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Notes

30 C.F.R. §§ 585.525–585.529

5 sections in range

§585.525. What general requirements must a financial assurance instrument meet?

30 C.F.R. § 585.525

(a)
Any bond or other acceptable financial assurance instrument that you provide must—
(1)
Be payable to BOEM upon demand; and
(2)
Guarantee compliance of all lessees, grant holders, operators, and payors with all terms and conditions of the lease or grant, any subsequent approvals and authorizations, and all applicable regulations.
(b)
All bonds and other forms of financial assurance must be on or in a form approved by BOEM. You may submit this on an approved form that you have reproduced or generated by use of a computer. If the document you submit omits any terms and conditions that are included on the BOEM-approved form, your bond is deemed to contain the omitted terms and conditions.
(c)
Surety bonds must be issued by an approved surety listed in the current Treasury Circular 570, as required by 31 CFR 223.16. You may obtain a copy of Circular 570 from the Treasury website at https://www.fiscal.treasury.gov/surety-bonds/circular-570.html.
(d)
Your surety bond cannot exceed the underwriting limit listed in the current Treasury Circular 570, except as permitted therein.
(e)
You and a qualified surety must execute your bond. When the surety is a corporation, an authorized corporate officer must sign the bond and attest to it over the corporate seal.
(f)
You may not terminate the period of liability of your bond or cancel your bond, except as provided in this subpart. Bonds must continue in full force and effect even though an event has occurred that could diminish or terminate a surety's obligation under State law.
(g)
Your surety must notify you and BOEM within 5 business days after:
(1)
It initiates any judicial or administrative proceeding alleging its insolvency or bankruptcy; or
(2)
The Treasury decertifies the surety.
Notes, amendments, and revision history

Source

Source: 89 FR 42740, May 15, 2024, unless otherwise noted.

Authority

Authority: 43 U.S.C. 1337.

Source

Source: 88 FR 6430, Jan. 31, 2023, unless otherwise noted.

§585.526. What instruments other than a surety bond may I use to meet the financial assurance requirement?

30 C.F.R. § 585.526

(a)
You may use other types of security instruments, if BOEM determines that such security protects BOEM to the same extent as the surety bond. BOEM will consider pledges of the following:
(1)
U.S. Department of Treasury securities identified in 31 CFR part 225;
(2)
A pledge of cash, in an amount equal to the required dollar amount of the financial assurance, to be deposited and maintained in a Federal depository account of the U.S. Treasury;
(3)
Certificates of deposit or savings accounts in a bank or financial institution organized or authorized to transact business in the United States with:
(i)
Minimum net assets of $500,000,000; and
(ii)
Minimum Bankrate.com Safe & Sound rating of 3 Stars, and Capitalization, Assets, Equity and Liquidity (CAEL) rating of 3 or less;
(4)
Negotiable U.S. Government, State, and municipal securities or bonds having a market value of not less than the required dollar amount of the financial assurance and maintained in a Securities Investors Protection Corporation insured trust account by a licensed securities brokerage firm for the benefit of BOEM;
(5)
Investment-grade rated securities having a Standard and Poor's rating of AAA or an equivalent rating from a nationally recognized securities rating service having a market value of not less than the required dollar amount of the financial assurance and maintained in a Securities Investors Protection Corporation insured trust account by a licensed securities brokerage firm for the benefit of BOEM;
(6)
Insurance, if its form and function is such that the funding or enforceable pledges of funding are used to guarantee performance of regulatory obligations in the event of default on such obligations by the lessee. Insurance must have an A.M. Best rating of “superior” or an equivalent rating from a nationally recognized insurance rating service;
(7)
Letters of credit, subject to the following conditions—
(i)
The letter of credit provider must have an issuer credit rating from a Nationally Recognized Statistical Rating Organization (NRSRO) greater than or equal to investment grade from either Standard & Poor's Ratings Service or Moody's Investor Service, or a proxy credit rating determined by BOEM based on audited financial information (including an income statement, balance sheet, statement of cash flows, and the auditor's certificate) greater than or equal to investment grade from either Standard & Poor's Ratings Service or Moody's Investor Service;
(ii)
The letter of credit must grant BOEM full authority to demand immediate payment in case of default in the performance of the terms and conditions of a lease or regulatory obligations;
(iii)
The letter of credit must be irrevocable during its term and will be subject to collection by BOEM if not replaced by another letter of credit or other form of financial assurance at least 30 calendar days before its expiration date;
(iv)
The expiration date of the letter of credit must not be less than 90 days following the date it becomes effective;
(v)
The letter of credit must contain a provision for automatic renewal for periods of not less than 1 year in the absence of notice of cancellation to BOEM at least 90 calendar days before the expiration date; and
(vi)
The letter of credit must contain a venue provision, which requires any disputes to be adjudicated in a U.S. Federal court that is mutually agreed upon by BOEM and the issuers of the letter of credit;
(8)
Another form of security approved by BOEM in its discretion; or
(9)
A combination of security instruments described in paragraphs (a)(1) through (8) of this section.
(b)
If you use a Treasury security:
(1)
You must post 115 percent of your financial assurance amount;
(2)
You must monitor the collateral value of your security. If the collateral value of your security as determined in accordance with 31 CFR part 203, Collateral Margins Table (which can be found at https://www.treasurydirect.gov), falls below the required level of coverage, you must pledge additional security to provide 115 percent of the required amount; and
(3)
You must include with your pledge authority for us to sell the security and use the proceeds if we determine that you have failed to comply with any of the terms and conditions of your lease or grant, any subsequent approval or authorization, or applicable regulations.
(c)
If you use the instruments described in paragraph (a)(4) or (5) of this section, you must provide BOEM by the end of each calendar year a certified statement describing the nature and market value of the instruments maintained in that account, and including any current statements or reports furnished by the brokerage firm to the lessee concerning the asset value of the account.
Notes, amendments, and revision history

Source

Source: 89 FR 42740, May 15, 2024, unless otherwise noted.

Authority

Authority: 43 U.S.C. 1337.

Source

Source: 88 FR 6430, Jan. 31, 2023, unless otherwise noted.

§585.527. May I demonstrate financial strength and reliability to meet the financial assurance requirement for lease or grant activities?

30 C.F.R. § 585.527

BOEM may allow you to use your financial strength and reliability to meet financial assurance requirements if:
(a)
You have an investment grade issuer credit rating. If any Securities and Exchange Commission (SEC)-recognized NRSRO provides a credit rating that differs from any other SEC-recognized NRSRO credit rating, BOEM will apply the highest rating for the purposes of determining your financial assurance requirements.
(b)
You have a proxy credit rating determined by BOEM, which must be based on audited financial information for the most recent fiscal year (which must include an income statement, balance sheet, statement of cash flows, and the auditor's certificate).
(1)
The audited financial information for your most recent fiscal year must cover a continuous twelve-month period within the twenty-four-month period prior to the lessee's receipt of the determination that you must provide supplemental financial assurance.
(2)
In determining your proxy credit rating, BOEM may include the value of the offshore decommissioning liabilities associated with any lease(s) or grants in which you have an ownership interest. Upon BOEM's request, you must provide the information that BOEM determines is necessary to properly evaluate your offshore decommissioning liabilities, including joint ownership interests and liabilities associated with your OCS leases and grants.
(c)
Your co-lessee or co-grant-holder has an issuer credit rating or a proxy credit rating that meets the criteria set forth in paragraph (a) of this section; however, BOEM may require you to provide financial assurance for decommissioning obligations for which such co-lessee or co-grant-holder is not liable.
(d)
You have a contract with a counterparty that projects net income will exceed three times the estimated decommissioning expenses associated with the facilities that will generate that income.
(e)
If we approve your request to use your financial strength and reliability to meet your financial assurance requirements, you must submit annual updates.
(f)
If the annual updates do not continue to demonstrate financial strength and reliability or BOEM has reason to believe that you are unable to meet the requirements of this section, after notice and opportunity for a hearing, BOEM will terminate your ability to use financial strength and reliability for financial assurance and require you to provide another type of financial assurance. You must provide this new financial assurance instrument within 90 days after we terminate your use of financial strength and reliability.
Notes, amendments, and revision history

Source

Source: 89 FR 42740, May 15, 2024, unless otherwise noted.

Authority

Authority: 43 U.S.C. 1337.

Source

Source: 88 FR 6430, Jan. 31, 2023, unless otherwise noted.

§585.528. May I use a third-party guaranty to meet the financial assurance requirement for lease or grant activities?

30 C.F.R. § 585.528

(a)
You may use a third-party guaranty to secure all or part of the obligations for which financial assurance was demanded by BOEM if the guarantor:
(1)
Meets the credit rating or proxy credit rating criterion set forth in § 585.527(a); and
(2)
Submits an agreement containing each of the provisions in paragraph (d) of this section.
(b)
A third-party guarantor may limit its cumulative obligations to a fixed dollar amount as agreed to by BOEM at the time the third-party guaranty is provided.
(c)
If, during the life of your third-party guaranty, your guarantor no longer meets the criterion referred to in paragraph (a)(1) of this section, you must:
(1)
Notify BOEM within 72 hours of so learning; and
(2)
Submit a surety bond or other financial assurance covering the obligations previously secured by the third-party guaranty.
(d)
Your guarantor must submit an agreement executed by the guarantor and all parties bound by the agreement. All parties are bound jointly and severally, and the guarantor must meet the legal and financial qualifications set forth in §§ 585.107 and 585.108.
(1)
When any party is a corporation, two corporate officers authorized to execute the guaranty agreement on behalf of the corporation must sign the agreement.
(2)
When any party is a partnership, joint venture, or syndicate, the guaranty agreement must bind each party who has a beneficial interest in your guarantor and provide that, upon BOEM demand under your guaranty, each party is jointly and severally liable for compliance with all terms and conditions of your lease(s) or grant(s) covered by the agreement.
(3)
When forfeiture of the guaranty is called for, the agreement must provide that your guarantor will either bring your lease(s) or grant(s) into compliance or provide, within 7 days, sufficient funds to permit BOEM to complete corrective action.
(4)
The guaranty agreement must contain a confession of judgment, providing that, if BOEM determines that you or your operator is in default, the guarantor must not challenge the determination and must remedy the default.
(5)
If your guarantor wants to terminate the period of liability, your guarantor must notify you and BOEM at least 90 days before the proposed termination date, obtain BOEM's approval for termination of all or a specified portion of the guarantee for liabilities arising after that date, and remain liable for all your work performed during the period the agreement is in effect.
(6)
Each guaranty submitted pursuant to this section is deemed to contain all the terms described in paragraphs (d)(1) through (5) of this section, even if they are not actually in the agreement.
(e)
Before the termination of your guaranty, you must provide an acceptable replacement in the form of a bond or other security.
Notes, amendments, and revision history

Source

Source: 89 FR 42740, May 15, 2024, unless otherwise noted.

Authority

Authority: 43 U.S.C. 1337.

Source

Source: 88 FR 6430, Jan. 31, 2023, unless otherwise noted.

§585.529. Can I use a lease- or grant-specific decommissioning account to meet the financial assurance requirements related to decommissioning?

30 C.F.R. § 585.529

(a)
In lieu of a surety bond, BOEM may authorize you to establish a lease-, ROW grant-, or RUE grant-specific decommissioning account in a federally insured institution. The funds may not be withdrawn from the account without our written approval.
(1)
The funds must be payable to BOEM and pledged to meet your lease or grant decommissioning and site clearance obligations;
(2)
You must fund the account in the amount determined by and according to the payment schedule approved by BOEM. BOEM will estimate the cost of decommissioning, including site clearance; and
(3)
Subject to BOEM's approval, a decommissioning account may be funded in whole or in part during the operations period of a lease or grant.
(b)
Any interest paid on the account will be treated as account funds unless we authorize in writing that any interest be paid to the depositor.
(c)
We may allow you to pledge Treasury securities, payable to BOEM on demand, to satisfy your obligation to make payments into the account. Acceptable Treasury securities and their collateral value are determined in accordance with 31 CFR part 203, Collateral Margins Table (which can be found at https://www.treasurydirect.gov).
(d)
We may require you to commit a specified stream of revenues as payment into the account so that the account will be fully funded, as prescribed in paragraph (a)(2) of this section. The commitment may include revenue from other operations.
Notes, amendments, and revision history

Source

Source: 89 FR 42740, May 15, 2024, unless otherwise noted.

Authority

Authority: 43 U.S.C. 1337.

Source

Source: 88 FR 6430, Jan. 31, 2023, unless otherwise noted.