Case No. RF340-00162
June 25, 1997
DECISION AND ORDER
OF THE DEPARTMENT OF ENERGY
Application for Refund
Name of Petitioner: Enron Corp./
Chevron U.S.A., Inc.
Date of Filing: May 4, 1992
Case Number: RF340-162
On September 14, 1988, the Economic Regulatory Administration of the Department of Energy (DOE) filed a Petition with the Office of Hearings and Appeals (OHA) requesting that the OHA formulate and implement procedures for distributing funds obtained through a consent order with Enron Corp. (Enron). See 10 C.F.R. Part 205, Subpart V. The consent order resolved DOE allegations that Enron and all of its subsidiaries, affiliates, prior subsidiaries, predecessors and successors in interest violated the mandatory petroleum regulations in their sales of crude oil and refined petroleum products from January 1, 1973 through January 27, 1981 (the consent order period). On July 10, 1991, the OHA issued a Decision and Order setting forth final procedures for disbursing the portion of the Enron settlement fund attributable to various Enron entities' sales of NGLs and NGLPs. Enron Corp., 21 DOE ¶ 85,323 (1991) (Enron). These covered Enron entities are UPG, Inc. (UPG), Northern Propane Gas Company (Northern), and Florida Hydrocarbons Company. In accordance with the goals of 10 C.F.R. Part 205, Subpart V, Enron implements a process for refunding the consent order funds to purchasers of Enron NGLs and NGLPs who are able to demonstrate that they were injured as a result of the covered entities' alleged overcharges.
This Decision and Order renders a determination upon the merits of an Application for Refund submitted by a Chevron U.S.A., Inc. (Chevron) formerly Standard Oil of California (Standard) on behalf of Standard and two entities acquired by Chevron in 1984, Gulf Oil Company (Gulf) and Warren Petroleum Company (Warren). Standard, Gulf and Warren all purchased covered product from Enron during the refund period. In its Application, Chevron states that the
products purchased from Enron by Standard, Gulf and Warren "were sold to third parties or to other divisions and subsidiaries of the companies, or were stored for subsequent sale and distribution." Application for Refund at 2. Accordingly, for purposes of this proceeding, we find that Standard, Gulf and Warren were resellers of Enron product.
I. Background.
In Enron, we adopted a presumption that the alleged overcharges attributable to NGLs and NGLPs had been dispersed equally in all sales of refined product made by the covered entities during the consent order period. Enron, 21 DOE at 88,959. We stated that, in the absence of a demonstration of a disproportionate overcharge, a claimant would be allocated a share of the consent order funds on a volumetric basis. We provided that eligible claimants would receive $.00601 per gallon of covered Enron product purchased.(1)Id. We refer to the dollar amount derived by multiplying an applicant's purchase volume by the per gallon refund amount as the applicant's allocable share.
Enron generally requires a claimant to demonstrate that it was injured by Enron's alleged overcharges in order to receive a refund equal to its full allocable share. However, in Enron, we adopted several presumptions of injury that would allow certain types of claimants to receive a refund without a detailed demonstration of injury. We established that resellers, retailers and refiners seeking volumetric refunds of $10,000 or less were injured by Enron's pricing practices. Id. at 88,960. Such applicants would, therefore, only have to document their purchases of covered Enron products in order to receive a refund of their full volumetric
share under this "small claim" presumption of injury. Id. at 88,960.
We further established that a reseller, retailer or refiner whose volumetric share of the Enron consent order funds exceeds $10,000 may elect to receive as its refund the larger of $10,000 or 60 percent of its volumetric share up to $50,000. Id. Accordingly, a claimant in that group need only establish the volume of Enron covered products that it purchased during the refund period to receive a refund of 60 percent of its allocable share up to $50,000 under this "mid-range" presumption of injury.
However, we also adopted a rebuttable presumption that firms that purchased Enron covered products on the spot market were not injured by Enron's alleged overcharges. A claimant is a spot purchaser if it made only sporadic purchases of significant volumes of Enron's covered products. Id. at 88,961. This presumption is based upon the general conclusion that purchasers on the spot market tend to have considerable discretion in where and when to make purchases. Therefore, a firm would not have made spot purchases of Enron product without evaluating the full financial effect of those purchases. Accordingly, we believe that a spot purchaser would not generally have made a spot purchase unless it was to its financial advantage. A spot purchaser can rebut this presumption by demonstrating that it was in fact injured by its spot purchases. See generally Sauvage Gas Co./NGL Supply, Inc., 19 DOE ¶ 85,622 (1989). In prior proceedings we have allowed applicants to rebut the spot purchaser presumption by demonstrating that: 1) they were forced to make the purchases to meet their base period supply obligations; or 2) they resold the product at a loss which was not subsequently recovered. E.g., Saber Energy, Inc./Mobil Oil Corp., 14 DOE ¶ 85,170 (1986).
II. Standard and Gulf were Spot Purchasers of Enron Products.
In a February 24, 1997 letter to Chevron, we tentatively identified Standard and Gulf as spot purchasers of Enron product. In that letter, we noted that the information in Chevron's Application for Refund indicated that Standard and Gulf made isolated purchases of significant volumes of product from Enron. Specifically, Standard purchased 5.04 million gallons of iso-butane from Enron in 1973 and Gulf purchased 4.7 million gallons of propane from Enron in 1978. We stated that unless Chevron was able to demonstrate that Standard and Gulf were not spot purchasers or was able to show that they were injured by their spot purchases, we would exclude the Standard and Gulf purchase volumes from Chevron's refund claim. See February 24, 1997 letter from Thomas L. Wieker, Deputy Director, Office of Hearings and Appeals, to Andrew D. Balch, Manager, Financial Analysis, Chevron. In a response to this letter dated June 16, 1997, Mr. Balch stated that Chevron was unable to locate the records required to respond to our letter. See June 16, 1997 letter from Mr. Balch to Mr. Wieker.
Accordingly, we have determined that Standard and Gulf probably were spot market purchasers of Enron products, and that Chevron has not shown that Standard and Gulf suffered injury with respect to these spot market purchases. As a result, Chevron has failed to rebut the spot market purchaser presumption of noninjury applicable to Standard and Gulf in this proceeding. We therefore will exclude the Standard and Gulf purchase volumes from Chevron's refund claim.
III. The "Mid-range" Injury Presumption is Applicable to Warren.
Unlike Standard and Gulf, Warren was a steady purchaser of certain Enron products. The Warren purchase records submitted by Chevron indicate that Warren was a monthly purchaser of propane from UPG throughout the refund period, and that Warren was a monthly purchaser of propane and butane from Florida Hydrocarbons Company from September 1979 through January 1981. Warren's purchases from these two Enron affiliates total 71,154,832 gallons of product. We find that this pattern of purchases indicates that Warren was a regular customer of UPG and Florida Hydrocarbons Company.
Warren also purchased 10,278,202 gallons of propane and butane from another Enron affiliate, Northern. However, Warren's purchase records indicate that its purchases from Northern consisted chiefly of significant volumes of product purchased on a sporadic basis. As discussed above, we believe that this pattern of purchases strongly suggests that Warren's purchases from Northern were spot purchases. Moreover, there is no information in Chevron's Refund Application to indicate that Warren suffered injury as a result of these apparent spot purchases from Northern. Accordingly, we will exclude the volume of Warren's purchases from Northern in calculating Chevron's refund in this proceeding. Therefore, based upon the information before us, we find that Chevron is eligible to receive a refund for the 71,154,832 gallons of propane and butane that Warren purchased from UPG and Florida Hydrocarbons Company.
Chevron has submitted all of the information required of applicants in the Enron proceeding. Specifically, the firm has established a refund period volume of purchases from Enron of 71,154,832 gallons. Chevron has not claimed that it was disproportionately overcharged. Nor has Chevron attempted to show that it was injured by Enron's alleged overcharges. Accordingly, the firm's refund will be calculated based upon the "mid-range" presumption of injury described above.(2)
Under the "mid-range" presumption of injury, Chevron will receive a principal refund of $50,000 (the smaller of $50,000 or 71,154,832 x $.00601 x .60 = $256,584). Chevron will also receive $33,235 as its pro rata share of the interest that has accrued on the consent order funds since they were placed in escrow.(3)Accordingly, the total refund granted to Chevron, including interest, is $83,235.
The total volume approved in this Decision and Order is therefore 71,154,832 gallons of Enron product and the total refund granted, including interest, is $83,235.
It Is Therefore Ordered That:
(1) The Application for Refund submitted by Chevron U.S.A., Inc. (Case No. RF340-162) is hereby granted as specified in paragraph (2).
(2) The Director of Special Accounts and Payroll, Office of the Controller, of the Department of Energy shall take appropriate action to disburse a total of $83,235 ($50,000 in principal and $33,235 in interest) from the DOE deposit fund escrow account maintained at the Department of the Treasury and funded by Enron Corp., Consent Order No. 730V00221Z, to (Case No. RF340-162):
Chevron U.S.A., Inc.
c/o Andrew D. Balch
Manager, Financial Analysis
Chevron U.S.A., Inc.
575 Market Street, Rm. 2886
San Francisco, California 94105
(3) The determinations made in this Decision and Order are based on the presumed validity of the statements and documentary material submitted by the applicants. Any of those determinations may be revoked or modified at any time upon a determination that the factual bases underlying the Applications for Refund are incorrect.
(4) This is a final Order of the Department of Energy.
George B. Breznay
Director
Office of Hearings and Appeals
Date: June 25, 1997
(1)1/ This amount was derived by dividing the fund received from Enron allocable to refined products ($43,200,000) by the estimated volume of refined products sold by Enron from June 13, 1973 through the date of decontrol of the relevant product (7,186,265,624). Id. at n. 8.
(2)In its original Application for Refund, Chevron attempted to show that it was injured by the Enron purchases of Standard, Gulf and Warren. However, in its June 16, 1997 submission, Chevron stated that it was unable to locate information requested by the OHA concerning injury and therefore would accept the presumption of injury limiting Chevron's refund in this proceeding to $50,000 plus applicable interest. See June 16, 1997 letter from Mr. Balch to Mr. Wieker.
(3)Interest has accrued on the Enron consent order funds since July 27, 1988, the date that Enron remitted the consent order funds to the DOE. Almost all of this money earns interest at rates established in auctions of six month treasury bills. The current ratio of interest to principal in the Enron account is roughly three to five.