Case No. RR272-00225

April 1, 1997

DECISION AND ORDER

OF THE DEPARTMENT OF ENERGY

Motion for Reconsideration

Name of Petitioner:Continental Grain Company

Date of Filing:October 23, 1995

Case Number: RR272-00225

On March 3, 1995, the Office of Hearings and Appeals (OHA) issued a Decision and Order, Case No. RC272-282, in which it rescinded a prior Decision and Order, Case Nos. RF272-13180, et al.,

with respect to the Application for Refund filed by Continental Grain Company, Case No. RF272- 13180, in the Subpart V crude oil refund proceeding. Continental Grain Company, Case No. RC272- 282 (March 3, 1995). Continental Grain Company filed the present Motion for Reconsideration on October 27, 1995.

In our March 3, 1995 Decision and Order, we found that a subsidiary of Continental Grain, Conticarriers & Terminals, Inc. (Conticarriers), had previously waived its right to a crude oil refund by electing to participate in one of the "Stripper Well" refund proceedings.(1) On August 21, 1987, Conticarriers was granted a refund from the Rail and Water Transporters (RWT) Escrow. Conticarriers & Terminals Inc., Case No. RF271-00184 (August 21, 1987). Pursuant to Paragraph III.A.1 of the Settlement Agreement, an applicant to one of the Stripper Well escrows waives its right to a refund in the Subpart V crude oil proceedings. See Combustion Engineering, Inc., 20 DOE ¶ 85,009 (1990); Crystal Oil Co., 19 DOE ¶ 85,143 (1989). The waiver provisions of Paragraph III.A.1 of the Settlement Agreement were incorporated into Paragraphs 7 and 9 of the RWT Escrow Claim Form and Waiver, which all RWT applicants had to agree to and execute in order to be eligible for an RWT refund.

We further found that Conticarriers had also waived the right of its parent company, Continental Grain, to a crude oil refund, pursuant to the following language in paragraph VI.A of the Stripper Well Settlement Agreement:

The provisions of this Agreement, which shall include the Exhibits hereto as though fully set forth in the text thereof, shall be binding upon (1) all the Parties hereto and (2) all Persons executing waivers or releases pursuant to this Agreement, and with respect to such Parties and Persons, their Affiliates, subsidiaries, member-patrons and their owners, officers, agents, attorneys and any other Persons while acting under their direction or control. As used herein, an Affiliate of any Party includes any Person (and the successors and assigns of such Person) which controls, is controlled by, or is under common control with such Party. For this purpose, 'control' means the power (existing on the Payment Date), by contract, partnership agreement, stock ownership or otherwise, to control the policies and business operations of a Person, . . . .

We therefore rescinded our prior Decision and Order with respect to the crude oil refund application filed by Continental Grain Company.

In its Motion for Reconsideration, Continental Grain argues that the waiver submitted by Conticarriers waived only Conticarriers' claims. Motion for Reconsideration at 2. "It did not purport to waive Continental Grain's independent claims. True, it also bound [Conticarrier's] ?parents, subsidiaries, affiliates, successors and assigns,' but that ?binding' on its face applies only to [Conticarrier's] claims." Id. (emphasis in original). Continental Grain cites the following reasons for reconsideration of our prior decision:

Id. (emphasis in original).

Continental Grain is correct that we have granted refunds from the RWT and Surface Transporter escrows to independent affiliates of companies who received refunds from the Stripper Well Refiners' escrow. Union Pac. R.R. Co., 16 DOE ¶ 85,526 (1987) (Union Pacific). But, contrary to Continental Grain's assertions, this office and the Temporary Emergency Court of Appeals have provided reasoned explanations for our interpretation of the waiver provisions.

In Union Pacific, we examined the RWT Escrow Claim Form and Waiver and found

that Paragraph (7) is in essence an election of remedies clause. An applicant must choose between obtaining relief under the M.D.L. 378 Escrows or under the Subpart V process. It must also decide from which M.D.L. 378 escrow account it seeks recovery. Thus, once an applicant files and Application for Refund from the RWT Escrow, it is precluded from receiving a refund in crude oil refund proceedings conducted under the provisions of 10 C.F.R. Part 205, Subpart V. That preclusion includes that party's affiliates, subsidiaries, assigns, etc. An applicant is also precluded from receiving a refund from another M.D.L. 378 escrow under its own name.

Union Pacific, 16 DOE at 89,050 (citations omitted). However, based upon our evaluation of extrinsic evidence regarding the circumstances and conduct surrounding the negotiation of the settlement, we concluded that "the parties never intended to prohibit independent affiliates of refiners from filing Applications for Refunds in other M.D.L. 378 Escrows." Id. (footnote omitted).(2)

In Mid-America Dairymen v. Herrington, 878 F.2d 1448 (Temp. Emer. Ct. App. 1988), Mid-America Dairymen challenged our interpretation of the waiver provisions of the settlement agreement after we denied its Subpart V crude oil claim because its affiliate signed a release and waiver when it applied for a refund from the Surface Transporters' escrow. The appellant argued, as does Continental Grain in the present case, that "the release was effective only with respect to the specific gallons of oil product which were the subject matter" of the affiliates Stripper Well escrow claim. Id. at 1449. TECA rejected the argument.

Any view which would limit the effect of the waiver and release form executed by parties making claim to the Stripper Well escrow funds to affect only the gallonage claimed by the one making the waiver fails to take into account the very clear and unambiguous provisions throughout the Settlement Agreement and the Release and Waiver forms, that the one who executes the waiver releases all claims of affiliates to further recovery of overcharges in Subpart V proceedings.

. . . Any limitation of the release on the basis of "gallonage" would require a complete re-writing of the Settlement Agreement, the Order Establishing the Surface Transporters Escrow Fund, and the accompanying release and waiver form. There is no "internal inconsistency" in the Settlement Agreement with reference to the waiver, and the language in that Agreement is clear and not ambiguous. When [the appellant's affiliate] executed the release and waiver, it released all of its claims, and all of the claims of any of its affiliates to any further participation in Subpart V refund proceedings, unless such claim was specifically exempted from coverage by other language contained in the Settlement Agreement.

Id. at 1455, 1457 (footnote omitted). As does Continental Grain, the appellant in Mid-Amerca Dairymen also contended that its position was supported by our ruling in Union Pacific. TECA noted the distinct circumstances of that case and the fact that Union Pacific "did not hold that affiliates could seek refunds in Subpart V proceedings." Id. at 1456 n.7. Thus, the court found the appellant's citation of Union Pacific "unpersuasive." Id.

Finally, Continental Grain's argument that "the Federal Treasury and the States will receive the maximum to which they are entitled no matter how the waivers are interpreted" implies that our interpretation of the settlement agreement has been guided by a desire to maximize the amount of money received by the federal and state goverments. Such has never been the case. Rather, we have simply applied what TECA recognized as "the very clear and unambiguous provisions throughout the Settlement Agreement and the Release and Waiver forms. . . . The Settlement Agreement in M.D.L. No. 378 was just that--a hard fought, negotiated agreement between numerous parties, all with adverse interests, to reach a ?global settlement . . . .'" Id. at 1455. Conticarriers became a party to that agreement when it submitted the RWT Escrow Claim Form and Waiver, and thereby agreed to waive its right and the rights of its affiliates to receive a Subpart V refund. Accordingly, the present Motion for Reconsideration should be denied.

It Is Therefore Ordered That:

(1) The Motion for Reconsideration filed by Continental Grain Company, Case No. RR272- 00225, is hereby denied.

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

George B. Breznay

Director

Office of Hearings and Appeals

Date: April 1, 1997

(1) 1/ The "Stripper Well" refund proceedings refer to the eight escrow accounts created by the U.S. District Court for the District of Kansas to implement the terms of the Settlement Agreement approved in In Re: The Department of Energy Stripper Well Exemption Litigation, M.D.L. 378 (July 7, 1986). The escrow accounts were created to refund a portion of the 1.4 billion dollars in crude oil overcharges to eight enumerated groups of petroleum product purchasers: Refiners, Retailers, Resellers, Agricultural Cooperatives, Airlines, Surface Transporters, Rail and Water Transporters, and Utilities.

(2) Communications between Champlin, a refiner, and the Economic Regulatory Administration (ERA) during the course of settlement negotiations showed that both Champlin and the ERA believed that Champlin's RWT affiliates would be permitted to file for refunds from the RWT escrow. Id. at 89,050 n.5.