Price Competitive Sale of Strategic Petroleum Reserve Petroleum; Standard Sales Provisions, 39364-39383 [05-12906]

Agencies

• DEPARTMENT OF ENERGY

[Federal Register Volume 70, Number 129 (Thursday, July 7, 2005)]
[Rules and Regulations]
[Pages 39364-39383]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-12906]



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Part II





Department of Energy





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10 CFR Part 625



Price Competitive Sale of Strategic Petroleum Reserve Petroleum; 
Standard Sales Provisions; Final Rule

Federal Register / Vol. 70, No. 129 / Thursday, July 7, 2005 / Rules 
and Regulations

[[Page 39364]]


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DEPARTMENT OF ENERGY

10 CFR Part 625

RIN 1901-AB15


Price Competitive Sale of Strategic Petroleum Reserve Petroleum; 
Standard Sales Provisions

AGENCY: Department of Energy.

ACTION: Final rule; revised appendix.

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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 July 7, 2005, these SSPs are adopted for use in 
the price competitive sale of SPR petroleum.

FOR FURTHER INFORMATION CONTACT:
Nancy T. Marland, U.S. Department of Energy, Strategic Petroleum 
Reserve, FE-43, Room 3G-038, 1000 Independence Ave., SW., Washington, 
DC 20585-0340, Phone: (202) 586-4691, Fax: (202) 586-0835 E-mail: 
nancy.marland@hq.doe.gov.
Gary C. Landry, FE-4451, U.S. Department of Energy, Strategic Petroleum 
Reserve, Project Management Office, 900 Commerce Road East, New 
Orleans, LA 70123, Phone: (504) 734-4660, Fax: (504) 734-4947, E-mail: 
gary.landry@spr.doe.gov.
Diane J. Stubbs, U.S. Department of Energy, Office of Assistant General 
Counsel for Legislation and Regulatory Law, GC-71, Room 6E-042, 1000 
Independence Ave., SW., Washington, DC 20585-0103, Phone: (202) 586-
4297, Fax: (202) 586-0971, E-mail: 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
    I. Review Under the Treasury and General Government 
Appropriations Act, 2001
    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), Pub. L. 94-163, to store 
petroleum to diminish the impact of disruptions on petroleum supplies 
and to carry out the obligations of the United States under the 
International Energy Program. EPCA required the preparation of a ``SPR 
Plan'' detailing proposals for the development of the SPR. The SPR Plan 
was to include a Distribution Plan setting forth the methods for 
drawing down and distributing the SPR in the event of an emergency. In 
1979, a detailed Distribution Plan was transmitted to Congress as 
Amendment No. 3 to the SPR Plan. This Distribution Plan set out a 
number of alternative distribution methods, ranging from allocation to 
price competitive sales.
    In the Energy Emergency Preparedness Act of 1982, Pub. L. 97-229, 
Congress required a new ``Drawdown'' (Distribution) Plan. The new plan, 
SPR Plan Amendment No. 4, was transmitted to Congress on December 1, 
1982, and provided that the principal method of distributing SPR oil 
would be price competitive sale.
    On March 16, 1983, DOE published a notice of proposed rulemaking 
(48 FR 11125) to establish a framework for implementing the policies 
and procedures set out in SPR Plan Amendment No. 4. The final SPR sales 
rule (published at 48 FR 56538, December 21, 1983), adopted after 
consideration of public comments, provides for the establishment of 
Standard Sales Provisions (SSPs), containing contract terms and 
conditions expected to be contained in contracts for the sale of SPR 
petroleum. The final SPR sales rule is at 10 CFR part 625. The rule 
calls for the publication of the SSPs in the Federal Register and the 
Code of Federal Regulations as an appendix to the rule (10 CFR 
625.4(a)). The rule also provides for the periodic review and 
republication of the SSPs in the Federal Register, including any 
revisions to such provisions (10 CFR 625.4(b)).
    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

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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 Sale
    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 Hawaii Access to SPR Crude Oil
    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 Sale line item schedule--petroleum quantity, 
quality, and delivery method
    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

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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: https://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 (August 4, 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 carefully assess 
the necessity for such actions. The Executive Order also requires 
agencies to have an accountable process to ensure meaningful and timely 
input by State and local officials in the development of regulatory 
policies that have federalism implications. On March 14, 2000, DOE 
published a statement of policy describing the intergovernmental 
consultation process it will follow in the development of such 
regulations (65 FR 13735). DOE has examined today's rule and has 
determined that it does not preempt State law and does 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. 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 March 18, 1997, DOE published a statement 
of policy on its process for intergovernmental consultation under the 
Act (62 FR 12820) (also available at https://www.gc.doe.gov). The rule 
published today does not contain any Federal mandate, so these 
requirements do not apply.

H. Review Under the Treasury and General Government Appropriations Act, 
1999

    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.

I. Review Under the Treasury and General Government Appropriations Act, 
2001

    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 (February 22, 2002), 
and DOE's guidelines were published at 67 FR 62446 (October 7, 2002). 
DOE has reviewed today's notice under the OMB and DOE guidelines and 
has concluded that it is consistent with applicable policies in those 
guidelines.

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

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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 Washington, DC on May 20, 2005.
John D. Shages,
Deputy Assistant Secretary, Petroleum Reserves.

0
For the reasons set forth in the preamble, 10 CFR Part 625 is amended 
as follows:

PART 625--PRICE COMPETITIVE SALE OF STRATEGIC PETROLEUM RESERVE 
PETROLEUM

0
1. The authority citation for Part 625 continues to read as follows:

    Authority: 15 U.S.C. 761; 42 U.S.C. 7101; 42 U.S.C. 6201.

0
2. Appendix A to 10 CFR part 625 is revised to read as follows:

Appendix A To Part 625--Standard Sales Provisions

Index

Section A--General Pre-Sale Information

A.1 List of abbreviations
A.2 Definitions
A.3 Standard Sales Provisions (SSPs)
A.4 Periodic revisions of the Standard Sales Provisions
A.5 Sales Notification List (SNL)
A.6 Publication of the Notice of Sale
A.7 Penalty for false statements in offers to buy SPR petroleum

Section B--Sales Solicitation Provisions

B.1 Requirements for a valid offer--caution to offerors
B.2 Price indexing
B.3 Certification of independent price determination
B.4 Requirements for vessels--caution to offerors
B.5 ``Superfund'' tax on SPR petroleum--caution to offerors
B.6 Export limitations and licensing--caution to offerors
B.7 State of Hawaii access to SPR crude oil
B.8 Issuance of the Notice of Sale
B.9 Submission of offers and modification of previously submitted 
offers
B.10 Acknowledgment of amendments to a Notice of Sale
B.11 Late offers, modifications of offers, and withdrawal of offers
B.12 Offer guarantee
B.13 Explanation requests from offerors
B.14 Currency for offers
B.15 Language of offers and contracts
B.16 Proprietary data
B.17 SPR crude oil streams and delivery points
B.18 Notice of Sale line item schedule--petroleum quantity, quality, 
and delivery method
B.19 Line item information to be provided in the offer
B.20 Mistake in offer
B.21 Evaluation of offers
B.22 Procedures for evaluation of offers
B.23 Financial statements and other information
B.24 Resolicitation procedures on unsold petroleum
B.25 Offeror's certification of acceptance
B.26 Notification of Apparently Successful Offeror
B.27 Contract documents
B.28 [Reserved]
B.29 Procedures for selling to other U.S. Government agencies

Section C--Sales Contract Provisions

C.1 Delivery of SPR petroleum
C.2 Compliance with the ``Jones Act'' and the U.S. export control 
laws
C.3 [Reserved]
C.4 Environmental compliance
C.5 Delivery and transportation scheduling
C.6 Contract modification--alternate delivery line items
C.7 Application procedures for ``Jones Act'' and Construction 
Differential Subsidy waivers
C.8 Vessel loading procedures
C.9 Vessel laytime and demurrage
C.10 Vessel loading expedition options
C.11 Purchaser liability for excessive berth time
C.12 Pipeline delivery procedures
C.13 Title and risk of loss
C.14 Acceptance of crude oil
C.15 Delivery acceptance and verification
C.16 Price adjustments for quality differentials
C.17 Determination of quality
C.18 Determination of quantity
C.19 Delivery documentation
C.20 Contract amounts
C.21 Payment and Performance Letter of Credit
C.22 Billing and payment
C.23 Method of payments
C.24 Interest
C.25 Termination
C.26 Other Government remedies
C.27 Liquidated damages
C.28 Failure to perform under SPR contracts
C.29 Government options in case of impossibility of performance
C.30 Limitation of Government liability
C.31 Notices
C.32 Disputes
C.33 Assignment
C.34 Order of precedence
C.35 Gratuities

Exhibits:

A--SPR Crude Oil Comprehensive Analysis
B--SPR Delivery Point Data
C--Offer Standby Letter of Credit
D--Payment and Performance Letter of Credit
E--Strategic Petroleum Reserve Crude Oil Delivery Report--SPRPMO-F-
6110.2-14b 1/87 REV.8/91

Section A--General Pre-Sale Information

A.1 List of Abbreviations

(a) ASO: Apparently Successful Offeror
(b) DLI: Delivery Line Item
(c) DOE: U.S. Department of Energy
(d) MLI: Master Line Item
(e) NA: Notice of Acceptance
(f) NS: Notice of Sale
(g) SNL: Sales Notification List
(h) SSPs: Standard Sales Provisions
(i) SPR: Strategic Petroleum Reserve
(j) SPRCODR: SPR Crude Oil Delivery Report (Exhibit E)
(k) SPR/PMO: Strategic Petroleum Reserve Project Management Office

A.2 Definitions

    Affiliate. The term ``affiliate'' means associated business 
concerns or individuals if, directly or indirectly, (1) either one 
controls or can control the other, or (2) a third party controls or 
can control both.
    Business Day. The term ``business day'' means any day except 
Saturday, Sunday or a U.S. Government holiday.
    Contract. The term ``contract'' means the contract under which 
DOE sells SPR petroleum. It is composed of the NS, the NA, the 
successful offer, and the SSPs incorporated by reference.
    Contracting Officer. The term ``Contracting Officer'' means the 
person executing sales contracts on behalf of the Government, and 
any other Government employee properly designated as Contracting 
Officer. The term includes the authorized representative of a 
Contracting Officer acting within the limits of his or her 
authority.
    Electronic signature or signature means a method of signing an 
electronic message that--

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    (1) Identifies and authenticates a particular person as the 
source of the electronic message; and
    (2) Indicates such person's approval of the information 
contained in the electronic message.
    Government. The term ``Government'', unless otherwise indicated 
in the text, means the United States Government.
    Head of the Contracting Activity. The term ``Head of the 
Contracting Activity'' means Project Manager, Strategic Petroleum 
Reserve Project Management Office.
    Notice of Acceptance (NA). The term ``Notice of Acceptance'' 
means the document that is sent by DOE to accept the purchaser's 
offer to create a contract.
    Notification of Apparently Successful Offeror (ASO). The term 
``notification of apparently successful offeror'' means the notice, 
written or oral, by the Contracting Officer to an offeror that it 
will be awarded a contract if it is determined to be responsible.
    Notice of Sale (NS). The term ``Notice of Sale'' means the 
document announcing the sale of SPR petroleum, the amount, 
characteristics and location of the petroleum being sold, the 
delivery period and the procedures for submitting offers. The NS 
will specify what contractual provisions and financial and 
performance responsibility measures are applicable to that 
particular sale of petroleum and provide other pertinent 
information.
    Offeror. The term ``offeror'' means any person or entity 
(including a government agency) who submits an offer in response to 
a NS.
    Petroleum. The term ``petroleum'' 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.
    Project Management Office (SPR/PMO). The term ``Project 
Management Office'' means the DOE personnel and DOE contractors 
located in Louisiana and Texas responsible for the operation of the 
SPR.
    Purchaser. The term ``purchaser'' means any person or entity 
(including a government agency) who enters into a contract with DOE 
to purchase SPR petroleum.
    Standard Sales Provisions (SSPs). The term ``Standard Sales 
Provisions'' means this set of terms and conditions of sale 
applicable to price competitive sales of SPR petroleum. These SSPs 
constitute the ``standard sales agreement'' referenced in the 
Strategic Petroleum Reserve ``Drawdown'' (Distribution) Plan, 
Amendment No. 4 (December 1, 1982, DOE/EP 0073) to the SPR Plan.
    Strategic Petroleum Reserve (SPR). The term ``Strategic 
Petroleum Reserve'' means that DOE program established by Title I, 
Part B, of the Energy Policy and Conservation Act, 42 U.S.C. 6201, 
as amended.
    Vessel. The term ``vessel'' means a tankship, an integrated tug-
barge (ITB) system, a self-propelled barge, or other barge.

A.3 Standard Sales Provisions (SSPs)

    (a) These SSPs contain pre-sale information, sales solicitation 
provisions, and sales contract clauses setting forth terms and 
conditions of sale, including purchaser financial and performance 
responsibility measures, or descriptions thereof, which may be 
applicable to price competitive sales of petroleum from the SPR in 
accordance with the SPR Sales Rule, 10 CFR Part 625. The NS will 
specify which of these provisions shall apply to a particular sale 
of such petroleum, and it may specify any revisions therein and any 
additional provisions which shall be applicable to that sale.
    (b) All offerors must, as part of their offers for SPR petroleum 
in response to a NS, agree without exception to all sales provisions 
of that NS.

A.4 Periodic Revisions of the Standard Sales Provisions

    DOE will review the SSPs periodically and republish them in the 
Federal Register, with any revisions. When an NS is issued, it will 
cite the Federal Register and the Code of Federal Regulations (if 
any) in which the latest version of the SSPs was published. Offerors 
are cautioned that the Code of Federal Regulations may not contain 
the latest version of the SSPs published in the Federal Register. 
Interested persons may view the current SSPs at https://
www.spr.doe.gov/reports/SSPs/ssp.htm.

A.5 Sales Notification List (SNL)

    (a) The SPR/PMO will maintain a Sales Notification List (SNL) of 
those potential offerors who wish to receive notification of an NS 
whenever one is issued. In order to assure that prospective offerors 
will receive such notification in a timely fashion, all potential 
offerors are encouraged to register on the SNL as soon as possible.
    (b) Any firm or individual may complete the SNL on-line 
registration process at https://www.spr.doe.gov.

A.6 Publication of the Notice of Sale

    (a) Notification of a NS will be sent via e-mail to those who 
have registered on the SNL referenced in Provision A.5.
    (b) The NS will be posted on the SPR web page https://
www.spr.doe.gov for public viewing. In addition, the issuance of the 
NS will be publicized on the Fossil Energy web page https://
www.fe.doe.gov/programs/reserves/.
    (c) A DOE press release, which will include the salient features 
of the NS, will be made available to all news agencies.

A.7 Penalty for False Statements in Offers to Buy SPR Petroleum

    (a) Making false statements in an offer to buy SPR petroleum may 
expose an offeror to a penalty under the False Statements Act, 18 
U.S.C. 1001, which provides:

 Whoever, in any matter within the jurisdiction of any department or 
agency of the United States knowingly and willfully falsifies, 
conceals or covers up by any trick, scheme, or device a material 
fact, or makes any false, fictitious or fraudulent statements or 
representations, or makes or uses any false writing or document 
knowing the same to contain any false, fictitious or fraudulent 
statement or entry, shall be fined under this title or imprisoned 
not more than 5 years, or both.

    (b) Under 18 U.S.C. 3571, the maximum fine to which an 
individual or organization may be sentenced for violations of 18 
U.S.C. (including Section 1001) is set at $250,000 and $500,000 
respectively, unless there is a greater amount specified in the 
statute setting out the offense, or the violation is subject to 
special factors set out in Section 3571. The United States 
Sentencing Guidelines also apply to violations of Section 1001, and 
offenders may be subject to a range of fines under the guidelines up 
to and including the maximum amounts permitted by law.

Section B--Sales Solicitation Provisions

B.1 Requirements for a Valid Offer--Caution to Offerors

    (a) Offerors are advised that the submission of an offer 
electronically is required. Submission of an offer via the SPR's 
specified on-line system will constitute a legal, binding offer. The 
use of the combination of User Name and password to login and submit 
offers constitutes an electronic signature.
    (b) A valid offer to purchase SPR petroleum must meet the 
following conditions:
    (1) The offer must be submitted via the SPR's on-line system as 
designated in the NS;
    (2) The offer must be received no later than the date and time 
set for receipt of offers;
    (3) The offer guarantee (see Provision B.12) must be received no 
later than the time set for the receipt of offers;
    (4) Any amendments to the NS that explicitly require 
acknowledgment of receipt must be properly acknowledged as specified 
in the NS; and
    (5) Submission of an on-line offer in accordance with this 
provision constitutes agreement without exception to all provisions 
of the SSPs that the NS makes applicable to a particular sale, as 
well as to all provisions in the NS.
    (c) At the discretion of the Contracting Officer, offers may be 
received by alternative means if circumstances preclude use of the 
specified on-line system.

B.2 Price Indexing

    The Government, at its discretion, may make use of a price 
indexing mechanism to effect contract price adjustments based on 
petroleum market conditions, e.g., crude oil market price changes 
between the times of offer price submissions and physical 
deliveries. The NS will set forth the provisions applicable to any 
such mechanism.

B.3 Certification of Independent Price Determination

    (a) The offeror certifies that:
    (1) The prices in this offer have been arrived at independently, 
without, for the purposes of restricting competition, any 
consultation, communication, or agreement with any other offeror or 
competitor relating to:
    (i) Those prices;
    (ii) The intention to submit an offer; or
    (iii) The methods or factors used to calculate the prices 
offered.
    (2) The prices in this offer have not been and will not be 
knowingly disclosed by the offeror, directly or indirectly, to any 
other

[[Page 39369]]

offeror or to any competitor before the time set for receipt of 
offers, unless otherwise required by law; and
    (3) No attempt has been made or will be made by the offeror to 
induce any other concern to submit or not to submit an offer for the 
purpose of restricting competition.
    (b) Each submission of an offer is considered to be a 
certification by the offeror that the offeror:
    (1) Is the person within the offeror's organization responsible 
for determining the prices being offered, and that the offeror has 
not participated, and will not participate, in any action contrary 
to paragraphs (a)(1) through (a)(3) of this provision; or
    (2)(i) Has been authorized in writing to act as agent for the 
persons responsible for such decision in certifying that such 
persons have not participated, and will not participate, in any 
action contrary to (a)(1) through (a)(3) of this provision;
    (ii) As their agent does hereby so certify; and
    (iii) As their agent has not participated, and will not 
participate, in any action contrary to paragraphs (a)(1) through 
(a)(3) of this provision.

B.4 Requirements for Vessels--Caution to Offerors

    (a) The ``Jones Act'', 46 U.S.C. 883, prohibits the 
transportation of any merchandise, including SPR petroleum, by water 
or land and water, on penalty of forfeiture thereof, between points 
within the United States (including Puerto Rico, but excluding the 
Virgin Islands) in vessels other than vessels built in and 
documented under laws of the United States, and owned by United 
States citizens, unless the prohibition has been waived by the 
Secretary of Homeland Security. Further, certain U.S.-flag vessels 
built with Construction Differential Subsidies (CDS) are precluded 
by Section 506 of the Merchant Marine Act of 1936 (46 U.S.C. 1156) 
from participating in U.S. coastwise trade, unless such prohibition 
has been waived by the Secretary of Transportation, the waiver being 
limited to a maximum of 6 months in any given year. CDS vessels may 
also receive Operating Differential Subsidies, requiring separate 
permission from the Secretary of Transportation for domestic 
operation, under Section 805(a) of the same statute. The NS will 
advise offerors of any general waivers allowing use of non-coastwise 
qualified vessels or vessels built with Construction Differential 
Subsidies for a particular sale of SPR petroleum. If there is no 
general waiver, purchasers may request waivers in accordance with 
Provision C.7, but remain obligated to complete performance under 
this contract regardless of the outcome of that waiver process.
    (b) The Department of Homeland Security's regulations concerning 
Vessels Carrying Oil, Noxious Liquid Substances, Garbage, Municipal 
or Commercial Waste, and Ballast Water (33 CFR part 151) and 
Reception Facilities For Oil, Noxious Liquid Substances, and Garbage 
(33 CFR part 158) implement the requirements of the International 
Convention for the Prevention of Pollution from Ships, 1973, as 
modified by the 1978 Protocol relating thereto (MARPOL 73/78). These 
regulations prohibit any oceangoing tankship, required to retain oil 
or oily mixtures on-board while at sea, from entering any port or 
terminal unless the port or terminal has a valid Certificate of 
Adequacy as to its oil reception capabilities. Marine terminals in 
support of the SPR (see Exhibit B, SPR Delivery Point Data) have 
Certificates of Adequacy; however, they may not have reception 
facilities for oily ballast, vessel sludge or oily bilge water 
wastes. Accordingly, tankships will be required to make arrangements 
for and be responsible for all costs associated with appropriate 
disposal of such ballast, vessel sludge or oily bilge water waste or 
permission to load may be denied.

B.5 ``Superfund'' Tax on SPR Petroleum--Caution to Offerors

    (a) Sections 4611 and 4612 of the Internal Revenue Code, provide 
for the imposition of taxes on domestic and imported petroleum to 
support the Hazardous Substance Response Fund (the ``Superfund'') 
and the Oil Spill Liability Trust Fund (``Trust Fund''). These taxes 
are not currently being collected.
    (b) DOE has already paid the Superfund and Trust Fund taxes on 
some of the oil imported and stored in the SPR. However, no 
Superfund or Trust Fund tax has been paid on any domestic oil stored 
in the SPR or on imported oil stored prior to the imposition of 
these taxes. Because domestic and imported crude oil for which no 
Superfund and Trust Fund taxes have been paid and crude oils for 
which these taxes have been paid have been commingled in the SPR, 
the Government retains records of the tax status of all SPR 
petroleum in storage. The NS will advise purchasers in the event 
these taxes are reimposed.

B.6 Export Limitations and Licensing--Caution to Offerors

    Offerors for SPR petroleum are put on notice that export of SPR 
crude oil is subject to U.S. export control laws implemented by the 
Department of Commerce Short Supply Controls, codified at 15 CFR 
part 754, Sec.  754.2, Crude oil. Subsections of Sec.  754.2 provide 
for the approval of applications to export crude oil from the SPR in 
connection with refining or exchange of SPR oil. Specifically, these 
subsections are Sec. Sec.  754.2(b)(iii), and 754.2(f), Refining or 
exchange of Strategic Petroleum Reserve Oil. These provisions 
implement the authority given to the President by 42 U.S.C. 6241(i) 
to permit the export of oil in the SPR for the purpose of obtaining 
refined petroleum for the U.S. market. In addition, the President 
could waive the requirement for an export license altogether. The NS 
will advise of any waivers under this Presidential authority.

B.7 State of Hawaii Access to SPR crude oil

    Potential offerors are advised that pursuant to 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. By submission of a 
binding offer, the State of Hawaii is entitled to purchase up to 
three percent of the quantity of SPR petroleum offered for sale or 
one-twelfth of the state's annual import quantity barrels. The price 
will be equal to the volumetrically weighted average price of the 
successful competitive offers for the applicable Master Line Item. 
Furthermore, at the request of the Hawaii or its designated eligible 
entity, the petroleum purchased will have first preference in its 
scheduling for delivery. The State of Hawaii may also enter into 
exchange or processing agreements to permit delivery of the 
purchased petroleum to other locations, if a petroleum product of 
similar value or quantity is delivered to the State.

B.8 Issuance of the Notice of Sale

    In the event petroleum is sold from the SPR, DOE will issue a NS 
containing all the pertinent information necessary for the offeror 
to prepare a priced offer. A NS may be issued with a week or less 
allowed for the receipt of offers. Offerors are expected to examine 
the complete NS document, and to become familiar with the SSPs cited 
therein. Failure to do so will be at the offeror's risk.

B.9 Submission of Offers and Modification of Previously Submitted 
Offers

    (a) Unless otherwise provided in the NS, offers must be 
submitted via SPR's on-line system and received no later than the 
date and time set for offer receipt as specified in the NS.
    (b) Unless otherwise provided in the NS, offers may be modified 
or withdrawn on-line, provided that the modification or withdrawal 
is accomplished prior to the date and time specified for receipt of 
offers.
    (c) An offeror may withdraw an offer by deleting the submission 
in accordance with the instructions provided for the SPR's on-line 
system.
    (d) An offeror may modify a previously submitted offer by 
withdrawing the original offer (see (c) above) and resubmitting the 
replacement offer in its entirety no later than the date and time 
set for offer receipt.
    (e) DOE will not release to the general public the identities of 
the offerors, or their offer quantities and prices, until the 
Apparently Successful Offerors have been determined. DOE will inform 
simultaneously all offerors and other interested parties of the 
successful and unsuccessful offerors and their offer data by means 
of a public ``offer posting.'' The offer posting will normally occur 
within a week of receipt of offers and will provide all interested 
parties access to offer data as well as any DOE changes in the 
petroleum quantities or quality to be sold. DOE will announce the 
date, time, and location of the offer posting as soon as 
practicable.

B.10 Acknowledgment of Amendments to a Notice of Sale

    When an amendment to a NS requires acknowledgment of issuance, 
it must be acknowledged by an offeror in accordance with 
instructions provided in the NS. Such acknowledgment must be 
received as part of a timely offer submission.

B.11 Late Offers, Modifications of Offers, and Withdrawal of Offers

    (a) The date/time stamp affixed by the SPR's on-line system will 
be the sole determinant of timely offer receipt. Any offer

[[Page 39370]]

received after the date and time specified in the NS for receipt 
will be considered only if
    (1) it is received before award is made; and
    (2) the Contracting Officer determines that the late receipt was 
due solely to a failure of the Government's electronic receiving 
equipment, or
    (3) it is the only offer received.
    (b) Any modification or withdrawal of an offer is subject to the 
same conditions as in (a) of this provision.
    (c) Notwithstanding (a) and (b) of this provision, a late 
modification of an otherwise successful offer that makes its terms 
more favorable to the Government will be considered at any time it 
is received and may be accepted.

B.12 Offer Guarantee

    (a) Each offeror must submit an acceptable offer guarantee for 
each offer submitted. Each offer guarantee must be received at the 
place specified in the NS no later than the date and time set for 
receipt of offers.
    (b) An offeror's failure to submit a timely, acceptable 
guarantee will result in rejection of its offer. A properly executed 
copy of the offer guarantee(s) may be faxed to the telephone numbers 
provided in the NS, with the original sent to the Contracting 
Officer as provided in paragraph (d) of this provision.
    (c) The amount of each offer guarantee is $10 million or 5 
percent of the maximum potential contract amount, whichever is less. 
The maximum potential contract amount is the sum of the products 
determined by multiplying the offer's maximum purchase quantity for 
each master line item, times the highest offer prices that the 
offeror would have to pay for that master line item if the offer 
were to be successful. The SPR on-line system will perform this 
calculation automatically as offer information is entered.
    (d) For each offer, an offeror must submit an irrevocable 
standby letter of credit from a U.S. depository institution 
containing the substantive provisions set out in Exhibit C, Offer 
Standby Letter of Credit, all letter of credit costs to be borne by 
the offeror. If the letter of credit contains any provisions at 
variance with Exhibit C or fails to include any provisions contained 
in Exhibit C, nonconforming provisions must be deleted and missing 
substantive provisions must be added or the letter of credit will 
not be accepted. The depository institution must be located in and 
authorized to do business in any state of the United States or the 
District of Columbia, and authorized to issue letters of credit by 
the banking laws of the United States or any state of the United 
States or the District of Columbia. The depository institution must 
be an account holder with the Federal Reserve Banking system and a 
participant (on line) in the Fed's Fedwire Deposit System Network 
funds transfer system. The original of the letter of credit must be 
sent to the Contracting Officer at the address specified in the NS. 
The issuing bank must provide documentation indicating that the 
person signing the letter of credit is authorized to do so, in the 
form of corporate minutes, the Authorized Signature List, or the 
General Resolution of Signature Authority.
    (e) The envelope containing the original letter of credit shall 
clearly be marked ``RE: NS  --------. OFFER STANDBY LETTER 
OF CREDIT (Name of Company). Offerors are cautioned that if they 
provide more than one Offer Standby Letter of Credit for multiple 
offers and, due to the absence of clear information from the 
offeror, the Government is unable to identify which letter of credit 
applies to which offer, the Contracting Officer in his sole 
discretion may assign the letters of credit to specific offers.
    (f) The offeror shall be liable for any amount lost by DOE due 
to the difference between the offer and the resale price, and for 
any additional resale costs incurred by DOE in the event that the 
offeror:
    (1) withdraws its offer within 10 days following the time set 
for receipt of offers;
    (2) withdraws its offer after having agreed to extend its 
acceptance period; or
    (3) having received a notification of ASO, fails to furnish an 
acceptable payment and performance letter of credit (see Provision 
C.21) within the time limit specified by the Contracting Officer.
    The offer guarantee shall be used toward offsetting such price 
difference or additional resale costs. Use of the offer guarantee 
for such recovery shall not preclude recovery by DOE of damages in 
excess of the amount of the offer guarantee caused by such failure 
of the offeror.
    (g) Letters of credit furnished as offer guarantees must be 
valid for at least 60 calendar days after the date set for the 
receipt of offers.
    (h) Offer guarantee letters of credit may be returned upon 
request to an unsuccessful offeror 5 business days after expiration 
of the offeror's acceptance period, and, except as provided in (i) 
of this provision, to a successful offeror upon receipt of a 
satisfactory payment and performance letter of credit.
    (i) If an offeror defaults on its offer, DOE will hold the offer 
guarantee so that damages can be assessed against it.

B.13 Explanation Requests From Offerors

    Offerors may request explanations regarding meaning or 
interpretation of the NS from the individual at the telephone number 
and/or e-mail address indicated in the NS. On complex and/or 
significant questions, DOE reserves the right to have the offeror 
put the question in writing; explanation or instructions regarding 
these questions will be given as an amendment to the NS.

B.14 Currency for Offers

    Prices shall be stated and invoices shall be paid in U.S. 
dollars.

B.15 Language of Offers and Contracts

    All offers in response to the NS and all modifications of offers 
shall be in English. All correspondence between offerors or 
purchasers and DOE shall be in English.

B.16 Proprietary Data

    Offer quantities and prices are not considered proprietary 
information. If any other information submitted in connection with a 
sale is considered proprietary, that information shall be identified 
by e-mail to the address indicated in the NS, and an explanation 
provided as to the reason such data should be considered 
proprietary. Any final decision as to whether the material so 
identified is proprietary will be made by DOE. DOE's Freedom of 
Information Act regulations governing the release of proprietary 
data shall apply.

B.17 SPR Crude Oil Streams and Delivery Points

    (a) The geographical locations of the terminals, pipelines, and 
docks interconnected with permanent SPR storage locations, the SPR 
crude oil streams available at each location and the delivery points 
for those streams are as follows, (See also Exhibit A, SPR Crude Oil 
Comprehensive Analysis, and Exhibit B, SPR Delivery Point Data):

------------------------------------------------------------------------
    Geographical location        Delivery points      Crude oil stream
------------------------------------------------------------------------
Freeport, Texas.............  Seaway Terminal or    SPR Bryan Mound
                               Seaway Pipeline       Sweet, SPR Bryan
                               Jones Creek.          Mound Sour
Texas City, Texas...........   Seaway Terminal or   SPR Bryan Mound
                               Local Pipelines.      Sweet, SPR Bryan
                                                     Mound Sour
Nederland, Texas............  Sunoco Logistics      SPR West Hackberry
                               Partners, Nederland   Sweet, SPR West
                               Terminal.             Hackberry Sour, SPR
                                                     Big Hill Sweet, SPR
                                                     Big Hill Sour
Lake Charles, Louisiana.....  Shell 22-Inch/DOE     SPR West Hackberry
                               Lake Charles          Sweet, SPR West
                               Pipeline Connection.  Hackberry Sour
St. James, Louisiana........  Shell Sugarland       SPR Bayou Choctaw
                               Terminal connected    Sweet, SPR Bayou
                               to LOCAP and          Choctaw Sour
                               Capline.
Beaumont, Texas.............  Unocal Terminal.....  SPR Big Hill Sweet,
                                                     SPR Big Hill Sour
Winnie, Texas...............  Shell 20-Inch Meter   SPR Big Hill Sweet,
                               Station.              SPR Big Hill Sour
------------------------------------------------------------------------


[[Page 39371]]

    (b) The NS may change delivery points and it may also include 
additional crude oils, terminals, temporary storage facilities or 
systems utilized in connection with petroleum in transit to the SPR.
    (c) The NS may contain additional information supplementing 
Exhibit B, SPR Delivery Point Data.

B.18 Notice of Sale Line Item Schedule--Petroleum Quantity, Quality, 
and Delivery Method

    (a) Unless the NS provides otherwise, the possible master line 
items (MLI) that may be offered are as identified in Provision B.17. 
Currently, there are eight MLIs, one for each of the eight crude oil 
streams that the SPR has in storage. The NS may not offer all the 
possible MLIs.
    (b) Each MLI contains multiple delivery line items (DLIs), each 
of which specifies an available delivery method and the nominal 
delivery period. Offerors are cautioned that the NS may alter the 
period of time covered by each DLI. The NS will specify which DLIs 
are offered for each MLI.
    (1) DLI-A covers petroleum to be transported by pipeline, either 
common carrier or local. The nominal delivery period is one month.
    (2) DLI-B covers petroleum to be transported by tankships. The 
nominal delivery period is one month.
    (3) DLI-E covers petroleum to be transported by barges (Note: 
These DLIs are usually only applicable to deliveries of West 
Hackberry and Big Hill Sweet and Sour crude oil streams from Sun 
Docks). The nominal delivery period is one month.
    (4) Where the storage site is connected to more than one 
terminal or pipeline, additional DLIs will be offered. The 
additional DLIs will include DLI-H, covering petroleum to be 
transported by pipeline over the period of a month; DLI-I, covering 
tankships, etc. The Notice of Sale will specify any additional DLIs 
which may be applicable.
    (c) The NS will state the total estimated number of barrels to 
be sold on each MLI. An offeror may offer to buy all or part of the 
petroleum offered on an MLI. In making awards, the Contracting 
Officer shall attempt to achieve award of the exact quantities 
offered by the NS, but may sell a quantity of petroleum in excess of 
the quantity offered for sale on a particular MLI in order to match 
the DLI offers received. In addition, the Contracting Officer may 
reduce the MLI quantity available for award by any amount and reject 
otherwise acceptable offers, if he determines, in his sole 
discretion after consideration of the offers received on all of the 
MLIs, that award of those quantities is not in the best interest of 
the Government because the prices offered for them are not 
reasonable, or that, in light of market conditions after offers are 
received, a lesser quantity than that offered should be sold.
    (d) The NS will specify a minimum contract quantity for each 
DLI. To be responsive, an offer on a DLI must be for at least that 
quantity.
    (e) The NS will specify the maximum quantity that could be sold 
on each of the DLIs. The maximum quantity is not an indication of 
the amount of petroleum that, in fact, will be sold on that DLI. 
Rather, it represents DOE's best estimate of the maximum amount of 
the particular SPR crude oil stream that can be moved by that 
transportation system over the delivery period. The total DOE 
estimated DLI maximums may exceed the total number of barrels to be 
sold on that MLI, as the NS DLI estimates represent estimated 
transportation capacity, not the amount of petroleum offered for 
sale.
    (f) The NS will not specify what portion of the petroleum that 
DOE offers on a MLI will, in fact, be sold on any given DLI. Rather, 
the highest priced offers received on the MLI will determine the 
DLIs against which the offered petroleum is sold.
    (g) DOE will not sell petroleum on a DLI in excess of the DLI 
maximum; however, DOE reserves the right to revise its estimates at 
any time and to award or modify contracts in accordance with its 
revised estimates. Offerors are cautioned that: DOE cannot guarantee 
that such transportation capacity is available; offerors should 
undertake their own analyses of available transportation capacity; 
and each purchaser is wholly responsible for arranging all 
transportation other than terminal arrangements at the terminals 
listed in Provision B.17, which shall be made in accordance with 
Provision C.5. A purchaser against one DLI cannot change a 
transportation mode without prior written permission from DOE, 
although such permission will be given whenever possible, in 
accordance with Provision C.6.
    (h) Exhibit A, SPR Crude Oil Comprehensive Analysis, contains 
nominal characteristics for each SPR crude oil stream. Prospective 
offerors are cautioned that these data may change with SPR inventory 
changes. The NS will provide, to the maximum extent practicable, the 
latest data on each stream offered.

B.19 Line Item Information To Be Provided in the Offer

    (a) Each offeror, if determined to be an ASO on a DLI, agrees to 
enter into a contract under the terms of its offer for the purchase 
of petroleum in the offer and to take delivery of that petroleum 
(plus or minus 10 percent as provided for in Provision C.20) in 
accordance with the terms of that contract.
    (b) An offeror may submit an offer for any or all the MLIs 
offered by the NS. However, offerors are cautioned that alternate 
offers on different MLIs are not permitted. For example, an offeror 
may offer to purchase 1,000,000 barrels of SPR West Hackberry Sweet 
and 1,000,000 barrels of SPR West Hackberry Sour, but may not offer 
to purchase, in the alternative, either 1,000,000 barrels of sweet 
or 1,000,000 barrels of sour.
    (c) An offeror may submit multiple offers. However, separate on-
line offers and offer guarantees must be submitted and each offer 
will be evaluated on an individual basis.
    (d) The following information will be provided to DOE by the 
offeror on the SPR on-line offer form:
    (1) Maximum MLI Quantity. The offer shall state the maximum 
quantity of each crude oil stream that the offeror is willing to 
buy.
    (2) Desired Qty. The offer shall state the number of barrels 
that the offeror will accept on each DLI, i.e., by the delivery mode 
and during the delivery period specified. The quantity stated on a 
single DLI shall not exceed the Maximum MLI Quantity for the MLI. 
The offeror shall designate a quantity on at least one DLI for the 
MLI, but may designate quantities on more than one DLI. If the 
offeror is willing to accept alternate DLIs, the total of its 
desired DLI quantities would exceed its Maximum MLI quantity; 
otherwise, the total of its desired DLI quantities should equal its 
Maximum MLI quantity.
    (3) Price. The offer shall state the price per barrel for each 
DLI for which the offeror has designated a Desired Qty. Where offers 
have indicated quantities on more than one DLI with a different 
price on each, DOE will award the highest priced DLI first. If the 
offeror has the same price for two or more DLIs, it may indicate its 
first choice, second choice, etc., for award of those items; if the 
offeror does not indicate a preference, or indicates the same 
preference for more than one DLI, DOE may select the DLIs to be 
awarded at its discretion. Prices may be stated in hundredths of a 
cent ($0.000l). DOE shall drop from the offer and not consider any 
numbers of less than one one-hundredth of a cent.
    (4) Accept Minimum Quantity. The offeror must choose whether to 
accept only the Desired Qty (by deselecting the Accept Min Qty 
checkbox to indicate an unwillingness to accept less than the 
Desired Qty for that DLI) or, in the alternative, to accept any 
quantity awarded between the offer's Desired Qty and the minimum 
contract quantity for the DLI (by leaving the Accept Min Qty 
checkbox selected). However, DOE will award less than the Desired 
Qty only if the quantity available to be awarded is less than the 
Desired Qty.

B.20 Mistake in Offer

    (a) After receiving offers, the Contracting Officer shall 
examine all offers for mistakes. If the Contracting Officer 
discovers any quantity discrepancies, he may obtain from the offeror 
oral or written verification of the offer actually intended, but in 
any event, he shall proceed with offer evaluation applying the 
following procedures:
    (1) In case of conflict between the maximum MLI quantity and the 
stated DLI quantities (for example, if a single stated DLI quantity 
exceeds the corresponding maximum MLI quantity), the lesser quantity 
will govern in the evaluation of the offer.
    (2) In the event that the offer fails to specify a maximum MLI 
quantity, the offer will be evaluated as though the largest stated 
DLI quantity is the offer's maximum MLI quantity.
    (b) In cases where the Contracting Officer has reason to believe 
a mistake not covered by the procedures set forth in paragraph (a) 
may have been made, he shall request from the offeror a verification 
of the offer, calling attention to the suspected mistake. The 
Contracting Officer may telephone the offeror and confirm the 
request by electronic means. The Contracting Officer may set a limit 
of as little as 6 hours for telephone response, with any required 
written documentation to be received within 2 business days. If no 
response is received, the Contracting Officer may determine that no 
error exists and proceed with offer evaluation.

[[Page 39372]]

    (c) The Head of the Contracting Activity will make 
administrative determinations described in paragraphs