In re Department of Energy Stripper Well Exemption Litigation

746 F. Supp. 1446, 110 Oil & Gas Rep. 79, 1990 U.S. Dist. LEXIS 12184, 1990 WL 132912
CourtDistrict Court, D. Kansas
DecidedSeptember 4, 1990
DocketM.D.L. No. 378
StatusPublished

This text of 746 F. Supp. 1446 (In re Department of Energy Stripper Well Exemption Litigation) is published on Counsel Stack Legal Research, covering District Court, D. Kansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Department of Energy Stripper Well Exemption Litigation, 746 F. Supp. 1446, 110 Oil & Gas Rep. 79, 1990 U.S. Dist. LEXIS 12184, 1990 WL 132912 (D. Kan. 1990).

Opinion

MEMORANDUM AND ORDER

THEIS, District Judge.

This matter is before the court on the States’ motion to enforce DOE’s obligation under the Final Settlement Agreement to permit rebuttal of the presumption of injury (States’ motion to enforce) (Doc. 1693). The court heard oral argument on May 30, 1990. In addition to the briefs filed by the States and Department of Energy (DOE), the court has received various amicus briefs. Appearing and participating in oral argument were counsel for the DOE and the States. The court also heard the statements of an attorney for certain end user claimants who would potentially be affected by the court’s ruling. The court has received several additional filings since the date of oral argument. The court has considered all the filings as well as the transcript of the hearing and is now prepared to rule.

This is the States’ third motion to enforce involving the presumption of injury for end user claimants in refund proceedings under the Subpart V regulations, 10 C.F.R. Part 205, Subpart V. The previous two motions to enforce were denied by the court and were not appealed by the States; consequently, the issue of the validity of the use of presumptions of injury for end users in the Subpart V refund process is law of the case. The States object to the implementation of the presumption by DOE’s Office of Hearings and Appeals (OHA) and OHA’s rejection of the States’ rebuttal evidence. The States style their motion as one to “enforce” the Final Settlement Agreement in order to obtain jurisdiction. See In re: Department of Energy Stripper Well Exemption Litigation, 864 F.2d 796 (Temp.Emer.Ct.App.1988).

In this court’s decision denying the States’ first motion to enforce, the court held that OHA could employ a presumption of end user injury in crude oil refund proceedings under the Subpart V regulations. In re: Department of Energy Stripper Well Exemption Litigation, 671 F.Supp. 1318 (D.Kan.1987). The States did not appeal from this portion of the order.1 In this court’s decision denying the States’ second motion to enforce, the court held that OHA could award crude oil refunds to uninjured utilities conditioned on pass-through to their customers. In re: Department of Energy Stripper Well Exemption Litigation, 707 F.Supp. 1269 (D.Kan.1989).

The court’s two previous decisions were based on the provision in the Final Settle[1448]*1448ment Agreement that nothing contained therein may be construed to amend the Subpart V regulations.. See FSA 11 IV.B.l. The court held that OHA’s prior precedents and discretion were fully preserved under the Final Settlement Agreement. See 707 F.Supp. at 1274; 671 F.Supp. at 1322-23.

OHA is employing a presumption that end users of petroleum products were injured by crude oil overcharges. OHA is awarding refunds based on the amount of petroleum products purchased during the relevant time period. The States argue that OHA has turned the rebuttable presumption of end user injury into an irre-buttable one by rejecting the States’ proffered evidence that claimants passed through to their customers some or all of the overcharges. The States ask that the court “clarify the legal standard for rebutting the presumption.” States’ motion to enforce, Doc. 1693, at 2.

According to the States, OHA is requiring proof that a particular claimant passed through specific amounts of crude oil overcharges incurred by that claimant, yet OHA is denying the States’ requests for discovery from claimants to determine this information. The States suggest that OHA may employ a variety of procedures to determine whether claimants are able affirmatively to demonstrate injury. Claimants within an industry may file a consolidated brief or appear before OHA to answer questions posed by OHA. Alternatively, claimants may wish to rely on the estimates produced by the States regarding the level of absorption of overcharges. For those contested cases in which OHA has already issued refunds, the States request 90 days from the date of this order to file motions for reconsideration, seeking either the return of excessive refunds already disbursed, or a finding that, in the absence of further proof from the claimant, the amounts already received shall constitute full restitution.

The States have proffered three types of evidence in an attempt to rebut the presumption of end user injury: (1) economic analyses of market conditions in the claimants’ industries, purportedly demonstrating that supply and demand conditions allowed companies in such industries to pass through to their customers the majority of increased costs; (2) evidence of growth and profitability in the face of rising costs; and (3) evidence of increasing prices during the relevant period, including admissions by specific claimants that prices were raised to pass through increased costs.

The first category of evidence proffered by the States involves market conditions. The States have presented various market analyses based on industry-wide data, evidence concerning supply and demand conditions in particular industries, and evidence of average pass-through of costs in general. OHA has rejected the States’ industry-wide evidence as not relevant to the specific factual situation of the claimant.

The second category of the States' evi- ' dence is evidence of continued growth and profitability during the price control period. The States assert that evidence of growth and profitability supports a finding that the claimant did not absorb all of the overcharges, because to remain growing and profitable, the claimant must have been able to pass through its increased costs. OHA has rejected this evidence as not definitely indicating the pass-through of petroleum cost increases.

In their third category, the States presented evidence, on both an industry-wide and claimant-specific basis, that prices of products were increased in the face of rising costs. In some cases, the States quoted statements by the claimants that prices had been raised to pass through increased costs. In certain cases, the claimant referred to energy costs in particular. To the extent this evidence was industry-wide, OHA rejected the evidence for the same reasons it rejected the States’ other industry-wide evidence. OHA rejected the evidence for the additional reason that evidence of pass-through of increased costs in general into higher prices is not probative of pass-through of increased energy costs or crude oil overcharges in particular.

The States argue that since OHA has rejected their proffered rebuttal evidence, OHA has rendered the presumption of end user injury irrebuttable. The States assert [1449]*1449that they do not seek a ruling that would require every claimant to present complex econometric proof of its precise degree of absorption of overcharges. What they seek is a “reasonable” standard for rebuttal of the presumption so that, when they present evidence that the claimant passed through a “significant portion” of the overcharges, the presumption disappears, and the claimant is required to produce evidence of injury. The States argue that an irrebuttable presumption violates the Final Settlement Agreement. In addition, the States argue that OHA precedent does not require an irrebuttable presumption of end user injury.

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Related

Mid-America Dairymen, Inc. v. Herrington
704 F. Supp. 198 (D. Kansas, 1988)
Energy Reserves Group, Inc. v. Department of Energy
690 F.2d 1375 (Temporary Emergency Court of Appeals, 1982)
In re the Department of Energy Stripper Well Exemption Litigation, M.D.L. No. 378
857 F.2d 1481 (Temporary Emergency Court of Appeals, 1988)
In re Department of Energy Stripper Well Exemption Litigation
864 F.2d 796 (Temporary Emergency Court of Appeals, 1988)
Mid-America Dairymen, Inc. v. Herrington
878 F.2d 1448 (Temporary Emergency Court of Appeals, 1989)

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Bluebook (online)
746 F. Supp. 1446, 110 Oil & Gas Rep. 79, 1990 U.S. Dist. LEXIS 12184, 1990 WL 132912, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-department-of-energy-stripper-well-exemption-litigation-ksd-1990.