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30 CFR - Code of Federal Regulations
§ 250.160 When will MMS grant me a right-of-use and easement,
and what requirements must I meet?
(c) You must meet the requirements at 30 CFR 256.35
(Qualification of lessees); establish a regional Company File as required by MMS; and must
meet bonding requirements;
§ 250.166 If I have a State lease, what surety bond must I have
for a right of-use and easement?
(a) Before MMS issues you a right-of use and easement on the
OCS, you must furnish the Regional Director a surety bond for $500,000.
(b) The Regional Director may require additional security from
you (i.e., security above
the prescribed $500,000) to cover additional costs and
liabilities for regulatory compliance.
This additional surety:
(1) Must be in the form of a supplemental bond or bonds meeting
the requirements of 30 CFR 256.54 (General requirements for bonds) or an increase in
the coverage of an existing surety bond.
(2) Covers additional costs and liabilities for regulatory
compliance, including well abandonment, platform and structure removal, and site clearance
from the seafloor of the right-of-use and easement.
§ 250.213
What general information must accompany the EP?
(sections omitted)
(e) Bonds, oil spill financial responsibility, and well control statements.
Statements attesting that:
(1) The activities and facilities proposed in your EP are or will be covered by
an appropriate bond under 30 CFR part 256, subpart I;
(2) You have demonstrated or will demonstrate oil spill financial responsibility
for facilities proposed in your EP according to 30 CFR part 253; and
(3) You have or will have the financial capability to drill a relief well and
conduct other emergency well control operations.
§ 250.243
What general information must accompany the DPP or DOCD?
(sections omitted)
(f) Bonds, oil spill financial responsibility, and well control statements.
Statements attesting that:
(1) The activities and facilities proposed in your DPP or DOCD are or will be
covered by an appropriate bond under 30 CFR part 256, subpart I;
(2) You have demonstrated or will demonstrate oil spill financial responsibility
for facilities proposed in your DPP or DOCD, according to 30 CFR part 253; and
(3) You have or will have the financial capability to drill a relief well and
conduct other emergency well control operations.
§ 250.1011 Bond requirements for pipeline right-of-way holders.
(a) When you apply for, or are the holder of, a right-of-way,
you must:
(1) Provide and maintain a $300,000 bond (in addition to the
bond coverage required in part 256) that guarantees compliance with all the terms and
conditions of the rights-of-way
you hold in an OCS area; and
(2) Provide additional security if the Regional Director
determines that a bond in excess of $300,000 is needed.
(b) For the purpose of this paragraph, there are three areas:
(1) The areas offshore the Gulf of Mexico and Atlantic Coast;
(2) The area offshore the Pacific Coast States of California,
Oregon, Washington, and Hawaii; and
(3) The area offshore the Coast of Alaska.
(c) If, as the result of a default, the surety on a right-of-way
grant bond makes payment to the Government of any indebtedness under a grant secured by the
bond, the face amount of such bond and the surety’s liability shall be reduced by the
amount of such payment.
(d) After a default, a new bond in the amount of $300,000 shall
be posted within 6 months or such shorter period as the Regional Supervisor may
direct. Failure to post a new bond shall be grounds for forfeiture of all grants covered
by the defaulted bond.
§ 250.1409 What are my appeal rights?
(a) When you receive the Reviewing Officer’s final decision, you
have 60 days to either pay the penalty or file an
appeal in accordance with 30 CFR part 290, subpart A.
(b) If you file an appeal, you must either:
(1) Submit a surety bond in the amount of the penalty to the Regional
Adjudication Office in the Region where the penalty
was assessed, following instructions that the
Reviewing Officer will include in the final decision; or
(2) Notify the Regional Adjudication Office, in the Region where the penalty was
assessed, that you want your lease specific/ area-wide bond on file to be
used as the bond for the penalty amount.
(c) If you choose the alternative in paragraph (b)(2) of this section, the
Regional Director may require additional security ( i.e.,
security in excess of your existing bond) to ensure
sufficient coverage during an appeal. In that event, the Regional
Director will require you to post the supplemental
bond with the regional office in the same manner as under §§
256.53(d) through (f) of this chapter. If the Regional Director
determines the appeal should be covered by a
lease-specific abandonment account then you must establish an
account that meets the requirements of § 256.56.
(d) If you do not either pay the penalty or file a timely appeal, MMS
will take one or more of the following actions:
(1) We will collect the amount you were assessed, plus interest, late payment
charges, and other fees as provided by law, from the date you received
the Reviewing Officer’s final decision until the date
we receive payment;
(2) We may initiate additional enforcement, including, if appropriate,
cancellation of the lease, right-of-way, license,
permit, or approval, or the forfeiture of a bond under this
part; or
(3) We may bar you from doing further business with the Federal Government
according to Executive Orders 12549 and 12689, and
section 2455 of the Federal Acquisition Streamlining
Act of 1994, 31 U.S.C. 6101. The Department of the Interior’s regulations
implementing these authorities are found at 43 CFR part 12, subpart D.
§ 251.7 Test drilling activities under a permit
(d) Bonding requirements.
You must submit a bond under this part before you may start a
deep stratigraphic test.
(1) Before MMS issues a permit authorizing the drilling of a deep stratigraphic
test, you must either:
(i) Furnish to MMS a bond of not less than $200,000 that guarantees compliance
with all the terms and conditions of the permit; or
(ii) Maintain a $1 million bond that guarantees compliance with all the
terms and conditions of the permit you hold for the
OCS area where you propose to drill.
(2) You must provide additional security to MMS if the Regional Director
determines that it is necessary for the permit or
area.
(3) The Regional Director may require you to provide a bond, in an amount the
Regional Director prescribes, before authorizing you
to drill a shallow test well.
(4) Your bond must be on a form approved by the Associate Director for Offshore
Minerals Management.
Subpart I—Bonding
§ 256.52 Bond requirements for an oil and gas or sulphur lease.
This section establishes bond requirements for the lessee of an
OCS oil and gas or sulphur lease.
(a) Before MMS will issue a new lease or approve the assignment of an
existing lease to you as lessee, you or another record
title owner for the lease must:
(1) Maintain with the Regional Director a $50,000 lease bond that guarantees
compliance with all the terms and conditions of the
lease; or
(2) Maintain a $300,000 areawide bond that guarantees compliance with all the
terms and conditions of all your oil and gas and
sulphur leases in the area where the lease is located;
or
(3) Maintain a lease or areawide bond in the amount required in § 256.53(a) or
(b) of this part.
(b) For the purpose of this section, there are three areas. The area offshore
the Atlantic Coast is included in the Gulf of Mexico.
Areawide bonds issued in the Gulf of Mexico will cover
oil and gas or sulphur operations offshore the Atlantic Coast.
The three areas
are:
(1) The Gulf of Mexico and the area offshore the Atlantic Coast.
(2) The area offshore the Pacific Coast States of California, Oregon,
Washington, and Hawaii; and
(3) The area offshore the Coast of Alaska.
(c) The requirement to maintain a lease bond (or substitute security
instruments) under paragraph (a)(1) of this section
and § 256.53 (a) and (b) is satisfied if your operator
provides a lease bond in the required amount that guarantees compliance with all
the terms and conditions of the lease.
Your operator
may use an areawide bond under this paragraph to
satisfy your bond obligation.
(d) If a surety makes payment to the United States under a bond or alternative
form of security maintained under this section, the
surety’s remaining liability under the bond or
alternative form of security is reduced by the amount of that payment.
See
paragraph (e) of this section for the requirement to
replace the reduced bond coverage.
(e) If the value of your surety bond or alternative security is reduced because
of a default, or for any other reason, you must
provide additional bond coverage sufficient to meet the
security required under this subpart within 6 months, or such shorter
period of time as the Regional Director may direct.
(f) You may pledge U.S. Department of the Treasury (Treasury) securities instead
of a bond. The Treasury securities you pledge must be
negotiable for an amount of cash equal to the value of
the bond they replace.
(1) If you pledge Treasury securities under this paragraph (f), you must monitor
their value. If their market value falls below the
level of bond coverage required under this subpart,
you must pledge additional Treasury securities to raise the value of the
securities pledged to the required amount.
(2) If you pledge Treasury securities, you must include authority for the
Regional Director to sell them and use the proceeds
when the Regional Director determines that you fail to
satisfy any lease obligation.
(g) You may pledge alternative types of security instruments instead of
providing a bond if the Regional Director determines
that the alternative security protects the interests of
the United States to the same extent as the required bond.
(1) If you pledge an alternative type of security under this paragraph, you must
monitor the security’s value. If its market value
falls below the level of bond coverage required under
this subpart, you must pledge additional securities to raise the value of the
securities pledged to the required amount.
(2) If you pledge an alternative type of security, you must include authority
for the Regional Director to sell the security and use
the proceeds when the Regional Director determines
that you failed to satisfy any lease obligation.
(h) If you fail to replace a deficient bond or to provide additional bond
coverage upon demand, the Regional Director may:
(1) Assess penalties under part 250, subpart N of this chapter;
(2) Suspend production and other operations on your leases in accordance with §
250.110 of this chapter; and
(3) Initiate action to cancel your lease.
§ 256.53 Additional bonds.
(a) This paragraph explains what bonds the lessee must provide
before lease exploration activities commence.
(1)(i) You must furnish the Regional Director a $200,000 bond that guarantees
compliance with all the terms and conditions of the lease by the earliest
of:
(A) The date you submit a proposed Exploration Plan (EP) for approval;
(B) The date you submit a request for approval of the assignment of a lease on
which an EP has been approved; or
(C) December 8, 1997, for any lease for which an EP has been approved.
(ii) The Regional Director may authorize you to submit the $200,000 lease
exploration bond after you submit an EP but before
he/she approves drilling activities under the EP.
(iii) You may satisfy the bond requirement of this paragraph (a) by
providing a new bond or by increasing the amount of
your existing bond.
(2) A $200,000 lease exploration bond pursuant to paragraph (a)(1) of this
section need not be submitted and maintained if the
lessee either:
(i) Furnishes and maintains an areawide bond in the sum of $1 million issued by
a qualified surety and conditioned on compliance with
all the terms and conditions of oil and gas and
sulphur leases held by the lease on the OCS for the area in which the lessee
is situated; or
(ii) Furnishes and maintains a bond pursuant to paragraph (b)(2) of this
section.
(b) This paragraph explains what bonds you (the lessee) must provide before
lease development and production activities commence.
(1)(i) You must furnish the Regional Director a $500,000 bond that
guarantees compliance with all the terms and
conditions of the lease by the earliest of:
(A) The date you submit a proposed Development and Production Plan (DPP)
or Development Operations Coordination Document (DOCD)
for approval;
(B) The date you submit a request for approval of the assignment of a lease on
which a DPP or DOCD has been approved; or
(C) December 8, 1997, for any lease for which a DPP or DOCD has been
approved.
(ii) The Regional Director may authorize you to submit the $500,000 lease
development bond after you submit a DPP or DOCD, but
before he/she approves the installation of a platform
or the commencement of drilling activities under the DPP or DOCD.
(iii) You may satisfy the bond requirement of this paragraph by providing a new
bond or by increasing the amount of your existing
bond.
(2) The lessee need not submit and maintain a $500,000 lease development bond
pursuant to paragraph (b)(1) of this section if the
lessee furnishes and maintains an areawide bond in the
sum of $3 million issued by a qualified surety and conditioned on compliance
with all the terms and conditions of oil and gas and
sulphur leases held by the lessee on the OCS for the
area in which the lease is situated.
(c) When a lessee can demonstrate to the satisfaction of the authorized officer
that wells and platforms can be abandoned and removed
and the drilling and platform sites cleared of
obstructions for less than the amount of lease bond coverage required under
paragraph
(b)(1) of this section, the authorized officer may accept a lease surety bond in
an amount less than the prescribed amount but not less
than the amount of the cost for well abandonment,
platform removal, and site clearance.
(d) The Regional Director may determine that additional security (i.e.,
security above the amounts prescribed in §§ 256.52(a)
and 256.53 (a) and (b) of this part) is necessary to
ensure compliance with the obligations under your lease and the regulations in
this chapter.
(1) The Regional Director’s determination will be based on his/her evaluation of
your ability to carry out present and future financial
obligations demonstrated by:
(i) Financial capacity substantially in excess of existing and anticipated lease
and other obligations, as evidenced by audited
financial statements (including auditor’s certificate,
balance sheet, and profit and loss sheet);
(ii) Projected financial strength significantly in excess of existing and future
lease obligations based on the estimated value of your
existing OCS lease production and proven reserves of
future production;
(iii) Business stability based on 5 years of continuous operation and production
of oil and gas or sulphur in the OCS or in the onshore
oil and gas industry;
(iv) Reliability in meeting obligations based on:
(A) Credit rating(s); or
(B) Trade references, including names and addresses of other lessees, drilling
contractors, and suppliers with whom you have dealt;
and
(v) Record of compliance with laws, regulations, and lease terms.
(2) You may satisfy the Regional Director’s demand for additional security by
increasing the amount of your existing bond or by
providing a supplemental bond or bonds.
(e) The Regional Director will determine the amount of supplemental bond
required to guarantee compliance. The Regional
Director will consider potential underpayment of
royalty and cumulative obligations to abandon wells, remove platforms and
facilities, and clear the seafloor of obstructions in
the Regional Director’s case-specific analysis.
(f) If your cumulative potential obligations and liabilities either increase or
decrease, the Regional Director may adjust the amount
of supplemental bond required.
(1) If the Regional Director proposes an adjustment, the Regional Director will:
(i) Notify you and the surety of any proposed adjustment to the amount of
bond required; and
(ii) Give you an opportunity to submit written or oral comment on the
adjustment.
(2) If you request a reduction of the amount of supplemental bond required, you
must submit evidence to the Regional Director
demonstrating that the projected amount of royalties
due the Government and the estimated costs of lease abandonment and cleanup
are less than the required bond amount. If the Regional Director finds
that the evidence you submit is convincing, he/ she
may reduce the amount of supplemental bond required.
§ 256.54 General requirements for bonds.
(a) Any bond or other security that you, as lessee or operator,
provide under this part must:
(1) Be payable upon demand to the Regional Director;
(2) Guarantee compliance with all of your obligations under the lease and
regulations in this chapter; and
(3) Guarantee compliance with the obligations of all lessees, operating rights
owners and operators on the lease.
(b) All bonds and pledges you furnish under this part must be on a form or in a
form approved by the Associate Director for Offshore
Minerals Management. Surety bonds
must be issued by a surety that the Treasury certifies as an acceptable
surety on Federal bonds and that is listed in the
current Treasury Circular No. 570. You may
obtain a copy of the current Treasury Circular No.
570 from the Surety Bond Branch, Financial Management
Service, Department of the Treasury, East-West Highway,
Hyattsville, MD 20782.
(c) You and a qualified surety must execute your bond.
When either party is a
corporation, an authorized official for the party must sign the bond and
attest to it by an imprint of the corporate seal.
(d) Bonds must be noncancellable, except as provided in § 256.58 of this
part. Bonds must
continue in full force and effect even though an event occurs that could
diminish, terminate, or cancel a surety obligation
under State surety law.
(e) Lease bonds must be:
(1) A surety bond;
(2) Treasury securities as provided in § 256.52(f);
(3) Another form of security approved by the Regional Director; or
(4) A combination of these security methods.
(f) You may submit a bond to the Regional Director executed on a form
approved under paragraph (b) of this section that you
have reproduced or generated by use of a computer.
If you do this, and if the document omits terms or conditions contained
on the form approved by the Associate Director for
Offshore Minerals Management the bond you submit will
be deemed to contain the omitted terms and conditions.
§ 256.55 Lapse of bond.
(a) If your surety becomes bankrupt, insolvent, or has its
charter or license suspended or revoked, any bond
coverage from that surety terminates immediately. In
that event, you must promptly provide a new bond in
the amount required under §§ 256.52 and 256.53 of this
part to the Regional Director and advise the Regional Director of the lapse in
your previous bond.
(b) You must notify the Regional Director of any action filed alleging
that you, your surety, or guarantor are insolvent or
bankrupt. You must notify the Regional Director
within 72 hours of learning of such an action. All
bonds must require the surety to provide this
information to you and directly to MMS.
§ 256.56 Lease-specific abandonment accounts.
(a) The Regional Director may authorize you to establish a
lease-specific abandonment account in a federally
insured institution in lieu of the bond required under §
256.53(d). The account must provide that,
except as provided in paragraph (a)(3) of this section,
funds may not be withdrawn without the written approval of the Regional
Director.
(1) Funds in a lease-specific abandonment account must be payable upon demand to
MMS and pledged to meet the lessee’s obligations under § 250.1703 of this
chapter.
(2) You must fully fund the lease-specific abandonment account to cover
all the costs of lease abandonment and site clearance
as estimated by MMS within the timeframe the Regional
Director prescribes.
(3) You must provide binding instructions under which the institution managing
the account is to purchase Treasury securities pledged
to MMS under paragraph (d) of this section.
(b) Any interest paid on funds in a lease-specific abandonment account will be
treated as other funds in the account unless the
Regional Director authorizes in writing the payment of
interest to the party who deposits the funds.
(c) The Regional Director may allow you to pledge Treasury securities that are
made payable upon demand to the Regional Director to
satisfy your obligation to make payments into a
lease-specific abandonment account.
(d) Before the amount of funds in a lease-specific abandonment account equals
the maximum insurable amount as determined by the
Federal Deposit Insurance Corporation or the Federal
Savings and Loan Insurance Corporation, the institution managing the
account must use the funds in the account to purchase Treasury securities
pledged to MMS under paragraph (c) of this section.
The institution managing the lease specific
abandonment account will join with the Regional
Director to establish a Federal Reserve Circular 154
account to hold these Treasury securities, unless the Regional Director
authorizes the managing institution to retain the pledged Treasury
securities in a separate trust account.
You may obtain a copy of the current Treasury
Circular No. 154 from the Surety Bond Branch,
Financial Management Service, Department of the Treasury, East-West Highway,
Hyattsville, MD 20782.
(e) The Regional Director may require you to create an overriding royalty
or production payment obligation for the benefit of a
lease-specific account pledged for the abandonment and
clearance of a lease. The required obligation
may be associated with oil and gas or sulphur
production from a lease other than the lease bonded through the lease-specific
abandonment account.
§ 256.57 Using a third-party guarantee instead of a bond.
(a) When the Regional Director may accept a third-party
guarantee. The Regional Director may accept a
third-party guarantee instead of an additional bond under §
256.53(d) if:
(1) The guarantee meets the criteria in paragraph (c) of this section;
(2) The guarantee includes the terms specified in paragraph (d) of this section;
(3) The guarantor’s total outstanding and proposed guarantees do not exceed 25
percent of its unencumbered net worth in the United
States; and
(4) The guarantor submits an indemnity agreement meeting the criteria in
paragraph (e) of this section.
(b) What to do if your guarantor becomes unqualified.
If, during
the life of your third-party
guarantee, your guarantor no longer meets the criteria of paragraphs (a)(3) and
(c)(3) of this section, you must:
(1) Notify the Regional Director immediately; and
(2) Cease production until you comply with the bond coverage requirements
of this subpart.
(c) Criteria for acceptable guarantees. If you propose to furnish
a third party’s guarantee, that guarantee must ensure
compliance with all lessees’ lease obligations, the obligations
of all operating rights owners, and the obligations of all operators on
the lease. The Regional Director will base acceptance
of your third-party guarantee on the following
criteria:
(1) The period of time that your third-party guarantor (guarantor) has
been in continuous operation as a business entity
where:
(i) Continuous operation is the time that your guarantor conducts business
immediately before you post the guarantee; and
(ii) Continuous operation excludes periods of interruption in operations
that are beyond your guarantor’s control and that do
not affect your guarantor’s likelihood of remaining in
business during exploration, development, production, abandonment, and clearance
operations on your lease.
(2) Financial information available in the public record or submitted by
your guarantor, on your guarantor’s own initiative, in
sufficient detail to show to the Regional Director’s
satisfaction that your guarantor is qualified based on:
(i) Your guarantor’s current rating for its most recent bond issuance by either
Moody’s Investor Service or Standard and Poor’s
Corporation;
(ii) Your guarantor’s net worth, taking into account liabilities under its
guarantee of compliance with all the terms and
conditions of your lease, the regulations in this chapter,
and your guarantor’s other guarantees;
(iii) Your guarantor’s ratio of current assets to current liabilities, taking
into account liabilities under its guarantee of
compliance with all the terms and conditions of your
lease and the regulations in this chapter and your guarantor’s other guarantees;
and
(iv) Your guarantor’s unencumbered fixed assets in the United States.
(3) When the information required by paragraph (c) of this section is not
publicly available, your guarantor may submit the
information in the following table. Your guarantor
must update the information annually within 90 days of the end of the fiscal
year or by the date prescribed by the Regional Director.
| The guarantor should submit— |
that— |
|
(i) Financial statements for the most
recently completed fiscal year.
|
Include a report by an independent
certified public accountant containing the
accountant’s audit opinion or review opinion of
the statements. The report must be prepared in
conformance with generally accepted accounting
principles and contain no adverse opinion.
|
|
(ii) Financial statements for completed
quarters in the current fiscal year. |
Your guarantor’s financial officer certifies
to be correct.
|
|
(iii) Additional information as requested by
the Regional Director. |
Your guarantor’s financial officer certifies
to be correct.
|
(d) Provisions required in all third-party guarantees.
Your third-party guarantee must contain each of the
following provisions.
(1) If you, your operator, or an operating rights owner fails to
comply with any lease term or regulation, your guarantor must either:
(i) Take corrective action; or
(ii) Be liable under the indemnity agreement to provide, within
7 calendar days, sufficient funds for the Regional Director to complete corrective action.
(2) If your guarantor complies with paragraph (d)(1) of this
section, this compliance will not reduce its liability.
(3) If your guarantor wishes to terminate the period of
liability under its guarantee, it must:
(i) Notify you and the Regional Director at least 90 days before
the proposed termination date;
(ii) Obtain the Regional Director’s approval for the termination
of the period of liability for all or a specified portion of your guarantor’s guarantee;
and
(iii) Remain liable for all work and workmanship performed
during the period that your guarantor’s guarantee is in effect.
(4) You must provide a suitable replacement security instrument
before the termination of the period of liability under your third-party guarantee.
(e) Required criteria for indemnity agreements. If the
Regional Director approves your third-party guarantee, the guarantor must submit an indemnity
agreement.
(1) The indemnity agreement must be executed by your guarantor
and all persons and parties bound by the agreement.
(2) The indemnity agreement must bind each person and party
executing the agreement jointly and severally.
(3) When a person or party bound by the indemnity agreement is a
corporate entity, two corporate officers who are authorized to bind the corporation
must sign the indemnity agreement.
(4) Your guarantor and the other corporate entities bound by the
indemnity agreement must provide the Regional Director copies of:
(i) The authorization of the signatory corporate officials to
bind their respective corporations;
(ii) An affidavit certifying that the agreement is valid under
all applicable laws; and
(iii) Each corporation’s corporate authorization to execute the
indemnity agreement.
(5) If your third-party guarantor or another party bound by the
indemnity agreement is a partnership, joint venture, or syndicate, the indemnity
agreement must:
(i) Bind each partner or party who has a beneficial interest in
your guarantor; and
(ii) Provide that, upon demand by the Regional Director under
your third-party guarantee, each partner is jointly and severally liable for compliance with
all terms and conditions of your lease.
(6) When forfeiture is called for under § 256.59 of this part,
the indemnity agreement must provide that your guarantor will either:
(i) Bring your lease into compliance; or
(ii) Provide, within 7 calendar days, sufficient funds to permit
the Regional Director to complete corrective action.
(7) The indemnity agreement must contain a confession of
judgment. It must provide
that, if the Regional Director determines that you, your
operator, or an operating rights owner is in default of the lease, the guarantor:
(i) Will not challenge the determination; and
(ii) Will remedy the default.
(8) Each indemnity agreement is deemed to contain all terms and
conditions contained in this paragraph (e), even if the guarantor has omitted them.
§ 256.58 Termination of the period of liability and cancellation
of a bond.
This section defines the terms and conditions under which MMS
will terminate the period of liability of a bond or cancel a bond.
Terminating the period
of liability of a bond ends the period during which obligations continue to accrue but does
not relieve the surety of the responsibility for obligations that accrued during the
period of liability. Canceling a
bond relieves the surety of all liability. The liabilities that
accrue during a period of liability include obligations that started to accrue prior to
the beginning of the period of liability and had not been met and obligations that begin
accruing during the period of liability.
(a) When the surety under your bond requests termination:
(1) The Regional Director will terminate the period of liability
under your bond within 90 days after MMS receives the request; and
(2) If you intend to continue operations, or have not met all
end of lease obligations, you must provide a replacement bond of an equivalent amount.
(b) If you provide a replacement bond, the Regional Director
will cancel your previous bond and the surety that provided your previous bond will not
retain any liability, provided that:
(1) The new bond is equal to or greater than the bond that was
terminated, or you provide an alternative form of security, and the Regional Director
determines that the alternative form of security provides a level of security equal to or
greater than that provided for by the bond that was terminated;
(2) For a base bond submitted under § 256.52(a) or under §
256.53(a) or (b), the surety issuing the new bond agrees to assume all outstanding
liabilities that accrued during the period of liability that was terminated; and
(3) For supplemental bonds submitted under § 256.53(d), the
surety issuing the new supplemental bond agrees to assume that portion of the
outstanding liabilities that accrued during the period of liability which was terminated and
that the Regional Director determines may exceed the coverage of the base bond,
and of which the Regional Director notifies the provider of the bond.
(c) This paragraph applies if the period of liability is
terminated for a bond but the bond is not replaced by a bond of an equivalent amount.
The surety
that provided your terminated bond will continue to be responsible for accrued
obligations:
(1) Until the obligations are satisfied; and
(2) For additional periods of time in accordance with paragraph
(d) of this section.
(d) When your lease expires or is terminated, the surety that
issued a bond will continue to be responsible, and the Regional Director will retain other
forms of security as shown in the following table:
| For the following type
of bond |
The period of liability
will end |
Your bond will be cancelled . . . |
|
(1) Base bonds submitted under
§ 256.52(a), § 256.53(a),
or (b). |
When the Regional Director
determines that you have met all
of your obligations under the lease. |
Seven years after the termination of the lease, 6 years
after completion of all bonded obligations, or at
the conclusion of any appeals or litigation
related to your bonded obligation, whichever is
the latest. The Regional Director will
reduce the amount of your bond or return a portion
of your security if the Regional Director
determines that you need less than the full amount
of the base bond to meet any possible future
problems.
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(2) Supplemental bonds
submitted under § 256.53(d). |
When the Regional Director
determines that you have
met all your obligations covered
by the supplemental bond. |
When you meet your bonded obligations, unless the
Regional Director:
(i) Determines that the future potential liability resulting
from any undetected problems is greater than the amount
of the base bond; and
(ii) Notifies the provider of the bond that the Regional
Director will wait 7 years before canceling all or a part of
the bond (or longer period as necessary to complete any
appeals or judicial litigation related to your bonding
obligation). |
(e) For all bonds, the Regional Director may reinstate your bond
as if no cancellation or release had occurred if:
(1) A person makes a payment under the lease and the payment is rescinded or
must be repaid by the recipient because the person
making the payment is insolvent, bankrupt, subject to
reorganization, or placed in receivership; or
(2) The responsible party represents to MMS that it has discharged its
obligations under the lease, and the representation
was materially false when the bond was canceled or
released.
§ 256.59 Forfeiture of bonds and/or
other securities.
This section explains how a bond or other security may be forfeited.
(a) The Regional Director will call for forfeiture of all or
part of the bond, other form of security, or guarantee
you provide under this part if:
(1) You (the party who provided the bond) refuse, or the Regional Director
determines that you are unable, to comply with any
term or condition of your lease; or
(2) You default under one of the conditions under which the Regional Director
accepts your bond, third-party guarantee, and/or other
form of security.
(b) The Regional Director may pursue forfeiture of your bond without first
making demands for performance against any lessee,
operating rights owner, or other person authorized to
perform lease obligations.
(c) The Regional Director will:
(1) Notify you, the surety on your bond or other form of security, and any
third-party guarantor, of his/her determination to
call for forfeiture of the bond, security, or
guarantee under this section.
(i) This notice will be in writing and will provide the reasons for the
forfeiture and the amount to be forfeited.
(ii) The Regional Director must base the amount he/she determines is forfeited
upon his/her estimate of the total cost of corrective
action to bring your lease into compliance.
(2) Advise you, your third-party guarantor, and any surety, that you, your
guarantor, and any surety may avoid forfeiture if,
within 5 working days:
(i) You agree to, and demonstrate that you will, bring your lease into
compliance within the timeframe that the Regional
Director prescribes;
(ii) Your third-party guarantor agrees to, and demonstrates that it will,
complete the corrective action to bring your lease
into compliance within the timeframe that the Regional
Director prescribes; or
(iii) Your surety agrees to, and demonstrates that it will, bring your lease
into compliance within the timeframe that the Regional
Director prescribes, even if the cost of compliance
exceeds the face amount of the bond or other surety instrument.
(d) If the Regional Director finds you are in default, he/she may cause the
forfeiture of any bonds and other security deposited
as your guarantee of compliance with the terms and
conditions of your lease and the regulations in this chapter.
(e) If the Regional Director determines that your bond and/or other
security is forfeited, the Regional Director will:
(1) Collect the forfeited amount; and
(2) Use the funds collected to bring your leases into compliance and to correct
any default.
(f) If the amount the Regional Director collects under your bond and other
security is insufficient to pay the full cost of
corrective actions he/she may:
(1) Take or direct action to obtain full compliance with your lease and the
regulations in this chapter; and
(2) Recover from you, any co-lessee, operating rights owner, and/or any
third-party guarantor responsible under this subpart
all costs in excess of the amount he/she collects
under your forfeited bond and other security.
(g) The amount that the Regional Director collects under your forfeited bond and
other security may exceed the costs of taking the
corrective actions required to obtain full compliance
with the terms and conditions of your lease and the regulations in this
chapter. In this case, the Regional Director will return the excess funds
to the party from whom they were collected.
§ 281.33 Bonds and bonding requirements.
(a) When the leasing notice specifies that payment of a portion
of the bonus bid can be deferred, the lessee shall be
required to submit a surety or personal bond to guarantee
payment of a deferred portion of the bid. Upon the payment of the full
amount of the cash bonus bid, the lessee’s bond will
be released.
(b) All bonds to guarantee payment of the deferred portion of the high cash
bonus bid furnished by the lessee must be in a form or
on a form approved by the Associate Director for
Offshore Minerals Management. A single copy of the required form is to be
executed by the principal or, in the case of surety bonds, by both the
principal and an acceptable surety.
(1) Only those surety bonds issued by qualified surety companies approved
by the Department of the Treasury shall be accepted.
(See Department of the Treasury Circular No. 570 and
any supplemental or replacement circulars.)
(2) Personal bonds shall be accompanied by a cashier’s check, certified check,
or negotiable U.S. Treasury bonds of an equal value to
the amount specified in the bond. Negotiable Treasury
bonds shall be accompanied by a proper conveyance of full
authority to the Director to sell such securities in case of default in
the performance of the terms and conditions of the
lease.
(c) Prior to the commencement of any activity on a lease(s), the lessee shall
submit a surety or personal bond as described in §
282.40 of this title. Prior to the approval of a
Delineation, Testing, or Mining Plan, the bond amount shall be adjusted, if
appropriate, to cover the operations and activities
described in the proposed plan.
Subpart D—Payments
§ 282.40 Bonds.
(a) Pursuant to the requirements for a bond in § 281.33 of this
title, prior to the commencement of any activity on a
lease, the lessee shall submit a surety or personal
bond to cover the lessee’s royalty and other obligations under the lease as
specified in this section.
(b) All bonds furnished by a lessee or operator must be in a form
approved by the Associate Director for Offshore
Minerals Management. A single copy of the required
form is to be executed by the principal or, in the case of surety bonds, by both
the principal and an acceptable surety.
(c) Only those surety bonds issued by qualified surety companies approved by the
Department of the Treasury shall be accepted. (See Department of Treasury
Circular No. 570 and any supplemental or replacement
circulars.)
(d) Personal bonds shall be accompanied by a cashier’s check, certified check,
or negotiable U.S. Treasury bonds of an equal value to
the amount specified in the bond. Negotiable Treasury
bonds shall be accompanied by a proper conveyance of full
authority to the Director to sell such securities in case of default in
the performance of the terms and conditions of the
lease.
(e) A bond in the minimum amount of $50,000 to cover the lessee’s obligations
under the lease shall be submitted prior to the
commencement of any activity on a leasehold. A $50,000
bond shall not be required on a lease if the lessee already maintains or
furnishes a $300,000 bond conditioned on compliance
with the terms of leases for OCS minerals other than
oil, gas, and sulphur held by the lessee on the OCS for the area in which the
lease is located. A bond submitted pursuant to § 256.58(a) of this
chapter may be amended to include the aforementioned
condition for compliance. Prior to approval of a
Delineation, Testing, or Mining Plan, the bond amount shall be adjusted, if
appropriate, to cover the operations and activities
described in the proposed plan.
(f) For the purposes of this section there are four areas:
(1) The Gulf of Mexico;
(2) The area offshore the Pacific Coast States of California, Oregon,
Washington, and Hawaii;
(3) The area offshore the coast of Alaska; and
(4) The area offshore the Atlantic coast.
(g) A separate bond shall be required for each area. An operator’s bond may be
submitted for a specific lease(s) in the same amount
as the lessee’s bond(s) applicable to the lease(s)
involved.
(h) Where, upon a default, the surety makes a payment to the United States of an
obligation incurred under a lease, the face amount of the surety bond and
the surety’s liability thereunder shall be reduced by
the amount of such payment.
(i) After default, the principal shall, within 6 months after notice or within
such shorter period as may be fixed by the Director,
either post a new bond or increase the existing bond
to the amount previously held. In lieu thereof, the principal may, within that
time, file separate or substitute bonds for each
lease. Failure to meet these requirements may result
in a suspension of operations including production on leases covered by such
bonds.
(j) The Director shall not consent to termination of the period of liability of
any bond unless an acceptable alternative bond has
been filed or until all the terms and conditions of
the lease covered by the bond have been met.
§ 290.7 Do I have to comply with the
decision or order while my appeal is pending?
(a) The decision or order is effective during the 60-day period
for filing an appeal under §290.3 unless:
(1) OMM notifies you that the decision or order, or some portion of it, is
suspended during this period because there is no
likelihood of immediate and irreparable harm to human
life, the environment, any mineral deposit, or property; or
(2) You post a surety bond under 30 CFR 250.1409 pending the appeal
challenging an order to pay a civil penalty.
(b) This section applies rather than 43 CFR 4.21(a) for appeals of OMM orders.
(c) After you file your appeal, IBLA may grant a stay of a decision or order
under 43 CFR 4.21(b); however, a decision or order
remains in effect until IBLA grants your request for a
stay of the decision or order under appeal.
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