Case No. RR272-00308
July 28, 1998
DECISION AND ORDER
OF THE DEPARTMENT OF ENERGY
Motion for Reconsideration
Name of Applicant: Donald Claunch
Date of Filing: May 28, 1998
Case Numbers: RR272-308
RR272-309
On May 28, 1998, John Broberg of Federal Refunds, Inc., a private filing service, filed a Motion for Reconsideration with the Office of Hearings and Appeals (OHA) of the Department of Energy (DOE) on behalf of two corporations, Stukel Rock and Paving, Inc. (Stukel Rock) and Custom Rock Products, Inc. (Custom Rock). During the refund period (August 19, 1973 through January 21, 1981), Donald Claunch owned all of the shares of Stukel Rock, which 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. If the Motion were granted, the OHA would reconsider the Applications for Refund filed by Mr. Claunch in the Subpart V crude oil refund proceeding (Case Nos. RG272-766 and RG272-767) that were denied on February 11, 1998.
In 1995, an Application for Refund was submitted by Mr. Broberg on Mr. Claunchs behalf. Between October 1996 and November 1997, we sent Mr. Claunch and Mr. Broberg four letters requesting additional information regarding the refund claims. We received several submissions from them, but the submissions did not resolve all of our concerns. On February 11, 1998, we denied Mr. Claunchs applications on the basis that the gallonage estimate was not adequately supported and issues regarding the ownership of the companies were still unresolved.
In his May 28, 1998 Motion for Reconsideration, Mr. Broberg requests that we reconsider the applications. Mr. Broberg submitted several arguments as well as additional documents to support the refund claims. Although the Motion was submitted more than three months after the February 11 Decision, Mr. Broberg notified us by telephone of his intention to file a Motion soon after the Decision was issued. In addition, Mr. Broberg explained that he would not be able to submit the Motion until certain papers
had been submitted to and approved by a bankruptcy court. Because Mr. Broberg notified us of his intention to file a Motion and the reasonable basis for the delay in filing, we have decided to consider the Motion for Reconsideration.
In the past, purchasers of refined petroleum 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 that we have established specify that, to receive a refund, an applicant generally must: (1) document its purchase volumes; and (2) show that it was injured by crude oil overcharges.
We have further established that an applicant is presumed to have absorbed rather than passed on crude oil overcharges if it (1) was an end-user (ultimate consumer) of petroleum products; (2) was in a business unrelated to the petroleum industry; and (3) was not subject to the price regulations of the DOE or its predecessors. 52 Fed. Reg. 11737 (April 10, 1987); City of Columbus, Georgia, 16 DOE ¶ 85,550 (1987). Such an applicant is presumed to have been injured and does not need to provide a showing of injury.
We denied Mr. Claunchs applications for two reasons. First, he failed to adequately substantiate the level of refined petroleum products which he claimed to have purchased. Second, he did not provide adequate information regarding the corporate status of the companies which would permit us to verify the proper recipient of any potential refund. Mr. Brobergs Motion addresses both of these areas. We will consider each area separately.
The Gallonage Claim
Liquid Asphalt
The companies were manufacturers of bituminous concrete. In order to produce bituminous concrete, the companies purchased liquid asphalt, which makes up 5.5 percent of bituminous concrete by weight. When we denied the Applications for Refund, there was not enough information for us to determine a reasonable gallonage claim for liquid asphalt purchases. With the Motion for Reconsideration, however, Mr. Broberg submitted additional information which makes a reasonable gallonage calculation possible. This information is the price the companies paid for rock and sand to mix with liquid asphalt in the production of bituminous concrete.
The following is our calculation of the amount of liquid asphalt purchased by the companies.
According to the oldest available records, the companies spent $1,793,697 on materials in 1983 and $1,109,001 on materials in 1982. Mr. Broberg and Mr. Claunch state that the materials would have included liquid asphalt, rock, and sand. Mr. Claunch states that the companies quarried sand and stone from nearby quarries. The companies paid a royalty fee of approximately $.25 per ton. Mr. Broberg obtained a letter from the Division of State Lands in Oregon, the state in which the companies were located, which states that the royalty rate for the refund period was approximately $.215 per ton of sand and stone. Therefore, we find that Mr. Claunchs estimate of $.25 per ton is reasonable.
According to the DOEs Energy Information Administration (EIA), the average price of liquid asphalt in Oregon in 1982 was $.630 per gallon. This price translates into a price of $148 per ton ($.630 per gallon x 235 gallons per ton = $148 per ton). Let n be the number of tons of liquid asphalt purchased. Let y be the number of tons of rock and sand purchased. Then, we have the following two equations.
148n + .25y = 1,109,001
n / y = .055 / .945 or n = .0582y
The first equation means that $148 times the number of tons of asphalt purchased, plus $.25 times the number of tons of rock and sand purchased, totals $1,109,001, the amount spent on materials in 1982. The second equation means that there are .055 tons of liquid asphalt for every .945 tons of rock and sand in a ton of bituminous concrete.
By solving the two equations above, we find that the companies purchased approximately 125,116 tons of rock and sand and approximately 7,282 tons of asphalt in 1982. There are approximately 235 gallons of liquid asphalt per ton. Therefore, the companies purchased approximately 1,711,270 gallons of liquid asphalt in 1982 (7,282 tons of liquid asphalt x 235 gallons per ton = 1,711,270 gallons of liquid asphalt).
We can compute the amount of liquid asphalt purchased by the companies in 1983 the same way. The EIAs price for asphalt in Oregon in 1983 is $.654 per gallon. This price translates into a price of $154 per ton ($.654 per gallon x 235 gallons per ton = $154 per ton). The equations, using $154 per ton and $1,793,697 as the cost of materials in 1983, are as follows.
154n + .25y = 1,793,697
n / y = .055 / .945 or n = .0582y
By solving the equations, we find that the companies bought approximately 194,693 tons of rock and sand and approximately 11,331 tons of liquid asphalt in 1983. At 235 gallons per ton, the companies purchased 2,662,785 gallons of liquid asphalt in 1983. (11,331 tons of asphalt x 235 gallons per ton = 2,662,785 gallons of liquid asphalt).
The average number of gallons of liquid asphalt purchased by the companies in 1982 and 1983 is 2,187,028 gallons ([1,711,270 gallons + 2,662,785 gallons] / 2 = 2,187,028). There were 7.44 years in the refund period, so the companies total gallonage claim for liquid asphalt based on the years 1982 and 1983 will be 16,271,488 gallons (2,187,028 gallons x 7.44 years = 16,271,488 gallons in the refund period).
Mr. Claunch originally estimated that he purchased 15,392,500 gallons of liquid asphalt during the refund period. The estimate was based on his first-hand knowledge of the business and some incomplete records provided by the companies liquid asphalt supplier from the refund period. The estimated gallonage we determined for the companies for 1982 and 1983, based on additional information submitted with the Motion for Reconsideration, suggests that Mr. Claunchs estimate is reasonable. Therefore, the companies approved gallonage claim for liquid asphalt is 15,392,500 gallons.(1)
No. 2 Heating Oil
Mr. Claunch claims that the companies used 3,723,448 gallons of No. 2 heating oil. He calculated the heating oil gallonage claim based on his claimed liquid asphalt usage. Mr. Claunch estimates that he used 1.9 gallons of heating oil per ton of bituminous concrete produced. The approved gallonage claim for liquid asphalt is 15,392,500 gallons. These gallons weigh approximately 65,500 tons. Liquid asphalt is approximately 5.5 percent of bituminous concrete by weight. Therefore, the companies produced approximately 1,190,909 tons of bituminous concrete (65,500 tons of liquid asphalt divided by 5.5 percent = 1,190,909 tons of bituminous concrete). At 1.9 gallons of No. 2 heating oil per ton of bituminous concrete, the companies purchased approximately 2,262,727 gallons of No. 2 heating oil during the refund period (1,190,909 tons x 1.9 gallons per ton = 2,262,727 gallons). Based on the records Mr. Claunch and Mr. Broberg have submitted, we find the gallonage claim of 2,262,727 gallons of heating oil to be reasonable.
Diesel Fuel
Mr. Broberg submitted accounting records which show the dollar amounts the companies spent on fuel, gas, [and] oil in 1982 and 1983. Mr. Claunch claims that the entire amount spent on fuel, gas, and oil was used to purchase diesel fuel. We, however, believe that the cost of No. 2 heating oil was included in these costs. Therefore, we will remove the heating oil from the expenses, and then calculate the amount of diesel fuel purchased based on the new dollar figures.
According to the EIA, No. 2 heating oil cost $.905 per gallon in 1982. The approved gallonage claim for the 7.44 years of the refund period for No. 2 heating oil is 2,262,727 gallons. Therefore, the companies purchased approximately 304,130 gallons of No. 2 heating oil per year (2,262,727 gallons / 7.44 years = 304,130 gallons per year). At $.905 per gallon, the companies spent approximately $275,238 on No. 2 heating oil in 1982 (304,130 gallons x $.905 per gallon = $275,238).
The total dollar amount spent on fuel, gas, and oil in 1982 is $1,149,657. The approximate amount spent on diesel is $874,419 ($1,149,657 - $275,238 = $874,419). The EIA price for diesel in 1982 is $.942. Hence, the companies purchased approximately 928,258 gallons of diesel in 1982 ($874,420 / $.942 per gallon = 928,258 gallons).
According to the EIA, No. 2 heating oil cost $.916 per gallon in 1983. The approved gallonage claim for the 7.44 years of the refund period for No. 2 heating oil is 2,262,727 gallons. Therefore, the companies purchased approximately 304,130 gallons of No. 2 heating oil per year (2,262,727 gallons / 7.44 years = 304,130 gallons per year). At $.916 per gallon, the companies spent approximately $278,583 on No. 2 heating oil in 1983 (304,130 gallons x $.916 per gallon = $278,583).
The total dollar amount spent on fuel, gas, and oil in 1983 is $1,139,933. The approximate amount spent on diesel is $861,350 (1,139,933 - $278,583 = $861,350). The EIA price for diesel in 1983 is $.826. Hence, the companies purchased approximately 1,042,797 gallons of diesel in 1983 ($861,350 / $.826 per gallon = 1,042,797).
The companies purchased an average of 985,528 gallons of diesel fuel in 1982 and 1983 ([928,258 gallons + 1,042,797 gallons] / 2 = 985,528 gallons). There were 7.44 years in the refund period. Hence, the approved gallonage claim for diesel fuel is 7,332,328 gallons (985,528 gallons x 7.44 years = 7,332,328 gallons in the refund period).
The volume approved in this Decision and Order is 15,392,500 gallons of liquid asphalt, 2,262,727 gallons of No. 2 heating oil, and 7,332,328 gallons of diesel fuel, for a total of 24,987,555 gallons of refined petroleum products. The total refund amount granted, which is calculated by multiplying the approved gallonage claim by the volumetric refund amount of $0.0016 per gallon, is $39,980.
Mr. Broberg argues that the gallonage claim should be increased by 150 percent because of the poor economic climate in 1982 and 1983. In support of this argument, Mr. Broberg submitted records from the United States Geological Survey which show that fewer tons of two types of stone were sold in the United States in 1982 and 1983 than in the refund period. We are unconvinced by this argument. Our analysis of the companies liquid asphalt purchases shows that the companies probably used more petroleum products in 1982 and 1983 than they did on average during the refund period. We have previously found that an applicants estimation method must produce a result that is reasonably likely to be less than or equal to its actual purchases. Continental Steel Corporation, 25 DOE ¶ 85,103 (1996). Increasing the companies gallonage claim by 150 percent for reasons unsupported by their records does not meet this standard.
Ownership
Mr. Claunch owned all of the shares of Stukel Rock. Stukel Rock in turn owned all of the shares of Custom Rock. 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. In addition, Mr. Claunch and Mr. Broberg have not provided any information on Stukel Rocks current ownership status. Mr. Broberg requested that the entire refund amount be paid to the bankruptcy trustee for Custom Rock, and Mr. Claunch has not indicated any objection to Mr. Brobergs request. We believe that Mr. Brobergs request is reasonable, and we will therefore send the entire refund to the trustee.
The final deadline for the crude oil proceeding was June 30, 1995. It is the current policy of the DOE to pay eligible crude oil refund applicants at the rate of $0.0016 per gallon. We will decide whether sufficient crude oil overcharge funds are available for additional refunds for this and other successful applicants when we are better able to determine how much additional money will be collected from firms that have either outstanding obligations to the DOE or enforcement cases currently in litigation.
It Is Therefore Ordered That:
(1) The Motions for Reconsideration filed in connection with Donald Claunch are hereby granted as set forth in Paragraph (2) below.
(2) 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 $39,980 from the DOE deposit fund escrow account denominated Crude Tracking-Claimants 4, Account Number 999DOE010Z, maintained at the Department of Treasury to John Mitchell, Trustee for Custom Rock Products, Inc., 222 Southwest Harrison, G.O. 10, Portland, OR, 97201.
(3) To facilitate the payment of future refunds, the bankruptcy trustee shall notify the Office of Hearings and Appeals in the event that there is a change of 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. 20585-0107
(4) The determinations made in this Decision and Order are based upon the presumed validity of the statements and documentary materials submitted by the applicant. These determinations may be revoked or modified at any time upon a finding that the factual basis underlying any Application for Refund is incorrect.
(5) This is a final Order of the Department of Energy.
George B. Breznay
Director
Office of Hearings and Appeals
Date: July 28, 1998
(1)Mr. Broberg re-estimated the companies gallonage claim when he submitted the accounting records and again when he submitted the Motion for Reconsideration. Considering our analysis of all of the documents submitted in this case, we believe Mr. Claunchs estimate to be the most reasonable for two reasons: it is based partially on his own knowledge of the business which he ran, and it is most compatible with our gallonage calculations for 1982 and 1983.