Case No. RF354-00004

June 28, 2002

DECISION AND ORDER

OF THE DEPARTMENT OF ENERGY

Application for Refund

Name of Petitioner: Vessels Gas Processing Company/

Scurlock Permian Corp.

Date of Filing: April 11, 1996

Case Number: RF354-00004

On December 21, 1995, the Office of Hearings and Appeals (OHA) of the Department of Energy (DOE) issued a Decision and Order instituting special refund procedures for distribution of a fund obtained by the DOE through a Consent Order entered into with Vessels Gas Processing Company (Vessels) of Colorado.(1) See Vessels Gas Processing Company, 25 DOE ¶ 85,085 (1995)(Vessels). The Consent Order settled an enforcement proceeding initiated when the DOE’s Economic Regulatory Administration (ERA) performed an audit of Vessels’ business records. Under the terms of the Consent Order, Vessels agreed to remit $1,564,222.74 to the DOE in order to settle all claims and disputes between Vessels and DOE regarding Vessels’ compliance with DOE price regulations in sales of Natural Gas Liquids (NGLs) and Natural Gas Liquid Products (NGLPs) during the period from September 1, 1973 through December 31, 1977, at the firm’s Irondale gas plant and April 1, 1975 through December 31, 1977, at its Brighton gas plant.

This determination involves an Application for Refund in the Vessels refund proceeding filed by Scurlock Permian Corporation, (Scurlock), a petroleum products and NGL reseller. Scurlock is one of the Vessels NGL/NGLP customers identified in the ERA audit of Vessels.

In Vessels, the DOE established procedures for the distribution of the funds held in the Vessels escrow account. Applicants for refunds from that account must certify that they purchased NGLs or NGLPs from Vessels during the audit period from one of the two Vessels gas plants. Claimants which made purchases of covered products for consumption in the course of their business activities,

need only document the volume of its purchases. Applicants that purchased Vessels product for resale to others may elect to receive a refund under the medium-range presumption of injury under which a claimant may receive as its refund the larger of $10,000 or 60 percent of its allocable share up to $50,000. This involves resellers which purchased in excess of 383,142 gallons of Vessels product during the consent order period.

In order to distribute the funds in the Vessels escrow account, the OHA determined that refunds should be calculated on a volumetric basis. The volumetric methodology assigns a uniform, per- gallon refund amount to all purchases made from either gas plant during the Consent Order period

which were subject to price controls. This methodology assumes that the Vessels overcharges were dispersed equally over all gallons of price controlled NGLs/NGLPs marketed by Vessels during the audit period, a reasonable assumption because DOE price regulations generally required regulated firms to account for increased product costs on a firm-wide basis when establishing product prices. The volumetric factor of $0.0261 per gallon was computed by dividing $1,564,222.74 by 59,913,647 gallons, the approximate number of gallons of price controlled NGLs and NGLPs Vessels sold to its customers during the audit period from the two gas plants ($1,564,222.74/59,913,647gallons = $0.0261 per gallon) .(2) A claimant’s “allocable share” (or “volumetric share”) is equal to $0.0261 per gallon multiplied by the combined volume of NGL and NGLP purchased by the claimant from the two gas plants during the audit period.

Scurlock, a petroleum products reseller with headquarters located in Houston, Texas, initially stated that it had purchased refrigeration grade propane from Vessels which may have served as a coolant at its plants. See Enron Corp./Scurlock Permian Corp., (Case No. RF340-119) (issued April 8, 1998) (unpublished Decision). Subsequently, Scurlock was not able to document that its 11,292,296 gallons of Vessels propane was used for this purpose. Scurlock revised its submission to request a mid-range, injury presumption refund.

Upon reviewing the entire case file in this proceeding, we have determined that Scurlock has not presented sufficient evidence to establish that it was an end-user of the propane it purchased from Vessels. Consequently we will presume that Scurlock was a reseller of Vessels propane and will calculate its refund based on the medium-range presumption of injury for reseller claimants. Sixty percent of Scurlock’s allocable share is $176,834 (11,292,296 gallons x $0.0261 per gallon x .60). Scurlock is therefore eligible for the maximum presumption refund of $50,000. Scurlock is also entitled to accrued interest of $41,452 for a total refund of $91,452.

Although we have carefully scrutinized the Scurlock refund claim and purchase volume claim documentation, the determination reached in this Decision and Order is based on the presumed validity of the presentations made in the Scurlock Application for Refund. If the factual basis underlying our determination in this Decision is later shown to be inaccurate, this Office has the authority to order appropriate remedial action, including rescission or reduction of the refund ordered.

It Is Therefore Ordered That:

(1) The Application for Refund filed by Scurlock Permian Corporation, (Case No. RF354-0004) is hereby granted as set forth in Paragraph (2) 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 $91,452 ($50,000 principal and $41,452 interest) from the DOE deposit fund escrow account maintained at the Department of the Treasury and funded by Vessels Gas Processing Company, Consent Order No. 999DOE035W, to:

Scurlock Permian Corporation

or Bode & Grenier, LLP

Ninth Floor, Connecticut Building

1150 Connecticut Avenue, NW

Washington, D.C. 20036-4192

(3) The determination made in this Decision and Order is based upon the presumed validity of statements and documentary material submitted by the applicant. This determination may be revoked or modified at any time upon a determination that the factual basis underlying the applicant’s Application for Refund is incorrect.

(4) This is a final order of the Department of Energy.

George B. Breznay

Director

Office of Hearings and Appeals

Date: June 28, 2002

(1)In this proceeding “Vessels” refers to Vessels Gas Processing Company (VGPC) and Vessels Gas Processing, Limited (VGPL). In addition, “Vessels” refers to the operations of Halliburton Resource Management (HRM) at the Irondale and Brighton plants on behalf of VGPC and VGPL. Vessels operated under a contract with HRM, a division of Halliburton Company.

(2)On August 13, 1997, the DOE issued a Supplemental Decision and Order increasing the per gallon volumetric factor for the Vessels refund proceeding from $0.0185 to $0.0261. The modification was necessary because of an error OHA made in its initial calculation of the volumetric factor in Vessels. See Vessels Gas Processing Company, 26 DOE ¶ 85,052 (1997).