Case No. RG272-00793
June 13, 1997
DECISION AND ORDER
OF THE DEPARTMENT OF ENERGY
Application for Refund
Name of Applicant:W.R. Grace & Co.
Date of Filing: July 5, 1995
Case Number: RG272-793
This Decision and Order will consider an Application for Refund filed by W.R. Grace & Co. (W.R. Grace), a specialty chemical company. In its application, W.R. Grace requests a refund from crude oil overcharge funds. These funds are available for disbursement by the Office of Hearings and Appeals (OHA) of the Department of Energy (DOE) under 10 C.F.R. Part 205, Subpart V. As explained below, we will deny W.R. Graces application.
In the past, purchasers of refined petroleum products during the crude oil price control period were allowed to apply to the OHA for a refund from crude oil overcharge funds.(1)51 Fed. Reg. 27899 (August 4, 1986). These funds were collected by the DOE through consent orders with certain firms that sold crude oil during the 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). We accepted Applications for Refund in the Subpart V crude oil proceeding from injured parties that had not waived their claims by participating in one of the "Stripper Well" refund proceedings. 51 Fed. Reg. 29689 (August 20, 1986); 52 Fed. Reg. 11737 (April 10, 1987).
The "Stripper Well" refund proceedings were created to carry out the terms of the Settlement Agreement reached in The Department of Energy Stripper Well Exemption Litigation, 653 F. Supp. 108 (D. Kan. 1986). The Settlement Agreement established escrow accounts to refund crude oil overcharges to eight groups of petroleum product purchasers: Refiners, Retailers, Resellers, Agricultural Cooperatives, Airlines, Surface Transporters, Rail and Water Transporters, and Utilities.
In creating the escrow accounts, the court announced that "all parties and claimants receiving refunds under this agreement will waive any further claims to crude oil refunds." 653 F. Supp. at 114. Following the court's holding, the Settlement Agreement provides that the settling parties waive their right to participate in any future refund proceeding based on crude oil overcharges. Settlement Agreement, Paragraph III.A.1, 6 Fed. Energy Guidelines ¶ 90,509 at 90,660. Furthermore, this waiver provision is binding not only on the settling parties, but on their affiliates as well. Settlement Agreement, Paragraph VI.A, "Agreement Binding on Parties and their Affiliates," 6 Fed. Energy Guidelines at 90,667.(2)
W.R. Grace was the parent company of Grace Distribution Services, Inc., (Grace Distribution) when the waiver provisions became effective. Therefore, Grace Distribution and W.R. Grace were affiliates on the payment date. Grace Distribution participated in the Surface Transporters refund proceeding of the Stripper Well settlement.(3)To participate in this proceeding, Grace Distribution executed a Claim Form and Waiver.(4)
The provisions of the Claim Form and Waiver follow those in the Settlement Agreement. The general waiver provision is found in Paragraph 7 of the Claim Form and Waiver, which provides that Grace Distribution:
hereby releases, and waives all [Grace Distributions] existing and future claims whether assertable at law or in equity, and whether known or unknown that fall within any one or more of the following classes ... :
... (2) all present and future claims asserting rights to share in existing or future monies paid, ordered to be paid, or held for payment as restitution as a result of any judicial or administrative proceeding relating to the federal mandatory allocation and price regulations applicable to crude oil....
In addition, Paragraph 10 of the Claim Form provides that:
... [Grace Distribution] hereby agrees to withdraw and to take all necessary steps to file appropriate withdrawals of any and all claims it now has or hereinafter may have for funds in any Court or agency proceedings, including "Subpart V" proceedings, where such funds are related to Alleged Crude Oil Violations ... [Grace Distribution] agrees it will not file any such claims for refund of Alleged Crude Oil Violations in these or similar proceedings in the future.
The waiver of an affiliate's rights is found in Paragraph 9 of the Claim Form, which says that "this Waiver and Release shall be binding upon [Grace Distribution], its parents, subsidiaries, affiliates, successors and assigns." The terms of the Settlement Agreement and Claim Form mean that:
an applicant must choose between obtaining relief under the M.D.L. 378 [Stripper Well] Escrows or under the Subpart V process. Once an applicant files an Application for Refund from a [Stripper Well] Escrow, it is precluded from receiving a refund in crude oil refund proceedings conducted under the provisions of 10 C.F.R. Part 205, Subpart V.
Roberts Dairy Co., 16 DOE ¶ 85,573 at 89,147 (1987); enforced sub nom. Mid-American Dairymen, Inc. v. Herrington, 704 F. Supp. 198 (D. Kan. 1988); aff'd 878 F.2d 1448 (Temp. Emer. Ct. App. 1989); see also Boise Cascade Corp., 16 DOE ¶ 85,214 (1987); enforced sub nom. In Re: The Department of Energy Stripper Well Exemption Litigation, 707 F. Supp. 1267 (1987).
By choosing to obtain relief from the Surface Transporters escrow account, Grace Distribution waived its own right, and the right of each of its affiliates, to participate in the Subpart V crude oil proceeding. We will therefore deny W.R. Graces Application because it was an affiliate of Grace Distribution on August 7, 1986.
It Is Therefore Ordered That:
(1) The Application for Refund filed by W.R. Grace & Co., (Case No. RG272-793) is hereby denied.
(2) This is a final Order of the Department of Energy.
George B. Breznay
Director
Office of Hearings and Appeals
Date: June 13, 1997
(1)The crude oil price control period extended from August 19, 1973 through January 27, 1981.
(2)2/ As defined in Paragraph VI.A of the Settlement Agreement, an affiliate of a party
includes any Person ... which controls, is controlled by or is under common control with such party. For this purpose, "control" means the power (existing on the Payment Date) to control the policies and business operations of a person, including ... the ownership ... of shares of stock ... of more than 49 percent of a person....
The Settlement Agreement goes on to define the "Payment Date" as "the date on which funds are distributed to all of the Parties or their Escrows." Paragraph III.B.1.b, 6 Fed. Energy Guidelines at 90,654. The court directed the transfer of funds to the escrows in an Order dated August 7, 1986. In Re: The Department of Energy Stripper Well Exemption Litigation, 3 Fed. Energy Guidelines ¶ 26,568. Therefore, August 7, 1986 is the Payment Date. Any firm that was an affiliate of a party to the Settlement Agreement on August 7, 1986 is bound by the waiver provision.
(3)3/ The OHA, administrator of the Surface Transporters escrow account, granted a refund to Grace Distribution Services, Inc. (Case No. RF270-1099) on July 10, 1987. Grace Distribution Services, Inc., 16 DOE ¶ 85,218.
(4)The Claim Form was signed on behalf of Grace Distribution by Charles E. Barnett, Purchasing Manager, on November 25, 1986.