Case No. RF304-15508
December 2, 1997
DECISION AND ORDER
OF THE DEPARTMENT OF ENERGY
Supplemental Order
Names of Petitioners:Atlantic Richfield Company/
Major Oil, Inc.
K.C. Distributing, Inc.
Date of Filing: November 21, 1997
Case Numbers: RF304-15508
RF304-15509
This Decision and Order concerns Applications for Refund that were filed by K.C. Distributing, Inc., (K.C.) and Major Oil, Inc. (Major) in the ARCO special refund proceeding. Both firms are distributors of ARCO products in the State of Oregon. On January 18, 1989, K.C. was granted a refund of $4,869 ($3,830 principal plus $1,039 interest) based upon purchases of 5,211,211 gallons of ARCO products (Case No. RF304-2137) and on November 30, 1989, Major was granted a refund of $6,705 ($5,000 principal plus $1,607 interest) based upon purchases of 13,472,936 gallons (Case No. RF304-6551). As set forth in detail below, this decision rescinds excessive refunds that these two firms received, because they did not reveal in their applications that they are related.
Evaluating applications in this proceeding involves both the allocation of an appropriate portion of the consent order fund to each applicant, and the evaluation of economic harm or injury suffered by that applicant. See Atlantic Richfield Co., 17 DOE ¶ 85,069 at 88,151-54 (1988). To determine the portion of the fund to be allocated to each claimant, we assume that any overcharges were distributed equally over every gallon of regulated products sold by ARCO during the consent order period and allocate the consent order monies by dividing the value of the fund by the total volume of ARCO's sales of covered products during that period. ARCO, 17 DOE at 89,526-527. This calculation produces a volumetric factor of $0.000735 per gallon. When that factor is multiplied by an applicant's total eligible purchases, the result is a claimant's allocable share of the consent order fund which results in a "volumetric" refund. We next evaluate injury to the applicant. Not every claimant need prove injury, i.e., that it absorbed the overcharges, in order to receive its allocable share. We provide presumptions of injury for small and mid-sized firms. Resellers and retailers may receive their full volumetric share up to $5,000 in principal, or 41% of their volumetric refund, not to exceed $50,000, without making a detailed demonstration of injury. See Id. at 88,152.
The principal purpose of the presumptions of injury described above is to reduce the burden on small claimants. As a result, in applying the presumptions, we generally aggregate the purchase volumes of all related firms. Separate analysis of individual claims by related applicants is inappropriate because affiliated firms are in a better position to undertake the burden of demonstrating injury and have less need for the presumption of injury. Separate treatment of affiliated firms under the small or medium-range presumptions of injury would therefore result in windfall benefits. See, e.g., Texaco Inc./Triple A Oil Co., 22 DOE ¶ 85,156 ar 88,440-41 (1992).
K.C. and Major have significant ownership in common. The owners of the firms, and their share of ownership are set forth in the table below:
Owner
K.C. Distributing
Major Oil Company
Michael Truax
39.5%
31.25%
B.E. Douglas
39.5
31.25
Paul Farrell
7.5
12.5
Phillips Murray
7.5
Peter Meyer
3.0
12.5
James Wechter
3.0
12.5
As indicated in the table, with one exception, the two firms have the same owners, and the same two individuals, Michael Truax and B.E. Douglas, own controlling interests in both firms. The firms maintain that K.C. and Major should be treated separately in determining their refunds, because they were operated separately and served slightly different markets. We have considered, and rejected, these arguments in the past. See id. at 88,441. What is important in our analysis is the degree of common ownership and the corresponding greater ability of the combined firms to make a showing of injury. We therefore find that K.C. and Major should have been considered together when calculating their refund. The principal amount of the combined refund for the two related firms should have been $5,630 (18,684,147 gallons x 0.41 x $.000735 per gallon). This is $3,200 less than the combined principal refund amount that was granted.
The Department of Energy's refund process depends upon the accuracy of the information submitted by the applicants. Both K.C. and Major indicted in their applications that no related firm was filing a claim in the ARCO refund proceeding.(1) The submission of false or incomplete information is a serious matter. We stated in the determinations granting the refunds that:
The determinations made in this Decision and Order are based on the presumed validity of statements and documentary material submitted by the applicants. The determinations may be revoked or modified at any time upon a finding that the factual basis underlying any of the Applications for Refund is incorrect.
Such remedial action is appropriate here. Accordingly, we shall require the firms to repay the excess refund, plus interest. The total repayment obligation is $6,570. This reflects the $3,200 overpayment of principal, $1,092 in interest to the date of the refund payment, and $2,278 in interest to date that the overpayment would have earned had it remained on deposit in the ARCO escrow account. Bassman, Mitchell and Alfano, the law firm through which K.C. and Major filed their applications, shall be held jointly and severally responsible for this repayment. The firm has an obligation to exercise due diligence to ensure that filings before this Office are accurate. See Atlantic Richfield Co./Bassman, Mitchell & Alfano, RR304-65 (December 21, 1995).
It Is Therefore Ordered That:
(1) The Decisions and Orders issued to K.C. Distributing, Inc., on January 18, 1989 (Case No. RF304-2137, redesignated as RF304-15509)., and to Major Oil, Inc., on November 30, 1989 (Case No. RF304-6551, redesignated as RF304-15508) are hereby rescinded in part.
(2) K.C. Distributing, Inc., Major Oil, Inc., and Bassman, Mitchell and Alfano, Chartered, are hereby directed to remit $6,570 to the Department of Energy at the following address:
U.S. Department of Energy
Office of the Chief Financial Officer
P.O. Box 500
Germantown, MD 20874-0500
Payment should be made by check payable to the U.S. Department of Energy and should refer to Case No. RF304-15508. In the event that payment is not made within 30 days of the date of this Decision and Order, interest shall accrue on the unpaid amount at the rate generally assessed by the Department of Energy on overdue receivables. Other charges generally assessed on overdue receivables shall also apply.
(3) Upon receipt of the payment specified above, the Director of Special Accounts and Payroll, Office of the Controller of the Department of Energy shall take appropriate action to deposit these funds into the DOE deposit fund escrow account funded by Atlantic Richfield, Inc., Consent Order No. RARH00001Z. For purposes of this account, the payment shall consist of $3,200 principal and $3,370 interest.
(4) This is a final Order of the Department of Energy.
George B. Breznay
Director
Office of Hearings and Appeals
Date:December 2, 1997
(1)In neither application was the following question answered affirmatively: "If any related firm has filed or will file any other application for an ARCO refund, check here _____" Only after approval of the refunds and discovery that both applications had been signed by the same person as treasurer and filed through the same law firm did we initiate an inquiry into their relationship.