Case No. VFA-0484, 27 DOE ¶ 80,198

April 9, 1999

DECISION AND ORDER

OF THE DEPARTMENT OF ENERGY

Appeal

Name of Petitioner:William E. Logan, Jr.

Date of Filing:March 12, 1999

Case Number: VFA-0484

On March 12, 1999, William E. Logan, Jr. filed an Appeal from a determination issued to him in response to a request for documents submitted under the Freedom of Information Act (FOIA), 5 U.S.C. § 552, as implemented by the Department of Energy (DOE) in 10 C.F.R. Part 1004. The Assistant Project Manager for Management and Administration (Authorizing Official) of the Strategic Petroleum Reserve Project Management Office (SPR) issued the determination on February 12, 1999. This Appeal, if granted, would require that the Authorizing Official release responsive information withheld under FOIA Exemption 4, 5 U.S.C. § 552(b)(4).

The FOIA requires that a federal agency generally release documents to the public upon request. The FOIA, however, lists nine exemptions that set forth the types of information that a federal agency may withhold at its discretion. 5 U.S.C. § 552(b); 10 C.F.R. § 1004.10(b). The DOE regulations further provide that the DOE shall nonetheless release to the public a document exempt from disclosure under the FOIA whenever the DOE determines that disclosure is in the public interest. 10 C.F.R. § 1004.1.

I. Background

On November 18, 1998, William E. Logan, Jr. filed a request with the SPR for information concerning lease agreements between Shell Pipe Line Corporation (now doing business as Equilon Pipeline Company LLC) and the DOE for the Bayou Choctaw crude oil pipeline and St. James Terminal. The Authorizing Official responded to this FOIA request in a December 3, 1998 letter and provided documents responsive to Mr. Logan's request, but redacted Equilon's payment equations (also known as formula rates) pursuant to Exemption 4 of the FOIA. Following the Authorizing Official's determination, Mr. Logan filed an appeal with the Office of Hearings and Appeals of the DOE (OHA). On January 21, 1999, the OHA issued a decision in which it remanded the appeal to the SPR for a new determination to either release the payment equations or provide a new justification for withholding. William E. Logan, Jr., 27 DOE ¶ 80,185 (1999). Finally, on February 12, 1999, the SPR issued a new determination in which it continued to withhold the payment equations pursuant to Exemption 4 of the FOIA.

II. Analysis

In his Appeal, Mr. Logan claims that the SPR incorrectly applied Exemption 4 to the responsive information. Mr. Logan states that the formula rates are not fee schedules used for the sale of any of Equilon Pipeline Company's services, but are formulas for rental payment amounts paid to the federal government for use of the pipeline. Furthermore, he states that there are several reasons the formula rates are not proprietary. First, the federal government obtained these rates from Equilon through a negotiation. Second, the contract between Equilon and the federal government did not contain a trade secret, proprietary information or confidentiality clause. Finally, he states, since the federal government "is one of the contracting parties and is receiving revenue from this contract," that unless the federal government "claims that the information is classified . . . ," the SPR must disclose the information. For these reasons, Mr. Logan argues that the OHA must reverse the SPR's determination and disclose the withheld information.

As an initial matter, we note that Mr. Logan's arguments do not directly address the requirements for an agency to withhold a document pursuant to Exemption 4. Exemption 4 exempts from mandatory public disclosure "trade secrets and commercial or financial information obtained from a person and privileged or confidential." 5 U.S.C. § 552(b)(4); 10 C.F.R. § 1004.10(b)(4). In order to qualify under Exemption 4, a document must contain either (1) trade secrets or (2) information that is "commercial" or "financial," "obtained from a person," and "privileged or confidential." National Parks & Conservation Ass'n v. Morton, 498 F.2d 765 (D.C. Cir. 1974) (National Parks). In National Parks, the United States Court of Appeals for the District of Columbia Circuit found that commercial or financial information submitted to the federal government involuntarily is "confidential" for purposes of Exemption 4 if disclosure of the information is likely either (1) to impair the government's ability to obtain necessary information in the future or (2) to cause substantial harm to the competitive position of the person from whom the government obtained the information. Id. at 770; Critical Mass Energy Project v. NRC, 975 F.2d 871, 879 (D.C. Cir. 1992) (Critical Mass). By contrast, information a submitter provided to an agency voluntarily is "confidential" if "it is of a kind that the provider would not customarily make available to the public." Critical Mass, 975 F.2d at 879.

In appropriate cases, Exemption 4 protects the release of the type of information the requester seeks. We have reviewed the redacted information and find that it contains payment equations negotiated between the SPR and Shell Pipeline Corporation for rental of the pipeline. These negotiated payment equations are confidential commercial information within the meaning of Exemption 4. The SPR obtained this material from a "person" as Exemption 4 requires, since the FOIA considers corporate entities as persons for the purposes of that exemption. See John T. O'Rourke & Associates, 12 DOE ¶ 80,149 (1985). In this case, once the SPR began negotiations with Shell Pipeline Corporation, the SPR required the firm to submit a proposed rental amount for use of the pipeline. See April 5, 1999 Record of Telephone Conversation between Leonard M. Tao, OHA Staff Attorney, and Deanna Harvey, SPR Program Analyst, and Pat Sigur, SPR Realty Officer. Since the submission of this rental amount was necessary to complete the lease agreement, we find that the firm's submission was involuntary. Thus, the information Shell Pipeline Corporation submitted is "confidential" if it meets the test set out in National Parks. We conclude that the payment equations are confidential because their release would substantially harm the submitter's competitive position. A competitor could use the release of these payment rates to easily determine how to adjust its proposed rental payments to offer more favorable terms than the submitter in an attempt to obtain another similar agreement with the federal government. In fact, the contract between the SPR and Equilon allows for the possibility of a pipeline rental recompetition. See April 5, 1999 Record of Telephone Conversation between Leonard M. Tao, OHA Staff Attorney, and Deanna Harvey, SPR Program Analyst, and Pat Sigur, SPR Realty Officer. Moreover, release of these lease terms would provide a competitor with detailed information revealing the submitter's financial strategy and methods in its negotiations with the federal government.

III. The Public Interest in Disclosure

The DOE regulations provide the DOE should release to the public material exempt from mandatory disclosure under the FOIA if the DOE determines that federal law permits disclosure and it is in the public interest. 10 C.F.R. § 1004.1. We have determined that Exemption 4 requires the continued withholding of negotiated payment equations between the SPR and Equilon. However, in cases involving material determined to be exempt from mandatory disclosure under Exemption 4, we do not make the usual inquiry into whether release of the material would be in the public interest. Disclosure of confidential information that an agency can withhold pursuant to Exemption 4 would constitute a violation of the Trade Secrets Act, 18 U.S.C. § 1905, and is therefore prohibited. See, e.g., Chicago Power Group, 23 DOE ¶ 80,125 at 80,560 (1993). Accordingly, we may not consider whether the public interest warrants discretionary release of the information properly withheld under Exemption 4.

It Is Therefore Ordered That:

(1) The Appeal William E. Logan, Jr. filed on March 12, 1999, Case No. VFA-0484, is hereby denied.

(2) This is a final Order of the Department of Energy of 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 either in the district where 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 9, 1999