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DEPARTMENT OF ENERGY 10 CFR Part 625 RIN Number: 1901-AB15 Price Competitive Sale of
Strategic Petroleum Reserve Petroleum; Standard Sales Provisions AGENCY: Department of Energy ACTION: Final rule; revised appendix. SUMMARY: On December 21, 1983, the Department of
Energy (DOE) published in the Federal Register a final rule governing
the price competitive sales of petroleum from the Strategic Petroleum Reserve
(SPR) in the event that the SPR is drawn down to respond to a severe energy
supply interruption or to meet obligations of the United States under the
Agreement on an International Energy Program.
The final rule provides for the publication and periodic update, as an
appendix to the rule, of Standard Sales Provisions (SSPs) containing or
describing contract clauses, terms and conditions of sale, and performance
and financial responsibility measures, which may be used for particular sales
of SPR petroleum. First published in
interim final form on January 20, 1984, the SSPs have since been updated
several times, with the latest version published in the Federal Register
on October 8, 1998 (63 FR 54196). As
provided in the rule, DOE is now issuing revised SSPs for use in an SPR
drawdown. EFFECTIVE
DATE: As of FOR FURTHER INFORMATION CONTACT: Thomas H. McGarry Strategic Petroleum Reserve FE-43, Room 3G-070 Phone: (202) 586-8197 Fax: (202) 586-7919 Email: Thomas.McGarry@hq.doe.gov Kelly. Gele, FE-4451 Strategic Petroleum Reserve Project Management Office Phone: (504) 734-4343 Fax: (504) 818-5343 Email: Kelly.Gele@spr.doe.gov Diane J. Stubbs Office
of Assistant General Counsel for Legislation and Regulatory Law GC-71, Room 6E-042 Phone: (202) 586-4297 Fax: (202) 586-0971 Email: diane.stubbs@hq.doe.gov SUPPLEMENTARY INFORMATION: I. Background A. The
Strategic Petroleum Reserve Drawdown Plan and Sales Rule B. General Sales
Procedures II. The
Revised Standard Sales Provisions III. Procedural
Requirements A. Review Under Executive Order 12866 B. Review Under
Regulatory Flexibility Act C. Review
Under the Paperwork Reduction Act D. Review
Under the National Environmental Policy Act E. Review
Under Executive Order 13132 F. Review
Under Executive Order 12988 G. Review
Under the Unfunded Mandates Reform Act of 1995 H.
Review Under the Treasury and General Government Appropriations Act, 1999 J. Review
Under Executive Order 13211 K.
Congressional Notification I. Background A. The Strategic Petroleum Reserve Drawdown Plan
and Sales Rule The Strategic Petroleum Reserve (SPR)
was established by the Energy Policy and Conservation Act of 1975 (EPCA),
P.L. 94-163, to store petroleum to diminish the impact of disruptions on
petroleum supplies and to carry out the obligations of the In the Energy Emergency Preparedness Act of 1982,
P.L. 97-229, Congress required a new "Drawdown" (Distribution)
Plan. The new plan, SPR Plan Amendment
No. 4, was transmitted to Congress on On Upon a Presidential decision to draw down the SPR,
DOE would issue a Notice of Sale, announcing the amounts and types of the SPR
petroleum to be sold, the delivery locations and modes, and other pertinent
information. The rule provides that
the Secretary of Energy or the Secretary’s designee would specify in the
Notice of Sale, by referencing the latest version of the SSPs, which of the
terms and conditions in the SSPs would or would not apply to a particular
sale (10 CFR §§ 625.3(a); 625.4(c)).
In addition, in the Notice of Sale, the Secretary could revise the
terms and conditions, or add new ones applicable to that sale (10 CFR §
625.3(a)). The rule provides that no
contract could be awarded to an offeror who had not unconditionally agreed to
all provisions made applicable by the Notice of Sale (10 CFR § 625.3(c)). B. General
Sales Procedures Under the SPR sales rule, the first step in the SPR
competitive sales process is the issuance of a Notice of Sale which lists the
volume, characteristics, and location of the petroleum for sale, delivery
dates and procedures for submitting offers, as well as measures for assuring
performance and financial responsibility. Over the course of a drawdown, several Notices of Sale
may be issued, each covering a sales period of one to two months. Offerors may have only five days from the
date a Notice of Sale is issued until offers are due, with delivery of oil
commencing no later than thirty days after the Presidential direction to draw
down the Reserve. Subsequent sales
periods will coordinate Notice of Sale issuance with standard industry
delivery periods. Because of the
possible short initial lead-time, the Department maintains a registry of
prospective offerors who will receive electronic notification of all Notices
of Sale. The next step in the sales process is for
prospective purchasers to submit offers, as specified in the Notice of
Sale. Offerors must unconditionally
accept all terms and conditions in the Notice of Sale, and submit an offer
guarantee based on potential contract value.
After submission, the offers are evaluated and "apparently
successful offerors" are selected. The offer evaluation process is
structured so that the offerors bidding the highest prices determine their
method of delivery, up to the limits of the distribution system, with
specific delivery arrangements negotiated later in the process. All apparently successful offerors are required,
within five business days of being notified, to provide a letter of credit as
a guarantee of performance and payment of amounts due under the
contract. Upon timely receipt of the
letters of credit, and a final determination by the Contracting Officer that
offers are responsive and offerors responsible, the DOE issues the Notices of
Award. Deliveries then commence to the
purchasers, consistent with their arrangements for commercial pipeline or
marine vessel transportation. Purchasers are invoiced following crude oil deliveries. II.
The Revised Standard Sales
Provisions A. Major Revisions The SSPs are being revised as contemplated by the
SPR sales rule. The revisions primarily relate to the increased use of the
internet as the primary means of providing SPR program information and
conducting business operations. The
most significant of these revisions is the adoption by DOE of a web-based
drawdown sales system for registering and communicating with potential
offerors, posting sales documents and receiving offers. The new system
replaces the existing registration database in its entirety, so any
interested parties who had previously registered on DOE’s Sales Offerors
Mailing List must complete a new registration in order to receive drawdown
sales notifications and participate in a sale. Also, due to the transference of the sales
process to the internet, several former SSP exhibits, e.g., Exhibit A,
“Strategic Petroleum Reserve Sales Offer Form,” have been eliminated as their
functions have been superseded by the on-line program. Other noteworthy revisions relate to the crude oil
streams and delivery options offered during a sale. Maya crude oil is no longer stored as a
separate segregation at the SPR, resulting in the elimination of former
Master Line Item 003, Bryan Mound Maya. In addition, a change has been made
to the nominal definition of marine delivery line items, wherein the three
sequential 10-day periods within a sales cycle for vessel or barge deliveries
have been replaced by a single 30-day period which coincides with the cycle.
Also, as the SPR crude oil stream assays are periodically updated according
to a long-term storage cavern sampling program, the revised provisions
provide an internet link to the latest assay files for each of the eight SPR
crude oil streams. In accordance with subsection 161 (j) of the Energy
Policy and Conservation Act (42 U.S.C. 6241 (j)), the State of Hawaii, or a
State-designated eligible entity authorized to act on the State’s behalf, may
submit a “binding offer” for the purchase of SPR petroleum. A new sales provision C.7 summarizes the
rights accorded to the State under that authority. Finally, cash wire deposits and electronic funds
transfers to the account of the U.S. Treasury are no longer acceptable
methods for submission of offer guarantees.
An irrevocable standby letter of credit is now the only acceptable
form of offer guarantee. Slightly
revised irrevocable standby letter of credit formats have been provided for
both the offer guarantee and the payment and performance guarantee. The instructions for the return of cash
wire deposit or funds transfer offer guarantees have been eliminated. The following is a provision-by-provision
discussion of the noteworthy changes to the SSPs. B. Revised Provisions SSP No. A.1 List of abbreviations SSP No. A.5 Sales Notification List (SNL) These
provisions make clear that the previous Sales Offeror Mailing List has been
totally replaced by the new on-line Sales Notification List, and that new
registration is required on the SNL. SSP No. A.2 Definitions New
subparagraph (e) is the definition of an electronic signature, as recognized
for the internet-based sales program. SSP A.6 Publication of the Notice of This
provision reinforces that such publication will primarily be accomplished by
electronically notifying the SNL registrants and posting the document on
identified Department of Energy websites. SSP No. B.1 Requirements for a valid offer - caution to
offerors SSP No. B.9 Submission of offers and modification of previously
submitted offers These
provisions stipulate that offers to purchase SPR petroleum must be submitted,
modified or withdrawn using the internet-based sales system. SSP No. B.7 State of The
provision summarizes the rights of the State of Hawaii under its authority to
submit a binding offer to purchase SPR petroleum in accordance with
subsection 161 (j) of the Energy Policy and Conservation Act (42 U.S.C. 6241
(j)). SSP No. B.12 Offer guarantee This
provision specifies that the only acceptable offer guarantee is an
irrevocable standby letter of credit, and allows an offeror to fax a properly
executed copy in advance of the original document. The issuing financial institution must be a
participant in the Fedwire Deposit System Network funds transfer system. SSP No. B.18
Notice of This provision redefines marine
delivery line items (tanker and barge) to be single 30-day delivery periods
instead of the former three sequential 10-day delivery periods within a sales
cycle. SSP No. B.22 Procedures for
evaluation of offers This provision describes how DOE
evaluates offers in relation to the Government’s estimates of the market
values for each SPR crude oil stream offered for sale. SSP No. C.21
Payment and Performance Letter of Credit The
requirement that the issuing financial institution be a participant in the Fedwire
Deposit System Network funds transfer system also applies to payment and
performance irrevocable standby letters of credit. III. Procedural
Requirements A. Review
Under Executive Order 12866 The Office of Information and Regulatory Affairs of
the Office of Management and Budget (OMB) has determined that today's
regulatory action is not a "significant regulatory action" under
Executive Order 12866, "Regulatory Planning and Review," 58 FR
51735 (October 4, 1993). Accordingly,
this action was not subject to review under the Executive Order. B. Review
Under the Regulatory Flexibility Act The
Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires preparation
of an initial regulatory flexibility analysis for any rule that by law must
be proposed for public comment, unless the agency certifies that the rule, if
promulgated, will not have a significant economic impact on a substantial
number of small entities. As required
by Executive Order 13272, “Proper Consideration of Small Entities in Agency
Rulemaking,” 67 FR 53461 (August 16, 2002), DOE published procedures and
policies on February 19, 2003, to ensure that the potential impacts of its
rules on small entities are properly considered during the rulemaking process
(68 FR 7990). DOE has made its
procedures and policies available on the Office of General Counsel’s Web
site: http://www.gc.doe.gov. No statute or other law requires DOE to
propose today’s rule for public comment.
Accordingly, the requirements of the Regulatory Flexibility Act do not
apply to this rulemaking. C. Review
Under the Paperwork Reduction Act This rulemaking will impose no
new information or record keeping requirements. Accordingly, OMB clearance is not required under
the Paperwork Reduction Act (44 U.S.C. 3501 et seq.) D. Review
Under the National Environmental Policy Act DOE has determined that this rule falls into a
class of actions that are categorically excluded from review under the National
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) and the
Department’s implementing regulations at 10 CFR part 1021. Specifically, this rule is strictly
procedural, and, therefore, is covered by the Categorical Exclusion in
paragraph A6 to subpart D, 10 CFR part 1021. Accordingly, neither an environmental
assessment nor an environmental impact statement is required. E. Review
Under Executive Order 13132 Executive Order 13132, "Federalism," 64
FR 43255 ( F. Review
Under Executive Order 12988 With respect to the review of existing regulations
and the promulgation of new regulations, section 3(a) of Executive Order
12988, "Civil Justice Reform" (61 FR 4729, February 7, 1996),
imposes on Federal agencies the general duty to adhere to the following
requirements: (1) eliminate drafting
errors and ambiguity; (2) write regulations to minimize litigation; and (3)
provide a clear legal standard for affected conduct rather than a general
standard and promote simplification and burden reduction. Section 3(b) of Executive Order 12988
specifically requires that Executive agencies make every reasonable effort to
ensure that the regulation: (1)
clearly specifies the preemptive effect, if any; (2) clearly specifies any
effect on existing Federal law or regulation; (3) provides a clear legal
standard for affected conduct while promoting simplification and burden reduction;
(4) specifies the retroactive effect, if any; (5) adequately defines key
terms; and (6) addresses other important issues affecting clarity and general
draftsmanship under any guidelines issued by the Attorney General. Section 3(c) of Executive Order 12988
requires Executive agencies to review regulations in light of applicable
standards in section 3(a) and section 3(b) to determine whether they are met
or it is unreasonable to meet one or more of them. DOE has completed the required review and
determined that, to the extent permitted by law,
this rule meets the relevant standards of Executive Order 12988. G. Review
Under the Unfunded Mandates Reform Act of 1995. Title II of the Unfunded Mandates Reform Act of 1995
(Pub. L. 104-4) requires each Federal agency to assess the effects of Federal
regulatory actions on State, local, and tribal governments and the private
sector. With respect to a proposed
regulatory action that may result in the expenditure by State, local and
tribal governments, in the aggregate, or by the private sector of $100
million or more (adjusted annually for inflation), section 202 of the Act
requires a Federal agency to publish estimates of the resulting costs,
benefits, and other effects on the national economy (2 U.S.C. 1532(a),(b)). The Act also
requires a Federal agency to develop an effective process to permit timely
input by elected officers of State, local, and tribal governments on a
proposed "significant intergovernmental mandate," and requires an
agency plan for giving notice and opportunity for timely input to potentially
affected small governments before establishing any requirements that might
significantly or uniquely affect small governments. On H.
Review Under the Treasury and General Government Appropriations Section
654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L.
105-277) requires Federal agencies to issue a Family Policymaking Assessment
for any rule that may affect family well-being. This rule would not have any impact on the
autonomy or integrity of the family as an institution. Accordingly, DOE has concluded that it is
not necessary to prepare a Family Policymaking Assessment.
Section 515 of the Treasury and General Government
Appropriations Act, 2001 (44 U.S.C. 3516, note) provides for agencies to
review most disseminations of information to the public under guidelines
established by each agency pursuant to general guidelines issued by OMB. OMB’s guidelines were published at 67 FR
8452 ( J. Review
Under Executive Order 13211 Executive Order 13211, "Actions Concerning Regulations
That Significantly Affect Energy Supply, Distribution, or Use," 66 FR
28355 (May 22, 2001) requires Federal agencies to prepare and submit to the
Office of Information and Regulatory Affairs (OIRA), Office of Management and
Budget, a Statement of Energy Effects for any proposed significant energy
action. A "significant energy
action" is defined as any action by an agency that promulgated or is
expected to lead to promulgation of a final rule, and that: (1) is a
significant regulatory action under Executive Order 12866, or any successor
order; and (2) is likely to have a significant adverse effect on the supply,
distribution, or use of energy, or (3) is designated by the Administrator of
OIRA as a significant energy action.
For any proposed significant energy action, the agency must give a
detailed statement of any adverse effects on energy supply, distribution, or
use should the proposal be implemented, and of reasonable alternatives to the
action and their expected benefits on energy supply, distribution, and
use. Today's regulatory action would
not have a significant adverse effect on the supply, distribution, or use of
energy and, therefore, is not a significant energy action. Accordingly, DOE has not prepared a
Statement of Energy Effects. K. Congressional
Notification As
required by 5 U.S.C. 801, DOE will report to Congress on the promulgation of
today’s rule prior to its effective date.
The report will state that it has been determined that the rule is not
a “major rule” as defined by 5 U.S.C. 804(2). List of Subjects in 10 CFR
part 625 Government contracts, Oil and gas reserves,
Strategic and critical materials. Issued in John D. Shages Deputy Assistant Secretary Petroleum Reserves |
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