Case No. VFA-0658, 28 DOE ¶ 80,159

April 10, 2001

DECISION AND ORDER

OF THE DEPARTMENT OF ENERGY

Appeal

Name of Petitioner: The Wenatchee World

Date of Filing: March 13, 2001

Case Number: VFA-0658

On March 13, 2001, The Wenatchee World (The World), a newspaper located in Wenatchee, Washington, filed an Appeal from a determination that the Bonneville Power Administration (BPA) of the Department of Energy (DOE) issued to it on February 27, 2001. In that determination, BPA denied in part a request for information that The World filed under the Freedom of Information Act (FOIA), 5 U.S.C. § 552, as implemented by the DOE in 10 C.F.R. Part 1004. This Appeal, if granted, would require the DOE to release the withheld information.

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 that set forth the types of information agencies are not required to release. Under the DOE’s regulations, a document exempt from disclosure under the FOIA shall nonetheless be released to the public whenever the DOE determines that disclosure is not contrary to federal law and is in the public interest. 10 C.F.R. § 1004.1.

I. Background

In its FOIA request, The World sought access to contracts by which BPA sold power to, and purchased power from, Alcoa, Inc. (Alcoa). BPA identified four documents as being responsive to this request, and released three of those documents in their entirety. The fourth document, Confirmation Agreement, Contract No. 01PB-23944, was released with price information withheld pursuant to Exemptions 4 and 5 of the FOIA. 5 U.S.C. § 552(b)(4), (b)(5). This Agreement concerned the purchase of power by BPA from Alcoa. In its Appeal, The World contests BPA’s application of these Exemptions.

II. Analysis

A. Exemption 4

Exemption 4 shields 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). In order to qualify under Exemption 4, a document must contain either (a) trade secrets or (b) information which 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 (i) to impair the government’s ability to obtain necessary information in the future or (ii) to cause substantial harm to the competitive position of the person from whom the information was obtained. Id. at 770; Critical Mass Energy Project v. NRC, 975 F.2d 871, 879 (D.C. Cir. 1992), cert. denied, 507 U.S. 984 (1993) (Critical Mass). By contrast, information that is provided to an agency voluntarily is considered “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. We have generally considered information submitted as a prerequisite to doing business with the government as having been involuntarily submitted. See, e.g., Glen M. Jameson, 25 DOE ¶ 80,191 (1996); Hanford Education Action League, 23 DOE ¶ 80,143 (1993). We will therefore employ the National Parks test in determining whether BPA properly applied Exemption 4.

It is undisputed that the withheld information is “commercial” in nature, and that it was submitted by a “person,” as that term is used in Exemption 4. There is no claim that the price information is privileged in nature; therefore, unless it is “confidential,” the information may not be withheld under this Exemption. In its determination, BPA contends that the price information is confidential because its release would likely cause substantial harm to Alcoa’s competitive position.

In its Appeal, The World contests this conclusion. It argues that information of this sort has been released to the public by BPA and other aluminum manufacturers, thereby undermining any claim of competitive harm. In support of this argument, The World cites news articles from the Associated Press (AP) and an internet website entitled “The Daily News Online.” The AP article contains pricing information concerning the sale of electricity by BPA to Kaiser Aluminum Corp. (Kaiser), and the resale of that electricity to BPA. The Daily News article contains similar information about BPA’s dealings with Longview Aluminum LLC (Longview).

After reviewing The World’s submission and BPA’s response, we find that BPA properly applied Exemption 4 in withholding the pricing information. (1) Although some pricing information regarding these other BPA transactions has previously been made public, we find that there are substantial differences between these sales and BPA’s dealings with Alcoa, and that the potential for competitive harm from the release of the Alcoa price information is significantly greater. BPA’s contract with Kaiser permitted the firm to resell the electricity it purchased from BPA on the open market. See Associated Press Article; Memoranda of April 3-4, 2001 Telephone Conversations between Mark Miller, BPA, and Robert Palmer, OHA Staff Attorney. Therefore, the price of that electricity when it was resold to BPA was set by market forces, and did not necessarily reflect Kaiser’s fixed costs. However, under Alcoa’s contract, the firm could only resell the energy to BPA. Consequently, the resale price was significantly lower, and much more reflective of overhead and fixed costs that remain even when the firm’s production facilities are shut down. Id. BPA’s contract with Longview, like its agreement with Alcoa, limited the resale rights of the purchaser. Id. However, the Longview deal was much bigger and more complicated, and contained requirements that were not set forth in the Alcoa deal. For example, Longview was required to take its “load,” or purchases of electricity from BPA, down to zero for the remainder of the year, to support certain federal legislation, and to pay its laid-off employees 100 percent of the salary and benefits. Id. Therefore, the revenue realized by Longview from its resale to BPA reflected not only a recovery of fixed costs, but also compensation for these additional services. For these reasons the release of the Alcoa pricing information would reveal substantially more about that company’s overhead and other fixed costs than was revealed by the information cited in The World’s Appeal. Alcoa’s competitors could use this information to gain an advantage in pricing and competitive bidding situations. We conclude that BPA properly applied Exemption 4 in withholding the information in question. See, e.g., The FOIA Group, 27 DOE ¶ 80,111 (1998).

B. Exemption 5

Exemption 5 of the FOIA exempts from mandatory disclosure documents that are "inter-agency or intra-agency memorandums or letters which would not be available by law to a party other than an agency in litigation with the agency." 5 U.S.C. § 552(b)(5); 10 C.F.R. § 1004.10(b)(5). The Supreme Court has held that this provision exempts "those documents, and only those documents, normally privileged in the civil discovery context." NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 149; 95 S. Ct. 1504, 1515 (1975) (Sears). The courts have identified three traditional privileges that fall within this exemption: the attorney-client privilege, the attorney work-product privilege and the executive "deliberative process" or "predecisional" privilege. Coastal States Gas Corp. v. Department of Energy, 617 F.2d 854, 862 (D.C. Cir. 1980) (Coastal States). However, the Supreme Court has recognized that Exemption 5 also incorporates those "privileges which the Government enjoys under the relevant statutory and case law in the pre-trial discovery context." Renegotiation Board v. Grumman Aircraft Engineering Corp., 421 U.S. 168, 184; 95 S. Ct. 1491, 1500 (1975). Accordingly, "[t]he test under Exemption 5 is whether the documents would be routinely or normally disclosed upon a showing of relevance." F.T.C. v. Grolier, 462 U.S. 19, 26; 103 S. Ct. 2209, 2214 (1983) (citing Sears, 421 U.S. at 148-49; 95 S. Ct. at 1515 (1975)). Therefore, if a privilege is well recognized by statute or in the case law, it may properly be invoked under Exemption 5. See United States v. Weber Aircraft Corp., 465 U.S. 797, 799-801; 104 S. Ct. 1488, 1492-93 (1984).

Among the privileges incorporated by the courts under Exemption 5 is the "confidential commercial information privilege." See, e.g., Federal Open Market Comm. v. Merrill, 443 U.S. 340; 99 S. Ct. 2800 (1979) (Merrill) (holding that since disclosure of Domestic Policy Directives would significantly harm the Government's monetary functions or commercial interests, they could properly be withheld under Exemption 5); Government Land Bank v. General Services Administration, 671 F.2d 663 (1st Cir. 1982) (Land Bank) (withholding a government generated real estate appraisal). "The Federal courts have long recognized a qualified evidentiary privilege for trade secrets and other confidential commercial information." Merrill, 443 U.S. at 356; 99 S. Ct. at 2810. The courts have applied this privilege in the FOIA context to prevent the Government from being placed at a competitive disadvantage and to facilitate the consummation of contracts. Id., 443 U.S. at 360; 99 S. Ct. at 2812. Exemption 5 therefore "protects the government when it enters the marketplace as an ordinary commercial buyer or seller." Land Bank , 671 F.2d 665 (footnote omitted).

The protection afforded by this privilege is limited in scope and lasts only as long as necessary to protect the government's commercial interests. Id. Moreover, the application of this privilege is not automatic. Merrill, 443 U.S. at 362; 99 S. Ct. at 2813. The burden is upon the agency to show that the records it seeks to withhold under the privilege are confidential and that their disclosure might be harmful. American Standard v. Pfizer, Inc., 828 F.2d 734, 746 (Fed. Cir. 1987) (applying the privilege in the civil discovery context). In the civil discovery context, once these burdens are met, the burden shifts to the party seeking disclosure to prove that disclosure should occur by establishing a substantial need for those documents. R&D Business Systems v. Xerox Corp., 152 F.R.D. 195; 196-197 (D. Colo. 1993) (Xerox). In the FOIA context, however, the individual FOIA applicant's need for information is not to be taken into account in determining whether materials are exempt under Exemption 5. See Merrill, 443 U.S. at 362-63; 99 S. Ct. at 2813, and cases cited therein. Accordingly, courts have found that documents which are immune from discovery absent a showing of substantial need are not "routinely" or "normally" available to parties in litigation and therefore are exempt from mandatory disclosure under Exemption 5. F.T.C. v. Grolier, Inc., 462 U.S. 19, 27; 103 S. Ct. 2209, 2214 (1983).

Accordingly, if the agency has shown that it has maintained the confidentiality of the withheld records and that their release might result in harm to the government's commercial interests, the agency could properly withhold records under Exemption 5. In the present case, there is no indication in the record that BPA has not maintained the confidentiality of the information in question. We therefore turn to the next issue before us: whether release of the price information would likely result in harm to BPA's commercial interests or its ability to consummate future contracts. We conclude that it would. Specifically, BPA has informed us that in the near future, it will be negotiating contracts similar to its agreement with Alcoa. See Memorandum of April 4, 2001 Telephone Conversation between Mr. Miller and Mr. Palmer. The withheld price information, if released, would establish a benchmark for future negotiations, and would make it extremely difficult for BPA to obtain more favorable terms. We therefore conclude that BPA properly applied Exemption 5 in withholding the information. See, e.g., The Oregonian, 26 DOE ¶ 80,336 (1997) (load amounts and exit fees properly withheld by BPA under Exemption 5); Convergence Research, 26 DOE ¶ 80,239 (1997) (load amounts and price information properly withheld by BPA under Exemption 5).

III. Public Interest Determination

The fact that material requested falls within a statutory exemption does not necessarily preclude release of the material to the requester. The DOE regulations implementing the FOIA provide that "[t]o the extent permitted by other laws, the DOE will make records available which it is authorized to withhold under 5 U.S.C. § 552 whenever it determines that such disclosure is in the public interest." 10 C.F.R. § 1004.1.

We find that release of the withheld material would not be in the public interest. Although the public does have a general interest in learning about the manner in which the government operates, we find that interest to be attenuated by the fact that the withheld information consists of confidential commercial information that if released would affect BPA's abilities to conduct future business. Any benefit that would accrue from the release of the withheld information is, we believe, outweighed by the likelihood of harm to these commercial interests. Accordingly, we conclude that release of the withheld information would result in foreseeable harm to the interests that are protected by the confidential commercial information privilege. See FOIA Update, U.S. Department of Justice, Office of Information and Privacy (Spring 1994); Memorandum from Janet Reno, Attorney General, to Heads of Departments and Agencies (October 4, 1993) (in order to withhold material, agency must first determine that release would foreseeably harm basic institutional interests that underlie Exemption 5.)

It Is Therefore Ordered That:

(1) The Appeal filed by The Wenatchee World, Case No. VFA-0658, is hereby denied.

(2) 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 10, 2001

(1)In its Appeal, The World contends that BPA withheld both the price at which it sold electricity to Alcoa and the price at which it purchased electricity from Alcoa. However, BPA did release its 1996 Wholesale Power and Transmission Rate Schedules, which set forth the price at which BPA sold to Alcoa. BPA Determination at 1.