Department of Energy Has Made Slow Progress Resolving Alleged Crude Oil Reseller Pricing Violations

EMD-82-46: Published: Jun 1, 1982. Publicly Released: Jun 4, 1982.

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GAO reviewed the Department of Energy (DOE) crude oil reseller program. Specifically, GAO examined the: (1) extent of civil and criminal violations; (2) slowness in issuing proposed remedial orders; (3) subpoena problems; (4) adequacy of staffing; (5) settlement efforts; and (5) effect on the program of the reorganization of the Economic Regulatory Administration (ERA), which took place in late 1981.

GAO found that the situation in the crude reseller program has not improved significantly since the last GAO review of the program. The crude oil reseller program was established to enforce the Emergency Petroleum Allocation Act of 1973 which required the President to establish regulations for controlling the allocation and the selling price of crude oil and refined products. The President delegated this authority to DOE and its predecessor agencies. The program will not improve, regardless of the ambitious objectives ERA will set for fiscal year 1982, without a firm commitment and concerted actions on the part of DOE to resolve the alleged violations identified in crude reseller audits. DOE must be willing to continue the crude reseller program long enough to obtain the data necessary to disclose potential willful violations, including evidence of involvement by major refiners. The necessary work must be done because of the 5-year statute of limitations on willful violations. In addition, GAO found that: (1) the number of audits undertaken and the number of violations alleged have increased; (2) ERA audit coverage of the sales and purchases of crude oil by major refiners has been inadequate; (3) ERA has experienced decreasing company cooperation; (4) ERA staff morale has continued to suffer because of uncertainties about the program's future; (5) the reorganization removed the position of Director, Crude Oil Reseller Program; and (6) ERA has had little success in negotiating settlements of alleged violations with companies.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: DOE has reorganized the ERA since this recommendation was made and does not intend to make the recommended organizational change. Because the ERA is in the process of phasing out its enforcement program, GAO does not plan to pursue this recommendation.

    Recommendation: The Secretary of Energy should direct the Administrator of the Economic Regulatory Administration to reestablish the position of Director, Crude Oil Reseller Program, and fill it with a highly experienced official.

    Agency Affected: Department of Energy

  2. Status: Closed - Not Implemented

    Comments: This recommendation is being repeated in a forthcoming report. Any necessary followup action will be conducted in conjunction with that report.

    Recommendation: The Secretary of Energy should direct the Administrator of the Economic Regulatory Administration to provide for audit coverage of selected major refiners' crude oil sales and purchase activities, based on the implications of the former Office of Enforcement study of crude oil pipeline transactions, to assess the legality of the refiners' sales and purchase transactions with crude oil resellers, where not precluded by existing global settlements.

    Agency Affected: Department of Energy


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