Case No. RF272-61725November 8, 2000
DECISION AND ORDER
OF THE DEPARTMENT OF ENERGY
Application for Refund
Motion for Discovery
Name of Petitioner: Ameripol Synpol Corporation
Dates of Filing: June 20, 1988
December 1, 1988
Case Numbers: RF272-61725
RD272-61725
This Decision and Order will consider the Application for Refund filed by Ameripol Synpol Corporation (ASC) based upon purchases of refined petroleum products during the crude oil price control period, August 19, 1973 through January 27, 1981. ASC requests a refund from the crude oil monies currently being disbursed 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 States and Territories of the United States (collectively referred to as "the States") has filed a consolidated objection and comments to ASC'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 Department of Energy (DOE) policy, purchasers of refined petroleum products could 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) (the MSRP). We established refund procedures for these funds, which were 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. ASC's Application for Refund
ASC, a manufacturer of SBR type synthetic rubber, seeks a refund for purchases of products used as fuel and in production processes. The applicant has claimed, based upon contemporaneous records and reasonable estimates, that it purchased a total of 1,105,045,875 gallons of petroleum products during the period of crude oil price controls.(1) The applicant seeks a refund on the basis of these purchases, and relies on the presumption of injury for end-users.
ASCs application is based on purchases of extender oil, liquid asphalt, and n-butylenes. The OHA has set forth the following standard regarding the eligibility for refund of products in the crude oil overcharge refund proceeding.
We will presume that a claimant incurred a crude oil overcharge in the purchase of a product during the relevant period if either that product was named as a covered product in regulations promulgated pursuant to the EPAA, or (a) was purchased from a crude oil refinery or (b) originated in a crude oil refinery and was purchased from a reseller who did not substantially change its form.
Notice of General Interest Concerning DOE's Crude Oil Overcharge Refund Program, 57 Fed. Reg. 30731 (July 10, 1992). There is no question that extender oil and liquid asphalt are eligible for refunds in this proceeding. See, e.g., Firestone Tire & Rubber Co., 21 DOE ¶ 85,396 (1991) (extender oil); City of Provo, Case No. RG272-738 (January 20, 1998) (liquid asphalt).
However, n-butylenes, used by the applicant as feedstock for the extraction of butadiene for the manufacture of synthetic rubber, are not named as a covered product in regulations promulgated pursuant to the EPAA. And while such feedstocks may be produced from a crude oil refinery, they also may be produced from natural gas. Because products such as the feedstocks purchased by ASC can be produced from sources other than crude oil, ASC must establish that a product not within the definition of covered products under the EPAA was in fact produced at a crude oil refinery before we may presume that ASC incurred crude oil overcharges in its purchases of that product.
With regard to most of the n-butylene purchases for which ASC claims a refund, the applicant has produced affidavits in support of its contention that the products that its predecessor, B.F. Goodrich Company,(2) purchased were produced at a crude oil refinery. The affidavits, one by an individual employed by B.F. Goodrich during the relevant period, and another by an ASC Vice President of Purchasing, attest to the fact that some of the feedstocks purchased were produced at facilities that were an integral component of the Gulf oil refinery, Affidavit of Steve G. Michalicek (July 12, 2000), or physically integrated with the Gulf oil refinery. Affidavit of Leonard J. LaMagna (August 11, 2000). We regard these affidavits as probative evidence that the purchases . . . were from crude oil refineries." Goodyear Tire and Rubber Co. v. Department of Energy, 118 F.3d 1531, 1541 (Fed. Cir. (1997). Thus, 520,103,808 gallons of the n-butylene purchases claimed by ASC are eligible for a crude oil refund.(3)
III. The States Objection
In their Objection, the States maintain that ASC's refund application should be denied. The States do not dispute that the applicant was an end-user of petroleum products during the period of crude oil price controls; nor do the States challenge the purchase volume specified by the firm. Instead, the States contend that the applicant is not entitled to the refund it claims because it was able to pass through overcharges to the purchasers of its products. Objection at 8-13.
The States argue that whether a cost increase is absorbed by a firm depends on the conditions of supply and demand in each of the specific markets in which the firm sells. Id. at 9. Because the applicant did business in many markets, the States contend that ASC could have absorbed the crude oil overcharges only if demand was infinitely price elastic or supply infinitely price inelastic, and that these conditions persisted for the entire period of the overcharge. Id. at 10-11. Thus, according to the States, a claim of 100% absorption by an applicant . . . is simply not a reasonable contention. Id. The States conclude that because they have shown that ASC was able to pass through some or all of its costs to its customers during the relevant period, ASCs application must be denied unless the company can present convincing evidence of injury and its magnitude. Objection at 16.
IV. Analysis of the States' Objections
The OHA agrees with the States' contention that the end-user presumption is rebuttable, and we have previously denied crude oil refund claims in instances where it was clearly shown that the applicant was able to pass through the amount of the overcharges. For example, in ICI Americas Inc., 17 DOE ¶ 85,104 (1988), the applicant's claim was denied because it was reimbursed for all of its petroleum purchases pursuant to the terms of its cost-plus contract with the U.S. Government. Id. at 88,229. In that instance, there was direct evidence that the applicant did not bear the burden of the overcharges. We have similarly excluded from refund consideration purchase volumes which were subject to a cost pass-through provision. See Washington Construction Co., 20 DOE ¶ 85,229 (1990).
In this case, however, the information presented by the States is insufficient either to rebut the end- user presumption or to shift the burden of going forward with the evidence back to the applicants in this proceeding. The States objection, which contains theoretical statements about the pricing behavior of industrial firms in general fails to shed any light on the issue of cost absorption. Using the theory of incidence analysis, the objection explains that the demand and supply conditions in the marketplace to speculate whether cost increases experienced by industrial firms were absorbed or passed on to consumers during the period of petroleum price controls. After describing the incidence equation, however, the States make no attempt to provide the actual data needed to apply it to the claimant.
Thus, there has been no direct evidence produced to suggest that the applicant did in fact pass through the overcharges. The States' arguments are primarily based on theoretical statements that provide no evidence which is particular to the applicant. The mere contention that a company had the ability to pass through overcharges does not convince us that a particular claimant is likely in fact to have passed through overcharges.
In light of the States' failure to provide any reliable support for their assertion that the applicant was able to pass through the majority of crude oil overcharges to its customers, the presumption of injury that is generally accorded to end-users outside of the petroleum industry remains unrebutted.
V. The States' Motion for Discovery
The States also contend that if we do not deny the applicant's claim, we must grant their Motion for Discovery. The States' Motion consists of interrogatories and requests for documents similar to the requests the States have made in other Subpart V crude oil refund cases. See, e.g., Gulf States Asphalt Co., 18 DOE ¶ 85,154 at 88,249-51 (1988); Copper Range Co., 18 DOE ¶ 85,431 at 88,692- 93 (1988). As discussed in our past Decisions, such general requests for information are not appropriate in a case where the States have presented no relevant evidence to rebut the presumption of injury. Cf. Christian Haaland A/S, 17 DOE ¶ 85,439 (1988). For the reasons discussed in those cases, we will deny the States' Motion for Discovery.
VI. Conclusion
We have determined that the applicant was an end-user of the refined petroleum products which form the basis for its refund applications, i.e. the firm did not resell these products but consumed them in business operations unrelated to the petroleum industry. We have further found that the applicant was injured by its purchases as a result of crude oil overcharges, based upon the reasoning set forth in the April 10 Notice. Accordingly, the applicant is eligible to receive its full allocable share of the available crude oil monies. The principal refund amount equals the approved gallons of petroleum products which the firm purchased during the period of crude oil price controls, multiplied by the current volumetric amount, $0.0016 per gallon. The principal refund amount, thus derived, is $1,016,089, based upon purchases of 635,055,405 gallons.
It Is Therefore Ordered That:
(1) The Application for Refund filed by Ameripol Synpol Corporation, Case No. RF272-61725, for all available crude oil overcharge funds is hereby approved as set forth in Paragraph (3) below.
(2) The Motion for Discovery or for Issuance of Special Report Order, and for Stay of Proceedings, filed by the consortium of States and Territories, Case No. RD272-61725, is hereby denied.
(3) The Director of Special Accounts and Payroll, Office of Departmental Accounting and Financial Systems Development, Office of the Controller, of the Department of Energy shall take appropriate action to disburse from the escrow fund denominated Crude Tracking- Claimants II, Account No. 999DOE008Z, maintained at the Department of Treasury, the sum of $1,016,089 to Ameripol Synpol Corporation at the following address:
Daniel S. Brown
Huber Lawrence & Abell
605 Third Avenue
New York, NY 10158
(4) To facilitate the payment of future refunds and interest, an applicant shall notify the Office of Hearings and Appeals in the event that there is a change in its address, or if an address correction is necessary. Such notification shall be sent to:
Director of Management Information
Office of Hearings and Appeals
Department of Energy
1000 Independence Avenue, S.W.
Washington, D.C. 20585
(5) The determinations made in this Decision and Order are based upon the presumed validity of the statements and documentary material submitted by the applicants. This Decision and Order may be revoked or modified at any time upon a determination that the basis underlying a refund application is incorrect.
(6) This is a final Order of the Department of Energy.
George B. Breznay
Director
Office of Hearings and Appeals
Date: November 8, 2000
(1) The purchases for which ASC claims a refund were made by the Texas-U.S. Chemical Company, the Ameripol Division of the B.F. Goodrich Company, and Synpol, Inc., a subsidiary of Uniroyal, Inc. ASC has submitted documentation demonstrating that it is a successor in interest to these companies and therefore would be the proper recipient of a refund based upon their eligible purchases.
(2) See supra note 1.
(3) Because at this time there is insufficient evidence in the record to support ASCs claim for the remaining 469,990,470 gallons of n-butylene purchases, we have bifurcated ASCs claim to allow the applicant an additional opportunity to support the remainder of its claim, which will be considered under OHA Case No. RG272-01101.