Case No. RK272-03844

February 24, 1998

DECISION AND ORDER

OF THE DEPARTMENT OF ENERGY

Supplemental Order

Name of Petitioner:The Augsbury Organization, Inc.

Atlantic Richfield Co./The Augsbury Organization, Inc.

Dates of Filing:July 26, 1996

January 29, 1998

Case Numbers:RK272-3844

RC272-379

RF304-15515

This Decision and Order concerns Applications for Refund that were filed by The Augsbury Organization, Inc. (Augsbury) in the Atlantic Richfield Company (ARCO) and crude oil special refund proceedings. As set forth below, this Decision and Order rescinds the refund that Augsbury was previously granted in the crude oil refund proceeding and denies the firm's Application for a Supplemental Refund in that proceeding. This Decision also rescinds in part the refund Augsbury was granted in the ARCO refund proceedings. The firm is directed to repay the amount of the refunds it improperly received.

I. Augsbury's Crude Oil Refund Application

Purchasers of refined petroleum products were able to apply for a refund from overcharge funds collected by the DOE from numerous firms that sold crude oil during the price control period. 51 Fed. Reg. 27899 (August 4, 1986). To receive a refund for crude oil overcharges, an Applicant generally must (1) document its purchase volumes and (2) show that it was injured by the overcharges. However, applicants that were end users (consumers) of petroleum products and whose business was unrelated to the petroleum industry are presumed to have been injured. As such, they need not submit proof of injury to receive a refund in the Subpart V proceeding. City of Columbus, 16 DOE ¶ 85,550 (1987).

The distinction between end-user and reseller or retailer applicants is based on the operation of the Old Oil Entitlements Program during the crude oil price control period. The Entitlements Program caused crude oil overcharges to be spread evenly throughout the industry, resulting in a uniform increase in the cost of all crude oil to refiners. Refiners were therefore able to pass through crude oil overcharges in the form of higher prices in their sales refined petroleum products. Because crude oil overcharges tended to affect all resellers and retailers equally, regardless of their supplier, we presume that the market permitted resellers and retailers to pass through crude oil overcharges to their customers through higher selling prices. There is thus no presumption of injury for reseller or retailer applicants. Therefore, in order to establish injury, a reseller or retailer applicant must demonstrate that selling prices in its market did not increase as a result of crude oil overcharges, so that it was unable to pass through the effects of the overcharges to its customers. See Delta Petroleum Products, 21 DOE ¶ 85,037 (1991).

Augsbury filed its application in the crude oil refund proceeding on October 16, 1989 (Case No. RF272- 75086). The application was signed by Donald H. Grissom, attorney for Augsbury. Augsbury clearly

indicated in its crude oil refund application that it was a consumer of petroleum products. As a consumer, Augsbury was presumed to have been injured by crude oil overcharges in its purchases of refined petroleum products. The refund application was approved on May 15, 1991, and the firm was granted a refund of $11,057. Hancor, Inc., et al., Case No. RF272-55640 et al. (May 15, 1997). In 1995, DOE began distributing supplemental refunds to firms like Augsbury that had previously been granted crude oil refunds. These supplemental refunds are intended to distribute additional crude oil overcharge funds that DOE has collected, and are paid out at the volumetric rate of $0.0008 cent per gallon. Augsbury applied for a supplemental crude oil refund on July 26, 1996 (Case No. RK272-3844).

It has recently come to our attention that Augsbury was a reseller of petroleum products, and not a consumer as it claimed in its application. See Memorandum of Telephone Conversation between Tom LaRosa, Augsbury, and Linda Lazarus, Office of Hearings and Appeals (January 27, 1998). Consequently, the firm was not entitled to rely upon the end-user presumption of injury and, absent an affirmative showing of injury, was not entitled to receive a crude oil refund. See Delta Petroleum Products, 21 DOE at 88,136. Augsbury has not attempted to demonstrate that it was injured as a result of overcharges in the sale of crude oil, and we therefore find that the firm is ineligible for either the crude oil refund it previously received or for a supplemental refund.

II. Augsbury's ARCO Refund Application

The ARCO refund proceeding is intended to disburse the funds received by DOE from ARCO pursuant to a consent order that settled allegations regarding ARCO's sales of refined petroleum products. Atlantic Richfield Co., 17 DOE ¶ 85,069 (1988) (ARCO). As with the crude oil proceeding, applicants are required to show the volume of their ARCO purchases and that they were injured by the alleged ARCO overcharges. However, in ARCO resellers may receive limited refunds without a detailed showing of injury.

In the ARCO proceeding, Augsbury claimed to have purchased more ARCO products during the refund period than it had actually purchased, and as a result, received a larger refund than it was entitled. Specifically, on July 29, 1991, Wilson, Keller & Associates (WKA), a private filing service, filed a refund application on behalf of Augsbury in the ARCO refund proceeding (Case No. RF304-12374). That application claimed purchases during the refund period of 26,077,315 gallons of ARCO products. The volume claim was based upon records the firm obtained from ARCO. On December 30, 1991, Augsbury's refund application was approved, and the firm received a refund of $11,852, consisting of $7,858 in principal plus $3,994 in interest.(1) Atlantic Richfield Co./The Augsbury Corp., et al., Case No. RF304-12374, et al. (1991).

Subsequently, we found that another firm, LaValley & Woulf (LaValley), had received an ARCO refund based upon some of the same ARCO purchases that formed the basis of Augsbury's claim (Case No. RF304-4643). We contacted both firms, and they agree that Augsbury purchased the ARCO distributorship from LaValley in October 1976. However, ARCO's sales records included purchases by both Augsbury and its predecessor, LaValley, under the same account numbers. Consequently, the ARCO records that Augsbury relied upon in its refund application included purchases that had been made by LaValley before Augsbury acquired the distributorship. There is no evidence in the record that Augsbury acquired LaValley's right to an ARCO refund. After obtaining more detailed records than those that ARCO provided to Augsbury, we find that Augsbury's actual ARCO purchases during the refund period amounted to 8,999,097 gallons — about one-third the amount claimed. In the ARCO proceeding, resellers that purchased between 6,802,721 gallons and 16,592,003 gallons that do not prove they were injured may receive a refund of $5,000, in principal. Consequently, Augsbury received an ARCO refund that was $4,311 ($2,858 principal plus $1,453 interest) higher than it was entitled.

III. Augsbury's Repayment Obligation

The refund process depends upon the accuracy of the information submitted by the applicants. In the present case, the firm incorrectly stated in its crude oil refund application that it was a consumer of petroleum products when, in fact, it was a reseller of such products. As a result, Augsbury received a crude oil refund to which it was not entitled. In the ARCO refund proceeding, the firm claimed a purchase volume that was nearly three times its actual ARCO purchase volume. We stated in the May 15, 1991 determination granting the crude oil refund (the Decision granting the ARCO refund contains similar language) that:

The determinations made in this Decision and Order are based upon the presumed validity of statements and documentary material submitted by the applicants. This Decision and Order may be revoked or modified at any time upon a determination that the basis underlying the refund applications is incorrect.

Such remedial action is appropriate here. Accordingly, Augsbury, and its attorney to whom the crude oil refund check was jointly payable, shall be jointly required to repay the crude oil refund ($11,057). We shall also deny Augsbury's supplemental crude oil refund application.

With respect to the ARCO refund, Augsbury and its agent, WKA, shall be jointly required to repay the excessive ARCO refund that Augsbury received ($4,311), together with the additional interest the funds would have earned had they remained on deposit in the ARCO escrow account ($1,548). The total amount of this repayment obligation is $5,859.

It Is Therefore Ordered That:

(1) The Application for a Supplemental Crude Oil Refund filed by The Augsbury Organization, Inc. (RK272- 3844) is hereby denied.

(2) The Decision and Order issued by the DOE on May 15, 1997, Hancor, Inc., et al., Case No. RF272-55640 et al. is hereby rescinded with respect to Augsbury Corporation (Case No. RF272-75806, redesignated as RC272-379).

(3) The Decision and Order issued by the DOE on December 30, 1979, Atlantic Richfield Co./The Augsbury Corp., et al., Case No. RF304-12374, et al. is hereby rescinded in part with respect to The Augsbury Corporation (Case No. RF304-12374, redesignated as RF304-15515).

(4) The Augsbury Organization, Inc., and Donald H. Grissom are hereby directed to remit $11,057 to the Department of Energy. Payment should be made by check payable to the U.S. Department of Energy and should refer to Case No. RC272-379.

(5) The Augsbury Organization, Inc., and Wilson, Keller & Associates are hereby directed to remit $5,859 to the Department of Energy. Payment should be made by check payable to the U.S. Department of Energy and should refer to Case No. RF304-15515.

(6) The payments directed above should be made by check payable to the U.S. Department of Energy and should be mailed to the following address:

U.S. Department of Energy

Office of the Chief Financial Officer

P.O. Box 500

Germantown, MD 20874-0500

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

(7) 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 the funds received pursuant to Paragraph (4) above into the deposit fund escrow account maintained at the Department of Treasury, denominated Crude Tracking-Claimants 4, Account No. 999DOE0010Z, and the funds received pursuant to Paragraph (5) above into the DOE deposit fund escrow account funded by Atlantic Richfield, Inc., Consent Order No. RARH00001Z. For purposes of this account, the payment shall consist of $2,858 principal plus $3,001 interest.

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

George B. Breznay

Director

Office of Hearings and Appeals

Date: February 24, 1998

(1)In the ARCO proceeding claimants are allocated a share of the consent order funds on a volumetric basis at the rate of $.000735 per gallon of covered ARCO product purchased. Resellers that purchased more than 16,592,003 gallons of ARCO products may receive a refund of 41 percent of their allocable share without proving injury.