Proposed Rule2022-16081
Procedures for the Acquisition of Petroleum for the Strategic Petroleum Reserve
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
August 4, 2022
Issuing agencies
Energy Department
Abstract
The Energy Policy Act of 2005 directed the Secretary of Energy to develop procedures for the acquisition of petroleum products for the Strategic Petroleum Reserve ("SPR"). Pursuant to that direction, the Department of Energy ("DOE" or the "Department") promulgated the Procedures for Acquisition of Petroleum for the Strategic Petroleum Reserve. Over the intervening 16 years, the existing regulations have become outdated due to changes in statutory authority, agency practice, and market dynamics. In this notice of proposed rulemaking ("NOPR"), DOE proposes to amend the procedures for the acquisition of petroleum products for the SPR to: more closely align the regulatory language with the applicable statutory language; remove outdated procedures for acquisition under the royalty-in-kind program; add procedures for acquisition by exchange to better reflect petroleum product acquisition operations as conducted by the Office of Petroleum Reserves; and increase the Department's flexibility in structuring acquisitions.
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[Federal Register Volume 87, Number 149 (Thursday, August 4, 2022)]
[Proposed Rules]
[Pages 47652-47659]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-16081]
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DEPARTMENT OF ENERGY
10 CFR Part 626
RIN 1901-AB56
Procedures for the Acquisition of Petroleum for the Strategic
Petroleum Reserve
AGENCY: Office of Petroleum Reserves, Department of Energy.
ACTION: Notice of proposed rulemaking and request for comment.
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SUMMARY: The Energy Policy Act of 2005 directed the Secretary of Energy
to develop procedures for the acquisition of petroleum products for the
Strategic Petroleum Reserve (``SPR''). Pursuant to that direction, the
Department of Energy (``DOE'' or the ``Department'') promulgated the
Procedures for Acquisition of Petroleum for the Strategic Petroleum
Reserve. Over the intervening 16 years, the existing regulations have
become outdated due to changes in statutory authority, agency practice,
and market dynamics. In this notice of proposed rulemaking (``NOPR''),
DOE proposes to amend the procedures for the acquisition of petroleum
products for the SPR to: more closely align the regulatory language
with the applicable statutory language; remove outdated procedures for
acquisition under the royalty-in-kind program; add procedures for
acquisition by exchange to better reflect petroleum product acquisition
operations as conducted by the Office of Petroleum Reserves; and
increase the Department's flexibility in structuring acquisitions.
DATES: DOE will accept comments, data, and information regarding this
NOPR no later than September 6, 2022.
Comments regarding the likely competitive impact of the proposed
standard are to be sent to the DOE by the methods set forth in the
ADDRESSES section on or before September 6, 2022.
ADDRESSES: Interested persons are encouraged to submit comments using
the Federal eRulemaking Portal at <a href="http://www.regulations.gov">www.regulations.gov</a>. Follow the
instructions for submitting comments. Alternatively, interested persons
may submit comments, identified by RIN 1901-AB56, by any of the
following methods:
1. Federal eRulemaking Portal: <a href="http://www.regulations.gov">www.regulations.gov</a>. Follow the
instructions for submitting comments.
2. Email: <a href="/cdn-cgi/l/email-protection#11626163706262786265707f72745179603f757e743f767e67"><span class="__cf_email__" data-cfemail="196a696b786a6a706a6d78777a7c597168377d767c377e766f">[email protected]</span></a>. Include the RIN 1901-AB56 in
the subject line of the message.
3. Postal Mail: U.S. Department of Energy, Office of the General
Counsel (GC-33), Room 6B-159, 1000 Independence Avenue SW, Washington,
DC 20585.
4. Hand Delivery/Courier: U.S. Department of Energy, Room 6B-159,
1000 Independence Avenue SW, Washington, DC 20585.
No telefacsimiles (faxes) will be accepted. For detailed
instructions on submitting comments and additional information on the
rulemaking process, see section III, Public Participation, for details.
Docket: The docket, which includes Federal Register notices,
comments, and other supporting documents/materials, is available for
review at <a href="http://www.regulations.gov">www.regulations.gov</a>. All documents in the docket are listed
in the <a href="http://www.regulations.gov">www.regulations.gov</a> index. However, some documents listed in the
index, such as those containing information that is exempt from public
disclosure, may not be publicly available.
The docket web page can be found at the <a href="http://www.regulations.gov">www.regulations.gov</a> web
page associated with RIN 1901-AB56. The docket web page contains simple
instructions on how to access all documents, including public comments,
in the docket. See section III, Public Participation, for information
on how to submit comments through <a href="http://www.regulations.gov">www.regulations.gov</a>.
FOR FURTHER INFORMATION CONTACT: Mr. Thomas McGarry, U.S. Department of
Energy, Office of Petroleum Reserves, Office of Fossil Energy and
Carbon Management, Forrestal Building, Room 3G-024, 1000 Independence
Avenue SW, Washington, DC 20585; (202) 586-8197, email:
<a href="/cdn-cgi/l/email-protection#91e5f9fefcf0e2bffcf2f6f0e3e3e8d1f9e0bff5fef4bff6fee7"><span class="__cf_email__" data-cfemail="75011d1a1814065b1816121407070c351d045b111a105b121a03">[email protected]</span></a>; or Mr. Edward Toyozaki, U.S. Department of
Energy, Office of the General Counsel, Forrestal Building, Room 6B-159,
1000 Independence Avenue SW, Washington, DC 20585; (202) 586-0126,
email: <a href="/cdn-cgi/l/email-protection#402524372132246e342f392f3a212b290028316e242f256e272f36"><span class="__cf_email__" data-cfemail="5a3f3e2d3b283e742e352335203b31331a322b743e353f743d352c">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Background and Introduction
II. Discussion of Proposed Rule
III. Public Participation
IV. Regulatory Review
V. Approval of the Office of the Secretary
I. Background and Introduction
The SPR was established by the Energy Policy and Conservation Act
(``EPCA''), (Pub. L. 94-163), to store petroleum products to diminish
the impact of disruptions on petroleum supplies and to carry out the
obligations of the United States under the International Energy
Program. (42 U.S.C. 6231 et seq.) Section 160 of EPCA authorizes the
Secretary of Energy to acquire petroleum products for the SPR.
Subsequently, the Energy Policy Act of 2005, (Pub. L. 109-58), amended
EPCA and directed the Secretary of Energy to develop, with the
opportunity for public notice and comment, procedures for the
acquisition of petroleum products for the SPR (42 U.S.C. 6240). The
principal method for acquiring SPR petroleum products is by purchase,
but SPR petroleum may also be acquired via exchange. (42 U.S.C.
6240(a)) On November 8, 2006, and pursuant to EPCA, as amended by the
Energy Policy Act of 2005, DOE established procedures for the
acquisition of SPR
[[Page 47653]]
petroleum at 10 CFR part 626. 71 FR 65376 (``2006 final rule''). The
2006 final rule included provisions regarding the direct purchase,
exchange, and transfer of royalty oil from the Department of the
Interior (``DOI'').
Subsequent to DOE promulgating the 2006 final rule, the Government
Accountability Office and the DOI Inspector General published several
reports between 2008 and 2009 on the shortcomings of and personnel
misconduct related to the royalty-in-kind program, and, as a result,
the DOI terminated its royalty-in-kind program in 2010. Then, in 2013,
with section 306(a) of the Bipartisan Budget Act of 2013, Congress
repealed DOE's authority to conduct SPR acquisitions under the royalty-
in-kind program that was incorporated into the 2006 final rule.
However, 10 CFR part 626 has not been updated since it was promulgated
by DOE in the 2006 final rule, and, thus, does not reflect the
intervening changes to the authorizing statutory authority.
Additionally, as DOE has had numerous opportunities to conduct
exchanges, mostly in an emergency exchange capacity, DOE is in a
position to rewrite these regulations to both provide more clarity and
better reflect operational realities.
Lastly, in light of changing petroleum product market dynamics, the
Department intends to align the acquisition regulations more closely
with the statutory language of 42 U.S.C. 6240 and provide the Secretary
with additional flexibility in structuring acquisitions.
II. Discussion of Proposed Rule
The proposed rule would revise 10 CFR part 626 in several respects.
First, the proposed rule would update language throughout part 626 to
more closely align with the statutory language found in Section 160 of
EPCA. This includes updating the definitions for ``DOE'', ``Exchange'',
and ``Strategic Petroleum Reserve'', while adding new definitions for
``Premium'', ``Requestor'', and ``Solicitation''. The definition
pertaining to ``DOI'' would also be struck. These changes would provide
more clarity and maintain continuity throughout the part while
supporting other proposed changes.
Second, because Congress repealed DOE's authority for it in 2013,
all references to the royalty-in-kind program would be removed. This
includes removal of the procedures for acquisition under the royalty-
in-kind program currently at 10 CFR 626.7.
Third, the proposed rule would codify procedures for the exchange
of petroleum products at a revised 10 CFR 626.7, as well as add
references to ``exchange'' throughout part 626, as appropriate. These
proposed changes are intended to reflect current operational practices
of the SPR. Since 1996, in accordance with statutory authority in
Sections 159 and 160 of EPCA, DOE has conducted over a dozen emergency
exchanges with private industry. In these emergency exchanges, upon
request from refiners and verification of the request by DOE, the SPR
provides emergency barrels of petroleum product to refiners; in return,
the requesting refiners later provide the SPR the original number of
barrels plus extra barrels called a ``premium.'' In addition to the
emergency exchanges by request, since 2000, DOE has twice utilized the
exchange authority to conduct solicitations for exchange, whereby the
general public may bid to contract to accept barrels of SPR petroleum
products in the present and return those barrels plus a premium in the
future. DOE is proposing to codify these long-standing procedures into
the acquisition regulations.
Fourth, the proposed rule would amend 10 CFR 626.5 and 626.6 to
increase flexibility for DOE to enter into contracts for the purchase
of petroleum products, consistent with the requirements and objectives
of section 160 of EPCA. These changes ensure that DOE continues to
acquire petroleum products in accordance with the competitive
principles of the Federal Acquisition Regulations and the DOE
Acquisition Regulations, while providing DOE the flexibility to use
either fixed-price or index-priced contracts for future petroleum
product acquisitions. DOE is proposing these changes because the
current acquisition regulations, including the requirement that DOE
acquire oil in accordance with the Federal Acquisition Regulations and
the requirement to use a price index to set purchase prices,
unnecessarily restrict DOE's flexibility to procure petroleum products
using fixed price contracts, notwithstanding the fact that there may be
circumstances in which a fixed price acquisition would better meet the
statutory objectives of EPCA.
Lastly, the proposed rule would add 10 CFR 626.9 to implement 42
U.S.C. 6240(f). This final proposed change has been included because,
while the Department has had the statutory authority to suspend
previously announced or contracted acquisitions of petroleum products
or divert the injection of petroleum products into the SPR when there
is a perceived imminent severe energy supply interruption, to date,
this authority has not been incorporated into any existing regulations.
III. Public Participation
DOE will accept comments, data, and information regarding this NOPR
on or before the date provided in the DATES section at the beginning of
this proposed rule. Interested parties may submit comments, data, and
other information using any of the methods described in the ADDRESSES
section at the beginning of this document.
Submitting comments via <a href="http://www.regulations.gov">www.regulations.gov</a>. The
<a href="http://www.regulations.gov">www.regulations.gov</a> web page will require you to provide your name and
contact information. Your contact information will not be publicly
viewable except for your first and last names, organization name (if
any), and submitter representative name (if any). If your comment is
not processed properly because of technical difficulties, DOE will use
this information to contact you. If DOE cannot read your comment due to
technical difficulties and cannot contact you for clarification, DOE
may not be able to consider your comment.
However, your contact information will be publicly viewable if you
include it in the comment itself or in any documents attached to your
comment. Any information that you do not want to be publicly viewable
should not be included in your comment, nor in any document attached to
your comment. Otherwise, persons viewing comments will see only first
and last names, organization names, correspondence containing comments,
and any documents submitted with the comments.
Do not submit to <a href="http://www.regulations.gov">www.regulations.gov</a> information the disclosure of
which is restricted by statute, such as trade secrets and commercial or
financial information (hereinafter referred to as Confidential Business
Information (``CBI'')). Comments submitted through <a href="http://www.regulations.gov">www.regulations.gov</a>
cannot be claimed as CBI. Comments received through the website will
waive any CBI claims for the information submitted. For information on
submitting CBI, see the Confidential Business Information section
below.
DOE processes submissions made through <a href="http://www.regulations.gov">www.regulations.gov</a> before
posting. Normally, comments will be posted within a few days of being
submitted. However, if large volumes of comments are being processed
simultaneously, your comment may not be viewable for up to several
weeks. Please keep the comment tracking number that <a href="http://www.regulations.gov">www.regulations.gov</a>
[[Page 47654]]
provides after you have successfully uploaded your comment.
Submitting comments via email, hand delivery/courier, or postal
mail. Comments and documents submitted via email, hand delivery/
courier, or postal mail also will be posted to <a href="http://www.regulations.gov">www.regulations.gov</a>. If
you do not want your personal contact information to be publicly
viewable, do not include it in your comment or any accompanying
documents. Instead, provide your contact information in a cover letter.
Include your first and last names, email address, telephone number, and
optional mailing address. The cover letter will not be publicly
viewable as long as it does not include any comments.
Include contact information each time you submit comments, data,
documents, and other information to DOE. If you submit via postal mail
or hand delivery/courier, please provide all items on a CD, if
feasible, in which case it is not necessary to submit printed copies.
No telefacsimiles (faxes) will be accepted.
Comments, data, and other information submitted to DOE
electronically should be provided in PDF (preferred), Microsoft Word or
Excel, WordPerfect, or text (ASCII) file format. Provide documents that
are written in English, and that are free of any defects or viruses.
Documents should not contain special characters or any form of
encryption and, if possible, they should carry the electronic signature
of the author.
Confidential Business Information. Pursuant to 10 CFR 1004.11, any
person submitting information that he or she believes to be
confidential and exempt by law from public disclosure should submit via
email, postal mail, or hand delivery/courier two well-marked copies:
One copy of the document marked ``confidential'' including all the
information believed to be confidential, and one copy of the document
marked ``non-confidential'' that deletes the information believed to be
confidential. Submit these documents via email or on a CD, if feasible.
DOE will make its own determination about the confidential status of
the information and will treat it according to its determination. It is
DOE's policy that all comments, including any personal information
provided in the comments, may be included in the public docket, without
change and as received, except for information deemed to be exempt from
public disclosure.
IV. Regulatory Review
A. Executive Order 12866
This proposed rule has been determined to not be 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 that Executive order by the Office of
Information and Regulatory Affairs (``OIRA'') of the Office of
Management and Budget (``OMB'').
B. Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires the
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. The Department
has made its procedures and policies available on the Office of General
Counsel's website: <a href="http://www.energy.gov/gc/office-general-counsel">www.energy.gov/gc/office-general-counsel</a>.
The proposed rule would update the procedures DOE utilizes for the
acquisition of petroleum products for the SPR, change definitions, and
remove references to the repealed royalty-in-kind program. DOE has
reviewed the proposed changes under the provisions of the Regulatory
Flexibility Act and the procedures and policies published on February
19, 2003. These proposed procedures are procedural and not designed to
set the terms or conditions of an acquisition and apply only to
entities that are engaged in the sale of petroleum products to the
Strategic Petroleum Reserve. Historically, Strategic Petroleum Reserve
acquisitions have typically been large volume acquisitions, and usually
filled by larger entities operating in the petroleum industry.
Therefore, the proposed procedures are unlikely to directly affect
small businesses or other small entities. For these reasons, DOE
certifies that this proposed rule would not have a significant economic
impact on a substantial number of small entities. Accordingly, DOE has
not prepared a regulatory flexibility analysis for this rulemaking.
DOE's certification and supporting statement of factual basis will be
provided to the Chief Counsel for Advocacy of the Small Business
Administration for review under 5 U.S.C. 605(b).
C. Paperwork Reduction Act of 1995
The proposed rule would 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 of 1969
Per 10 CFR 1021.410(a), DOE has determined that promulgation of
these regulations fall into a class of actions that does not
individually or cumulatively have a significant impact on the human
environment as set forth under DOE's regulations implementing the
National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).
Furthermore, this proposed rulemaking is covered under the Categorical
Exclusion found in DOE's National Environmental Policy Act regulations
at paragraph A6 of appendix A to subpart D, 10 CFR part 1021, which
applies to rulemakings that are strictly procedural. Accordingly,
neither an EIS nor an EA is required.
E. Executive Order 13132
Executive Order 13132, ``Federalism,'' 64 FR 43255 (August 10,
1999), imposes certain requirements on agencies formulating and
implementing policies or regulations that preempt State law or that
have federalism implications. The Executive order requires agencies to
examine the constitutional and statutory authority supporting any
action that would limit the policymaking discretion of the States and
to carefully assess the necessity for such actions. DOE examined this
proposed rule and determined that it would not preempt State law and
would not have a substantial direct effect on the States, on the
relationship between the national government and the States, or on the
distribution of power and responsibilities among the various levels of
Government. No further action is required by Executive Order 13132.
F. Executive Order 13175
Executive Order 13175, ``Consultation and Coordination with Indian
Tribal Governments,'' 65 FR 67249, November 9, 2000, applies to agency
regulations that have Tribal implications, that is, regulations that
have substantial direct effects on one or more Indian tribes, on the
relationship between the Federal Government and Indian Tribes, or on
the distribution of power and
[[Page 47655]]
responsibilities between the Federal Government and Indian Tribes. The
proposed rule has been analyzed in accordance with the principles and
criteria contained in Executive Order 13175. Because this proposed rule
would not significantly or uniquely affect the communities of the
Indian tribal governments or impose substantial direct compliance costs
on them, the funding and consultation requirements of Executive Order
13175 do not apply.
G. 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
its 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 its 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, the proposed rule would meet the relevant standards
of Executive Order 12988.
H. Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995 (``UMRA'')
(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. For a proposed regulatory action likely to result
in a rule that may cause the expenditure by State, local, and tribal
governments, in the aggregate, or by the private sector of $100 million
or more in any one year (adjusted annually for inflation), section 202
of UMRA requires a Federal agency to publish a written statement that
estimates the resulting costs, benefits, and other effects on the
national economy (2 U.S.C. 1532(a) and (b)). UMRA 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 March 18, 1997, DOE published a statement of policy on
its process for intergovernmental consultation under UMRA (62 FR 12820)
(also available at <a href="http://www.energy.gov/gc/office-general-counsel">www.energy.gov/gc/office-general-counsel</a>). DOE
examined this proposed rule according to UMRA and its statement of
policy and has determined that the proposed rule contains neither an
intergovernmental mandate nor a mandate that may result in the
expenditure of $100 million or more in any year by State, local, and
tribal governments, in the aggregate, or by the private sector.
Accordingly, no further assessment or analysis is required under UMRA.
I. Treasury and General Government Appropriations Act of 1999
Section 654 of the Treasury and General Government Appropriations
Act of 1999 (Pub. L. 105-277) requires Federal agencies to issue a
Family Policymaking Assessment for any proposed rule that may affect
family well-being. This proposed 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.
J. Treasury and General Government Appropriations Act, 2001
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 (February 22, 2002), and DOE's guidelines
were published at 67 FR 62446 (October 7, 2002). DOE has reviewed the
proposed rule under the OMB and DOE guidelines and has concluded that
it is consistent with applicable policies in those guidelines.
K. 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 OIRA
and OMB, 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. This proposed rule
would update DOE's acquisition of petroleum product procedures for the
SPR to align the regulatory language more closely with existing
statutory language and current practice. Accordingly, the proposed rule
would also update definitions, as appropriate, for the newly aligned
regulatory language. This proposed rule, therefore, does not meet any
of the three criteria listed above and would not have a significant
adverse effect on the supply, distribution, or use of energy and is
therefore not a significant regulatory action. Accordingly, DOE has not
prepared a Statement of Energy Effects.
V. Approval of the Office of the Secretary
The Secretary of Energy has approved publication of this notice of
proposed rulemaking and request for comment.
List of Subjects in 10 CFR Part 626
Government contracts, Oil and gas reserves, Strategic and critical
materials.
Signing Authority
This document of the Department of Energy was signed on July 21,
2022, by Bradford J. Crabtree, Assistant Secretary for Fossil Energy
and Carbon Management, pursuant to delegated authority from the
Secretary of Energy. That document with the original signature and date
is maintained by DOE. For administrative purposes only, and in
compliance with requirements of the Office of the Federal Register, the
undersigned DOE Federal Register
[[Page 47656]]
Liaison Officer has been authorized to sign and submit the document in
electronic format for publication, as an official document of the
Department of Energy. This administrative process in no way alters the
legal effect of this document upon publication in the Federal Register.
Signed in Washington, DC, on July 22, 2022.
Treena V. Garrett,
Federal Register Liaison Officer, U.S. Department of Energy.
For reasons stated in the preamble, DOE proposes to revise part 626
in chapter II of title 10 of the Code of Federal Regulations as set
forth below:
PART 626--PROCEDURES FOR ACQUISITION OF PETROLEUM FOR THE STRATEGIC
PETROLEUM RESERVE
Sec.
626.1 Purpose.
626.2 Definitions.
626.3 Applicability.
626.4 General acquisition strategy.
626.5 Acquisition procedures--general.
626.6 Acquiring petroleum products by purchase.
626.7 Acquiring petroleum products by exchange.
626.8 Deferrals of contractually scheduled deliveries.
626.9 Suspension and pre-drawdown diversion.
Authority: 42 U.S.C. 6240(c); 42 U.S.C. 7101, et seq.
Sec. 626.1 Purpose.
This part establishes the procedures for acquiring petroleum
products for, and deferring contractually scheduled deliveries to, the
Strategic Petroleum Reserve. The procedures do not represent actual
terms and conditions to be contained in the contracts for the
acquisition of SPR petroleum products.
Sec. 626.2 Definitions.
Backwardation means a market situation in which prices are
progressively lower in succeeding delivery months than in earlier
months.
Contango means a market situation in which prices are progressively
higher in the succeeding delivery months than in earlier months.
Contract means the agreement under which DOE acquires SPR petroleum
products, consisting of the solicitation, the contract form signed by
both parties, the successful offer, and any subsequent modifications,
including those granting requests for deferrals.
Contracting Officer means a person with the authority to enter
into, administer, and/or terminate contracts and make related
determinations and findings, including entering into sales contracts on
behalf of the Government. The term includes certain authorized
representatives of the Contracting Officer acting within the limits of
their authority as delegated by the Contracting Officer.
DEAR means the Department of Energy Acquisition Regulation.
Deferral means a process whereby petroleum products scheduled for
delivery to the SPR in a specific contract period is rescheduled for
later delivery, outside of that period and encompasses the future
delivery of the originally scheduled quantity plus an in-kind premium.
DOE means the Department of Energy and includes any of its
subsidiary offices, such as the Office of Petroleum Reserves (OPR) and
the Strategic Petroleum Reserve Program Management Office.
Exchange means a process whereby petroleum products owned by or due
to the SPR are provided to an entity or requestor in return for
petroleum products of comparable quality plus a premium quantity of
petroleum products (in barrels)--or another form of premium as
permitted by law--delivered to the SPR in the future, or when SPR
petroleum products are traded for petroleum products of a different
quality preferred by DOE for operational reasons based on the relative
values of the quantities traded.
FAR means the Federal Acquisition Regulation.
Government means the United States Government and includes DOE as
its representative.
OPR means the Office of Petroleum Reserves within DOE, whose
responsibilities include the operation of the Strategic Petroleum
Reserve.
Petroleum products means crude oil, residual fuel oil, or any
refined product (including any natural gas liquid, and any natural gas
liquid product) owned, or contracted for, by DOE and in storage in any
permanent SPR facility, or temporarily stored in other storage
facilities.
Premium means the additional amount of petroleum product (in
barrels)--or another form of payment as permitted by law--that must be
delivered to the SPR above the principal amount of petroleum product
owed to SPR in the case of an exchange or a deferred contractually
scheduled delivery. The premium may include a calculation based on a
rate set by DOE and duration of time until the SPR receives the
petroleum product.
Requestor is an entity that makes an emergency request under Sec.
626.7(b).
Secretary means the Secretary of Energy.
Solicitation means the written request by DOE for submission of
offers or quotations to DOE for the acquisition of petroleum products.
Strategic Petroleum Reserve or SPR means the reserve for the
storage of up to 1 billion barrels of petroleum products established by
Title I, Part B, of the Energy Policy and Conservation Act, 42 U.S.C.
6201 et seq.
Sec. 626.3 Applicability.
The procedures in this part apply to the acquisition of petroleum
products by DOE for the Strategic Petroleum Reserve through purchase or
exchange, as well as to deferrals of contractually scheduled
deliveries.
Sec. 626.4 General acquisition strategy.
(a) Criteria for commencing acquisition. DOE shall consider the
following factors prior to commencing acquisition of petroleum products
for the SPR:
(1) The current inventory of the SPR;
(2) The current level of private inventories;
(3) Days of net import protection;
(4) Current price levels for petroleum products and related
commodities, the ability to minimize costs and avoid incurring
excessive costs in acquisition, and the possible effect on consumer and
market prices of any SPR acquisition;
(5) The outlook for international and domestic production levels;
(6) Existing or potential disruptions in supply or refining
capability;
(7) The level of market volatility;
(8) Futures market price differentials for petroleum products and
related commodities;
(9) The need to protect national security; and
(10) Any other factor the Secretary deems necessary or appropriate
to consider.
(b) Review of rate of acquisition. DOE shall review the appropriate
rate of petroleum product acquisition each time an open market
acquisition has been suspended for more than three months.
(c) Acquisition through other Federal agencies. DOE may enter into
arrangements with another Federal agency for that agency to acquire
petroleum products for the SPR on behalf of DOE.
Sec. 626.5 Acquisition procedures--general.
(a) Notice of acquisition.
(1) Except when DOE has determined there is good cause to do
otherwise, DOE shall provide advance public notice of its intent to
acquire petroleum
[[Page 47657]]
products for the SPR. The notice of acquisition will, to the extent
feasible, include the general terms and details of DOE's petroleum
products acquisition and inform the public of DOE's overall fill goals.
(2) The notice of acquisition will generally include the:
(i) Manner of acquisition;
(ii) Time period for solicitations;
(iii) Quantity of petroleum products sought;
(iv) Minimum petroleum product quality requirements;
(v) Time period for delivery;
(vi) Acceptable delivery locations; and
(vii) Instructions for the offer process.
(b) Manner of acquisition.
(1) DOE shall specify the manner of petroleum product acquisition,
either purchase or exchange, in the notice of acquisition.
(2) DOE shall, to the greatest extent practicable, determine the
manner of petroleum product acquisition after considering:
(i) The availability of appropriated funds;
(ii) Minimization of costs;
(iii) Minimization of the Nation's vulnerability to a severe energy
supply interruption;
(iv) Minimization of the impact to supply levels and market forces;
(v) Whether the manner of acquisition would encourage competition
in the petroleum industry; and
(vi) Other considerations DOE deems to be relevant.
(c) Solicitation.
(1) To secure the economic benefit and security of a diversified
base of potential suppliers of petroleum products to the SPR, DOE shall
maintain a listing, developed through online registration, direct
requests to DOE, and outreach to potential suppliers by DOE. Upon the
issuance of a solicitation, DOE shall notify potential suppliers via
their registered email addresses.
(2) DOE shall make the solicitation publicly available on the
website of the OPR: <a href="http://www.spr.doe.gov">www.spr.doe.gov</a>.
(d) Timing and duration of solicitation.
(1) DOE shall determine petroleum products requirements on nominal
six-month cycles, and shall review and update these requirements prior
to each solicitation cycle.
(2) Unless termination rights are explicitly waived by DOE, DOE may
terminate any solicitations and contracts pertaining to the acquisition
or exchange of petroleum products at the convenience of the Government,
and in such event shall not be responsible for any costs incurred by
suppliers, other than costs for petroleum products delivered to the SPR
and for reasonable, customary, and applicable costs incurred by the
supplier in the performance of a valid contract for delivery before the
effective date of termination of such contract. In no event shall the
Government be liable for consequential damages or the entity's lost
profits as a result of such termination.
(e) Quality.
(1) DOE shall define minimum petroleum product quality
specifications for the SPR. DOE shall include such specifications in
acquisition solicitations, and shall make them available on the website
of the OPR: <a href="http://www.spr.doe.gov">www.spr.doe.gov</a>.
(2) DOE shall periodically review the quality specifications to
ensure, to the greatest extent practicable, the petroleum product mix
in storage matches the demand of the United States refining system.
(f) Quantity. In determining the quantities of petroleum products
to be delivered to the SPR, DOE shall:
(1) Take into consideration market conditions and the availability
of transportation systems; and
(2) Seek to avoid adversely affecting other market participants or
petroleum product market fundamentals.
(g) Offer and evaluation procedures.
(1) Each solicitation shall provide necessary instructions on offer
format and submission procedures. The details of the offer, evaluation
and award procedures may vary depending on the method of acquisition.
(2) DOE may use relative values and time differentials to manage
acquisition and delivery schedules to reduce acquisition costs.
(3) DOE may evaluate offers based on prevailing market prices of
specific petroleum products, and shall award contracts on a competitive
basis.
(4) Whether acquisition is by purchase or exchange, DOE may use a
price index to account for fluctuations in absolute and relative market
prices at the time of delivery to reduce market risk to all parties
throughout the contract term.
(h) Scheduling and delivery.
(1) Except as provided in paragraph (h)(4) of this section, DOE
shall accept offers for petroleum products delivered to specified SPR
storage sites via pipeline or as waterborne cargos delivered to the
terminals serving those sites.
(2) Except as provided in paragraph (h)(4) of this section, DOE
shall generally establish schedules that allow for evenly spaced
deliveries of economically sized marine and pipeline shipments within
the constraints of SPR site and commercial facilities receipt
capabilities.
(3) DOE shall strive to maximize U.S. flag carrier utilization
through the terms of its supply contracts.
(4) DOE reserves the right to accept offers for other methods of
delivery if, in DOE's sole judgment, market conditions and logistical
constraints require such other methods.
Sec. 626.6 Acquiring petroleum products by purchase.
(a) General. For the purchase of petroleum products, DOE shall,
through certified contracting officers, conduct petroleum product
acquisitions in accordance with the competitive principles of the FAR
and the DEAR.
(b) Acquisition strategy.
(1) DOE solicitations:
(i) May be either continuously open or fixed for a period of time;
and
(ii) May provide either for immediate delivery or for delivery at
future dates.
(2) DOE may alter the acquisition plan to take advantage of
differentials in prices for different qualities of petroleum products,
based on a consideration of factors, including the availability of
storage capacity in the SPR sites, the logistics of changing delivery
streams, and the availability of ships, pipelines and terminals to move
and receive the petroleum products.
(3) Based on the market analysis described in paragraph (d) of this
section, DOE may refuse offers or suspend the acquisition process on
the basis of Government estimates projecting substantially lower
petroleum product prices in the future than those contained in offers.
If DOE determines there is a high probability that the cost to the
Government can be reduced without significantly affecting national
energy security goals, DOE may either contract for delivery at a future
date or delay purchases to take advantage of the projected lower future
prices. Conversely, DOE may increase the rate of purchases if prices
fall below recent price trends or futures markets present a significant
contango and prices offer the opportunity to reduce the average cost of
petroleum product acquisitions in anticipation of higher future prices.
(4) Based on the market analysis described in paragraph (d) of this
section, DOE may refuse offers, decrease the rate of purchase, or
suspend the acquisition process if DOE determines acquisition will add
significant upward pressure to prices either regionally or on a world-
wide basis. DOE may consider recent price changes, private inventory
levels, petroleum product acquisition by other stockpiling entities,
the outlook
[[Page 47658]]
for world petroleum products production, incipient disruptions of
supply or refining capability, logistical problems for moving petroleum
products, macroeconomic factors, and any other considerations that may
be pertinent to the balance of petroleum product supply and demand.
(c) Fill requirements determination. DOE shall develop SPR fill
requirements for each solicitation based on an assessment of national
energy security goals, the availability of storage capacity, and the
need for specific grades and quantities of petroleum products.
(d) Market analysis.
(1) DOE shall establish a market value for each petroleum product
to be acquired based on a market analysis at the time of contract
award.
(2) DOE may consider prices on futures markets, spot markets,
recent price movements, current and projected shipping rates, forecasts
by the DOE Energy Information Administration, and any other analytic
tools available to DOE to determine the most desirable purchase
profile.
(3) DOE may also consider factors including recent price changes,
private inventory levels, petroleum product acquisition by other
stockpiling entities, the outlook for world petroleum product
production, disruptions of supply or refining capability, logistical
problems for moving petroleum products, macroeconomic factors, and any
other considerations that may be pertinent relevant to the balance of
petroleum product supply and demand.
(e) Evaluation of offers.
(1) DOE shall evaluate offers using:
(i) The criteria and requirements stated in the solicitation; and
(ii) The market analysis under paragraph (d) of this section.
(2) DOE shall require financial guarantees from the contracting
entity, in the form of a letter of credit or equivalent financial
assurance.
Sec. 626.7 Acquiring petroleum products by exchange.
(a) General. DOE may, through certified contracting officers,
conduct petroleum product acquisitions through the exchange of
petroleum products. Exchanges are conducted through emergency requests
or by solicitation.
(b) Emergency Requests.
(1) Notwithstanding the requirements of Section 626.5, the
requirements of this subsection shall control all exchanges by
emergency request.
(2) At any point, in the event of an emergency, a requestor may
request, in writing, for an exchange of petroleum product from the SPR.
(3) All requests shall include the following:
(i) A justification of need that describes:
(A) The emergency event,
(B) The emergency event's impact on the requestor, and
(C) The requestor's inability to acquire petroleum product from an
alternative source;
(ii) The quantity of petroleum product (in barrels) requested;
(iii) The quality specifications of petroleum product requested;
and
(iv) The anticipated duration of the emergency event.
(4) Upon receipt of an emergency request, DOE will verify the
emergency, evaluate the need, and assess the market to ensure there is
no alternative source of petroleum products available to the requester.
DOE, in its sole discretion, may approve or disapprove any emergency
request.
(5) Upon approval of an emergency request, DOE may enter into
contract negotiations with the requestor.
(6) Repayment to the SPR for an exchange by emergency request shall
be in the form of barrels of petroleum products, or another form of
repayment as permitted by law, and shall include the following to be
returned to the SPR by the contracted date:
(i) The principal amount of petroleum products provided to the
requestor;
(ii) A premium; and
(iii) Costs incurred by DOE in conducting the emergency request.
(c) Solicitation for Exchange.
(1) A solicitation for exchange:
(i) May be either continuously open or fixed for a period of time;
(ii) Shall advertise the quantity and quality specification of
petroleum product available for exchange;
(iii) May provide either for immediate delivery or for delivery at
future dates to a bidding entity;
(iv) May, in DOE's sole discretion, include a rate table from which
offerors may offer dates for repayment; and
(v) May require financial guarantees from offerors in the form of a
letter of credit or equivalent financial assurance to accompany their
bids.
(2) In conducting the bidding and selection process:
(i) Offerors shall follow the instructions to offerors included in
the solicitation;
(ii) DOE shall evaluate and select bids that best support national
energy security goals, the availability of petroleum products and
storage capacity, and need for specific grades and quantities of
petroleum products; and
(iii) Upon selection of a successful bid, DOE shall notify the
apparently successful offeror.
(3) Repayment to the SPR for an exchange by solicitation shall be
in the form of barrels of petroleum products or another form of
repayment as permitted by law, and may be calculated based on any rate
table, if applicable, and shall include the following:
(i) Principal amount of petroleum product owed to SPR in the case
of an exchange or a deferred contractually scheduled delivery;
(ii) Costs incurred by DOE in conducting the exchange; and
(iii) A premium for each prospective date for repayment.
(4) Based on the market analysis described in paragraph (c)(5) of
this section, DOE may refuse offers, decrease the rate of acquisition,
or suspend the exchange process if DOE determines acquisition will add
significant upward pressure to prices either regionally or on a
worldwide basis. DOE may consider recent price changes, private
inventory levels, petroleum product acquisition by other stockpiling
entities, the outlook for world petroleum products production,
incipient disruptions of supply or refining capability, logistical
problems for moving petroleum products, macroeconomic factors, and any
other considerations that may be pertinent to the balance of petroleum
product supply and demand.
(5) Market analysis.
(i) DOE shall establish a market value for each petroleum product
to be acquired based on a market analysis at the time of contract
award.
(ii) DOE may consider prices on futures markets, spot markets,
recent price movements, current and projected shipping rates, forecasts
by the DOE Energy Information Administration, and any other analytic
tools available to DOE to determine the most desirable purchase
profile.
(iii) DOE may also consider factors including recent price changes,
private inventory levels, petroleum product acquisition by other
stockpiling entities, the outlook for world petroleum product
production, disruptions of supply or refining capability, logistical
problems for moving petroleum products, macroeconomic factors, and any
other considerations that may be pertinent relevant to the balance of
petroleum product supply and demand.
Sec. 626.8 Deferrals of contractually scheduled deliveries.
(a) General.
(1) DOE prefers to take deliveries of petroleum products for the
SPR at times scheduled under applicable contracts.
[[Page 47659]]
However, in the event the market is distorted by disruption to supply
or other factors, DOE may defer scheduled deliveries or consider
deferral requests from awardees.
(2) An awardee seeking to defer scheduled deliveries of petroleum
products to the SPR may submit a deferral request to DOE.
(b) Deferral criteria. DOE shall only grant a deferral request for
negotiation under paragraph (c) of this section if it determines that
DOE can receive a premium for the deferral and, based on DOE's deferral
analysis, that at least one of the following conditions exists:
(1) DOE can reduce the cost of its petroleum products acquisition
per barrel and increase the volume of petroleum products being
delivered to the SPR by means of the premium barrels required by the
deferral process;
(2) DOE anticipates private inventories are approaching a point
where unscheduled outages may occur;
(3) There is evidence that refineries are reducing their run rates
for lack of feedstock; or
(4) There is an unanticipated disruption to petroleum product
supply.
(c) Negotiating terms.
(1) If DOE decides to negotiate a deferral of deliveries, DOE shall
estimate the market value of the deferral and establish a strategy for
negotiating with suppliers the minimum percentage of the market value
to be taken by the Government. During these negotiations, if the
deferral request was initiated by DOE, DOE may consider any reasonable,
customary, and applicable costs already incurred by the supplier in the
performance of a valid contract for delivery. In no event shall such
consideration account for any consequential damages or lost profits
suffered by the supplier as a result of such deferral.
(2) DOE shall only agree to amend the contract if the negotiation
results in an agreement to give the Government a fair and reasonable
share of the market value.
Sec. 626.9 Suspension and pre-drawdown diversion.
Where the Secretary has found that a severe energy supply
interruption may be imminent, the Secretary may suspend any previously
announced or contracted acquisition of any petroleum product by the SPR
or injection of petroleum products into the SPR; or sell any petroleum
product acquired for injection into the SPR that has not yet been
injected into the SPR.
[FR Doc. 2022-16081 Filed 8-3-22; 8:45 am]
BILLING CODE 6450-01-P
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</html>Indexed from Federal Register on August 4, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.