Case No. RF340-00171
April 14, 2000
DECISION AND ORDER
OF THE DEPARTMENT OF ENERGY
Application for Refund
Name of Petitioner: Enron Corporation/
Richardson Products Company, Ltd.
Date of Filing: June 9, 1992
Case Number: RF340-0171
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., Northern Propane Gas Company, 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 the Richardson Products Company, Ltd. (Richardson). Richardson was a gas liquids marketer that purchased propane and
natural gasoline from Enron. Accordingly, Richardson was a reseller of Enron products.
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. 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.
Richardson has chosen not to rely upon these presumptions of injury. Instead, the firm has submitted information aimed at showing that it was injured with respect to the full volumetric refund amount associated with the product that it purchased from Enron and resold to third parties. Accordingly, we will consider granting Richardson a refund for its volumes of Enron purchases based on our analysis of this information concerning injury.
A reseller whose allocable share exceeds $10,000 must demonstrate that it was injured by Enron's alleged overcharges in order to receive a refund equal to its full volumetric allocation of the consent order fund. The procedures in Enron outline a two-step requirement for applicants attempting to make an injury showing. First, a claimant must show that it accumulated banks of unrecovered increased product costs large enough to justify the amount of the refund claimed during the period from either November 1973, the first month of the banking period, or the first month in which it purchased from Enron, whichever was later, through the end of the banking period. Second, it must show that market conditions forced it to absorb the alleged overcharges. Id. at 88,960.
However, in Enron 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 to supply regular retail or end-user customers; 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. Richardson Identified as a Possible Spot Purchaser from Enron
In a February 18, 1997 letter from Thomas L. Wieker, Deputy Director, OHA to Mr. Michael ON. Barron, the legal representative for Richardson, we tentatively identified Richardson as a spot purchaser of Enron product. In that letter, we noted that information in Richardsons Application indicated that Richardson was a reseller operating at the wholesale marketer level of NGL distribution.
The characteristics of sales in the producer/wholesaler marketer market are large volumes and a price that is usually negotiated for each transaction. It therefore appears that [Richardson] may have purchased [its] Enron products on the spot market. Spot purchasers are generally presumed not to have been injured by the alleged overcharges.
February 18 letter at 2. We further stated that unless Richardson was able to demonstrate that it was not a spot purchaser or was able to show that it was injured by its spot purchases, we would be unable to grant its refund claim.
In that letter, we indicated that there are two ways that Richardson could respond in order to receive a refund in the Enron proceeding. The first was for Richardson to demonstrate that it was not a spot purchaser. To do this, we indicated that Richardson should submit a detailed description of its purchasing relationship with Enron and Richardson's relationship with its customers, that establishes that Richardson was required to make regular purchases from Enron in order to maintain supplies to base period customers. Alternatively, we indicated that Richardson could establish that it was forced by market conditions to resell the product purchased from Enron at a loss that was not subsequently recovered.
In addition, we requested that Richardson provide more information concerning its business operations as an NGL wholesale marketer so that we could evaluate the appropriateness of Richardson's injury claim. We asked Richardson to provide us with a description of the typical manner in which Richardson located customers and negotiated the purchase and sale of NGLs. We also asked Richardson to identify its marketing region and describe how Richardson's purchase and sale transactions facilitated the distribution and consumption of NGLs. Id. at p. 3.
In a submission dated March 5, 1999, Mr. Barron responded to the OHAs tentative identification of Richardson as a spot purchaser of Enron products and to our request for additional information regarding Richardsons role as a wholesale marketer of NGLs. The submission includes a memorandum from Mr. Barron regarding the spot purchaser presumption and its relation to the instant Application (the Memorandum). Attached to the Memorandum are a number of exhibits, including a statement from Mr. Joe Bourne, the Manager of Supply at Richardson, the statements of other NGL industry officials, additional company records, and analyses of OHA decisions involving spot purchase and cost bank issues.
As discussed below, we conclude that the spot purchaser presumption of non-injury should not apply to Richardsons purchases of propane from Enron. However, the information provided to us by Richardson is insufficient to establish that the firm was injured by its spot purchase of natural gasoline from Enron in 1979.
III. Analysis
A. Applicability of the Spot Purchase Presumption to Richardsons Purchases of Enron Propane and Natural Gasoline
Richardsons Enron purchases occurred at the wholesale marketer level of NGLP distribution. They therefore appear to meet the characteristics of sales in the producer/wholesaler market that often involve large volumes and a price that is usually negotiated for each transaction.
Accordingly, it appears that Richardson purchased Enron product primarily on the spot market. As noted above, spot purchasers are generally presumed not to have been injured by the alleged overcharges. The OHA has adopted this presumption because firms usually made spot purchases only when those transactions were beneficial to them and provided the best available terms. Thus, it is unlikely that they would have been injured on those purchases by the consent order firm's pricing practices.
In determining whether Richardsons purchases from Enron were spot purchases, it is important to first understand the purpose and scope of the presumption, so that it may be correctly applied to the facts of this case. In this regard, Enron's extensive discussion of the spot purchaser presumption in the context of responding to comments on the proposed Enron implementation order provides a detailed explanation of the meaning of the presumption, and can provide a basis for our analysis of whether the presumption is applicable to Richardsons purchases and sales of Enron products.
In Enron, we concluded that the concept of spot purchaser is sufficiently well defined to allow applicants to understand the theoretical basis for the presumption.
The term spot purchase is commonly used and understood in the petroleum industry to mean a contract for the purchase and sale of petroleum products on a short term basis. Sauvage Gas Company/NGL Supply, Inc., 19 DOE ¶ 85,622 at 89,142 (1989)(Supply). The OHA has interpreted the term spot purchaser to mean any firm that purchased significant volumes of covered products from a supplier on a sporadic or isolated basis outside of a long term supply obligation.
Enron at 88,955. It is clear from this discussion that the purchaser's discretion in selecting its supplier of product is a key element underlying the presumption of non-injury.
We have consistently determined that spot purchasers tend to have considerable discretion in where and when to make purchases and therefore would not have made spot market purchases from a firm at increased prices unless they were able to pass through the full price of the purchases to their own customers. The OHA has utilized this spot purchaser presumption of non-injury in numerous special refund proceedings.
Id., citing Sauvage, 17 DOE ¶ 85,304. We recognize that short term, discretionary sales and purchases may have been a normal business arrangement in certain portions of the NGL industry, particularly in the producer and wholesale reseller markets. Nevertheless, we believe such spot market purchases of Enron product establish a presumption that the purchaser was not injured. Such a purchaser may submit additional information concerning its business operations to rebut the presumption on a case-specific basis. As we noted in Enron,
The OHA examines the circumstances of each case to make an initial determination whether the applicant's purchases were likely to have been spot purchases. Where it appears likely that an applicant's purchases were spot purchases, the applicant is generally notified of our tentative conclusion and offered an opportunity to show either that it was not a spot purchaser or that it was injured by its spot purchases. Since this analysis focuses on the fundamental refund issue, viz., whether the applicant was injured, there is no merit to the claim that it is based on an impermissibly vague definition. ...
In Supply, ... we stated that "the determination of whether a [sic] individual's purchases from a particular supplier are spot purchases is a question of fact and therefore must be made on a case-by-case basis." Id. at 89,143.
Id. at 88,955-56. This case-by-case injury analysis is a broad one. Under this method, "we consider the circumstances under which a claimant made its purchases and any information submitted by the applicant that might aid our determination concerning whether its purchases were spot purchases." [Emphasis added] Our determination of whether a spot purchaser was injured is similarly based on a case-by-case analysis of information submitted by the claimant. Id. at 88,956-57. Accordingly, we will proceed with an evaluation of Richardsons relevant business operations and the circumstances under which it purchased butane, propane, and natural gasoline from Enron.
In his 1999 Memorandum, Mr. Barron submitted information, substantially supported by the statement of Mr. Bourne, concerning the applicants company history and its purchases of propane from Enron. Mr. Barron states that Richardson was established in the 1970's by the Sid Richardson Carbon and Gasoline Company (Sid Richardson) to handle that firms marketing of its NGLs.(2) This assertion is supported by the UPG customer list furnished to the DOE by Enron. That list indicates propane purchases by Sid Richardson from 1973 through 1976 and by Richardson Products from 1977 through 1981. Accordingly, we believe that it is proper to view Sid Richardson and Richardson as a single continuing business entity for purposes of this refund application. Moreover, it appears appropriate based on this information to permit Richardson to claim a refund that includes the volumes of Enron product purchased by Sid Richardson prior to the creation of Richardson. Accordingly, we will hereinafter use Richardson to refer to both Richardson Products Company and Sid Richardson.
In its application, Richardson asserts that its wholesale marketing activities began in the late 1940's, when it built a gas plant in West Texas and began to market propane and other gas liquids to propane retailers and other marketers in Texas. It states that in the 1950s and 1960s, it expanded its marketing efforts to include propane retailers located in Missouri, Nebraska, Iowa, northern Illinois, Wisconsin and Minnesota. It asserts that the propane supplied to these customers was produced at its own gas plant or purchased from other producers, principally Enron. Memorandum at 1.
With respect to propane, it appears that Enron was one of Richardsons base period suppliers for that product. Mr. Bourne, who began working at Richardson in February 1979, makes the following assertions in his letter to Mr. Barron.
The original contract with Enron (Northern Propane Gas/UPG, Inc.) Was negotiated before I came to Richardson so I cannot give you the details of that contract. Our company regularly discussed past and present suppliers and Richardsons relationship with them so I can tell you that Enron was a base period supplier and that Richardson depended on Enron for product that it owed to its propane retailer, business and manufacturing customers throughout the Midwest.
February 26, 1999 letter from Mr. Joe Bourne to Michael Barron, attached as Exhibit 1 to the Memorandum.
Moreover, gallonage information provided to the DOE by Richardson indicates that Richardson purchased 58,803,402 gallons of Enron propane from September 1973 through January 1981. This information is supported by UPG sales records that were provided to the DOE by Enron. The UPG sales records further indicate that Richardson purchased an additional 2,154,000 gallons of propane from Enron sometime between January 1 and August 31, 1973.(3)Richardson has used this figure to estimate purchases totalling an additional 382,200 gallons during the period June 13, 1973 (the beginning of the Enron refund period) through August 31, 1973. Accordingly, the firms total gallonage claim for Enron propane is 59,185,602. In addition, the information submitted by Richardson indicates that Richardson was a steady purchaser of propane from Enron from September 1973 through much of the refund period. These statements and Enron records are sufficient for us to conclude that it is likely that Richardson was a base period purchaser of propane from Enron. As Enrons base period customer for purposes of being allocated a supply of product under the regulatory framework, Richardson may well have been required throughout the refund period to depend on Enron as a supplier of propane in order to meet its own requirements for that product, regardless of the prices being charged by Enron for propane. Accordingly, with respect to the propane that it purchased from Enron, we conclude that Richardson has rebutted the presumption of non-injury for purchases of product made on the spot market.
The UPG records obtained from Enron also indicate that Richardson purchased 840,000 gallons of natural gasoline from UPG in 1979, possibly in a single transaction. Such a sporadic and high volume purchase of Enron natural gasoline by Richardson would fit the pattern of short term, discretionary purchases of large volumes of product that were a normal business arrangement in the producer and wholesale reseller spot market for NGLPs. Accordingly, we find that the apparant nature of this purchase or purchases establishes a presumption that Richardson was not injured by its spot market purchase(s) of Enron natural gasoline, and that Richardson must make a factual showing to refute this presumption. In this instance, however, Richardson does not include any natural gasoline volumes in its refund claim, and makes no attempt to show that natural gasoline purchases from Enron were not spot market purchases. Nor has it made the affirmative showings of injury required of spot market purchasers with repect to that product. We therefore conclude that Richardson has not shown that it was injured by Enrons alleged overcharges on natural gasoline, and we will not include the volume of natural gasoline purchased from Enron in Richardsons refund claim.
B. Richardsons Injury Showing for Propane
1. The Bases for Showing Injury in this Proceeding
A refiner whose allocable share exceeds $10,000 must demonstrate that it was injured by Enron's alleged overcharges in order to receive a refund equal to its full volumetric allocation of the consent order fund. The procedures in Enron outline a two-step requirement for applicants attempting to make an injury showing. First, a claimant must show that it accumulated banks of unrecovered increased product costs large enough to justify the amount of the refund claimed during the period from either November 1973, the first month of the banking period, or the first month in which it purchased from Enron, whichever was later, through the end of the banking period. Second, it must show that market conditions forced it to absorb the alleged overcharges. Id. at 88,960.
In order to determine the degree to which market conditions forced an applicant to absorb the alleged overcharges, we apply a three part competitive disadvantage analysis that has been upheld by the courts. See Behm Family Corp. v. DOE, 903 F.2d 830 (Temp. Emer. Ct. App. 1990); Atlantic Richfield Co. v. DOE, 618 F. Supp. 1199 (D. Del. 1985). Under this methodology, we infer that purchases made at above average market prices indicate that the firm was unable to pass through the alleged overcharges. Conversely, we infer that purchases made at prices below the market average placed a firm at a competitive advantage and did not injure the firm. The analysis produces three measures which the OHA uses as guidelines in determining the claimant's level of injury. The first measure, "gross excess cost," is the sum of the amounts by which an applicant's monthly purchase costs exceeded the market average. The second measure, "net excess cost," equals an applicant's gross excess cost minus the sum of the amounts by which its purchase costs were below the market average. This measure provides an indication of the cumulative impact of the alleged overcharges, balancing the adverse effect of the comparatively expensive purchases against the positive effect of comparatively inexpensive purchases. The third measure, the "above-market volumetric share," is the number of gallons purchased at prices which exceed market prices multiplied by the volumetric factor. This measure is indifferent to the magnitude of the excess costs incurred, accounting only for the number of gallons of uncompetitively priced product purchased by the applicant. We consider all of these indicators of competitive disadvantage in determining whether, and to what extent, an applicant was injured by its purchases, and thereby we calculate an appropriate refund amount. See Texas Oil and Gas Corp./Gulf Oil Corp., 13 DOE ¶ 85,135 (1985); see also Texaco Inc./Oakwood Oil Co., 22 DOE ¶ 85,262 (1993) (Oakwood).
2. Richardsons Injury Showing for Propane
In his February 18, 1997 letter to Mr. Barron, Mr. Wieker stated that information in the possession of the DOE indicated that Richardson entered into a consent order with the DOE concerning compliance with the DOEs Mandatory Price and Allocation Regulations whereby Richardson agreed to pay $1,100,000 to the DOE. He stated that this payment to the DOE raised the following concern regarding Richardsons banks of unrecovered increased product costs:
The fact that a firm was deemed to be in compliance with the price regulations after it made the payments described in a consent order does not necessarily mean that the firm retained banks of costs for all of its products. Indeed, the payments required by a consent order indicate that the firm probably did not have banks to cover the prices it was charging for certain products to certain categories of customers.
February 18, 1997 letter from Mr. Wieker to Mr. Barron at 1. Accordingly, Richardson was requested to provide additional information concerning the specific products and customers affected by the payments specified in the consent order. Id.
As Exhibit 6 attached to its March 2, 1999 filing, Richardson provided a copy of a June 27, 1977 letter from the FEA to Richardson, detailing the potential regulatory violations raised by the FEAs audit of Richardson. This letter indicates that the alleged violations concern over recoveries of product costs by Richardson for NGLPs produced at its Keystone and Halley processing plants. No alleged violations are identified with respect to the pricing of NGL products acquired by Richardson from other sources and resold. June 27, 1977 letter from Ernest D. Moore, Area Manager, Dallas Group II, FEA, to Fred Massey, Vice President, Richardson. Moreover, as Exhibit 1 to Richardsons March 2, 1999 filing, Richardson also submitted data aimed at documenting a reconstructed bank of unrecovered increased product costs for its purchases and sales of propane. The bank was reconstructed by Mr. Barron using DOE audit data of Richardson and the firms extant customer records. This bank data indicates that Richardson maintained a positive bank for propane from the beginning of its calculations in September 1973 through the deregulation of propane in January 1981. The Richardson data indicates that at the end of January 1981, Richardson had banks of unrecovered increased product costs for propane of $10,908,381. Accordingly, we conclude that Richardsons banks for propane are in excess of the firm's full allocable share of the Enron consent order fund for its purchases of that product.
We also believe that Richardson has demonstrated that its propane purchases made from September 1973 onward were not made pursuant to a fixed price contract established prior to the refund period. Firms which had on-going supply contracts with Enron in 1973 often purchased product at a contract price established prior to the refund period. Such fixed price purchases did not transfer any injury from overcharges to the purchaser. The fact that Richardson paid different prices Enron propane in September, October and November of 1973 indicates that whatever contractual agreement existed between Enron and Richardson in 1973 appears to have given Enron the discretion to raise the price it charged Richardson for propane. In a March 8, 1999 submission, Richardson contends that this evidence of price flexibility in late 1973 should be sufficient for us to conclude that Enron exercised similar price flexibility with regard to the propane that it sold to Richardson from June 13 through August of 1973 and for which no price data currently exists. We believe that such an assumption concerning a relatively brief period of time is reasonable, and therefore will not apply a presumption of fixed price purchases to the volumes of Enron propane purchased by Richardson in those months.
We therefore conclude that, for the period from June 13, 1973 through January 1981, Richardson has satisfied the first part of the two-part injury requirement by demonstrating that it maintained banks of unrecovered product costs for propane. See Atlantic Richfield Co./Gast Fuel and Service, Inc., 20 DOE ¶ 85,127 (1990)(ARCO/Gast).
In its Application for Refund, Richardson also has performed the three step competitive disadvantage analysis outlined above. The firm has submitted two alternative analyses using different sources of comparative pricing data. As one source of data, the firm used average national propane prices compiled in the Energy Information Administration's (EIA) Monthly Petroleum Product Price Report (MPPPR). In its alternative analysis, the firm used regional propane prices published in Platt's Oil Price Handbook and Oilmanac (Platt's). In his March 8, 1999 letter, Mr. Barron provided the following explanation for Richardsons submission of two sets of comparative price data.
I think it is important for OHA to consider both sets of price information. Both are flawed and I see no reason for OHA to base a decision on only one.
March 8, 1999 letter from Michael Barron, to Kent Woods, OHA analyst (emphasis in original).
When determining competitive injury, the OHA generally relies on Platt's as the best source of regional average market price data for the purpose of determining the months in which an applicant purchased refined products at prices higher than the regional average. See Atlantic Richfield Company/Phillips Petroleum Company, 22 DOE ¶ 85,217 (1992)(ARCO/Phillips), and cases cited therein at 88,575. We believe that price information assembled on a nationwide basis (like the EIA prices) does not adequately reflect competitive conditions characterizing the regional product markets. See Atlantic Richfield Company/BTU Energy Corp., 22 DOE ¶ 85,074 at 88,231 (1992)(ARCO/BTU). Accordingly, we will refer only to the Platt's postings for Oklahoma (Group 3) submitted by Richardson in our analysis of that firm's purchases of propane from Enron.
Richardsons competitive disadvantage analysis using Platts price postings, as summarized in the Table below, indicate that Richardson experienced a competitive disadvantage from its Enron propane purchases.
TABLE
Propane
59,185,602 Gallons
Allocable Share for those Gallons: $355,705
Total Gross Excess Cost$1,647,129
Total Net Excess Cost$1,277,551
Above-Market Volumetric Share $232,214
Volumetric Share [65%]
While none of these figures is intended to represent an absolute measure of the injury suffered by the firm, taken together they reveal whether an applicant was placed at a competitive disadvantage by its refined petroleum product costs during the period in which it was allegedly being overcharged. Richardsons gross excess costs and net excess costs substantially exceed the firm's full allocable share of the Enron consent order funds. For the period as a whole, Richardsons net excess cost for propane is 3.5 times the value of the firms full allocable refund share of the Enron refund, and Richardsons gross excess cost is 4.6 times the value of the firm's full allocable share. In previous cases, the gross and/or net excess costs of refund applicants has frequently been more than ten times the applicants' full allocable share of the refund. In such instances, it is clear that an applicant experienced a substantial and consistent competitive disadvantage as a result of its purchases. See Enron Corp./Unocal Corp., 26 DOE ¶ 85,041 at 88,104 (1997); Atlantic Richfield Co./Coast Gas, Inc., 24 DOE ¶ 85,136 (1995) (analysis of propane and butane purchases); Total Petroleum/Mid States Petroleum, Inc., 19 DOE ¶ 85,665 (1989) (analysis of motor gasoline purchases); Conoco, Inc./Power Pak Co., Inc., 17 DOE ¶ 85,016 (1988); Marathon Petroleum Co./Acme Oil Co., 17 DOE ¶ 85,634 (1988); Mobil Oil Corp./Hughes Oil Co., 17 DOE ¶ 85,510 (1988).
This Office has granted only partial refunds to firms whose competitive disadvantage analyses fail to indicate a substantial and consistent competitive disadvantage. For example, in several previous instances where an applicant's net excess cost for covered product is less than 100 percent of its allocable share for that product, we have granted a refund only for the gallons of covered product that the competitive disadvantage analysis indicates were purchased by the applicant at above-market prices. See Atlantic Richfield Company/Coast Gas, Inc., 24 DOE ¶ 85,136 (1995) (analysis of natural gasoline purchases); Total Petroleum/Mid States Petroleum, Inc., 19 DOE ¶ 85,665 (1989) (analysis of No. 2 Oil purchases); Marathon Petroleum Co./Acme Oil Co., 17 DOE ¶ 85,634 (1988); Mobil Oil Corp./Perry Oil Co., 17 DOE ¶ 85,074 (1988). Also, in several instances where even the applicant's gross excess cost of covered product was less than 100 percent of the volumetric refund for its above market purchases, we have limited the applicant's refund to its gross excess cost. See Eason Oil Company/Presidio Exploration, Inc., 26 DOE ¶ 85,046 (1997) (analysis of propane purchases); Aminoil U.S.A., Inc./Mornes, Walter J., 18 DOE ¶ 85,564 at 88,924 (1989); see also Kansas- Nebraska Natural Gas Co., Inc./Cities Service Oil and Gas Corp., 14 DOE ¶ 85,231 at 88,434-35 (1986) (in a case involving a large, negative, net excess cost and a gross excess cost much smaller than the firm's allocable share, the applicant's refund was limited to 50 percent of the gallons that it purchased at above market prices multiplied by the per gallon refund rate).
As noted above, Richardsons competitive disadvantage analysis for propane indicates that its net excess cost is 3.5 times its full allocable refund share and its gross excess cost is 4.6 times its full volumetric share of the Enron Consent Order funds. These figures, although indicative of some level of injury, do not clearly establish that Richardson experienced the level of substantial and consistent competitive disadvantage from its purchases of Enron propane that would justify a refund based on its full volume of Enron propane purchases. Under these circumstances, we believe it is appropriate to grant Richardson a refund based on approximately 82.5 percent of the gallonage of its allowable Enron propane purchases (48,828,122 gallons), the average of its total allowable Enron propane purchases (100 percent or 59,185,602 gallons) and its above market Enron propane purchases (65 percent or 38,470,641 gallons). See Enron Corp./MAPCO, Inc., 27 DOE ¶ 85.018, 88,118-19 (1998); Eason/Koch, 26 DOE at 88,188-89. Accordingly, Richardson will receive a refund equal to its allocable share of the Enron refund for purchases of 48,828,122 gallons of propane from Enron during the period June 13, 1973 through January 1981, or $293,457 (48,828,122 x $.00601 = $293,457). In addition, Richardson is entitled to receive a proportionate share of the interest accrued on the consent order fund, or $217,099.(4)Therefore, Richardsons total refund in this proceeding is $510,556 ($293,457 principal and $217,099 interest) for the volumes of propane that it purchased from Enron.
Accordingly, the total volume approved in this Decision and Order is 48,828,122 gallons of Enron product and the total refund, including interest, is $510,556.
Although we have examined Richardson's claim and supporting data, the determination reached in this Decision is based on the representations made in the application. If the factual basis underlying our determination in the Decision is later shown to be inaccurate, this Office has the authority to order appropriate remedial action, including rescission or reduction of the refund.
C. Impact of PODRA Amendments on Richardson's Refund Payment
The Interior and Related Agencies Appropriations Act for FY 1999 amended certain provisions of the Petroleum Overcharge Distribution and Restitution Act of 1986 (PODRA). These amendments extinguished rights that refund applicants had under PODRA to refunds for overcharges on the purchase of refined petroleum products. They also identified and appropriated a substantial portion of the funds being held by the DOE to pay refund claims. Congress specified that these funds were to be used to fund other DOE programs. As a result, the petroleum overcharge escrow accounts in the refined product area contain substantially less money than before. In fact, they may not contain sufficient funds to pay in full all pending refund claims (including those in litigation) if they should all be found meritorious. Congress directed DOE to "assure that the amount remaining in escrow to satisfy refined petroleum product claims for direct restitution is allocated equitably among all claimants." In view of this Congressional directive and the limited amount of funds available, it may become necessary to prorate the funds available among the meritorious claims. However, it could be several years before we know the full value of the meritorious claims and the precise, total amount available for distribution. It will therefore be some time before we are able to determine the amount that is available for distribution to each claimant.
We believe that it is equitable to pay the remaining small claims (less than 250) in full. To require small claimants to wait several more years for their refunds would constitute an inordinate burden and be inequitable. Cf. Atlantic Richfield Co./Major Oil, Inc., 26 DOE ¶ 85,068 at 88,195 (1997) ("The principal purpose of the presumptions of injury . . . is to reduce the burden on small claimants.").
The Richardson refund is not in this category of small claimants. Full payment of Richardsons refund of $510,556 could well have a substantial impact on the ability of this Office to make payments to other remaining claimants who are seeking large refund claims. Until these other large claims are resolved, we cannot determine whether there will be sufficient funds to provide full refund payments on all meritorious claims. We therefore will limit the current Richardson refund payment to fifty percent of the total approved refund (principal and interest). Atlantic Richfield Co./Oil Transit, Inc., et al., 27 DOE ¶ 85,026 at 88,188 (1999). Once the other pending refund claims have been resolved, the remainder of the Richardson refund, if any, will be paid to the extent that is possible through an equitable distribution of the funds remaining in the petroleum overcharge escrow accounts. Accordingly, at this time, we will disburse to Richardson a total of $255,279 ($146,729 principal and $108,550 interest) from the Enron escrow account.
It Is Therefore Ordered That:
(1) The Application for Refund submitted by Richardson Products Company, Ltd. (Case No. RF340-0171) is hereby granted as specified below.
(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 $255,279 ($146,729 principal and $108,550 interest) from the DOE deposit fund escrow account maintained at the Department of the Treasury titled Product Tracking - Claimants, Account No. 999DOE035W, to:
Richardson Products Company, Ltd.
c/o Michael ON. Barron
Attorney at Law
12417 Conway Road
St. Louis, Missouri 63141
(3) The determinations made in this Decision and Order are based on the presumed validity of the statements and documentary material submitted by the applicant. Any of those determinations may be revoked or modified at any time upon a determination that the factual bases underlying the Application 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: April 14, 2000
(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)Richardsons original refund application states that it is affiliated with Sid Richardson, a family-owned petroleum company in Fort Worth, Texas, which is [Richardsons] managing partner. Refund Application at 2.
(3)These purchases support Richardsons claim that it was a base period purchaser of Enron propane.
(4)4/ Interest is now being paid on Enron refunds at the rate of $0.7398 per dollar of refund.