Case No. VFA-0482, 27 DOE ¶ 80,197

April 8, 1999

DECISION AND ORDER

OF THE DEPARTMENT OF ENERGY

Appeal

Name of Petitioner: BP Exploration, Inc.

Date of Filing: March 10, 1999

Case Number: VFA-0482

This Decision and Order concerns an Appeal that BP Exploration, Inc. (BP) filed from a determination issued to it by the Department of Energy’s (DOE) Strategic Petroleum Reserve Project Management Office (SPRP). In this determination, SPRP granted in part a request for information that BP filed pursuant to the Freedom of Information Act (FOIA), 5 U.S.C. § 552, as implemented by the DOE in 10 C.F.R. Part 1004. The FOIA generally requires that documents held by the federal government be released to the public upon request. However, Congress has provided nine exemptions to the FOIA which set forth the types of information agencies are not required to release. In its appeal, BP contests the adequacy of SPRP's determination, and requests the release of certain withheld information.

I. Background

In its FOIA request, BP asked for a copy of the lease between the DOE and Exxon Co., USA (Exxon) for the Bryan Mound Distribution System in Texas. SPRP released this document to BP in redacted form, withholding under 5 U.S.C. § 552(b)(4) (Exemption 4) the formula used to determine the amounts to be paid by Exxon to the DOE. Exemption 4 protects from mandatory disclosure trade secrets and privileged or confidential commercial or financial information that is obtained from a person. SPRP explained its application of Exemption 4 in the following manner:

Exxon claims that this information is confidential and privileged, and that its release would cause substantial competitive harm to Exxon. Disclosure of this underlying cost data would place Exxon at a commercial disadvantage with potential customers and competitors.

SPRP Determination Letter at 1. In its Appeal, BP contests the adequacy of this determination, and contends that SPRP improperly applied Exemption 4 in withholding the price information.

II. Analysis

Once the DOE decides to withhold information, both the FOIA and the Department’s regulations require the agency to provide a reasonably specific justification for its withholding. 5 U.S.C. § 552(a)(6), 10 C.F.R. § 1004.7(b)(1); Mead Data Central, Inc. v. Department of the Air Force, 566 F.2d 242 (D.C. Cir. 1977); National Parks & Conservation Ass'n v. Kleppe, 547 F.2d 673 (D.C. Cir. 1976) (Kleppe); Digital City Communications, Inc., 26 DOE ¶ 80,149 at 80,657 (1997); Data Technology Industries, 4 DOE ¶ 80,118 (1979). This allows both the requester and this Office to determine whether the claimed exemption was accurately applied. Tri-State Drilling, Inc., 26 DOE ¶ 80,202 at 80,816 (1997). It also aids the requester in formulating a meaningful appeal and this Office in reviewing that appeal. Wisconsin Project on Nuclear Arms Control, 22 DOE ¶ 80,109 at 80,517 (1992).

Thus, an agency withholding material under Exemption 4 must explain how that exemption was applied. William E. Logan, Jr. & Associates, 27 DOE ¶ 80,185 (1999) (Logan). If, for example, the agency believes that disclosure is likely to cause substantial competitive harm, it must state its reasons for this finding. Larson Associated, Inc., 25 DOE ¶ 80,204 (1996); Milton L. Loeb, 23 DOE ¶ 80,124 (1993). Conclusory and generalized allegations of substantial competitive harm are unacceptable and cannot support an agency's decision to withhold requested documents. Public Citizen Health Research Group v. F.D.A., 704 F.2d 1280, 1291 (D.C.Cir. 1983); Kleppe.

The circumstances in Logan are quite similar to those in the case that is presently before us. In Logan, the requester sought access to lease and purchase agreements between the DOE and an oil company concerning a crude oil pipeline and terminal. The agency released redacted copies of the agreements, withholding information relating to costs under Exemption 4. On appeal, we found the agency's determination to be deficient because it did not adequately explain the manner in which that Exemption was applied. We stated that in Exemption 4 cases, the agency must first determine whether the information in question is a trade secret or is commercial or financial information. If the former, then the agency's analysis is complete and the material may be withheld under Exemption 4. Public Citizen Health Research Group v. Food and Drug Administration, 704 F.2d 1280, 1286, 1288 (D.C. Cir. 1983). However, we said that if the agency determines the material is commercial or financial information, obtained from a person, and privileged or confidential, then there is an additional analysis that must be performed. First, the agency must decide whether the information was involuntarily or voluntarily submitted. If the information was voluntarily submitted, it may be withheld under Exemption 4 if the submitter would not customarily make such information available to the public. Critical Mass Energy Project v. Nuclear Regulatory Commission, 975 F.2d 871, 879 (D.C. Cir. 1992). If it was involuntarily submitted, the information may be withheld under Exemption 4 if disclosure would either impair the government’s ability to obtain similar information in the future or cause substantial harm to the competitive position of the person from whom the government obtained the information. National Parks and Conservation Ass'n v. Morton, 498 F.2d 765, 770 (D.C. Cir. 1974).

The determination letter issued by SPRP to BP does not adequately justify the agency's application of Exemption 4 in withholding the price-related information. Because the determination letter mentions substantial competitive harm, it appears that SPRP categorized the price data as involuntarily submitted commercial or financial information. However, SPRP did not provide any explanation of how it arrived at this categorization. As a result, we cannot evaluate whether SPRP applied the proper standard in withholding the price information. Furthermore, the determination letter does not specify the competitive harm that disclosure of the information would cause, nor does it provide any basis for its apparent finding that such harm would be "substantial." Consequently, the determination letter consists of the type of conclusory or general allegations of competitive harm that the courts have found to be inadequate, and it does not permit either a meaningful appeal or an appropriate review.

We will therefore remand this matter to SPRP. On remand, SPRP should either release the withheld information or provide a new justification for withholding it. If SPRP continues to withhold the information under Exemption 4, it must fully explain its analysis, including the nature of the competitive harm that disclosure would cause and SPRP's reasons for believing that such harm would be "substantial."

It Is Therefore Ordered That:

(1) The Appeal filed by BP Exploration, Inc., Case No. VFA-0482, is hereby granted as specified in Paragraph (2) below, and is denied in all other respects.

(2) This matter is hereby remanded to the Strategic Petroleum Reserve Project Management Office, to issue a new determination in accordance with the instructions set forth in the above Decision and Order.

(3) This is a final Order of the Department of Energy from which any aggrieved party may seek judicial review pursuant to the provisions of 5 U.S.C. § 552(a)(4)(B). Judicial review may be sought in the district in which the requester resides or has a principal place of business, or in which the agency records are situated, or in the District of Columbia.

George B. Breznay

Director

Office of Hearings and Appeals

Date: April 8, 1999