KF27 I5542 1980% COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE HARLEY O. STAGGERS, West Virginia, Chairman JOHN D. DINGELL, Michigan RICHARDSON PREYER, North Carolina JAMES J. FLORIO, New Jersey ANTHONY TOBY MOFFETT, Connecticut JIM SANTINI, Nevada ANDREW MAGUIRE, New Jersey EDWARD J. MARKEY, Massachusetts THOMAS A. LUKEN, Ohio DOUG WALGREN, Pennsylvania ALBERT GORE, JR., Tennessee BARBARA A. MIKULSKI, Maryland RONALD M. MOTTL, Ohio PHIL GRAMM, Texas AL SWIFT, Washington MICKEY LELAND, Texas JAMES T. BROYHILL, North Carolina TOM CORCORAN, Illinois WILLIAM E. DANNEMEYER, California CONTENTS Bloom, Paul, Special Counsel for Compliance, Department of Energy.... Breznay, George B., Acting Director, Office of Hearings and Appeals, Chelberg, Col. Robert D., Staff Director, Office of the Deputy Assistant Coleman, Lynn R., Acting Deputy Secretary, Department of Energy America Page 5, 43 Fygi, Eric, Acting General Counsel, Department of Energy.. Harvey, Gordon, Acting Assistant Administrator, Office of Enforcement, Hewitt, John A., Jr., Chief Financial Officer, Department of Energy. Kirby, Peter M., counsel, The Transportation Group Landry, James E., senior vice president and general counsel, Air Trans- port Association of America, and also on behalf of American Associ- ation of Railroads, American Trucking Associations, Inc., and Ameri- can Bus Association (The Transportation Group)...... Shenefield, John H., Associate Attorney General, Department of Justice... Energy Department: Memorandum to Paul L. Bloom from Carl A. Cor- Letter submitted for the record by American Public Transit Association, Jack L. Gilstrap, executive vice president. Statement submitted for the record by Texas Oil Marketers Association......... Appendix A-Getty consent order and Department of Energy materials relat- ed to the development of the Department of Energy's distribution plan of Appendix B-Subcommittee correspondence with the Department of Energy and related materials concerning Getty and other oil company settlements.. Appendix C-Correspondence and related materials between the subcommit- tee and the Department of Energy's Office of Hearings and Appeals con- cerning the Department of Energy's subpart V regulations..... Appendix D-Correspondence between the Department of Justice and the subcommittee concerning the Getty and other oil company settlements.... Appendix E-Correspondence with the General Accounting Office concerning the Getty and other oil company settlements and related enforcement Appendix F-Subcommittee correspondence with the Department of Defense concerning the Getty distribution plan Appendix G-Subcommittee correspondence with the Department of the ENFORCEMENT OF MAJOR REFINER CASES: GETTY OIL AND OTHER SETTLEMENTS TUESDAY, OCTOBER 14, 1980 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON ENERGY AND Power, COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, Washington, D.C. The subcommittee met, pursuant to notice, at 10 a.m. in room 2322, Rayburn House Office Building, Hon. John D. Dingell (chairman) presiding. Mr. DINGELL. The subcommittee will come to order. This morning the Subcommittee on Energy and Power goes into matters relative to settlements by the Department of Energy on overcharges within the petroleum industry. Prior to 1977, this subcommittee was very critical of the failure of the then Federal Energy Administration to reduce the backlog of alleged oil price and allocation violations by major refiners. No audits had been completed and enforcement was nearly nonexistent. In July 1977, an FEA study, called the Sporkin Report, recommended combining auditors and lawyers at the new Energy Department into one office to aid enforcement. It also urged conferring on the DOE exclusive responsibility and authority for the conduct of all litigation. The subcommittee held hearings on this report in September 1977 and urged adoption of the recommendations. In October 1977 the Office of Special Counsel was established at the Energy Department. In April 1978, after considerable prodding by this subcommittee, the Energy and Justice Departments entered into a memorandum of understanding under which each agency shares primary civil litigation duties of matters arising under the Emergency Petroleum Allocation Act. This sharing is determined on a case-by-case basis. The Special Counsel's Office is a success story. The memorandum is not. In the case of the Special Counsel, nearly all audits for the 197376 period are complete. Administrative, civil, and criminal actions have been initiated. Over $1.5 billion in refunds, price rollbacks, eliminations of banks, and payments for restitution have been collected, together with over $2.7 million in penalties, through the use of consent orders to settle some claims against Amoco, Cities Service, Getty, Kerr-McGee, Phillips, Sun, Arco, Exxon, Chevron, Gulf, Mobil, Texaco, and Union Oil. The settlements themselves are generally supported by the subcommittee, although not necessarily every aspect of them. Howev er, the DOE's indirect restitution schemes, and Justice's role in concurring in these orders and in trying to terminate and undermine the memorandum of understanding are of particular concern to us today. Last December, Getty Oil and the DOE's Office of the Special Counsel entered into consent orders calling for $25 million to be deposited in escrow under DOE control. Over the next 6 months, the DOE wrangled internally over how to distribute these funds. On July 11, 1980, the DOE announced a plan to distribute $21 million to 20 States and $4 million to military personnel. One State, Missouri, has already received over $1.3 million. The subcommittee challenged the plan as not being authorized and asked the Comptroller General to rule on its legality. In an October 10, 1980 opinion which we are releasing today, the GAO concluded: The current energy plan for distribution of the Getty funds is unauthorized and Energy cannot lawfully implement it. Under Subpart V of Part 205 of its regulations Energy must use the procedures it has adopted for distributing refunds in instances where victims of violations cannot be readily ascertained. Any portion of the Getty funds which cannot be distributed under Subpart V must be deposited in the Treasury as miscellaneous receipts. The GAO said that subpart V is a statutory regulation which is binding upon the DOE. In an October 8, 1980 letter to me, Secretary Duncan said that on August 26 he instructed the DOE General Counsel to seek the views of the Department of Justice as to the legal questions raised by the subcommittee. Strangely, the General Counsel did not do so until last Friday, according to Justice officials. Now that the GAO has ruled on the matter, there is no need for this opinion. Surely Justice has better things to do. The DOE must abide by the GAO ruling and so advise the States and the Defense Department. While Getty may not like the result, it is hardly in a position to object. In addition to the Getty fund, more than $200 million has been collected by the DOE's Office of the Special Counsel and Office of Enforcement and placed in escrow accounts as restitution. More can be expected. As the GAO observed, the regulations provide that these offices may petition the DOE's Office of Hearings and Appeals to institute proceedings to distribute the funds to individuals and firms claiming to be overcharged. However, only 13 petitions have been filed as of October 10. The OHA accepted jurisdiction over seven. We want to learn why more have not been filed and why six were denied. On September 10, 1980 the OHA issued a Federal Register notice asking comments as to how some $90 million in consent order funds should be distributed. The OHA said it is particularly interested in alternative distribution mechanisms. The notice concluded that there is reason to believe that it is not likely that the Office of Hearings and Appeals will be able to identify a substantial number of purchasers that are entitled to a portion of the consent funds. The OHA apparently relied on the filed documents to reach this conclusion. No proceeding was instituted as required by the regula |