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CENTER FOR PUBLIC INTEGRITY v. DEPARTMENT OF ENERGY
March 26, 2002
CENTER FOR PUBLIC INTEGRITY, PLAINTIFF,
DEPARTMENT OF ENERGY, DEFENDANT
The opinion of the court was delivered by: Henry H. Kennedy, Jr., United States District Judge.
By this action brought under the Freedom of Information Act ("FOIA"),
5 U.S.C. § 552, the Center for Public Integrity ("CPI") seeks to
compel the Department of Energy ("DOE") to disclose records in its
possession related to the federal government's sale of Naval Petroleum
Reserve Numbered-1 ("NPR-1"). Before the court are the parties'
cross-motions for summary judgment. Upon consideration of the motions,
the respective oppositions thereto, and the summary judgment record, the
court concludes that CPI's motion must be granted because DOE has not met
its burden of showing that the records are exempt from FOIA's disclosure
Congress enacted FOIA to promote "a policy of broad disclosure of
Government documents" and "ensure `an informed citizenry, vital to the
functioning of a democratic society.'" Critical Mass. Energy Project v.
Nuclear Regulatory Comm'n, 975 F.2d 871, 872 (D.C. Cir. 1992) (quoting
FBI v. Abramson, 456 U.S. 615, 621 (1982) (internal citations omitted)).
In so doing, however, Congress acknowledged that "legitimate governmental
and private interests could be harmed by release of certain types of
information." Id. In order to balance these competing interests,
Congress crafted nine exemptions to FOIA under which an agency may
withhold information. See 5 U.S.C. § 552(a)(4)(B) & (b)(1)-(9). In
the present case DOE invokes Exemptions 3 and 4, see id. at §
552(b)(3) & (b)(4), as grounds for denying CPI's request for information
relating to the sale of NPR-1.
Under Exemption 3, an agency may withhold records "specifically
exempted from disclosure by statute" if the statute affords the agency no
discretion on disclosure, establishes particular criteria for withholding
the information, or refers to the particular types of material to be
withheld. See id. at § 552(b)(3)(A) & (B). The Supreme Court has
established a two-part test for determining whether information is exempt
from disclosure under Exemption 3: 1) the asserted statute must qualify
as an exemption statute; and 2) the information requested must fall
within the statute. See CIA v. Simms, 471 U.S. 159, 167 (1985). CPI
concedes that the statute relied upon by DOE as the basis for withholding
the NPR-1 records, Section 821(b)(m) of the National Defense
Authorization Act for Fiscal Year 1997*fn1, is an exemption statute for
purposes of Exemption 4, but contends that the records do not fall within
Under Exemption 4, an agency may withhold from disclosure "trade
secrets and commercial or financial information obtained from a person
and privileged or confidential." 5 U.S.C. § 552(b)(4). Under the
law of this Circuit, information is "confidential" for purposes of
Exemption 4 if it is submitted "involuntarily" and is "likely" to 1)
"cause substantial harm to the competitive position of the person from
whom the information was obtained"; or 2) "impair the government's
ability to obtain
necessary information in the future." Nat'l Parks & Conservation
Ass'n v. Morton, 498 F.2d 765, 770 (D.C. Cir. 1974).
NPR-1 is a tract of approximately 47,000 acres of land located in Elk
Hills, California, 25 miles south of Bakersfield. In the National
Defense Authorization Act for Fiscal Year 1996 ("the Act"), Pub.L. No.
104-106, § 3412(a), 110 Stat. 186, 631-32 (1996), Congress directed
DOE to sell "all right, title, and interest of the United States in and
to all lands owned or controlled by the United States" inside NPR-1. The
Act required DOE to "set the minimum acceptable price for the reserve,"
to solicit offers for the purchase of the reserve, and then to identify
the "highest responsible offer or offers" that "meet or exceed the
minimum acceptable price. . . ." Id. at § 3412(d)(3), (f)(2).
The Act additionally required DOE to "retain the services of an
investment banker or an appropriate equivalent financial adviser to
independently administer" the sale of NPR-1 "in a manner that maximizes
sale proceeds to the Government" and "in a manner consistent with
commercial practices." Id. at 3412(e)(1). Pursuant to this provision,
DOE hired C.S. First Boston and Petrie Parkman as financial advisers.
These advisers contacted over 200 companies from the United States and
abroad to assess their potential interest in NPR-1, prepared and
distributed a marketing brochure and data sets to interested parties,
held technical briefings, and required prospective participants in the
sale to execute confidentiality agreements.
DOE then issued a Solicitation of Offers for the sale of the
government's interest in NPR-1, structured as one operating working
interest representing seventy-four percent of the government's interest,
and thirteen non-operating working interests each representing two
percent of the government's interest. Qualified parties were allowed to
submit bids on one, some, or all of the segments and to submit multiple
alternative bids. The offer form that DOE required the offerors to
submit stated "Privileged, Confidential, and Highly Sensitive Divestiture
Process Information." On October 6, 1997, DOE announced that it had
accepted the offer of Occidental Petroleum Corporation to purchase the
reserve for $3.65 billion, making the sale the largest privatization in
United States history.
In January 2000, CPI filed a FOIA request with DOE, seeking in
pertinent part "[t]he names of all entities that placed bids on NPR-1, any
portion thereof, and the amounts of all bids." Pl.'s Compl. Ex. 1 at 1.
In April 2000, DOE's Office of Fossil Energy ("FE") issued a
determination letter denying this request on the grounds that the records
sought were exempt from disclosure under Exemption 4 of FOIA. On CPI's
appeal, DOE's Office of Hearings and Appeals ("OHA") held that the records
were not exempt under Exemption 4 and remanded the matter to FE with
instructions "to either release all or part of the withheld information
or provide a new justification for any continued withholdings." Pl.'s
Compl. Ex. 3 at 8.
On remand, FE denied CPI's request again, this time relying on
Exemption 3 in addition to Exemption 4. On CPI's second appeal, OHA held
that the records were exempt from disclosure under Exemption 3 and
affirmed FE's denial of CPI's request. This suit followed.
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