July 29, 1997
DECISION AND ORDER
OF THE DEPARTMENT OF ENERGY
Application for Refund
Name of Petitioner: Chesebrough-Pond's USA Co.
Date of Filing: June 6, 1994
Case Number: RF272-97101
This Decision and Order will consider an Application for Refund filed by Chesebrough-Pond's USA Co. (CP), a manufacturer of a wide range of consumer products. CP requests a refund from crude oil overcharge monies available for disbursement by the Office of Hearings and Appeals (OHA) of the Department of Energy (DOE).
In the past, purchasers of refined petroleum products were able to apply to the OHA for a refund from crude oil overcharge funds under the OHA's jurisdiction. Statement of Modified Restitutionary Policy To Be Implemented In Crude Oil Cases, 51 Fed. Reg. 27899 (August 4, 1986) (the MSRP). These proceedings are referred to as Subpart V crude oil overcharge refund proceedings because they are conducted pursuant to regulations set forth at 10 C.F.R. Part 205, Subpart V.
OHA has established refund procedures for these funds, which have been made available through consent orders entered into by DOE and a number of firms that sold crude oil during the crude oil price control period, August 19, 1973 through January 27, 1981 (the refund period). E.g., Berry Holding Co., 16 DOE ¶ 85,405 (1987); A. Tarricone, Inc., 15 DOE ¶ 85,495 (1987)(Tarricone).
The refund procedures set forth in these cases specify that in order to receive a refund, an applicant generally must (1) document its purchase volumes during the refund period; and (2) show that it was injured by alleged crude oil overcharges. An applicant that is an end-user of petroleum products is presumed to have been injured by the crude oil overcharges, and does not need to make a further showing of injury. City of Columbus, Georgia, 16 DOE ¶ 85,550 (1987). As defined in the petroleum regulations, an end-user is the ultimate consumer of the product. 10 C.F.R. § 211.51.
Although an end-user applicant is presumed to have been injured, a reseller or retailer applicant must submit a specific demonstration
that it was injured by the crude oil overcharges. Tarricone, 15 DOE at 88,895-96. The distinction between end-user and reseller or retailer applicants is based on the operation of the Entitlements Program during the crude oil price control period. The Entitlements Program caused crude oil overcharges to be spread evenly throughout the industry, resulting in a uniform increase in the cost of all crude oil to refiners. Refiners were able to pass through this crude oil cost increase in the form of higher prices of refined petroleum products. With uniformly higher prices of refined petroleum products among all suppliers, OHA presumes that the market prices of all resellers and retailers increased. See Tarricone, 15 DOE at 88,896. It is reasonable to conclude that all resellers and retailers compensated for increased costs through higher selling prices to their customers.
There is thus no presumption of injury for reseller or retailer applicants in the Subpart V crude oil proceeding, because they were able to pass through, rather than obliged to absorb, the crude oil overcharges. Therefore, in order to establish injury, a reseller or retailer applicant must demonstrate that selling prices in its market did not increase as a result of crude oil overcharges, so that it was thus unable to pass through the effects of the overcharges to its customers. Chet's Cedarville Quicki Stop, 17 DOE ¶ 85,081 (1988).
CP's refund claim in this case is based on its purchases of the following products: gasoline, motor oil and petrolatum. We will first consider CP's refund claim for its petrolatum purchases. Petrolatum is a type of paraffinic oil. It is a pure petroleum product, and covered by the petroleum regulations. Carlisle Companies, Inc., 21 DOE ¶ 85,091 (1991). Thus, it is clearly a product for which a refund is available in OHA's Subpart V crude oil overcharge refund proceeding. However, as stated above, in order to receive a refund for these petrolatum purchases, CP must either show that it was an end user of the product, or establish that it was injured as a result of the petrolatum purchases.
CP indicates that it purchased the petrolatum for resale as petroleum jelly under the brand name Vaseline. If CP simply repackaged the petrolatum as Vaseline, it did nothing more than resell a petroleum product. As a reseller, it would not be eligible for the end-user presumption of injury. In order to be considered the end-user for purposes of the crude oil overcharge refund proceeding, CP would have had to substantially change the form of the petrolatum. See Bic Corp., 21 DOE ¶ 85,219 (1991). This substantial change in form would involve a chemical alteration of the product. Elf Aquitaine Asphalt, Inc., 22 DOE ¶ 85,040 (1992).
Accordingly, we asked CP to describe in detail the process it uses for turning petrolatum into Vaseline.(1) The firm stated that petrolatum is the only material used in making Vaseline. CP indicated that the petrolatum is received in bulk, stored molten, subjected to a vacuum, and then cooled. This cooling process gives the product its viscosity.
After reviewing the firm's statement, we find that, for purposes of this Subpart V refund proceeding, CP has not substantially altered the petrolatum. Vaseline is nothing more than molten petrolatum that has been subjected to a vacuum and cooled. The petrolatum has not been substantially physically altered. There is no evidence in the record that the cooled petrolatum is chemically different from molten petrolatum. CP has thus not used the petrolatum to formulate a chemically altered compound. See Elf Aquitaine, 22 DOE at 88,111. The heating process to which the petrolatum has been subjected changes the consistency of the material. Accordingly, we find that CP is not the end-user of the petrolatum, but a reseller of that product. (2)
As stated above, in the Subpart V crude oil overcharge refund proceeding, a reseller of petroleum products must provide a showing that it was injured, in order to receive a refund for those petroleum purchases. Since CP has not supplied any information in this regard, it is not entitled to a refund for its petrolatum purchases. Accordingly, this aspect of its refund claim will not be approved.
We will next consider the firm's request for a refund based on its purchases of motor gasoline and motor oil. CP used these products in its motor vehicles. In previous cases we have found that a firm that resold or retailed some petroleum products is eligible for a refund for petroleum products that it purchased for end-use in its business operations only if the use is (a) not related to the petroleum industry; and (b) distinct from its reseller or retailer operations. Henry G. Meigs, Inc., 21 DOE ¶ 85,203 (1991).
CP is a large corporation. Its subsidiaries are engaged in the manufacture and sale of many different types of consumer items, including food, cosmetics, sporting equipment and clothing. In this regard, the firm is clearly using the gasoline and motor oil to a significant degree in connection with transportation of items that are unrelated to the petroleum industry and that are distinct from its petrolatum reseller operations. Accordingly, we find that it is eligible to receive a refund as an end-user of gasoline and motor oil.
We will next consider the amount of the refund it should receive in connection with those purchases. Applicants for a crude oil overcharge refund are eligible to receive a refund of $.0016 per gallon of eligible products purchased. In its refund application, CP indicated that it purchased 581,252,737 gallons of petroleum products from Exxon Company U.S.A. during the refund period. (3)This volume has been confirmed by a computer printout developed by Exxon in connection with another OHA refund proceeding (Case No. RF307-9704). See Exxon Company U.S.A./Isam A. Kussad, Case Nos. RF307-1500, et al., April 18, 1990, unpublished Decision and Order.
CP also states that it purchased approximately 2.2 million gallons of gasoline from other suppliers. We asked the firm to support this figure. CP provided a document showing that it made purchases of resin and raw petroleum jelly from a number of firms other than Exxon. However, this document does not indicate any additional gasoline purchases. Since CP has not provided any reasonable basis for this additional volume of gasoline purchases, this aspect of its claim will be denied.
The firm has also estimated that it used 36,615 gallons of motor oil in its trucks. It bases this claim on the volumes needed for periodic oil changes. We believe that this estimate is reasonable and does not overstate the firm's motor oil purchases. CP's refund will therefore be based on its purchases of 581,252,737 gallons of petroleum products from Exxon, and 36,615 gallons of motor oil, or a total of 581,289,352 gallons of petroleum products. The firm's refund is therefore $930,063 (581,289,352 x $.0016 = $930,063).
The final deadline for the filing of applications in the crude oil overcharge 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 $.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 Chesebrough-Pond's USA Co. (CP) (Case No. RF272-97101) is hereby granted as set forth in Paragraph (2) below.
(2) 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 to CP a total of $930,063 from the DOE deposit fund escrow account maintained at the Department of the Treasury denominated Crude Tracking-Claimants 4, Account No. 999DOE010Z. The disbursement should be made by means of a wire transfer. Instructions for this transfer will be provided in a separate document.
(3) To facilitate the payment of future refunds, CP shall notify the OHA in the event that there is a change in its address or if an address correction is necessary. This notification should be sent to:
Director of Management Information
Office of Hearings and Appeals
Department of Energy
1000 Independence Ave., S.W.
Washington, D.C. 20585-0107
(4) The determinations made in this Decision and Order are based on the presumed validity of statements and documentary material submitted by the Applicant. Any determination may be revoked or modified at any time upon a determination that the factual basis underlying the application is incorrect.
(5) This is a final Order of the Department of Energy.
George B. Breznay
Director
Office of Hearings and Appeals
Date: July 29, 1997
(1) CP stated that it purchased 253,195,450 gallons of petrolatum.
(2) CP indicates that a small amount of its petrolatum purchases, between 1 and 15 percent, was not resold as Vaseline. It states that small amounts were used as raw material in other products such as creams, lotions and lip ointments. While it is possible that some of this petrolatum might have been subjected to a chemical alteration, in the absence of specific information as to volumes and manufacturing processes, we cannot approve a refund for volumes of this product that were not resold as Vaseline.
(3) This volume includes 581,252,462 gallons of gasoline and 275 gallons of naphtha.