Case No. RK272-03695
January 30, 1997
DECISION AND ORDER
OF THE DEPARTMENT OF ENERGY
Supplemental Order
Name of Applicants: Dorothy and Harriet Davis
D.R. and H.C. Davis
D.R. and H.C. Davis
Dorothy and Harriet Davis
Dates of Filing: March 11, 1996
September 30, 1996
November 1, 1996
November 1, 1996
Case Numbers: RK272-03695
RK272-03933
RC272-00359
RC272-00360
This Decision and Order will consider two Applications for Supplemental Refund filed in the Subpart V crude oil refund proceeding, conducted by the Office of Hearings and Appeals (OHA) of the Department of Energy (DOE) pursuant to the OHA's authority under 10 C.F.R. Part 205, Subpart V. The first, Case No. RK272- 03695, is based on Case No. RF272-66357, which was granted to "Dorothy and Harriet Davis" in the amount of $18,081 (based on 22,601,621 gallons) on November 30, 1990. Renaud, Inc., Case No. RF272-65595 (November 30, 1990). The second, Case No. RK272-03933, is based on RF272-78141, which was granted to "D.R. and H.C. Davis" in the amount of $238 (based on 297,734 gallons) on April 9, 1990. Elmsford Transportation, Case No. RF272-78002 (April 9, 1990). Both Applications were filed by Ms. Dorothy Davis and Ms. Harriet Davis as owners of Overall Paint, Inc., which was dissolved in 1985. As explained below, we have determined that these Applications should be denied, and that the original refunds should be rescinded.
In the past, purchasers of refined petroleum products were allowed to apply to the OHA for a refund from crude oil overcharge funds
collected by the DOE.(1) Statement of Modified Restitutionary Policy In Crude Oil Cases, 51 Fed. Reg. 27899 (August 4, 1986). We have established refund procedures for these funds, which have been made available through consent orders entered into by the DOE and several firms that sold crude oil during the crude oil 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 have established 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. We presume that applicants who were end-users absorbed, rather than passed on, the alleged crude oil overcharges.(2) Therefore, we presume that crude oil overcharges injured end-user applicants, and they generally need not submit proof of injury to receive a refund in the Subpart V proceeding. See Berry Holding Co., 16 DOE ¶ 85,405 at 88,799 (1987).
In contrast, an applicant who was not an end-user -- a refiner, reseller, or retailer -- must submit a detailed demonstration establishing that the alleged crude oil overcharges caused it injury.(3) 52 Fed. Reg. 11737 (April 10, 1987), reprinted at 6 Fed. Energy Guidelines ¶ 90,512. Applicants who were not end-users are not presumed injured in the crude oil proceeding because of the Entitlements Program. During the price control period, the Entitlements Program spread crude oil overcharges evenly through the petroleum industry, resulting in a uniform increase in the cost of all crude oil to refiners.(4) Applicants who were not end- users received compensation for the increased costs of petroleum products through higher selling prices of the products they sold in their marketplace.
Therefore, we have not established a presumption of injury for such an applicant in the crude oil proceeding. To make a sufficient show of injury, an applicants who was not an end-user must: (1) show that the selling prices in its market did not increase because of crude oil overcharges; and (2) show that it was thus unable to pass through the overcharges to its customers. Chet's Cedarville Quiki-Stop, 17 DOE ¶ 85,081 (1988).
In reviewing the Applications for Supplemental Refund submitted by Ms. Dorothy Davis and Ms. Harriet Davis, we have determined that Overall Paint, Inc. was a reseller of petroleum products during the refund period. In one of the original Applications, Case No. RF272- 66357, the representative for the Applicants, Mr. Kenneth Traeger, wrote: "Overall Paint, Inc. was a manufacturer of Asphalt base protective coatings. Crude Oil purchased from Sohio was the basic component of its products. Solvents purchased primarily from Ashland Chemical Co. was a lesser component of Aluminum roof coating and cement products.(5) Mr. Traeger also stated that "Crude Oil was the basic component of its products." (6) In a telephone conversation with OHA Staff Attorney Warren M. Gray on November 1, 1996, Mr. Traeger explained that Overall Paint, Inc. started in the 1940's as a paint manufacturer but that, by the refund period, the company sold roof coatings and asphalt products, which were primarily composed of liquid asphalt. Mr. Traeger also confirmed that Overall Paint, Inc. purchased liquid asphalt in large quantities, made minor (if any) modifications, repackaged it, and then resold it to its customers.(7) Because Overall Paint, Inc. was a reseller of petroleum products during the refund period it is ineligible to receive crude oil refund monies unless it demonstrates either that it was unable to pass through alleged overcharges to its customers or that the gallons purchased were used in a business distinct from its reseller operation.(8)
In Case No. RF272-66357, the gallons claimed are liquid asphalt and solvents used in the production of asphalt base protective coatings and other roofing products. Although they may have been mixed with other materials, these petroleum products were repackaged and resold to the firm's customers without substantial change. Therefore, under DOE regulations, Overall Paint, Inc. is considered a reseller of petroleum products. There has been no demonstration that Overall Paint, Inc. was unable to pass through any alleged crude oil overcharges to its customers. Because Overall Paint, Inc. is a reseller that has not shown injury, it is not eligible to receive a crude oil refund for those purchases. In Case No. RF272- 78141, the gallons claimed were "used as fuel in trucks" by Overall Paint, Inc.(9) Because the gallons claimed were purchased as part of the reseller operation, absent a showing of injury Overall Paint, Inc. is similarly ineligible to receive a crude oil refund based on those purchases. See Martin Gas Sales, Inc., 18 DOE ¶ 85,545 (1989). See also Delta Petroleum Products, Inc. and Pam Oil, Inc., 21 DOE ¶ 85,037 (1991).
These two Applications (Case Nos. RF272-66357 and RF272-78141) filed by Ms. Dorothy Davis and Ms. Harriet Davis, based on their purchases as owners of Overall Paint, Inc. during the refund period, were granted refunds in the Subpart V crude oil refund proceeding. Based upon the foregoing explanations, we will rescind these crude oil refunds. In Case No. RF272-66357, the total amount rescinded is $18,081 (22,601,621 gallons x $.0008 = $18,081). In Case No. RF272-78141, the total amount rescinded is $238 (297,734 gallons x $.0008 = $238). The two pending Applications for Supplemental Refund (Case Nos. RK272-03695 and RK272-03933) shall be denied.
It Is Therefore Ordered That:
(1) The Decision and Order issued by the DOE on November 30, 1990, Renaud, Inc., Case No. RF272-65595, is hereby rescinded with respect to Dorothy and Harriet Davis, Case No. RF272-63357. For purposes of the rescission, the case has been redesignated RC272- 00360. The total amount rescinded from Dorothy and Harriet Davis in this case is $18,081. This amount shall be remitted to the Department of Energy as instructed in Paragraph (3) of this Order.
(2) The Decision and Order issued by the DOE on April 9, 1990, Elmsford Transportation, Case No. RF272-78002, is hereby rescinded with respect to D.R. and H.C. Davis, Case No. RF272-78141. For purposes of the rescission, the case has been redesignated RC272- 00359. The total amount rescinded from D.R. and H.C. Davis in this case is $238. This amount shall be remitted to the Department of Energy as instructed in Paragraph (4) of this Order.
(3) With respect to Case No. RF272-66357, Ms. Dorothy Davis and Ms. Harriet Davis are hereby jointly and severally directed to remit the sum of $18,081 within thirty (30) days of this Decision and Order. The check shall be made payable to the "U.S. Department of Energy," shall prominently display the redesignated Case No., RC272-00360, and shall be sent to:
Department of Energy
Office of the Controller
Cash Control Branch
P.O. Box 500
Germantown, MD 20874
(4) With respect to Case No. RF272-78141, Dorothy and Harriet Davis applied for and received a crude oil refund with the assistance of Petroleum Funds, Inc., a private filing service located in Paris, Tennessee. Ms. Dorothy Davis, Ms. Harriet Davis and Petroleum Funds, Inc. are hereby jointly and severally directed to remit the sum of $238 within thirty (30) days of this Decision
and Order. The check shall be made payable to the "U.S. Department
of Energy," shall prominently display the redesignated Case No., RC272-00359, and shall be sent to:
Department of Energy
Office of the Controller
Cash Control Branch
P.O. Box 500
Germantown, MD 20874
(5) In the event that these payments are 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) 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 No. 999DOE010Z.
(7) The two pending Applications for Supplemental Refund filed by Ms. Dorothy Davis and Ms. Harriet Davis, Case Nos. RK272-03695 and RK272-03933, are hereby denied.
(8) This is a final Order of the Department of Energy.
George B. Breznay
Director
Office of Hearings and Appeals
Date: January 30, 1997
(1)The crude oil price control period extended from August 19, 1973 through January 27, 1981.
(2)We consider the end-user to be the ultimate consumer of petroleum products, whose business is unrelated to the petroleum industry and who was not subject to the price regulations of the DOE or its predecessors.
(3)See definition of "refiner," "reseller," and "retailer" at 10 C.F.R. § 212.31.
(4)The Department of Energy established the Entitlements Program, 10 C.F.R. § 211.67, to equalize access to the benefits of crude oil price controls among all domestic refiners and their downstream customers. To accomplish this end, refiners were required to transfer payments among themselves through the purchase and sale of "entitlements." Because of the manner in which the program worked, any overcharges resulting from miscertifications throughout the domestic refining industry were evenly dispersed. See Amber Refining, Inc., 13 DOE ¶ 85,217 (1985).
(5)"See "Application for Refund" submitted by Kenneth Traeger, Attorney at Law, on behalf of Dorothy Davis and Harriet Davis, former owners of Overall Paint, Inc., Case No. RF272-66357.
(6)Id.
(7)See "Record of Telephone Conversation" between Warren M. Gray, OHA Staff Attorney, and Kenneth Traeger, Attorney for the Applicants, November 1, 1996.
(8)To date, no reseller applicant has successfully argued that it was injured by alleged crude oil overcharges. See Borst Oil Corporation, 17 DOE ¶ 85,232 (1988), Storey Oil Company, 17 DOE ¶ 85,273 (1988), Silgas, Inc., 18 DOE ¶ 86,015 (1989), Joe's Exxon Service, 19 DOE ¶ 85,116 (1989), Coastal Gas, Inc., 20 DOE ¶ 85,225 (1990). However, an applicant who was not an end-user may be eligible for refunds if it purchased petroleum products for use in business unrelated to the petroleum industry and distinct from its reseller operations. See Henry G. Meigs, Inc., 21 DOE ¶ 85,203 (1991); International Financial Corporation, 20 DOE ¶ 85,265 (1990).
(9)See "Application for Refund" submitted by Petroleum Funds, Inc. on behalf of D.R. (Dorothy) and H.C. (Harriet) Davis, former owners of Overall Paint, Inc., Case No. RF272-78141.