Case No. RF272-48280

January 30, 1998

DECISION AND ORDER

OF THE DEPARTMENT OF ENERGY

Application for Refund

Motion for Discovery

Name of Petitioner: Polysar Gulf Coast, Inc.

Dates of Filing: April 4, 1988

June 30, 1988

Case Numbers: RF272-48280

RD272-48280

This Decision and Order will consider the Application for Refund filed by Polysar Gulf Coast, Inc. (Polysar),(1) a firm that purchased refined petroleum products during the crude oil price control period, August 19, 1973 through January 27, 1981. Polysar requests a refund from the crude oil monies currently available for disbursement by the Office of Hearings and Appeals (OHA) pursuant to the OHA's authority under 10 C.F.R. Part 205, Subpart V. A group of twenty-eight States and two Territories of the United States (collectively referred to as "the States") has filed a consolidated objection and comments to Polysar's refund application. In addition, the States have filed a Motion for Discovery (alternatively styled as a request for a Special Report Order) in this proceeding which, according to the States, should be approved unless the OHA denies the applicant's Application for Refund.

I. Background

Pursuant to current Department of Energy (DOE) policy, purchasers of refined petroleum products may apply to the OHA for a refund from crude oil overcharge funds collected by the DOE. Statement of Modified Restitutionary Policy in Crude Oil Cases, 51 Fed. Reg. 27899 (August 4, 1986). We have established refund procedures for these funds, which have been made available through court approved settlements, remedial orders and consent orders entered into by the DOE and numerous firms that sold crude oil during the period of price controls. See, e.g., New York Petroleum, Inc., 18 DOE ¶ 85,435 (1988); Ernest A. Allerkamp, 17 DOE ¶ 85,079 (1988); A. Tarricone, Inc., 15 DOE ¶ 85,495 (1987). The refund procedures set forth in these cases specify that

in order to receive a refund, an applicant generally must: (i) document its purchase volumes during the period of price controls; and (ii) show that it was injured by alleged crude oil overcharges.

End-users of petroleum products whose businesses are unrelated to the petroleum industry are presumed to have absorbed the crude oil overcharges and need not submit any further proof of injury to receive a refund. See, e.g., City of Columbus, 16 DOE ¶ 85,550 (1987); see also 52 Fed. Reg. 11737 at 11742 (April 10, 1987) (the April 10 Notice) and cases cited therein. The end-user presumption of injury is rebuttable, however. If an interested party submits evidence which is of sufficient weight to rebut the end-user presumption, the applicant will be required to produce further evidence of injury. Berry Holding Co., 16 DOE ¶ 85,405 at 88,797 (1987).

In explaining the rationale for the end-user presumption, we have stated:

The end-user presumption was adopted first and foremost as an evidentiary tool so that parties injured by crude oil overcharges would have the opportunity to obtain some measure of restitution for those overcharges. As we previously noted, the DOE "has a duty to identify injured persons and, to the extent possible, to make direct refunds to them. . . ." To fulfill this Congressional mandate and assure that restitution is achieved, the OHA must take into account the complexity of oil overcharge proceedings, as well as the difficulty in actually proving injury from crude oil overcharges, caused in part by the passage of time since the period of price controls and difficulties applicants may experience in locating records and relevant market data. . . . If end-user claimants were routinely required to submit detailed evidence of injury in order to receive refunds for crude oil overcharges, a great majority of claimants would find that the refunds in question were not worth the time and cost involved in pursuing them. The result would be the complete frustration of the restitutionary purposes of these proceedings, since "virtually no end-users would receive restitution for the crude oil overcharges they experienced."

New York Petroleum, 18 DOE at 88,702 (citations omitted). See also April 10 Notice, 52 Fed. Reg. at 11741-42.

Meritorious claimants are eligible to receive refunds equal to the number of gallons of petroleum products they purchased during the period of price controls multiplied by a per-gallon or volumetric refund amount. The volumetric refund amount currently available is $0.0016 per gallon. We derived this refund amount by dividing the total crude oil refund monies currently available by the total consumption of petroleum products in the United States during the period of price controls (2,020,997,335,000 gallons).

II. Polysar's Application for Refund

Polysar, a synthetic rubber manufacturer, seeks a refund for purchases made by the B.F. Goodrich Company for a plant located in Orange, Texas. The applicant’s refund claim is based upon its purchase of this plant from B.F. Goodrich in 1981.

Under OHA precedent, the right to receive a refund generally remains with the owner of a firm during the price control period. We have determined that the right to receive a refund can be transferred to a subsequent owner of the firm if: (i) the firm is a corporation, the entire capital stock of which was purchased by the subsequent owner; or (ii) the firm's assets were sold under an agreement that indicated, either explicitly or implicitly, that potential refunds were being transferred. Mrs. M.B. Troy, 23 DOE ¶ 85,049 (1993); see also Ward Transport, Inc., 26 DOE ¶ 85,027 (1997).

Because B.F. Goodrich was the owner of the Orange, Texas plant and made the claimed petroleum product purchases during the crude oil price control period, we begin with the presumption that B.F. Goodrich would have been entitled to any crude oil overcharge refund based on those purchases. Polysar does not contend that it purchased the stock of the B.F. Goodrich Company, but the applicant has submitted a copy of a purchase and sale agreement by which Polysar purchased the plant in question from B.F. Goodrich on December 31, 1981. See Letter from Scott G. Brown, Polysar, to Steven Goering, OHA (April 22, 1996). In our review of this agreement, we find no language that indicates, either explicitly or implicitly, that the right to potential refunds was transferred from B.F. Goodrich to Polysar.

The applicant has also submitted a December 5, 1994 letter agreement it entered into with B.F. Goodrich, under which the applicant and B.F. Goodrich agreed “in consideration of 50% of whatever refund is obtained for the crude oil overcharge . . . that the rights to the Refund were transferred in the Purchase and Sale Agreement dated December 31, 1981, and that any remaining rights of Goodrich are hereby assigned to [the applicant].” Letter agreement between Scott G. Brown, Polysar, and Alexander C. Schoch, B.F. Goodrich (December 5, 1994).

As we have stated in prior crude oil refund cases, we

have a duty to identify injured persons and, to the extent possible, to make direct refunds to them. This duty arises from Section 209 of the Economic Stabilization Act of 1970, 12 U.S.C. § 1904, the Petroleum Overcharge Distribution and Restitution Act of 1986, 15 U.S.C. § 4502(b) (PODRA), and Paragraph IV.B.1 of the Stripper Well Settlement Agreement.

Firestone Tire and Rubber Company, 21 DOE ¶ 85,396 at 89,172 (1991). Applying this principle, we have found that the right to a crude oil refund remains with the seller of the assets of a firm where the assets sales agreement is silent on the matter of rights to the refund, even when the seller and purchaser retrospectively agree that the right to a refund was transferred in the asset sale. Golden Cat Division/Ralston Purina Company, Case No. RJ272-00012 (June 13, 1996); see also Georgia Kraft Company, 25 DOE ¶ 85,075 (1995) (rejecting request to distribute refund monies based on a mutually agreed upon percentage breakdown between parties).

We therefore conclude in the present case that Polysar is not eligible for a refund based on purchases made by B.F. Goodrich at its Orange, Texas, plant. Accordingly, we will deny the Application for Refund submitted by Polysar, and we will dismiss as moot the States' Motion for Discovery and their request for the issuance of a Special Report Order.(2)

It Is Therefore Ordered That:

(1) The Application for Refund filed by Polysar Gulf Coast, Inc., on April 4, 1988 (Case No. RF272-48280) is hereby denied.

(2) The Motion for Discovery (and request for the issuance of a Special Report Order) filed by a consortium of States and U.S. Territories (Case No. RD272-48280) is hereby dismissed.

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

George B. Breznay

Director

Office of Hearings and Appeals

Date: January 30, 1998

(1) Subsequent to filing its Application, Polysar became a division of Miles Inc., which later became Bayer Corporation. To avoid confusion, we will refer to the applicant as Polysar throughout this Decision.

(2)In light of the disposition of this case, it is not necessary to discuss the States' Objection to Polysar's application for refund.