Case No. RF272-98766

November 3, 1997

DECISION AND ORDER

OF THE DEPARTMENT OF ENERGY

Application for Refund

Supplemental Orders

Names of Petitioners: TMBR/Sharp Drilling, Inc.

Tom Brown, Inc.

Tom Brown, Inc.

Dates of Filing: July 5, 1994

October 27, 1997

October 27, 1997

Case Numbers: RF272-98766

RC272-00375

RJ272-00050

This Decision and Order will consider the Application for Refund filed by TMBR/Sharp Drilling, Inc (TMBR) for the claimed purchases of 50,503,808 gallons of refined petroleum products during the period August 19, 1973, through January 27, 1981 (the crude oil price control period). TMBR, an oil-drilling company, has requested a refund from crude oil monies available for disbursement by the Office of Hearings and Appeals of the Department of Energy under 10 C.F.R. Part 205, Subpart V. We have established refund procedures for these funds, which have been made available through consent orders entered into by the DOE and numerous firms that sold crude oil during the price control period. E.g., Berry Holding Co., 16 DOE ¶ 85,405 (1987) (Berry); A. Tarricone, Inc., 15 DOE ¶ 85,495 (1987); Mountain Fuel Supply Co., 14 DOE ¶ 85,475 (1986).

In order to receive a refund for crude oil overcharges, an applicant generally must: (1) document its purchase volumes; and (2) show that it was injured as a result of the alleged overcharges. However, as we discussed in City of Columbus, Georgia, 16 DOE ¶ 85,550 (1987), applicants who were end-users of petroleum products and whose businesses were unrelated to the petroleum industry are presumed to have absorbed the crude oil overcharges, and generally need not submit proof of injury to receive a refund in the Subpart V proceeding. See also Berry.

In general, a claimant is eligible for a refund equal to the number of gallons it purchased multiplied by $0.0016 per gallon, the volumetric refund amount currently available. We derived the volumetric refund amount by dividing the total crude oil refund monies currently available by the total U.S. consumption of

petroleum products during the period of crude oil price controls (2,020,997,335,000 gallons).

In its application, TMBR informed us that the firm had been known as Tom Brown, Inc. (TBI) during the price control period. We further discovered that TBI had earlier received a refund in this proceeding of $12,904 based on the purchases of 16,129,678 gallons of motor gasoline, diesel fuel and motor oil/grease (using a $0.0008 per gallon volumetric refund amount). Buffalo Fuel Corp., Inc. et al., Case Nos. RF272-68512 et al. (June 29, 1990) (Case No. RF272-68916). TBI later received a supplemental refund of $12,904 for those purchases (also using a $0.0008 per gallon volumetric). Crude Oil Supplemental Refund Distribution, Case No. RB272-00054 (December 13, 1995).(1) Thus, the total refund that TBI received was $25,808.

Upon our inquiry, we learned that TBI’s drilling operations had been spun off from TBI under the name of TMBR in 1984.(2) According to TBI, TMBR is entitled under the spin-off agreement to most of the refund that TBI received in 1990 because TMBR is entitled to all gallons purchased by the drilling operation of TBI. Because the shareholders of TMBR after the spin-off were the same as TBI’s shareholders and owned stock in the same percentages in both companies, see Record of Telephone Conversation between Dawn Goldstein, OHA, and Brent Wilburn, TBI (October 30, 1997), we find that TMBR is entitled to a refund for its purchases as TBI’s drilling division and that a portion of the TBI refund must be rescinded. Cf. Shell Oil Company/Johnson LPG Sales Co., 23 DOE ¶ 85,170 at 88,449 (1993) (successor corporation entitled to refund where stockholders and percentage of ownership same as predecessor’s).

This Office must next determine how many gallons we will subtract from TBI’s granted refund claim and how many gallons we will approve for TMBR. According to TBI, the drilling division purchased all of the diesel fuel and a portion of the motor oil and grease claimed on its purchase schedule. TBI also states that its gasoline claim was for purchases by divisions other than its drilling division. See Records of Telephone Conversations between Dawn Goldstein and Brent Wilburn (August 1, 1997 and October 21, 1997). There are serious differences between TBI’s and TMBR’s purchase schedules. TMBR claims that it, as TBI’s drilling division, purchased 24,881,400 gallons of propane between August 1973 and mid-1977 for use in its drilling rigs. It further claims that after TBI switched to diesel drilling rigs in mid-1977, it purchased 23,385,200 gallons of diesel fuel from that time until January 1981. In contrast, TBI did not make any claim for propane purchases and claimed that it only purchased 11,260,522 gallons of diesel fuel. There are also discrepancies in the claimed purchase volumes for motor gasoline, and motor oil and grease.

In support of its original refund claim, TBI supplied a spreadsheet apparently prepared in 1987 or 1988 listing its petroleum product purchases during the refund period. TBI evidently had records of the costs of the fuel purchases from the refund period, and then converted those dollar figures to gallons. TMBR is unable to supply documentation from the refund period, but has supplied documentation of its current purchases of diesel fuel. Concerning propane, TMBR states that its drilling rigs used 25 percent more propane than diesel fuel. However, it chose to estimate conservatively that it used approximately the same amount of propane and diesel fuel during the refund period.

Regarding diesel fuel purchases, we believe that TBI’s volume claim is generally more accurate than TMBR’s since it was apparently prepared based at least partially on contemporaneous records. In addition, we note that TMBR’s post-refund period merger with Sharp created a different firm and its operations could be much different than the pre-merger TMBR. Therefore, we have chosen to accept TBI’s figure of 11,260,522 gallons of diesel fuel purchases by the drilling division during the refund period rather than TMBR’s claim.

TBI was unable to ascertain why it did not apply for propane. TBI informed us that it is possible that it did not realize propane was a covered product in this proceeding. Further, the person who filled out TBI’s volume claim form did not work for TBI during the refund period and therefore may not have known that TBI ever purchased propane. See Record of Telephone Conversation between Dawn Goldstein and Brent Wilburn (October 21, 1997). In contrast, TMBR’s application was prepared with the assistance of employees who had worked in the drilling division during the refund period. Thus, we are willing to find that TBI did purchase propane during the refund period. However, in light of the lack of documentation for propane purchases, and because TMBR believes that it used approximately the same amount of propane and diesel fuel during the refund period, we are limiting TMBR’s approved purchase volume for propane to 11,260,522 gallons.

The following chart summarizes our decisions regarding the approved volume claims in gallons for TBI and TMBR.(3)

Applicant

Diesel

Gasoline

Propane

Motor Oil/Grease

Total

TBI (claimed)

11,260,522

3,363,400

0

1,505,756

16,129,678

TBI (now granted)

0

2,887,312

0

301,151

3,188,463

TBI (rescinded)

11,260,522

476,088

0

1,204,605

12,941,215

TMBR (claimed)

23,385,200

476,088

24,881,400

1,761,120

50,503,808

TMBR (granted)

11,260,522

476,088

11,260,522

1,204,605

24,201,737

The amount rescinded from TBI in dollars is calculated by multiplying the rescinded purchase volumes (12,941,215 gallons) by the volumetric refund amount of $0.0016 per gallon (the total of the per gallon original and supplemental volumetric refund amounts of $0.0008 each). Thus, the total amount being rescinded from TBI is $20,706(12,941,215 x $0.0016 = $20,706).

Since TMBR is an end-user of refined petroleum products, it is presumed injured by the crude oil overcharges and is entitled to receive its full allocable share of the crude oil monies.(4) The refund amount is calculated by multiplying the approved purchase volume by the volumetric refund amount of $0.0016 per gallon. TMBR purchased 24,201,737 gallons of refined petroleum products and is therefore being granted a refund of $38,723.

The final deadline for the crude oil refund proceeding was June 30, 1995. It is the current policy of the DOE to pay crude oil refund claimants at the current rate of $0.0016 per gallon. We will decide whether sufficient crude oil overcharge funds are available for additional refunds for these 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 Decision and Order issued by the DOE on June 29, 1990, Buffalo Fuel Corp., Inc. et al., Case Nos. RF272-68512 et al. is hereby modified with respect to Tom Brown, Inc. (Case No. RF272-68916, redesignated RC272-00375).

(2) The Decision and Order issued by the DOE on December 13, 1995, Crude Oil Supplemental Refund Distribution, RB272-00054, is hereby modified with respect to Tom Brown, Inc. (Case No. RF272-68916, redesignated RJ272-00050).

(3) Tom Brown, Inc. shall remit the sum of $20,706 to the DOE within 30 days. The check shall be made payable to the "U.S. Department of Energy" and shall prominently display Case Nos. RC272-00375 and RJ272-00050. 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.

(4) The volume claim approved for Tom Brown, Inc., Case No. RF272-68916, shall be changed in the Office of Hearings and Appeals database from 16,129,678 gallons to 3,188,463 gallons.

(5) 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.

(6) The Application for Refund filed by TMBR/Sharp Drilling, Inc. on July 5, 1994, Case No. RF272-98766, is hereby approved as set forth in Paragraph (7) below.

(7) 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 $38,723 from the escrow account maintained at the Department of the Treasury denominated Crude Tracking-Claimants 4, Account No. 999DOE010Z, to:

TMBR/Sharp Drilling, Inc.

c/o Patricia Elledge, Controller/Treasurer

Drawer 10970

Midland, TX 79702-7970

(8) To facilitate the payment of future refunds, TMBR/Sharp Drilling, Inc. and Tom Brown, 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 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.

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

George B. Breznay

Director

Office of Hearings and Appeals

Date: November 3,1997

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

(2)Further, in 1986, TMBR purchased Sharp Drilling Company (Sharp) and changed its name to TMBR/Sharp Drilling. Inc. Sharp, under Case No. RF272-41033, has also been granted a refund in the crude oil proceeding. We have confirmed that there is no duplication of gallonage between the TMBR and Sharp claims.

(3)TBI believed that all the gasoline claimed on its purchase schedule had been purchased by other TBI divisions. However, since TMBR has documented that it uses gasoline in its drilling operations, we find that TMBR purchased gasoline when it was TBI’s drilling division. Moreover, in the absence of contemporaneous data showing the gasoline purchases of the drilling division alone, we will accept TMBR’s estimate. We are also subtracting this amount from TBI’s approved gasoline purchase volume.

But we do not accept TMBR's estimate for its motor oil/grease purchases, which, as explained above, is based on current records. Instead, we find reasonable TBI's suggested methodology of allocating the motor oil/grease purchases between TBI and TMBR based on their respective purchases of diesel fuel and gasoline. Since TMBR's gasoline and diesel fuel purchases are 80 percent of the total purchases of those products by TBI, we have allocated 80 percent of the total motor oil/grease purchases (as shown by TBI’s records) to TMBR.

(4)We have previously held that oil drilling companies can take advantage of the end-user presumption since there was no regulatory mechanism during the price control period for them to automatically pass through increased fuel costs to their customers. See Mesa Limited Partnership, 22 DOE ¶ 85,038 (1992).