Procedures for the Acquisition of Petroleum for the Strategic Petroleum Reserve, 47652-47659 [2022-16081]

Agencies

• DEPARTMENT OF ENERGY

[Federal Register Volume 87, Number 149 (Thursday, August 4, 2022)]
[Proposed Rules]
[Pages 47652-47659]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-16081]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF ENERGY

10 CFR Part 626

RIN 1901-AB56


Procedures for the Acquisition of Petroleum for the Strategic 
Petroleum Reserve

AGENCY: Office of Petroleum Reserves, Department of Energy.

ACTION: Notice of proposed rulemaking and request for comment.

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

SUMMARY: The Energy Policy Act of 2005 directed the Secretary of Energy 
to develop procedures for the acquisition of petroleum products for the 
Strategic Petroleum Reserve (``SPR''). Pursuant to that direction, the 
Department of Energy (``DOE'' or the ``Department'') promulgated the 
Procedures for Acquisition of Petroleum for the Strategic Petroleum 
Reserve. Over the intervening 16 years, the existing regulations have 
become outdated due to changes in statutory authority, agency practice, 
and market dynamics. In this notice of proposed rulemaking (``NOPR''), 
DOE proposes to amend the procedures for the acquisition of petroleum 
products for the SPR to: more closely align the regulatory language 
with the applicable statutory language; remove outdated procedures for 
acquisition under the royalty-in-kind program; add procedures for 
acquisition by exchange to better reflect petroleum product acquisition 
operations as conducted by the Office of Petroleum Reserves; and 
increase the Department's flexibility in structuring acquisitions.

DATES: DOE will accept comments, data, and information regarding this 
NOPR no later than September 6, 2022.
    Comments regarding the likely competitive impact of the proposed 
standard are to be sent to the DOE by the methods set forth in the 
ADDRESSES section on or before September 6, 2022.

ADDRESSES: Interested persons are encouraged to submit comments using 
the Federal eRulemaking Portal at www.regulations.gov. Follow the 
instructions for submitting comments. Alternatively, interested persons 
may submit comments, identified by RIN 1901-AB56, by any of the 
following methods:
    1. Federal eRulemaking Portal: www.regulations.gov. Follow the 
instructions for submitting comments.
    2. Email: [email protected]. Include the RIN 1901-AB56 in 
the subject line of the message.
    3. Postal Mail: U.S. Department of Energy, Office of the General 
Counsel (GC-33), Room 6B-159, 1000 Independence Avenue SW, Washington, 
DC 20585.
    4. Hand Delivery/Courier: U.S. Department of Energy, Room 6B-159, 
1000 Independence Avenue SW, Washington, DC 20585.
    No telefacsimiles (faxes) will be accepted. For detailed 
instructions on submitting comments and additional information on the 
rulemaking process, see section III, Public Participation, for details.
    Docket: The docket, which includes Federal Register notices, 
comments, and other supporting documents/materials, is available for 
review at www.regulations.gov. All documents in the docket are listed 
in the www.regulations.gov index. However, some documents listed in the 
index, such as those containing information that is exempt from public 
disclosure, may not be publicly available.
    The docket web page can be found at the www.regulations.gov web 
page associated with RIN 1901-AB56. The docket web page contains simple 
instructions on how to access all documents, including public comments, 
in the docket. See section III, Public Participation, for information 
on how to submit comments through www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Mr. Thomas McGarry, U.S. Department of 
Energy, Office of Petroleum Reserves, Office of Fossil Energy and 
Carbon Management, Forrestal Building, Room 3G-024, 1000 Independence 
Avenue SW, Washington, DC 20585; (202) 586-8197, email: 
[email protected]; or Mr. Edward Toyozaki, U.S. Department of 
Energy, Office of the General Counsel, Forrestal Building, Room 6B-159, 
1000 Independence Avenue SW, Washington, DC 20585; (202) 586-0126, 
email: [email protected].

SUPPLEMENTARY INFORMATION: 

I. Background and Introduction
II. Discussion of Proposed Rule
III. Public Participation
IV. Regulatory Review
V. Approval of the Office of the Secretary

I. Background and Introduction

    The SPR was established by the Energy Policy and Conservation Act 
(``EPCA''), (Pub. L. 94-163), to store petroleum products to diminish 
the impact of disruptions on petroleum supplies and to carry out the 
obligations of the United States under the International Energy 
Program. (42 U.S.C. 6231 et seq.) Section 160 of EPCA authorizes the 
Secretary of Energy to acquire petroleum products for the SPR. 
Subsequently, the Energy Policy Act of 2005, (Pub. L. 109-58), amended 
EPCA and directed the Secretary of Energy to develop, with the 
opportunity for public notice and comment, procedures for the 
acquisition of petroleum products for the SPR (42 U.S.C. 6240). The 
principal method for acquiring SPR petroleum products is by purchase, 
but SPR petroleum may also be acquired via exchange. (42 U.S.C. 
6240(a)) On November 8, 2006, and pursuant to EPCA, as amended by the 
Energy Policy Act of 2005, DOE established procedures for the 
acquisition of SPR

[[Page 47653]]

petroleum at 10 CFR part 626. 71 FR 65376 (``2006 final rule''). The 
2006 final rule included provisions regarding the direct purchase, 
exchange, and transfer of royalty oil from the Department of the 
Interior (``DOI'').
    Subsequent to DOE promulgating the 2006 final rule, the Government 
Accountability Office and the DOI Inspector General published several 
reports between 2008 and 2009 on the shortcomings of and personnel 
misconduct related to the royalty-in-kind program, and, as a result, 
the DOI terminated its royalty-in-kind program in 2010. Then, in 2013, 
with section 306(a) of the Bipartisan Budget Act of 2013, Congress 
repealed DOE's authority to conduct SPR acquisitions under the royalty-
in-kind program that was incorporated into the 2006 final rule. 
However, 10 CFR part 626 has not been updated since it was promulgated 
by DOE in the 2006 final rule, and, thus, does not reflect the 
intervening changes to the authorizing statutory authority.
    Additionally, as DOE has had numerous opportunities to conduct 
exchanges, mostly in an emergency exchange capacity, DOE is in a 
position to rewrite these regulations to both provide more clarity and 
better reflect operational realities.
    Lastly, in light of changing petroleum product market dynamics, the 
Department intends to align the acquisition regulations more closely 
with the statutory language of 42 U.S.C. 6240 and provide the Secretary 
with additional flexibility in structuring acquisitions.

II. Discussion of Proposed Rule

    The proposed rule would revise 10 CFR part 626 in several respects. 
First, the proposed rule would update language throughout part 626 to 
more closely align with the statutory language found in Section 160 of 
EPCA. This includes updating the definitions for ``DOE'', ``Exchange'', 
and ``Strategic Petroleum Reserve'', while adding new definitions for 
``Premium'', ``Requestor'', and ``Solicitation''. The definition 
pertaining to ``DOI'' would also be struck. These changes would provide 
more clarity and maintain continuity throughout the part while 
supporting other proposed changes.
    Second, because Congress repealed DOE's authority for it in 2013, 
all references to the royalty-in-kind program would be removed. This 
includes removal of the procedures for acquisition under the royalty-
in-kind program currently at 10 CFR 626.7.
    Third, the proposed rule would codify procedures for the exchange 
of petroleum products at a revised 10 CFR 626.7, as well as add 
references to ``exchange'' throughout part 626, as appropriate. These 
proposed changes are intended to reflect current operational practices 
of the SPR. Since 1996, in accordance with statutory authority in 
Sections 159 and 160 of EPCA, DOE has conducted over a dozen emergency 
exchanges with private industry. In these emergency exchanges, upon 
request from refiners and verification of the request by DOE, the SPR 
provides emergency barrels of petroleum product to refiners; in return, 
the requesting refiners later provide the SPR the original number of 
barrels plus extra barrels called a ``premium.'' In addition to the 
emergency exchanges by request, since 2000, DOE has twice utilized the 
exchange authority to conduct solicitations for exchange, whereby the 
general public may bid to contract to accept barrels of SPR petroleum 
products in the present and return those barrels plus a premium in the 
future. DOE is proposing to codify these long-standing procedures into 
the acquisition regulations.
    Fourth, the proposed rule would amend 10 CFR 626.5 and 626.6 to 
increase flexibility for DOE to enter into contracts for the purchase 
of petroleum products, consistent with the requirements and objectives 
of section 160 of EPCA. These changes ensure that DOE continues to 
acquire petroleum products in accordance with the competitive 
principles of the Federal Acquisition Regulations and the DOE 
Acquisition Regulations, while providing DOE the flexibility to use 
either fixed-price or index-priced contracts for future petroleum 
product acquisitions. DOE is proposing these changes because the 
current acquisition regulations, including the requirement that DOE 
acquire oil in accordance with the Federal Acquisition Regulations and 
the requirement to use a price index to set purchase prices, 
unnecessarily restrict DOE's flexibility to procure petroleum products 
using fixed price contracts, notwithstanding the fact that there may be 
circumstances in which a fixed price acquisition would better meet the 
statutory objectives of EPCA.
    Lastly, the proposed rule would add 10 CFR 626.9 to implement 42 
U.S.C. 6240(f). This final proposed change has been included because, 
while the Department has had the statutory authority to suspend 
previously announced or contracted acquisitions of petroleum products 
or divert the injection of petroleum products into the SPR when there 
is a perceived imminent severe energy supply interruption, to date, 
this authority has not been incorporated into any existing regulations.

III. Public Participation

    DOE will accept comments, data, and information regarding this NOPR 
on or before the date provided in the DATES section at the beginning of 
this proposed rule. Interested parties may submit comments, data, and 
other information using any of the methods described in the ADDRESSES 
section at the beginning of this document.
    Submitting comments via www.regulations.gov. The 
www.regulations.gov web page will require you to provide your name and 
contact information. Your contact information will not be publicly 
viewable except for your first and last names, organization name (if 
any), and submitter representative name (if any). If your comment is 
not processed properly because of technical difficulties, DOE will use 
this information to contact you. If DOE cannot read your comment due to 
technical difficulties and cannot contact you for clarification, DOE 
may not be able to consider your comment.
    However, your contact information will be publicly viewable if you 
include it in the comment itself or in any documents attached to your 
comment. Any information that you do not want to be publicly viewable 
should not be included in your comment, nor in any document attached to 
your comment. Otherwise, persons viewing comments will see only first 
and last names, organization names, correspondence containing comments, 
and any documents submitted with the comments.
    Do not submit to www.regulations.gov information the disclosure of 
which is restricted by statute, such as trade secrets and commercial or 
financial information (hereinafter referred to as Confidential Business 
Information (``CBI'')). Comments submitted through www.regulations.gov 
cannot be claimed as CBI. Comments received through the website will 
waive any CBI claims for the information submitted. For information on 
submitting CBI, see the Confidential Business Information section 
below.
    DOE processes submissions made through www.regulations.gov before 
posting. Normally, comments will be posted within a few days of being 
submitted. However, if large volumes of comments are being processed 
simultaneously, your comment may not be viewable for up to several 
weeks. Please keep the comment tracking number that www.regulations.gov

[[Page 47654]]

provides after you have successfully uploaded your comment.
    Submitting comments via email, hand delivery/courier, or postal 
mail. Comments and documents submitted via email, hand delivery/
courier, or postal mail also will be posted to www.regulations.gov. If 
you do not want your personal contact information to be publicly 
viewable, do not include it in your comment or any accompanying 
documents. Instead, provide your contact information in a cover letter. 
Include your first and last names, email address, telephone number, and 
optional mailing address. The cover letter will not be publicly 
viewable as long as it does not include any comments.
    Include contact information each time you submit comments, data, 
documents, and other information to DOE. If you submit via postal mail 
or hand delivery/courier, please provide all items on a CD, if 
feasible, in which case it is not necessary to submit printed copies. 
No telefacsimiles (faxes) will be accepted.
    Comments, data, and other information submitted to DOE 
electronically should be provided in PDF (preferred), Microsoft Word or 
Excel, WordPerfect, or text (ASCII) file format. Provide documents that 
are written in English, and that are free of any defects or viruses. 
Documents should not contain special characters or any form of 
encryption and, if possible, they should carry the electronic signature 
of the author.
    Confidential Business Information. Pursuant to 10 CFR 1004.11, any 
person submitting information that he or she believes to be 
confidential and exempt by law from public disclosure should submit via 
email, postal mail, or hand delivery/courier two well-marked copies: 
One copy of the document marked ``confidential'' including all the 
information believed to be confidential, and one copy of the document 
marked ``non-confidential'' that deletes the information believed to be 
confidential. Submit these documents via email or on a CD, if feasible. 
DOE will make its own determination about the confidential status of 
the information and will treat it according to its determination. It is 
DOE's policy that all comments, including any personal information 
provided in the comments, may be included in the public docket, without 
change and as received, except for information deemed to be exempt from 
public disclosure.

IV. Regulatory Review

A. Executive Order 12866

    This proposed rule has been determined to not be a significant 
regulatory action under Executive Order 12866, ``Regulatory Planning 
and Review.'' 58 FR 51735 (October 4, 1993). Accordingly, this action 
was not subject to review under that Executive order by the Office of 
Information and Regulatory Affairs (``OIRA'') of the Office of 
Management and Budget (``OMB'').

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires the 
preparation of an initial regulatory flexibility analysis for any rule 
that by law must be proposed for public comment, unless the agency 
certifies that the rule, if promulgated, will not have a significant 
economic impact on a substantial number of small entities. As required 
by Executive Order 13272, Proper Consideration of Small Entities in 
Agency Rulemaking, 67 FR 53461 (August 16, 2002), DOE published 
procedures and policies on February 19, 2003, to ensure that the 
potential impacts of its rules on small entities are properly 
considered during the rulemaking process, 68 FR 7990. The Department 
has made its procedures and policies available on the Office of General 
Counsel's website: www.energy.gov/gc/office-general-counsel.
    The proposed rule would update the procedures DOE utilizes for the 
acquisition of petroleum products for the SPR, change definitions, and 
remove references to the repealed royalty-in-kind program. DOE has 
reviewed the proposed changes under the provisions of the Regulatory 
Flexibility Act and the procedures and policies published on February 
19, 2003. These proposed procedures are procedural and not designed to 
set the terms or conditions of an acquisition and apply only to 
entities that are engaged in the sale of petroleum products to the 
Strategic Petroleum Reserve. Historically, Strategic Petroleum Reserve 
acquisitions have typically been large volume acquisitions, and usually 
filled by larger entities operating in the petroleum industry. 
Therefore, the proposed procedures are unlikely to directly affect 
small businesses or other small entities. For these reasons, DOE 
certifies that this proposed rule would not have a significant economic 
impact on a substantial number of small entities. Accordingly, DOE has 
not prepared a regulatory flexibility analysis for this rulemaking. 
DOE's certification and supporting statement of factual basis will be 
provided to the Chief Counsel for Advocacy of the Small Business 
Administration for review under 5 U.S.C. 605(b).

C. Paperwork Reduction Act of 1995

    The proposed rule would impose no new information or record keeping 
requirements. Accordingly, OMB clearance is not required under the 
Paperwork Reduction Act (44 U.S.C. 3501 et seq.).

D. Review Under the National Environmental Policy Act of 1969

    Per 10 CFR 1021.410(a), DOE has determined that promulgation of 
these regulations fall into a class of actions that does not 
individually or cumulatively have a significant impact on the human 
environment as set forth under DOE's regulations implementing the 
National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.). 
Furthermore, this proposed rulemaking is covered under the Categorical 
Exclusion found in DOE's National Environmental Policy Act regulations 
at paragraph A6 of appendix A to subpart D, 10 CFR part 1021, which 
applies to rulemakings that are strictly procedural. Accordingly, 
neither an EIS nor an EA is required.

E. Executive Order 13132

    Executive Order 13132, ``Federalism,'' 64 FR 43255 (August 10, 
1999), imposes certain requirements on agencies formulating and 
implementing policies or regulations that preempt State law or that 
have federalism implications. The Executive order requires agencies to 
examine the constitutional and statutory authority supporting any 
action that would limit the policymaking discretion of the States and 
to carefully assess the necessity for such actions. DOE examined this 
proposed rule and determined that it would not preempt State law and 
would not have a substantial direct effect on the States, on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
Government. No further action is required by Executive Order 13132.

F. Executive Order 13175

    Executive Order 13175, ``Consultation and Coordination with Indian 
Tribal Governments,'' 65 FR 67249, November 9, 2000, applies to agency 
regulations that have Tribal implications, that is, regulations that 
have substantial direct effects on one or more Indian tribes, on the 
relationship between the Federal Government and Indian Tribes, or on 
the distribution of power and

[[Page 47655]]

responsibilities between the Federal Government and Indian Tribes. The 
proposed rule has been analyzed in accordance with the principles and 
criteria contained in Executive Order 13175. Because this proposed rule 
would not significantly or uniquely affect the communities of the 
Indian tribal governments or impose substantial direct compliance costs 
on them, the funding and consultation requirements of Executive Order 
13175 do not apply.

G. Review Under Executive Order 12988

    With respect to the review of existing regulations and the 
promulgation of new regulations, section 3(a) of Executive Order 12988, 
``Civil Justice Reform,'' 61 FR 4729 (February 7, 1996), imposes on 
Federal agencies the general duty to adhere to the following 
requirements: (1) eliminate drafting errors and ambiguity; (2) write 
regulations to minimize litigation; and (3) provide a clear legal 
standard for affected conduct, rather than a general standard and 
promote simplification and burden reduction. Section 3(b) of Executive 
Order 12988 specifically requires that executive agencies make every 
reasonable effort to ensure that the regulation: (1) clearly specifies 
its preemptive effect, if any; (2) clearly specifies any effect on 
existing Federal law or regulation; (3) provides a clear legal standard 
for affected conduct, while promoting simplification and burden 
reduction; (4) specifies its retroactive effect, if any; (5) adequately 
defines key terms; and (6) addresses other important issues affecting 
clarity and general draftsmanship under any guidelines issued by the 
Attorney General. Section 3(c) of Executive Order 12988 requires 
executive agencies to review regulations in light of applicable 
standards in section 3(a) and section 3(b) to determine whether they 
are met or it is unreasonable to meet one or more of them. DOE has 
completed the required review and determined that, to the extent 
permitted by law, the proposed rule would meet the relevant standards 
of Executive Order 12988.

H. Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (``UMRA'') 
(Pub. L. 104-4) requires each Federal agency to assess the effects of 
Federal regulatory actions on State, local, and tribal governments and 
the private sector. For a proposed regulatory action likely to result 
in a rule that may cause the expenditure by State, local, and tribal 
governments, in the aggregate, or by the private sector of $100 million 
or more in any one year (adjusted annually for inflation), section 202 
of UMRA requires a Federal agency to publish a written statement that 
estimates the resulting costs, benefits, and other effects on the 
national economy (2 U.S.C. 1532(a) and (b)). UMRA also requires a 
Federal agency to develop an effective process to permit timely input 
by elected officers of State, local, and tribal governments on a 
proposed ``significant intergovernmental mandate'' and requires an 
agency plan for giving notice and opportunity for timely input to 
potentially affected small governments before establishing any 
requirements that might significantly or uniquely affect small 
governments. On March 18, 1997, DOE published a statement of policy on 
its process for intergovernmental consultation under UMRA (62 FR 12820) 
(also available at www.energy.gov/gc/office-general-counsel). DOE 
examined this proposed rule according to UMRA and its statement of 
policy and has determined that the proposed rule contains neither an 
intergovernmental mandate nor a mandate that may result in the 
expenditure of $100 million or more in any year by State, local, and 
tribal governments, in the aggregate, or by the private sector. 
Accordingly, no further assessment or analysis is required under UMRA.

I. Treasury and General Government Appropriations Act of 1999

    Section 654 of the Treasury and General Government Appropriations 
Act of 1999 (Pub. L. 105-277) requires Federal agencies to issue a 
Family Policymaking Assessment for any proposed rule that may affect 
family well-being. This proposed rule would not have any impact on the 
autonomy or integrity of the family as an institution. Accordingly, DOE 
has concluded that it is not necessary to prepare a Family Policymaking 
Assessment.

J. Treasury and General Government Appropriations Act, 2001

    The Treasury and General Government Appropriations Act, 2001 (44 
U.S.C. 3516 note) provides for agencies to review most disseminations 
of information to the public under guidelines established by each 
agency pursuant to general guidelines issued by OMB. OMB's guidelines 
were published at 67 FR 8452 (February 22, 2002), and DOE's guidelines 
were published at 67 FR 62446 (October 7, 2002). DOE has reviewed the 
proposed rule under the OMB and DOE guidelines and has concluded that 
it is consistent with applicable policies in those guidelines.

K. Executive Order 13211

    Executive Order 13211, ``Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use,'' 66 FR 28355 
(May 22, 2001), requires Federal agencies to prepare and submit to OIRA 
and OMB, a Statement of Energy Effects for any proposed significant 
energy action. A ``significant energy action'' is defined as any action 
by an agency that promulgated or is expected to lead to promulgation of 
a final rule, and that: (1) is a significant regulatory action under 
Executive Order 12866, or any successor order; and (2) is likely to 
have a significant adverse effect on the supply, distribution, or use 
of energy, or (3) is designated by the Administrator of OIRA as a 
significant energy action. For any proposed significant energy action, 
the agency must give a detailed statement of any adverse effects on 
energy supply, distribution, or use should the proposal be implemented, 
and of reasonable alternatives to the action and their expected 
benefits on energy supply, distribution, and use. This proposed rule 
would update DOE's acquisition of petroleum product procedures for the 
SPR to align the regulatory language more closely with existing 
statutory language and current practice. Accordingly, the proposed rule 
would also update definitions, as appropriate, for the newly aligned 
regulatory language. This proposed rule, therefore, does not meet any 
of the three criteria listed above and would not have a significant 
adverse effect on the supply, distribution, or use of energy and is 
therefore not a significant regulatory action. Accordingly, DOE has not 
prepared a Statement of Energy Effects.

V. Approval of the Office of the Secretary

    The Secretary of Energy has approved publication of this notice of 
proposed rulemaking and request for comment.

List of Subjects in 10 CFR Part 626

    Government contracts, Oil and gas reserves, Strategic and critical 
materials.

Signing Authority

    This document of the Department of Energy was signed on July 21, 
2022, by Bradford J. Crabtree, Assistant Secretary for Fossil Energy 
and Carbon Management, pursuant to delegated authority from the 
Secretary of Energy. That document with the original signature and date 
is maintained by DOE. For administrative purposes only, and in 
compliance with requirements of the Office of the Federal Register, the 
undersigned DOE Federal Register

[[Page 47656]]

Liaison Officer has been authorized to sign and submit the document in 
electronic format for publication, as an official document of the 
Department of Energy. This administrative process in no way alters the 
legal effect of this document upon publication in the Federal Register.

    Signed in Washington, DC, on July 22, 2022.
Treena V. Garrett,
Federal Register Liaison Officer, U.S. Department of Energy.

    For reasons stated in the preamble, DOE proposes to revise part 626 
in chapter II of title 10 of the Code of Federal Regulations as set 
forth below:

PART 626--PROCEDURES FOR ACQUISITION OF PETROLEUM FOR THE STRATEGIC 
PETROLEUM RESERVE

Sec.
626.1 Purpose.
626.2 Definitions.
626.3 Applicability.
626.4 General acquisition strategy.
626.5 Acquisition procedures--general.
626.6 Acquiring petroleum products by purchase.
626.7 Acquiring petroleum products by exchange.
626.8 Deferrals of contractually scheduled deliveries.
626.9 Suspension and pre-drawdown diversion.

    Authority:  42 U.S.C. 6240(c); 42 U.S.C. 7101, et seq.


Sec.  626.1  Purpose.

    This part establishes the procedures for acquiring petroleum 
products for, and deferring contractually scheduled deliveries to, the 
Strategic Petroleum Reserve. The procedures do not represent actual 
terms and conditions to be contained in the contracts for the 
acquisition of SPR petroleum products.


Sec.  626.2  Definitions.

    Backwardation means a market situation in which prices are 
progressively lower in succeeding delivery months than in earlier 
months.
    Contango means a market situation in which prices are progressively 
higher in the succeeding delivery months than in earlier months.
    Contract means the agreement under which DOE acquires SPR petroleum 
products, consisting of the solicitation, the contract form signed by 
both parties, the successful offer, and any subsequent modifications, 
including those granting requests for deferrals.
    Contracting Officer means a person with the authority to enter 
into, administer, and/or terminate contracts and make related 
determinations and findings, including entering into sales contracts on 
behalf of the Government. The term includes certain authorized 
representatives of the Contracting Officer acting within the limits of 
their authority as delegated by the Contracting Officer.
    DEAR means the Department of Energy Acquisition Regulation.
    Deferral means a process whereby petroleum products scheduled for 
delivery to the SPR in a specific contract period is rescheduled for 
later delivery, outside of that period and encompasses the future 
delivery of the originally scheduled quantity plus an in-kind premium.
    DOE means the Department of Energy and includes any of its 
subsidiary offices, such as the Office of Petroleum Reserves (OPR) and 
the Strategic Petroleum Reserve Program Management Office.
    Exchange means a process whereby petroleum products owned by or due 
to the SPR are provided to an entity or requestor in return for 
petroleum products of comparable quality plus a premium quantity of 
petroleum products (in barrels)--or another form of premium as 
permitted by law--delivered to the SPR in the future, or when SPR 
petroleum products are traded for petroleum products of a different 
quality preferred by DOE for operational reasons based on the relative 
values of the quantities traded.
    FAR means the Federal Acquisition Regulation.
    Government means the United States Government and includes DOE as 
its representative.
    OPR means the Office of Petroleum Reserves within DOE, whose 
responsibilities include the operation of the Strategic Petroleum 
Reserve.
    Petroleum products means crude oil, residual fuel oil, or any 
refined product (including any natural gas liquid, and any natural gas 
liquid product) owned, or contracted for, by DOE and in storage in any 
permanent SPR facility, or temporarily stored in other storage 
facilities.
    Premium means the additional amount of petroleum product (in 
barrels)--or another form of payment as permitted by law--that must be 
delivered to the SPR above the principal amount of petroleum product 
owed to SPR in the case of an exchange or a deferred contractually 
scheduled delivery. The premium may include a calculation based on a 
rate set by DOE and duration of time until the SPR receives the 
petroleum product.
    Requestor is an entity that makes an emergency request under Sec.  
626.7(b).
    Secretary means the Secretary of Energy.
    Solicitation means the written request by DOE for submission of 
offers or quotations to DOE for the acquisition of petroleum products.
    Strategic Petroleum Reserve or SPR means the reserve for the 
storage of up to 1 billion barrels of petroleum products established by 
Title I, Part B, of the Energy Policy and Conservation Act, 42 U.S.C. 
6201 et seq.


Sec.  626.3  Applicability.

    The procedures in this part apply to the acquisition of petroleum 
products by DOE for the Strategic Petroleum Reserve through purchase or 
exchange, as well as to deferrals of contractually scheduled 
deliveries.


Sec.  626.4  General acquisition strategy.

    (a) Criteria for commencing acquisition. DOE shall consider the 
following factors prior to commencing acquisition of petroleum products 
for the SPR:
    (1) The current inventory of the SPR;
    (2) The current level of private inventories;
    (3) Days of net import protection;
    (4) Current price levels for petroleum products and related 
commodities, the ability to minimize costs and avoid incurring 
excessive costs in acquisition, and the possible effect on consumer and 
market prices of any SPR acquisition;
    (5) The outlook for international and domestic production levels;
    (6) Existing or potential disruptions in supply or refining 
capability;
    (7) The level of market volatility;
    (8) Futures market price differentials for petroleum products and 
related commodities;
    (9) The need to protect national security; and
    (10) Any other factor the Secretary deems necessary or appropriate 
to consider.
    (b) Review of rate of acquisition. DOE shall review the appropriate 
rate of petroleum product acquisition each time an open market 
acquisition has been suspended for more than three months.
    (c) Acquisition through other Federal agencies. DOE may enter into 
arrangements with another Federal agency for that agency to acquire 
petroleum products for the SPR on behalf of DOE.


Sec.  626.5  Acquisition procedures--general.

    (a) Notice of acquisition.
    (1) Except when DOE has determined there is good cause to do 
otherwise, DOE shall provide advance public notice of its intent to 
acquire petroleum

[[Page 47657]]

products for the SPR. The notice of acquisition will, to the extent 
feasible, include the general terms and details of DOE's petroleum 
products acquisition and inform the public of DOE's overall fill goals.
    (2) The notice of acquisition will generally include the:
    (i) Manner of acquisition;
    (ii) Time period for solicitations;
    (iii) Quantity of petroleum products sought;
    (iv) Minimum petroleum product quality requirements;
    (v) Time period for delivery;
    (vi) Acceptable delivery locations; and
    (vii) Instructions for the offer process.
    (b) Manner of acquisition.
    (1) DOE shall specify the manner of petroleum product acquisition, 
either purchase or exchange, in the notice of acquisition.
    (2) DOE shall, to the greatest extent practicable, determine the 
manner of petroleum product acquisition after considering:
    (i) The availability of appropriated funds;
    (ii) Minimization of costs;
    (iii) Minimization of the Nation's vulnerability to a severe energy 
supply interruption;
    (iv) Minimization of the impact to supply levels and market forces;
    (v) Whether the manner of acquisition would encourage competition 
in the petroleum industry; and
    (vi) Other considerations DOE deems to be relevant.
    (c) Solicitation.
    (1) To secure the economic benefit and security of a diversified 
base of potential suppliers of petroleum products to the SPR, DOE shall 
maintain a listing, developed through online registration, direct 
requests to DOE, and outreach to potential suppliers by DOE. Upon the 
issuance of a solicitation, DOE shall notify potential suppliers via 
their registered email addresses.
    (2) DOE shall make the solicitation publicly available on the 
website of the OPR: www.spr.doe.gov.
    (d) Timing and duration of solicitation.
    (1) DOE shall determine petroleum products requirements on nominal 
six-month cycles, and shall review and update these requirements prior 
to each solicitation cycle.
    (2) Unless termination rights are explicitly waived by DOE, DOE may 
terminate any solicitations and contracts pertaining to the acquisition 
or exchange of petroleum products at the convenience of the Government, 
and in such event shall not be responsible for any costs incurred by 
suppliers, other than costs for petroleum products delivered to the SPR 
and for reasonable, customary, and applicable costs incurred by the 
supplier in the performance of a valid contract for delivery before the 
effective date of termination of such contract. In no event shall the 
Government be liable for consequential damages or the entity's lost 
profits as a result of such termination.
    (e) Quality.
    (1) DOE shall define minimum petroleum product quality 
specifications for the SPR. DOE shall include such specifications in 
acquisition solicitations, and shall make them available on the website 
of the OPR: www.spr.doe.gov.
    (2) DOE shall periodically review the quality specifications to 
ensure, to the greatest extent practicable, the petroleum product mix 
in storage matches the demand of the United States refining system.
    (f) Quantity. In determining the quantities of petroleum products 
to be delivered to the SPR, DOE shall:
    (1) Take into consideration market conditions and the availability 
of transportation systems; and
    (2) Seek to avoid adversely affecting other market participants or 
petroleum product market fundamentals.
    (g) Offer and evaluation procedures.
    (1) Each solicitation shall provide necessary instructions on offer 
format and submission procedures. The details of the offer, evaluation 
and award procedures may vary depending on the method of acquisition.
    (2) DOE may use relative values and time differentials to manage 
acquisition and delivery schedules to reduce acquisition costs.
    (3) DOE may evaluate offers based on prevailing market prices of 
specific petroleum products, and shall award contracts on a competitive 
basis.
    (4) Whether acquisition is by purchase or exchange, DOE may use a 
price index to account for fluctuations in absolute and relative market 
prices at the time of delivery to reduce market risk to all parties 
throughout the contract term.
    (h) Scheduling and delivery.
    (1) Except as provided in paragraph (h)(4) of this section, DOE 
shall accept offers for petroleum products delivered to specified SPR 
storage sites via pipeline or as waterborne cargos delivered to the 
terminals serving those sites.
    (2) Except as provided in paragraph (h)(4) of this section, DOE 
shall generally establish schedules that allow for evenly spaced 
deliveries of economically sized marine and pipeline shipments within 
the constraints of SPR site and commercial facilities receipt 
capabilities.
    (3) DOE shall strive to maximize U.S. flag carrier utilization 
through the terms of its supply contracts.
    (4) DOE reserves the right to accept offers for other methods of 
delivery if, in DOE's sole judgment, market conditions and logistical 
constraints require such other methods.


Sec.  626.6  Acquiring petroleum products by purchase.

    (a) General. For the purchase of petroleum products, DOE shall, 
through certified contracting officers, conduct petroleum product 
acquisitions in accordance with the competitive principles of the FAR 
and the DEAR.
    (b) Acquisition strategy.
    (1) DOE solicitations:
    (i) May be either continuously open or fixed for a period of time; 
and
    (ii) May provide either for immediate delivery or for delivery at 
future dates.
    (2) DOE may alter the acquisition plan to take advantage of 
differentials in prices for different qualities of petroleum products, 
based on a consideration of factors, including the availability of 
storage capacity in the SPR sites, the logistics of changing delivery 
streams, and the availability of ships, pipelines and terminals to move 
and receive the petroleum products.
    (3) Based on the market analysis described in paragraph (d) of this 
section, DOE may refuse offers or suspend the acquisition process on 
the basis of Government estimates projecting substantially lower 
petroleum product prices in the future than those contained in offers. 
If DOE determines there is a high probability that the cost to the 
Government can be reduced without significantly affecting national 
energy security goals, DOE may either contract for delivery at a future 
date or delay purchases to take advantage of the projected lower future 
prices. Conversely, DOE may increase the rate of purchases if prices 
fall below recent price trends or futures markets present a significant 
contango and prices offer the opportunity to reduce the average cost of 
petroleum product acquisitions in anticipation of higher future prices.
    (4) Based on the market analysis described in paragraph (d) of this 
section, DOE may refuse offers, decrease the rate of purchase, or 
suspend the acquisition process if DOE determines acquisition will add 
significant upward pressure to prices either regionally or on a world-
wide basis. DOE may consider recent price changes, private inventory 
levels, petroleum product acquisition by other stockpiling entities, 
the outlook

[[Page 47658]]

for world petroleum products production, incipient disruptions of 
supply or refining capability, logistical problems for moving petroleum 
products, macroeconomic factors, and any other considerations that may 
be pertinent to the balance of petroleum product supply and demand.
    (c) Fill requirements determination. DOE shall develop SPR fill 
requirements for each solicitation based on an assessment of national 
energy security goals, the availability of storage capacity, and the 
need for specific grades and quantities of petroleum products.
    (d) Market analysis.
    (1) DOE shall establish a market value for each petroleum product 
to be acquired based on a market analysis at the time of contract 
award.
    (2) DOE may consider prices on futures markets, spot markets, 
recent price movements, current and projected shipping rates, forecasts 
by the DOE Energy Information Administration, and any other analytic 
tools available to DOE to determine the most desirable purchase 
profile.
    (3) DOE may also consider factors including recent price changes, 
private inventory levels, petroleum product acquisition by other 
stockpiling entities, the outlook for world petroleum product 
production, disruptions of supply or refining capability, logistical 
problems for moving petroleum products, macroeconomic factors, and any 
other considerations that may be pertinent relevant to the balance of 
petroleum product supply and demand.
    (e) Evaluation of offers.
    (1) DOE shall evaluate offers using:
    (i) The criteria and requirements stated in the solicitation; and
    (ii) The market analysis under paragraph (d) of this section.
    (2) DOE shall require financial guarantees from the contracting 
entity, in the form of a letter of credit or equivalent financial 
assurance.


Sec.  626.7  Acquiring petroleum products by exchange.

    (a) General. DOE may, through certified contracting officers, 
conduct petroleum product acquisitions through the exchange of 
petroleum products. Exchanges are conducted through emergency requests 
or by solicitation.
    (b) Emergency Requests.
    (1) Notwithstanding the requirements of Section 626.5, the 
requirements of this subsection shall control all exchanges by 
emergency request.
    (2) At any point, in the event of an emergency, a requestor may 
request, in writing, for an exchange of petroleum product from the SPR.
    (3) All requests shall include the following:
    (i) A justification of need that describes:
    (A) The emergency event,
    (B) The emergency event's impact on the requestor, and
    (C) The requestor's inability to acquire petroleum product from an 
alternative source;
    (ii) The quantity of petroleum product (in barrels) requested;
    (iii) The quality specifications of petroleum product requested; 
and
    (iv) The anticipated duration of the emergency event.
    (4) Upon receipt of an emergency request, DOE will verify the 
emergency, evaluate the need, and assess the market to ensure there is 
no alternative source of petroleum products available to the requester. 
DOE, in its sole discretion, may approve or disapprove any emergency 
request.
    (5) Upon approval of an emergency request, DOE may enter into 
contract negotiations with the requestor.
    (6) Repayment to the SPR for an exchange by emergency request shall 
be in the form of barrels of petroleum products, or another form of 
repayment as permitted by law, and shall include the following to be 
returned to the SPR by the contracted date:
    (i) The principal amount of petroleum products provided to the 
requestor;
    (ii) A premium; and
    (iii) Costs incurred by DOE in conducting the emergency request.
    (c) Solicitation for Exchange.
    (1) A solicitation for exchange:
    (i) May be either continuously open or fixed for a period of time;
    (ii) Shall advertise the quantity and quality specification of 
petroleum product available for exchange;
    (iii) May provide either for immediate delivery or for delivery at 
future dates to a bidding entity;
    (iv) May, in DOE's sole discretion, include a rate table from which 
offerors may offer dates for repayment; and
    (v) May require financial guarantees from offerors in the form of a 
letter of credit or equivalent financial assurance to accompany their 
bids.
    (2) In conducting the bidding and selection process:
    (i) Offerors shall follow the instructions to offerors included in 
the solicitation;
    (ii) DOE shall evaluate and select bids that best support national 
energy security goals, the availability of petroleum products and 
storage capacity, and need for specific grades and quantities of 
petroleum products; and
    (iii) Upon selection of a successful bid, DOE shall notify the 
apparently successful offeror.
    (3) Repayment to the SPR for an exchange by solicitation shall be 
in the form of barrels of petroleum products or another form of 
repayment as permitted by law, and may be calculated based on any rate 
table, if applicable, and shall include the following:
    (i) Principal amount of petroleum product owed to SPR in the case 
of an exchange or a deferred contractually scheduled delivery;
    (ii) Costs incurred by DOE in conducting the exchange; and
    (iii) A premium for each prospective date for repayment.
    (4) Based on the market analysis described in paragraph (c)(5) of 
this section, DOE may refuse offers, decrease the rate of acquisition, 
or suspend the exchange process if DOE determines acquisition will add 
significant upward pressure to prices either regionally or on a 
worldwide basis. DOE may consider recent price changes, private 
inventory levels, petroleum product acquisition by other stockpiling 
entities, the outlook for world petroleum products production, 
incipient disruptions of supply or refining capability, logistical 
problems for moving petroleum products, macroeconomic factors, and any 
other considerations that may be pertinent to the balance of petroleum 
product supply and demand.
    (5) Market analysis.
    (i) DOE shall establish a market value for each petroleum product 
to be acquired based on a market analysis at the time of contract 
award.
    (ii) DOE may consider prices on futures markets, spot markets, 
recent price movements, current and projected shipping rates, forecasts 
by the DOE Energy Information Administration, and any other analytic 
tools available to DOE to determine the most desirable purchase 
profile.
    (iii) DOE may also consider factors including recent price changes, 
private inventory levels, petroleum product acquisition by other 
stockpiling entities, the outlook for world petroleum product 
production, disruptions of supply or refining capability, logistical 
problems for moving petroleum products, macroeconomic factors, and any 
other considerations that may be pertinent relevant to the balance of 
petroleum product supply and demand.


Sec.  626.8  Deferrals of contractually scheduled deliveries.

    (a) General.
    (1) DOE prefers to take deliveries of petroleum products for the 
SPR at times scheduled under applicable contracts.

[[Page 47659]]

However, in the event the market is distorted by disruption to supply 
or other factors, DOE may defer scheduled deliveries or consider 
deferral requests from awardees.
    (2) An awardee seeking to defer scheduled deliveries of petroleum 
products to the SPR may submit a deferral request to DOE.
    (b) Deferral criteria. DOE shall only grant a deferral request for 
negotiation under paragraph (c) of this section if it determines that 
DOE can receive a premium for the deferral and, based on DOE's deferral 
analysis, that at least one of the following conditions exists:
    (1) DOE can reduce the cost of its petroleum products acquisition 
per barrel and increase the volume of petroleum products being 
delivered to the SPR by means of the premium barrels required by the 
deferral process;
    (2) DOE anticipates private inventories are approaching a point 
where unscheduled outages may occur;
    (3) There is evidence that refineries are reducing their run rates 
for lack of feedstock; or
    (4) There is an unanticipated disruption to petroleum product 
supply.
    (c) Negotiating terms.
    (1) If DOE decides to negotiate a deferral of deliveries, DOE shall 
estimate the market value of the deferral and establish a strategy for 
negotiating with suppliers the minimum percentage of the market value 
to be taken by the Government. During these negotiations, if the 
deferral request was initiated by DOE, DOE may consider any reasonable, 
customary, and applicable costs already incurred by the supplier in the 
performance of a valid contract for delivery. In no event shall such 
consideration account for any consequential damages or lost profits 
suffered by the supplier as a result of such deferral.
    (2) DOE shall only agree to amend the contract if the negotiation 
results in an agreement to give the Government a fair and reasonable 
share of the market value.


Sec.  626.9  Suspension and pre-drawdown diversion.

    Where the Secretary has found that a severe energy supply 
interruption may be imminent, the Secretary may suspend any previously 
announced or contracted acquisition of any petroleum product by the SPR 
or injection of petroleum products into the SPR; or sell any petroleum 
product acquired for injection into the SPR that has not yet been 
injected into the SPR.

[FR Doc. 2022-16081 Filed 8-3-22; 8:45 am]
BILLING CODE 6450-01-P