Energy Priorities and Allocations System Regulations, 33615-33631 [2011-14282]

Agencies

• DEPARTMENT OF ENERGY

[Federal Register Volume 76, Number 111 (Thursday, June 9, 2011)]
[Rules and Regulations]
[Pages 33615-33631]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-14282]



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Federal Register / Vol. 76, No. 111 / Thursday, June 9, 2011 / Rules 
and Regulations

[[Page 33615]]



DEPARTMENT OF ENERGY

10 CFR Part 217

[RIN 1901-AB28]


Energy Priorities and Allocations System Regulations

AGENCY: Department of Energy.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule establishes standards and procedures by which 
the Department of Energy (DOE) may require that certain contracts or 
orders that promote the national defense be given priority over other 
contracts or orders. This rule also sets new standards and procedures 
by which DOE may allocate materials, services and facilities to promote 
the national defense. DOE is publishing this rule to comply with a 
requirement of the Defense Production Act Reauthorization of 2009 to 
publish regulations providing standards and procedures for 
prioritization of contracts and orders and for allocation of materials, 
services and facilities to promote the national defense.

DATES: This rule is effective on July 11, 2011.

ADDRESSES: Written comments regarding the burden-hour estimates or 
other aspects of the collection-of-information requirements contained 
in this final rule may be submitted to Dr. Kenneth Friedman, Office of 
Infrastructure Security and Energy Restoration, U.S. Department of 
Energy, Room 1E-256, 1000 Independence Avenue, SW., Washington, DC 
20585 and to Christine Kymn at Christine_J._Kymn@omb.eop.gov.

FOR FURTHER INFORMATION CONTACT: Dr. Kenneth Friedman, Office of 
Infrastructure Security and Energy Restoration, U.S. Department of 
Energy, 1000 Independence Ave., SW., Washington, DC 20585; (202) 536-
0379 (GC-76EPAS@hq.doe.gov). Lot H. Cooke, Office of the General 
Counsel (GC-76), U.S. Department of Energy, 1000 Independence Ave., 
SW., Washington, DC 20585; (202) 586-0503 (GC-76EPAS@hq.doe.gov).

SUPPLEMENTARY INFORMATION:

Background

    This rule expands upon 10 CFR part 216, the Department of Energy's 
(DOE) Energy Priorities and Allocations System (EPAS) regulations.
    10 CFR Part 216 implements DOE's administration of priorities and 
allocations actions in order to maximize domestic energy supplies 
pursuant to its authority under Section 101(c) of the Defense 
Production Act (50 U.S.C. app. Section 2071 et seq.) (DPA) as delegated 
by Executive Order 12919 (June 3, 1994). These regulations, codified at 
10 CFR part 217, implement DOE's administration of priorities and 
allocations in order to promote the national defense pursuant to its 
DPA authorities other than section 101(c). The EPAS has two principal 
components: Priorities and allocations. Under the priorities component, 
certain contracts between the government and private parties or between 
private parties for the production or delivery of industrial resources 
are required to be given priority over other contracts to facilitate 
expedited delivery in promotion of the U.S. national defense. Under the 
allocations component, materials, services, and facilities may be 
allocated to promote the national defense. For both components, the 
term ``national defense'' is defined broadly and can include critical 
infrastructure protection and restoration, emergency preparedness, and 
recovery from natural disasters.
    On September 30, 2009, the Defense Production Act Reauthorization 
of 2009 (Pub. L. 111-67, 123 Stat. 2006, September 30, 2009) (DPAR) was 
enacted. The DPAR requires all agencies to which the President has 
delegated priorities and allocations authority under Title I of the DPA 
to publish final rules establishing standards and procedures by which 
that authority will be used to promote the national defense in both 
emergency and nonemergency situations. The DPAR also requires all such 
agencies to consult ``as appropriate and to the extent practicable to 
develop a consistent and unified Federal priorities and allocations 
system.'' (123 Stat. 2006, at 2009). This rule is one of several rules 
to be published to implement the provisions of the DPAR. The final 
rules of the agencies with DPAR authorities, which are the Departments 
of Commerce, Energy, Transportation, Health and Human Services, 
Defense, and Agriculture, will comprise the Federal Priorities and 
Allocations System.
    DOE published its proposed EPAS rule on July 16, 2010 (75 FR 
41405). DOE solicited public comment on the proposed rule, but no 
comments were received. DOE now publishes this final rule pursuant to 
the provision of the DPAR noted above. DOE believes that its existing 
rules at 10 CFR part 216 satisfy the DPAR's requirement that agencies 
have standards and procedures in place to implement the DPA's 101(c) 
authorities. However, in the interest of promoting a unified priorities 
and allocations system, and to implement DOE's DPA authorities other 
than those set forth in section 101(c), DOE sets forth this EPAS rule. 
DOE's EPAS provisions are consistent with the Federal Priorities and 
Allocations System regulations being issued by other agencies. The 
specific proposals in this rule are more fully described below.

Analysis of the Priorities and Allocations System

Subpart A

    Subpart A sets forth the purpose of the regulation.
    Section 217.1 states the purpose of the EPAS, which provides 
guidance and procedures for use of the DPA priorities and allocations 
authority (other than the authorities set forth in section 101(c)) with 
respect to all forms of energy necessary or appropriate to promote the 
national defense.
    Section 217.2 provides an overview of the EPAS program. This 
section describes briefly all aspects of the EPAS, including the 
resource jurisdiction of other agencies delegated priorities and 
allocations authority under the DPA.

Subpart B

    The ``Definitions'' section appears in section 217.20 in Subpart B 
and provides definitions for the relevant regulatory terms.

Subpart C

    Subpart C, titled ``Placement of Rated Orders,'' reflects the fact 
that the subpart

[[Page 33616]]

addresses only DOE's priorities authorities; allocations authorities 
are addressed in Subpart E.
    Section 217.30, ``Delegation of Authority,'' describes fully the 
President's delegations to the Department of Energy. It also describes 
the items subject to DOE's jurisdiction and notes that the Department 
of Commerce has delegated certain authorities to DOE. This provision 
facilitates public understanding of the role that each delegate agency 
plays in the overall priorities and allocations system.
    Section 217.31, ``Priority ratings,'' describes the different 
levels of priority and program symbols used when rating an order.
    Section 217.32, ``Elements of a rated order,'' describes in detail 
what each rated order must include, consisting of the appropriate 
priority rating, delivery date information, signatures and required 
language.
    Language in section 217.33, ``Acceptance and rejection of rated 
orders,'' details when orders placed by DOE may or must be accepted or 
rejected, and what the procedures are for both, including customer 
notification requirements and certain exceptions for emergency 
preparedness conditions.
    Specifically, persons must accept or reject rated orders for 
emergency response-related approved programs within two days of receipt 
of the order. DOE establishes the shorter time limit in which the 
recipient must respond to a rated order issued in connection with an 
emergency response related program because such programs would involve 
disaster assistance, emergency response or similar activities. DOE 
believes that the exigent circumstances inherent in such activities 
justify requiring a shorter response time.
    Section 217.34, ``Preferential scheduling,'' details procedures in 
cases where a person receives two or more conflicting rated orders. If 
a person is unable to resolve such a conflict, this section refers them 
to special priorities assistance as provided in sections 217.40 through 
217.44.
    Language in section 217.35, ``Extension of priority ratings,'' 
requires a person to use rated orders with suppliers to obtain items or 
services needed to fill a rated order. This allows the priority rating 
to ``extend'' from contractor to subcontractor to supplier throughout 
the entire procurement chain.
    Section 217.36, ``Changes or cancellations of priority ratings and 
rated orders,'' provides procedures for changing or cancelling a rated 
order, both by DOE or other persons who placed the order.
    Section 217.37, ``Use of rated orders,'' lists what items must be 
rated. It also introduces the use of certain program identification 
symbols used when rated orders may be combined, and details the 
procedures for combining two or more rated orders, as well as rated and 
unrated orders.
    Section 217.38, ``Limitations on placing rated orders,'' prohibits 
the use of rated orders in a list of specific circumstances. This 
section also specifically excludes the use of rated orders for 
resources within the resource jurisdiction of agencies other than DOE 
with DPA priorities and allocations authority.

Subpart D

    Subpart D ``Special Priorities Assistance'' describes instances in 
which DOE can provide assistance in resolving matters related to 
priority rated contracts and orders.
    Section 217.40 ``General provisions'' illustrates when and how DOE 
can provide special priorities assistance, and provides specific DOE 
points of contact and the form to be used for requesting such 
assistance. Special priorities assistance may generally be requested 
for any reason.
    Section 217.41, ``Requests for priority rating authority,'' directs 
persons to the Department of Energy or Department of Commerce (DOC), as 
appropriate, to request priority rating authority in the event a rated 
order is likely to be delayed. This section also identifies 
circumstances in which DOE or DOC, as appropriate, may authorize a 
person to place a priority rating on an order to a supplier in advance 
of the issuance of a rated prime contract, and lists factors the 
agencies will consider in deciding whether to grant this authority.
    Section 217.42, ``Examples of assistance,'' provides a number of 
examples of when special priorities assistance may be provided, 
although it may generally be provided for any reason.
    Section 217.43 lists the criteria for granting assistance, and 
section 217.44 lists instances in which assistance may not be provided 
(i.e., to secure a price advantage).

Subpart E

    Subpart E, ``Allocation Actions,'' provides the public with 
detailed information on the procedures governing allocations actions. 
Allocations actions would most likely be used in extreme circumstances, 
such as in response to a national emergency.
    Sections 217.50 through 217.52 describe allocations and when and 
how allocation orders may be used. Specifically, allocation orders may 
be used only if priorities authority would not provide a sufficient 
supply of material, services or facilities for national defense 
requirements, or when use of priorities authority would cause a severe 
and prolonged disruption in the supply of resources available to 
support normal U.S. economic activities. Allocation orders would not be 
used to ration materials or services at the retail level. Allocation 
orders will be distributed equitably among the suppliers of the 
resource(s) being allocated and will not require any person to 
relinquish a disproportionate share of the civilian market. The 
standards set forth in sections 217.50 through 217.52 to ensure that 
allocation orders will be used only in situations where the 
circumstances justify such orders.
    Section 217.53 describes the three types of allocation orders that 
DOE might issue, which are a set-aside, an allocation directive, and an 
allotment. A set-aside is an official action that requires a person to 
reserve resource capacity in anticipation of receipt of rated orders. 
An allocation directive is an official action that requires a person to 
take or refrain from taking certain actions in accordance with its 
provisions (an allocation directive can require a person to stop or 
reduce production of an item, prohibit the use of selected items, 
divert supply of one type of product to another, or to supply a 
specific quantity, size, shape, and type of an item within a specific 
time period). An allotment is an official action that specifies the 
maximum quantity of an item authorized for use in a specific program or 
application. DOE establishes these three types of allocation orders 
because it believes that, collectively they describe the types of 
actions that might be taken in any situation in which allocation is 
justified.
    Section 217.54, ``Elements of an allocation order,'' sets forth the 
minimum elements of an allocation order. Those elements are:
    (a) A detailed description of the required allocation action(s);
    (b) Specific start and end calendar dates for each required 
allocation action;
    (c) The written signature on a manually placed order, or the 
digital signature or name on an electronically placed order, of the 
Secretary of Energy. The signature or use of the name certifies that 
the order is authorized under this regulation and that the

[[Page 33617]]

requirements of this regulation are being followed;
    (d) A statement that reads in substance: ``This is an allocation 
order certified for national defense use. [Insert the legal name of the 
person receiving the order] is required to comply with this order, in 
accordance with the provisions of the Energy Priorities and Allocations 
System regulation (10 CFR part 217), which is part of the Federal 
Priorities and Allocations System''; and
    (e) A current copy of the Energy Priorities and Allocations System 
(10 CFR part 217).
    DOE establishes these elements because it believes that they 
provide a proper balance between the need for standards to permit the 
public to recognize and understand an allocation order if one is 
issued, and the expectation that any actual allocation orders will have 
to be tailored to meet unforeseeable circumstances. The language of 
section 217.54 does not preclude DOE from including additional 
information in an allocation order if circumstances warrant doing so.
    Section 217.55, ``Mandatory acceptance of allocation orders,'' 
requires that an allocation order must be accepted if a person is 
capable of fulfilling the order. If a person is unable to comply fully 
with the required actions specific in an allocation order, the person 
must notify DOE immediately, explain the extent to which compliance is 
possible, and give reasons why full compliance is not possible. This 
section also states that a person may not discriminate against an 
allocation order in any manner, such as by charging higher prices or 
imposing terms and conditions different than what the person imposed on 
contracts or orders for the same resource(s) that were received prior 
to receiving the allocation order. DOE establishes section 217.55 to 
clarify that the limited circumstances and emergency situations that 
trigger issuance of an allocation order require immediate response to 
address the situation in an expedient fashion.
    Section 217.56, ``Changes or cancellations of an allocation order'' 
provides that an allocation order may be changed or cancelled by the 
Department of Energy.

Subpart F

    Subpart F, ``Official Actions,'' provides the specific official 
actions the DOE may take to implement the provisions of this 
regulation. These official actions include Rating Authorizations, 
Directives, and Memoranda of Understanding.
    Section 217.61, ``Rating Authorizations,'' defines a rating 
authorization as an official action granting specific priority rating 
authority, and refers persons to section 217.21 to request such 
priority rating authority.
    Section 217.62, ``Directives,'' defines a directive as an official 
action that requires a person to take or refrain from taking certain 
actions in accordance with its provisions. This section details 
directive compliance for the public.
    Section 217.63, ``Letters and Memoranda of Understanding,'' defines 
a letter or memorandum of understanding as an official action that may 
be issued in resolving special priorities assistance cases to reflect 
an agreement reached by all parties, and explains its use.

Subpart G

    Subpart G, ``Compliance,'' provides DOE authority to enforce the 
administration of the DPA and other applicable statutes, this 
regulation, or an official action. This subpart provides that willful 
violations of the provisions of title I or section 705 of the DPA, this 
regulation, or a DOE official action, are criminal acts, punishable as 
provided in the DPA, and as set forth below in section 217.74.
    Section 217.71, ``Audits and investigations,'' details the 
procedures for official examinations of books, records, documents, and 
other writings and information to ensure that the provisions of the DPA 
and other applicable statutes, this regulation, and official actions 
have been properly followed. An audit or investigation may also include 
interviews and a systems evaluation to detect problems or failures in 
the implementation of this regulation.
    Section 217.72, ``Compulsory process,'' provides that if a person 
refuses to permit a duly authorized DOE representative to have access 
to necessary information, DOE may seek the institution of appropriate 
legal action, including ex parte application for an inspection warrant, 
in any forum of appropriate jurisdiction.
    Sections 217.73 and 217.74 both provide procedures for notification 
of failure to comply with the DPA, these regulations, or DOE official 
actions, and the violations, penalties and remedies that may result.
    Section 217.75, ``Compliance Conflicts,'' requires that persons 
immediately contact DOE should compliance with the DPA, these 
regulations, or an official action prevent a person from filling a 
rated order or from complying with another provision of the DPA and 
other applicable statutes, this regulation, or an official action.

Subpart H

    Section 217.80, ``Adjustments, Exceptions, and Appeals,'' sets 
forth the procedures to request an adjustment or exception to the 
provisions of these regulations on the grounds of exceptional hardship 
or compliance would be contrary to the intent of the DPA. These 
requests must be submitted in writing to the DOE contact provided in 
this section.
    Section 217.81, ``Appeals,'' provides the procedures, timing and 
contact information for appealing a decision made on a request for 
relief in the previous section.

Subpart I

    Subpart I, ``Miscellaneous Provisions,'' addresses a number of 
remaining issues, including protection against claims, records and 
reports, applicability issues, and communications.
    Section 217.90, ``Protection against claims,'' provides that a 
person shall not be held liable for damages or penalties for any act or 
failure to act resulting directly or indirectly from compliance with 
any part of this regulation, or an official action.
    Section 217.91, ``Records and reports,'' requires that persons make 
and preserve for at least three years, accurate and complete records of 
any transaction covered by this regulation or an official action. 
Various requirements and procedures regarding such records are provided 
in this section. The confidentiality provisions of the DPA governing 
the submission of information pursuant to the DPA and these regulations 
are also set forth.
    Section 217.92, ``Applicability of this regulation and official 
actions,'' provides the jurisdictional applicability of this regulation 
and official actions.
    Section 217.93, ``Communications,'' provides a DOE point of contact 
for all communications regarding this regulation.

Public Comments Received

    DOE received no comments on its proposed EPAS regulation. DOE 
finalizes its proposed regulation without change.

A. Review Under Executive Order 12866

    This rule has been determined to be significant for purposes of 
Executive Order 12866.

B. Review Under the Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires 
preparation

[[Page 33618]]

of an initial regulatory flexibility analysis for any rule that by law 
must be proposed for public comment, unless the agency certifies that 
the rule, if promulgated, will not have a significant economic impact 
on a substantial number of small entities. As required by Executive 
Order 13272, ``Proper Consideration of Small Entities in Agency 
Rulemaking,'' 67 FR 53461 (August 16, 2002), DOE published procedures 
and policies on February 19, 2003, to ensure that the potential impacts 
of its rules on small entities are properly considered during the 
rulemaking process. 68 FR 7990. DOE has made its procedures and 
policies available on the Office of the General Counsel's Web site, 
https://www.gc.doe.gov.
    DOE reviewed today's final rule under the provisions of the 
Regulatory Flexibility Act and the procedures and policies published on 
February 19, 2003.
Number of Small Entities
    Small entities include small businesses, small organizations and 
small governmental jurisdictions. For purposes of assessing the impacts 
of this final rule on small entities, a small business, as described in 
the Small Business Administration's Table of Small Business Size 
Standards Matched to North American Industry Classification System 
Codes (August 2008 Edition), has a maximum annual revenue of $ 33.5 
million and a maximum of 1,500 employees (for some business categories, 
these number are lower). A small governmental jurisdiction is a 
government of a city, town, school district or special district with a 
population of less than 50,000. A small organization is any not-for-
profit enterprise which is independently owned and operated and is not 
dominant in its field.
    This rule sets criteria under which DOE (or agencies to which DOE 
delegates authority) will authorize prioritization of certain orders or 
contracts as well as criteria under which DOE would issue orders 
allocating resources or production facilities. Because the rule affects 
commercial transactions, DOE believes that small organizations and 
small governmental jurisdictions are unlikely to be affected by this 
rule. To date, DOE has not exercised its existing allocations 
authority. As such, DOE has no basis on which to estimate the number of 
small businesses that may be affected by this rule.
Impact
    The final rule has two principle components: Prioritization and 
allocation. Under prioritization, DOE or its Delegate Agency designates 
certain orders as one of two possible priority levels. Once so 
designated, such orders are referred to as ``rated orders.'' The 
recipient of a rated order must give it priority over an unrated order 
or an order with a lower priority rating. A recipient of a rated order 
may place orders at the same priority level with suppliers and 
subcontractors for supplies and services necessary to fulfill the 
recipient's rated order and the suppliers and subcontractors must treat 
the request from the rated order recipient as a rated order with the 
same priority level as the original rated order. The rule does not 
require recipients to fulfill rated orders if the price or terms of 
sale are not consistent with the price or terms of sale of similar non-
rated orders. The rule provides a defense from any liability for 
damages or penalties for actions taken in, or inactions required for, 
compliance with the rule.
    Although rated orders could require a firm to fill one order prior 
to filling another, they would not necessarily require a reduction in 
the total volume of orders. The regulations would also not require the 
recipient of a rated order to reduce prices or provide rated orders 
with more favorable terms than a similar non-rated order. Under these 
circumstances, the economic effects on the rated order recipient of 
substituting one order for another are likely to be mutually 
offsetting, resulting in no net economic impact.
    Allocations could be used to control the general distribution of 
materials or services in the civilian market. Specific allocation 
actions that DOE might take are as follows:

    Set-aside: An official action that requires a person to reserve 
resource capacity in anticipation of receipt of rated orders.
    Allocations directive: An official action that requires a person 
to take or refrain from taking certain actions in accordance with 
its provisions. An allocation directive can require a person to stop 
or reduce production of an item, prohibit the use of selected items, 
or divert supply of one type of product to another, or to supply a 
specific quantity, size, shape, and type of an item within a 
specific time period.
    Allotment: An official action that specifies the maximum 
quantity of an item authorized for use in a specific program or 
application.

DOE has not yet taken any actions under its existing allocations 
authority, and any future allocations actions would be used only in 
extraordinary circumstances. As required by section 101(b) of the 
Defense Production Act of 1950, as amended, (50 U.S.C. app. section 
2071), hereinafter ``DPA,'' and by Section 201(d) of Executive Order 
12919 of June 3, 1994, as amended, DOE may implement allocations only 
if the Secretary of Energy makes, and the President approves, a finding 
``(1) that the material [or service] is a scarce and critical material 
[or service] essential to the national defense, and (2) that the 
requirements of the national defense for such material [or service] 
cannot otherwise be met without creating a significant dislocation of 
the normal distribution of such material [or service] in the civilian 
market to such a degree as to create appreciable hardship.'' The term 
``national defense'' is defined to mean ``programs for military and 
energy production or construction, military or critical infrastructure 
assistance to any foreign nation, homeland security, stockpiling, 
space, and any related activity. Such term includes emergency 
preparedness activities conducted pursuant to title IV of the Robert T. 
Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 
section 5195 et seq.) and critical infrastructure protection and 
restoration.
    Any allocation actions taken by DOE would also have to comply with 
Section 701(e) of the DPA (50 U.S.C. app. section 2151(e)), which 
provides that ``small business concerns shall be accorded, to the 
extent practicable, a fair share of the such material [including 
services] in proportion to the share received by such business concerns 
under normal conditions, giving such special consideration as may be 
possible to emerging business concerns.'' Such a provision may even 
provide an economic benefit to small businesses.
Conclusion
    Although DOE cannot determine precisely the number of small 
entities that would be affected by this rule, DOE believes that the 
overall impact on such entities would not be significant. In most 
instances, rated contracts would be fulfilled in addition to other 
(unrated) contracts and could actually increase the total amount of 
business of the firm that receives a rated contract.
    Because allocations can be imposed only after an agency 
determination confirmed by the President, and because DOE has not yet 
used its allocations authority that has existed since passage of the 
Defense Production Act in 1950, one can expect allocations will be 
ordered only in particular circumstances. However, DOE believes that 
the requirement for a Presidential determination and the provisions of 
section 701 of the DPA indicate that any

[[Page 33619]]

impact on small business will not be significant.
    DOE received no comments on the certification or economic impacts 
of the rule at the proposed rule stage.
    Therefore, for the reasons set forth above, the Assistant General 
Counsel for Legislation, Regulation, and Energy Efficiency certifies 
that this rule will not have a significant economic impact on a 
substantial number of small entities.

C. Review Under the Paperwork Reduction Act

    This rule contains a collection-of-information requirement subject 
to the Paperwork Reduction Act (PRA) and which has been approved by OMB 
under control number 1910-5159. This requirement has been submitted to 
OMB for approval. Public reporting burden for submission of Form DOE F 
544 (05-11) is estimated to average 30 minutes per response, including 
the time for reviewing instructions, searching existing data sources, 
gathering and maintaining the data needed, and completing and reviewing 
the collection of information.
    Send comments on this burden estimate or any other aspects of the 
collection of information to Dr. Kenneth Friedman (see ADDRESSES), and 
by e-mail to Christine_J._Kymn@omb.eop.gov.
    Notwithstanding any other provision of the law, no person is 
required to respond to, nor shall any person be subject to a penalty 
for failure to comply with, a collection of information subject to the 
requirements of the PRA, unless that collection of information displays 
a currently valid OMB Control Number.

D. Review Under Executive Order 13211

    Executive Order 13211, ``Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use,'' 66 FR 28355 
(May 22, 2001) requires Federal agencies to prepare and submit to the 
Office of Information and Regulatory Affairs (OIRA) a Statement of 
Energy Effects for any proposed significant energy action. DOE 
determined that today's rule, which sets forth procedures for 
compliance with the Defense Production Act (separate from the 
procedures set forth at 10 CFR part 216), is not a ``significant energy 
action'' within the meaning of Executive Order 13211. The Administrator 
of the Office of Information and Regulatory Affairs at OMB also did not 
designate this action as a significant energy action. Therefore, DOE 
concludes that today's rule is not a significant energy action within 
the meaning of Executive Order 13211 and has not prepared a Statement 
of Energy Effects.

E. Review Under Executive Order 13132

    DOE reviewed this rule pursuant to Executive Order 13132, 
``Federalism,'' 64 FR 43255 (August 4, 1999), which imposes certain 
requirements on agencies formulating and implementing policies or 
regulations that preempt State law or that have federalism 
implications. DOE also reviewed this rule pursuant to DOE's statement 
of policy describing the intergovernmental consultation process it will 
follow in the development of regulations that have federalism 
implications, 65 FR 13735 (March 14, 2000). DOE determined that the 
rule 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.

F. Congressional Notification

    As required by 5 U.S.C. 801, DOE will submit to Congress a report 
regarding the issuance of today's final rule prior to the effective 
date set forth at the outset of this rulemaking. The report will state 
that it has been determined that the rule is a ``major rule'' as 
defined by 5 U.S.C. 804(2). DOE also will submit the supporting 
analyses to the Comptroller General in the U.S. Government 
Accountability Office (GAO) and make them available to each House of 
Congress.

G. Approval of the Office of the Secretary

    The Secretary of Energy has approved publication of this notice of 
final rulemaking.

List of Subjects in 10 CFR Part 217

    Administrative practice and procedure, Business and industry, 
Government contracts, National defense, Reporting and recordkeeping 
requirements, Strategic and critical materials.

    Issued in Washington, DC on June 3, 2011.
Patricia Hoffman,
Assistant Secretary, Electricity Delivery and Energy Reliability.

    For the reasons stated in the preamble, DOE amends chapter II of 
title 10 of the Code of Federal Regulations, by adding a new part 217 
to read as set forth below:

PART 217--ENERGY PRIORITIES AND ALLOCATIONS SYSTEM

Subpart A--General
Sec.
217.1 Purpose of this part.
217.2 Priorities and allocations authority.
217.3 Program eligibility.
Subpart B--Definitions
217.20 Definitions.
Subpart C--Placement of Rated Orders
217.30 Delegation of authority.
217.31 Priority ratings.
217.32 Elements of a rated order.
217.33 Acceptance and rejection of rated orders.
217.34 Preferential scheduling.
217.35 Extension of priority ratings.
217.36 Changes or cancellations of priority ratings and rated 
orders.
217.37 Use of rated orders.
217.38 Limitations on placing rated orders.
Subpart D--Special Priorities Assistance
217.40 General provisions.
217.41 Requests for priority rating authority.
217.42 Examples of assistance.
217.43 Criteria for assistance.
217.44 Instances where assistance may not be provided.
Subpart E--Allocation Actions
217.50 Policy.
217.51 General procedures.
217.52 Controlling the general distribution of a material in the 
civilian market.
217.53 Types of allocation orders.
217.54 Elements of an allocation order.
217.55 Mandatory acceptance of an allocation order.
217.56 Changes or cancellations of an allocation order.
Subpart F--Official Actions
217.60 General provisions.
217.61 Rating Authorizations.
217.62 Directives.
217.63 Letters and Memoranda of Understanding.
Subpart G--Compliance
217.70 General provisions.
217.71 Audits and investigations.
217.72 Compulsory process.
217.73 Notification of failure to comply.
217.74 Violations, penalties, and remedies.
217.75 Compliance conflicts.
Subpart H--Adjustments, Exceptions, and Appeals
217.80 Adjustments or exceptions.
217.81 Appeals.
Subpart I--Miscellaneous Provisions
217.90 Protection against claims.
217.91 Records and reports.
217.92 Applicability of this part and official actions.
217.93 Communications.
Appendix I to Part 217--Sample Form DOE F 544 (05-11)

    Authority: Defense Production Act of 1950, as amended, 50 U.S.C. 
App. 2061-2171; E.O. 12919, as amended, (59 FR 29525, June 7, 1994).

[[Page 33620]]

Subpart A--General


Sec.  217.1  Purpose of this part.

    This part provides guidance and procedures for use of the Defense 
Production Act section 101(a) priorities and allocations authority with 
respect to all forms of energy necessary or appropriate to promote the 
national defense. (The guidance and procedures in this part are 
consistent with the guidance and procedures provided in other 
regulations that, as a whole, form the Federal Priorities and 
Allocations System. Guidance and procedures for use of the Defense 
Production Act priorities and allocations authority with respect to 
other types of resources are provided for: Food resources, food 
resource facilities, and the domestic distribution of farm equipment 
and commercial fertilizer; health resources; all forms of civil 
transportation (49 CFR Part 33); water resources; and all other 
materials, services, and facilities, including construction materials 
in the Defense Priorities and Allocations System (DPAS) regulation (15 
CFR Part 700).) Department of Energy (DOE) regulations at 10 CFR Part 
216 describe and establish the procedures to be used by DOE in 
considering and making certain findings required by section 
101(c)(2)(A) of the Defense Production Act of 1950, as amended.


Sec.  217.2  Priorities and allocations authority.

    (a) Section 201 of E.O. 12919 (59 FR 29525) delegates the 
President's authority under section 101 of the Defense Production Act 
to require acceptance and priority performance of contracts and orders 
(other than contracts of employment) to promote the national defense 
over performance of any other contracts or orders, and to allocate 
materials, services, and facilities as deemed necessary or appropriate 
to promote the national defense to:
    (1) The Secretary of Agriculture with respect to food resources, 
food resource facilities, and the domestic distribution of farm 
equipment and commercial fertilizer;
    (2) The Secretary of Energy with respect to all forms of energy;
    (3) The Secretary of Health and Human Services with respect to 
health resources;
    (4) The Secretary of Transportation with respect to all forms of 
civil transportation;
    (5) The Secretary of Defense with respect to water resources; and
    (6) The Secretary of Commerce for all other materials, services, 
and facilities, including construction materials.
    (b) Section 202 of E.O. 12919 states that the priorities and 
allocations authority delegated in section 201 of this order may be 
used only to support programs that have been determined in writing as 
necessary or appropriate to promote the national defense:
    (1) By the Secretary of Defense with respect to military production 
and construction, military assistance to foreign nations, stockpiling, 
outer space, and directly related activities;
    (2) By the Secretary of Energy with respect to energy production 
and construction, distribution and use, and directly related 
activities; and
    (3) By the Secretary of Homeland Security with respect to essential 
civilian needs supporting national defense, including civil defense and 
continuity of government and directly related activities.


Sec.  217.3  Program eligibility.

    Certain programs to promote the national defense are eligible for 
priorities and allocations support. These include programs for military 
and energy production or construction, military or critical 
infrastructure assistance to any foreign nation, deploying and 
sustaining military forces, homeland security, stockpiling, space, and 
any directly related activity. Other eligible programs include 
emergency preparedness activities conducted pursuant to title VI of the 
Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 
U.S.C. 5195 et seq.) and critical infrastructure protection and 
restoration.

Subpart B--Definitions


Sec.  217.20  Definitions.

    The following definitions pertain to all sections of this part:
    Allocation order means an official action to control the 
distribution of materials, services, or facilities for a purpose deemed 
necessary or appropriate to promote the national defense.
    Allotment means an official action that specifies the maximum 
quantity or use of a material, service, or facility authorized for a 
specific use to promote the national defense.
    Approved program means a program determined by the Secretary of 
Defense, the Secretary of Energy, or the Secretary of Homeland Security 
to be necessary or appropriate to promote the national defense, in 
accordance with section 202 of E.O. 12919.
    Civil transportation includes movement of persons and property by 
all modes of transportation in interstate, intrastate, or foreign 
commerce within the United States, its territories and possessions, and 
the District of Columbia, and, without limitation, related public 
storage and warehousing, ports, services, equipment and facilities, 
such as transportation carrier shop and repair facilities. However, 
``civil transportation'' shall not include transportation owned or 
controlled by the Department of Defense, use of petroleum and gas 
pipelines, and coal slurry pipelines used only to supply energy 
production facilities directly. As applied herein, ``civil 
transportation'' shall include direction, control, and coordination of 
civil transportation capacity regardless of ownership.
    Construction means the erection, addition, extension, or alteration 
of any building, structure, or project, using materials or products 
which are to be an integral and permanent part of the building, 
structure, or project. Construction does not include maintenance and 
repair.
    Critical infrastructure means any systems and assets, whether 
physical or cyber-based, so vital to the United States that the 
degradation or destruction of such systems and assets would have a 
debilitating impact on national security, including, but not limited 
to, national economic security and national public health or safety.
    Defense Production Act means the Defense Production Act of 1950, as 
amended (50 U.S.C. App. 2061 et seq.).
    Delegate Agency means a Federal government agency authorized by 
delegation from the Department of Energy to place priority ratings on 
contracts or orders needed to support approved programs.
    Directive means an official action that requires a person to take 
or refrain from taking certain actions in accordance with its 
provisions.
    Emergency preparedness means all those activities and measures 
designed or undertaken to prepare for or minimize the effects of a 
hazard upon the civilian population, to deal with the immediate 
emergency conditions which would be created by the hazard, and to 
effectuate emergency repairs to, or the emergency restoration of, vital 
utilities and facilities destroyed or damaged by the hazard. Such term 
includes the following:
    (1) Measures to be undertaken in preparation for anticipated 
hazards (including the establishment of appropriate organizations, 
operational plans, and supporting agreements, the recruitment and 
training of personnel, the conduct of research, the procurement and 
stockpiling of necessary materials and supplies, the provision of 
suitable warning systems,

[[Page 33621]]

the construction or preparation of shelters, shelter areas, and control 
centers, and, when appropriate, the nonmilitary evacuation of the 
civilian population).
    (2) Measures to be undertaken during a hazard (including the 
enforcement of passive defense regulations prescribed by duly 
established military or civil authorities, the evacuation of personnel 
to shelter areas, the control of traffic and panic, and the control and 
use of lighting and civil communications).
    (3) Measures to be undertaken following a hazard (including 
activities for fire fighting, rescue, emergency medical, health and 
sanitation services, monitoring for specific dangers of special 
weapons, unexploded bomb reconnaissance, essential debris clearance, 
emergency welfare measures, and immediately essential emergency repair 
or restoration of damaged vital facilities).
    Energy means all forms of energy including petroleum, gas (both 
natural and manufactured), electricity, solid fuels (including all 
forms of coal, coke, coal chemicals, coal liquification, and coal 
gasification), and atomic energy, and the production, conservation, 
use, control, and distribution (including pipelines) of all of these 
forms of energy.
    Facilities includes all types of buildings, structures, or other 
improvements to real property (but excluding farms, churches or other 
places of worship, and private dwelling houses), and services relating 
to the use of any such building, structure, or other improvement.
    Farm equipment means equipment, machinery, and repair parts 
manufactured for use on farms in connection with the production or 
preparation for market use of food resources.
    Fertilizer means any product or combination of products that 
contain one or more of the elements--nitrogen, phosphorus, and 
potassium--for use as a plant nutrient.
    Food resources means all commodities and products, simple, mixed, 
or compound, or complements to such commodities or products, that are 
capable of being ingested by either human beings or animals, 
irrespective of other uses to which such commodities or products may be 
put, at all stages of processing from the raw commodity to the products 
thereof in vendible form for human or animal consumption. ``Food 
resources'' also means all starches, sugars, vegetable and animal or 
marine fats and oils, cotton, tobacco, wool, mohair, hemp, flax fiber, 
and naval stores, but does not mean any such material after it loses 
its identity as an agricultural commodity or agricultural product.
    Food resource facilities means plants, machinery, vehicles 
(including on-farm), and other facilities required for the production, 
processing, distribution, and storage (including cold storage) of food 
resources, livestock and poultry feed and seed, and for the domestic 
distribution of farm equipment and fertilizer (excluding transportation 
thereof).
    Hazard means an emergency or disaster resulting from:
    (1) A natural disaster; or
    (2) An accidental or human-caused event.
    Health resources means drugs, biological products, medical devices, 
diagnostics, materials, facilities, health supplies, services and 
equipment required to diagnose, prevent the impairment of, improve, or 
restore the physical or mental health conditions of the population.
    Homeland security includes efforts--
    (1) To prevent terrorist attacks within the United States;
    (2) To reduce the vulnerability of the United States to terrorism;
    (3) To minimize damage from a terrorist attack in the United 
States; and
    (4) To recover from a terrorist attack in the United States.
    Industrial resources means all materials, services, and facilities, 
including construction materials, but not including: food resources, 
food resource facilities, and the domestic distribution of farm 
equipment and commercial fertilizer; all forms of energy; health 
resources; all forms of civil transportation; and water resources.
    Item means any raw, in process, or manufactured material, article, 
commodity, supply, equipment, component, accessory, part, assembly, or 
product of any kind, technical information, process, or service.
    Maintenance and repair and operating supplies or MRO--
    (1) ``Maintenance'' is the upkeep necessary to continue any plant, 
facility, or equipment in working condition.
    (2) ``Repair'' is the restoration of any plant, facility, or 
equipment to working condition when it has been rendered unsafe or 
unfit for service by wear and tear, damage, or failure of parts.
    (3) ``Operating supplies'' are any resources carried as operating 
supplies according to a person's established accounting practice. 
Operating supplies may include hand tools and expendable tools, jigs, 
dies, fixtures used on production equipment, lubricants, cleaners, 
chemicals and other expendable items.
    (4) MRO does not include items produced or obtained for sale to 
other persons or for installation upon or attachment to the property of 
another person, or items required for the production of such items; 
items needed for the replacement of any plant, facility, or equipment; 
or items for the improvement of any plant, facility, or equipment by 
replacing items which are still in working condition with items of a 
new or different kind, quality, or design.
    Materials includes--
    (1) Any raw materials (including minerals, metals, and advanced 
processed materials), commodities, articles, components (including 
critical components), products, and items of supply; and
    (2) Any technical information or services ancillary to the use of 
any such materials, commodities, articles, components, products, or 
items.
    (3) Natural resources such as oil and gas.
    National defense means programs for military and energy production 
or construction, military or critical infrastructure assistance to any 
foreign nation, homeland security, stockpiling, space, and any directly 
related activity. Such term includes emergency preparedness activities 
conducted pursuant to title VI of the Robert T. Stafford Disaster 
Relief and Emergency Assistance Act (42 U.S.C. 5195, et seq.) and 
critical infrastructure protection and restoration.
    Official action means an action taken by the Department of Energy 
or another resource agency under the authority of the Defense 
Production Act, E.O. 12919, and this part or another regulation under 
the Federal Priorities and Allocations System. Such actions include the 
issuance of Rating Authorizations, Directives, Set Asides, Allotments, 
Letters of Understanding, Memoranda of Understanding, Demands for 
Information, Inspection Authorizations, and Administrative Subpoenas.
    Person includes an individual, corporation, partnership, 
association, or any other organized group of persons, or legal 
successor or representative thereof, or any State or local government 
or agency thereof.
    Rated order means a prime contract, a subcontract, or a purchase 
order in support of an approved program issued in accordance with the 
provisions of this part.
    Resource agency means any agency delegated priorities and 
allocations authority as specified in Sec.  217.2.
    Secretary means the Secretary of Energy.

[[Page 33622]]

    Services includes any effort that is needed for or incidental to--
    (1) The development, production, processing, distribution, 
delivery, or use of an industrial resource or a critical technology 
item;
    (2) The construction of facilities;
    (3) The movement of individuals and property by all modes of civil 
transportation; or
    (4) Other national defense programs and activities.
    Set-aside means an official action that requires a person to 
reserve materials, services, or facilities capacity in anticipation of 
the receipt of rated orders.
    Stafford Act means title VI (Emergency Preparedness) of the Robert 
T. Stafford Disaster Relief and Emergency Assistance Act, as amended 
(42 U.S.C. 5195-5197g).
    Water resources means all usable water, from all sources, within 
the jurisdiction of the United States, which can be managed, 
controlled, and allocated to meet emergency requirements.

Subpart C--Placement of Rated Orders


Sec.  217.30  Delegations of authority.

    (a) The priorities and allocations authorities of the President 
under Title I of the Defense Production Act with respect to all forms 
of energy have been delegated to the Secretary of Energy under E.O. 
12919 of June 3, 1994 (59 FR 29525).
    (b) The Department of Commerce has delegated authority to the 
Department of Energy to provide for extension of priority ratings for 
``industrial resources,'' as provided in Sec.  261.35 of this part, to 
support rated orders for all forms of energy.


Sec.  217.31  Priority ratings.

    (a) Levels of priority.
    (1) There are two levels of priority established by the Energy 
Priorities and Allocations System regulations, identified by the rating 
symbols ``DO'' and ``DX''.
    (2) All DO-rated orders have equal priority with each other and 
take precedence over unrated orders. All DX-rated orders have equal 
priority with each other and take precedence over DO-rated orders and 
unrated orders. (For resolution of conflicts among rated orders of 
equal priority, see Sec.  217.34(c).)
    (3) In addition, a Directive regarding priority treatment for a 
given item issued by the Department of Energy for that item takes 
precedence over any DX-rated order, DO-rated order, or unrated order, 
as stipulated in the Directive. (For a full discussion of Directives, 
see Sec.  217.62.)
    (b) Program identification symbols. Program identification symbols 
indicate which approved program is being supported by a rated order. 
The list of currently approved programs and their identification 
symbols are listed in Schedule 1, set forth as an Appendix to 15 CFR 
part 700. For example, DO-F3 identifies a domestic energy construction 
program. Additional programs may be approved under the procedures of 
E.O. 12919 at any time. Program identification symbols do not connote 
any priority.
    (c) Priority ratings. A priority rating consists of the rating 
symbol--DO or DX--and the program identification symbol, such as F1, 
F2, or F3. Thus, a contract for a domestic energy construction program 
will contain a DO-F3 or DX-F3 priority rating.


Sec.  217.32  Elements of a rated order.

    Each rated order must include:
    (a) The appropriate priority rating (e.g. DO-F1 or DX-F1)
    (b) A required delivery date or dates. The words ``immediately'' or 
``as soon as possible'' do not constitute a delivery date. A 
``requirements contract'', ``basic ordering agreement'', ``prime vendor 
contract'', or similar procurement document bearing a priority rating 
may contain no specific delivery date or dates and may provide for the 
furnishing of items or service from time to time or within a stated 
period against specific purchase orders, such as ``calls'', 
``requisitions'', and ``delivery orders''. These purchase orders must 
specify a required delivery date or dates and are to be considered as 
rated as of the date of their receipt by the supplier and not as of the 
date of the original procurement document;
    (c) The written signature on a manually placed order, or the 
digital signature or name on an electronically placed order, of an 
individual authorized to sign rated orders for the person placing the 
order. The signature or use of the name certifies that the rated order 
is authorized under this part and that the requirements of this part 
are being followed; and
    (d)(1) A statement that reads in substance:
    This is a rated order certified for national defense use, and you 
are required to follow all the provisions of the Energy Priorities and 
Allocations System regulation at 10 CFR part 217.
    (2) If the rated order is placed in support of emergency 
preparedness requirements and expedited action is necessary and 
appropriate to meet these requirements, the following sentences should 
be added following the statement set forth in paragraph (d)(1) of this 
section:
    This rated order is placed for the purpose of emergency 
preparedness. It must be accepted or rejected within 2 days after 
receipt of the order if (1) The order is issued in response to a hazard 
that has occurred; or
    (2) If the order is issued to prepare for an imminent hazard, as 
specified in EPAS Section 217.33(e), 10 CFR 217.33(e).


Sec.  217.33  Acceptance and rejection of rated orders.

    (a) Mandatory acceptance. (1) Except as otherwise specified in this 
section, a person shall accept every rated order received and must fill 
such orders regardless of any other rated or unrated orders that have 
been accepted.
    (2) A person shall not discriminate against rated orders in any 
manner such as by charging higher prices or by imposing different terms 
and conditions than for comparable unrated orders.
    (b) Mandatory rejection. Unless otherwise directed by the 
Department of Energy for a rated order involving all forms of energy:
    (1) A person shall not accept a rated order for delivery on a 
specific date if unable to fill the order by that date. However, the 
person must inform the customer of the earliest date on which delivery 
can be made and offer to accept the order on the basis of that date. 
Scheduling conflicts with previously accepted lower rated or unrated 
orders are not sufficient reason for rejection under this section.
    (2) A person shall not accept a DO-rated order for delivery on a 
date which would interfere with delivery of any previously accepted DO- 
or DX-rated orders. However, the person must offer to accept the order 
based on the earliest delivery date otherwise possible.
    (3) A person shall not accept a DX-rated order for delivery on a 
date which would interfere with delivery of any previously accepted DX-
rated orders, but must offer to accept the order based on the earliest 
delivery date otherwise possible.
    (4) If a person is unable to fill all of the rated orders of equal 
priority status received on the same day, the person must accept, based 
upon the earliest delivery dates, only those orders which can be 
filled, and reject the other orders. For example, a person must accept 
order A requiring delivery on December 15 before accepting order B 
requiring delivery on December 31. However, the person must offer to 
accept the rejected orders based on the earliest delivery dates 
otherwise possible.

[[Page 33623]]

    (c) Optional rejection. Unless otherwise directed by the Department 
of Energy for a rated order involving all forms of energy, rated orders 
may be rejected in any of the following cases as long as a supplier 
does not discriminate among customers:
    (1) If the person placing the order is unwilling or unable to meet 
regularly established terms of sale or payment;
    (2) If the order is for an item not supplied or for a service not 
capable of being performed;
    (3) If the order is for an item or service produced, acquired, or 
provided only for the supplier's own use for which no orders have been 
filled for two years prior to the date of receipt of the rated order. 
If, however, a supplier has sold some of these items or provided 
similar services, the supplier is obligated to accept rated orders up 
to that quantity or portion of production or service, whichever is 
greater, sold or provided within the past two years;
    (4) If the person placing the rated order, other than the U.S. 
Government, makes the item or performs the service being ordered;
    (5) If acceptance of a rated order or performance against a rated 
order would violate any other regulation, official action, or order of 
the Department of Energy, issued under the authority of the Defense 
Production Act or another relevant statute.
    (d) Customer notification requirements. (1) Except as provided in 
this paragraph, a person must accept or reject a rated order in writing 
or electronically within fifteen (15) working days after receipt of a 
DO rated order and within ten (10) working days after receipt of a DX 
rated order. If the order is rejected, the person must give reasons in 
writing or electronically for the rejection.
    (2) If a person has accepted a rated order and subsequently finds 
that shipment or performance will be delayed, the person must notify 
the customer immediately, give the reasons for the delay, and advise of 
a new shipment or performance date. If notification is given verbally, 
written or electronic confirmation must be provided within five (5) 
working days.
    (e) Exception for emergency preparedness conditions. If the rated 
order is placed for the purpose of emergency preparedness, a person 
must accept or reject a rated order and transmit the acceptance or 
rejection in writing or in an electronic format within 2 days after 
receipt of the order if:
    (1) The order is issued in response to a hazard that has occurred; 
or
    (2) The order is issued to prepare for an imminent hazard.


Sec.  217.34  Preferential scheduling.

    (a) A person must schedule operations, including the acquisition of 
all needed production items or services, in a timely manner to satisfy 
the delivery requirements of each rated order. Modifying production or 
delivery schedules is necessary only when required delivery dates for 
rated orders cannot otherwise be met.
    (b) DO-rated orders must be given production preference over 
unrated orders, if necessary to meet required delivery dates, even if 
this requires the diversion of items being processed or ready for 
delivery or services being performed against unrated orders. Similarly, 
DX-rated orders must be given preference over DO-rated orders and 
unrated orders. (Examples: If a person receives a DO-rated order with a 
delivery date of June 3 and if meeting that date would mean delaying 
production or delivery of an item for an unrated order, the unrated 
order must be delayed. If a DX-rated order is received calling for 
delivery on July 15 and a person has a DO-rated order requiring 
delivery on June 2 and operations can be scheduled to meet both 
deliveries, there is no need to alter production schedules to give any 
additional preference to the DX-rated order.)
    (c) Conflicting rated orders.
    (1) If a person finds that delivery or performance against any 
accepted rated orders conflicts with the delivery or performance 
against other accepted rated orders of equal priority status, the 
person shall give precedence to the conflicting orders in the sequence 
in which they are to be delivered or performed (not to the receipt 
dates). If the conflicting orders are scheduled to be delivered or 
performed on the same day, the person shall give precedence to those 
orders that have the earliest receipt dates.
    (2) If a person is unable to resolve rated order delivery or 
performance conflicts under this section, the person should promptly 
seek special priorities assistance as provided in Sec. Sec.  217.40 
through 217.44. If the person's customer objects to the rescheduling of 
delivery or performance of a rated order, the customer should promptly 
seek special priorities assistance as provided in Sec. Sec.  217.40 
through 217.44. For any rated order against which delivery or 
performance will be delayed, the person must notify the customer as 
provided in Sec.  217.33.
    (d) If a person is unable to purchase needed production items in 
time to fill a rated order by its required delivery date, the person 
must fill the rated order by using inventoried production items. A 
person who uses inventoried items to fill a rated order may replace 
those items with the use of a rated order as provided in Sec.  
217.37(b).


Sec.  217.35  Extension of priority ratings.

    (a) A person must use rated orders with suppliers to obtain items 
or services needed to fill a rated order. The person must use the 
priority rating indicated on the customer's rated order, except as 
otherwise provided in this part or as directed by the Department of 
Energy. For example, if a person is in receipt of a DO-F1 rated order 
for an electric power sub-station, and needs to purchase a transformer 
for its manufacture, that person must use a DO-F1 rated order to obtain 
the needed transformer.
    (b) The priority rating must be included on each successive order 
placed to obtain items or services needed to fill a customer's rated 
order. This continues from contractor to subcontractor to supplier 
throughout the entire procurement chain.


Sec.  217.36  Changes or cancellations of priority ratings and rated 
orders.

    (a) The priority rating on a rated order may be changed or canceled 
by:
    (1) An official action of the Department of Energy; or
    (2) Written notification from the person who placed the rated 
order.
    (b) If an unrated order is amended so as to make it a rated order, 
or a DO rating is changed to a DX rating, the supplier must give the 
appropriate preferential treatment to the order as of the date the 
change is received by the supplier.
    (c) An amendment to a rated order that significantly alters a 
supplier's original production or delivery schedule shall constitute a 
new rated order as of the date of its receipt. The supplier must accept 
or reject the amended order according to the provisions of Sec.  
217.33.
    (d) The following amendments do not constitute a new rated order: a 
change in shipping destination; a reduction in the total amount of the 
order; an increase in the total amount of the order which has 
negligible impact upon deliveries; a minor variation in size or design; 
or a change which is agreed upon between the supplier and the customer.
    (e) If a person no longer needs items or services to fill a rated 
order, any rated orders placed with suppliers for the items or 
services, or the priority rating on those orders, must be canceled.
    (f) When a priority rating is added to an unrated order, or is 
changed or canceled, all suppliers must be promptly notified in 
writing.

[[Page 33624]]

Sec.  217.37  Use of rated orders.

    (a) A person must use rated orders to obtain:
    (1) Items which will be physically incorporated into other items to 
fill rated orders, including that portion of