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

Federal RegisterApr 8, 1998

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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

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

(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.

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.''

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.

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;

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

(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.

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.

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.

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.

(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.

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.

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.

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.

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.

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;

(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).

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.

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.

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.

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).

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.

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.

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.

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.

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.

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).

(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.

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

(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.

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.

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.

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.

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;

(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

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