§ 556.906 - Termination of the period of liability and cancellation of financial assurance.

§ 556.906 Termination of the period of liability and cancellation of a bond.

Cross Reference

Link to an amendment published at 89 FR 31596, Apr. 24, 2024.

financial assurance.

This section defines the terms and conditions under which BOEM will terminate the period of liability of a bond , or cancel a bond, financial assurance. Terminating the period of liability of a bond ends the period during which obligations continue to accrue, but does not relieve the surety financial assurance provider of the responsibility for obligations that accrued during the period of liability. Canceling a bond financial assurance instrument relieves the surety financial assurance provider 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 you or the surety under your bond requests your financial assurance provider request termination:

(1) The Regional Director will terminate the period of liability under your bond financial assurance within 90 calendar days after BOEM receives the request; and

(2) If you intend to continue operations, or have not met all decommissioning obligations, within 90 calendar days after BOEM receives your termination request, you must provide a replacement bond financial assurance of an equivalent amount.

(b) If you provide a replacement bondfinancial assurance, the Regional Director will cancel your previous bond financial assurance and the surety that provided your previous bond previous financial assurance provider will not retain any liability, provided that:

(1) The amount of the new bond financial assurance is equal to or greater than that of the bond financial assurance that was terminatedcancelled, or you provide an alternative form of securityfinancial assurance, and the Regional Director determines that the alternative form of security financial assurance provides a level of security equal to or greater than that provided for by the bond that was terminatedfinancial assurance that is proposed to be cancelled;

(2) For a base bond financial assurance submitted under § 556.900(a) or under , § 556.901(a) or (b), the surety issuing the new bond § 550.166(a) of this subchapter, or § 550.1011(a) of this subchapter, the new financial assurance provider agrees to assume all outstanding liabilities obligations that accrued during the period of liability that was terminated; and

(3) For additional bonds supplemental financial assurance submitted under § 556.901(d), the surety issuing the new additional bond § 550.166(b) of this subchapter, or § 550.1011(d) of this subchapter, the new financial assurance provider agrees to assume that portion of the outstanding liabilities obligations that accrued during the period of liability that 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 bondfinancial assurance submitted under § 556.900(a), § 556.901(a) or (b), § 550.166(a) of this subchapter, or § 550.1011(a) of this subchapter. The Regional Director will notify the provider of the new financial assurance of the amount required.

(c) This paragraph (c) applies if the period of liability is terminated for a bond, but the bond financial assurance is not replaced by a bond with financial assurance of an equivalent amount . The surety that provided your terminated bond pursuant to paragraph (b) of this section. The financial assurance provider will continue to be responsible for accrued obligationsobligations that accrued prior to the termination of the period of liability:

(1) Until the obligations are satisfied; and

(2) For additional periods of time in accordance with paragraph (d) of this section.

(d) When BOEM will cancel the financial assurance for your lease expires or is terminated, the surety that issued a bond will continue to be responsible, grant, and the Regional Director will retain other forms of security return any pledged financial assurance, as shown in the following table:

For the following type of bond	The period of liability will end	Your bond :	Your financial assurance will be reduced or cancelled, or your pledged financial assurance will be returned:
(1) Base bonds Financial assurance submitted under § 556.900(a), § 556.901(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 , § 550.166(a) of this subchapter, or § 550.1011(a) of this subchapter. (i) 7 years after the lease or grant expires or is terminated, 6 years after the Regional Director determines that you have completed all covered obligations, or at the conclusion of any appeals or litigation related to your bonded obligationcovered obligations, whichever is the latest. The Regional Director will reduce the amount of your bond financial assurance or return a portion of your security pledged financial assurance if the Regional Director determines that you need less than the full amount of the base bond to meet any possible future problems. (2) Additional bonds financial assurance or pledged financial assurance is required to cover any potential obligations. (ii) [Reserved]
(2) Financial assurance submitted under § 556.901(d), § 550.166(b) of this subchapter, or § 550.1011(d) of this subchapter.	(i) When the lease or grant expires or is terminated and the Regional Director determines that you have met all your obligations covered by the additional bond,When you meet your bonded obligations, unless the Regional Director: (iA) Determines that the future potential liability resulting from any undetected problem is greater than the amount of the base bondfinancial assurance submitted under § 556.900(a), § 556.901(a) or (b), § 550.166(a) of this subchapter, or § 550.1011(a) of this subchapter; and (iiB) Notifies the provider of the bond financial assurance submitted under § 556.901(d), § 550.166(b) of this subchapter, or 550.1011(d) of this subchapter that the Regional Director will wait 7 years before cancelling all or a part of the bond such financial assurance (or longer period as necessary to complete any appeals or judicial litigation related to your bonding obligation).

(e) For all bonds

secured obligations). (ii) At any time when: (A) BOEM has determined, using the criteria set forth in § 556.901(d)(1), as applicable, that you no longer need to provide the supplemental financial assurance for your lease, RUE grant, or pipeline ROW grant. (B) The operations for which the supplemental financial assurance was provided ceased prior to accrual of any decommissioning obligation; or, (C) Cancellation of the financial assurance is appropriate because, under the regulations, BOEM determines such financial assurance never should have been required.

(3) Third-party Guarantee under § 556.901(d), § 550.166(b) of this subchapter, or § 550.1011(d) of this subchapter.

(i) When the Regional Director determines you have met your obligations secured by the guarantee (or longer period as necessary to complete any appeals or judicial litigation related to your obligations secured by the guarantee). (ii) [Reserved]

(e) For all financial assurance, the Regional Director may reinstate your bond financial assurance as if no cancellation or release had occurred if:

(1) A person makes a payment under the lease, RUE grant, or pipeline ROW grant, and the payment is rescinded or must be repaid returned 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 BOEM that it has discharged its obligations under the lease, RUE grant, or pipeline ROW grant and the representation was materially false when the bond was canceled or released.financial assurance was cancelled.

[89 FR 39516, Apr. 24, 2024]