Case No. RF350-00002
June 19, 2002
DECISION AND ORDER
OF THE DEPARTMENT OF ENERGY
Application for Refund
Name of Petitioner:Permian Corporation/BTU Energy Corporation
Date of Filing:November 19, 1993
Case Number: RF350-2
This Decision and Order considers an Application for Refund that the BTU Energy Corporation (BTU) filed in the Permian Corporation (Permian) special refund proceeding. Under the terms of a June 25, 1982 Consent Order, Permian paid to the Department of Energy a total of $21,500,000 in settlement funds.(1) Permian paid $7,000,000, which the Economic Regulatory Administration (ERA), pursuant to its policy at that time, deposited with the U.S. Treasury. Permian paid the remaining $14,500,000 into an escrow account which funded (subject to ERA approval) settlements of certain litigation claims against Permian. On July 24, 1991, the ERA petitioned the Office of Hearings and Appeals to distribute the funds remaining in the escrow account, $10,953,665, in accordance with the special refund proceedings set forth in 10 C.F.R. Part 205, Subpart V. On April 15, 1993, the Office of Hearings and Appeals instituted the specific procedures which apply to the distribution of those funds. Permian Corp., 23 DOE ¶ 85,034 (1993) (Permian).
Evaluation of applications in the Permian refund proceeding involves both an allocation of an appropriate portion of the consent order fund to each applicant and an evaluation of economic harm or injury suffered by that applicant. Id. at 88,151; see Sid Richardson Carbon & Gasoline Co., 12 DOE ¶ 85,054 (1984). To determine the portion of the fund to be allocated to each claimant, we assume that any overcharges were distributed equally over every gallon of regulated products sold by Permian during the consent order period and have allocated the consent order monies accordingly, i.e., by dividing the amount of money in the fund by Permian's total sales of covered products during the period. Permian at 88,077-78. This calculation produces a "volumetric factor" of $0.008744 per gallon of refined products purchased from Permian. When that factor is multiplied by an applicant's total eligible purchases, the result is a claimant's allocable share of the consent order fund.
Resellers and retailers with an allocable share of less than $10,000 and end users are presumed to have been injured by Permian's alleged overcharges and are not required to submit a detailed showing of injury. Mid-level resellers and retailers whose allocable share exceeds $10,000 may receive the greater of $10,000 or 40 percent of their allocable share (up to a maximum of $50,000) without providing detailed demonstrations of economic injury. Id. at 88,079.
Another rule we continually apply in refund proceedings is that resellers and retailers that were spot purchasers, i.e., firms that made only sporadic, discretionary purchases, are presumed not to have
been injured, and will be ineligible for refunds. The basis for this presumption is that these spot purchasers tended to have considerable discretion as to where and when to make a purchase, and would not have made a purchase unless able to cover the full cost of a purchase, including any alleged overcharges in resales to customers. Permian, 23 DOE at 88,080. A spot purchaser can rebut this presumption by demonstrating that its base period supply obligation limited its discretion in making the purchases and that it resold the product at a loss that was not subsequently recouped. Id. In other words, if a firm made spot purchases in order to meet its regulatory obligations and was injured in the process, a refund can be appropriate.
In its application, BTU submitted the following schedule of its purchases from Permian made during the consent order period:
Date
Total Gallons Purchased
December 1976
630,000
February 1977
481,950
March 1977
336,000
April 1977
973,350
May 1977
210,000
On the face of it, this is a record of sporadic and limited purchases, i.e., spot purchases. See Enron Corp./BTU Energy Corporation, 26 DOE ¶ 85,070 (1997) (four large purchases of a covered product during entire consent order period indicate that refund applicant was a spot purchaser). In addition, there is no information in the record to indicate that any of BTUs regulatory responsibility - i.e., regulatory obligations to supply particular purchasers - compelled it to make these purchases from Permian. Nor is there anything indicating that BTU resold the product purchased from Permian at a loss that was not subsequently recouped. See Permian, 23 DOE at 88,080. Indeed, BTU itself has conceded that there is no question that [its] purchases fit within the general parameters of the [spot purchaser] presumption . . . . as OHA has developed it over the past twenty years. January 28, 2002 letter from Michael ON Barron, Counsel for BTU, to Richard Cronin, Assistant Director, OHA.
In support of its request for a refund, BTU does not directly challenge the spot purchaser presumption against refunds nor does the firm even claim that it was not able to recoup its costs incurred in the Permian transactions. Instead, BTU simply argues that it should be entitled to a refund if it can demonstrate either: (1) that it was economically injured by showing that it had banks of unrecouped product costs and that market conditions forced it to absorb the overcharges (as demonstrated by a competitive disadvantage analysis); or (2) that it could not resell its Permian products at prices that allowed BTU to receive its MLSP for the specific Permian product transactions. BTU claims that either of these methods would be more in concert with the prior regulatory scheme and with OHAs basic methodology for determining injury. We have rejected similar arguments in prior cases. See Enron Corp./BTU Energy Corporation, 26 DOE ¶ 85,070 (1997) (existence of cost banks does not necessarily indicate a spot purchaser was injured by overcharges).
The record indicates that on five occasions in 1976 and 1977, BTU, in full view of prevailing market price levels, freely purchased natural gasoline from Permian. There is no evidence that indicates that BTU made these purchases to satisfy any purpose or requirement of the prior regulatory program, such as a supply obligation to its historical customers. BTU has not presented sufficient evidence to rebut the spot purchaser presumption. We therefore conclude that BTU was not injured by the operation of the prior regulatory program. The fact that BTU may not have profited from these purchases as much as it would have liked is not a claim that is cognizable as an injury under Subpart V. Because refunds are only warranted for injury occurring because of the operation of the regulatory program, BTU is not entitled to a refund. See 10 C.F.R. § 205.280 (Subpart V regulations providing procedures under which refunds may be made to injured persons in order to remedy the effects of a violation of the regulations of the Department of Energy). Accordingly, the BTU Application for Refund should be denied.
It Is Therefore Ordered That:
(1) The Application for Refund filed by BTU Energy Corporation on November 19, 1993 is hereby denied.
George B. Breznay
Director
Office of Hearings and Appeals
Date: June 19, 2002
(1)The Consent Order settled, except for certain matters specifically excluded, all claims regarding Permian's compliance with the Federal Petroleum Price and Allocation Regulations during the period August 19, 1973, through January 27, 1981 (the consent order period).