Case No. RF340-0016
February 09, 2000
DECISION AND ORDER
OF THE DEPARTMENT OF ENERGY
Motion for Reconsideration
Name of Petitioners: Enron Corporation/
Sheila S. Brown
David A. Stillings
Dates of Filing: September 13, 1991
January 14, 2000
Case Numbers: RF340-0016
RF340-0204
On September 14, 1988, the Economic Regulatory Administration of the Department of Energy (DOE) filed a Petition with the Office of Hearings and Appeals (OHA) requesting that the OHA formulate and implement procedures for distributing funds obtained through a consent order with Enron Corp. (Enron). See 10 C.F.R. Part 205, Subpart V. The consent order resolved DOE allegations that Enron and all of its subsidiaries, affiliates, prior subsidiaries, predecessors and successors in interest violated the mandatory petroleum regulations in their sales of crude oil and refined petroleum products from January 1, 1973 through January 27, 1981 (the consent order period). On July 10, 1991, the OHA issued a Decision and Order setting forth final procedures for disbursing the portion of the Enron settlement fund attributable to various Enron entities' sales of NGLs and NGLPs. Enron Corp., 21 DOE ¶ 85,323 (1991) (Enron). These covered Enron entities are UPG, Inc., Northern Propane Gas Company, and Florida Hydrocarbons Company. In accordance with the goals of 10 C.F.R. Part 205, Subpart V, Enron implements a process for refunding the consent order funds to purchasers of Enron NGLs and NGLPs who are able to demonstrate that they were injured as a result of the covered entities' alleged overcharges. This Decision and Order renders a determination upon the merits of an Application for Refund submitted by the shareholders of Stillings Petroleum Corporation
(Stillings).(1) Stillings was a petroleum reseller that purchased propane, butane and natural gasoline from Enron. Accordingly, Stillings was a reseller of Enron products.
I. Background
In Enron we adopted a presumption that the alleged overcharges attributable to NGLs and NGLPs had been dispersed equally in all sales of refined product made by the covered entities during the consent order period. Enron, 21 DOE at 88,959. We stated that, in the absence of a demonstration of a disproportionate overcharge, a claimant would be allocated a share of the consent order funds on a volumetric basis. We provided that eligible claimants would receive $.00601 per gallon of covered Enron product purchased.(2)Id. We refer to the dollar amount derived by multiplying an applicant's purchase volume by the per gallon refund amount as the applicant's allocable share.
Enron generally requires a claimant to demonstrate that it was injured by Enron's alleged overcharges in order to receive a refund equal to its full allocable share. However, in Enron, we adopted several presumptions of injury that would allow certain types of claimants to receive a refund without a detailed demonstration of injury. We established that resellers, retailers and refiners seeking volumetric refunds of $10,000 or less were injured by Enron's pricing practices. Id. at 88,960. Such applicants would, therefore, only have to document their purchases of covered Enron products in order to receive a refund of their full volumetric share. Id. at 88,960.
We further established that a reseller, retailer or refiner whose volumetric share of the Enron consent order funds exceeds $10,000 may elect to receive as its refund the larger of $10,000 or 60 percent of its volumetric share up to $50,000. Id. Accordingly, a claimant in that group need only establish the volume of Enron covered products that it purchased during the refund period to receive a refund of 60 percent of its allocable share up to $50,000.
Stillings has chosen not to rely upon these presumptions of injury. Instead, the firm has submitted information aimed at showing that it was injured with respect to the full volumetric refund amount associated with the product that it purchased from Enron and resold to third parties. Accordingly, we will consider granting Stillings a refund for its volumes of Enron purchases based on our analysis of this information concerning injury.
A reseller whose allocable share exceeds $10,000 must demonstrate that it was injured by Enron's alleged overcharges in order to receive a refund equal to its full volumetric allocation of the consent order fund. The procedures in Enron outline a two-step requirement for applicants attempting to make an injury showing. First, a claimant must show that it accumulated banks of unrecovered increased product costs large enough to justify the amount of the refund claimed during the period from either November 1973, the first month of the banking period, or the first month in which it purchased from Enron, whichever was later, through the end of the banking period. Second, it must show that market conditions forced it to absorb the alleged overcharges. Id. at 88,960.
However, in Enron we also adopted a rebuttable presumption that firms that purchased Enron covered products on the spot market were not injured by Enron's alleged overcharges. A claimant is a spot purchaser if it made only sporadic purchases of significant volumes of Enron's covered products. Id. at 88,961. This presumption is based upon the general conclusion that purchasers on the spot market tend to have considerable discretion in where and when to make purchases. Therefore, a firm would not have made spot purchases of Enron product without evaluating the full financial effect of those purchases. Accordingly, we believe that a spot purchaser would not generally have made a spot purchase unless it was to its financial advantage. A spot purchaser can rebut this presumption by demonstrating that it was in fact injured by its spot purchases. See generally Sauvage Gas Co./NGL Supply, Inc., 19 DOE ¶ 85,622 (1989). In prior proceedings we have allowed applicants to rebut the spot purchaser presumption by demonstrating that: 1) they were forced to make the purchases to meet their base period supply obligations or to supply regular retail or end-user customers; or 2) they resold the product at a loss which was not subsequently recovered. E.g., Saber Energy, Inc./Mobil Oil Corp., 14 DOE ¶ 85,170 (1986).
II. Stillings Identified as a Possible Spot Purchaser from Enron
In a January 30, 1998 letter from Thomas L. Wieker, Deputy Director, OHA to Mr. Michael ON. Barron, the legal representative for Stillings owners(3), we tentatively identified Stillings as a spot purchaser of certain Enron product. In that letter, we noted that information in Stillings Application indicated that Stillings
purchased UPG propane in only six months of the entire price control period, and that it purchased butane from UPG in only four months of the period. As indicated in your submission in RF340-82 (Vanguard Petroleum Corporation), the characteristics of sales in the producer/wholesaler market often involve large volumes and a price that is usually negotiated for each transaction. See Statement of P.E. Goth, Jr. at 2.
January 30 letter at 1. We further stated that unless Stillings was able to demonstrate that it was not a spot purchaser or was able to show that it was injured by its spot purchases, we would be unable to grant its refund claim.
In that letter, we indicated that there are two ways that Stillings could respond in order to receive a refund in the Enron proceeding. The first was for Stillings to demonstrate that it was not a spot purchaser. To do this, we indicated that Stillings should submit a detailed description of its purchasing relationship with Enron and Stillings's relationship with its customers, that establishes that Stillings was required to make regular purchases from Enron in order to maintain supplies to base period customers. Alternatively, we indicated that Stillings could establish that it was forced by market conditions to resell the product purchased from Enron at a loss that was not subsequently recovered.
In addition, we requested that Stillings provide more information concerning its business operations as an NGL reseller so that we could evaluate the appropriateness of Stillings' injury claim. We asked Stillings to provide us with a description of the typical manner in which Stillings located customers and negotiated the purchase and sale of NGLs. We also asked Stillings to identify its marketing region and describe how Stillings's purchase and sale transactions facilitated the distribution and consumption of NGLs. Id. at p. 2.
In a submission dated February 8, 1999, Mr. Barron responded to the OHAs tentative identification of Stillings as a spot purchaser of Enron products and to our request for additional information regarding Stillingss role as a wholesale marketer of NGLs. The submission includes a memorandum from Mr. Barron regarding the spot purchaser presumption and its relation to the instant Application (the Memorandum). Attached to the Memorandum are a number of exhibits, including statements from Stillings officials and others, additional company records, and analyses of OHA decisions involving spot purchase and cost bank issues.
As discussed below, the information provided to us by Stillings is insufficient to establish that the firm was injured by its spot purchases of propane and butane from Enron. However, we conclude that the spot purchaser presumption of non-injury should not apply to Stillings purchases of natural gasoline from Enron.
III. Analysis
A. Stillings Was Not Injured by Its Spot Purchases of Enron Propane and Butane
Stillingss Enron purchases occurred at the wholesale marketer level of NGLP distribution. They therefore appear to meet the characteristics of sales in the producer/wholesaler market that often involve large volumes and a price that is usually negotiated for each transaction.
Accordingly, it appears that Stillings purchased Enron product primarily on the spot market. As noted above, spot purchasers are generally presumed not to have been injured by the alleged overcharges. The OHA has adopted this presumption because firms usually made spot purchases only when those transactions were beneficial to them and provided the best available terms. Thus, it is unlikely that they would have been injured on those purchases by the consent order firm's pricing practices.
In determining whether Stillingss purchases from Enron were spot purchases, it is important to first understand the purpose and scope of the presumption, so that it may be correctly applied to the facts of this case. In this regard, Enron's extensive discussion of the spot purchaser presumption in the context of responding to comments on the proposed Enron implementation order provides a detailed explanation of the meaning of the presumption, and can provide a basis for our analysis of whether the presumption is applicable to Stillingss purchases and sales of Enron products.
In Enron, we concluded that the concept of spot purchaser is sufficiently well defined to allow applicants to understand the theoretical basis for the presumption.
The term spot purchase is commonly used and understood in the petroleum industry to mean a contract for the purchase and sale of petroleum products on a short term basis. Sauvage Gas Company/NGL Supply, Inc., 19 DOE ¶ 85,622 at 89,142 (1989)(Supply). The OHA has interpreted the term spot purchaser to mean any firm that purchased significant volumes of covered products from a supplier on a sporadic or isolated basis outside of a long term supply obligation.
Enron at 88,955. It is clear from this discussion that the purchaser's discretion in selecting its supplier of product is a key element underlying the presumption of non-injury.
We have consistently determined that spot purchasers tend to have considerable discretion in where and when to make purchases and therefore would not have made spot market purchases from a firm at increased prices unless they were able to pass through the full price of the purchases to their own customers. The OHA has utilized this spot purchaser presumption of non-injury in numerous special refund proceedings.
Id., citing Sauvage, 17 DOE ¶ 85,304. We recognize that short term, discretionary sales and purchases may have been a normal business arrangement in certain portions of the NGL industry, particularly in the producer and wholesale reseller markets. Nevertheless, we believe such spot market purchases of Enron product establish a presumption that the purchaser was not injured. Such a purchaser may submit additional information concerning its business operations to rebut the presumption on a case-specific basis. As we noted in Enron,
The OHA examines the circumstances of each case to make an initial determination whether the applicant's purchases were likely to have been spot purchases. Where it appears likely that an applicant's purchases were spot purchases, the applicant is generally notified of our tentative conclusion and offered an opportunity to show either that it was not a spot purchaser or that it was injured by its spot purchases. Since this analysis focuses on the fundamental refund issue, viz., whether the applicant was injured, there is no merit to the claim that it is based on an impermissibly vague definition. ...
In Supply, ... we stated that "the determination of whether a [sic] individual's purchases from a particular supplier are spot purchases is a question of fact and therefore must be made on a case-by-case basis." Id. at 89,143.
Id. at 88,955-56. This case-by-case injury analysis is a broad one. Under this method, "we consider the circumstances under which a claimant made its purchases and any information submitted by the applicant that might aid our determination concerning whether its purchases were spot purchases." [Emphasis added] Our determination of whether a spot purchaser was injured is similarly based on a case-by-case analysis of information submitted by the claimant. Id. at 88,956-57. Accordingly, we will proceed with an evaluation of Stillingss relevant business operations and the circumstances under which it purchased butane, propane, and natural gasoline from Enron.
In his 1999 Memorandum, Mr. Barron submitted information concerning Stillings company history and its purchases of natural gasoline, propane and butane from Enron. He states that in 1967 or 1968, James Stillings and his wife, Beverly, formed Stillings as an Oklahoma corporation with its offices in Tulsa. Mr. Stillings had extensive experience as a sales representative selling propane to independent propane retailers, public utilities, and large manufacturing plants in the New England area, and, for the first year or two of its existence, most of the companys sales involved these customers. Memorandum at 1. However, in 1969 or 1970, Stillings hired Jack Weinheimer, a former Permian employee and a recognized expert in the marketing of butane and natural gasoline to refiners. Stillings then developed into a marketer of butane and natural gasoline. Marathon, American Petrofina, Amoco, Texaco, CRA, NCRA and Permian Corporation became regular customers of Stillings and were supplied with the natural gasoline and butane purchased in the storage areas and pipelines in Kansas and then shipped to them by pipeline or in some cases by railcar or truck transport. Memorandum at 2.
With respect to natural gasoline, it appears that Enron was one of Stillings base period suppliers for that product. Roger Helgoe, a former employee of Enron, recalls that Stillings:
was a regular customer of Enrons during the 1970s, and based on the sales information that you [Mr. Barron] have given me from UPG records, I can say that Stillings was one of our most regular natural gasoline customers.
January 18, 1999 letter from Roger Helgoe to Michael Barron, attached as Exhibit 2 to the Memorandum. David Onsgard, a former employee of Stillings, states that he is certain that Stillings had base period customers for natural gasoline and butane, and thinks that Stillings entered into long-term supply contracts in the early 1970's. See January 27, 1999 letter from David Onsgard to Michael Barron attached as Exhibit 1 to the Memorandum.
Moreover, sales records provided to the DOE by Enron indicate that Stillings purchased 71,686,168 gallons of Enron natural gasoline from 1973 through 1979. The estimated monthly Enron sales summaries for natural gasoline that Stillings has submitted with its Memorandum indicate that Stillings was a steady purchaser of natural gasoline from Enron from June 1973 and through January 1974 1974. These statements and Enron records are sufficient for us to conclude that it is likely that Stillings was a base period purchaser of natural gasoline from Enron. As Enrons base period customer for purposes of being allocated a supply of product under the regulatory framework, Stillings may well have been required throughout the refund period to depend on Enron as a supplier of natural gasoline in order to meet its own requirements for that product, regardless of the prices being charged by Enron for butane. Accordingly, with respect to the natural gasoline that it purchased from Enron, we conclude that the information submitted by Stillings rebuts the presumption of non-injury for purchases of product made on the spot market.
However, the information provided by Stillings presents very different circumstances with respect to its purchases of propane and butane from Enron. Information provided to the DOE by Enron indicates that Stillings purchased 15,750,000 gallons of propane and 5,250,000 gallons of butane from Enron during the entire refund period. Schedule C attached as Exhibit 9 to the Stillingss Memorandum shows that Stillings made the following monthly purchases:
Propane
1976 August 4,200,000 gallons
December 4,200,000 gallons
1978 November 4,200,000 gallons
1980 September 1,680,000 gallons
October 420,000 gallons
December 1,050,000 gallons
Butane
1975 July 1,050,000 gallons
August 1,722,000 gallons
October 1,683,000 gallons
1976 December 840,000 gallons
These sporadic and high volume purchases of Enron propane and butane by Stillings fit the pattern of short term, discretionary purchases of product that were a normal business arrangement in the producer and wholesale reseller spot market for NGLPs. As such, we find that the pattern and volume of these purchases establish a presumption that Stillings was not injured by its spot market purchases of Enron propane and butane, and that Stillings must make a factual showing to refute this presumption.
In its Memorandum, Stillings makes the following assertions concerning these purchases:
2. Propane. During 1976, 1978 and 1980, Stillings purchased 15.75 million gallons of propane from Enron. The customers for this product cannot be identified. But [Mr.] Onsgards multistate customers had many plants along the HTI and MAPCO pipelines and it is possible that much of this product was delivered to these plants in connection with Stillings continuing contact with these customers.
3. Butane. In 1975 and 1976 Stillings purchased 5.25 million gallons of butane from Enron. These purchases arose out of Stillings business relationship with Enron and Stillings assumes that these gallons were resold to refiner customers.
Memorandum at 6.
After reviewing the evidence submitted by Stillings, we conclude that it has not rebutted our finding that it purchased propane and butane from Enron on the spot market, nor has it made the affirmative showings of injury required of spot market purchasers. The assertion of Stillings that its sales of Enron propane and butane were part of a continuing contact with certain customers is insufficient, by itself, to establish that its purchases of propane and butane from Enron were not discretionary purchases. As indicated by the schedule of purchases, Stillings purchases of these products from Enron consisted of large or very large volumes of product made on a very sporadic basis.(4)Accordingly, we believe it is likely that these purchases from Enron were discretionary in nature and not to meet the immediate supply requirements of regular customers.
In view of these circumstances, we have determined that Stillings has not shown injury from its spot market purchases of propane and butane from Enron and has therefore failed to rebut the spot purchaser presumption. Accordingly, we conclude that Stillings was not injured by Enrons alleged overcharges on propane and butane, and we will therefore subtract these volumes of Stillings purchases from its refund claim.
B. Stillings Injury Showing for Natural Gasoline Purchases
1. The Bases for Showing Injury in this Proceeding
A refiner whose allocable share exceeds $10,000 must demonstrate that it was injured by Enron's alleged overcharges in order to receive a refund equal to its full volumetric allocation of the consent order fund. The procedures in Enron outline a two-step requirement for applicants attempting to make an injury showing. First, a claimant must show that it accumulated banks of unrecovered increased product costs large enough to justify the amount of the refund claimed during the period from either November 1973, the first month of the banking period, or the first month in which it purchased from Enron, whichever was later, through the end of the banking period. Second, it must show that market conditions forced it to absorb the alleged overcharges. Id. at 88,960.
In order to determine the degree to which market conditions forced an applicant to absorb the alleged overcharges, we apply a three part competitive disadvantage analysis that has been upheld by the courts. See Behm Family Corp. v. DOE, 903 F.2d 830 (Temp. Emer. Ct. App. 1990); Atlantic Richfield Co. v. DOE, 618 F. Supp. 1199 (D. Del. 1985). Under this methodology, we infer that purchases made at above average market prices indicate that the firm was unable to pass through the alleged overcharges. Conversely, we infer that purchases made at prices below the market average placed a firm at a competitive advantage and did not injure the firm. The analysis produces three measures which the OHA uses as guidelines in determining the claimant's level of injury. The first measure, "gross excess cost," is the sum of the amounts by which an applicant's monthly purchase costs exceeded the market average. The second measure, "net excess cost," equals an applicant's gross excess cost minus the sum of the amounts by which its purchase costs were below the market average. This measure provides an indication of the cumulative impact of the alleged overcharges, balancing the adverse effect of the comparatively expensive purchases against the positive effect of comparatively inexpensive purchases. The third measure, the "above-market volumetric share," is the number of gallons purchased at prices which exceed market prices multiplied by the volumetric factor. This measure is indifferent to the magnitude of the excess costs incurred, accounting only for the number of gallons of uncompetitively priced product purchased by the applicant. We consider all of these indicators of competitive disadvantage in determining whether, and to what extent, an applicant was injured by its purchases, and thereby we calculate an appropriate refund amount. See Texas Oil and Gas Corp./Gulf Oil Corp., 13 DOE ¶ 85,135 (1985); see also Texaco Inc./Oakwood Oil Co., 22 DOE ¶ 85,262 (1993) (Oakwood).
2. Stillings Injury Showing for Natural Gasoline
In its February 8, 1999 filing, Stillings submitted data which documents its bank of unrecovered increased product costs for its purchases of natural gasoline. The bank was calculated based on an analysis of profit margins for natural gasoline calculated by the Federal Energy Administration in August 1974. This bank data indicates that Stillings maintained a positive bank for natural gasoline from the beginning of its calculations in September 1973 through the deregulation of natural gasoline on December 31, 1979. The Stillings data indicates that at the end of December 1979, Stillings had banks of unrecovered increased product costs for natural gasoline of $652,135. Accordingly, we conclude that Stillingss banks for motor gasoline are in excess of the firm's full allocable share of the Enron consent order fund for its purchases of natural gasoline.
We also believe that Stillings has demonstrated that its Enron natural gasoline purchases made prior to February 1974 were not made pursuant to a fixed price contract established prior to the refund period. Firms which had on-going supply contracts with Enron in 1973 often purchased product at a contract price established prior to the refund period. Such fixed price purchases did not transfer any injury from overcharges to the purchaser. The fact that Stillings paid the same price for natural gasoline purchased from Enron in September, October and November of 1973 and January 1974 raised the issue of whether these purchases were made pursuant to a fixed price contract. However, Stillings has submitted information indicating that purchases made from Enron earlier in 1973 were made at a slightly lower price. Accordingly, we conclude that whatever contractual agreement existed between Enron and Stillings in 1973 appears to have given Enron the discretion to raise the price it charged Stillings for natural gasoline.
We therefore conclude that, for the period from June 13, 1973 through December 31, 1979, Stillings has satisfied the first part of the two-part injury requirement by demonstrating that it incurred increased costs that it was unable to pass through to its customers. See Atlantic Richfield Co./Gast Fuel and Service, Inc., 20 DOE ¶ 85,127 (1990)(ARCO/Gast).
In its Application for Refund, Stillings also has performed the three step competitive disadvantage analysis outlined above. As its source of data, the firm used the Energy Information Administration's (EIA) Monthly Petroleum Product Price Report (MPPPR). When determining competitive injury, the OHA generally relies on Platt's as the best source of regional average market price data for the purpose of determining the months in which an applicant purchased refined products at prices higher than the regional average. See Atlantic Richfield Company/Phillips Petroleum Company, 22 DOE ¶ 85,217 (1992)(ARCO/Phillips), and cases cited therein at 88,575. We believe that price information assembled on a nationwide basis (like the EIA prices) does not adequately reflect competitive conditions characterizing the regional product markets. See Atlantic Richfield Company/BTU Energy Corp., 22 DOE ¶ 85,074 at 88,231 (1992)(ARCO/BTU). Accordingly, we will substitute appropriate Platt's postings for the MPPPR data used by Stillings in its analysis of competitive disadvantage concerning the natural gasoline that it purchased from Enron. We believe that Platts postings covering the Kansas/Oklahoma area are the most appropriate to use in this analysis, because of the location of Enrons Bushton Kansas NGL plant and the general predominance of Enron business activity in that area. We will therefore use the Platt's postings for Oklahoma (Group 3) in our revised analysis of Stillings's Enron purchases.
Because Platt's regional price postings are not available for natural gasoline, we have developed a methodology for extrapolating regional natural gasoline prices from the Platt's postings for propane, based on a finding that natural gasoline follows a regional pricing pattern similar to propane, the most widely used NGL product. Enron Corp./Moon Scott Joint Venture, 27 DOE ¶ 85,014 at 88,079-80 (1998)(Enron/Moon Scott); Eason Oil Company/Koch Hydrocarbon Company, 26 DOE ¶ 85,065 at 88,187 (1997)(Eason/Koch); ARCO/BTU, 22 DOE at 88,231 and cases cited therein. Our estimation method takes the known monthly ratio between national prices for propane and natural gasoline and uses that ratio in conjunction with a regional propane price to estimate the regional price for natural gasoline. Thus, any potentially divergent pricing patterns between propane and natural gasoline will be accounted for through the use of this ratio between national propane and natural gasoline prices. Also, the impact of any regional, seasonal divergences in pricing patterns will be neutralized by our summation of price differences over the entire refund period. We therefore conclude that regional natural gasoline prices calculated according to our established methodology are reasonably accurate measures of those prices over the refund period.
Accordingly, we have revised Stillings' analysis of its natural gasoline purchases. Our revised analysis extrapolates comparative regional prices for natural gasoline using the Platt's wholesale propane price postings for "Oklahoma Group 3," and available EIA nationwide data. In Enron Corp./MAPCO, Inc., 27 DOE § 85,018 (1998), Enron/Moon Scott, and Eason/Koch, we used EIA prices for propane, natural gasoline and butane to arrive at monthly price ratios between propane and the other two products. We will use that method here. We will use these monthly ratios as conversion factors to extrapolate monthly regional prices for natural gasoline in this case. Accordingly, in our analysis of Stillings's natural gasoline purchases, we have multiplied the monthly Platt's propane price by the ratio of the EIA propane price to the EIA natural gasoline price for that month to arrive at extrapolated monthly regional prices for natural gasoline.(5)
Our competitive disadvantage analysis, as detailed in the Appendix to this Decision and Order and summarized in the Table below, shows that there is an indication that Stillings experienced injury.
TABLE
Natural gasoline
63,199,427 Gallons
Allocable Share for those Gallons: $379,829
Total Gross Excess Cost$4,351,097
Total Net Excess Cost$3,986,598
Above-Market Volumetric Share $304,694
Volumetric Share [80%]
While none of these figures is intended to represent an absolute measure of the injury suffered by the firm, taken together they reveal whether an applicant was placed at a competitive disadvantage by its refined petroleum product costs during the period in which it was allegedly being overcharged. Stillings' gross excess costs and net excess costs substantially exceed the firm's full allocable share of the Enron consent order funds. Its gross excess costs and net excess costs are, respectively, 11.5 and 10.5 times the amount of its full allocable share. Moreover, 80% of Stillings's purchases from Enron were made at above-market prices. Collectively, the measures used in the competitive disadvantage analysis suggest that Stillings experienced a substantial and consistent competitive disadvantage as a result of its purchases of natural gasoline from Enron. See, e.g., Enron Corp./Unocal Corp., 26 DOE ¶ 85,041 at 88,104 (1997); Enron Corp./Odessa L.P.G. Transport, Inc., 24 DOE ¶ 85,038 at 88,106 (1994); Texaco Inc./Oakwood Oil Co., 22 DOE ¶ 85,262 (1993); Marathon Petroleum Co./Acme Oil Co., 17 DOE ¶ 85,634 (1988); Conoco Inc./Power Pak Co., 17 DOE ¶ 85,016 (1988).
We therefore will grant Stillings a refund based on the full allocable share associated with 63,199,427 gallons of its Enron natural gasoline purchases. Accordingly, Stillings will receive a refund for all of its purchases of natural gasoline from Enron during the period June 13, 1973 through December 31, 1979, or $379,829 (63,199,427 x $.00601 = $379,829). In addition, Stillings is entitled to receive a proportionate share of the interest accrued on the consent order fund, or $280,997.(6)Therefore, Stillings total refund in this proceeding is $660,826 ($379,829 principal and $280,997 interest) for the volumes of natural gasoline that it purchased from Enron.
Accordingly, the total volume approved in this Decision and Order is 63,199,427 gallons of Enron product and the total refund, including interest, is $660,826.
Although we have examined Stillings's claim and supporting data, the determination reached in this Decision is based on the representations made in the application. If the factual basis underlying our determination in the Decision is later shown to be inaccurate, this Office has the authority to order appropriate remedial action, including rescission or reduction of the refund.
C. Impact of PODRA Amendments on Stillings's Refund Payment
The Interior and Related Agencies Appropriations Act for FY 1999 amended certain provisions of the Petroleum Overcharge Distribution and Restitution Act of 1986 (PODRA). These amendments extinguished rights that refund applicants had under PODRA to refunds for overcharges on the purchase of refined petroleum products. They also identified and appropriated a substantial portion of the funds being held by the DOE to pay refund claims. Congress specified that these funds were to be used to fund other DOE programs. As a result, the petroleum overcharge escrow accounts in the refined product area contain substantially less money than before. In fact, they may not contain sufficient funds to pay in full all pending refund claims (including those in litigation) if they should all be found meritorious. Congress directed DOE to "assure that the amount remaining in escrow to satisfy refined petroleum product claims for direct restitution is allocated equitably among all claimants." In view of this Congressional directive and the limited amount of funds available, it may become necessary to prorate the funds available among the meritorious claims. However, it could be several years before we know the full value of the meritorious claims and the precise, total amount available for distribution. It will therefore be some time before we are able to determine the amount that is available for distribution to each claimant.
We believe that it is equitable to pay the remaining small claims (less than 250) in full. To require small claimants to wait several more years for their refunds would constitute an inordinate burden and be inequitable. Cf. Atlantic Richfield Co./Major Oil, Inc., 26 DOE ¶ 85,068 at 88,195 (1997) ("The principal purpose of the presumptions of injury . . . is to reduce the burden on small claimants.").
The Stillings refund is not in this category of small claimants. Full payment of Stillings's refund of $660,826 could well have a substantial impact on the ability of this Office to make payments to other remaining claimants who are seeking large refund claims. Until these other large claims are resolved, we cannot determine whether there will be sufficient funds to provide full refund payments on all meritorious claims. We therefore will limit the current Stillings refund payment to fifty percent of the total approved refund (principal and interest). Atlantic Richfield Co./Oil Transit, Inc., et al., 27 DOE ¶ 85,026 at 88,188 (1999). Once the other pending refund claims have been resolved, the remainder of the Stillings refund, if any, will be paid to the extent that is possible through an equitable distribution of the funds remaining in the petroleum overcharge escrow accounts. Accordingly, at this time, we will disburse a Stillings refund totaling $330,413 ($189,915 in principal and $140,498 in interest that accrued in the Enron escrow account). As discussed in footnote one above, we find it appropriate to disburse this refund amount in equal shares to Sheila S. Brown and David A. Stillings, who are the heirs of Richard James Stillings, the former president and sole shareholder of Stillings Petroleum Corporation.
It Is Therefore Ordered That:
(1) The Applications for Refund submitted on behalf of Sheila S. Brown (Case No. RF340-16) and David A. Stillings (Case No. RF340- 204) are hereby granted as specified 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 $165,207 from the DOE deposit fund escrow account maintained at the Department of the Treasury titled Product Tracking - Claimants, Account No. 999DOE035Z, to:
Ms. Sheila S. Brown
Re: Stillings Petroleum Corporation
c/o Lloyd K. Holtz, Esq.
5314 South Yale, Suite 310
Tulsa, Oklahoma 74135
(3) 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 $165,206 from the DOE deposit fund escrow account maintained at the Department of the Treasury titled Product Tracking - Claimants, Account No. 999DOE035Z, to:
Mr. David A. Stillings
Re: Stillings Petroleum Corporation
c/o Lloyd K. Holtz, Esq.
5314 South Yale, Suite 310
Tulsa, Oklahoma 74135
(4) The determinations made in this Decision and Order are based on the presumed validity of the statements and documentary material submitted by the applicant. Any of those determinations may be revoked or modified at any time upon a determination that the factual bases underlying the Application for Refund are incorrect.
(5) This is a final Order of the Department of Energy.
George B. Breznay
Director
Office of Hearings and Appeals
Date: February 09, 2000
(1)Richard James Stillings, the president and sole shareholder of Stillings, died on July 29, 1988, and his firm had ceased business operations by that date. The Court Order allowing the final accounting of his estate indicated that the shares of Stillings were listed as part of his personal property to be distributed equally to his two children, Sheila S. Brown and David A. Stillings. See Order of the Oklahoma State District Court dated February 28, 1990, In the Matter of the Estate of Richard James Stillings, attached to the firms September 13, 1991 Application for Refund. In the case of a dissolved corporation, the OHA has generally directed that refunds be issued to the stockholders of a corporation at the time of dissolution according to their respective percentage of stock ownership. See, e.g., Texaco, Inc./Van Tex, Inc., 22 DOE ¶ 85,183 (1992). Accordingly, we will distribute the refund in equal shares to Sheila R. Brown and David A. Stillings.
(2)2/ This amount was derived by dividing the fund received from Enron allocable to refined products ($43,200,000) by the estimated volume of refined products sold by Enron from June 13, 1973 through the date of decontrol of the relevant product (7,186,265,624). Id. at n. 8.
(3)Ms. Brown and Mr. Stillings are also represented in this matter by their personal attorney, Mr. Lloyd K. Holtz.
(4)In Enron Corp./Presidio Exploration, Inc., 27 DOE ¶ 85,030 (1999), we found that there was a substantial likelihood that the applicant purchased higher priced Enron product for the purpose of meeting the supply requirements of its base-period customers, based in part on the relatively small volume of several of the applicants purchases from Enron. That is not the case here. The overwhelming volume of Stillings purchases of propane and butane from Enron were made in amounts of one million gallons or more.
(5)Because there is no EIA data for natural gasoline available prior to July 1975, we will use the ratio between EIA propane and natural gasoline prices in July 1975, combined with the appropriate monthly Platt's propane price, to extrapolate regional natural gasoline prices for those earlier months. See Enron/Moon Scott, 27 DOE at 88,080. We are not convinced that Stillingss use of the MPPPR crude oil price for July 1975 as an estimating tool yields a more accurate result than our use of the EIAs July 1975 propane price.
(6)6/ Interest is now being paid on Enron refunds at the rate of $0.7398 per dollar of refund.
APPENDIX
Case Nos. RF340-0016 and RF340-0204
Competitive Disadvantage Analysis
Natural Gasoline
Date
Gallons
UPG/Enron
Platt's
EIA
EIA
Extrapolated
Above/
Net
Gross
Above
Price/
Propane
Propane
Natural
Regional Price/
(Below)
Excess
Excess
Market
Gallon
Price
Gasoline
Natural Gasoline
Market
Cost
Cost
Volumes
1973
June
454,021
$0.09544
$0.092784
*
*
$0.1263
($0.0309)
($14,029)
$0
July
756,702
$0.09544
$0.095000
*
*
$0.1293
($0.0339)
($25,652)
$0
August
756,702
$0.09544
$0.095000
*
*
$0.1293
($0.0339)
($25,652)
$0
September
244,743
$0.12500
$0.114000
*
*
$0.1552
($0.0302)
($7,391)
$0
October
237,671
$0.12500
$0.138250
*
*
$0.1882
($0.0632)
($15,021)
$0
November
204,479
$0.12500
$0.138250
*
*
$0.1882
($0.0632)
($12,923)
$0
December
756,702
$0.09544
$0.138250
*
*
$0.1882
($0.0928)
($70,222)
$0
1974
January
9,174
$0.12500
$0.163628
*
*
$0.2228
($0.0978)
($897)
$0
September
203,653
$0.23000
$0.132875
*
*
$0.1809
$0.0491
$9,999
$9,999
203,653
October
829,928
$0.24000
$0.130000
*
*
$0.1770
$0.0630
$52,285
$52,285
829,928
November
226,742
$0.23000
$0.130000
*
*
$0.1770
$0.0530
$12,017
$12,017
226,742
December
3,657,045
$0.24430
$0.135000
*
*
$0.1838
$0.0605
$221,251
$221,251
3,657,045
*
*
1975
*
*
January
216,540
$0.21480
$0.135000
*
*
$0.1838
$0.0310
$6,713
$6,713
216,540
May
2,436,000
$0.21900
$0.147908
*
*
$0.2014
$0.0176
$42,874
$42,874
2,436,000
June
1,386,000
$0.22360
$0.157910
*
*
$0.2150
$0.0086
$11,920
$11,920
1,386,000
July
1,245,636
$0.28000
$0.159763
$0.1433
$0.1951
$0.2175
$0.0625
$77,852
$77,852
1,245,636
December
1,890,000
$0.28580
$0.179600
$0.1635
$0.2071
$0.2275
$0.0583
$110,187
$110,187
1,890,000
1976
January
1,260,000
$0.28500
$0.180971
$0.1661
$0.2164
$0.2358
$0.0492
$61,992
$61,992
1,260,000
February
1,470,000
$0.28500
$0.182100
$0.1607
$0.2194
$0.2486
$0.0364
$53,508
$53,508
1,470,000
March
1,260,000
$0.28500
$0.179770
$0.1599
$0.2155
$0.2423
$0.0427
$53,802
$53,802
1,260,000
May
2,730,000
$0.30040
$0.177100
$0.1526
$0.2212
$0.2567
$0.0437
$119,301
$119,301
2,730,000
June
1,050,000
$0.38000
$0.187100
$0.1564
$0.2305
$0.2757
$0.1043
$109,515
$109,515
1,050,000
August
1,680,000
$0.32000
$0.176900
$0.1628
$0.2372
$0.2577
$0.0623
$104,664
$104,664
1,680,000
September
210,000
$0.31500
$0.191250
$0.1739
$0.2364
$0.2600
$0.0550
$11,550
$11,550
210,000
November
1,008,000
$0.30000
$0.191750
$0.1763
$0.2430
$0.2643
$0.0357
$35,986
$35,986
1,008,000
December
525,000
$0.30250
$0.195766
$0.1913
$0.2435
$0.2492
$0.0533
$27,983
$27,983
525,000
1977
January
927,024
$0.31090
$0.206155
$0.1890
$0.2480
$0.2705
$0.0404
$37,452
$37,452
927,024
February
711,185
$0.31550
$0.215186
$0.1970
$0.2400
$0.2622
$0.0533
$37,906
$37,906
711,185
March
1,239,000
$0.32500
$0.223476
$0.1990
$0.2500
$0.2807
$0.0443
$54,888
$54,888
1,239,000
April
1,047,312
$0.34000
$0.224000
$0.1980
$0.2550
$0.2885
$0.0515
$53,937
$53,937
1,047,312
July
420,000
$0.30500
$0.242911
$0.2130
$0.2590
$0.2954
$0.0096
$4,032
$4,032
420,000
October
462,000
$0.30000
$0.256813
$0.2220
$0.2610
$0.3019
($0.0019)
($878)
$0
November
1,050,000
$0.29500
$0.259000
$0.2210
$0.2550
$0.2988
($0.0038)
($3,990)
$0
1978
January
840,000
$0.29500
$0.263476
$0.2200
$0.2520
$0.3018
($0.0068)
($5,712)
$0
February
1,554,000
$0.29500
$0.262750
$0.2210
$0.2570
$0.3056
($0.0106)
($16,472)
$0
March
1,050,000
$0.29500
$0.254355
$0.2090
$0.2600
$0.3164
($0.0214)
($22,470)
$0
April
840,000
$0.29250
$0.252233
$0.2030
$0.2570
$0.3193
($0.0268)
($22,512)
$0
May
420,000
$0.29250
$0.239506
$0.1940
$0.2640
$0.3259
($0.0334)
($14,028)
$0
June
383,460
$0.29250
$0.235900
$0.1940
$0.2650
$0.3222
($0.0297)
($11,389)
$0
July
504,000
$0.29250
$0.232513
$0.1930
$0.2700
$0.3253
($0.0328)
($16,531)
$0
August
354,270
$0.31000
$0.230367
$0.1860
$0.2810
$0.3480
($0.0380)
($13,462)
$0
October
846,048
$0.35000
$0.215126
$0.1830
$0.2920
$0.3433
$0.0067
$5,669
$5,669
846,048
November
1,623,594
$0.30000
$0.211500
$0.1840
$0.2960
$0.3402
($0.0402)
($65,268)
$0
December
1,803,060
$0.39000
$0.211500
$0.1870
$0.3140
$0.3551
$0.0349
$62,927
$62,927
1,803,060
1979
January
1,653,330
$0.42000
$0.210198
$0.1920
$0.3170
$0.3470
$0.0730
$120,693
$120,693
1,653,330
February
1,992,648
$0.43000
$0.208650
$0.1840
$0.3560
$0.4037
$0.0263
$52,407
$52,407
1,992,648
March
1,657,782
$0.55000
$0.207876
$0.1910
$0.3980
$0.4332
$0.1168
$193,629
$193,629
1,657,782
April
2,319,996
$0.55890
$0.204822
$0.2040
$0.4260
$0.4277
$0.1312
$304,383
$304,383
2,319,996
May
2,067,996
$0.61750
$0.219925
$0.2250
$0.4760
$0.4653
$0.1522
$314,749
$314,749
2,067,996
June
2,067,996
$0.75000
$0.248125
$0.2750
$0.5440
$0.4908
$0.2592
$536,025
$536,025
2,067,996
July
1,274,910
$0.77000
$0.282077
$0.2580
$0.5030
$0.5499
$0.2201
$280,608
$280,608
1,274,910
August
1,634,010
$0.66810
$0.297384
$0.2680
$0.5120
$0.5681
$0.1000
$163,401
$163,401
1,634,010
September
1,654,850
$0.66010
$0.314858
$0.2820
$0.5190
$0.5795
$0.0806
$133,381
$133,381
1,654,850
October
1,560,846
$0.69390
$0.334416
$0.3030
$0.5290
$0.5838
$0.1101
$171,849
$171,849
1,560,846
November
1,267,686
$0.69740
$0.344900
$0.3620
$0.5230
$0.4983
$0.1991
$252,396
$252,396
1,267,686
December
1,267,686
$0.90230
$0.351835
$0.3900
$0.6090
$0.5494
$0.3529
$447,366
$447,366
1,267,686
Totals
63,199,427
$3,986,598
$4,351,097
50,697,909
* The price ratio of EIA natural gasoline to EIA propane for July 1975 (1.3614) was used to compute
the Extropolated natural gasoline prices for September 1974 through June 1975.