§ 556.900 - Financial assurance requirements for an oil and gas or sulfur lease.

§ 556.900 Bond Financial assurance requirements for an oil and gas or sulfur lease.

Cross Reference

Link to an amendment published at 89 FR 31593, Apr. 24, 2024.

Cross Reference

Link to an amendment published at 89 FR 47081, May 31, 2024.

This section establishes bond financial assurance requirements for the lessee of an OCS oil and gas or sulfur lease.

(a) Before BOEM will issue a new lease to you as the lessee, you or another lessee for the lease must comply with one of the options in paragraphs (a)(1) through (3) of this section. Before BOEM will approve the assignment of a record title interest in an existing lease to you as the lessee, you or another record title owner lessee for the lease must :

(1)

provide any supplemental financial assurance required by the Regional Director and also comply with one of the options in paragraphs (a)(1) through (3).

(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 area-wide bond that guarantees compliance with all the terms and conditions of all your oil and gas and sulfur leases in the area where the lease is located; or

(3) Maintain a lease or area-wide bond in the amount required in § 556.901(a) or (b).

(b) For the purpose of this section, there are three areas. 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 instrument) under paragraph (a)(1) of this section and § 556.901(a) and (b) may be satisfied if your operator or an operating rights owner provides a lease bond in the required amount that guarantees compliance with all the terms and conditions of the lease. Your operator or an operating rights owner 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 United States 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 in the event that the Regional Director determines that you fail to satisfy any lease obligation.

(g) You may pledge provide alternative types of security instruments financial assurance instead of providing a surety bond if the Regional Director determines that the alternative security financial assurance protects the interests of the United States to the same extent as the required a surety 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 financial assurance or to provide additional bond coverage supplemental financial assurance upon demand, the Regional Director may:

(1) Assess penalties under part 550, subpart N of this chaptersubchapter;

(2) Suspend Request BSEE to suspend production and other operations on your leases lease in accordance with 30 CFR § 250.173 of this title; and/or

(3) Initiate action to cancel your lease.

(i) In the event you amend your area-wide surety bond covering lease obligations, or obtain a new area-wide lease surety bond, to cover the financial assurance requirements for any RUE(s), your area-wide lease surety bond may be called in whole or in part to cover any or all the obligations on which you default that are associated with your RUE(s) located in the area covered by such area-wide lease surety bond.

[81 FR 18152, Mar. 30, 2016, as amended at 89 FR 31593, Apr. 24, 2024]