Limited Public Interest Waiver Under Section 1605 (Buy American) of the American Recovery and Reinvestment Act of 2009 (Recovery Act), 81919-81920 [2011-33407]

Agencies

• DEPARTMENT OF ENERGY
• Office of Energy Efficiency and Renewable Energy

[Federal Register Volume 76, Number 250 (Thursday, December 29, 2011)]
[Notices]
[Pages 81919-81920]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-33407]


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DEPARTMENT OF ENERGY

Office of Energy Efficiency and Renewable Energy


Limited Public Interest Waiver Under Section 1605 (Buy American) 
of the American Recovery and Reinvestment Act of 2009 (Recovery Act)

AGENCY: Office of Energy Efficiency and Renewable Energy, U.S. 
Department of Energy (DOE).

ACTION: Notice of Limited Waiver.

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SUMMARY: The U.S. Department of Energy (DOE) is hereby granting a 
determination of inapplicability (unreasonable cost waiver) of section 
1605 of the American Reinvestment and Recovery Act of 2009 (Recovery 
Act Buy American provisions) to the Commonwealth Utilities 
Corporation's (CUC) located in the Commonwealth of the Northern Mariana 
Islands (CNMI), recipient of the EECBG grant DE-EE0000762, for 5 diesel 
engine radiators to be installed at the CUC's main power plant located 
in Saipan, CNMI. This waiver applies only to this project.

DATES: Effective Date: December 6, 2011.

FOR FURTHER INFORMATION CONTACT: Christine Platt-Patrick, 
Weatherization and Intergovernmental Program, Office of Energy 
Efficiency and Renewable Energy (EERE), (202) 287-1553, 
buyamerican@ee.doe.gov, Department of Energy, 1000 Independence Avenue 
SW., Mailstop EE-2K, Washington, DC 20585.

SUPPLEMENTARY INFORMATION: Under the authority of the Recovery Act, 
section 1605(b)(3), the head of a Federal department or agency may 
issue a ``determination of inapplicability'' (a waiver of the Buy 
American provisions) if the application of section 1605 would represent 
an `unreasonable cost.' The authority of the Secretary of Energy to 
make all inapplicability determinations was re-delegated to the 
Assistant Secretary for Energy Efficiency and Renewable Energy (EERE), 
for EERE projects under the Recovery Act, in Redelegation Order No. 00-
002.01E, dated April 25, 2011, for EERE Recovery Act projects.
    Pursuant to this delegation, the Acting Assistant Secretary has 
determined that application of section 1605 restrictions represents an 
`unreasonable cost' for the project described herein.
    Specifically, this unreasonable cost determination waives the Buy 
American requirements for the diesel engine radiators needed for the 
Commonwealth Utilities Corporation's (CUC) located in the Commonwealth 
of the Northern Mariana Islands (CNMI), recipient of the EECBG grant 
DE-EE0000762, for 5 diesel engine radiators to be installed at the 
CUC's main power plant located in Saipan, CNMI EERE has developed a 
robust process to ascertain in a systematic and expedient manner 
whether or not there is domestic manufacturing capacity for the items 
submitted for a waiver of the Recovery Act Buy American provision. This 
process involves a close collaboration with the United States 
Department of Commerce National Institute of Standards and Technology 
(NIST) Manufacturing Extension Partnership (MEP), in order to scour the 
domestic manufacturing landscape in search of producers before making 
any nonavailability or unreasonable cost determinations.
    The NIST MEP has 59 regional centers with substantial knowledge of, 
and connections to, the domestic manufacturing sector. MEP uses their 
regional centers to `scout' for current or potential manufacturers of 
the product(s) submitted in a waiver request. In the course of this 
interagency collaboration, MEP has been able to find exact or partial 
matches for manufactured goods that EERE grantees had been unable to 
locate. As a result, in those cases, EERE was able to work with the 
grantees to procure American-made products rather than granting a 
waiver.
    Upon receipt of completed waiver requests for the product in the 
current waiver, EERE reviewed the information provided and submitted 
the relevant technical information to the NIST MEP. The MEP then used 
their network of nationwide centers to scout for domestic 
manufacturers.
    In addition to the MEP collaboration outlined above, the EERE Buy 
American Team worked with labor unions, trade associations and other 
manufacturing stakeholders to scout for domestic manufacturing capacity 
or an equivalent product for the 5 diesel engine radiators contained in 
this waiver. EERE also conducted significant amounts of independent 
research to supplement MEP's scouting efforts.
    As a result of EERE's efforts and MEP's scouting process, a quote 
was obtained from the only domestic manufacturer that has the 
capabilities to produce a similar item. That quote is reflected in the 
price cited infra, and supports the finding that this item, if 
purchased domestically, will increase the total project cost by more 
than 25%.
    This ARRA supported project involves the Commonwealth Utilities 
Corporation's (CUC) main power plant-1. It was built in 1979 with the 
installation of four 7.2MW-18V 40/54A diesel engines. Four larger 
13.0MW-18V 52/55B engines were installed in 1990. Over the years, 
radiator fin corrosion and fouling have deteriorated to a point where 
inadequate cooling limited generator loads to just 60% of design 
capacity.
    Radiator deterioration on engines 5 and 6 were so 
advanced (generators de-rated to 30% of design capacity), the radiator 
sets on both engines were replaced in 2009. The performance of these 
new radiator sets since 2009 can be described as excellent.
    The 40% reduction in loading capacity on engines 1,2,3, 7 
and 8 have cost the Utility severely in terms of fuel efficiency and 
cost, which unfortunately continues to be passed on to the rate-payers. 
This 40% loss in engine capacity plus the unavailability of engines 5 
and 7 in 2008--resulted rolling blackouts and the eventual collapse of 
power plant-1 in 2008.
    In mid 2008, CUC contracted a rental generator company to supply 
15MW of generators for a period of 12 months at a total cost of 
$6,000,000 dollars.
    Power plant-1 rehabilitation work began in 2009 and although 
surplus power is now available--the 60% load limitation on engines 
1,2,3, 7 and 8 is costing CUC and its rate-payers dearly, in terms of 
fuel efficiency and cost.
    The diesel engines utilized in the facility are designed to operate 
between 70% to 100% of name plate rating. Fuel efficiency is at its 
maximum at this load range. De-rated gen-sets 1,2,3,7 and 8 currently 
operate at an average fuel efficiency of 14.0 kWh per gallon of diesel. 
Engines operated between 70% to 100% load do so at a higher fuel 
efficiency of 15.0 to 15.6kWh per gallon--a 7% better fuel consumption.
    CUC's power plant-1 burns an average of 1,000,000 gallons of diesel 
per month. Radiator replacement on engines 1,2,3,7 and 8 will enable 
CUC to increase the

[[Page 81920]]

load on the affected generator sets to 70% or higher of nameplate 
rating, and thereby reduce fuel consumption by approximately 70,000 
gallon per month. This represents a saving of $246,000 per month or 
$2.96m per year at the current fuel price of $3.52 per gallon. This 
saving will automatically be passed on to the rate-payers as required 
by the rate setting process.
    With the ability to operate generators at loads of 70% or more, 
fewer generators need to be on-line to supply demand. This will result 
in lower running hours per engine and as a result, lower maintenance 
cost per year. Savings in engine maintenance cost as a result of the 
radiator replacement project is expected to be at least $876,000 per 
year.
    Power plant-1 continues to be CUC's main power plant on the main 
island of Saipan. This radiator replacement project will reduce fuel 
consumption and overall engine run hours--by allowing generator loads 
to be operated at optimum levels. This in turn will reduce fuel and 
maintenance cost and provide some relief to rate payers in the CNMI, by 
way of electricity rate reduction.
    If for some reason the design of the radiators is ineffective, the 
current radiators are in such a severely decayed state that they cannot 
be reconnected one de-commissioned. If the project does not proceed on 
schedule, or if there is any flaw in the design, CNMI may be forced to 
resort to back-up power, similar to the 2008 scenario.
    The project to replace the radiators involves two 13.0MW-18V 52/55B 
and three 7.2MW-18V 40/54A diesel engines. $2,400,000 dollars in ARRA 
grant funds are allocated to the project. The proposed price of the 
only US manufacturer to come forward with a bid was $3 million dollars, 
including freight to Saipan. The proposed price by the manufacturer of 
the radiators used in the prior installation was $2,167,060. The total 
installation cost for the radiators is approximately $225,000.
    In addition to the price concerns, the only US bidder revealed that 
its largest previous project was for engines with continuous rating of 
less than 2.0MW. In addition, the foreign manufacturer is the supplier 
of choice for the 24 island countries who are members of the Pacific 
Power Association. All these island utilities have similar type of 
temperatures and salty environment as in the CNMI. All 24 island 
countries operate diesel engines to generate electricity.
    CFR 2 176.110, entitled ``Evaluating proposals of foreign iron, 
steel, and/or manufactured goods'', states that if ``the award official 
receives a request for an exception based on the cost of certain 
domestic iron, steel, and/or manufactured goods being unreasonable, in 
accordance with Sec.  176.80, then the award official shall apply 
evaluation factors to the proposal to use such foreign iron, steel, 
and/or manufactured goods.''
    Per that section, the total evaluated cost = project cost estimate 
+ (.25 x project cost estimate).
    The total cost of the project including the foreign manufactured 
radiators is $2,317,060. The total evaluated cost is $2,392,060 + (.25 
x $2,392,060) or $2990075. The minimum cost for the project with US 
collectors is $3,225,000, a cost increase of 34.8%. Thus, the diesel 
engine radiators needed for this project that are domestically 
manufactured will increase the cost of the overall project by more than 
25 percent.
    In light of the foregoing, and under the authority of section 
1605(b)(3) of Public Law No. 111-5 and the Re-delegation Order dated 
April 25, 2011, with respect to Recovery Act projects funded by EERE, 
on October 24, 2011, the Acting Assistant Secretary issued a 
determination of inapplicability (unreasonable cost waiver) of section 
1605 of the American Reinvestment and Recovery Act of 2009 (Recovery 
Act Buy American provisions) to the to the Commonwealth Utilities 
Corporation's (CUC) located in the Commonwealth of the Northern Mariana 
Islands(CNMI), recipient of the EECBG grant DE-EE0000762, for 5 diesel 
engine radiators to be installed at the CUC's main power plant located 
in Saipan, CNMI. This waiver applies only to this project.
    This waiver determination was made pursuant to the delegation of 
authority by the Secretary of Energy to the Acting Assistant Secretary 
for Energy Efficiency and Renewable Energy with respect to expenditures 
within the purview of his responsibility. Consequently, this waiver 
applies only to EERE projects carried out under the Recovery Act; and 
only to this project specifically, waiver requests, even for the same 
or similar items, will be handled individually, because individual 
factors apply to each project.

    Authority:  Pub. L. 111-5, section 1605.

    Issued in Washington, DC on December 6, 2011.
Henry Kelly,
Acting Assistant Secretary for Energy Efficiency and Renewable Energy, 
U.S. Department of Energy.
[FR Doc. 2011-33407 Filed 12-28-11; 8:45 am]
BILLING CODE 6450-01-P