation, the entire capital stock of which was purchased by the subsequent owner; or (b) the firm's assets were sold under an agreement that indicated, either explicitly or implicitly, that potential refunds were being transferred. Mrs. M.B. Troy, 23 DOE ¶ 85,049 (1993). Since CMC sold the capital stock of Milwaukee Motor Transport without retaining the crude oil refund, we will subtract Milwaukee Motor Transports gallonage from CMCs claim.
The remaining gallonage (1,645,205 gallons) is due to purchases by four other subsidiaries of CMC. Those subsidiaries are: Aslesen Company, which designed and installed food service equipment and distributed wholesale food supplies; Hi-Way Paving, Inc., a highway construction subcontractor; Southern Boiler and Tank Works, Inc., which was a fabricator of plate steel and manufacturer of carbon steel, aluminum, and stainless steel pressure vessels; and Vulcan- Hart Corp., which manufactured and sold equipment for the institutional food service market.(7)Southern Boiler was liquidated.(8)The assets, but not the capital stock, of the other three subsidiaries were sold without transfer of the right to apply in a crude oil overcharge refund proceeding.(9)Thus, CMC retained the right to apply for a refund for these former subsidiaries.
We have carefully reviewed CMC's Application. Since all former subsidiaries were end-users, CMC is presumed injured by the crude oil overcharges and is entitled to its full allocable share of crude oil overcharge funds. CMC estimated its gallonage claim by consulting copies of federal income tax returns from the price control period. We find that CMCs gallonage claim is reasonable.
We calculated CMCs refund amount by multiplying its approved gallonage claim by the current volumetric refund amount of $.0016 per gallon. The total volume that we have approved for CMC is 1,645,205 gallons of refined petroleum products. The total refund that we will grant CMC is therefore $2,632.
The final deadline for the crude oil refund proceeding was June 30, 1995. It is the current policy of the DOE to pay eligible crude oil refund claimants at the rate of $0.0016 per gallon. We will decide whether sufficient crude oil overcharge funds are available for additional refunds for this and other successful applicants when we are better able to determine how much additional money will be collected from firms that have either outstanding obligations to the DOE or enforcement cases currently in litigation.
It Is Therefore Ordered That:
(1) The Application for Refund filed by Chicago Milwaukee Corporation (Case No. RF272-69326) is hereby approved as set forth in Paragraph (3) below.
(2) The Motion for Discovery and Request for the Issuance of a Special Report, and for Stay of Proceedings, filed by a group of States and Territories of the United States (Case No. RD272-69326) is hereby denied.
(3) The Director of Special Accounts and Payroll, Office of Departmental Accounting and Financial Systems Development, Office of the Controller of the Department of Energy shall take appropriate action to disburse a total of $2,632 from the DOE deposit fund escrow account denominated Crude Tracking Claimants 4, Account No. 999DOE010Z, maintained at the Department of the Treasury, to:
Chicago Milwaukee Corporation
c/o CMC Heartland Partners
Attn.: Charles Harrison
547 W. Jackson Blvd., #1510
Chicago, IL 60606
(4) To facilitate the payment of future refunds, Chicago Milwaukee Corporation shall notify the Office of Hearings and Appeals in the event that there is a change of 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
(5) The determinations made in this Decision and Order are based upon the presumed validity of the statements and documentary materials submitted by Chicago Milwaukee Corporation. These determinations may be revoked or modified at any time upon a finding that the basis underlying the Application for Refund is incorrect.
(6) This is a final Order of the Department of Energy.
George B. Breznay
Director
Office of Hearings and Appeals
Date: July 8, 1997
(1) Chicago Milwaukee Corp., is now known as CMC Heartland Partners.
(2) The crude oil price control period extended from August 19, 1973 through January 27, 1981.
(3) Telephone statement to the OHA of Charles Harrison, CMC Heartland Partners, June 13, 1997.
(4) For information on the Stripper Well Rail and Water Transporter escrow refund proceeding, and Soo Lines refund, see Utah Railway Co., et al., 16 DOE ¶ 85,363 (1987).
(5) Telephone statement of Harrison, supra.
(6) 6/ Milwaukee Motor Transport filed for, and received, a refund in the Surface Transporter escrow proceeding, one of the Stripper Well escrows. See Lafferty Trucking, et al., 16 DOE ¶ 85,457 (1987). Since Milwaukee Motor Transport was not an affiliate of CMC when it executed its Stripper Well waiver form, its participation in a Stripper Well refund proceeding does not affect CMCs eligibility for a crude oil overcharge refund.
(7) Moodys 1992 Bank and Finance Manual, 4172.
(8) Application at 3.
(9) Application at 3; Moodys 1992 Bank and Finance Manual, 4172; Telephone statement of Harrison to the OHA, June 20, 1997.