Case No. RR272-00300

February 6, 1998

DECISION AND ORDER

OF THE DEPARTMENT OF ENERGY

Motions for Reconsideration

Names of Petitioners: Primerica Corporation

Travelers Group

Getty Oil Co./Primerica Corp.

Dates of Filing: August 14, 1997

August 27, 1997

January 29, 1998

Case Numbers: RR272-00300

RR272-00301

RF265-02888

Primerica Corporation (Primerica), now Travelers Group, Inc. (Travelers), requests reconsideration of Primerica Corp., 26 DOE ¶ 85,050 (1997) (Primerica). Travelers is the successor to Primerica, which in turn is the successor to the American Can Company (American Can). Travelers filed a crude oil refund application based on the purchases of refined petroleum products by the various businesses that American Can operated during 1973 to 1981 (the refund period).

In Primerica, we denied a portion of Travelers’ crude oil refund application. That portion was based on purchases of refined petroleum products during the refund period by (i) American Can, for the manufacture of cans and packaging materials (the can business) period, and (ii) The Chemplex Company (Chemplex), a joint venture between American Can and another firm, for the production of plastic. In Primerica, we determined that when Travelers transferred those businesses to third parties, Travelers also transferred the right to the refund.

In its reconsideration request, Travelers maintains that it is entitled to the refund for both businesses. Travelers’ request for a refund for the can business is opposed by the American National Can Company (American National Can). American National Can purchased American Can’s can business in 1986 and has already been granted a refund for its purchases.

As explained below, we have considered each of Travelers’ arguments. As also explained below, we have determined that Travelers’ reconsideration request should be denied.

I. Background

A. Refund Proceedings

During the period 1973 to 1981 (the refund period), the Department of Energy (DOE) regulations governed the allocation and pricing of crude oil and refined petroleum products. Through enforcement actions, the DOE collected monies that firms had received as the result of violations of those regulations.

In 1979, the DOE promulgated regulations which set forth procedures for refunding monies collected as the result of enforcement actions. 10 C.F.R. Part 205, Subpart V (hereinafter Subpart V), 44 Fed. Reg. 8566 (February 9, 1979). Under Subpart V, refunds are granted to injured persons in order to remedy the effect of regulatory violations. 10 C.F.R. § 205.280. In 1986, the DOE entered into the Stripper Well Settlement Agreement which (i) resolved court litigation over a type of crude oil overcharge and (ii) established a framework for the distribution of all crude oil overcharges to be recovered by the DOE. Under that framework, in order to receive a refund pursuant to the agreement, a firm was required to waive the right to any Subpart V refund. See In re: Stripper Well Litigation, 653 F. Supp. 108 (D. Kan. 1986). In conjunction with the agreement, the DOE announced its Modified Statement of Restitutionary Policy in Crude Oil Cases (MSRP). See 51 Fed. Reg. 27899 (August 4, 1986); see also 51 Fed. Reg. 29689 (August 20, 1986). Under the MSRP, up to 20 percent of crude oil overcharge funds may be reserved for direct restitution to injured purchasers pursuant to Subpart V procedures, with the remainder divided equally between the states and the federal government. Later, Congress passed the Petroleum Overcharge Distribution and Restitution Act of 1986 (PODRA), which left in place the existing mechanism for the distribution of crude oil overcharge funds. See 42 U.S.C. § 4501(c).

In addition to being subject to the standards set forth in Subpart V, crude oil refund applications are also subject to the case law that has developed with respect to such applications. 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). A refund applicant generally must: (i) document the volume of its refined product purchases during the refund period; and (ii) show that it was injured by the alleged crude oil overcharges. Despite the general requirement that an applicant show injury, there is a rebuttable presumption that end-users whose businesses were unrelated to the petroleum industry were injured. See, e.g., City of Columbus, 16 DOE ¶ 85,550 (1987); see also 52 Fed. Reg. 11737, 11742 (April 10, 1987).

Meritorious crude oil refund applicants are eligible to receive refunds equal to the number of gallons of refined petroleum products they purchased during the refund period, multiplied by a per-gallon volumetric refund amount. The volumetric is derived by dividing the crude oil refund monies available by the total consumption of petroleum products in the United States during the period of price controls (2,020,997,335,000 gallons). The DOE has increased the volumetric as additional crude oil overcharge funds have become available. Initially, the DOE paid successful crude oil applicants at a volumetric of $.0002 per gallon. Subsequently, the DOE increased the volumetric twice, first to $.0008 per gallon and then to $.0016 gallon, the current volumetric. Refund applicants whose applications were approved when a lower volumetric was in effect receive a supplemental payment to raise their refund to the current volumetric.

B. American Can

During the refund period, American Can engaged in a wide variety of businesses. These businesses included (i) the manufacture of cans and packaging materials (the can business) and (ii) the production of plastic through Chemplex, a joint venture in which American Can was a 50 percent partner. American Can also engaged in the manufacture of paper products, aluminum and metal products, the sale of consumer goods, and other businesses.

During the 1980's American Can divested itself of its industrial operations. These divestitures included the can business and its interest in Chemplex.

As a result of the divestitures, American Can was left with insurance and financial service businesses. American Can changed its name to Primerica Corp. As the result of subsequent corporate changes, “old” Primerica changed its name to Primerica Holdings and became a subsidiary of “new” Primerica, which changed its name to Travelers.

C. Travelers’ Application

Travelers filed its application in 1988. At that time, the OHA had a pending application filed by American National Can. American National Can’s application included the refined petroleum product purchases of American Can’s can business, as well as those of the National Can Company (the National Can), a principal competitor of the American Can can business during the refund period. American National Can resulted when a third party purchased each of the businesses and merged them.

In 1991, unaware of the conflict in the two applications, the OHA granted the American National Can application. The refund was based on purchases of 181 million gallons of refined petroleum products by American Can and National Can during the refund period. American National Can Co., 21 DOE ¶ 85,163 (1991). At that time, refund grants were based on a volumetric of $.0008 per gallon. Accordingly, the refund granted American National Can was $145,155.

After Travelers filed its application, Travelers submitted numerous amendments and supplements. These submissions generally increased Travelers’ volume claims, citing the extensive nature of American Can’s operations during the refund period. Currently, with respect to the can business and its interest in Chemplex, Travelers claims volumes of over 253 million gallons and 2 billion gallons, respectively.

In conjunction with our consideration of Travelers’ ongoing amendments and supplements to the application, we became aware of the conflict over the right to the refund for the American Can can business. As a result, we provided Travelers and American National Can the opportunity to file comments concerning which party was entitled to a refund for the American Can can business. In the meantime, American National Can’s 1995 request for a $145,155 supplemental refund check has remained pending.

In Primerica, we determined that Travelers had sold the assets of the can business, including the right to the refund, to Triangle Industries, Inc. (Triangle), which then operated the business as American National Can. We also determined that Travelers had (i) incorporated its interest in Chemplex in a subsidiary called ACC Chemical Company (ACC Chemical), and (ii) sold the stock of ACC Chemical to a third party, thereby divesting itself of the right to apply for a refund for Chemplex purchases. Travelers requests reconsideration of both determinations.

II. Analysis

A. The Right to the Refund for the Can Business

1. The Primerica holding

In Primerica, we determined that American Can transferred the right to a refund for its purchases for the can business when it sold the can business. We cited the following standard for determining the appropriate recipient of the refund where a change in ownership has occurred:

Under OHA precedent, the right to a refund generally remains with the owner of the business that made the purchases for which the refund is sought. There are two exceptions to this rule. The first is where the business is a corporation and the stock of the corporation is sold. The second is where an agreement transferring the business (i) specifically includes the right to the refund or (ii) contains language so broad as to encompass the right to a refund.

26 DOE at 88,139. We determined that the American Can sales agreement contained language so broad as to encompass the right to the refund. Id. at 88,140. We quoted the following description of the assets transferred:

· all of the assets, properties, rights and business of the Seller constituting such business, including the shares of capital stock of seller’s direct or indirect subsidiaries engaged in such business, subject to the Assumed Liabilities ... (all of which, taken as a whole, is hereinafter referred to as the “Business”) ....

· all of Seller’s assets, properties, rights and business of every type and description, real, personal and mixed, tangible and intangible, constituting the Business, wherever located and whether or not reflected on the books and records of the Seller, including, without limitation:

. . .

(vi) all other assets, properties, rights and business or every kind and nature included in the Business which are owned or held by the Seller, or in which the Seller has an interest, on the Closing Date, known or unknown, fixed or unfixed, choate or inchoate, accrued, absolute, contingent or otherwise whether or not specifically referred to . . . .

Id. (quoting pages 1 - 3 of the sales agreement). We noted that in other cases, we have found that similar language is sufficient to transfer the right to the refund. 26 DOE at 88,140 (citing Murphy Oil Corp./Aldridge and Love Service Station, 23 DOE ¶ 85,025 at 88,059 (1993) (“all right, title and interest . . . to all property and assets . . . of every kind and nature whatsoever, both tangible and intangible”); Texaco Inc./Coker’s Pedigreed Seed Co., 21 DOE ¶ 85,418 at 89,238 (1991) (“all properties, assets, claims, goodwill, rights, and entitlements . . . of every kind, character, and description whatsoever . . . whether real, personal, or mixed, tangible or intangible”); Shell Oil Co./Genetin & Walizer Shell, 21 DOE ¶ 85,278 at 88,846 (1991) (“all rights and credits of every kind and nature . . . and all other property and assets”)). We also referred to other cases involving language sufficiently broad to transfer the right to the refund. 26 DOE at 88,140 n.1 (citing Gulf Oil Corp./Marine Fueling, Inc., 25 DOE ¶ 85,011 (1995) (“any and all claims, rights, [and] choses in actions”); Murphy Oil Corp./Marine Fueling Div., 21 DOE ¶ 85,329 (1991) (“any and all claims, rights, [and] choses in actions”); Murphy Oil Corp./Severson Oil Co., 20 DOE ¶ 85,695 at 89,613-14 (1990) (“all of the property and assets . . . of every kind except as specified” including “tangible or intangible”)). Accordingly, we concluded that Travelers was not entitled to a refund for purchases by American Can’s can business.

2. Travelers’ Arguments for Reconsideration

In support of its reconsideration request, Travelers makes two arguments. First, Travelers notes that the American Can/Triangle sales agreement did not mention the right to the refund. Travelers maintains that, under OHA precedent, a purchaser is not entitled to apply for the refund unless the relevant agreement specifically mentions the refund as a transferred asset. Second, Travelers argues that, aside from the fact that the American Can/Triangle agreement did not mention the right to the refund, other language in that agreement indicates that the right to the refund was not transferred.

a. The lack of a specific reference to the refund in the sales agreement

Travelers maintains that, under OHA precedent, a sales agreement does not transfer the right to the refund unless the refund is specifically mentioned. Travelers cites the following language in another refund case:

Generally, the OHA has held that following a change in ownership, the right to a refund remains with the owner during the refund period unless (i) the firm was a corporation where stock was purchased by the current owner or (ii) the business was sold under contract which specified potential refunds as an asset being transferred.

Travelers’ October 7, 1997 Submission at 4 (citing Exxon Corp./American Can Company, 20 DOE ¶ 85,183 at 88,403 (1990).

Although the Exxon/American Can decision contains the language cited above, the decision did not hold that broad language in a sales agreement is insufficient to transfer the refund. In Exxon/American Can, a claimant for a refund from Exxon consent order funds argued that it was entitled to the refund for purchases by American Can for three facilities, because the claimant had subsequently purchased the facilities and had acquired American Can’s supply contact with Exxon. In its decision, the OHA rejected those arguments. The decision did not address the issue of whether a broad description of assets is sufficient to transfer the refund.

More importantly, Travelers’ contention that broad language in a sales agreement is insufficient to transfer the refund ignores the clear holdings of a long line of OHA decisions cited in Primerica and set forth above. In all of those cases, the sales agreement did not mention the right to a refund, but it contained sufficiently broad language to transfer the right to the refund. Thus, there is a well-developed body of precedent to support the holding in Primerica that broad language is sufficient to transfer the right to the refund.

b. The language in the sales agreement

Travelers notes that the sales agreement refers to rights “on the Closing Date” and argues that there was no right to a refund at that point. Travelers cites the July 1986 date of the agreement and the announcement of the MSRP in August 1986. Accordingly, Travelers argues, the right to the refund cannot be included in the assets tranferred.

As an initial matter, we note that the closing date for the agreement occurred in November 1986. Accordingly, contrary to Travelers’ contention, the closing date occurred after the announcment of the MSRP in August 1986.

More importantly, the date of the MSRP is irrelevant. Section 1.1(vi) of the agreement transfers “rights . . . of every kind and nature . . . in which the Seller has an interest, on the Closing Date, known or unknown, fixed or unfixed, choate or inchoate, accrued, absolute, contingent or otherwise whether or not specifically referred to . . . .” Agreement at 3. This reference to rights “of any kind” including “unknown” or “inchoate” is sufficiently broad to include a refund for purchases made as of the closing date. Murphy/Severson, 20 DOE at 89,613-14 (all assets “in which [the seller] has any right or interest as of the Closing Date”, where closing date six years before consent order).

Travelers also argues that its retention of liabilities for environmental matters requires the conclusion that the sales agreement did not transfer the right to the refund. We do not agree. The fact that Travelers retains liabilities for environmental matters is irrelevant to whether the refund falls within the broad description of the assets transferred. In fact, the existence of the provision concerning environmental liabilities provides further support for the notion that all assets and liabilities were transferred except for those specifically mentioned.

As the foregoing indicates, we have rejected Travelers’ argument that we applied the wrong standard. Similarly, we have rejected Travelers’ argument that any language in the agreement entitles it to the refund.

Finally, we observe that even if Travelers were entitled to a refund for the purchases by the American Can can business, Travelers has not provided any information concerning the volume of those purchases. Instead, Travelers relies on the refund application filed by American National Can, which also included, in its claimed purchases, those of National Can. The record indicates that National Can’s purchases were of sufficient size to constitute a significant portion of the American National Can refund claim. Although Travelers disavows any claim to National Can volumes, Travelers has not identified the volume that it claims for the American Can can business. For that reason, even assuming arguendo, that Travelers were entitled to claim a refund for the American Can can business, Travelers has not claimed, let alone documented, a specific volume of purchases.

B. The Right to the Refund for Chemplex Purchases

In Primerica, we determined that American Can was not entitled to a refund based on purchases by Chemplex. We based that determination on the history of American Can’s ownership of Chemplex. In 1965, American Can and Skelly Oil Company (Skelly) formed Chemplex as a joint venture in which each owned a 50 percent unincorporated interest. In 1977, the partners agreed to operate the joint venture through wholly-owned subsidiaries: for American Can, ACC Chemical; for Skelly, Skelly Chemical Company. In 1984, American Can sold the stock of ACC Chemical to Getty. In Primerica, we held that when American Can incorporated its interest in the joint venture, the right to the refund transferred to the newly formed subsidiary, ACC Chemical. 26 DOE at 88,141. We further held that American Can was not entitled to a refund for ACC Chemical because (i) ACC Chemical, as a corporation, has its own identity and (ii) American Can no longer owned the stock of the corporation. Id. Accordingly, we held that Travelers has no right to a refund based on its interest in Chemplex. Id. (citing Enron Corp./Thoms Enterprises, Inc., 23 DOE ¶ 85,098 at 88,257-58 (1993) (refund for partnership purchases granted to successor corporation operating same business); A.H. Smith Associates, 22 DOE ¶ 85,036 at 88,097 (1992) (refund for purchases by sole proprietorship granted to subsequent limited partnership operating same business).

Travelers agrees with the finding in Primerica that American Can transferred its unincorporated interest in Chemplex, including the right to the refund, to ACC Chemical in 1977. Traveler cites the 1977 Agreement, which provides for the substitution of ACC Chemical and Skelly Chemical as parties to the 1965 Joint Venture Agreement. Travelers’ October 21, 1997 Letter at 1-2. Based on the 1977 Agreement and the underlying Joint Venture Agreement, Travelers concludes as follows:

Therefore, the correct entity who suffered injury because of the Getty overcharges during the years 1973 - 1977 was ACC Chemical Company, a wholly owned subsidiary of American Can Company.

Letter at 2. Thus, Travelers concedes that ACC Chemical acquired the right to a refund for Chemplex purchases made during the period 1973 to 1977.

Although Travelers concedes that ACC Chemical acquired the right to the refund, Travelers disagrees with the finding that Travelers is not entitled to apply for a refund on behalf of ACC Chemical. Travelers claims that American Can’s 1984 sale of ACC Chemical was not a simple stock sale. Travelers maintains that it retained significant environmental liabilities and, therefore, is entitled to the refund.

Travelers’ argument that the 1984 sale of ACC Chemical did not transfer the right to a refund is not persuasive. ACC Chemical, as a corporation, has a separate corporate identity. American Can has not demonstrated that when it sold the stock of ACC Chemical, it retained the right to apply for a refund on behalf of ACC Chemical. Again, the retention of liabilities is not a sufficient basis to conclude that the right to the refund was also retained. Texaco Inc./Ossining Service Station, 21 DOE ¶ 85,211 (1991).

Finally, as noted in Primerica, ACC Chemical has not applied for a refund and the deadline is now passed. Moreover, under the terms of the Stripper Well Settlement Agreement, ACC Chemical would be ineligible for a Subpart V refund if it was affiliated with a refiner that entered into the agreement. The record indicates that the 1984 sale to Getty occurred just as Getty was being acquired by Texaco Inc. If ACC Chemical was owned by Texaco in 1986, when Texaco entered into the Stripper Well Settlement Agreement, ACC Chemical, as an affiliate of Texaco, waived the right to a Subpart V refund. Thus, it is doubtful that there was any eligible recipient with respect to Chemplex purchases.

C. The Right to the Refund Granted in Getty/Primerica

In Primerica, after concluding that Travelers was not entitled to a refund for Chemplex purchases, we raised the issue whether the $377,296 refund that Travelers received in Getty Oil Co./Primerica Corp., 17 DOE ¶ 85,354 (1988), was based on Chemplex purchases. 26 DOE at 88,141. Since then, we have determined that the Getty refund was based on Chemplex purchases. The Primerica refund application specifically stated that the purchases were made by Chemplex. Application for Refund, Case No. RF265-02615.

As we determined above, Travelers was not entitled to apply for a refund for Chemplex purchases. Accordingly, we have determined that the $377,296 Getty refund should be rescinded, and that Travelers should be required to return that amount to the DOE within 30 days. If that amount is not remitted within 30 days, interest shall accrue at the rate generally assessed by the DOE on overdue receivables, and other charges generally assessed on overdue DOE receivables shall also apply. See, e.g., Nabisco Brands, Inc., 23 DOE ¶ 85,056, reconsideration denied, 23 DOE ¶ 85,067 (1993).

III. Conclusion

Travelers is not entitled to a refund for the portion of its refund application that is based on American Can’s can business and Chemplex. Accordingly, Travelers’ reconsideration requests should be denied, and Travelers should be ordered to remit its Getty refund to the DOE. Finally, as we stated in Primerica, the remaining portion of Primerica’s refund application will be considered in the underlying case, Case No. RF272-68493.

It Is Therefore Ordered That:

(1) The Motion for Reconsideration filed by Primerica Corporation (Travelers) on August 14, 1997, Case No. RR272-00300, be and hereby is denied.

(2) The Motion for Reconsideration filed by Travelers Group, Inc. (Travelers) on August 27, 1997, Case No. RR272-00301, be and hereby is denied.

(3) The Decision and Order issued on April 22, 1988, Case No. RF265-02615, be and hereby is rescinded, in Case No. RF265-02888, as set forth in Paragraph (4) below.

(4) Travelers and Energy Refunds, Inc. shall remit the sum of $377,296 to the Department of Energy within 30 days of this Decision and Order. The check shall be made payable to the “U.S. Department of Energy,” shall prominently display Case No. RF265- 02888, and shall be sent to:

Department of Energy

Office of the Controller

Cash Control Branch

PO Box 500

Germantown, MD 20874

In the event that payment is not made within 30 days of the date of this Decision and Order, interest shall accrue on the amount due at the rate generally assessed by the Department of Energy on overdue receivables. Other charges generally assessed on overdue DOE receivables shall also apply.

(5) Upon notification by the Office of the Controller of the receipt of these funds, the Director of Special Accounts and Payroll, Office of the Departmental Accounting and Financial Systems Development, Office of the Controller of the Department of Energy, shall deposit these funds into the deposit fund escrow account maintained at the Department of Treasury and funded by Getty Oil Company, Consent Order No. RGEAQ0001Z.

(6) This is a final Order of the Department of Energy.

George B. Breznay

Director

Office of Hearings and Appeals

Date: February 6, 1998