In re The Department of Energy Stripper Well Exemption Litigation

707 F. Supp. 1269, 105 Oil & Gas Rep. 21, 1989 U.S. Dist. LEXIS 2013, 1989 WL 18866
CourtDistrict Court, D. Kansas
DecidedFebruary 23, 1989
DocketNo. MDL 378
StatusPublished
Cited by1 cases

This text of 707 F. Supp. 1269 (In re The 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 The Department of Energy Stripper Well Exemption Litigation, 707 F. Supp. 1269, 105 Oil & Gas Rep. 21, 1989 U.S. Dist. LEXIS 2013, 1989 WL 18866 (D. Kan. 1989).

Opinion

OPINION AND ORDER

THEIS, District Judge.

This case is before the court on the States’ Motion to Enforce the Final Settlement Agreement. The court has examined the briefs of the States, the Department of Energy (DOE), and amici curiae Pacific Gas and Electric Company and Southern California Edison Company. The court held oral argument on January 18, 1989, and is now prepared to rule.

In general terms, the States’ motion, which is their second such motion to enforce, asserts that the Office of Hearings and Appeals (OHA) of the DOE has violated the terms of the Final Settlement Agreement (FSA) approved by the court in this case, by awarding crude oil refunds to two California utilities for pass-through to their injured customers. The court denied the motion to intervene filed by the two utilities, Pacific Gas and Electric (PGE) and Southern California Edison (SCE). The court did, however, grant them leave to participate in the briefing as amici curiae. Dk. No. 1488.

A brief discussion of the States’ first Motion to Enforce the Final Settlement Agreement (first motion to enforce) and the court’s ruling on that motion will be helpful. In their first motion to enforce, the States made two arguments about the processing of claims by OHA in crude oil overcharge refund cases under Subpart V of DOE’s regulations, 10 C.F.R. Part 205, Subpart V. Only the first argument is relevant here. The States argued that OHA violated the FSA by employing presumptions of injury for end-users of petroleum products who sought Subpart V crude oil refunds. Following a hearing, the court denied the States’ first motion to enforce. See In re: The Department of Energy Stripper Well Exemption Litigation, 671 F.Supp. 1318 (D.Kan.1987) (hereinafter referred to as the August 17, 1987 order).

In the August 17, 1987 order, the court held that OHA could employ a rebuttable presumption of end-user injury in Subpart Y crude oil refund cases. The FSA allowed OHA to continue to process claims according to its precedents; OHA’s regulations and precedents allowed the use of presumptions in Subpart V proceedings. Id. at 1319-23. The States did not appeal this portion of the August 17, 1987 order.

Prior to the August 17, 1987 order, the two utilities involved here, Pacific Gas and Electric (PGE) and Southern California Edison (SCE), filed applications for Subpart V refunds with OHA. Both utilities had passed through all crude oil overcharges to their customers in the form of higher utility rates. Both utilities agreed to pass all refunds through to their customers. Following the August 17, 1987 order, the States filed objections to PGE’s and SCE’s refund applications in an attempt to rebut the presumption of injury. The States argued that PGE and SCE were not “injured” by the overcharges because they passed all overcharges through to their customers. OHA granted refunds to PGE and SCE on the condition that the utilities notify the appropriate state regulatory body and pass through all refunds to their customers. The States then filed the present motion to enforce, arguing that OHA is violating the terms of the FSA. The States assert that OHA is improperly awarding refunds to uninjured utilities and is using utilities to achieve indirect restitution. The States’ present motion asks the court to set aside OHA’s refund decisions. The parties stated at oral argument that the States have objected to several other refund claims by investor-owned utilities. OHA has volun[1271]*1271tarily stayed disbursement of refunds pending the court’s resolution of the present dispute.

The relevant provision of the Final Settlement Agreement is paragraph IY.B.l, which provides:

Modification of Policy. In order to carry out its remedial authority under the ESA and EPAA, within 20 days following the date of the Approval Order, DOE will issue a modification of the Statement of Restitutionary Policy concerning Alleged Crude Oil Violations issued on June 21, 1985 (50 Fed.Reg. 27400; July 2, 1985). DOE will publish that modification (hereinafter the Modified Policy) in the Federal Register. The Modified Policy will state that the policy of DOE is to process applications for refunds pursuant to existing Subpart V regulations and that in such administrative proceedings involving Alleged Crude Oil Violations, OHA will continue to require that each claimant must affirmatively demonstrate that it has been injured by the alleged violation and that it should therefore receive a refund. See e.g. Office of Special Counsel/Tenneco Oil Co., 9 DOE ¶ 82,538 at 85,206 (1982). The Modified Policy will state that individuals claiming such injury may file claims but OHA will not accept claims on behalf of classes, associations or trade groups. Nothing in the Modified Policy will preclude a claimant from attempting to prove injury through the use of econometric evidence of the type that was submitted in the Stripper Well evidentia-ry proceedings before the OHA nor preclude OHA from using the findings contained in the Report of the Office of Hearings and Appeals, In re The Department of Energy Stripper Well Exemption Litigation, M.D.L. 378 (D.Kan., filed June 21, 1985). Nothing contained herein may be construed to amend the Subpart V regulations.

The States’ argument focuses on the distinction between direct (first stage) and indirect (second stage) restitution. Pursuant to the FSA, the court set up several means of restitution, both direct and indirect, for the crude oil overcharges underlying this lawsuit. The FSA directed the distribution of the funds contained in the court’s escrow (the M.D.L. 378 funds) and other crude oil overcharge funds not within the court’s control (the non-M.D.L. 378 funds). A portion of the funds has been distributed to the settling parties as direct restitution via a series of escrow accounts. The remaining funds (which are still being collected by DOE) are to be split three ways: (1) up to 20% is set aside for the Subpart V crude oil refund process; (2) the remaining 80% of the funds are split evenly between the States and the Federal government; (3) any funds left over from the 20% set aside once the Subpart V claims have been paid is also to be split evenly between the States and the Federal government. The FSA dictates the percentage distribution of funds to each of the States. The States argue that “direct” restitution for injured parties is accomplished by the M.D. L. 378 escrows (for the settling parties) and through the Subpart V refund process (for the nonsettling parties). “Indirect” restitution (restitution for the benefit of the general population) is to be accomplished exclusively through the States and Federal governments for the benefit of all energy consumers. The FSA sets forth various energy-related uses for the funds received by the States.

The States phrase the issue as being whether, under the Final Settlement Agreement, indirect restitution may be achieved other than through the States and Federal government. The issue actually is whether refunds to utilities for pass-through to utility customers qualifies as direct restitution. Because the court answers this question in the affirmative, the States’ motion will be denied.

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707 F. Supp. 1269, 105 Oil & Gas Rep. 21, 1989 U.S. Dist. LEXIS 2013, 1989 WL 18866, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-the-department-of-energy-stripper-well-exemption-litigation-ksd-1989.