§ 556.907 - Forfeiture of bonds or other financial assurance.

§ 556.907 Forfeiture of bonds and/ or other securities.

Cross Reference

Link to an amendment published at 89 FR 31597, Apr. 24, 2024.

Cross Reference

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

financial assurance.

This section explains how a bond or other security financial assurance may be forfeited.

(a) The Regional Director will call for forfeiture of all or part of the bond, or other form of securityfinancial assurance, or including a guarantee you provide under this part, if:

(1) You (the party who provided the bond) refuse, or , or any party with the obligation to comply, refuse to comply with any term or condition of your lease, RUE grant, pipeline ROW grant, or any BOEM or BSEE order, or any applicable regulation, or the Regional Director determines that you are unable to comply with any term or condition of your leaseso comply; or

(2) You default on one of the conditions under which the Regional Director accepts your bond, third-party guarantee, and/or other form of securityfinancial assurance.

(b) The Regional Director may pursue forfeiture of your surety bond or other financial assurance without first making demands for performance against any lesseeother record title owner, operating rights owner, grant holder, or other person authorized to perform lease or grant obligations.

(c) The Regional Director will:

(1) Notify you, the surety on your bond or other form of security, and any third-party guarantor your surety, guarantor, or the financial institution holding or providing your financial assurance, of a determination to call for forfeiture of your financial assurance, whether it takes the form of a surety bond, securityguarantee, or guarantee under this sectionfunds, or other type of financial assurance.

(i) This notice will be in writing , and will provide the reason for the forfeiture and the amount to be forfeited.

(ii) The Regional Director must base will determine the amount he/she determines is forfeited upon his/her to be forfeited based upon an estimate of the total cost of corrective action to bring your lease or grant into compliance, subject, in the case of a guarantee, to any limitation in the guarantee authorized by § 556.905(b).

(2) Advise you , your third-party guarantor, and any surety that you, your guarantor, and any surety may avoid forfeiture and your financial assurance provider that forfeiture may be avoided if, within five working business days:

(i) You agree to , and demonstrate that you will bring your lease or grant into compliance within the timeframe that the Regional Director prescribes; or

(ii) Your third-party guarantor The provider of your financial assurance 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

or grant 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

that financial assurance.

(d) If the Regional Director finds you are in default , he/she under paragraph (a)(1) or (2) of this section, the Regional Director may cause the forfeiture of any bonds and other security deposited as your guarantee of compliance with financial assurance provided to ensure your compliance with BOEM and BSEE orders, the terms and conditions of your lease or grant, and the regulations in this chapter and 30 CFR chapters II and XII of this title.

(e) If the Regional Director determines that your bond and/or other security financial assurance is forfeited, the Regional Director will:

(1) Collect the forfeited amount; and

(2) Use the funds collected to bring your leases lease or grant into compliance and to correct any default.

(f) If the amount the Regional Director collects under your bond and other security financial assurance is insufficient to pay the full cost of corrective actions he/she action, the Regional Director may:

(1) Take or direct action to obtain full compliance with your lease or grant and the regulations in this chapter; and

(2) Recover from you, any co-lesseeother record title owner, operating rights owner, and/or co-grant holder or, to the extent covered by the guarantee, any third-party guarantor responsible under this subpart, all costs in excess of the amount he/she the Regional Director collects under your forfeited bond and other securityfinancial assurance.

(g) The If the amount that the Regional Director collects under your forfeited bond and other security may exceed financial assurance exceeds the costs of taking the corrective actions action required to obtain full bring your lease or grant into compliance with the its terms and conditions of your lease and the regulations in this chapter and 30 CFR , BOEM and BSEE orders, and chapters II and XII . In of this casetitle, the Regional Director will return the excess funds to the party from whom they were collected.

(h) The Regional Director may pay the funds from the forfeited financial assurance to a co- or predecessor lessee or third party who is taking the corrective action required to obtain partial or full compliance with the regulations, BOEM or BSEE orders, and/or the terms of your lease or grant.

[89 FR 31597, Apr. 24, 2024]