Case No. RF344-00001

November 4, 1997

PROPOSED

DECISION AND ORDER

OF THE DEPARTMENT OF ENERGY

Applications for Refund

Names of Cases: The 341 Tract Unit of the Citronelle Field/

Farmers Petroleum Cooperative, Inc., et al.

Consolidated Edison Co. of New York, et al.

Dates of Filing: June 29, 1993, et al.

May 1, 1992

Case Nos.: RF344-1, et al.

LER-0009

This Decision and Order will consider refund applications filed by a total of 25 applicants. These applicants are either airlines or large farm cooperatives. The monies that will be used to pay refunds to these applicants were originally collected by the Department of Energy ("DOE") in connection with the approval of exception relief for The 341 Tract Unit of Citronelle Field by the Office of Hearings and Appeals ("OHA"). The 341 Tract Unit of the Citronelle Field, 10 DOE ¶ 81,027 (1983).

The Citronelle exception relief spawned years of administrative and judicial litigation, including litigation over the final terms and conditions of the relief, OHA's authority to grant the relief and the evidentiary basis for its decision, and the possible revision or termination of the relief. Ultimately, in December 1991, OHA issued a decision terminating the exception relief and requiring the transfer of the remaining Citronelle exception relief funds to an escrow account in the United States Treasury under the supervision of the DOE Controller. The 341 Tract Unit of the Citronelle Field, 21 DOE ¶ 81,009 (1991). In April 1992, OHA issued a decision addressing certain claims to the Citronelle escrow account funds, establishing deadlines and procedures governing claims to the funds, and scheduling an evidentiary proceeding. The 341 Tract Unit of the Citronelle Field, 22 DOE ¶ 85,069 (1992). In May 1994, OHA issued a Decision and Order setting forth its determination of the percentage of the funds that should be allocated to entities listed on the November 1980 Entitlements Notice. The 341 Tract Unit of the Citronelle Field, 24 DOE ¶ 81,035 (1994).

Those actions led to further litigation. The Unit appealed OHA's termination decision to the Federal Energy Regulatory Commission ("FERC") and then sought judicial review of FERC's affirmance in

R.H. Stechmann, et al. v. Department of Energy, No. 94-0887-A-M (S.D. Ala. Filed Nov. 17, 1994). Certain refiners of petroleum products listed on the November 1980 Entitlements Notice (the "Refiner-Litigants") filed judicial challenges to OHA's May 1994 decision in Amoco Oil Co., et al. v. Department of Energy, No. H- 94-2423 (S.D. Tex. Filed July 15, 1994), and Total Petroleum, Inc. v. Department of Energy, No. 04-CV-72745 (E.D. Mich. filed July 18, 1994).

In order to avoid the risks and burdens of further extended judicial proceedings over the disposition of the Citronelle escrow account, DOE reached a settlement ("Settlement Agreement") resolving, first, the claims to the escrow of the Refiner-Litigants and, second, the Unit's claims. The settlement agreement resolving the claims of the Refiner-Litigants was approved by the United States District Court for the Southern District of Texas on December 6, 1995. On December 21, 1995, the United States District Court for the Southern District of Alabama approved the settlement agreement resolving the Unit's claims. The resolution of these claims cleared the way for OHA to resolve the remaining applications for refunds from the Citronelle fund filed in accordance with its 1992 and 1994 Decisions and Orders.

As of December 18, 1995, the funds on deposit in the interest- bearing escrow account attributable to the Citronelle exception relief totaled $144,204,002. Pursuant to the Settlement Agreement, these funds were deposited into specified escrow accounts for ultimate disbursal to parties to the Agreement, as well as to other entities. The 341 Tract Unit of the Citronelle Field, 25 DOE ¶ 82,505 (1995). The sum of $6.9 million was reserved to cover refunds for several groups of applicants, including the two groups that are involved in this case: Airlines and Cooperatives. (1) The applications of the subject Airlines and Cooperatives represent the final category of Citronelle fund refund claims requiring resolution by this office.

Several issues have arisen that must be considered prior to an evaluation of the individual refund applications. To ensure that all participants in these proceedings will have an opportunity to comment on our determinations concerning these issues, we intend to serve a copy of this decision in proposed form on all parties to this proceeding prior to finalizing the decision and authorizing payment of the subject claims. Comments should be filed with OHA within 30 days of the date of this Proposed Decision and Order.

I

The Airlines and Cooperatives all received refunds from an escrow fund established especially for their benefit as part of the Stripper Well Settlement Agreement. See Orders Approving Establishment of Escrow Accounts, In Re The Department of Energy Stripper Well Exemption Litigation, M.D.L. No. 378 (D. Kan. July 7, 1986). In order to receive those refunds, the Airlines and Cooperatives were required to sign a waiver releasing their rights to any further refunds derived from "alleged crude oil violations." Groups of state governments and end users have filed comments in these proceedings concerning these claims arguing that, as a result of their participation in Stripper Well, the Airlines and Cooperatives waived their ability to file for a refund from the Citronelle escrow. We therefore will review whether these claimants are precluded from receiving a Citronelle refund by virtue of having signed the Stripper Well waivers.

By way of background, the Stripper Well case involved the distribution of overcharge funds recovered by DOE due to violations of the petroleum pricing regulations in effect during the price control period. The Final Settlement Agreement, approved by the Kansas district court on July 7, 1986, established a mechanism for refunding a portion of the $1.4 billion in crude oil overcharges, through individual escrow accounts, to various groups -- including refiners, resellers of petroleum products, retailers, airlines, utilities, surface transporters, and rail and water transporters -- from the funds in the Stripper Well escrow.

The Stripper Well agreement required the parties to that agreement to waive any other claims to crude oil overcharge funds. However, as we explain below, the Stripper Well waivers were limited to claims to "alleged crude oil violations" funds and did not involve the subject Citronelle exception relief proceeding.

The preamble to the Stripper Well Settlement Agreement defines the term alleged crude oil violations in a "whereas" clause as follows: "certain parties are or will be involved in other proceedings both judicial and administrative involving alleged violations of DOE's price and allocation controls applicable to crude oil (hereinafter the Alleged Crude Oil Violations) including but not limited to (1) the first sale and the resale of crude oil under 10 C.F.R. Part 212, Subparts D, F, and L and (2) the Domestic Crude Oil Allocation Program (hereinafter the 'Entitlements Program')." The Stripper Well Agreement preamble further specifies the parties' intention of "establishing a mutually agreeable method of disbursing certain funds that have been or will be collected as a result of the alleged violations in issue." Paragraphs III.A.1 and III.A.3 governing the releases to be executed under the Stripper Well Agreement similarly specify that the releases to be executed by the parties will be to claims based on "Alleged Crude Oil Violations." Paragraph VI of the Stripper Well Agreement circumscribes the scope of the Agreement, providing, "by its terms this Agreement (except Part V hereof [addressing Refiner claims concerning the Entitlements Program]) applies only to Alleged Crude Oil Violation funds. Nothing in this agreement shall operate to the detriment of any party or claimant in a non-crude oil refund case."

The Kansas district court's decision approving the Stripper Well Settlement Agreement underscores that the settlement resolved three discrete categories of issues. Thus, the court noted that the Agreement "before the Court represents a comprehensive charter for the resolution of the immediate matter of satisfactory disbursement of the escrow held under the court's direction, as well as two related matters: the distribution of crude oil overcharge funds in other cases, and settlement of other litigation concerning the [DOE] Entitlements Program." In Re the Department of Energy Stripper Well Exemption Litigation, 653 F. Supp. 108, 109 (D. Kan. 1986).

The scope of the releases executed by the Airlines and Cooperatives carry through the general theme of the Stripper Well Agreement by providing for a release of claims by the Airlines to monies "relating to violations or alleged violations of the federal mandatory allocation and price control regulations applicable to crude oil, and the Entitlements Program (herein Alleged Crude Oil Violations)" and in the case of the Cooperatives to monies relating to "Alleged Crude Oil Violations." See Airlines Waiver, ¶¶ 7(a)(2), 10, Cooperatives Waiver, ¶ 5(a)(ii), Stripper Well Settlement Agreement at 100, 137.

Accordingly, our 1992 decision respecting these claims held that the releases executed by the Airlines and Cooperatives affected only their rights to apply for refunds relating to violations or alleged violations of the federal mandatory allocation and price regulations applicable to crude oil and the Entitlements Program, and did not "preclude them from filing a Citronelle refund application." The 341 Unit of the Citronelle Field, 22 DOE at 88,204 ("Citronelle I").

The States' and end users' contention that the Airlines and Cooperatives waived their claims to the Citronelle exception fund under Stripper Well is premised on an assumption that the Stripper Well Agreement governs the disposition of all funds relating to crude oil, not just crude oil violation funds. However, the preamble to the Agreement, the specific releases executed by the Airlines and Cooperatives, and Paragraphs III and VI of the Agreement all tie the scope of the Stripper Well waiver to alleged crude oil violations funds.

After carefully reviewing the language of the subject Stripper Well waivers, we find that the waivers are inapplicable to the Citronelle monies. The Citronelle proceeding does not involve the disbursement of funds attributable to actual or alleged crude oil violations. Cf. Boise Cascade Corp., 16 DOE ¶ 85,214 (1987) (signatories of the Surface Transporter Waiver in the Stripper Well Settlement Agreement ineligible to receive a Subpart V refund from the OHA, which involves funds collected as a result of alleged crude oil violations). The Citronelle funds originated with exception relief authorized by the DOE and were not the result of an alleged crude oil violation. Accordingly, the Airlines and Cooperatives are not barred from receiving Citronelle refunds by virtue of having signed the Stripper Well waivers.

II

A further issue arises from the fact that Citronelle I provided that the refund claims of applicants such as the Airlines and Cooperatives were to be filed by June 30, 1993. 22 DOE at 88,207. However, only one of the refund claims in the instant group was filed by that date, Farmers Petroleum Cooperative, Inc., Case No. RF344-1.

We have decided that the late filings should not be a bar to the approval of refunds for these applicants. In a number of our refund proceedings we have allowed the liberal filing of refund claims after the stated filing deadline. See Final Filing Deadline in Special Refund Proceeding No. LFX-0002, 59 Fed. Reg. 55656 (November 8, 1994); Final Filing Deadline in Special Refund Proceeding No. HEF-0590, 57 Fed. Reg. 27771 (June 22, 1992). Our rationale has been that as long as the acceptance of and decision on a belatedly filed refund claim does not interfere with the overall efficient administration of the refund proceedings, we will grant an otherwise meritorious refund application. See, e.g., Marathon Petroleum Co./Independent Oil & Tire Co., 24 DOE ¶ 85,032, 88,059 (1994). Compare Gulf Oil Corporation/New York Telephone Co., 25 DOE ¶ 85,161, 88,422.

Here, while all but one of the refund applications were filed after June 30, 1993, the last filed applications were submitted on October 4, 1994. Since these claims could not have been processed or paid prior to the resolution of the claims of the Unit and the Refiner-Litigants in December 1995, we find that acceptance of the late-filed claims would not interfere with our efficient administration of these refund proceedings, and we therefore will exercise our discretion to accept the late filings.

III

We also seek comments from interested parties concerning the calculation of refund awards for these refund claimants. In Citronelle I we described how we would calculate the refunds for Airline and Cooperative applicants. We stated that refunds would be calculated on a volumetric basis. We indicated that we would start with the total Citronelle escrow fund available and deduct from that sum the amount allocated to crude oil refiners. We then indicated that we would also deduct any amounts refunded to the Citronelle Unit. We also provided that we would divide the resulting figure by the total consumption of petroleum products in the United States during the price control period, 2,020,997,335,000 gallons. The resulting number would constitute the volumetric figure for end users in the Citronelle refund proceeding. 22 DOE at 88,206.

We have considered two potential methods for calculating the numerator of the volumetric for the Airline and Cooperative claimants. Under the first method we would deduct from the volumetric calculation the $8.5 million amount actually disbursed from the escrow to the Citronelle Unit and the amount of the exception relief held in Citronelle to have been absorbed by refiners as a class (i.e. 5.4%). See The 341 Unit of the Citronelle Field, 24 DOE at 82,621.

However, we have concluded that this method is too imprecise because it fails to take into account the amounts actually paid to Refiners under the Citronelle Settlement Agreement. It would therefore result in awards to these claimants that are disproportionate to the awards made to similarly situated end users. For this reason we find that adjusting the numerator of the volumetric to reflect the actual amounts disbursed to Refiners under the Citronelle Settlement is more appropriate and equitable under the circumstances. Accordingly, we propose to establish the numerator of the volumetric as 98,579,894. (144,204,002 - 8,500,000 (Unit distribution) - 37,124,108 (total Refiner distribution) = 98,579,894).

As end users, the Airlines are presumed injured by the additional costs associated with the Citronelle exception relief. They thus are not required to prove particularized injury. The Cooperatives, on the other hand, passed through the additional costs of the Citronelle relief to their members. Through their patronage systems, they will, in a like manner, be expected to pass through any Citronelle refunds to their members, and we will direct these Cooperatives to accomplish that pass through. Accordingly, the Cooperatives also are not required to demonstrate particularized injury in this case.

Based on these determinations, each applicant in the Appendix to this Proposed Decision and Order will be eligible for a refund equal to its total purchase of refined petroleum products during the period of price controls (August 19, 1973 through January 27, 1981) multiplied by $0.00004878. We have reviewed the gallonage claims of the applicants and find them reasonable. The approved gallonage of each applicant and the refund amount are set out in the Appendix.

It is Therefore Ordered That:

(1) The Director of Special Accounts and Payroll, Office of Departmental Accounting and Financial Systems Developments, Office of the Controller of the Department of Energy shall take appropriate action to disburse from the escrow account denominated "Citronelle-Coops" to the 25 Applicants the amounts specified in the Appendix to this Decision and Order. The total amount of the refunds granted in this determination is $1,716,784.

(2) The Motion for Reconsideration filed by Consolidated Edison Company of New York, et al. (Case No. LER-0009) is hereby denied.

(3) The cooperative refund recipients named in this determination shall pass through to their members the refunds received on a dollar for dollar basis.

(4) The determinations regarding refund amounts made in this Decision and Order are based on the presumed validity of statements and documentary material submitted by the Applicants. Any of those determinations may be revoked or modified at any time upon a finding that the basis underlying an application is incorrect.

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

(1) The names, case numbers and other pertinent information necessary for calculation and disbursement of the refunds granted to these applicants are set forth in the Appendix to this determination.


A
APPENDIX              
THE 341 TRACT UNIT OF THE CITRONELLE FIELD / FARMERS PETROLEUM COOPERATIVE, INC., ET AL.              
CASE NOS. RF344-1, ET AL.              
               
Case No. Applicant / Address   Date Filed App. Type Gallonage Refund  
               
RF344-1 Farmers Petroleum Cooperative, Inc.   06/29/93 Farmer Coop 352,591,000 $17,199  
  Attn: Thomas J. Parker            
  P.O. Box 30960            
  7373 West Saginaw Highway            
  Lansing, MI 48909            
               
RF344-2 Waterloo Service Company   05/13/94 Farmer Coop 338,048,000 $16,490  
  Attn: Claire W. Randall            
  1402 Logan Ave.            
  P.O. Box 300            
  Waterloo, IA 50704            
               
RF344-3 Delta Purchasing Federation   05/16/94 Farmer Coop 70,882,000 $3,458  
  Attn: Ralph T. Hand, Jr.            
  P.O. Box 8177            
  1206 Carnegie Street            
  Greenwood, MS 38935-8177            
               
RF344-4 SF Services, Inc.   05/16/94 Farmer Coop 74,113,000 $3,615  
  Attn: Larry Fortner            
  824 N. Palm Street            
  N. Little Rock, AR 72119            
               
RF344-5 Great American Airways   05/16/94 Airline 1,715,759 $84  
  c/o Target Airways Ltd.            
  Attn: Jean Garrabrant            
  P.O. Box 10165            
  Reno, NV 89510            
               
               
               
               
               
RF344-6 Countrymark, Inc.   05/16/94 Farmer Coop 1,048,107,957 $51,127  
  Attn: Steve Westfall            
  4565 Columbus Pike            
  Delaware, OH 43015            
               
RF344-7 Transamerica Airlines, Inc.   05/25/94 Airline 487,896,814 $23,800  
  Attn: Chris Fadeeff            
  P.O. Box 2504            
  Oakland, CA 94614            
               
RF344-8 Delta Air Lines, Inc.   05/25/94 Airline 7,129,298,712 $347,767  
  Attn: J.T. Shell            
  P.O. Box 20531            
  Hartsfield Atlanta Int'nl Airport            
  Atlanta, GA 30320-2531            
               
RF344-9 American Airlines, Inc.   05/27/94 Airline 8,872,374,000 $432,794  
  Attn: Sue Thoms            
  P.O. Box 619616            
  Dallas/Ft. Worth Intl. Airport, TX 75216            
               
RF344-10 Delta Airlines / Western Airlines   06/08/94 Airline 2,258,230,249 $110,156  
  Attn: J.T. Shell            
  P.O. Box 20531            
  Hartsfield Atlanta Int'nl Airport            
  Atlanta, GA 30320-2531            
               
RF344-11 US Air, Inc.   06/13/94 Airline 1,837,754,979 $89,646  
  Attn: Richard Landers            
  Crystal Park IV, 2345 Crystal Drive            
  Arlington, VA 22227            
               
RF344-12 US Air, Inc.   06/13/94 Airline 618,099,047 $30,151  
  Re: Piedmont Aviation            
  Attn: Richard Landers            
  Crystal Park IV, 2345 Crystal Drive            
  Arlington, VA 22227            
               
               
RF344-13 US Air, Inc.   06/13/94 Airline 766,014,947 $37,366  
  Re: Pacific SW Airlines            
  Attn: Richard Landers            
  Crystal Park IV, 2345 Crystal Drive            
  Arlington, VA 22227            
               
RF344-14 United Parcel Service of America, Inc.   06/16/94 Airline 970,341,080 $47,333  
  Attn: Jeff H. Ridings            
  55 Glenlake Parkway, NE            
  Atlanta, GA 30328            
               
RF344-15 Air Canada   06/17/94 Airline 278,287,000 $13,575  
  Attn: Peter Reichman            
  Centre Air Canada 025, CP 10,000            
  St. Laurent, Que., CANADA, H4Y ICI            
               
RF344-16 Aloha Airlines, Inc.   06/20/94 Airline 123,676,091 $6,033  
  Attn: Owen Sekimura            
  P.O. Box 30028            
  Honolulu, HI 96280            
               
RF344-17 Alaska Airlines, Inc.   06/24/94 Airline 274,290,427 $13,380  
  Attn: Fred Ketzeback            
  P.O. Box 68900            
  Seattle, WA 98168            
               
RF344-18 Southwest Airlines Co.   07/07/94 Airline 103,420,752 $5,045  
  Attn: John Chaussee            
  2702 Love Field Drive            
  Dallas, TX 75235            
               
RF344-19 Pan American World Airways, Inc.   07/26/94 Airline 5,065,761,000 $247,108  
  Attn: Paul Rendish            
  24 Link Drive            
  Rockleigh, NJ 07647            
               
               
               
               
RF344-20 Tennessee Farmers Cooperative   10/04/94 Farmer Coop 162,788,000 $7,941  
  c/o Sutherland, Asbill & Brennan            
  Attn: Jacob Dweck            
  1275 Pennsylvania Avenue, NW            
  Washington, DC 20004-2404            
               
RF344-21 Southern States Cooperative, Inc.   10/04/94 Farmer Coop 1,342,517,000 $65,488  
  c/o Sutherland, Asbill & Brennan            
  Attn: Jacob Dweck            
  1275 Pennsylvania Avenue, NW            
  Washington, DC 20004-2404            
               
RF344-22 Growmark, Inc.   10/04/94 Farmer Coop 2,397,311,000 $116,941  
  c/o Sutherland, Asbill & Brennan            
  Attn: Jacob Dweck            
  1275 Pennsylvania Avenue, NW            
  Washington, DC 20004-2404            
               
RF344-23 MFA Oil Company   10/04/94 Farmer Coop 563,931,000 $27,509  
  c/o Sutherland, Asbill & Brennan            
  Attn: Jacob Dweck            
  1275 Pennsylvania Avenue, NW            
  Washington, DC 20004-2404            
               
RF344-24 Agway Petroleum Corporation   09/26/94 Farmer Coop 31,868,704 $1,555  
  Attn: Richard A. Hysick            
  P.O. Box 4852            
  Syracuse, NY 13221            
               
RF344-25 Universal Cooperatives, Inc.   05/13/94 Farmer Coop 25,079,000 $1,223  
  Attn: Patrick M. Finley            
  7801 Metro Parkway            
  Bloomington, MN 55425            
               
TOTALS 25 Applicants   11 Farmer Coops   35,169,318,518 $1,716,784  
      14 Airlines        
               
Volumetric = $98,579,894 / 2,020,997,335,000 =       $0.00004878 per gallon    


Last Updated on 6/10/98
By Marcia Carlson