Case No. RF315-09975
October 21, 1998
DECISION AND ORDER
OF THE DEPARTMENT OF ENERGY
Application for Refund
Petitioner: Shell Oil Company/Plaquemines Oil Sales Corp.
Date of Filing:May 21, 1990
Case Number: RF315-9975
I. BACKGROUND
A. The Shell Refund Procedures
On January 13, 1989, the Department of Energys (DOE) Office of Hearings and Appeals (OHA) issued a Decision instituting special refund procedures for the distribution of $20,407,550.64, plus accrued interest, which Shell Oil Company (Shell) remitted to the DOE under the terms of a 1987 Consent Order. See Shell Oil Co., 18 DOE ¶ 85,492 (1989) (Shell). In accordance with 10 C.F.R. Part 205, Subpart V, the Shell determination implemented a process for distributing the consent order fund to purchasers of Shell refined petroleum products who are able to demonstrate that they were injured by Shell's alleged regulatory violations during the period January 1, 1973 through January 27, 1981 (the Consent Order Period).
The Shell refund procedures adopted two presumptions. The first of these presumptions is the "volumetric presumption." Under this presumption, it is assumed that the alleged Shell overcharges had been dispersed equally among each gallon of regulated petroleum product sold by the firm during the Consent Order Period. Therefore, every applicant that can show it purchased covered petroleum products from Shell during the consent order period is presumed to have been overcharged by the amount of $0.000226 per gallon. Shell at 88,797. The Shell refund procedures require that a claimant show that it was injured by Shells alleged overcharges. However, the procedures established in Shell also included an end-user presumption under which those applicants that were end-users are not required to submit any further evidence of injury. Id. at 88,798-99.
In Shell, we recognized that some applicants may be able to show that they were overcharged to a greater extent than presumed. Shell, at 88,798 n. 5. In order to receive an above-volumetric refund, an applicant bears the burden of proving that it was overcharged by a specific amount. See, e.g., Mobil Oil Corp./Cantro Petroleum Corp., 19 DOE ¶ 85,076 at 88,137 (1989) (improper elimination of early payment discount); Mobil Oil Corp./Marine Corps Exchange Service, 17 DOE ¶ 85,714 at 89,359 (1988) (improper elimination of competitive discount). To receive an above-volumetric
refund for the improper calculation of a Maximum Allowable Price (MAP), an applicant must show the amount by which the price it actually paid exceeded the MAP. See Mobil Oil Corp./The Atchison, Topeka and Santa Fe Railway Co., Inc., 20 DOE ¶ 85,788 at 89,858-59 (1990) (refund calculated as the difference between the price actually paid and the approximate MAP). Those applicants seeking above-volumetric refunds that have prevailed have generally submitted evidence that the DOE or its predecessors had at least made a preliminary determination (that was not later found to be incorrect) that overcharges had occurred. See, e.g., Texaco Inc./Time Oil Co., 23 DOE ¶ 85,115 (1993) (applicant's alleged overcharge specifically identified in schedule attached to Notice of Probable Violation); Mobil Oil Corp./The Atchison, Topeka & Santa Fe Railway Co., Inc., 20 DOE ¶ 85,788 (1990) (record contained the consent order firm's admission that the applicant had been overcharged, as well as an NOPV which OHA found to be supporting evidence of the overcharge); Amtel, Inc./Whitco, Inc., 19 DOE & 85,319 (1989) (ERA audit specifically found that applicant had been overcharged); Mobil Oil Corp./Cantro Petroleum Corp., 17 DOE & 85,076 (1988) (record contained letter from Office of Special Counsel to applicant expressing conclusion that the consent order firm had violated the regulations); Standard Oil Co./Army and Air Force Exchange Service, 12 DOE & 85,015 (1984) (applicant specifically identified as being overcharged in the NOPV).
Our scrutiny of refund claims is not without good reason. Granting frivolous or unsupported claims would have the effect of conferring windfalls upon undeserving claimants. Equity would be poorly served by such a result, since it would divert funds away from injured persons designated to receive indirect restitution through the states. Petroleum Overcharge and Restitution Act of 1986, 15 U.S.C. § 4501 et seq. Any diversion of funds from the indirect restitutionary programs would be at the expense of injured non-applicants. Cf. Denny Klepper Oil Co. v. DOE, 598 F. Supp. 522, 527 n.11 (D.D.C. 1984).
B. The Mandatory Petroleum Price Regulations
Under these regulations which were in effect from August 19, 1973 through January 27, 1981, Shell was a "refiner" as that term was defined in 10 C.F.R. § 212.31 and therefore was subject to the pricing rules applicable to crude oil refiners set forth at 6 C.F.R. Part 150, Subpart L and later recodified at 10 C.F.R. Part 212, Subpart E. These regulations were generally designed to preserve each refiner's May 15, 1973, or historic, margin and therefore provided for a dollar-by-dollar pass through of increased product costs. 39 Fed. Reg. 44407, 44408 (December 24, 1974). Under the regulations, Shell was required to charge prices for its covered products that were not in excess of the "maximum allowable price" (MAP) as defined in 10 C.F.R.§ 212.82. Under that provision, the MAP "means the weighted average price at which the item was lawfully priced in transactions with the class of purchaser concerned on May 15, 1973, plus increased product and non-product costs incurred between the month of measurement and the month of May 1973 and measured pursuant to the provisions of section 212.83 . . . ." 39 Fed. Reg. 1924 (1974); 10 C.F.R. § 212.82 (f)(1)(ii) (emphasis supplied). Once the refiner established the appropriate May 15 prices for its classes of purchaser, it could then calculate the MAP for each class by adding to those prices additional increments to reflect increases in product and non-product costs incurred subsequent to May 1973.
C. The Present Proceeding
On May 21, 1990, Plaquemines Oil Sales Corp. (POSC) filed an application for Refund in the Shell Oil Corp. refund proceeding. That application was based upon POSC's contention that it was overcharged by Shell when it purchased No. 2 diesel fuel from Shell during the consent order period. Alternatively, POSC apparently claims that it was illegally overcharged when Shell allegedly discontinued a $.0025 per gallon freight allowance discount to Plaquemines. POSC seeks an above volumetric refund of $113,134 for these alleged overcharges.
On April 20, 1992, OHA wrote Plaquemines representative seeking information that was necessary to analyze Plaquemines claim. On February 25, 1993, OHA wrote Plaquemines representative again seeking information. OHA apparently received no response to that request. On June 11, 1993, OHA wrote Plaquemines stating that the information sought in the February 25, 1993 request was still needed by OHA in order to process Plaquemines claim. On February 8, 1994, OHA again wrote seeking the information requested in the February 25, 1993 letter. On November 5, 1997, OHA once again wrote Plaquemines, seeking some of the same information that been previously requested. On December 18, 1997, Plaquemines submitted a substantial response to that request.
II. ANALYSIS
A. POSC Was Not Injured By Shell's Alleged Overcharges
It is well settled that an applicant for refund in the Subpart V refund proceedings must prove that it was injured by the alleged overcharges n order to receive restitutionary relief. Shell Oil Co., 18 DOE ¶ 85,492, 88,798 (1989). Most successful applicants in the Subpart V proceedings rely upon at least one or several presumptions of injury afforded to claimants in order to prove that they were injured. However, these presumptions of injury are unavailable in those instances where it is obvious that the claimant was not in fact injured.
In the present case, POSC was engaged in a special relationship with Shell during the consent order period. Shell was both POSC's sole supplier of No. 2 diesel fuel and its largest customer for that fuel. Indeed, Shell purchased over one third of the diesel fuel resold by POSC during the consent order period. Under the terms of a contract between Shell and POSC that was in effect during the consent order period, POSC was to sell diesel fuel that it had purchased from Shell back to Shell at an automatic 25% mark-up. As a result of this agreement, POSC was able to recoup any overcharges from Shell, when it resold diesel fuel to Shell. Therefore, the presumption of injury is not available for that portion of POSCs purchases from Shell which it resold to Shell.
As the record of a previous proceeding before this office indicates, neither is the presumption of injury available for those gallons which POSC resold to customers other than Shell. On September 19, 1980, the Economic Regulatory Administration (ERA) issued a Proposed Remedial Order (PRO) to POSC. POSC filed a Statement of Objections to this PRO and an enforcement proceeding before this office ensued. During this enforcement proceeding, POSC claimed that it was overcharged by Shell and that it should therefore be allowed to offset those overcharges against its restitutionary liability. However, OHA specifically found that since POSC was not injured by Shell's alleged overcharges, ERA was not required to reduce the amount of overcharges alleged in the PRO. Plaquemines Oil Sales Corp., 9 DOE ¶ 83,017, 86,095 (POSC). Specifically, OHA found that Plaquemines had overcharged customers in its sales of diesel fuel by pricing its fuel in excess of its MLSP. Since POSC was able to overcharge its customers by selling diesel fuel at prices in excess of its MLSP, it was therefore able to pass on any overcharges it incurred from Shell to those third party customers. As a result, the fact that POSC may have been overcharged by Shell did not mean the firm was injured in its sales to customers other than Shell.
B. POSCs Arguments in Favor of An Above-Volumetric Refund Are Without Merit
POSCs December 12, 1997, submission contends that Shells termination of a $.0025 freight allowance in May 1973 constituted an overcharge for which it should receive an above-volumetric refund. However, the record of the enforcement proceeding unambiguously shows that POSCs overcharge liability was reduced by the ERAs predecessor in order to compensate POSC for the lost freight allowance discount. Our determination in the POSC enforcement proceeding found that
the firm was given credit for the entire amount of any increased costs resulting from Shells termination of the freight allowance discount. POSC, ¶ 83,017 at 86,095. Since POSC was specifically allowed to pass through the cost of the Shell overcharges stemming from cancellation of the freight allowance to its customers on a dollar for dollar basis, POSC was not injured by Shells termination of that discount. Therefore, it is not eligible for a refund from the Shell consent order fund.
III. CONCLUSION
For the reasons stated above, we have found that Plaquemines has failed to show that it was injured by Shells alleged overcharges. Therefore, we have determined that its Application for Refund be denied.
It Is Therefore Ordered That:
(1) The Application for Refund filed by Plaquemines Oil Sales Corporation, Case Number RF315-9975, is hereby denied.
(2) This is a Final Order of the Department of Energy.
George B. Breznay
Director
Office of Hearings and Appeals
Date: October 21, 1998