Procedures for Acquisition of Petroleum for the Strategic Petroleum Reserve

<RULE> DEPARTMENT OF ENERGY <DEPDOC>[DOE-HQ-2025-0009]</DEPDOC> <CFR>10 CFR Part 626</CFR> <RIN>RIN 1901-AB66</RIN> <SUBJECT>Procedures for Acquisition of Petroleum for the Strategic Petroleum Reserve</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Office of Cybersecurity, Energy Security, and Emergency Response, Department of Energy. <HD SOURCE="HED">ACTION:</HD> Direct final rule; delay of effective date; response to comments. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Department of Energy (“DOE”) is publishing this document to respond to comments received on the May 16, 2025, direct final rule. As a result, DOE delays the effective date of the direct final rule on the procedures for acquisition of petroleum for the Strategic Petroleum Reserve (SPR) to require index-priced contracts. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> As of July 14, 2025, the effective date of the direct final rule published May 16, 2025, at 90 FR 20764, is delayed until August 13, 2025. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Mr. Jeffrey Novak, U.S. Department of Energy, Office of the General Counsel, Acting General Counsel, 1000 Independence Avenue SW, Washington, DC 20585-0121; (202) 586-5281 or <E T="03">DOEGeneralCounsel@hq.doe.gov.</E> </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. General Discussion</HD> DOE is amending part 626 of title 10 of the Code of Federal Regulations in this rule. Part 626 contains rules that govern the procedures for acquiring petroleum products for, and deferring contractually scheduled deliveries to, the SPR. On October 25, 2022, DOE amended the part 626 regulations for the first time since being promulgated by DOE in 2006. <E T="03">See</E> 87 FR 64369. The 2022 revisions were intended to provide more clarity, including by using more consistent language throughout the regulation; better reflect the underlying statutory authorities, which had changed since the rule's promulgation in 2006; better reflect the operational practices and realities of the SPR; and provide additional flexibility in structuring acquisitions, including by allowing fixed-price contracts. While most of these changes were sorely needed, the changes to permit the use of fixed-price contracts—added under claims of increased flexibility—have only served to unnecessarily create confusion in the industry, which uses index-price contracts, with no recognizable benefit. For this reason, DOE amends the language contemplating fixed-price contracts to revert to the regulation's prior standard requiring index-price contracts. <HD SOURCE="HD1">II. Response to Comments</HD> DOE received four comments  <SU>1</SU> <FTREF/> in response to the direct final rule published on May 16, 2025. 90 FR 20764 (“May 2025 DFR”). <FTNT> <SU>1</SU>  DOE received a fifth comment that was outside of the scope of this rulemaking. </FTNT> <GPOTABLE COLS="4" OPTS="L2,nj,i1" CDEF="s50,r50,13,r50"> <TTITLE>Table II.1—List of Commenters From the May 2025 DFR</TTITLE> <CHED H="1">Commenter</CHED> <CHED H="1">Reference in this rule</CHED> <CHED H="1"> Comment No. in the docket </CHED> <CHED H="1">Commenter type</CHED> <ROW> <ENT I="01">TP</ENT> <ENT>Anonymous.</ENT> </ROW> <ROW> <ENT I="01">Employ America</ENT> <ENT>Employ America</ENT> <ENT>5</ENT> <ENT>Advocacy Organization.</ENT> </ROW> <ROW> <ENT I="01">Bridget Dooling</ENT> <ENT>Dooling</ENT> <ENT>6</ENT> <ENT>Individual.</ENT> </ROW> <ROW> <ENT I="01">Center for Biological Diversity</ENT> <ENT>CBD</ENT> <ENT>4</ENT> <ENT>Conservation Organization.</ENT> </ROW> </GPOTABLE> Employ America, Dooling, and CBD all had procedural objections to DOE's use of a direct final rule. Employ America and Dooling stated that the May 2025 DFR did not satisfy the good cause exemption from notice and comment rulemaking under the Administrative Procedure Act (“APA”). (Employ America, No. 5 at pp. 10-11; Dooling, No. 6 at pp. 3-4). CBD also stated that DOE should have engaged in a full notice-and-comment rulemaking process. (CBD, No. 3 at p. 1). In response, DOE notes that the APA requires that agencies provide all interested persons with fair notice and an opportunity to comment on the rulemaking. <E T="03">See</E> 5 U.S.C. 553(b) & (c). The May 2025 DFR provided the public with fair notice of DOE's changes to its own petroleum acquisition regulations for the SPR. <E T="03">See</E> 90 FR 20764 (discussing DOE's return to its historic practice of using index-price contracts). DOE also requested comments on the May 2025 DFR, and stated, if the Department received significant adverse comments, the Department would withdraw the rule or issue a new final rule that responds to such comments. <E T="03">Id.</E> Thus, DOE has provided interested persons with fair notice and an opportunity to comment as required by the APA. So, the lack of discussion of a good cause exemption under 5 U.S.C. 553(b)(B) in the DFR is irrelevant as the notice and comment procedures under 5 U.S.C. 553(b) and (c) have been observed before this rule takes effect. Commenters cannot argue they were denied fair notice and an opportunity to comment solely based on how the notice was labeled. <E T="03">See Little Sisters of the Poor Saints Peter & Paul Home</E> v. <E T="03">Pennsylvania,</E> 140 S. Ct. 2367, 2384 (2020) (holding that “[f]ormal labels aside, the [interim final rules] contained all of the elements of a notice of proposed rulemaking as required by the APA”). In addition to its procedural comment, Employ America also urged the Department to withdraw the direct final rule and leave the existing rule in place. (Employ America, No. 5 at p. 2). DOE has properly considered the comment from Employ America and provides the following response. The Department notes that on October 25, 2022, DOE amended the part 626 regulations expressly to include the ability to allow fixed-price contracts. At that time, Employ America provided the only comment within the scope of the proposed rule. In 2025, Employ America's comment mirrors its 2022 comment that DOE should utilize fixed-price contracts with sufficient flexibility to achieve the objectives and procedural needs defined in the SPR's governing statute. <E T="03">See</E> Acquisition of Petroleum for the Strategic Petroleum Reserve, 87 FR 64369, DOE-HQ-2022-0022. Significantly, outside of the procedural questions, the difference between the 2022 and 2025 comments is that Employ America now bases much of its comments on a misunderstanding of DOE's recent use of the fixed-price and index-based methods. In its argument that requiring index-price contracts for all acquisitions would undermine statutory objectives and procedural requirements, it states that index-based pricing introduces budgetary and operational risks for DOE, alternative methods can deliver more certainty, and that logistical and infrastructure constraints require contractual flexibility. It further states in its argument that the justification for the direct final rule does not hold up to scrutiny that the direct final rule is unnecessary because DOE retains the ability to utilize index-price contracts under the existing regulation, DOE acquired over 60 million barrels of crude oil through fixed-price contracting, undermining claims it created confusion, and it is incorrect that the industry only uses index-price contracts; contracts with fixed prices are used to hedge or minimize exposure to price risk. However, to support their arguments, Employ America relies on an inaccurate claim that recent SPR contracts have been based on fixed pricing. For example, in its argument that the justification for the direct final rule does not hold up to scrutiny, it notes that “given successful fixed-price contracts executed to acquire over sixty million barrels, the evidence that it created sufficient confusion to warrant the change is weak.” Further, it states that that “DOE acquired over 60 million barrels of crude oil though fixed-price contracting, undermining claims it created confusion,” and although a “pilot acquisition to test the fixed-price failed to result in successful bids, . . . the problems were recognizable and were ultimately corrected.” They also state that “DOE issued 20 successful solicitations, for which they received over 500 responses, and ultimately acquired over 60 million barrels of oil. . . . Any initial confusion was rectified by subsequent solicitations.” However, DOE utilized the index-based pricing method in the referenced purchase of 60 million barrels of crude oil. While changes to permit the use of fixed-price contracts were added under claims of increased flexibility, it only served to unnecessarily create confusion in industry, which uses index-price contracts. The use of fixed-price contracts provided no recognizable benefit, as the only attempt by DOE to use the fixed-price method failed to obtain bids. Further, Employ America admits in its comment that index-based pricing is the norm. Thus, Employ America's above arguments and endorsement of the use of fixed-pricing as a method that works better than the index-based pricing fails based on the Department's past experience and due to Employ America's inaccurate premise regarding recent purchases. Further, its support of those purchases actually supports the use of index-based pricing method. <SU>2</SU> <FTREF/> <FTNT> <SU>2</SU>  Employ America's misunderstanding further supports DOE's statement in the May 16, 2025, direct final rule that the changes made to DOE regulations to permit the use of fixed-price contracts have only served to create confusion. </FTNT> Finally, DOE received a comment from a member of the public (Comment DOE-HQ-2025-0009-0003) that raises procedural objections regarding Executive Order 14192 requiring identification of 10 regulati ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 12k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━