[Federal Register Volume 63, Number 67 (Wednesday, April 8, 1998)]
[Proposed Rules]
[Pages 17260-17305]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-8757]



[[Page 17259]]

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Part II





Department of Energy





_______________________________________________________________________



10 CFR Part 625



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

  Federal Register / Vol. 63, No. 67 / Wednesday, April 8, 1998 / 
Proposed Rules  

[[Page 17260]]


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DEPARTMENT OF ENERGY

10 CFR Part 625

RIN Number 1901-AA81


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

AGENCY: Department of Energy.

ACTION: Proposed rule and request for comments.

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SUMMARY: On December 21, 1983, the Department of Energy (DOE) published 
in the Federal Register a final rule governing the price competitive 
sales of petroleum from the Strategic Petroleum Reserve (SPR) in the 
event that the SPR is drawn down to respond to a severe energy supply 
interruption or to meet obligations of the United States under the 
Agreement on an International Energy Program. The final rule provided 
for the publication and periodic update in the Federal Register, as an 
appendix thereto, of Standard Sales Provisions (SSPs) containing or 
describing contract clauses, terms and conditions of sale, and 
performance and financial responsibility measures, which may be 
applicable to a particular sale of SPR petroleum. First published in 
interim final form on January 20, 1984, the SSPs have since been 
updated several times, with the latest version published in the Federal 
Register on December 11, 1992. DOE is now proposing revised SSPs that 
would supersede the 1992 SSPs, and DOE solicits written comments with 
respect to these proposed revised SSPs.

DATES: Interested persons are invited to submit written comments at the 
address below by May 26, 1998.

ADDRESSES: Send comments to: Nancy T. Marland, U.S. Department of 
Energy, Strategic Petroleum Reserve, FE-43, Room 3G-070, 1000 
Independence Ave., SW., Washington, DC 20585-0340.
    Comments may also be submitted by use of the Internet by linking to 
the DOE Fossil Energy web site at: http://www.fe.doe.gov/spr.html

FOR FURTHER INFORMATION CONTACT:

Nancy T. Marland, U.S. Department of Energy, Strategic Petroleum 
Reserve, FE-43, Room 3G-070, 1000 Independence Ave., SW., Washington, 
DC 20585-0340, Phone: (202) 586-4691, Fax: (202) 586-7919, Internet: 
[email protected]
Gary C. Landry, FE-4451, U.S. Department of Energy, Strategic Petroleum 
Reserve, Project Management Office, 900 Commerce Road East, New 
Orleans, LA 70123, Phone: (504) 734-4660; Fax: (504) 734-4947; 
Internet: [email protected]
Lot H. Cooke, U.S. Department of Energy, Office of Assistant General 
Counsel for Fossil Energy, GC-40, Room 6E-042, 1000 Independence Ave., 
SW., Washington, DC 20585-0103, Phone: (202) 586-6667; Fax: (202) 586-
0971; [email protected]

SUPPLEMENTARY INFORMATION:

I. Background
    A. The Strategic Petroleum Reserve Drawdown Plan and Sales Rule
    B. General Sales Procedures
II. The Revised Standard Sales Provisions
    A. Major Revisions
    B. Revised Provisions
III. Procedural Requirements
    A. Review Under Executive Order 12866
    B. Review Under the National Environmental Policy Act
    C. Review Under Regulatory Flexibility Act
    D. Review Under the Paperwork Reduction Act of 1995
    E. Review Under Executive Order 12612
    F. Review Under the Unfunded Mandate Reform Act of 1995
    G. Review Under Executive Order 12988

I. Background

A. The Strategic Petroleum Reserve Drawdown Plan and Sales Rule

    The Strategic Petroleum Reserve (SPR) was established by the Energy 
Policy and Conservation Act of 1975 (EPCA), P.L. 94-163, to store 
petroleum to diminish the impact of disruptions on petroleum supplies 
and to carry out the obligations of the United States under the 
International Energy Program. EPCA required the preparation of an ``SPR 
Plan'' detailing proposals for the development of the SPR. The SPR Plan 
was to include a Distribution Plan setting forth the methods for 
drawing down and distributing the SPR in the event of an emergency. In 
1979, a detailed Distribution Plan was transmitted to Congress as 
Amendment No. 3 to the SPR Plan. This Distribution Plan set out a 
number of alternative distribution methods, ranging from allocation to 
price competitive sales.
    In the Energy Emergency Preparedness Act of 1982, P.L. 97-229, 
Congress required a new ``Drawdown'' (Distribution) Plan. The new plan, 
SPR Plan Amendment No. 4, was transmitted to Congress on December 1, 
1982, and provided that the principal method of distributing SPR oil 
would be price competitive sale.
    On March 16, 1983, DOE published a notice of proposed rulemaking 
(48 FR 11125) to establish a framework for implementing the policies 
and procedures set out in SPR Plan Amendment No. 4. The final SPR sales 
rule (published at 48 FR 56538, December 21, 1983), adopted after 
consideration of public comments, provides for the establishment of 
Standard Sales Provisions (SSPs), containing contract terms and 
conditions expected to be contained in contracts for the sale of SPR 
petroleum. The final SPR sales rule is at 10 CFR Part 625. The rule 
calls for the publication of the SSPs in the Federal Register and the 
Code of Federal Regulations as an appendix to the rule. The rule also 
provides for the periodic review and republication of the SSPs in the 
Federal Register, including any revisions to such provisions.
    Upon a Presidential decision to draw down the SPR, DOE would issue 
a Notice of Sale, announcing the amounts and types of the SPR petroleum 
to be sold, the delivery locations and modes, and other pertinent 
information. The rule provides that the Secretary of Energy or his 
designee would specify in the Notice of Sale, by referencing the latest 
version of the SSPs, which of the terms and conditions in the SSPs 
would or would not apply to a particular sale. In addition, in the 
Notice of Sale, the Secretary could revise the terms and conditions, or 
add new ones applicable to that sale. It should be noted that the 
latest revision of the SSPs, published in the Federal Register on 
December 11, 1992 (57 FR 58872), was never codified as an appendix to 
the rule in the Code of Federal Regulations. The changes noted in the 
revisions below are changes to that latest Federal Register version 
and, if promulgated, will supersede the 1992 SSPs.
    In the event that an SPR sale does occur before the proposed SSP 
revisions herein are formally adopted, the Notice of Sale could specify 
some or all of these revisions for use.

B. General Sales Procedures

    Under the current SSPs, the first step in the SPR competitive sales 
process is the issuance of a Notice of Sale which lists the volume, 
characteristics, and location of the petroleum for sale, delivery dates 
and procedures for submitting offers, as well as measures for assuring 
performance and financial responsibility.
    Over the course of a drawdown, several Notices of Sale may be 
issued, each covering a sales period of one to two months. Offerors may 
have only seven days from the date of issuance until offers are due, 
and thirty days or less until purchasers must begin accepting delivery 
of the oil, although a less compressed schedule may become more 
feasible after the initial stages of drawdown. Because of the possible 
short lead time and as provided in the

[[Page 17261]]

SSPs, DOE maintains a list of prospective offerors who will receive all 
Notices of Sale.
    The next step in the sales process is for prospective purchasers to 
submit offers, as specified in the Notice of Sale. Offerors must 
unconditionally accept all terms and conditions in the Notice of Sale, 
submit an offer guarantee, and offer at least the minimum price, if 
any, specified in the Notice of Sale. After submission, the offers are 
evaluated and ``apparently successful offerors'' are selected. The 
offer evaluation process is structured so that the offerors bidding the 
highest prices determine their method of delivery, up to the limits of 
the distribution system, with specific delivery arrangements negotiated 
later in the process.
    All apparently successful offerors are required, within five 
business days of being notified, to provide a letter of credit as a 
guarantee of performance and payment of amounts due under the contract. 
Upon timely receipt of the letters of credit, and a final determination 
by the Contracting Officer that offers are responsive and offerors 
responsible, the DOE issues the Notices of Award. Deliveries then 
commence to the purchasers, consistent with their arrangements for 
commercial pipeline or marine vessel transportation. Purchasers are 
invoiced following crude oil deliveries.

II. The Revised Standard Sales Provisions

A. Major Revisions

    The SSPs are being revised in accordance with the SPR sales rule. 
The revisions reflect a number of events, including experience gained 
through various sales, the relocation of inventory within the SPR, 
commercialization of SPR distribution facilities, the addition of new 
distribution points, the growth of electronic communications, and 
changes to the legal and regulatory framework under which a drawdown 
would be conducted. Although the revised SSPs do not reflect any major 
changes to the elemental competitive sales process, a conscious effort 
to conduct SPR business more closely in alignment with standard 
commercial terms underpins many of these revisions.
    Since the last revision of the SSPs, due to geotechnical problems, 
crude oil at the SPR's Weeks Island site was relocated to the Bayou 
Choctaw and Big Hill sites, consequently deleting the crude oil stream 
known as Weeks Island Sour, Master Line Item 006. The addition of 
distribution points at UNOCAL Terminal in Nederland, Texas, and at the 
Texaco Pipeline, Inc. 20-inch pipeline near Winnie, Texas, to serve the 
Big Hill site enabled the definition of two new streams, Big Hill Sweet 
and Big Hill Sour, Master Line Items 009 and 010, respectively. These 
two new streams may also be delivered through the Sun Terminal in 
Nederland by tanker, barge and pipeline.
    In order to reduce operational costs and generate revenues, DOE has 
initiated a program to lease the use of designated SPR distribution 
facilities, including the DOE St. James Terminal and approximately 240 
miles of off-site crude oil pipelines. While commercialization of these 
facilities does not affect their availability for drawdown, future 
commercialization activities may affect the distribution alternatives 
and capabilities available at any time. The revised SSPs acknowledge 
and allow for this variability of available crude oil streams and 
delivery line items.
    Experience with recent sales of SPR oil has led to the proposed 
revision in payment methods and terms. Currently, purchasers of SPR 
crude have two options: advance payment or payment under a commercial 
letter of credit payable by draft through the Federal Reserve Bank's 
FEDWIRE system. Under the revised SSPs, this has been changed to more 
standard commercial billing and payment terms, requiring purchaser 
payment of DOE invoices via wire transfer of funds or cash wire deposit 
to the U.S. Treasury, with a standby letter of credit used to assure 
payment and performance. Alternative networks for the wire transfer of 
funds have eliminated the requirement that the participating banks be 
members of the Federal Reserve Bank's FEDWIRE system. Changes by the 
International Chamber of Commerce in their 1993 revision of the Uniform 
Customs and Practice for Documentary Credits (UCP 500), reducing the 
risk of nonpayment, facilitated this change to more standard commercial 
practice while maintaining the SPR's objective of assuring purchaser 
performance.
    Recent experience with sales of SPR oil, as well as the conduct of 
other SPR business, have emphasized the efficiencies achieved through 
electronic communications. Several SSPs have been revised to allow for 
electronic communication throughout the sales solicitation, offer, 
award and delivery processes.
    The legal and regulatory framework, particularly concerning export 
controls and environmental compliance, has been updated since the 1992 
version in ways that specifically and generally affect SPR purchasers. 
In 1990, Congress amended EPCA to give the President discretionary 
power to waive export control laws with regard to SPR oil in connection 
with refining or exchange of SPR oil to obtain refined products for the 
U.S. market. The revised SSPs identify the Department of Commerce 
revised Short Supply Controls applicable to exports of SPR crude oil in 
connection with refining or exchange for refined products. In addition, 
many changes in U.S. environmental legislation and international 
environmental agreements affect purchaser responsibilities in 
contracting for transport from the SPR, particularly by vessel. The 
revised SSPs contain a matrix identifying currently applicable statutes 
governing environmental and financial responsibility requirements for 
tankships transporting oil in the United States.
    Several exhibits have also been substantially revised. A form to be 
included with an offer submission has been simplified. The form for the 
presentation of the SPR crude oil assays has been modified. The sample 
letters of credit for the offer guarantee, and payment and performance 
guarantee have been revised to reflect the use of new electronic funds 
transfer mechanisms and the new billing and payment procedure. 
Information for the SPR delivery terminals has been expanded to include 
the new delivery points.
    The following is a provision-by-provision discussion of the 
significant changes in the revised SSPs.

B. Revised Provisions

SSP No. A.1 List of Abbreviations
    The abbreviation ``SOML'' for ``Sales Offerors Mailing List'' was 
added.
SSP No. A.3 Standard Sales Provisions (SSPs)
    The required offeror's agreement to all sales provisions may be 
submitted on offer forms generated by electronic means as specified by 
DOE in the Notice of Sale.
SSP No. A.5 Sales Offerors' Mailing List (SOML)
    A potential offeror may now be added to the SOML by providing 
pertinent information by means of electronic mail to the address 
specified in this provision.
SSP No. A.6 Publicizing the Notice of Sale
    The Internet and other media were added to the options for 
distribution of the Notice of Sale to interested parties.

[[Page 17262]]

SSP No. A.7 Penalty for Making False Statements in Offers To Buy SPR 
Petroleum
    This provision has been revised to caution offerors concerning the 
applicability of the United States Sentencing Guidelines to violations 
of 18 U.S.C. Sec. 1001.
SSP No. B.1 Requirements for a Valid Offer--Caution to Offerors
    This provision now provides that offer forms may be generated by 
electronic means specified by DOE in the Notice of Sale. In addition, 
Standard Form 33, previously required to be submitted with an offer, 
has been replaced by SPRPMO Form 33S, which is provided in a new 
Exhibit C.
SSP B.6 Export Limitations and Licensing--Caution to Offerors
    This provision has been revised to identify the sections of the 
Department of Commerce Short Supply Controls governing applications to 
export SPR crude oil in connection with arrangements to obtain refined 
petroleum for the U.S. market.
SSP B.8 Submission of Offers and Modification of Previously Submitted 
Offers
    1. This provision now provides for the electronic submission or 
modification of offers, reserving the right of the Contracting Officer 
to request submission of a complete signed original document.
    2. The conditions under which the Government will not be 
responsible for the unsuccessful electronic transmission of an offer or 
modification are delineated.
SSP B.9 Acknowledgment of Amendments to a Notice of Sale
    The provision provides for acknowledgment of amendments on new Form 
SPRPMO 33S or electronically, as specified in the NS.
SSP B.10 Late Offers, Modification of Offers and Withdrawal of Offers
    This provision identifies the conditions under which late offers 
which had been submitted via a commercial express service will be 
considered. A late offer which is the only offer received will also be 
considered.
SSP B.11 Offer Guarantee
    1. A certified check is no longer acceptable as an offer guarantee.
    2. Offer guarantees submitted by cash wire deposit or electronic 
funds transfer must follow new submission instructions detailed in SSP 
No. C.23.
    3. The requirement that a standby letter of credit submitted as an 
offer guarantee conform without exception to the sample form provided 
in Exhibit F has been changed to require substantive compliance with 
Exhibit F. The requirement that the issuing bank maintain an account 
with the Federal Reserve Bank has been eliminated.
    4. In line with the revised procedures for invoicing and payment 
(see SSP C.22), a successful offeror's cash wire deposit offer 
guarantee may be applied toward the first delivery invoice under the 
resultant contract.
SSP B.16 SPR Crude Oil Streams and Delivery Points
    The UNOCAL terminal at Nederland, Texas, and a meter station on the 
Texaco Pipeline Inc. 20-inch pipeline in Jefferson County, Texas have 
been added as delivery points for the new SPR Big Hill Sweet and SPR 
Big Hill Sour crude oil streams.
SSP B.17 Notice of Sale Line Item Schedule--Petroleum Quantity, Quality 
and Delivery Method
    Due to the addition of the two new streams at the Big Hill site and 
the deletion of the stream from the Weeks Island site, and the 
attendant changes in feasible delivery points, this provision has been 
changed in various places to accommodate the expansion and variability 
of possible line item offerings.
SSP C.4 Environmental Compliance
    This provision has been updated to reflect the current applicable 
regulations with which vessels used to transport SPR oil must comply, 
as well as the financial responsibility requirements for vessel owners 
or operators.
SSP C.5 Delivery and Transportation Scheduling
    This provision has been revised to require that purchasers 
scheduling deliveries by pipeline initially specify five-day shipment 
ranges for which deliveries are to be tendered to the pipeline and the 
quantity to be tendered for each date range.
SSP C.6 Application Procedures for ``Jones Act'' and Construction 
Differential Subsidy Waivers
    This provision has been restructured by revising and regrouping the 
order in which the addressees for original Jones Act and Construction 
Differential Subsidy waiver requests, and copies thereof, are 
presented.
SSP C.12 Pipeline Delivery Procedures
    In consonance with the requirement established in SSP NO. 5, the 
purchaser will establish five-day shipment ranges with pipeline 
carrier. Three days prior to the beginning of the specified range, the 
purchaser will provide DOE the firm date within the range on which 
delivery is to begin.
SSP C.17 Determination of Quality
    This provision reflects the latest SPR and industry preferred tests 
for the determination of sediment and water, sulfur and API gravity. 
One new primary test for API gravity has been added and several 
formerly acceptable alternate tests for all three categories have been 
deleted.
SSP C. 21-23 Payment Procedures
    1. These provisions replace former SSPs C.21-26, under which the 
buyer had two options: advance payment or payment under a commercial 
letter of credit payable through the Federal Reserve Banks's FEDWIRE 
system. The new provisions delete the advance payment option and 
implement a procedure for billing and payment following standard 
industry practice, using a standby letter of credit to assure payment 
and performance.
    2. SSP C.21 requires the purchaser to provide an irrevocable 
standby letter of credit for 100 percent of the contract award value 
before DOE will execute a contract award. The letter of credit must be 
in substantive compliance with the example provided in Exhibit G. DOE 
will authorize cancellation of the letter of credit within 30 days 
after receipt of final payment under the contract.
    3. SSP C.22 provides for the purchaser to be invoiced after each 
delivery under the contract , with payment due in full on the 20th day 
of the month after the month of delivery. Options available to the 
Government if payment is not received include drawing against the 
letter of credit, withholding future deliveries or contract 
termination.
    4. SSP C.23 provides for payment by either a deposit to the account 
of the U.S. Treasury by wire transfer of funds over the Fedwire Deposit 
System Network or electronic funds transfer through the Automated 
Clearing House network, using the Federal Remittance Express Program.
    5. DOE may draw against the standby letter of credit at any time 
for other monies due under the contract and remaining unpaid in 
violation of the terms of the contract.
Exhibit A SPR Sales Offer Form
    This form, provided as an alternative to any other electronic means 
that may

[[Page 17263]]

be provided by DOE for preparation and submission of offers, has been 
expanded to include the Big Hill Sweet and Big Hill Sour crude oil 
streams.
Exhibit B Sample Notice of Sale
    This exhibit has been slightly revised to be more illustrative of 
the SSPs as now written.
Exhibit C SPRPMO Form 33S
    This form, replacing Standard Form 33, has been streamlined to 
include only those elements pertinent to the SPR sales contracting 
process.
Exhibit D SPR Crude Oil Stream Characteristics
    This exhibit contains an example of the assay format used for SPR 
crude oil stream characteristics. Updated assay data for all nine SPR 
crude oil streams will be included in any future Notice of Sale.
Exhibit E SPR Delivery Point Data
    This exhibit contains the information for the UNOCAL Terminal at 
Nederland, Texas, and the Texaco Pipeline, Inc. 20-inch pipeline meter 
station in Jefferson County, Texas, for delivery of Big Hill Sweet and 
Big Hill Sour streams.
Exhibit F Offer Standby Letter of Credit
    The letter of credit has been revised to specify payment through 
the Federal Deposit Network System, or the Automated Clearing House 
Network using the Federal Remittance Express Program.
Exhibit G Payment and Performance Letter of Credit
    The letter of credit has been changed from a commercial letter of 
credit to an irrevocable standby letter. Drawings against the letter of 
credit will only be made due to purchaser's failure to pay or perform. 
Payments will be made through the same means specified in Exhibit F.

III. Procedural Requirements

A. Review Under Executive Order 12866

    Today's action does not constitute a ``significant regulatory 
action'' as defined in section 3(f) of Executive Order 12866, 
``Regulatory Planning and Review,'' 58 FR 51735 (October 4, 1993). 
Accordingly, this action was not subject to review under the Executive 
Order by the Office of Information and Regulatory Affairs of the Office 
of Management and Budget.

B. Review Under the National Environmental Policy Act

    In today's notice DOE proposes revisions to the SSPs that may be 
incorporated into sales contracts following a Presidential decision to 
draw down the Strategic Petroleum Reserve. The SSPs are not binding 
upon DOE or bidders until they are included in particular Notices of 
Sale. The proposed amendments are procedural in nature and will not 
result in environmental impacts. The Department, therefore, has 
determined that the proposed revisions are covered under the 
Categorical Exclusion found at paragraph A.6 of Appendix A to Subpart 
D, 10 CFR Part 1021, which applies to such procedural rulemakings. 
Accordingly, neither an environmental assessment nor an environmental 
impact statement is required.

C. Review Under Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., requires that 
a federal agency prepare a regulatory flexibility analysis for any rule 
for which the agency is required to publish a general notice of 
proposed rulemaking. The Regulatory Flexibility Act does not apply to 
this rulemaking because DOE is not required by the Administrative 
Procedure Act (APA) or other law to publish proposed revisions to the 
Standard Sales Provisions for public comment. The Standard Sales 
Provisions, which are included as Appendix to 10 CFR Part 625, are not 
binding upon DOE unless they are incorporated into a Notice of Sale, 
and DOE may revise or supplement the Standard Sales Provisions in a 
Notice of Sale. 10 CFR 625.3. Thus, the Standard Sales Provisions, and 
revisions thereof, are non-binding provisions that are covered under 
the APA's exemption from notice and comment rulemaking requirements at 
5 U.S.C. 553(b)(B).

D. Review Under the Paperwork Reduction Act of 1995

    The proposed revisions of Standard Sales Provisions would impose no 
new collection of information requiring the approval of the Office of 
Management and Budget under the Paperwork Reduction Act, 44 U.S.C. 3501 
et seq., and the procedures implementing that Act, 5 CFR Part 1320.

E. Review Under Executive Order 12612

    Executive Order 12612, ``Federalism,'' 52 FR 41685 (October 30, 
1987), requires the review of regulations, rules, legislation, and any 
other policy actions for any substantial direct effects on States, on 
the relationship among the federal government and the states, or on the 
distribution of power and responsibilities among various levels of 
government. If there are sufficient substantial direct effects, then 
the Executive Order requires preparation of a federal assessment to be 
used in all decisions involved in promulgating and implementing a 
policy action. DOE has analyzed this proposed rule in accordance with 
the principles and criteria in Executive Order 12612, and has 
determined that the rule would not have a substantial direct effect on 
the institutional interests or traditional functions of states.

F. Review Under the Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1531 
et seq., requires each federal agency, to the extent permitted by law, 
to prepare a written assessment of the effects of any federal mandate 
in an agency rule that may result in the expenditure by state, local, 
tribal governments, in the aggregate or by the private sector, of $100 
million or more (adjusted annually for inflation) in any one year. The 
revisions of Standard Sales Provisions today would not impose a federal 
mandate on state, local, and tribal governments or on the private 
sector. Therefore, the requirements of Title II of the Unfunded 
Mandates Reform Act of 1995 do not apply.

G. Review Under Executive Order 12988

    Section 3 of Executive Order 12988, Civil Justice Reform, 61 FR 
4729 (February 7, 1996), instructs each agency to adhere to certain 
requirements when promulgating new regulations and reviewing existing 
regulations. These requirements, set forth in paragraphs 3(a) and 
(b)(2) of the Executive Order, include eliminating drafting errors and 
needless ambiguity, drafting the regulations to minimize litigation, 
providing clear and certain legal standards for affected legal conduct, 
and promoting simplification and burden reduction. Agencies are also 
instructed to make every reasonable effort to ensure that the 
regulation specifies clearly any preemptive effect, describes any 
administrative proceedings, and defines key terms. The Department has 
determined that the proposed rule meets the requirements of paragraphs 
3(a) and (b) of Executive Order 12988.

List of Subjects in 10 CFR Part 625

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


[[Page 17264]]


    Issued in Washington, D.C. on March 27, 1998.
R.D. Furiga,
Deputy Assistant Secretary, Strategic Petroleum Reserve.

    For the reasons set forth in the preamble, 10 CFR part 625 is 
proposed to be amended as follows:

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

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

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

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

Appendix A to Part 625--Standard Sales Provisions Index

Section A--General Pre-Sale Information

A.1  List of abbreviations
A.2  Definitions
A.3  Standard Sales Provisions
A.4  Periodic revisions of the Standard Sales Provisions
A.5  Sales Offerors' Mailing List
A.6  Publicizing the Notice of Sale
A.7  Penalty for false statements in offers to buy SPR petroleum

Section B--Sales Solicitation Provisions

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

Section C--Sales Contract Provisions

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

Exhibits:

A--SPR Sales Offer Form
B--Sample Notice of Sale
C--SPRPMO Form 33S
D--SPR Crude Oil Comprehensive Analysis
E--SPR Delivery Point Data
F--Offer Standby Letter of Credit
G--Payment and Performance Letter of Credit
H--SPR Crude Oil Delivery Report--SPRPMO-F-6110.2-14b/REV.8/91
I--Instruction Guide for Return of Offer Guarantees by Electronic 
Transfer or Treasury Check
J--Offer Guarantee Calculation Worksheet

Section A--General Pre-Sale Information

A.1  List of abbreviations

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

A.2  Definitions

    (a) Affiliate. The term ``affiliate'' means associated business 
concerns or individuals if, directly or indirectly, (1) either one 
controls or can control the other, or (2) a third party controls or 
can control both.
    (b) Business Day. The term ``business day'' means any day except 
Saturday, Sunday or a U.S. Government holiday.
    (c) Contract. The term ``contract'' means the contract under 
which DOE sells SPR petroleum. It is composed of the NS, the NA, the 
successful offer, and the SSPs incorporated by reference.
    (d) Contracting Officer. The term ``Contracting Officer'' means 
the person executing sales contracts on behalf of the Government, 
and any other Government employee properly designated as Contracting 
Officer. The term includes the authorized representative of a 
Contracting Officer acting within the limits of his or her 
authority.
    (e) Government. The term ``Government'', unless otherwise 
indicated in the text, means the United States Government.
    (f) Head of the Contracting Activity. The term ``Head of the 
Contracting Activity'' means Project Manager, Strategic Petroleum 
Reserve Project Management Office.
    (g) Notice of Acceptance (NA). The term ``Notice of Acceptance'' 
means the document that is sent by DOE to accept the purchaser's 
offer to create a contract.
    (h) Notification of Apparently Successful Offeror (ASO). The 
term ``notification of apparently successful offeror'' means the 
notice, written or oral, by the Contracting Officer to an offeror 
that it will be awarded a contract if it is determined to be 
responsible.
    (i) Notice of Sale (NS). The term ``Notice of Sale'' means the 
document announcing the sale of SPR petroleum, the amount, 
characteristics and location of the petroleum being sold, the 
delivery period and the procedures for submitting offers. The NS 
will specify what contractual provisions and financial and 
performance responsibility measures are applicable to that 
particular sale of petroleum and provide other pertinent 
information. (See Exhibit B, Sample Notice of Sale)
    (j) Offeror. The term ``offeror'' means any person or entity 
(including a government agency) who submits an offer in response to 
a NS.
    (k) Petroleum. The term ``petroleum'' means crude oil, residual 
fuel oil, or any refined product (including any natural gas liquid, 
and any natural gas liquid product) owned or contracted for by DOE 
and in storage in any permanent SPR facility, temporarily stored in 
other storage facilities, or in transit to such facilities 
(including petroleum under contract but not yet delivered to a 
loading terminal).
    (l) Project Management Office (SPR/PMO). The term ``Project 
Management Office''

[[Page 17265]]

means the DOE personnel and DOE contractors located in Louisiana and 
Texas responsible for the operation of the SPR.
    (m) Purchaser. The term ``purchaser'' means any person or entity 
(including a government agency) who enters into a contract with DOE 
to purchase SPR petroleum.
    (n) Standard Sales Provisions (SSPs). The term ``Standard Sales 
Provisions'' means this set of terms and conditions of sale 
applicable to price competitive sales of SPR petroleum. These SSPs 
constitute the ``standard sales agreement'' referenced in the 
Strategic Petroleum Reserve ``Drawdown'' (Distribution) Plan, 
Amendment No. 4 (December 1, 1982, DOE/EP 0073) to the SPR Plan.
    (o) Strategic Petroleum Reserve (SPR). The term ``Strategic 
Petroleum Reserve'' means that DOE program established by Title I, 
Part B, of the Energy Policy and Conservation Act, 42 U.S.C. Section 
6201, et seq.
    (p) Vessel. The term ``vessel'' means a tankship, an integrated 
tug-barge (ITB) system, a self-propelled barge, or other barge.

A.3  Standard Sales Provisions (SSPs)

    (a) These SSPs contain pre-sale information, sales solicitation 
provisions, and sales contract clauses setting forth terms and 
conditions of sale, including purchaser financial and performance 
responsibility measures, or descriptions thereof, which may be 
applicable to price competitive sales of petroleum from the SPR in 
accordance with the SPR Sales Rule, 10 CFR Part 625. The NS will 
specify which of these provisions shall apply to a particular sale 
of such petroleum, and it may specify any revisions therein and any 
additional provisions which shall be applicable to that sale. (See 
Exhibit B, Sample Notice of Sale)
    (b) All offerors must, as part of their offers for SPR petroleum 
in response to a NS, agree without exception to all sales provisions 
of that NS. Offerors shall indicate their agreement by signing the 
Sales Offer Form (Exhibit A) or other form generated from electronic 
media used for submitting offers as specified by DOE in the NS. The 
Government will not award a contract to an offeror who has failed to 
so agree.

A.4  Periodic Revisions of the Standard Sales Provisions

    DOE will review the SSPs periodically and republish them in the 
Federal Register, with any revisions. When an NS is issued, it will 
cite the Federal Register and the Code of Federal Regulations (if 
any) in which the latest version of the SSPs was published. Offerors 
are cautioned that the Code of Federal Regulations may not contain 
the latest version of the SSPs published in the Federal Register. 
Interested persons may obtain a copy of the current SSPs by 
contacting the SPR/PMO at the address set forth in Provision No. 
A.5.

A.5  Sales Offerors' Mailing List (SOML)

    (a) The SPR/PMO will maintain a Sales Offerors Mailing List 
(SOML) of those potential offerors who wish to receive an NS 
whenever one is issued. In order to assure that prospective offerors 
will receive the NS or offer forms in a timely fashion, all 
potential offerors are encouraged to submit the information in 
paragraph (d) of this provision as soon as possible. An NS may be 
issued with a week or less allowed for the receipt of offers. While 
DOE will use its best efforts to timely supply copies of the NS to 
persons not on the list who request the NS at the time an SPR 
petroleum sale is announced, this may not always be feasible in 
light of the short amount of time available before offers must be 
received.
    (b) Any firm or individual may request to be on the SOML by 
providing the information in paragraph (d) of this provision by 
letter, telephone or electronic means to: Sales Offerors Mailing 
List (SOML), U.S. Department of Energy, Strategic Petroleum Reserve, 
Project Management Office, Acquisition and Sales Division, Mail Stop 
FE-4451, 900 Commerce Road East, New Orleans, Louisiana 70123, 
Telephone Number (504) 734-4249/4201, Facsimile (504) 734-4427, e-
mail: [email protected]. Any envelope should be marked ``SPR Sales 
Offerors' Mailing List.''
    (c) Copies of the SSPs and the NS, when one is issued, may also 
be obtained from this address.
    (d) A request to be placed on the SOML should include the 
following information: Name of firm; Mailing address (Street and 
P.O. Box); City, State, Zip Code; Name of authorized agent and 
alternate authorized agent; Telephone numbers for agent and 
alternate including area code; Agent address, if different from firm 
represented; Internet address; Telephone number for facsimile 
transmission, including area code Telephone number for verification 
of message receipt, including area code; Dun's number. As DOE may 
use express mail, which cannot be delivered to a Post Office box, 
failure to provide a street address could result in untimely receipt 
of the NS and will be at the offeror's risk.

A.6  Publicizing the Notice of Sale

    (a) The NS will be sent to names on the SOML referenced in 
Provision No. A.5. Interested persons may send a representative to 
the address in Provision No. A.5 to obtain a copy of the NS.
    (b) In addition to those on the SOML, the NS will also be sent 
to anyone requesting it when a sale is announced.
    (c) A DOE press release, which will include the salient features 
of the NS, will be made available to all news agencies.
    (d) At the option of the Contracting Officer, advertisements may 
be placed in publications or media (including the Internet) likely 
to reach interested parties. The advertisements will contain the 
salient features of the NS and a point of contact at the SPR/PMO for 
further information.

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

    (a) Making false statements in an offer to buy SPR petroleum may 
expose an offeror to a penalty under the False Statements Act, 18 
U.S.C. Section 1001, which provides: Whoever, in any matter within 
the jurisdiction of any department or agency of the United States 
knowingly and willfully falsifies, conceals or covers up by any 
trick, scheme, or device a material fact, or makes any false, 
fictitious or fraudulent statements or representations, or makes or 
uses any false writing or document knowing the same to contain any 
false, fictitious or fraudulent statement or entry, shall be fined 
under this title or imprisoned not more than 5 years, or both.
    (b) Under 18 U.S.C. Sec. 3571, the maximum fine to which an 
individual or organization may be sentenced for violations of 18 
U.S.C. (including Section 1001) is set at $250,000 and $500,000 
respectively, unless there is a greater amount specified in the 
statute setting out the offense, or the violation is subject to 
special factors set out in Section 3571. The United States 
Sentencing Guidelines also apply to violations of Section 1001, and 
offenders may be subject to a range of fines under the guidelines up 
to and including the maximum amounts permitted by law.

Section B--Sales Solicitation Provisions

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

    A valid offer to purchase SPR petroleum must meet the following 
conditions:
    (a) The offer guarantee (see Provision No. B.11) must be 
received no later than the time set for the receipt of offers;
    (b) The offer must include a completed Sales Offer Form, i.e., 
Exhibit A or other form generated by electronic means for submitting 
offers as specified by DOE in the NS, and signed SPRPMO Form 33S 
(Exhibit C) or other forms as specified in the NS;
    (c) The offer must be received no later than the time set for 
receipt of offers;
    (d) Any amendments to the NS that explicitly require 
acknowledgment of receipt must be properly acknowledged as provided 
for on Exhibit C; and
    (e) The offeror must agree without exception to all provisions 
of the SSPs that the NS makes applicable to a particular sale, as 
well as to all provisions in the NS.

B.2  Price Indexing

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

B.3  Certification of Independent Price Determination

    (a) The offeror certifies that:
    (l) The prices in this offer have been arrived at independently, 
without, for the purposes of restricting competition, any 
consultation, communication, or agreement with any other offeror or 
competitor relating to: (i) those prices; (ii) the intention to 
submit an offer; or (iii) the methods or factors used to calculate 
the prices offered.
    (2) The prices in this offer have not been and will not be 
knowingly disclosed by the offeror, directly or indirectly, to any 
other offeror or to any competitor before the time set for receipt 
of offers, unless otherwise required by law; and
    (3) No attempt has been made or will be made by the offeror to 
induce any other

[[Page 17266]]

concern to submit or not to submit an offer for the purpose of 
restricting competition.
    (b) Each signature on the offer is considered to be a 
certification by the signatory that the signatory:
    (1) Is the person within the offeror's organization responsible 
for determining the prices being offered, and that the signatory has 
not participated, and will not participate, in any action contrary 
to paragraphs (a)(1) through (a)(3) of this provision; or
    (2) (i) Has been authorized in writing to act as agent for the 
persons responsible for such decision in certifying that such 
persons have not participated, and will not participate, in any 
action contrary to paragraphs (a)(1) through (a)(3) of thIS 
provision;
    (ii) As their agent does hereby so certify; and
    (iii) As their agent has not participated, and will not 
participate, in any action contrary to paragraphs (a)(l) through 
(a)(3) of this provision
    (c) An offer will not be considered for award where paragraphs 
(a)(l), (a)(3), or (b) of this provision has been deleted or 
modified. If the offeror deletes or modifies paragraph (a)(2) of 
this provision, the offeror must furnish with the offer a signed 
statement setting forth in detail the circumstances of the 
disclosure.

B.4  Requirements for Vessels--Caution to Offerors

    (a) The ``Jones Act'', 46 U.S.C. 883, prohibits the 
transportation of any merchandise, including SPR petroleum, by water 
or land and water, on penalty of forfeiture thereof, between points 
within the United States (including Puerto Rico, but excluding the 
Virgin Islands) in vessels other than vessels built in and 
documented under laws of the United States, and owned by United 
States citizens, unless the prohibition has been waived by the 
Secretary of Treasury. Further, certain U.S.-flag vessels built with 
Construction Differential Subsidies (CDS) are precluded by Section 
506 of the Merchant Marine Act of 1936 (46 U.S.C. 1156) from 
participating in U.S. coastwise trade, unless such prohibition has 
been waived by the Secretary of Transportation, the waiver being 
limited to a maximum of 6 months in any given year. CDS vessels may 
also receive Operating Differential Subsidies, requiring separate 
permission from the Secretary of Transportation for domestic 
operation, under Section 805(a) of the same statute. The NS will 
advise offerors of any general waivers allowing use of non-coastwise 
qualified vessels or vessels built with Construction Differential 
Subsidies for a particular sale of SPR petroleum. If there is no 
general waiver, purchasers may request waivers in accordance with 
Provision No. C.7, but remain obligated to complete performance 
under this contract regardless of the outcome of that waiver 
process.
    (b) The Department of Transportation's interim rule concerning 
Reception Facility Requirements for Waste Materials Retained on 
Board (33 CFR Parts 151 and 158) implements the reception facility 
requirements of the International Convention for the Prevention of 
Pollution from Ships, 1973, as modified by the 1978 Protocol 
relating thereto (MARPOL 73/78). This rule prohibits any oceangoing 
tankship, required to retain oil or oily mixtures on-board while at 
sea, from entering any port or terminal unless the port or terminal 
has a valid Certificate of Adequacy as to its oily waste reception 
facilities. SPR marine terminals (see Exhibit E, SPR Delivery Point 
Data) have Certificates of Adequacy and reception facilities for 
vessel sludge and oily bilge water wastes, all costs for which will 
be borne by the vessel. The terminals, however, may not have 
reception facilities for oily ballast. Accordingly, tankships 
without segregated ballast systems will be required to make 
arrangements for and be responsible for all costs associated with 
appropriate disposal of such ballast, or they will be denied 
permission to load SPR petroleum at terminals that lack reception 
facilities for oily ballast.
    (c) By submission of an offer, the offeror certifies that it 
will comply with the ``Jones Act'' and all applicable ballast 
disposal requirements.

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

    (a) Sections 4611 and 4612 of the Internal Revenue Code, which 
imposed a tax on domestic and imported petroleum to support the 
Hazardous Substance Response Fund (the ``Superfund''), were revised 
by the Superfund Amendments and Reauthorization Act of 1986, Public 
Law 99-499; and the Omnibus Budget Reconciliation Act of 1986, 
Public Law 99-509; the Steel Trade Liberalization Program 
Implementation Act, Public Law 101-221; and the Omnibus Budget 
Reconciliation Act of 1989, Public Law 101-239. As amended, these 
sections impose taxes to finance the Hazardous Substance Superfund 
and the Oil Spill Liability Trust Fund (``Trust Fund'').
    (b) Section 4611 imposes taxes on domestic crude oil and on 
imported crude oil to support the Superfund and the Trust Fund. The 
taxes are imposed on (1) crude oil received at a United States 
refinery and (2) petroleum products (including crude oil) entered 
into the United States for consumption, use, or warehousing. Section 
4612 provides that no tax is imposed if it is established that a 
prior tax imposed by Section 4611 has already been paid with respect 
to a barrel of oil. Additionally, as determined by the Secretary of 
Treasury, the Hazardous Substance Superfund tax and the Oil Spill 
Liability Trust Fund tax may not be imposed during certain periods 
when the unobligated balances of the funds reach particular 
statutorily-prescribed levels.
    (c) DOE has already paid the Superfund and Trust Fund taxes on 
some of the oil imported and stored in the SPR.
    However, no Superfund or Trust Fund tax has been paid on 
imported oil stored prior to the effective dates of these Acts or on 
any domestic oil stored in the SPR. Because domestic and imported 
crude oil for which no taxes have been paid and crude oils for which 
Superfund and Trust Fund taxes have been paid have been commingled 
in the SPR, upon drawdown of the SPR, the NS will advise purchasers 
of the tax liability.

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

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

B.7  Issuance of the Notice of Sale

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

B.8  Submission of Offers and Modification of Previously Submitted 
Offers

    (a) Unless otherwise provided in the NS, offers must be 
submitted to the SPR/PMO in New Orleans, Louisiana, by mail, hand-
delivery, or electronic means as specified in the NS. Any direct 
cash deposits as offer guarantees shall be sent by wire or 
electronic funds transfer in accordance with Provision No. C.23.
    (b) Unless otherwise provided in the NS, offers may be modified 
or withdrawn by hand delivery, mail, telegram, or electronic means 
specified in the NS, provided that the hand delivery, mail, 
telegram, or electronic submission is received at the designated 
office prior to the time specified for receipt of offers.
    (c) Envelopes containing offers and any material related to 
offers shall be plainly marked on the outside; ``RE: NS #________ 
FOR SALE OF PETROLEUM FROM STRATEGIC PETROLEUM RESERVE. OFFERS ARE 
DUE (insert time of opening), LOCAL NEW ORLEANS, LA TIME ON (insert 
date of opening). MAIL ROOM MUST MARK DATE AND TIME OF RECEIPT ON 
FACE OF THE ENVELOPE.'' Envelopes containing modified offers or any 
material related to supplements or modifications of offers, shall be 
plainly marked on the outside: ``RE: NS #________ FOR SALE OF 
PETROLEUM FROM STRATEGIC PETROLEUM RESERVE. OFFER MODIFICATION. MAIL 
ROOM MUST MARK DATE AND TIME OF RECEIPT ON FACE OF THE ENVELOPE.''
    (d) All envelopes shall be marked with the full name and return 
address of the offeror.

[[Page 17267]]

    (e) Offers being sent by mail and modifications being sent by 
hand delivery, mail, telegram, or electronic means must be received 
at the address specified in the NS. Offers or modifications 
submitted by electronic means must contain the required signatures. 
If requested by the contracting officer, the offeror agrees to 
promptly submit the complete original signed offer/modification.
    (f) If the offeror chooses to transmit an offer/modification by 
electronic means, the Government will not be responsible for any 
failure attributable to the transmission or receipt of the offer/
modification, including, but not limited to, the following:
    (1) Receipt of garbled or incomplete offer/modification,
    (2) Availability or condition of the receiving equipment,
    (3) Incompatibility between the sending and receiving equipment,
    (4) Delay in transmission or receipt of the offer/modification,
    (5) Failure of the offeror to properly identify the offer/
modification,
    (6) Illegibility of offer/modification
    (7) Security of the data contained in the offer/modification.
    (g) Handcarried offers brought during normal business hours on 
the day set for receipt of offers, or any day prior to that day, 
shall be taken by the offeror to the place specified in the NS. This 
includes mail being delivered by a delivery service.
    (h) Public opening of offers is not anticipated unless otherwise 
indicated in the NS. DOE will not release to the general public the 
identities of the offerors, or their offer quantities and prices, 
until the Apparently Successful Offerors have been determined. DOE 
will inform simultaneously all offerors and other interested parties 
of the successful and unsuccessful offerors and their offer data by 
means of a public ``offer posting.'' The offer posting will normally 
occur within a week of receipt of offers and will provide all 
interested parties access to offer data as well as any DOE changes 
in the petroleum quantities or quality to be sold. DOE will announce 
the date, time, and location of the offer posting as soon as 
practicable.

B.9  Acknowledgment of Amendments to a Notice of Sale

    When an amendment to a NS requires acknowledgment of receipt by 
an offeror, it must be acknowledged either by (a) signing and 
returning the amendment; (b) identifying the amendment number and 
date in the space provided for this purpose on SPRPMO Form 33S 
(Exhibit C); or (c) letter, telegram, or electronic means as 
specified in the NS, sent to the address specified in the NS. Such 
acknowledgment must be received prior to the time specified for 
receipt of offers.

B.10  Late Offers, Modifications of Offers, and Withdrawal of 
Offers

    (a) Any offer received at the office designated in the NS after 
the date and time specified for receipt will be considered only if 
it is received before award is made and only under the following 
conditions:
    (1) It was sent by registered or certified mail not later than 
the fifth calendar day prior to the date specified for the receipt 
of offers (e.g., an offer submitted in response to a NS requiring 
receipt of offers by the 20th of the month must have been mailed by 
the 15th or earlier); or,
    (2) It was sent by U.S. Postal Service Express Mail Next Day 
Service-Post Office to Addressee, or established commercial express 
service, not later than the close of business at the place of 
mailing 2 working days prior to the date specified for receipt of 
offers. The working days excludes weekends and U.S. Federal 
holidays; or,
    (3) It was sent by mail, express mail, telegram or electronic 
means as specified in the NS, and it is determined by the 
Contracting Officer that the late receipt was due solely to 
mishandling by the SPR/PMO after receipt at the address specified in 
the NS; or
    (4) It is the only offer received.
    (b) Any modification or withdrawal of an offer is subject to the 
same conditions as in paragraph (a) of this provision, except that 
it shall be mailed not less than the third calendar day prior to the 
date specified for receipt of offers. An offer may also be withdrawn 
in person by an offeror or its authorized representative, provided 
the representative's identity is made known and the representative 
signs a receipt for the offer, but only if the withdrawal is made 
prior to the time set for receipt of offers.
    (c) The only acceptable evidence to establish:
    (1) The date of mailing of a late offer, modification, or 
withdrawal sent either by registered or certified mail is the U.S. 
Postal Service postmark on either (i) the envelope or wrapper, or 
(ii) the original receipt from the U.S. Postal Service. If neither 
postmark shows a legible date, the offer, modification or withdrawal 
shall be deemed to have been mailed late. Postmark means a printed, 
stamped, or otherwise placed impression, exclusive of a postage 
meter machine impression, that is readily identifiable without 
further action as having been supplied and affixed on the date of 
mailing by employees of the U.S. Postal Service. Therefore, offerors 
should request the postal clerk to place a hand cancellation 
``bull's-eye'' postmark on both the receipt and the envelope or 
wrapper.
    (2) The date of mailing of a late offer, modification, or 
withdrawal sent by Express Mail Next Day Service-Post Office to 
Addressee or established commercial service is the date entered by 
the receiving clerk on the ``Express Mail Next Day Service-Post 
Office to Addressee'' or other comparable service label and the 
postmark on both the envelope or wrapper and on the original receipt 
from the U.S. Postal Service or commercial service.
    (3) The time of receipt at the address specified in the NS is 
the time/date stamp at such address on the offer's wrapper or other 
documentary evidence of receipt maintained at the place of receipt.
    (d) Notwithstanding paragraphs (a) and (b) of this provision, a 
late modification of an otherwise successful offer that makes its 
terms more favorable to the Government will be considered at any 
time it is received and may be accepted.

B.11  Offer Guarantee

    (a) Each offeror must submit an acceptable offer guarantee for 
each offer submitted. Each offer guarantee must be received at the 
place specified for receipt of offers no later than the time and 
date set for receipt of offers.
    (b) An offeror's failure to submit a timely, acceptable 
guarantee will result in rejection of its offer.
    (c) The amount of each offer guarantee is $10 million or 5 
percent of the maximum potential contract amount, whichever is less. 
The maximum potential contract amount is the sum of the products 
determined by multiplying the offer's maximum purchase quantity for 
each master line item, times the highest offer prices that the 
offeror would have to pay for that master line item if the offer 
were to be successful. To assist in this calculation, instructions 
and a worksheet are available at Exhibit J. Submission of the 
worksheet is not desired.
    (d) Each offeror must submit one of the following types of offer 
guarantees with each offer:
    (1) A cash wire deposit or electronic funds transfer to the 
account of the U.S. Treasury in accordance with Provision No. C.23, 
all attendant costs to be borne by the offeror; or
    (2) A irrevocable standby letter of credit from a U.S. 
depository institution containing the substantive provisions set out 
in Exhibit F, Offer Standby Letter of Credit, all letter of credit 
costs to be borne by the offeror. If the letter or credit contains 
any provisions at variance with Exhibit F or fails to include any 
provisions contained in Exhibit F, nonconforming provisions must be 
deleted and missing substantive provisions must be added or the 
letter of credit will not be accepted. The depository institution 
must be located in and authorized to do business in any state of the 
United States or the District of Columbia, and authorized to issue 
letters of credit by the banking laws of the United States or any 
state of the United States or the District of Columbia. The original 
of the letter of credit must be sent to the Contracting Officer. The 
issuing bank must provide documentation indicating that the person 
signing the letter of credit is authorized to do so, in the form of 
corporate minutes, the Authorized Signature List, or the General 
Resolution of Signature Authority.
    (e) If the offeror elects to make an offer guarantee by cash 
wire deposit or electronic funds transfer, the Sales Offer Form 
shall be annotated with the statement ``Offer guarantee made by cash 
wire deposit (or electronic funds transfer.)'' The amount 
transferred shall be annotated on the bottom of the first page of 
the offer form. In addition, the information identified in Exhibit 
I, Instruction Guide for Return of Offer Guarantees by Electronic 
Transfer or Treasury Check, shall be provided with the offer.
    (f) If the offeror or bank forwards the letter of credit 
separately from the offer, the envelope shall clearly be marked 
``Offer Standby Letter of Credit (Name of Company)'' and also marked 
in accordance with Provision No. B.8(c). Offerors are cautioned that 
if they provide more than one Offer Standby Letter of Credit for 
multiple offers and, due to the absence of clear information

[[Page 17268]]

from the offeror, the Government is unable to identify which Letter 
of Credit applies to which offer, the Contracting Officer in his 
sole discretion may assign the Letters of Credit to specific offers.
    (g) The offeror shall be liable for any amount lost by DOE due 
to the difference between the offer and the resale price, and for 
any additional resale costs incurred by DOE in the event that the 
offeror:
    (1) Withdraws its offer within l0 days following the time set 
for receipt of offers;
    (2) Withdraws its offer after having agreed to extend its 
acceptance period; or
    (3) Having received a notification of ASO, fails to furnish an 
acceptable payment and performance letter of credit (see Provision 
C.21) within the time limit specified by the Contracting Officer.
    The offer guarantee shall be used toward offsetting such price 
difference or additional resale costs. Use of the offer guarantee 
for such recovery shall not preclude recovery by DOE of damages in 
excess of the amount of the offer guarantee caused by such failure 
of the offeror.
    (h) Letters of credit furnished as offer guarantees must be 
valid for at least 60 calendar days after the date set for the 
receipt of offers.
    (i) Offer guarantees (except letters of credit) will be returned 
to an unsuccessful offeror 5 business days after expiration of the 
offeror's acceptance period, and, except as provided in paragraph 
(k) of this provision, to a successful offeror upon receipt of a 
satisfactory payment and performance letter of credit. Cash offer 
guarantees will be subsequently returned to unsuccessful offerors 
via Treasury check or electronic transfer in accordance with the 
information delineated in Exhibit I. Letters of credit will be 
returned only upon request.
    (j) Where the offer guarantee was a cash wire deposit or 
electronic funds transfer, a successful offeror may apply it toward 
the first invoice for delivery under the resultant contract.
    (k) If an offeror defaults on its offer, DOE will hold the offer 
guarantee so that damages can be assessed against it.

B.12  Explanation Requests From Offerors

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

B.13  Currency for Offers

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

B.14  Language of Offers and Contracts

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

B.15  Proprietary Data

    If any information submitted in connection with a sale is 
considered proprietary, that information should be so marked, and an 
explanation provided as to the reason such data should be considered 
proprietary. Any final decision as to whether the material so marked 
is proprietary will be made by DOE. DOE's Freedom of Information Act 
regulations governing the release of proprietary data shall apply.

B.16  SPR Crude Oil Streams and Delivery Points

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

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

    (b) The NS may change delivery points and it may also include 
additional terminals, temporary storage facilities or systems 
utilized in connection with petroleum in transit to the SPR. 
Alternatively, DOE may provide for transportation to the purchaser's 
facility, for example, when the petroleum is in transit to the SPR 
at time of sale.
    (c) The NS may contain additional information supplementing 
Exhibit E, SPR Delivery Point Data.

B.17  Notice of Sale Line Item Schedule--Petroleum Quantity, 
Quality, and Delivery Method

    (a) Unless the NS provides otherwise, the possible master line 
items (MLI) that may be offered are as provided in Exhibit A, SPR 
Sales Offer Form. Currently, there are nine MLIs in Exhibit A, one 
for each of the nine crude oil streams that the SPR has in storage. 
The NS may not offer all the possible MLIs.
    (b) Each MLI contains several delivery line items (DLIs), each 
of which specifies an available delivery method and the nominal 
delivery period. Offerors are cautioned that the NS may alter the 
period of time covered by each DLI. This is most likely to occur in 
the first sales period of a drawdown if the period of sale does not 
correspond to a calendar month. The NS will specify which DLIs are 
offered for each MLI.
    (1) DLI-A covers petroleum to be transported by pipeline, either 
common carrier or local. The nominal delivery period is one month.
    (2) DLI-B, DLI-C and DLI-D cover petroleum to be transported by 
tankships: DLI-B, covering tankships to be loaded from the 1st 
through the 10th of the month; DLI-C, tankships to be loaded from 
the 11th through the 20th; and DLI-D, tankships to be loaded from 
the 21st through the last day of the month.
    (3) DLI-E, DLI-F and DLI-G cover petroleum to be transported by 
barges (Caution: These DLIs are currently only applicable to 
deliveries of West Hackberry and Big Hill Sweet and Sour crude oil 
streams from Sun Docks); DLI-E, covering barges to be loaded from 
the 1st through the 10th of the month; DLI-F, barges to be loaded 
from the 11th through the 20th; and DLI-G, barges to be loaded from 
the 21st through the last day of the month.
    (4) Where the storage site is connected to more than one 
terminal or pipeline, additional DLIs will be offered. The 
additional DLIs will include DLI-H, covering petroleum to be 
transported by pipeline over the period of a month; DLI-I thru DLI-
K, covering tankships, etc. The Notice of Sale

[[Page 17269]]

will specify any additional DLIs which may be applicable.
    (c) The NS will state the total estimated number of barrels to 
be sold on each MLI. An offeror may offer to buy all or part of the 
petroleum offered on an MLI. In making awards, the Contracting 
Officer shall attempt to achieve award of the exact quantities 
offered by the NS, but may sell a quantity of petroleum in excess of 
the quantity offered for sale on a particular MLI in order to match 
the DLI offers received. In addition, the Contracting Officer may 
reduce the MLI quantity available for award by any amount and reject 
otherwise acceptable offers, if he determines, in his sole 
discretion after consideration of the offers received on all of the 
MLIs, that award of those quantities is not in the best interest of 
the Government because the prices offered for them are not 
reasonable, or that, in light of market conditions after offers are 
received, a lesser quantity than that offered should be sold.
    (d) The NS will specify a minimum contract quantity for each 
DLI. To be responsive, an offer on a DLI must be for at least that 
quantity.
    (e) The NS will specify the maximum quantity that could be sold 
on each of the DLIs. The maximum quantity is not an indication of 
the amount of petroleum that, in fact, will be sold on that DLI. 
Rather, it represents DOE's best estimate of the maximum amount of 
the particular SPR crude oil stream that can be moved by that 
transportation system over the delivery period. The total DOE 
estimated DLI maximums may exceed the total number of barrels to be 
sold on that MLI, as the NS DLI estimates represent estimated 
transportation capacity, not the amount of petroleum offered for 
sale.
    (f) The NS will not specify what portion of the petroleum that 
DOE offers on a MLI will, in fact, be sold on any given DLI. Rather, 
the highest priced offers received on the MLI will determine the 
DLIs against which the offered petroleum is sold.
    (g) DOE will not sell petroleum on a DLI in excess of the DLI 
maximum; however, DOE reserves the right to revise its estimates at 
any time and to award or modify contracts in accordance with its 
revised estimates. Offerors are cautioned that: DOE cannot guarantee 
that such transportation capacity is available; offerors should 
undertake their own analyses of available transportation capacity; 
and each purchaser is wholly responsible for arranging all 
transportation other than terminal arrangements at the terminals 
listed in Provision No. B.16, which shall be made in accordance with 
Provision No. C.5. A purchaser against one DLI cannot change a 
transportation mode without prior written permission from DOE, 
although such permission will be given whenever possible, in 
accordance with Provision No. C.6.
    (h) Exhibit D, SPR Crude Oil Stream Characteristics, provides an 
example of the assay format used for the SPR crude oil streams. The 
NS will provide, to the maximum extent practicable, the latest data 
on each stream offered.

B.18  Line Item Information To Be Provided in the Offer

    (a) Each offeror, if determined to be an ASO on a DLI, agrees to 
enter into a contract under the terms of its offer for the purchase 
of petroleum in the offer and to take delivery of that petroleum 
(plus or minus 10 percent as provided for in Provision No. C.20) in 
accordance with the terms of that contract.
    (b) An offeror may submit an offer which is for more than one 
MLI. However, offerors are cautioned that alternate offers on 
different MLIs are not permitted. For example, an offeror may offer 
to purchase 1,000,000 barrels of SPR West Hackberry Sweet and 
1,000,000 barrels of SPR West Hackberry Sour, but may not offer to 
purchase, in the alternative, either 1,000,000 barrels of sweet or 
1,000,000 barrels of sour.
    (c) An offeror may submit multiple offers. However, separate 
offer forms and offer guarantees must be submitted and each offer 
will be evaluated on an individual basis.
    (d) The following information will be provided to DOE by the 
offeror on the form in Exhibit A or other forms as required by the 
NS:
    (1) MLI quantity. (``MAXQ'' on the Exhibit A offer form) The 
offer shall state the maximum quantity of each crude oil stream that 
the offeror is willing to buy.
    (2) DLI quantity. (``DESQ'') The offer shall state the number of 
barrels that the offeror will accept on each DLI, i.e., by the 
delivery mode and during the delivery period specified. The quantity 
stated on a single DLI shall not exceed the MAXQ for the MLI. The 
offeror shall designate a quantity on at least one DLI for the MLI, 
but may designate quantities on more than one DLI. If the offeror is 
willing to accept alternate DLIs, the total of its designated DLI 
quantities would exceed its maximum MLI quantity; otherwise, the 
total of its designated DLI quantities should equal its maximum MLI 
quantity.
    (3) DLI unit price (``UP$$'') and total price. The offer shall 
state the price per barrel for each DLI for which the offeror has 
designated a desired quantity, as well as the total price (quantity 
times unit price). Where offers have indicated quantities on more 
than one DLI with a different price on each, DOE will award the 
highest priced DLI first. If the offeror has the same price for two 
or more DLIs, it may indicate its first choice, second choice, etc., 
for award of those items; if the offeror does not indicate a 
preference, or indicates the same preference for more than one DLI, 
DOE may select the DLIs to be awarded at its discretion. Prices may 
be stated in hundredths of a cent ($0.0001). DOE shall drop from the 
offer and not consider any numbers of less than one one-hundredth of 
a cent.
    (4) Minimum DLI quantity acceptable. (``MINQ'') The offeror must 
choose whether to accept only the stated DLI quantity (DESQ) or, in 
the alternative, to accept any quantity awarded between the offer's 
stated DLI quantity and the minimum contract quantity for the DLI 
(indicated by the ``N'' and ``Y'' blocks respectively under ``MINQ'' 
on the offer form). However, DOE will award less than the DESQ only 
if the quantity available to be awarded is less than the DESQ. If 
the offer fails to indicate the offeror's choice, the offer will be 
evaluated as though the offeror has indicated willingness to accept 
the minimum contract quantity.
    (5) Any other data required by the NS.

B.19  Mistake in Offer

    (a) After opening and recording offers, the Contracting Officer 
shall examine all offers for mistakes. If the Contracting Officer 
discovers any price discrepancies or quantity discrepancies, he may 
obtain from the offeror oral or written verification of the offer 
actually intended, but in any event, he shall proceed with offer 
evaluation applying the following procedures:
    (1) Price discrepancy: An offer for a DLI must contain the unit 
price per barrel being offered, the desired quantity of barrels to 
which the unit price applies, and an extension price which is the 
total of the quantity desired multiplied by the unit price offered. 
If there is a discrepancy between the unit price and the extension 
price, the unit price will govern and be recorded as the offer, 
unless it is clearly apparent on the face of the offer that there 
has been a clerical error, in which case the Contracting Officer may 
correct the offer.
    (2) Quantity discrepancy: In case of conflict between the 
maximum MLI quantity and the stated DLI quantities (for example, if 
a single stated DLI quantity exceeds the corresponding maximum MLI 
quantity), the lesser quantity will govern in the evaluation of the 
offer. In the event that the offer fails to specify a maximum MLI 
quantity, the offer will be evaluated as though the largest stated 
DLI quantity is the offer's maximum MLI quantity.
    (b) In cases where the Contracting Officer has reason to believe 
a mistake not covered by the procedures set forth in paragraph (a) 
of this provision may have been made, he shall request from the 
offeror a verification of the offer, calling attention to the 
suspected mistake. The Contracting Officer may telephone the offeror 
and confirm the request by electronic means. The Contracting Officer 
may set a limit of as little as 6 hours for telephone response, with 
any required written documentation to be received within as little 
as 2 business days. If no response is received, the Contracting 
Officer may determine that no error exists and proceed with offer 
evaluation.
    (c) The Head of the Contracting Activity will make 
administrative determinations described in paragraphs (c)(1) and (2) 
of this provision if an offeror alleges a mistake after opening of 
offers and before award.
    (1) The Head of the Contracting Activity may refuse to permit 
the offeror to withdraw an offer, but permit correction of the offer 
if clear and convincing evidence establishes both the existence of a 
mistake and the offer actually intended. However, if such correction 
would result in displacing one or more higher acceptable offers, the 
Head of the Contracting Activity shall not so determine unless the 
existence of the mistake and the offer actually intended are 
ascertainable substantially from the NS and offer itself.
    (2) The Head of the Contracting Activity may determine that an 
offeror shall be

[[Page 17270]]

permitted to withdraw an offer in whole, or in part if only part of 
the offer is affected, without penalty under the offer guarantee, 
where the offeror requests permission to do so and clear and 
convincing evidence establishes the existence of a mistake, but not 
the offer actually intended.
    (d) In all cases where the offeror is allowed to make verbal 
corrections to the original offer, confirmation of these corrections 
must be received in writing within the time set by the Contracting 
Officer or the original offer will stand as submitted.

B.20  Evaluation of Offers

    (a) The Contracting Officer will be the determining official as 
to whether an offer is responsive to the SSPs and the NS. DOE 
reserves the right to reject any or all offers and to waive minor 
informalities or irregularities in offers received.
    (b) A minor informality or irregularity in an offer is an 
inconsequential defect the waiver or correction of which would not 
be prejudicial to other offerors. Such a defect or variation from 
the strict requirements of the NS is inconsequential when its 
significance as to price, quantity, quality or delivery is 
negligible.

B.21  Procedures for Evaluation of Offers

    (a) Award on each DLI will be made to the responsible offerors 
that submit the highest priced offers responsive to the SSPs and the 
NS and that have provided the required payment and performance 
guarantee as required by Provision No. C.21.
    (b) DOE will array all offers on an MLI from highest price to 
lowest price for award evaluation regardless of DLI. However, DOE 
will award against the DLIs and will not award a greater quantity on 
a DLI than DOE's estimate (which is subject to change at any time) 
of the maximum quantity that can be moved by the delivery method. 
Selection of the apparently successful offers involves the following 
steps:
    (1) Any offers below the minimum acceptable price, if any 
minimum price has been established for the sale, will be rejected as 
nonresponsive.
    (2) All offers on each MLI will be arrayed from highest price to 
lowest price.
    (3) The highest priced offers will be reviewed for 
responsiveness to the NS.
    (4) In the event the highest priced offer does not take all the 
petroleum available on the MLI, sequentially, the next highest 
priced offer will be selected until all of the petroleum offered on 
the MLI is awarded or there are no more acceptable offers. In the 
event that acceptance of an offer against an MLI or a DLI would 
result in the sale of more petroleum on an MLI than DOE has offered 
or the sale of more petroleum on a DLI than DOE estimates can be 
delivered by the specified delivery method, DOE will not award the 
full amount of the offer, but rather the remaining MLI quantity or 
DLI capacity, provided such portion exceeds DOE's minimum contract 
quantity. In the event that the quantity remaining is less than the 
offeror is willing to accept, but more than DOE's minimum contract 
quantity, the Contracting Officer shall proceed to the next highest 
priced offer.
    (5) In the event of tied offers and an insufficient remaining 
quantity available on the MLI or insufficient remaining capacity on 
the DLI to fully award all tied offers, the Contracting Officer 
shall apply an objective random methodology for allocating the 
remaining MLI quantity or DLI capacity among the tied offers, taking 
into consideration the quantity the offeror is willing to accept as 
indicated in its offer. When making this allocation, the Contracting 
Officer in his sole discretion may do one or more of the following:
    (i) Make an additional quantity or capacity available;
    (ii) Contact an offeror to determine whether alternative 
delivery arrangements can be made; or
    (iii) Not award all or part of the remaining quantity of 
petroleum.
    (6) The Contracting Officer may reduce the MLI quantity 
available for award by any amount and reject otherwise acceptable 
offers if in his sole discretion he determines, after consideration 
of the offers received on all of the MLIs, that award of those 
quantities is not in the best interest of the Government because the 
prices offered for them are not reasonable; or if the Government 
determines, in light of market conditions after offers are received, 
to sell less than the overall quantity of SPR petroleum offered for 
sale.
    (7) Determinations of ASO responsibility will be made by the 
Contracting Officer before each award. All ASOs will be notified and 
advised to provide to the Contracting Officer, within five business 
days or such other longer time as the Contracting Officer shall 
determine, a letter of credit (See Exhibit G, Payment and 
Performance Letter of Credit) as specified in Provision No. C.21, 
all letter of credit costs to be borne by the purchaser.
    (8) Compliance with required payment and performance guarantees 
will effectively assure a finding of responsibility of offerors, 
except where: (i) an offeror is on either DOE's or the Federal 
Government's list of debarred, ineligible and suspended bidders; or 
(ii) evidence, with respect to an offeror, comes to the attention of 
the Contracting Officer of conduct or activity that represents a 
violation of law or regulation (including an Executive Order); or 
(iii) evidence is brought to the attention of the Contracting 
Officer of past activity or conduct of an offeror that shows a lack 
of integrity (including actions inimical to the welfare of the 
United States) or willingness to perform, so as to substantially 
diminish the Contracting Officer's confidence in the offeror's 
performance under the proposed contract.

B.22  Financial Statements and Other Information

    (a) As indicated in Provision No. B.21(b)(8) above, compliance 
with the required payment and performance guarantee will in most 
instances effectively assure a finding of responsibility. Therefore, 
DOE does not intend to ask for financial information from all 
offerors. However, after receipt of offers, but prior to making 
award, DOE reserves the right to ask for the audited financial 
statements for an offeror's most recent fiscal year and unaudited 
financial statements for any subsequent quarters. These financial 
statements must include a balance sheet and profit and loss 
statement for each period covered thereby. A certification by a 
principal accounting officer that there have been no material 
changes in financial condition since the date of the audited 
statements, and that these present the true financial condition as 
of the date of the offer, shall accompany the statements. If there 
has been a change, the amount and nature of the change must be 
specified and explained in the unaudited statements and a principal 
accounting officer shall certify that they are accurate. The 
Contracting Officer shall set a deadline for receipt of this 
information.
    (b) DOE also reserves the right to require the submission of 
information from the offeror regarding its plans for use of the 
petroleum, the status of requests for export licenses, plans for 
complying with the Jones Act, and any other information relevant to 
the performance of the contract. The Contracting Officer shall set a 
deadline for receipt of this information.

B.23  Resolicitation Procedures on Unsold Petroleum

    (a) In the event that petroleum offered on an MLI remains unsold 
after evaluation of all offers, the Contracting Officer, at his 
option, may issue an amendment to the NS, resoliciting offers from 
all interested parties. DOE reserves the right to alter the MLIs 
and/or offer different MLIs in the resolicitation.
    (b) In the event that for any reason petroleum that has been 
awarded or allotted for award becomes available to DOE for resale, 
the following procedures will apply:
    (1) If priced offers remain valid in accordance with Provision 
No. B.24, the petroleum may go to the next highest ranked offer.
    (2) If offers have expired in accordance with Provision No. 
B.24, the Contracting Officer at his option may offer the petroleum 
to the highest offeror for that MLI. The pertinent offeror may, at 
its option, accept or reject that petroleum at the price it 
originally offered. If that offeror rejects the petroleum, it may be 
offered to the next highest offeror. This process may continue until 
all the remaining petroleum has been allotted for award.
    (3) If the petroleum is not then resold, the Contracting Officer 
may at his option proceed to amend the NS to resolicit offers for 
that petroleum or add the petroleum to the next sales cycle.

B.24  Offeror's Certification of Acceptance Period

    (a) By submission of an offer, the offeror certifies that its 
priced offer will remain valid for 10 calendar days after the date 
set for the receipt of offers, and further that the successful line 
items of its offer will remain valid for an additional 30 calendar 
days should it receive a notification of ASO either by telephone or 
in writing during the initial 10-day period.
    (b) By mutual agreement of DOE and the offeror, an individual 
offeror's acceptance period may be extended for a longer period.

[[Page 17271]]

B.25  Notification of Apparently Successful Offeror

    The following information concerning its offer will be provided 
to the apparently successful offeror by DOE in the notification of 
ASO:
    (a) Identification of SPR crude oil streams to be awarded;
    (b) Total quantity to be awarded on each MLI and on each DLI;
    (c) Price in U.S. dollars per barrel for each DLI;
    (d) Extended total price offer for each DLI;
    (e) Provisional contract number;
    (f) Any other data necessary.

B.26  Contract Documents

    If an offeror is successful, DOE will make award using an NA 
signed by the Contracting Officer. The NA will identify the items, 
quantities, prices and delivery method which DOE is accepting. 
Attached to the NA will be the NS and the successful offer. 
Provisions of the SSPs will be made applicable through incorporation 
by reference in the NS. The Contracting Officer also shall provide 
the purchaser with an information copy of the current SSPs as 
published in the Federal Register. DOE may accept the offeror's 
offer by an electronic notice and the contract award shall be 
effective upon issuance of such notice. The electronic notice will 
be followed by a mailing of full documentation as described above.

B.27  Purchaser's Representative

    As part of its offer, each offeror shall designate an agent as a 
point of contact for any telephone calls or correspondence from the 
Contracting Officer. Any such agent shall have a U.S. address and 
telephone number and must be conversant in English.

B.28  Procedures for Selling to Other U.S. Government Agencies

    (a) If a U.S. Government agency submits an offer for petroleum 
in a price competitive sale, that offer will be arrayed for award 
consideration in accordance with Provision No. B.21. If a U.S. 
Government agency is an ASO, award and payment will be made 
exclusively in accordance with statutory and regulatory requirements 
governing transactions between agencies, and the U.S. Government 
agency will be responsible for complying with these requirements 
within the time limits set by the Contracting Officer.
    (b) U.S. Government agencies are exempt from all guarantee 
requirements, but must make all necessary arrangements to accept 
delivery of and transport SPR petroleum as set out in Provision No. 
C.1. Failure by a U.S. Government agency to comply with any of the 
requirements of these SSPs shall not provide a basis for challenging 
a contract award to that agency.

Section C--Sales Contract Provisions

C.1  Delivery of SPR Petroleum

    (a) The purchaser, at its expense, shall make all necessary 
arrangements to accept delivery of and transport the SPR petroleum, 
except for terminal arrangements which shall be coordinated with the 
SPR/PMO. The DOE will deliver and the purchaser will accept the 
petroleum at delivery points listed in the NS. The purchaser also 
shall be responsible for meeting any delivery requirements imposed 
at those points including complying with the rules, regulations, and 
procedures contained in applicable port/terminal manuals, pipeline 
tariffs or other applicable documents.
    (b) For petroleum in the SPR's permanent storage sites, DOE 
shall provide, at no cost to the purchaser, transportation by 
pipeline from the SPR to the supporting SPR distribution terminal 
facility specified for the MLI and, for vessel loadings, a safe 
berth and loading facilities sufficient to deliver petroleum to the 
vessel's permanent hose connection. The purchaser agrees to assume 
responsibility for, to pay for, and to indemnify and hold DOE 
harmless for any other costs associated with terminal, port, vessel 
and pipeline services necessary to receive and transport the 
petroleum, including but not limited to demurrage charges assessed 
by the terminal, ballast and oily waste reception services other 
than those provided by DOE or its agent, mooring and line-handling 
services, tank storage charges and port charges incurred in the 
delivery of SPR petroleum to the purchaser. The purchaser also 
agrees to assume responsibility for, to pay for and to indemnify and 
hold DOE harmless for any liability, including consequential or 
other damages, incurred or occasioned by the purchaser, its agent, 
subcontractor at any tier, assignee or any subsequent purchaser, in 
connection with movement of petroleum sold under a contract 
incorporating this provision.

C.2  Compliance With the ``Jones Act'' and the U.S. Export Control 
Laws

    Failure to comply with the ``Jones Act,'' 46 U.S.C. 883, 
regarding use of U.S.-flag vessels in the transportation of oil 
between points within the United States, and with any applicable 
U.S. export control laws affecting the export of SPR petroleum will 
be considered to be a failure to comply with the terms of any 
contract containing these SSPs and may result in termination for 
default in accordance with Provision No. C.25. Purchasers who have 
failed to comply with the ``Jones Act'' or the export control laws 
in SPR sales may be found to be non-responsible in the evaluation of 
offers in subsequent sales under Provision No. B.21 of the SSPs. 
Those purchasers may also be subject to proceedings to make them 
ineligible for future awards in accordance with l0 CFR Part 625.

C.3  Storage of SPR Petroleum

    Continued storage of purchasers' oil in the SPR facilities after 
the end of the contract delivery periods is not permitted, unless 
specifically authorized by the Secretary of Energy and provided for 
in the NS. Allowing petroleum to remain in storage as the result of 
failure to complete delivery arrangements may result in assessment 
of liquidated damages under Provision Nos. C.25 through C.27 unless 
such failure is excused pursuant to those provisions.

C.4  Environmental Compliance

    (a) SPR offerors must ensure that vessels used to transport SPR 
oil comply with all applicable statutes, including the Ports and 
Waterways Safety Act of 1972; the Port and Tanker Safety of 1972; 
the Act to Prevent Pollution from Ships of 1980 (implements Annexes 
I, II, and V of MARPOL 73/78); and the Oil Pollution Act of 1990. 
Annex I, II, and V of MARPOL 73/78 prescribe procedures for the 
prevention of pollution by oil, noxious liquid substances, and 
garbage, respectively. Offerors must also ensure that vessels used 
to transport SPR oil comply with all applicable regulations, 
including the following:

------------------------------------------------------------------------
         CFR citation                  Title               Purpose      
------------------------------------------------------------------------
33 CFR 151...................  Vessels Carrying      Implements the Act 
                                Oil, Noxious Liquid   to Prevent        
                                Substances,           Pollution from    
                                Garbage, Municipal    Ships, as amended 
                                or Commercial         and Annexes I, II,
                                Waste, and Ballast    and V of the      
                                Water.                International     
                                                      Convention for the
                                                      Prevention of     
                                                      Pollution from    
                                                      Ships, as modified
                                                      by MARPOL 73/78.  
33 CFR 153...................  Control of Pollution  Prescribes         
                                by Oil and            regulations       
                                Hazardous             concerning        
                                Substances,           notification of   
                                Discharge Removal.    the discharge of  
                                                      oil and hazardous 
                                                      substances,       
                                                      procedures for    
                                                      removing          
                                                      discharges of oil,
                                                      and the costs     
                                                      associated with   
                                                      removing          
                                                      discharges of oil.
33 CFR 155...................  Oil or Hazardous      Establishes        
                                Material Pollution    regulations       
                                Prevention            concerning vessel 
                                Regulations for       equipment and     
                                Vessels.              transfer          
                                                      procedures,       
                                                      including         
                                                      personnel,        
                                                      equipment, and    
                                                      records.          
33 CFR 157...................  Rules for the         Establishes        
                                Protection of the     regulations       
                                Marine Environment    governing the     
                                Relating to Tank      design and        
                                Vessels Carrying      installation of   
                                Oil in Bulk.          equipment for     
                                                      vessels and the   
                                                      operation of      
                                                      vessels.          

[[Page 17272]]

                                                                        
33 CFR 159...................  Marine Sanitation     Prescribes         
                                Devices.              regulations       
                                                      governing the     
                                                      design and        
                                                      construction of   
                                                      marine sanitation 
                                                      devices and       
                                                      procedures for    
                                                      certifying that   
                                                      marine sanitation 
                                                      devices are       
                                                      consistent with   
                                                      EPA regulations   
                                                      promulgated under 
                                                      section 312 of    
                                                      FWPCA, to         
                                                      eliminate the     
                                                      discharge of      
                                                      untreated sewage  
                                                      from vessels.     
46 CFR Chapter I, Subchapter   Tank Vessels........  Sets out design,   
 D.                                                   equipment, and    
                                                      operations        
                                                      requirements      
                                                      relating to       
                                                      pollution         
                                                      prevention from   
                                                      tank vessels.     
------------------------------------------------------------------------

    (b) To transport SPR oil, a purchaser or the purchaser's 
subcontractors must use only those tankships for which the vessel's 
owner, operator, or demise charter has made a showing of financial 
responsibility under 33 CFR part 138, Financial Responsibility for 
Water Pollution (Vessels).
    (c) Failure of the purchaser or the purchaser's subcontractors 
to comply with all applicable statutes and regulations in the 
transportation of SPR petroleum will be considered a failure to 
comply with the terms of any contract containing these SSPs, and may 
result in termination for default, unless, in accordance with 
Provision No. C.25, such failure was beyond the control and without 
the fault or negligence of the purchaser, its affiliates, or 
subcontractors.

C.5  Delivery and Transportation Scheduling

    (a) Unless otherwise instructed in the notification of ASO, each 
purchaser shall submit a proposed vessel lifting program and/or 
pipeline delivery schedule to the SPR/PMO by hand-delivery, express 
mail, or electronic transfer, no later than the fifteenth day prior 
to the earliest delivery date offered by the NS. The vessel lifting 
program shall specify the requested three-day loading window for 
each tanker and the quantity to be lifted. The pipeline schedule 
will specify the five day shipment ranges (i.e., day 1-5, 6-10, 11-
15, etc.) for which deliveries are to be tendered to the pipeline 
and the quantity to be tendered for each date. In the event 
conflicting requests are received, preference will be given to such 
requests in descending order, the highest offered price first. The 
SPR/PMO will respond to each purchaser no later than the tenth day 
prior to the start of deliveries, either confirming the schedule as 
originally submitted or proposing alterations. The purchaser is 
deemed to have received a notice by hand delivery, express mail, or 
electronic transfer on the day after dispatch. The purchaser shall 
be deemed to have agreed to those alterations unless the purchaser 
requests the SPR/PMO to reconsider within two days after receipt of 
such alterations. The SPR/PMO will use its best efforts to 
accommodate such requests, but its decision following any such 
reconsideration shall be final and binding.
    (b) Electronic transfer information, as well as the address to 
which express mailed and hand-carried proposed schedules should be 
delivered, will be provided in the notification of ASO.
    (c) In order to expedite the scheduling process, at the time of 
submission of each vessel lifting program or pipeline delivery 
schedule, each purchaser shall provide the DOE Contracting Officer's 
Representative with a written notice of the intended destination for 
each cargo scheduled, if such destination is known at that time. For 
pipeline deliveries, the purchaser shall also include, if known, the 
name of each pipeline in the routing to the final destination.
    (d) Notwithstanding paragraph (a) of this provision, ASOs and 
purchasers may request early deliveries, i.e., deliveries commencing 
prior to the contractual delivery period. DOE will use its best 
efforts to honor such requests, unless unacceptable costs might be 
incurred or SPR schedules might be adversely affected or other 
circumstances make it unreasonable to honor such requests. DOE's 
decision following any such consideration for a change shall be 
final and binding. Requests accepted by DOE will be handled on a 
first-come, first-served basis, except that where conflicting 
requests are received on the same day, the highest-priced offer will 
be given preference. Requests that include both a change in delivery 
method and an early delivery date may also be accommodated subject 
to Provision No. C.6. DOE may not be able to confirm requests for 
early deliveries until 24 hours prior to the delivery date.
    (e) Not withstanding paragraphs (a) and (d) of this provision, 
in no event will schedules be confirmed prior to award of contracts.

C.6  Contract Modification--Alternate Delivery Line Items

    (a) A purchaser may request a change in delivery method after 
the issuance of the NA. Such requests may be made either orally (to 
be confirmed in writing within 24 hours) or in writing, but will 
require written modification of the contract by the Contracting 
Officer. Such modification shall be permitted by DOE, provided, in 
the sole judgement of DOE, the change is viewed as reasonable and 
would not interfere with the delivery plans of other purchasers, and 
further provided that the purchaser agrees to pay all increased 
costs incurred by DOE because of such modification. The NS shall 
establish per barrel rates for such increased costs.
    (b) Changes in delivery method will only be considered after the 
initial confirmation of schedules described in Provision C.5(a) 
above.

C.7  Application Procedures for ``Jones Act'' and Construction 
Differential Subsidy Waivers

    (a) Unless otherwise specified in the Notice of Sale, an ASO or 
purchaser seeking a waiver of the ``Jones Act'' should submit a 
request by letter, telegram or electronic means to: U.S. Customs 
Service, Chief, Carrier Rulings Branch 1301 Constitution Avenue, NW, 
Washington, D.C. 20229, Telephone: (202) 482-6940, Facsimile: (202) 
482-6943.
    (b) A purchaser seeking a waiver to use a vessel built with a 
Construction Differential Subsidy (and, if applicable, operated with 
an Operating Differential Subsidy) should have the vessel owner 
submit a waiver request by letter, telegram, or electronic means to: 
Associate Administrator for Ship Financial Assistance and Cargo 
Preference, Maritime Administration, U.S. Department of 
Transportation, 400 7th Street, SW, 1Washington, D.C. 20590, Fax: 
(202) 366-7901. For speed and brevity, the request may incorporate 
by reference appropriate contents of any earlier ``Jones Act'' 
waiver request by the purchaser. Under 46 U.S.C. App. 1223, a 
hearing is also required for any intervenor, and a waiver may not be 
approved if it will result in unfair competition to any person, 
firm, or corporation operating exclusively in the coastwise or 
intercoastal service.
    (c) Copies of the Jones Act, CDS, or ODS requests should also be 
sent, as appropriate, to:

(1) Associate Administrator for Port, Intermodal and Environmental 
Activities, Maritime Administration, U.S. Department of 
Transportation, 400 7th Street, S.W., Washington, D.C. 20590, 1Fax: 
(202) 366-7901.
(2) U.S. Department of Energy, ATTN: Deputy Assistant Secretary for 
Strategic Petroleum Reserve, FE-40, 1000 Independence Avenue, SW, 
Washington, D.C. 20585, Fax: (202) 586-7919.
(3) Contracting Officer, FE-4451, Strategic Petroleum Reserve 
Project Management Office, Acquisition and Sales Division, 900 
Commerce Road East, New Orleans, LA 70123, Fax: (504) 734-4947.

    (d) In addition to the above addresses, copies of the ``Jones 
Act'' request should also be sent to: Assistant Secretary of Defense 
(Acquisition and Logistics), U.S. Department of Defense, Washington, 
DC 20301-8000.
    (e) Any request for waiver should include the following 
information:
    (1) Name, address and telephone number of requestor;
    (2) Purpose for which waiver is sought, e.g., to take delivery 
of so many barrels of SPR crude oil, with reference to the SPR NS 
number and the provisional or assigned contract number;
    (3) Name and flag of registry of vessel for which waiver is 
sought, if known at the time of waiver request, and either the 
scheduled 3-day delivery window(s), if available, or 10-day delivery 
period applicable to the contract;

[[Page 17273]]

    (4) The intended number of voyages, including the ports for 
loading and discharging;
    (5) Estimated period of time for which vessel will be employed; 
and
    (6) Reason for not using qualified U.S.-flag vessel, including 
documentary evidence of good faith effort to obtain suitable U.S.-
flag vessel and responses received from that effort. Such evidence 
would include copies of correspondence and telephone conversation 
summaries. Use of commercial brokers and the Transportation News 
Ticker (TNT) is suggested for maximum market coverage. Requests for 
waivers by electronic transmittals may reference such documentary 
evidence, with copies to be provided by mail, postmarked no more 
than one business day after the transmission requesting the waiver.
    (7) For waivers to use Construction Differential Subsidy 
vessels, the request must also contain a specific agreement for 
Construction Differential Subsidies payback pursuant to Section 506 
of the Merchant Marine Act of 1936 and must be signed by an official 
of the vessel owner authorized to make a payback commitment.
    (f) If there are shown to be ``Jones Act'' vessels available and 
in a position to meet the loading dates required, no waivers may be 
approved.
    (g) The names of any vessel(s) to be employed under a ``Jones 
Act'' waiver must be provided to the U.S. Customs Service no later 
than 3 days prior to the beginning of the 3-day loading window 
scheduled in accordance with Provision No. C.5.

C.8  Vessel Loading Procedures

    (a) After notification of ASO, each ASO shall provide the SPR/
PMO a proposed schedule of vessel loading windows in accordance with 
Provision No. C.5.
    (b) The length of the scheduled loading window shall be 3 days. 
If the purchaser schedules more than one window, the average 
quantity to be lifted during any single loading window will be no 
less than DOE's minimum contract quantity.
    (c) Tankships, ITBs, and self-propelled barges shall be capable 
of sustaining a minimum average load rate commensurate with 
receiving an entire full cargo within twenty-four (24) hours pumping 
time. Barges with a load rate of not less than 4,000 BPH shall be 
permitted at the Sun Terminal barge docks. With the consent of the 
SPR/PMO, lower loading rates and the use of barges at the Sun and 
Phillips Terminals' suitably equipped tankship docks may be 
permitted if such do not interfere with DOE's obligations to other 
parties.
    (d) At least 7 days in advance of the beginning of the scheduled 
loading window, the purchaser shall furnish the SPR/PMO with vessel 
nominations specifying: (i) name and size of vessel or advice that 
the vessel is ``To Be Nominated'' at a later date (such date to be 
no later than 3 days before commencement of the loading window); 
(ii) estimated date of arrival (to be narrowed to a firm date not 
later than 72 hours prior to the first day of the vessel's 3-day 
window, as provided in paragraph (f) of this provision); (iii) 
quantity to be loaded and contract number; and (iv) other relevant 
information requested by the SPR/PMO including but not limited to a 
copy of the crew list, ship's specifications, last three ports and 
cargoes, vessel owner/operator and flag, any known deficiencies, and 
on board quantities of cargo and slops. The listing of all required 
vessel information shall be provided in the Notice of Sale. DOE will 
advise the purchaser, in writing, of the acceptance or rejection of 
the nominated vessel within 24 hours of such nomination. If no 
advice is furnished within 24 hours, the nomination will be firm. 
Once established, changes in such nomination details may be made 
only by mutual agreement of the parties, to be confirmed by DOE in 
writing. The purchaser shall be entitled to substitute another 
vessel of similar size for any vessel so nominated, subject to DOE's 
approval. DOE must be given at least 3 days' notice prior to the 
first day of the 3-day loading window of any such substitution. DOE 
shall make a reasonable effort to accept any nomination for which 
notice has not been given in strict accordance with the above 
provisions.
    (e) In the event the purchaser intends to use more than one 
vessel to take delivery of the contract quantity scheduled to be 
delivered during a loading window, the information in paragraphs (d) 
and (f) of this provision shall be provided for each vessel.
    (f) The vessel or purchaser shall notify the SPR/PMO of the 
expected day of arrival 72 hours before the beginning of his 
scheduled 3-day loading window. This notice establishes the firm 
agreed-upon date of arrival which is the 1-day window for the 
purposes of vessel demurrage (see Provision No. C.9). If the 
purchaser fails to make notification of the expected day of arrival, 
the 1-day window will be deemed to be the middle day of the 
scheduled 3-day window. The vessel shall also notify the SPR/PMO of 
the expected hour of arrival 72, 48 and 24 hours in advance of 
arrival, and after the first notice, to advise of any variation of 
more than 4 hours. With the first notification of the hour of 
arrival, the Master shall advise the SPR/PMO: (i) quantity of oily 
bilge wastes or sludge requiring discharge ashore; (ii) cargo 
loading rate requested; (iii) number, size, and material of vessel's 
manifold connections; and (iv) defects in vessel or equipment 
affecting performance or maneuverability.
    (g) Notice of Readiness shall be tendered upon arrival at berth 
or at customary anchorage which is deemed to be any anchorage within 
6 hours vessel time to the SPR dock. The preferred anchorages are 
identified in Exhibit E. The Notice of Readiness shall be confirmed 
promptly in writing to the SPR/PMO and the terminal responsible for 
coordination of crude oil loading operations. Such notice shall be 
effective only if given during customary port operating hours. If 
notice is given after customary business hours of the port, it shall 
be effective as of the beginning of customary business hours on the 
next business day.
    (h) DOE shall use its best efforts to berth the purchaser's 
vessel as soon as possible after receipt of the Notice of Readiness.
    (I) Standard hose and fittings (American Standard Association 
standard connections) for loading shall be provided by DOE. 
Purchasers must arrange for line handling, deballasting, tug boat 
and pilot services, both for arrival and departure, through the 
terminal or ship's agent, and bear all costs associated with such 
services.
    (j) Tankships, ITBs, and self-propelled barges shall be allowed 
berth time of 36 hours. Barges loading at Sun Terminal barge dock 
facilities shall be allowed berth time of three (3) hours plus the 
quotient determined by dividing the cargo size (gross standard 
volume barrels) by four thousand (4,000). Vessels loading cargo 
quantities in excess of 500,000 barrels shall be allowed berth time 
of 36 hours plus 1 hour for each 20,000 barrels to be loaded in 
excess of 500,000 barrels. Conditions below excepted, however, the 
vessel shall not remain at berth more than 6 hours after completion 
of cargo loading unless hampered by tide or weather.
    (1) Berth time shall commence with the vessel's first line 
ashore and shall continue until loading of the vessel, or vessels in 
case more than one vessel is loaded, is completed and the last line 
is off. In addition, allowable berth time will be increased by the 
amount of any delay occurring subsequent to the commencement of 
berth time and resulting from causes due to adverse weather, labor 
disputes, force majeure and the like, decisions made by port 
authorities affecting loading operations, actions of DOE, its 
contractors and agents resulting in delay of loading operations 
(providing this action does not arise through the fault of the 
purchaser or purchaser's agent), and customs and immigration 
clearance. The time required by the vessel to discharge oily wastes 
or to moor multiple vessels sequentially into berth shall count as 
used berth time.
    (2) For all hours of berth time used by the vessel in excess of 
allowable berth time provided for above, the purchaser shall be 
liable for dock demurrage and also shall be subject to the 
conditions of Provision No. C.11.

C.9  Vessel Laytime and Demurrage

    (a) The laytime allowed DOE for handling of the purchaser's 
vessel shall be 36 running hours. For vessels with cargo quantities 
in excess of 500,000 barrels, laytime shall be 36 running hours plus 
1 hour for each 20,000 barrels of cargo to be loaded in excess of 
500,000 barrels. Vessel laytime shall commence when the vessel is 
moored alongside (all fast) the loading berth or 6 hours after 
receipt of a Notice of Readiness, whichever occurs first. It shall 
continue 24 hours per day, seven days per week without interruption 
from its commencement until loading of the vessel is completed and 
cargo hoses or loading arms are disconnected. Any delay to the 
vessel in reaching berth caused by the fault or negligence of the 
vessel or purchaser, delay due to breakdown or inability of the 
vessel's facilities to load, decisions made by vessel owners or 
operators or by port authorities affecting loading operations, 
discharge of ballast or slops, customs and immigration clearance, 
weather, labor disputes, force majeure and the like shall not count 
as used laytime. In addition, movement in roads shall not count as 
used laytime.
    (b) If the vessel is tendered for loading on a date earlier than 
the firm agreed-upon

[[Page 17274]]

arrival date, established in accordance with Provision No. C.8, and 
other vessels are loading or have already been scheduled for loading 
prior to the purchaser's vessel, the purchaser's vessel shall await 
its turn and vessel laytime shall not commence until the vessel 
moors alongside (all fast), or at 0600 hours local time on the firm 
agreed-upon date of arrival, whichever occurs first. If the vessel 
is tendered for loading later than 2400 hours on the firm agreed-
upon date of arrival, DOE will use its best efforts to have the 
vessel loaded as soon as possible in its proper turn with other 
scheduled vessels, under the circumstances prevailing at the time. 
In such instances, vessel laytime shall commence when the vessel 
moors alongside (all fast).
    (c) For all hours or any part thereof of vessel laytime that 
elapse in excess of the allowed vessel laytime for loading provided 
for above, demurrage shall be paid by DOE, for U.S.-flag vessels, at 
the lesser of the demurrage rate in the tanker voyage or charter 
party agreement, or the most recently available United States 
Freight Rate Average (USFRA) for a hypothetical tanker with a 
deadweight in long tons equal to the weight in long tons of the 
petroleum loaded, multiplied by the most recent edition of the 
American Tanker Rate Schedule rate for such hypothetical tanker. For 
foreign flag vessels, demurrage shall be as determined above, except 
that the London Tanker Brokers' Panel Average Freight Rate 
Assessment (AFRA) and most recent edition of the New Worldwide 
Tanker Nominal Freight Scale ``Worldscale'' shall be used as 
appropriate, if less than the charter party rate. For all foreign 
flag vessel loadings that commence during a particular calendar 
month, the applicable AFRA shall be the one that is determined on 
the basis of freight assessments for the period ended on the 15th 
day of the preceding month. The demurrage rate for barges will be 
the hourly rate contained in the charter of a chartered barge, or if 
it is not a chartered barge, at a rate determined by DOE as a fair 
rate under prevailing conditions. If demurrage is incurred because 
of breakdown of machinery or equipment of DOE or its contractors 
(other than the purchaser), the rate of demurrage shall be reduced 
to one-half the rate stipulated herein per running hour and pro rata 
of such reduced rate for part of an hour for demurrage so incurred. 
Demurrage payable by DOE, however, shall in no event exceed the 
actual demurrage expense incurred by the purchaser as the result of 
the delay.
    (d) In the event the purchaser is using more than one vessel to 
load the contract quantity scheduled to be delivered during a single 
loading window, the terms of this provision and the Government's 
liability for demurrage apply only to the first vessel presenting 
its Notice of Readiness in accordance with paragraph (a) of this 
provision.
    (e) The primary source document and official record for 
demurrage calculations is the SPRCODR (see Provision No. C.19).

C.10  Vessel Loading Expedition Options

    (a) Notwithstanding Provision No. C.8(j)(1) above, in order to 
avoid disruption in the SPR distribution process, the Government may 
limit berthing time for any vessel receiving SPR petroleum to that 
period required for loading operations and the physical berthing/
unberthing of the vessel. At the direction of the Government, 
activities not associated with the physical loading of the vessel 
(e.g., preparing documentation, guaging, sampling, etc.) may be 
required to be accomplished away from the berth. Time consumed by 
these activities will not be for the Government's account. If 
berthing time is to be restricted, the Government will so advise the 
vessel prior to berthing of the vessel.
    (b) In addition to paragraph (a) of this provision, the 
Government may limit vessels calling at SPR terminals to a total of 
24 hours for petroleum transfer operations. In such an event, the 
loading will be considered completed if the vessel has loaded 95 
percent or more of the nominated quantity within a total of 24 
hours. If the vessel has loaded less than 95 percent of its 
nominated quantity, then Provision C.11 shall apply.

C.11  Purchaser Liability for Excessive Berth Time

    The Government reserves the right to direct a vessel loading SPR 
petroleum at a delivery point specified in the NS, to vacate its SPR 
berth, and absorb all costs associated with this movement, should 
such vessel, through its operational inability to receive oil at the 
average rates provided for in Provision No. C.8, cause the berth to 
be unavailable for an already scheduled follow-on vessel. 
Furthermore, should a breakdown of the vessel's propulsion system 
prevent its getting under way on its own power, the Government may 
cause the vessel to be removed from the berth with all costs to be 
borne by the purchaser.

C.12  Pipeline Delivery Procedures

    (a) The purchaser shall nominate his delivery requirements to 
the pipeline carrier, to include the total quantity to be moved and 
his preferred five-day shipment range(s) as specified in C.5. The 
purchaser shall provide confirmation of the carrier's acceptance of 
the above quantity [in thousands of barrels per day] and shipment 
ranges to the SPR/PMO no later than the last day of the month 
preceeding the month of delivery. The purchaser shall also furnish 
the SPR/PMO with the name and telephone number of the pipeline point 
of contact with whom the SPR/PMO should coordinate the petroleum 
delivery.
    (b) The SPR/PMO will ensure oil is made available to the carrier 
within the shipment date range(s) established in accordance with 
Provision C.5. Once established, the pipeline delivery schedule can 
only be changed with SPR/PMO's prior written consent. Should the 
schedule established in accordance with paragraph (a) of this 
provision vary from the original schedule established in accordance 
with Provision No. C.5, the Government will provide its best efforts 
to accommodate this revised schedule but will incur no liability for 
failure to provide delivery on the dates requested.
    (c) Three days prior to the beginning of any five-day shipping 
range in which the purchaser is to receive delivery, the purchaser 
shall furnish the SPR/PMO the firm date within that range on which 
the movement is to commence, the quantity to be moved, and the 
contract number.
    (d) The date of delivery, which will be recorded on the CODR 
(see Provision No. C.19), is the date delivery commenced to the 
custody transfer point, as identified in the NS.
    (e) The purchaser shall receive pipeline deliveries at a minimum 
average rate of 100,000 barrels per day. The purchaser is solely 
responsible for making the necessary arrangements with pipeline 
carriers, including storage, to achieve the stated minimum.

C.13  Title and Risk of Loss

    Unless otherwise provided in the NS, title to and risk of loss 
for SPR petroleum will pass to the purchaser at the delivery point 
as follows:
    (a) For vessel shipment--when the petroleum passes from the dock 
loading equipment connections to the vessel's permanent hose 
connection.
    (b) For pipeline shipment--as identified in the NS.
    (c) For in-transit shipments--when the petroleum passes the 
permanent flange of the discharging vessel manifold upon discharge 
into the purchaser's designated marine terminal facility or vessel.

C.14  Acceptance of Crude Oil

    (a) An example of the assay format used for SPR crude oil is 
shown in Exhibit D, SPR Crude Oil Stream Characteristics. Updated 
assays for all nine SPR crude oil streams will be provided in the 
NS. However, the purchaser shall accept the crude oil delivered 
regardless of characteristics. Except as provided below, DOE assumes 
no responsibility for deviations in quality.
    (b) In the event that the crude oil stream delivered both has a 
total sulfur content (by weight) in excess of 3.5 percent if Bryan 
Mound Maya, 2.0 percent if any other sour crude oil stream, or 0.50 
percent if a sweet crude oil stream, and, in addition, has an API 
gravity less than 20 deg.API if Bryan Mound Maya, 28 deg.API if any 
other sour crude oil stream, or 32 deg.API if a sweet crude oil 
stream, the purchaser shall accept the crude oil delivered and 
either pay the contract price adjusted in accordance with Provision 
No. C.16, or request negotiation of the contract price. Unless the 
purchaser submits a written request for negotiation of the contract 
price to the Contracting Officer within 10 days from the date of 
delivery, the purchaser shall be deemed to have accepted the 
adjustment of the price in accordance with Provision No. C.16. 
Should the purchaser request a negotiation of the price and the 
parties be unable to agree as to that price, the dispute shall be 
settled in accordance with Provision No. C.32.

C.15  Delivery Acceptance and Verification

    (a) The purchaser shall provide written confirmation to SPR/PMO, 
no later than 72 hours prior to the scheduled date of the first 
delivery under the contract, the name(s) of the authorized agent(s) 
given signature authority to sign/endorse the delivery documentation 
(CODR, etc.) on the

[[Page 17275]]

purchaser's behalf. Any changes to this listing of names must be 
provided to the SPR/PMO in writing no later than 72 hours before the 
first delivery to which such change applies. In the event that an 
independent surveyor (separate from the authorized signatory agent) 
is appointed by the purchaser to witness the delivery operation 
(gauging, sampling, testing, etc.), written notification must be 
provided to SPR/PMO, no later than 72 hours prior to the scheduled 
date of each applicable cargo delivery.
    (b) Absence of the provision of the name(s) of bona fide 
agent(s) and the signature of such agent on the delivery 
documentation constitutes acceptance of the delivery quantity and 
quality as determined by DOE and/or its agents.

C.16  Price Adjustments for Quality Differentials

    (a) The NS will specify quality price adjustments applicable to 
the crude oil streams offered for sale. Unless otherwise specified 
by the NS, quality price adjustments will be applied only to the 
amount of variation by which the API gravity of the crude oil 
delivered differs by more than plus or minus five-tenths of one 
degree API (+/-0.5 deg.API) from the API gravity of the crude oil 
stream contracted for as published in the NS.
    (b) Price adjustments for SPR crude oil are expected to be 
similar to one or more commercial crude oil postings for equivalent 
quality crude oil. The contract price per barrel shall be increased 
by that amount if the API gravity of the crude oil delivered exceeds 
the published API gravity by more than 0.5 deg.API and decreased by 
that amount if the API gravity of the crude oil delivered falls 
below the published API gravity by more than 0.5 deg.API.

C.17  Determination of Quality

    (a) The quality of the crude oil delivered to the purchaser will 
be determined from samples taken from the delivery tanks in 
accordance with API Manual of Petroleum Measurement Standards, 
Chapter 8.1, Manual Sampling of Petroleum and Petroleum Products 
(ASTM D4057), latest edition; or from a representative sample 
collected by an automatic sampler whose performance has been proven 
in accordance with the API Manual of Petroleum Measurement 
Standards, Chapter 8.2, Automatic Sampling of Petroleum and 
Petroleum Products (ASTM D4177), latest edition. Preference will be 
given to samples collected by means of an automatic sampler when 
such a system is available and operational. Tests to be performed by 
DOE or its authorized contractor are:

(1) Sediment and Water

    Primary methods: API Manual of Petroleum Measurement Standards, 
Chapter 10.1, Determination of Sediment in Crude Oils and Fuel Oils 
by the Extraction Method (ASTM D473) (IP53), latest edition; or API 
Manual of Petroleum Measurement Standards, Chapter 10.8, Sediment in 
Crude Oil by Membrane Filtration (ASTM D4807), latest edition; and 
API Manual of Petroleum Measurement Standards, Chapter 10.2, 
Determination of Water in Crude Oil by Distillation (ASTM D4006) 
(IP358), latest edition; or API Manual of Petroleum Measurement 
Standards, Chapter 10.9, Water in Crude Oil by Coulometric Karl 
Fischer Titration (ASTM D4928) (IP 386), latest edition.
    Alternate methods: API Manual of Petroleum Measurement 
Standards, Chapter 10.3, Determination of Water and Sediment in 
Crude Oil by the Centrifuge Method (Laboratory Procedure) (ASTM 
D4007) (IP 359), latest edition.

(2) Sulfur

    Primary method: ASTM D1552, Sulfur in Petroleum Products (High 
Temperature Method), latest edition.
    Alternate method: ASTM D4294, Sulfur in Petroleum Products by 
Energy-Dispersive X-ray Fluorescence Spectrometry, latest edition.

(3) API Gravity

    Primary methods: API Manual of Petroleum Measurement Standards, 
Chapter 9.1, Density, Relative Density (Specific Gravity), or API 
Gravity of Crude Petroleum and Liquid Petroleum Products by 
Hydrometer Method (ASTM D1298) (IP 160), latest edition; or Density 
and Relative Density of Crude Oils by Digital Density Analyzer (ASTM 
D5002), latest edition.
    Alternate method: API Gravity of Crude Petroleum and Petroleum 
Products (Hydrometer Method) (ASTM D287), latest edition.
    To the maximum extent practicable, the primary methods will be 
used for determination of SPR crude oil quality characteristics. 
However, because of conditions prevailing at the time of delivery, 
it may be necessary to use alternate methods of test for one or more 
of the quality characteristics. The Government's test results will 
be binding in any dispute over quality characteristics of SPR 
petroleum.
    (b) The purchaser or his representative may arrange to witness 
and verify testing simultaneously with the Government Quality 
Assurance Representatives. Such services, however, will be for the 
account of the purchaser. Any disputes will be settled in accordance 
with Provision No. C.32. Should the purchaser opt not to witness the 
testing, then the Government findings will be binding on the 
purchaser.

C.18  Determination of Quantity

    (a) The quantity of crude oil delivered to the purchaser will be 
determined by opening and closing tank gauges with adjustment for 
opening and closing free water and sediment and water as determined 
from shore tank samples where an automatic sampler is not available, 
or delivery meter reports. All volumetric measurements will be 
corrected to net standard volume in barrels at 60 deg.F, using the 
API Manual of Petroleum Measurement Standards, Chapter 11.1, Volume 
1, Volume Correction Factors (ASTM D1250) (IP 200); Table 5A-
Generalized Crude Oils, Correction of Observed API Gravity to API 
Gravity at 60 deg.F; Table 6A-Generalized Crude Oils, Correction of 
Volume to 60 deg.F Against API Gravity at 60 deg.F, latest edition, 
and by deducting the tanks' free water, and the entrained sediment 
and water as determined by the testing of composite all-levels 
samples taken from the delivery tanks; or by deducting the sediment 
and water as determined by testing a representative portion of the 
sample collected by a certified automatic sampler, and also 
corrected by the applicable pressure correction factor and meter 
factor.
    (b) The quantity measurements shall be performed and certified 
by the DOE contractor responsible for delivery operations, and 
witnessed by the Government Quality Assurance Representative at the 
delivery point. The purchaser shall have the right to have 
representatives present at the gauging/metering, sampling, and 
testing. Should the purchaser arrange for additional inspection 
services, such services will be for the account of the purchaser. 
Any disputes shall be settled in accordance with Provision No. C.32. 
Should the purchaser not arrange for additional services, then DOE's 
quantity determination shall be binding on the purchaser.

C.19  Delivery Documentation

    The quantity and quality determination shall be documented on 
the SPR/PMO Crude Oil Delivery Report (SPRCODR), SPRPMO-F-6110.2-14b 
(Rev 8/91) (see Exhibit H for copy of this form). The SPRCODR will 
be signed by the purchaser's agent to acknowledge receipt of the 
quantity and quality of crude oil indicated. In addition, for vessel 
deliveries, the time statement on the SPRCODR will be signed by the 
vessel's Master when loading is complete. Copies of the completed 
SPRCODR, with applicable supporting documentation (i.e., metering or 
tank gauging tickets and appropriate calculation worksheets), will 
be furnished to the purchaser and/or the purchaser's authorized 
representative after completion of delivery. They will serve as the 
basis for invoicing and/or reconciliation invoicing for the sale of 
petroleum as well as for any associated services that may be 
provided.

C.20  Contract Amounts

    The contract quantities and dollar value stated in the NA are 
estimates. The per barrel unit price is subject to adjustment due to 
variation in the API gravity from the published characteristics, 
changes in delivery mode and price index values, if applicable. In 
addition, due to conditions of vessel loading and shipping or 
pipeline transmission, the quantity actually delivered may vary by 
10 percent for each shipment. However, a purchaser is 
not required to engage additional transportation capacity if 
sufficient capacity to take delivery of at least 90 percent of the 
contract quantity has been engaged.

C.21  Payment and Performance Letter of Credit

    (a) Within five business days of receipt of notification of 
Apparently Successful Offeror, the Purchaser must provide to the 
Contracting Officer an ``Irrevocable Standby Letter of Credit'' 
established in favor of the United States Department of Energy equal 
to 100 percent of the contract awarded value and containing the 
substantive provisions set out in Exhibit G. The purchaser must 
furnish

[[Page 17276]]

an acceptable letter of credit before DOE will execute the NA. The 
letter of credit must not vary in substance from the sample at 
Exhibit G. If the letter of credit contains any provisions at 
variance with Exhibit G or fails to include any provisions contained 
in Exhibit G, nonconforming provisions must be deleted and missing 
substantive provisions must be added or the letter of credit will 
not be accepted. The letter of credit must be effective on or before 
the first delivery under the contract and remain in effect for a 
period of 120 days, must permit multiple partial drawings, and must 
contain the contract number. The original of the letter of credit 
must be sent to the Contracting Officer.
    (b) The letter of credit must be issued by a depository 
institution located in and authorized to do business in any state of 
the United States or the District of Columbia, and authorized to 
issue letters of credit by the banking laws of the United States or 
any state of the United States or the District of Columbia. The 
issuing bank must provide documentation indicating that the person 
signing the letter of credit is authorized to do so, in the form of 
corporate minutes, the Authorized Signature List, or the General 
Resolution of Signature Authority.
    (c) All wire deposit electronic funds transfer and letter of 
credit costs will be borne by the purchaser.
    (d) The letter of credit must be maintained at 100 percent of 
the contract value of the petroleum remaining to be delivered, plus 
any other charges owed to the Government under the contract. In the 
event the letter of credit falls below the level specified, or at 
the discretion of the Contracting Officer must be increased because 
of the effect of the price indexing mechanism provided for in 
Provision B.2, DOE reserves the right to demand the purchaser modify 
the letter of credit to a level deemed sufficient by the Contracting 
Officer. The purchaser shall make such modification within two 
business days of being notified by the Contracting Officer by 
express mail or electronic means. The purchaser is deemed to have 
received such notification the next business day after its dispatch. 
If such modification is not made within two days after purchaser is 
deemed to have received the notice, the Contracting Officer may, on 
the 3rd business day, without prior notice to the purchaser, 
withhold deliveries in whole or in part under the contract and/or 
terminate the contract in whole or in part under Provision C.25.
    (e) Within 30 calendar days after final payment under the 
contract, the Contracting Officer shall authorize the cancellation 
of the letter of credit and shall return it to the bank or financial 
institution issuing the letter of credit. A copy of the notice of 
cancellation will be provided to the purchaser.

C.22  Billing and Payment

    (a) The Government will invoice the Purchaser at the conclusion 
of each delivery.
    (b) Payment is due in full on the 20th of the month following 
each delivery month. Should the 20th of the month fall on a 
Saturday, Sunday, or Federal holiday, payment will be due and 
payable in full on the last business day preceding the 20th of the 
month.
    (c) If an invoice is not paid in full, the Government may 
provide the Purchaser oral or written notification that Purchaser is 
delinquent in its payments; draw against the letter of credit for 
all quantities for which unpaid invoices are outstanding; withhold 
all or any part of future deliveries under the contract; and/or 
terminate the contract, in whole or in part, in accordance with 
Provision C.25.
    (d) In the event that the bank refuses to honor the draft 
against the letter of credit, the purchaser shall be responsible for 
paying the principal and any interest due (see Provision No. C.24) 
from the due date.

C.23  Method of Payments

    (a) All amounts payable by the purchaser shall be paid by 
either:
    (1) Deposit to the account of the U.S. Treasury by wire transfer 
of funds over the Fedwire Deposit System Network. The information to 
be included in each wire transfer will be provided in the NS.
    (2) Electronic funds transfer through the Automated Clearing 
House (ACH) network, using the Federal Remittance Express Program. 
The information to be included in each transfer will be provided in 
the NS.
    (b) If the purchaser disagrees with the amounts invoiced by the 
Government, the purchaser shall immediately pay the amount invoiced, 
and notify the Contracting Officer of the basis for its 
disagreement. The Contracting Officer will receive and act upon any 
such objection. Failure to agree to any adjustment shall be a 
dispute, and a purchaser shall file a claim promptly in accordance 
with Provision C.32.
    (c) DOE may designate another place, different timing, or 
another method of payment after reasonable written notice to the 
purchaser.
    (d) Notwithstanding any other contract provision, DOE may via a 
draft message request a wire transfer of funds against the standby 
letter of credit at any time for payment of monies due under the 
contract and remaining unpaid in violation of the terms of the 
contract. These would include but not be limited to interest, 
liquidated damages, demurrage, amounts owing for any services 
provided under the contract, and the difference between the contract 
price and price received on the resale of undelivered petroleum as 
defined in Provision No. C.25. If the invoice is for delinquent 
payments, interest shall accrue from the payment due date.
    (e) No payment due DOE hereunder shall be subject to reduction 
or set-off for any claim of any kind against the United States 
arising independently of the contract.

C.24  Interest

    (a) Amounts due and payable by the purchaser or its bank that 
are not paid in accordance with the provisions governing such 
payments shall bear interest from the date due until the date 
payment is received by the Government.
    (b) Interest shall be computed on a daily basis. The interest 
rate shall be in accordance with the Current Value of Funds rate as 
established by the Department of the Treasury in accordance with the 
Debt Collection Improvement Act of 1997 and published periodically 
in Bulletins to the Treasury Fiscal Requirements Manual and in the 
Federal Register.

C.25  Termination

    (a) Immediate termination.
    (1) The Contracting Officer may terminate this contract in whole 
or in part, without liability of DOE, by written notice to the 
purchaser effective upon its being deposited in the U.S. Postal 
System addressed to the purchaser as provided in Provision No. C.31 
in the event that the purchaser either notifies the Contracting 
Officer that it will not be able to accept, or fails to accept, any 
delivery line item in accordance with the terms of the contract. 
Such notice shall invite the purchaser to submit information to the 
Contracting Officer as to the reasons for the failure to accept the 
delivery line item in accordance with the terms of the contract.
    (2) Within 10 business days after the issuance of the notice of 
termination, the Contracting Officer may determine that such 
termination was a termination for default under paragraph (b)(l)(ii) 
of this provision. In the absence of information which persuades the 
Contracting Officer that the purchaser's failure to accept the 
delivery line item was excusable, the fact of such failure may be 
the basis for the Contracting Officer determining the purchaser to 
be in default, without first determining under paragraphs (b)(2) and 
(b)(3) whether such failure was excusable under the terms of the 
contract. The Contracting Officer shall promptly give the purchaser 
written notice of such determination.
    (3) Any immediate termination other than one determined to be a 
termination for default in accordance with paragraph (a)(2) and 
paragraph (b) of this provision shall be a termination for the 
convenience of DOE without liability of the Government.
    (b) Termination for Default.
    (l) Subject to the provisions of paragraphs (b)(2) and (b)(3) of 
this provision, the Contracting Officer may terminate the contract 
in whole or in part for purchaser default, without liability of DOE, 
by written notice to the purchaser, effective upon its being 
deposited in the U.S. Postal System, addressed to the purchaser as 
provided in Provision No. C.31 in the event that:
    (i) The Government does not receive payment in accordance with 
any payment provision of the contract;
    (ii) The purchaser fails to accept delivery of petroleum in 
accordance with the terms of the contract; or
    (iii) The purchaser fails to comply with any other term or 
condition of the contract within 5 business days after the purchaser 
is deemed to have received written notice of such failure from the 
Contracting Officer.
    (2) Except with respect to defaults of subcontractors, the 
purchaser shall not be determined to be in default or be charged 
with any liability to DOE under circumstances which prevent the 
purchaser's acceptance of delivery hereunder due to causes beyond 
the control and without the fault or negligence of the purchaser as 
determined by the Contracting Officer. Such causes shall include but 
are not limited to:

[[Page 17277]]

    (i) Acts of God or the public enemy;
    (ii) Acts of the Government acting in its sovereign or 
contractual capacity;
    (iii) Fires, floods, earthquakes, explosions, unusually severe 
weather, or other catastrophes; or
    (iv) Strikes.
    (3) If the failure to perform is caused by the default of a 
subcontractor, the purchaser shall not be determined to be in 
default or to be liable for any excess costs for failure to perform, 
unless the supplies or services to be furnished by the subcontractor 
were obtainable from other sources in sufficient time to permit the 
purchaser to meet the delivery schedule, if:
    (i) Such default arises out of causes beyond the control of the 
purchaser and its subcontractor, and without the fault or negligence 
of either of them; or
    (ii) Such default arises out of causes within the control of a 
transportation subcontractor, not an affiliate of the purchaser, 
hired to transport the purchaser's petroleum by vessel or pipeline, 
and such causes are beyond the purchaser's control, without the 
fault or negligence of the purchaser, and notwithstanding the best 
efforts of the purchaser to avoid default.
    (4) In the event that the contract is terminated in whole or in 
part for default, the purchaser shall be liable to DOE for:
    (i) The difference between the contract price on the contract 
termination date and any lesser price the Contracting Officer 
obtained upon resale of the petroleum; and
    (ii) Liquidated damages as specified in Provision No. C.27 as 
fixed, agreed, liquidated damages for each day of delay until the 
petroleum is delivered to a purchaser under either a resolicitation 
for the sale of the quantities of oil defaulted on, or an NS issued 
after the date of default that specifies that it is for the sale of 
quantities of oil defaulted on. In no event shall liquidated damages 
be assessed for more than 30 days.
    (5) In the event that the Government exercises its right of 
termination for default, and it is later determined that the 
purchaser's failure to perform was excused in accordance with 
paragraphs (b)(2) and (3) of this provision, the rights and 
obligations of the parties shall be the same as if such termination 
was a termination for convenience without liability of the 
Government under paragraph (c).
    (c) Termination for convenience.
    (1) In addition to any other right or remedy provided for in the 
contract, the Government may terminate this contract at any time in 
whole or in part whenever the Contracting Officer shall determine 
that such termination is in the best interest of the Government. 
Such termination shall be without liability of the Government if 
such termination arises out of causes specified in paragraphs (a)(1) 
or (b)(1) of this provision, acts of the Government in its sovereign 
capacity, or causes beyond the control and without the fault or 
negligence of the Government, its contractors (other than the 
purchaser of SPR crude oil under this contract) and agents. For any 
other termination for convenience, the Government shall be liable 
for such reasonable costs incurred by the purchaser in preparing to 
perform the contract, but under no circumstances shall the 
Government be liable for consequential damages or lost profits as 
the result of such termination.
    (2) The purchaser will be given immediate written notice of any 
decrease of petroleum deliveries greater than 10 percent, or of 
termination, under this paragraph (c). The termination or reduction 
shall be effective upon its notice being deposited in the U.S. 
Postal System unless otherwise specified in the notice. The 
purchaser is deemed to have received a mailed notice on the second 
day after its dispatch and an electronic or express mail notice on 
the day after dispatch.
    (3) Termination for the convenience of the Government shall not 
excuse the purchaser from liquidated damages accruing prior to the 
effective date of the termination.
    (d) Nothing herein contained shall limit the Government in the 
enforcement of any legal or equitable remedy that it might otherwise 
have, and a waiver of any particular cause for termination shall not 
prevent termination for the same cause occurring at any other time 
or for any other cause.
    (e) In the event that the Government exercises its right of 
termination, as provided in paragraphs (a), (b), or (c)(1) of this 
provision, the Contracting Officer may sell any undelivered 
petroleum under such terms and conditions as he deems appropriate.
    (f) DOE's ability to deliver petroleum on the date on which the 
defaulted purchaser was scheduled to accept delivery, under another 
contract awarded prior to the date of the contractor's default, 
shall not excuse a purchaser that has been terminated for default 
from either liquidated damages or the difference between the 
contract price and any lesser price obtained on resale.
    (g) Any disagreement with respect to the amount due the 
Government for either resale costs or liquidated damages shall be 
deemed to be a dispute and will be decided by the Contracting 
Officer pursuant to Provision No. C.32.
    (h) The term ``subcontractor'' or ``subcontractors'' includes 
subcontractors at any tier.

C.26  Other Government Remedies

    (a) The Government's rights under this provision are in addition 
to any other right or remedy available to it by law or by virtue of 
this contract.
    (b) The Government may, without liability on its part, withhold 
deliveries of petroleum under this contract or any other contract 
the purchaser may have with DOE if payment is not made in accordance 
with this contract.
    (c) If the purchaser fails to take delivery of petroleum in 
accordance with the delivery schedule developed under the terms of 
the contract, and such tardiness is not excused under the terms of 
Provision No. C.25, but the Government does not elect to terminate 
that item for default, the purchaser nonetheless shall be liable to 
the Government for liquidated damages in the amount established by 
Provision No. C.27 for each calendar day of delay or fraction 
thereof until such time as it accepts delivery of the petroleum. In 
no event shall such damages be assessed for longer than 30 days. No 
purchaser that fails to perform in accordance with the terms of the 
contract shall be excused from liability for liquidated damages by 
virtue of the fact that DOE is able to deliver petroleum on the date 
on which the non-performing purchaser was scheduled to accept 
delivery, under another contract awarded prior to the date of 
default.

C.27  Liquidated damages

    (a) In case of failure on the part of the purchaser to perform 
within the time fixed in the contract or any extension thereof, the 
purchaser shall pay to the Government liquidated damages in the 
amount of 1 percent of the contract price of the undelivered 
petroleum per calendar day of delay or fraction thereof in 
accordance with paragraph (b) of Provision No. C.25 and paragraph 
(c) of Provision No. C.26.
    (b) As provided in paragraph (a) of this provision, liquidated 
damages will be assessed for each day or fraction thereof a 
purchaser is late in accepting delivery of petroleum in accordance 
with this contract, unless such tardiness is excused under Provision 
No. C.25. For petroleum to be lifted by vessel, damages will be 
assessed in the event that the vessel has not commenced loading by 
11:59 p.m. on the second day following the last day of the 3-day 
delivery window established under Provision No. C.5, unless the 
vessel has arrived in roads and its Master has presented a notice of 
readiness to the Government or its agents. Liquidated damages shall 
continue until the vessel presents its notice of readiness. For 
petroleum to be moved by pipeline, if delivery arrangements have not 
been made by the last day of the month prior to delivery, liquidated 
damages shall commence on the 3rd day of the delivery month until 
such delivery arrangements are completed; if delivery arrangements 
have been made, then liquidated damages shall begin on the 3rd day 
after the scheduled delivery date if delivery is not commenced and 
shall continue until delivery is commenced.
    (c) Any disagreement with respect to the amount of liquidated 
damages due the Government will be deemed to be a dispute and will 
be decided by the Contracting Officer pursuant to Provision No. 
C.32.

C.28  Failure To Perform Under SPR Contracts

    In addition to the usual debarment procedures, 10 CFR 625.3 
provides procedures to make purchasers that fail to perform in 
accordance with these provisions ineligible for future SPR 
contracts.

C.29  Government Options in Case of Impossibility of Performance

    (a) In the event that DOE is unable to deliver petroleum 
contracted for to the purchaser due either to events beyond the 
control of the Government, including actions of the purchaser, or to 
acts of the Government, its agents, its contractors or 
subcontractors at any tier, the Government at its option may do 
either of the following:
    (l) Terminate for the convenience of the Government under 
Provision No. C.25; or
    (2) Offer different SPR crude oil streams or delivery times to 
the purchaser in

[[Page 17278]]

substitution for those specified in the contract.
    (b) In the event that a different SPR crude oil stream than 
originally contracted for is offered to the purchaser, the contract 
price will be negotiated between the parties. In no event shall the 
negotiated price be less than the minimum acceptable price, if 
established for the same or similar crude oil streams in the most 
recent NS or determined after the opening of offers.
    (c) DOE's obligation in such circumstances is to use its best 
efforts, and DOE under no circumstances shall be liable to the 
purchaser for damages arising from DOE's failure to offer alternate 
SPR crude oil streams or delivery times.
    (d) If the parties are unable to reach agreement as to price, 
crude oil streams or delivery times, DOE may terminate the contract 
for the convenience of the Government under Provision No. C.25.

C.30  Limitation of Government Liability

    DOE's obligation under these SSPs and any resultant contract is 
to use its best efforts to perform in accordance therewith. The 
Government under no circumstances shall be liable thereunder to the 
purchaser for the conduct of the Government's contractors or 
subcontractors or for indirect, consequential, or special damages 
arising from its conduct, except as provided herein; neither shall 
the Government be liable thereunder to the purchaser for any damages 
due in whole or in part to causes beyond the control and without the 
fault or negligence of the Government, including but not restricted 
to, acts of God or public enemy, acts of the Government acting in 
its sovereign capacity, fires, floods, earthquakes, explosions, 
unusually severe weather, other catastrophes, or strikes.

C.31  Notices

    (a) Any notices required to be given by one party to the 
contract to the other in writing shall be forwarded to the 
addressee, prepaid, by U.S. registered, return receipt requested 
mail, express mail, telegram, or electronic means as provided in the 
NS. Parties shall give each other written notice of address changes.
    (b) Notices to the purchaser shall be forwarded to the 
purchaser's address as it appears in the offer and in the contract.
    (c) Notices to the Contracting Officer shall be forwarded to the 
following address: U.S. Department of Energy, Strategic Petroleum 
Reserve, Project Management Office, Acquisition and Sales Division, 
Mail Stop FE-4451, 900 Commerce Road East, New Orleans, Louisiana 
70123.

C.32  Disputes

    (a) This contract is subject to the Contract Disputes Act of 
1978 (41 U.S.C. Section 601 et seq.). If a dispute arises relating 
to the contract, the purchaser may submit a claim to the Contracting 
Officer, who shall issue a written decision on the dispute in the 
manner specified in 48 CFR l-33.211.
    (b) ``Claim'' means:
    (1) A written request submitted to the Contracting Officer;
    (2) For payment of money, adjustment of contract terms, or other 
relief;
    (3) Which is in dispute or remains unresolved after a reasonable 
time for its review and disposition by the Government; and
    (4) For which a Contracting Officer's decision is demanded.
    (c) In the case of dispute requests or amendments to such 
requests for payment exceeding $50,000, the purchaser shall certify 
at the time of submission as a claim, as follows:
    I certify that the claim is made in good faith, that the 
supporting data are current, accurate and complete to the best of my 
knowledge and belief and that the amount requested accurately 
reflects the contract adjustment for which the purchaser believes 
the Government is liable.
Purchaser's Name
Signature
Title
    (d) The Government shall pay to the purchaser interest on the 
amount found due to the purchaser on claims submitted under this 
provision at the rate established by the Department of the Treasury 
from the date the amount is due until the Government makes payment. 
The Contract Disputes Act of 1978 and the Prompt Payment Act adopt 
the interest rate established by the Secretary of the Treasury under 
the Renegotiation Act as the basis for computing interest on money 
owed by the Government. This rate is published semi-annually in the 
Federal Register.
    (e) The purchaser shall pay to DOE, interest on the amount found 
due to the Government and unpaid on claims submitted under this 
provision at the rate specified in Provision No. C.24 from the date 
the amount is due until the purchaser makes payment.
    (f) The decision of the Contracting Officer shall be final and 
conclusive and shall not be subject to review by any forum, 
tribunal, or Government agency unless an appeal or action is 
commenced within the times specified by the Contract Disputes Act of 
1978.
    (g) The purchaser shall comply with any decision of the 
Contracting Officer and at the direction of the Contracting Officer 
shall proceed diligently with performance of this contract pending 
final resolution of any request for relief, claim, appeal, or action 
related to this contract.

C.33  Assignment

    The purchaser shall not make or attempt to make any assignment 
of a contract that incorporates these SSPs or any interest therein 
contrary to the provisions of Federal law, including the Anti-
Assignment Act (4l U.S.C. 15), which provides:
    No contract or order, or any interest therein, shall be 
transferred by the party to whom such contract or order is given to 
any other party, and any such transfer shall cause the annulment of 
the contract or order transferred, so far as the United States are 
concerned. All rights of action, however, for any breach of such 
contract by the contracting parties, are reserved to the United 
States.

C.34  Order of Precedence

    In the event of an inconsistency between the terms of the 
various parts of this contract, the inconsistency shall be resolved 
by giving precedence in the following order:
    (a) The NA and written modifications thereto;
    (b) The NS;
    (c) Those provisions of the SSPs (as published in the Federal 
Register) made applicable to the contract by the NS;
    (d) The instructions to the SPR Sales Offer Form; and
    (e) The successful offer.

C.35  Gratuities

    (a) The Government, by written notice to the purchaser, may 
terminate the right of the purchaser to proceed under this contract 
if it is found, after notice and hearing, by the Secretary of Energy 
or his duly authorized representative, that gratuities (in the form 
of entertainment, gifts, or otherwise) were offered by or given by 
the purchaser, or any agent or representative of the purchaser, to 
any officer or employee of the Government with a view toward 
securing a contract or securing favorable treatment with respect to 
the awarding, amending, or making of any determinations with respect 
to the performing of such contract; provided, that the existence of 
the facts upon which the Secretary of Energy or his duly authorized 
representative makes such findings shall be in issue and may be 
reviewed in any competent court.
    (b) In the event that this contract is terminated as provided in 
paragraph (a) of this provision, the Government shall be entitled 
(1) to pursue the same remedies against the purchaser as it could 
pursue in the event of a breach of the contract by purchaser, and 
(2) as a penalty in addition to any other damages to which it may be 
entitled by law, to exemplary damages in an amount (as determined by 
the Secretary of Energy or his duly authorized representative) which 
shall not be less than three nor more than 10 times the cost 
incurred by the purchaser in providing any such gratuities to any 
such officer or employee.
    (c) The rights and remedies of the Government provided in this 
clause shall not be exclusive and are in addition to any other 
rights and remedies provided by law or under this contract.

Exhibits

A--SPR Sales Offer Form
B--Sample Notice of Sale
C--SPRPMO Form 33S
D--SPR Crude Oil Comprehensive Analysis
E--SPR Delivery Point Data
F--Offer Standby Letter of Credit
G--Payment and Performance Letter of Credit
H--Form SPRPMO-F-6110.2-14b (Rev 8/91)--SPR Crude Oil Delivery 
Report
I--Instruction Guide for Return of Offer Guarantees by Electronic 
Transfer
J--Offer Guarantee Calculation Worksheet

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[FR Doc. 98-8757 Filed 4-7-98; 8:45 am]
BILLING CODE 6450-01-C