§ 556.904 - Decommissioning accounts.

§ 556.904 Lease-specific abandonment accounts.

Cross Reference

Link to an amendment published at 89 FR 31595, Apr. 24, 2024.

Decommissioning accounts.

(a) The Regional Director may authorize you to establish a lease-specific abandonment account decommissioning account(s) in a federally insured institution in lieu of the bond required under financial institution to satisfy a supplemental financial assurance demand made pursuant to § 556.901(d). The account must provide that, except as provided in paragraph (a)(3) of this section, , § 550.166(b) of this subchapter, or § 550.1011(d) of this subchapter. The decommissioning account must be set up in such a manner that funds may not be withdrawn without the written approval of the Regional Director.

(1) Funds in a lease-specific abandonment the account must be used only to meet your decommissioning obligations and must be payable upon demand to BOEM and pledged to meet your decommissioning obligations.

(2) You must fully fund the lease-specific abandonment account to cover all decommissioning costs as estimated by BOEM within the timeframe the BSEE, to the amount, and pursuant to the schedule, that the Regional Director prescribes.

(3) You must provide binding instructions under which the institution managing the account is to purchase Treasury securities pledged to BOEM under paragraph (d) of this section If you fail to make the initial payment or any scheduled payment into the decommissioning account and you fail to correct a missed payment within 30 days, you must immediately submit, and subsequently maintain, a surety bond or other financial assurance in an amount equal to the remaining unfulfilled portion of the supplemental financial assurance demand.

(b) Any interest paid on funds in a lease-specific abandonment decommissioning account will be treated as other become part of the principal funds in the account unless the Regional Director authorizes in writing the payment of the 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 BOEM 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

authorize or require you to create an overriding royalty

or

, production payment obligation, or other revenue stream for the benefit of

a lease-specific account pledged

an account established as financial assurance for the decommissioning of

a lease

your lease(s) or RUE or pipeline ROW grant(s). The

required

obligation may be associated with oil and gas or sulfur production from a lease other than

the

a lease

bonded

or grant secured through the

lease-specific abandonment account.

decommissioning account.

(d) BOEM may provide funds from the decommissioning account to the party that performs the decommissioning in response to a BOEM or BSEE order to perform such decommissioning or to cover the costs thereof. BOEM will distribute the funds from the decommissioning account upon presentation of paid invoices for reasonable and necessary costs incurred by the party performing the decommissioning.

[89 FR 31595, Apr. 24, 2024]