Case No. RG272-00766

February 11, 1998

DECISION AND ORDER

OF THE DEPARTMENT OF ENERGY

Applications for Refund

Name of Applicant:Donald R. Claunch

Date of Filing: July 5, 1995

Case Numbers: RG272-766

RG272-767

This Decision and Order will consider two Applications for Refund filed by Donald R. Claunch. The Applications are based upon purchases of refined petroleum products made by two corporations owned by Mr. Claunch during the crude oil price control period (August 19, 1973 through January 27, 1981). The two corporations were named Stukel Rock and Paving, Inc., (Stukel Rock), Case No. RG272-767, and Custom Rock Products, Inc., (Custom Rock), Case No. RG272-766. Mr. Claunch owned all of the shares of Stukel Rock and Stukel Rock in turn owned all of the shares of Custom Rock. For the purposes of this Decision, we will refer to Stukel Rock and Custom Rock collectively as “the companies.” Mr. Claunch has requested a refund from crude oil funds available for disbursement by the Office of Hearings and Appeals (OHA) of the Department of Energy (DOE) under the provisions of 10 C.F.R. Part 205, Subpart V. As explained below, we will deny these Applications.

In the past, purchasers of refined products were allowed to apply to the OHA for a refund from crude oil overcharge funds collected by the DOE. 51 Fed. Reg. 27899 (August 4, 1986). We have established refund procedures for these funds, which have been made available through consent orders between the DOE and numerous 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).

The refund procedures specify that in order to receive a refund, an applicant generally must: (1) document its purchase volumes and (2) show that it was injured by alleged crude oil overcharges. Applicants who were end-users of petroleum products, however, and whose businesses were unrelated to the petroleum industry are presumed to have absorbed the crude oil overcharges. These applicants need not submit proof of injury to receive a refund in the Subpart V proceeding. City of Columbus, Georgia, 16 DOE ¶ 85,550 (1987).

In general, an applicant is eligible for a refund equal to the number of gallons it purchased multiplied by the volumetric refund amount. Currently, the volumetric refund amount is $.0016 per gallon.

Mr. Claunch filed his Applications in July 1995. The Applications were originally filed without a statement of the volumes of petroleum products purchased by the companies. However, the Applications indicated that such a statement would soon be submitted. We sent Mr. Claunch a letter on October 3, 1996 explaining that we had not yet received gallonage information from him. We received a gallonage claim from Mr. Claunch on December 6, 1996. However, the gallonage calculation and the supporting documents were unclear. We sent Mr. Claunch letters on February 20, June 2, and November 7, 1997 in an attempt to clarify the gallonage claim. The November 7 letter also asked Mr. Claunch to explain ownership issues related to the companies. On January 30, 1998, we received an additional submission about the gallonage claim from Mr. Claunch. However, we have yet to receive the ownership information we requested.

We have made numerous attempts to develop a complete record in this case. We have sent four letters to Mr. Claunch over the last year. We have also had numerous telephone conversations with him, John Broberg of Federal Refunds, Mr. Claunch’s representative in this proceeding, and the bankruptcy trustee for Custom Rock. We believe it is now time to make a decision in this case, based on the information that is currently before us. We will first consider the gallonage claim and we will then discuss the unresolved ownership issues regarding the companies.

The Gallonage Claim

The OHA generally accepts gallonage estimates, provided that an applicant’s estimation method produces a result that is reasonably likely to be less than or equal to its actual purchases. Continental Steel Corporation, 25 DOE ¶ 85,103 (1996). Mr. Claunch estimated that the companies purchased 27,279,240 gallons of liquid asphalt, 3,926,466 gallons of burner fuel (#2 and #4 heating oil), and 11,215,428 gallons of diesel fuel during the refund period for use in rock crushing and road paving. We will consider the estimate for each product separately.

Mr. Claunch calculated the amount of liquid asphalt the companies purchased by using accounting records from 1982 and 1983. The records show that the companies spent $1,793,697 on “materials” in 1983 and $1,109,001 on “materials” in 1982. Mr. Claunch states that “since the company crushed its own rock, the only material to be purchased for manufacture of hot mix asphaltic concrete would be liquid asphalt.” Therefore, Mr. Claunch asserts that all of the cost attributed to materials was spent on purchases of liquid asphalt. We are not convinced that Mr. Claunch’s assertion is reasonable.

Hot mix asphaltic concrete, which is a form of bituminous concrete, is liquid asphalt aggregated with gravel, sand, and stones. Approximately five percent of bituminous concrete is liquid asphalt. See City of Annapolis, 17 DOE ¶ 85,774 (1988). The accounting firm that prepared the accounting documents included a section of the records entitled “Notes to Financial Statements.” Note 3 states that “the company’s main sources of raw material are covered under concurrent ten year agreements with two adjacent landowners and expire in 1983.” Thus, the companies’ main sources of raw materials were adjacent landowners, not refiners or other sellers of liquid asphalt. These facts suggest that most of the costs listed under “materials” were probably for gravel, sand, and stones. Therefore, we believe Mr. Claunch’s estimate of the companies’ liquid asphalt purchases is not reasonable, and we will not grant the companies a refund based on their estimate of liquid asphalt purchases.

Mr. Claunch estimated the companies’ purchases of burner fuel by calculating the number of gallons of burner fuel used per ton of hot mix asphaltic concrete produced. The number of tons of hot mix asphaltic concrete produced was determined by dividing the number of tons of liquid asphalt claimed by 5.5 percent (the percentage of liquid asphalt Mr. Claunch claims was in hot mix asphaltic concrete). Since this estimation method depends on the liquid asphalt estimate, we also find that Mr. Claunch’s burner fuel estimate has not been adequately supported.

Mr. Claunch also estimated the companies’ purchases of diesel fuel by reference to the accounting records. The records show that the companies spent $1,139,933 on fuel, gas, and oil in 1983 and $1,149,657 on fuel, gas, and oil in 1982. Mr. Claunch stated that all of these costs would have been for diesel fuel. Mr. Claunch calculated the average yearly cost of diesel fuel for 1983 and 1982 and divided the resulting figure by $.70 per gallon to determine the number of gallons the companies purchased.

We have two concerns about Mr. Claunch’s diesel claim. First, the records state that the expenditures were for fuel, oil, and gas. Mr. Claunch has not provided any reasoned argument or information to substantiate his assertion that all of the expenditures were for diesel fuel. The price of $.70 per gallon is also unsupported. According to the Energy Information Administration (EIA), the average refiner prices of diesel to end-users in 1983 and 1982 were $.826 and $.942 respectively. In the absence of support from Mr. Claunch for the $.70 per gallon price, we believe the EIA data is more reasonable. While we would be willing to calculate a refund for the companies based on the EIA data, we are unable to do so without a reasonable estimate of the breakdown of fuel, oil, and gas purchases.

Mr. Claunch also requested that the entire gallonage claim be increased by 50 percent because “in the years 1976 - 1979, which were boom years, he remembers business being almost double what it was in the early 1980's.” Mr. Claunch provided no information to support this assertion. Therefore, we are unable to adjust the 1982 and 1983 purchases to obtain an estimate of purchases during the refund period.

Ownership

In order to determine the proper recipient of any refund granted in this case, we must consider the ownership history of the companies. It has come to our attention that Custom Rock filed for Chapter 7 bankruptcy in 1984. The case was closed, but was reopened on June 11, 1997 for reasons unrelated to this refund proceeding. In cases in which a refund applicant is in bankruptcy, we have generally determined that the restitutionary purposes of the refund process are served by disbursing the refund to the trustee for appropriate distribution in accordance with the instructions of the bankruptcy court. See, e.g., Murphy Oil Corp./Energy Cooperative, Inc., 23 DOE ¶ 85,104 at 88,271 (1993) (“the OHA has recognized the court- appointed bankruptcy trustee, not the individual creditors, as the appropriate recipient of the refund”); see also Atlantic Richfield Co./Mid Continent Systems, Inc., 21 DOE ¶ 85,424 (1991). Because the trustee is the appropriate person to receive the refund in such cases, we have directed that the refund be sent to the trustee even when he has not filed a formal Application for Refund. See, e.g., Shell Oil Co./Eastern Air Lines, Inc., Case No. RF315-5538 (December 16, 1992) (unpublished Decision). In this case, we believe the trustee is the proper recipient of any refunds granted to Custom Rock.

The records Mr. Claunch submitted are consolidated statements of income and make no distinction between purchases made by Custom Rock and purchases made by Stukel Rock. We are unaware of Stukel Rock’s current ownership status. We sent our letter of November 7 to both Mr. Claunch and the bankruptcy trustee for Custom Rock. In that letter we requested that they submit an explanation of which company, Stukel Rock or Custom Rock, purchased the petroleum products. We also requested a description of Stukel Rock’s current ownership and bankruptcy status. We have not received any answers to these two requests.

Conclusion

Because the applicant has failed to adequately substantiate its gallonage claim and did not provide adequate information regarding the proper recipient of the refund, we will deny both Applications for Refund.

It Is Therefore Ordered That:

(1) The Applications for Refund filed by Donald R. Claunch on behalf of Stukel Rock and Paving, Inc., and Custom Rock Products, Inc., are hereby denied.

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

George B. BreznayDirectorOffice of Hearings and Appeals

Date: February 11, 1998