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Title 30: Mineral Resources

PART 581—LEASING OF MINERALS OTHER THAN OIL,
GAS, AND SULPHUR IN THE OUTER CONTINENTAL SHELF

Contents

Subpart
A—General
§ 581.0   Authority
for information collection.
§ 581.1   Purpose
and applicability.
§ 581.2   Authority.
§ 581.3   Definitions.
§ 581.4   Qualifications
of lessees.
§ 581.5   False
statements.
§ 581.6   Appeals.
§ 581.7   Disclosure
of information to the public.
§ 581.8   Rights
to minerals.
§ 581.9   Jurisdictional
controversies.

Subpart
B—Leasing Procedures
§ 581.11   Unsolicited
request for a lease sale.
§ 581.12   Request
for OCS mineral information and interest.
§ 581.13   Joint
State/Federal coordination.
§ 581.14   OCS
mining area identification.
§ 581.15   Tract
size.
§ 581.16   Proposed
leasing notice.
§ 581.17   Leasing
notice.
§ 581.18   Bidding
system.
§ 581.19   Lease
term.
§ 581.20   Submission
of bids.
§ 581.21   Award
of leases.
§ 581.22   Lease
form.
§ 581.23   Effective
date of leases.

Subpart
C—Financial Considerations
§ 581.26   Payments.
§ 581.27   Annual
rental.
§ 581.28   Royalty.
§ 581.29   Royalty
valuation.
§ 581.30   Minimum
royalty.
§ 581.31   Overriding
royalties.
§ 581.32   Waiver,
suspension, or reduction of rental, minimum royalty, or production
royalty.
§ 581.33   Bonds
and bonding requirements.

Subpart
D—Assignments and Lease Extensions
§ 581.40   Assignment
of leases or interests therein.
§ 581.41   Requirements
for filing for transfers.
§ 581.42   Effect
of assignment on particular lease.
§ 581.43   Effect
of suspensions on lease term.

Subpart
E—Termination of Leases
§ 581.46   Relinquishment
of leases or parts of leases.
§ 581.47   Cancellation
of leases.

Authority: 31
U.S.C. 9701, 43 U.S.C. 1334.

Source: 76
FR 64623, Oct. 18, 2011, unless otherwise noted.

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Subpart A—General

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§ 581.0   Authority for
information collection.

The information collection requirements contained in part 581 have been
approved by the Office of Management and Budget under 44 U.S.C. 3507 and
assigned clearance number 1010-0082. The information is being collected to
determine if the applicant for a lease on the Outer Continental Shelf
(OCS) is qualified to hold such a lease or to determine if a requested
action is warranted. The information will be used to make those
determinations. An applicant must respond to obtain or retain a
benefit.

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§ 581.1   Purpose and
applicability.

The purpose of these regulations is to establish procedures under which
the Secretary of the Interior (Secretary) will exercise the authority
granted to administer a leasing program for minerals other than oil, gas,
and sulphur in the OCS. The rules in this part apply exclusively to
leasing activities for minerals other than oil, gas, and sulphur in the
OCS pursuant to the Act.

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§ 581.2   Authority.

The Act authorizes the Secretary to grant leases for any mineral other
than oil, gas, and sulphur in any area of the OCS to the qualified persons
offering the highest cash bonuses on the basis of competitive bidding upon
such royalty, rental, and other terms and conditions as the Secretary may
prescribe at the time of offering the area for lease (43 U.S.C. 1337(k)).
The Secretary is to administer the leasing provisions of the Act and
prescribe the rules and regulations necessary to carry out those
provisions (43 U.S.C. 1334(a)).

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§ 581.3   Definitions.

When used in this part, the following terms shall have the following
meaning:

Act means the OCS Lands Act, as
amended (43 U.S.C. 1331 et seq.
).

Adjacent State means with
respect to any activity proposed, conducted, or approved under this part,
any coastal State—

(1) That is, or is proposed to be, receiving for processing, refining,
or transshipping OCS mineral resources commercially recovered from the
seabed;

(2) That is used, or is scheduled to be used, as a support base for
prospecting, exploration, testing, and mining activities; or

(3) In which there is a reasonable probability of significant effect on
land or water uses from such activity.

Director means the Director of
the Bureau of Ocean Energy Management (BOEM) of the U.S. Department of the
Interior or an official authorized to act on the Director's behalf.

Governor means the Governor of
a State or the person or entity designated by, or pursuant to, State law
to exercise the powers granted to such Governor pursuant to the Act.

Lease means any form of
authorization which is issued under section 8 of the Act and which
authorizes exploration for, and development and production of, minerals,
or the area covered by that authorization, whichever is required by the
context.

Lessee means the person
authorized by a lease, or an approved assignment thereof, to explore for
and develop and produce the leased deposits in accordance with the
regulations in this chapter. The term includes all persons holding that
authority by or through the lessee.

OCS mineral means a mineral
deposit or accretion found on or below the surface of the seabed but does
not include oil, gas, sulphur; salt or sand and gravel intended for use in
association with the development of oil, gas, or sulphur; or source
materials essential to production of fissionable materials which are
reserved to the United States pursuant to section 12(e) of the Act.

Outer Continental Shelf means
all submerged lands lying seaward and outside of the area of lands beneath
navigable waters as defined in section 2 of the Submerged Lands Act (43
U.S.C. 1301) and of which the subsoil and seabed appertain to the United
States and are subject to its jurisdiction and control.

Overriding royalty means a
royalty created out of the lessee's interest which is over and above the
royalty reserved to the lessor in the original lease.

Person means a citizen or
national of the United States; an alien lawfully admitted for permanent
residency in the United States as defined in 8 U.S.C. 1101(a)(20); a
private, public, or municipal corporation organized under the laws of the
United States or of any State or territory thereof; an association of such
citizens, nationals, resident aliens or private, public, or municipal
corporations, States, or political subdivisions of States; or anyone
operating in a manner provided for by treaty or other applicable
international agreements. The term does not include Federal Agencies.

Secretary means the Secretary
of the Interior or an official authorized to act on the Secretary's
behalf.

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§ 581.4   Qualifications
of lessees.

(a) In accordance with section 8(k) of the Act, leases shall be awarded
only to qualified persons offering the highest cash bonus bid.

(b) Mineral leases issued pursuant to section 8 of the Act may be held
only by:

(1) Citizens and nationals of the United States;

(2) Aliens lawfully admitted for permanent residence in the United
States as defined in 8 U.S.C. 1101(a)(20);

(3) Private, public, or municipal corporations organized under the laws
of the United States or of any State or of the District of Columbia or
territory thereof; or

(4) Associations of such citizens, nationals, resident aliens, or
private, public, or municipal corporations, States, or political
subdivisions of States.

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§ 581.5   False
statements.

Under the provisions of 18 U.S.C. 1001, it is a crime punishable by up
to 5 years imprisonment or a fine of $10,000, or both, for anyone
knowingly and willfully to submit or cause to be submitted to any Agency
of the United States any false or fraudulent statement(s) to any matters
within the Agency's jurisdiction.

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§ 581.6   Appeals.

Any party adversely affected by a decision of a BOEM official made
pursuant to the provisions of this part shall have the right of appeal
pursuant to 30 CFR part 590, except as provided otherwise in § 581.21
of this part.

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§ 581.7   Disclosure of
information to the public.

The Secretary shall make data and information available to the public
in accordance with the requirements and subject to the limitations of the
Act, the Freedom of Information Act (5 U.S.C. 552), and the implementing
regulations (30 CFR parts 580, 582, and 43 CFR part 2).

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§ 581.8   Rights to
minerals.

(a) Unless otherwise specified in the leasing notice, a lease for OCS
minerals shall include rights to all minerals within the leased area
except the following;

(1) Minerals subject to rights granted by existing leases;

(2) Oil;

(3) Gas;

(4) Sulphur;

(5) Minerals produced in direct association with oil, gas, or
sulphur;

(6) Salt deposits which are identified in the leasing notice as being
reserved;

(7) Sand and gravel deposits which are identified in the leasing notice
as being reserved; and

(8) Source materials essential to production of fissionable materials
which are reserved pursuant to section 12(a) of the Act.

(b) When an OCS mineral lease issued under this part limits the
minerals to which rights are granted, such lease shall include rights to
minerals produced in direct association with the OCS mineral specified in
the lease but not the rights to minerals specifically reserved.

(c) The existence of an OCS mineral, oil and gas, or sulphur lease
shall not preclude the issuance of a lease(s) for other OCS minerals in
the same area. However, no OCS mineral lease shall authorize or permit the
lessee thereunder to unreasonably interfere with or endanger operations
under an existing OCS mineral, oil and gas, or sulphur lease.

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§ 581.9   Jurisdictional
controversies.

In the event of a controversy between the United States and a State as
to whether certain lands are subject to Federal or State jurisdiction (43
U.S.C. 1336), either the Governor or the Secretary may initiate
negotiations in an attempt to settle the jurisdictional controversy. With
the concurrence of the Attorney General, the Secretary may enter into an
agreement with a State with respect to OCS mineral activities under the
Act or under State authority and to payment and impounding of rents,
royalties, and other sums and with respect to the offering of lands for
lease pending settlement of the controversy.

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Subpart B—Leasing Procedures

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§ 581.11   Unsolicited
request for a lease sale.

(a) Any person may at any time request that OCS minerals be offered for
lease. A request that OCS minerals be offered for lease shall be submitted
to the Director and shall contain the following information:

(1) The area to be offered for lease.

(2) The OCS minerals of primary interest.

(3) The available OCS mineral resource and environmental information
pertaining to the area of interest to be offered for lease which supports
the request.

(b) Within 45 days after receipt of a request submitted under paragraph
(a) of this section, the Director shall either initiate steps leading to
the offer of OCS minerals for lease and notify the applicant of the action
taken or inform the applicant of the reasons for not initiating steps
leading to the offer of OCS minerals for lease.

(c) Any interested party may at any time submit information to the
Director concerning the scheduling of proposed lease sales of OCS minerals
in any area of the OCS. Such information may include but not be limited to
any of the following:

(1) Benefits of conducting a lease sale in an area.

(2) Costs of conducting a lease sale in an area.

(3) Geohazards which could be encountered in an area.

(4) Geological information about an area and mineral resource
potential.

(5) Environmental information about an area.

(6) Information about known archaeological resources in an area.

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§ 581.12   Request for
OCS mineral information and interest.

(a) When considering whether to offer OCS minerals for lease, the
Secretary, upon the Department of the Interior's own initiative or as a
result of a submission under § 581.11, may request indications of
interest in the leasing of a specific OCS mineral, a group of OCS
minerals, or all OCS minerals in the area being considered for lease.
Requests for information and interest shall be published in the Federal
Register and may be published elsewhere.

(b) States and local governments, industry, other Federal Agencies, and
all interested parties (including the public) may respond to a request for
information and interest. All information provided to the Secretary will
be considered in the decision whether to proceed with additional steps
leading to the offering of OCS minerals for lease.

(c) The Secretary may request specific information concerning the
offering of a specific OCS mineral, a group of OCS minerals, or all OCS
minerals in a broad area for lease or the offering of one or more discrete
tracts which represent a minable orebody. The Secretary's request may ask
for comments on OCS areas which have been determined to warrant special
consideration and analysis. Requests may be for comments concerning
geological conditions or archaeological resources on the seabed; multiple
uses of the area proposed for leasing, including navigation, recreation
and fisheries; and other socioeconomic, biological, and environmental
information relating to the area proposed for leasing.

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§ 581.13   Joint
State/Federal coordination.

(a) The Secretary may invite the adjacent State Governor(s) to join in,
or the adjacent State Governor(s) may request that the Secretary join in,
the establishment of a State/Federal task force or some other joint
planning or coordination arrangement when industry interest exists for OCS
mineral leasing or geological information appears to support the leasing
of OCS minerals in specific areas. Participation in joint State/Federal
task forces or other arrangements will afford the adjacent State
Governor(s) opportunity for access to available data and information about
the area; knowledge of progress made in the leasing process and of the
results of subsequent exploration and development activities; facilitate
the resolution of issues of mutual interest; and provide a mechanism for
planning, coordination, consultation, and other activities which the
Secretary and the Governor(s) may identify as contributing to the leasing
process.

(b) State/Federal task forces or other such arrangements are to be
constituted pursuant to such terms and conditions (consistent with Federal
law and these regulations) as the Secretary and the adjacent State
Governor(s) may agree.

(c) State/Federal task forces or other such arrangements will provide a
forum which the Secretary and adjacent State Governor(s) may use for
planning, consultation, and coordination on concerns associated with the
offering of OCS minerals other than oil, gas, or sulphur for lease.

(d) With respect to the activities authorized under these regulations
each State/Federal task force may make recommendations to the Secretary
and adjacent State Governor(s) concerning:

(1) The identification of areas in which OCS minerals might be offered
for lease;

(2) The potential for conflicts between the exploration and development
of OCS mineral resources, other users and uses of the area, and means for
resolution or mitigation of these conflicts;

(3) The economic feasibility of developing OCS mineral resources in the
area proposed for leasing;

(4) Potential environmental problems and measures that might be taken
to mitigate these problems;

(5) Development of guidelines and procedures for safe, environmentally
responsible exploration and development practices; and

(6) Other issues of concern to the Secretary and adjacent State
Governor(s).

(e) State/Federal task forces or other such arrangements might also be
used to conduct or oversee research, studies, or reports (e.g.,
Environmental Impact Statements).

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§ 581.14   OCS mining
area identification.

The Secretary, after considering the available OCS mineral resources
and environmental data and information, the recommendation of any joint
State/Federal task force established pursuant to § 581.13 of this
part, and the comments received from interested parties, shall select the
tracts to be considered for offering for lease. The selected tracts will
be considered in the environmental analysis conducted for the proposed
lease offering.

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§ 581.15   Tract
size.

The size of the tracts to be offered for lease shall be as determined
by the Secretary and specified in the leasing notice. It is intended that
tracts offered for lease be sufficiently large to include potentially
minable OCS mineral orebodies. When the presence of any minable orebody is
unknown and additional prospecting is needed to discover and delineate OCS
minerals, the size of tracts specified in the leasing notice may be
relatively large.

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§ 581.16   Proposed
leasing notice.

(a) Prior to offering OCS minerals in an area for lease, the Director
shall assess the available information including recommendations of any
joint State/Federal task force established pursuant to § 581.13 of
this part to determine lease sale procedures to be prescribed and to
develop a proposed leasing notice which sets out the proposed primary term
of the OCS mineral leases to be offered; lease stipulations including
measures to mitigate potentially adverse impacts on the environment; and
such rental, royalty, and other terms and conditions as the Secretary may
prescribe in the leasing notice.

(b) The proposed leasing notice shall be sent to the Governor(s) of any
adjacent State(s), and a Notice of its availability shall be published in
the Federal
Register at least 60 days prior to the publication of the leasing
notice.

(c) Written comments of the adjacent State Governor(s) submitted within
60 days after publication of the Notice of Availability of the proposed
leasing notice shall be considered by the Secretary.

(d) Prior to publication of the leasing notice, the Secretary shall
respond in writing to the comments of the adjacent State Governor(s)
stating the reasons for accepting or rejecting the Governor's
recommendations, or for implementing any alternative mutually acceptable
approach identified in consultation with the Governor(s) as a means to
provide a reasonable balance between the National interest and the well
being of the citizens of the adjacent State.

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§ 581.17   Leasing
notice.

(a) The Director shall publish the leasing notice in the Federal
Register at least 30 days prior to the date that OCS minerals will
be offered for lease. The leasing notice shall state whether oral or
sealed bids or a combination thereof will be used; the place, date, and
time at which sealed bids shall be filed; and the place, date, and time at
which sealed bids shall be opened and/or oral bids received. The leasing
notice shall contain or reference a description of the tract(s) to be
offered for lease; specify the mineral(s) to be offered for lease (if less
than all OCS minerals are being offered); specify the period of time the
primary term of the lease shall cover; and any stipulation(s), term(s),
and condition(s) of the offer to lease (43 U.S.C. 1337(k)).

(b) The leasing notice shall contain a reference to the OCS minerals
lease form which shall be issued to successful bidders.

(c) The leasing notice shall specify the terms and conditions governing
the payment of the winning bid.

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§ 581.18   Bidding
system.

(a) The OCS minerals shall be offered by competitive, cash bonus
bidding under terms and conditions specified in the leasing notice and in
accordance with all applicable laws and regulations.

(b)(1) When the leasing notice specifies the use of sealed bids, such
bids received in response to the leasing notice shall be opened at the
place, date, and time specified in the leasing notice. The sole purpose of
opening bids is to publicly announce and record the bids received, and no
bids shall be accepted or rejected at that time.

(2) The Secretary reserves the right to reject any and all sealed bids
received for any tract, regardless of the amount offered.

(3) In the event the highest bids are tie bids when using sealed
bidding procedures, the tied bidders may be permitted to submit oral bids
to determine the highest cash bonus bidder.

(c)(1) When the leasing notice specifies the use of oral bids, oral
bids shall be received at the place, time, and date and in accordance with
the procedures specified in the leasing notice.

(2) The Secretary reserves the right to reject all oral bids received
for any tract, regardless of the amount offered.

(d) When the leasing notice specifies the use of deferred cash bonus
bidding, bids shall be received in accordance with paragraph (b) or (c) of
this section, as appropriate. The high bid will be determined based upon
the net present value of each total bid. The appropriate discount rate
will be specified in the leasing notice. High bidders using the deferred
bonus option shall pay a minimum of 20 percent of the cash bonus bid prior
to lease issuance. At least a total of 60 percent of the cash bonus bid
shall be due on or before the 5th anniversary of the lease, and payment of
the remainder of the cash bonus bid shall be due on the 10th anniversary
of the lease. The lessee shall submit a bond guaranteeing payment of the
deferred portion of the bonus, in accordance with § 581.33.

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§ 581.19   Lease
term.

An OCS mineral lease for OCS minerals other than sand and gravel shall
be for a primary term of not less than 20 years as stipulated in the
leasing notice. The primary lease term for each OCS mineral shall be
determined based on exploration and development requirements for the OCS
minerals being offered by the Secretary. An OCS mineral lease for sand and
gravel shall be for a primary term of 10 years unless otherwise stipulated
in the leasing notice. A lease will continue beyond the specified primary
term for so long thereafter as leased OCS minerals are being produced in
accordance with an approved mining operation or the lessee is otherwise in
compliance with provisions of the lease and the regulations in this
chapter under which a lessee can earn continuance of the OCS mineral lease
in effect.

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§ 581.20   Submission of
bids.

(a) If the bidder is an individual, a statement of citizenship shall
accompany the bid.

(b) If the bidder is an association (including a partnership), the bid
shall be accompanied by a certified statement indicating the State in
which it is registered and that the association is authorized to hold
mineral leases on the OCS, or appropriate reference to statements or
records previously submitted to a BOEM OCS office (including material
submitted in compliance with prior regulations).

(c) If the bidder is a corporation, the bid shall be accompanied by the
following information:

(1) Either a statement certified by the corporate Secretary or
Assistant Secretary over the corporate seal showing the State in which it
was incorporated and that it is authorized to hold mineral leases on the
OCS or appropriate reference to statements or record previously submitted
to a BOEM OCS office (including material submitted in compliance with
prior regulations).

(2) Evidence of authority of persons signing to bind the corporation.
Such evidence may be in the form of a certified copy of either the minutes
of the board of directors or of the bylaws indicating that the person
signing has authority to do so, or a certificate to that effect signed by
the Secretary or Assistant Secretary of the corporation over the corporate
seal, or appropriate reference to statements or records previously
submitted to a BOEM OCS office (including material submitted in compliance
with prior regulations). Bidders are advised to keep their filings
current.

(3) The bid shall be executed in conformance with corporate
requirements.

(d) Bidders should be aware of the provisions of 18 U.S.C. 1860, which
prohibits unlawful combination or intimidation of bidders.

(e) When sealed bidding is specified in the leasing notice, a separate
sealed bid shall be submitted for each bid unit that is bid upon as
described in the leasing notice. A bid may not be submitted for less than
a bidding unit identified in the leasing notice.

(f) When oral bidding is specified in the leasing notice, information
which must accompany a bid pursuant to paragraph (a), (b), or (c) of this
section, shall be presented to BOEM at the lease sale prior to the
offering of an oral bid.

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§ 581.21   Award of
leases.

(a)(1) The decision of the Director on bids shall be the final action
of the Department, subject only to reconsideration by the Secretary,
pursuant to a written request in accordance with paragraph (a)(2) of this
section. The delegation of review authority to the Office of Hearings and
Appeals shall not be applicable to decisions on high bids for leases in
the OCS.

(2) Any bidder whose bid is rejected by the Director may file a written
request for reconsideration with the Secretary within 15 days of notice of
rejection, accompanied by a statement of reasons with a copy to the
Director. The Secretary shall respond in writing either affirming or
reversing the decision.

(b) Written notice of the Director's action in accepting or rejecting
bids shall be transmitted promptly to those bidders whose deposits have
been held. If a bid is accepted, such notice shall transmit three copies
of the lease form to the successful bidder. As provided in § 581.26
of this part, the bidder shall, not later than the 10th business day after
receipt of the lease, execute the lease, pay the first year's rental, and
unless payment of a portion of the bid is deferred, pay the balance of the
bonus bid. When payment of a portion of the bid is deferred, the
successful bidder shall also file a bond to guarantee payment of the
deferred portion as required in § 581.33. Deposits shall be refunded
on high bids subsequently rejected. When three copies of the lease have
been executed by the successful bidder and returned to the Director, the
lease shall be executed on behalf of the United States; and one fully
executed copy shall be transmitted to the successful bidder.

(c) If the successful bidder fails to execute the lease within the
prescribed time or to otherwise comply with the applicable regulations,
the successful bidder's deposit shall be forfeited and disposed of in the
same manner as other receipts under the Act.

(d) If, before the lease is executed on behalf of the United States,
the land which would be subject to the lease is withdrawn or restricted
from leasing, the deposit shall be refunded.

(e) If the awarded lease is executed by an agent acting on behalf of
the bidder, the bidder shall submit with the executed lease, evidence that
the agent is authorized to act on behalf of the bidder.

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§ 581.22   Lease
form.

The OCS mineral leases shall be issued on the lease form prescribed by
the Secretary in the leasing notice.

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§ 581.23   Effective date
of leases.

Leases issued under the regulations in this part shall be dated and
become effective as of the first day of the month following the date
leases are signed on behalf of the lessor except that, upon written
request, a lease may be dated and become effective as of the first day of
the month within which it is signed on behalf of the lessor.

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Subpart C—Financial Considerations

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§ 581.26   Payments.

(a) For sealed bids, a bonus bid deposit of a specified percentage of
the total amount bid is required to be submitted with the bid. The
percentage of bonus bid required to be deposited will be specified in the
leasing notice. The remittance may be made in cash or by Federal Reserve
check, commercial check, bank draft, money order, certified check, or
cashier's check made payable to “Department of the Interior—BOEM.” Payment
of this portion of the bonus bid may not be made by Electronic Funds
Transfer.

(b) For oral bids, a bonus bid deposit of a specified percentage of the
total amount bid must be submitted to the official designated in the
leasing notice following the completion of the oral bidding. The
percentage of bonus bid required to be deposited will be specified in the
leasing notice. Payment of this portion of the bonus bid must be made by
Electronic Fund Transfer within the timeframe specified in the leasing
notice.

(c) The deposit received from high bidders will be placed in a Treasury
account pending acceptance or rejection of the bid. Other bids submitted
under paragraph (a) of this section will be returned to the bidders. If
the high bid is subsequently rejected, an amount equal to that deposited
with the high bid will be returned according to applicable
regulations.

(d) The balance of the winning bonus bid and all rentals and royalties
must be paid in accordance with the terms and conditions of this part, the
Leasing Notice, and Subchapter A of this chapter.

(e) For each lease issued pursuant to this subpart, there shall be one
person identified who shall be solely responsible for all payments due and
payable under the provisions of the lease. The single responsible person
shall be designated as the payor for the lease and shall be so identified
on the Solid Minerals Production and Royalty Report (P&R) (Form
ONRR-4430) in accordance with 30 CFR 1210.201 of this title. The
designated person shall be responsible for all bonus, rental, and royalty
payments.

(f) Royalty shall be computed at the rate specified in the leasing
notice, and paid in value unless the Secretary elects to have the royalty
delivered in kind.

(g) For leases which provide for minimum royalty payments, each lessee
shall pay the minimum royalty specified in the lease at the end of each
lease year beginning with the lease year in which production royalty is
paid (whether the full amount specified in the lease or 1⁄2 the amount specified
in the lease pursuant to § 581.28(b) on this part) of OCS minerals
produced (sold, transferred, used, or otherwise disposed of) from the
leasehold.

(h)(1) Unless stated otherwise in the lease, product valuation will be
in accordance with the regulations in part 1206 of chapter XII. The value
used in the computation of royalty shall be determined by the Director of
the Office of Natural Resources Revenue. The value, for royalty purposes,
shall be the gross proceeds received by the lessee for produced substances
at the point the product is produced and placed in its first marketable
condition, consistent with prevailing practices in the industry. In
establishing the value, the Director shall consider, in this order:

(i) The price received by the lessee;

(ii) Commodity and spot market transactions;

(iii) Any other valuation method proposed by the lessee and approved by
the Director; and

(iv) Value or cost netback.

(2) For non-arm's length transactions, the first benchmark will only be
accepted if it is not less than the second benchmark.

(i) All payors must submit payments and payment forms and maintain
auditable records in accordance with 30 CFR chapter XII, Subchapter
A—Natural Resources Revenue.

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§ 581.27   Annual
rental.

(a) The annual lease rental shall be due and payable in accordance with
the provisions of this section. No rental shall be due or payable under a
lease commencing with the first lease anniversary date following the
commencement of royalty payments on leasehold production computed on the
basis of the royalty rate specified in the lease except that annual rental
shall be due for any year in which production from the leasehold is not
subject to royalty pursuant to § 581.28.

(b) Unless otherwise specified in the leasing notice and subsequently
issued lease, no annual rental payment shall be due during the first 5
years in the life of a lease.

(c) The leasee shall pay an annual rental in the amount specified in
the leasing notice and subsequently issued lease not later than the last
day prior to the commencement of the rental year.

(d) A rental adjustment schedule and amount may be specified in a
leasing notice and subsequently issued lease when a variance is warranted
by geologic, geographic, technical, or economic conditions.

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§ 581.28   Royalty.

(a) The royalty due the lessor on OCS minerals produced ( i.e., sold, transferred, used, or
otherwise disposed of) from a lease shall be set out in a separate
schedule attached to and made a part of each lease and shall be as
specified in the leasing notice. The royalty due on production shall be
based on a percentage of the value or amount of the OCS mineral(s)
produced, a sum assessed per unit of product, or other such method as the
Secretary may prescribe in the leasing notice. When the royalty specified
is a sum assessed per unit of product, the amount of the royalty shall be
subject to an annual adjustment based on changes in the appropriate price
index, when specified in the leasing notice. When the royalty is specified
as a percentage of the value or amount of the OCS minerals produced, the
Secretary will notify the lessee when and where royalty is to be delivered
in kind. Unless stated otherwise in the lease, product valuation will be
in accordance with the regulations in part 1206 of chapter XII. The value
used in the computation of royalty shall be determined by the Director of
the Office of Natural Resources Revenue.

(b) When prescribed in the leasing notice and subsequently issued
lease, royalty due on OCS minerals produced from a leasehold will be
reduced for up to any 5 consecutive years, as specified by the lessee
prior to the commencement of production, during the 1st through 15th year
in the life of the lease. No royalty shall be due in any year of the
specified 5-year period that occurs during the 1st through 10th years in
the life of the lease, and a royalty of one-half the amount specified in
the lease shall be due in any year of the specified 5-year period that
occurs in the 11th through 15th year in the life of the lease. The lessee
shall pay the amount specified in the lease rental for any royalty free
year. The minimum royalty specified in the lease shall apply during any
year of reduced royalty.

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§ 581.29   Royalty
valuation.

Unless stated otherwise in the leasing notice and subsequently issued
lease, product valuation will be in accordance with the regulations in
part 1206 of chapter XII. The value used in the computation of royalty
shall be determined by the Director of the Office of Natural Resources
Revenue.

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§ 581.30   Minimum
royalty.

Unless otherwise specified in the leasing notice, each lease issued
pursuant to the regulations in this part shall require the payment of a
specified minimum annual royalty beginning with the year in which OCS
minerals are produced (sold, transferred, used, or otherwise disposed of)
from the leasehold except that the annual rentals shall apply during any
year that royalty free production is in effect pursuant to
§ 581.28(b). Minimum royalty payments shall be offset by royalty paid
on production during the lease year. Minimum royalty payments are due at
the beginning of the lease year and payable by the end of the month
following the end of the lease year for which they are due.

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§ 581.31   Overriding
royalties.

(a) Subject to the approval of the Secretary, an overriding royalty
interest may be created by an assignment pursuant to section 8(e) of the
Act. The Secretary may deny approval of an assignment which creates an
overriding royalty on a lease whenever that denial is determined to be in
the interest of conservation, necessary to prevent premature abandonment
of a producing mine, or to make possible the mining of economically
marginal or low-grade ore deposits. In any case, the total of applicable
overriding royalties may not exceed 2.5 percent or one-half the base
royalty due the Federal Government, whichever is less.

(b) No transfer or agreement may be made which creates an overriding
royalty interest unless the owner of that interest files an agreement in
writing that such interest is subject to the limitations provided in
§ 581.30 of this part, paragraph (a) of this section, and
§ 581.32 of this part.

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§ 581.32   Waiver,
suspension, or reduction of rental, minimum royalty, or production
royalty.

(a) The Secretary may waive, suspend, or reduce the rental, minimum
royalty, and/or production royalty prescribed in a lease for a specified
time period when the Secretary determines that it is in the National
interest, it will result in the conservation of natural resources of the
OCS, it will promote development, or the mine cannot be successfully
operated under existing conditions.

(b) An application for waiver, suspension, or reduction of rental,
minimum royalty, or production royalty under paragraph (a) of this section
shall be filed in duplicate with the Director. The application shall
contain the serial number(s) of the lease(s), the name of the lessee(s) of
record, and the operator(s) if applicable. The application shall
either:

(1)(i) Show the location and extent of all mining operations and a
tabulated statement of the minerals mined and subject to royalty for each
of the last 12 months immediately prior to filing the application:

(ii) Contain a detailed statement of expenses and costs of operating
the lease, the income from the sale of any lease products, and the amount
of all overriding royalties and payments out of production paid to others
than the United States; and

(iii) All facts showing whether or not the mine(s) can be successfully
operated under the royalty fixed in the lease; or

(2) If no production has occurred from the lease, show that the lease
cannot be successfully operated under the rental, royalty, and other
conditions specified in the lease.

(c) The applicant for a waiver, suspension, or reduction under this
section shall file documentation that the lessee and the royalty holders
agree to a reduction of all other royalties from the lease so that the
aggregate of all other royalties does not exceed one-half the amount of
the reduced royalties that would be paid to the United States.

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§ 581.33   Bonds and
bonding requirements.

(a) When the leasing notice specifies that payment of a portion of the
bonus bid can be deferred, the lessee shall be required to submit a surety
or personal bond to guarantee payment of a deferred portion of the bid.
Upon the payment of the full amount of the cash bonus bid, the lessee's
bond will be released.

(b) All bonds to guarantee payment of the deferred portion of the high
cash bonus bid furnished by the lessee must be in a form or on a form
approved by the Associate Director for BOEM. A single copy of the required
form is to be executed by the principal or, in the case of surety bonds,
by both the principal and an acceptable surety.

(1) Only those surety bonds issued by qualified surety companies
approved by the Department of the Treasury shall be accepted (see
Department of the Treasury Circular No. 570 and any supplemental or
replacement circulars).

(2) Personal bonds shall be accompanied by a cashier's check, certified
check, or negotiable U.S. Treasury bonds of an equal value to the amount
specified in the bond. Negotiable Treasury bonds shall be accompanied by a
proper conveyance of full authority to the Director to sell such
securities in case of default in the performance of the terms and
conditions of the lease.

(c) Prior to the commencement of any activity on a lease(s), the lessee
shall submit a surety or personal bond as described in § 582.40 of
this title. Prior to the approval of a Delineation, Testing, or Mining
Plan, the bond amount shall be adjusted, if appropriate, to cover the
operations and activities described in the proposed plan.

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Subpart D—Assignments and Lease Extensions

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§ 581.40   Assignment of
leases or interests therein.

(a) Subject to the approval of the Secretary, a lease may be assigned,
in whole or in part, pursuant to section 8(e) of the Act to anyone
qualified to hold a lease.

(b) Any approved assignment shall be deemed to be effective on the
first day of the lease month following the date that it is submitted to
the Director for approval unless by written request the parties request
that the effective date be the first of the month in which the Director
approves the assignment.

(c) The assignor shall be liable for all obligations under the lease
occurring prior to the effective date of an assignment.

(d) The assignee shall be liable for all obligations under the lease
occurring on or after the effective date of an assignment and shall comply
with all terms and conditions of the lease and applicable regulations
issued under the Act.

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§ 581.41   Requirements
for filing for transfers.

(a)(1) All instruments of transfer of a lease or of an interest therein
including subleases and assignments of record interest shall be filed in
triplicate for approval within 90 days from the date of final execution.
They shall include a statement over the transferee's own signature with
respect to citizenship and qualifications similar to that required of a
lessee and shall contain all of the terms and conditions agreed upon by
the parties thereto.

(2) An application for approval of any instrument required to be filed
will not be accepted unless a nonrefundable fee of $50 is paid
electronically through Pay.gov at:
https://www.pay.gov/paygov/ and a
copy of the Pay.gov confirmation
receipt page is included with your application. For any document you are
not required to file by these regulations but which you submit for record
purposes, you must also pay electronically through Pay.gov a nonrefundable fee of $50 per
lease affected, and you must include a copy of the Pay.gov confirmation receipt page with
your document. Such documents may be rejected at the discretion of the
authorized officer.

(b) An attorney in fact signing on behalf of the holder of a lease or
sublease, shall furnish evidence of authority to execute the assignment or
application for approval and the statement required by § 581.20 of
this part.

(c) Where an assignment creates separate leases, a bond shall be
furnished for each of the resulting leases in the amount prescribed in
§ 582.40 of this title. Where an assignment does not create separate
leases, the assignee, if the assignment so provides and the surety
consents, may become a joint principal on the bond with the assignor.

(d) An heir or devisee of a deceased holder of a lease or any interest
therein shall be recognized as the lawful successor to such lease or
interest if evidence of status as an heir or devisee is furnished in the
form of:

(1) A certified copy of an appropriate order or decree of the court
having jurisdiction over the distribution of the estate, or

(2) If no court action is necessary, the statement of two disinterested
persons having knowledge of the fact or a certified copy of the will.

(e) The heirs or devisee shall file statements that they are the
persons named as successors to the estate with evidence of their
qualifications to hold such lease or interest therein.

(f) In the event an heir or devisee is unable to qualify to hold the
lease or interest, the heir or devisee shall be recognized as the lawful
successor of the deceased and be entitled to hold the lease for a period
not to exceed 2 years from the date of death of the predecessor in
interest.

(g) Each obligation under any lease and under the regulations in this
part shall inure to the heirs, executors, administrators, successors, or
assignees of the lease.

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§ 581.42   Effect of
assignment on particular lease.

(a) When an assignment is made of all the record title to a portion of
the acreage in a lease, the assigned and retained portions of the lease
area become segregated into separate and distinct leases. In such a case,
the assignee becomes a lessee of the Government as to the segregated tract
that is the subject of the assignment and is bound by the terms of the
lease as though the lease had been obtained from the United States in the
assignee's own name, and the assignment, after its approval, shall be the
basis of a new record. Royalty, minimum royalty, and annual rental
provisions of the lease shall apply separately to each segregated
portion.

(b) Each lease of an OCS mineral created by the segregation of a lease
under paragraph (a) of this section shall continue in full force and
effect for the remainder of the primary term of the original lease and so
long thereafter as minerals are produced from the portion of the lease
created by segregation in accordance with operations approved by the
Director or the lessee is otherwise in compliance with provisions of the
lease or regulations for earning the continuation of the lease in
effect.

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§ 581.43   Effect of
suspensions on lease term.

(a) If the BSEE Director orders the suspension of either operations or
production, or both, with respect to any lease in its primary term, the
primary term of the lease shall be extended by a period of time equivalent
to the period of the directed suspension.

(b) If the BSEE Director orders or approves the suspension of either
operations or production, or both, with respect to any lease that is in
force beyond its primary term, the term of the lease shall not be deemed
to expire so long as the suspension remains in effect.

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Subpart E—Termination of Leases

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§ 581.46   Relinquishment
of leases or parts of leases.

(a) A lease or any part thereof may be surrendered by the record title
holder by filing a written relinquishment with the Director. A
relinquishment shall take effect on the date it is filed subject to the
continued obligation of the lessee and the surety to:

(1) Make all payments due, including any accrued rentals and royalties;
and

(2) Abandon all operations, remove all facilities, and clear the land
to be relinquished to the satisfaction of the Director.

(b) Upon relinquishment of a lease, the data and information submitted
under the lease will no longer be held confidential and will be available
to the public.

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§ 581.47   Cancellation
of leases.

(a) Whenever the owner of a nonproducing lease fails to comply with any
of the provisions of the Act, the lease, or the regulations issued under
the Act, and the default continues for a period of 30 days after mailing
of notice by registered or certified letter to the lease owner at the
owner's record post office address, the Secretary may cancel the lease
pursuant to section 5(c) of the Act, and the lessee shall not be entitled
to compensation. Any such cancellation is subject to judicial review as
provided by section 23(b) of the Act.

(b) Whenever the owner of any producing lease fails to comply with any
of the provisions of the Act, the lease, or the regulations issued under
the Act, the Secretary may cancel the lease only after judicial
proceedings pursuant to section 5(d) of the Act, and the lessee shall not
be entitled to compensation.

(c) Any lease issued under the Act, whether producing or not, may be
canceled by the Secretary upon proof that it was obtained by fraud or
misrepresentation and after notice and opportunity to be heard has been
afforded to the lessee.

(d) The Secretary may cancel a lease in accordance with the
following:

(1) Cancellation may occur at any time if the Secretary determines
after a hearing that:

(i) Continued activity pursuant to such lease would probably cause
serious harm or damage to life (including fish and other aquatic life), to
property, to any mineral (in areas leased or not leased), to the National
security or defense, or to the marine, coastal, or human environment;

(ii) The threat of harm or damage will not disappear or decrease to an
acceptable extent within a reasonable period of time; and

(iii) The advantages of cancellation outweigh the advantages of
continuing such lease in force;

(2) Cancellation shall not occur unless and until operations under such
lease shall have been under suspension or temporary prohibition by the
Secretary, with due extension of any lease term continuously for a period
of 5 years, or for a lesser period upon request of the lessee; and

(3) Cancellation shall entitle the lessee to receive such compensation
as is shown to the Secretary as being equal to the lesser of:

(i) The fair value of the canceled rights as of the date of
cancellation, taking into account both anticipated revenues from the lease
and anticipated costs, including costs of compliance with all applicable
regulations and operating orders, liability for cleanup costs or damages,
or both, and all other costs reasonably anticipated on the lease, or

(ii) The excess, if any, over the lessee's revenues from the lease
(plus interest thereon from the date of receipt to date of reimbursement)
of all consideration paid for the lease and all direct expenditures made
by the lessee after the date of issuance of such lease and in connection
with exploration or development, or both, pursuant to the lease (plus
interest on such consideration and such expenditures from date of payment
to date of reimbursement), except that in the case of joint leases which
are canceled due to the failure of one or more partners to exercise due
diligence, the innocent parties shall have the right to seek damages for
such loss from the responsible party or parties and the right to acquire
the interests of the negligent party or parties and be issued the lease in
question.

(iii) The lessee shall not be entitled to compensation where one of the
following circumstances exists when a lease is canceled:

(A) A producing lease is forfeited or is canceled pursuant to section
(5)(d) of the Act;

(B) A Testing Plan or Mining Plan is disapproved because of the
lessee's failure to demonstrate compliance with the requirements of
applicable Federal Law; or

(C) The lessee(s) of a nonproducing lease fails to comply with a
provision of the Act, the lease, or regulations issued under the Act, and
the noncompliance continues for a period of 30 days or more after the
mailing of a notice of noncompliance by registered or certified letter to
the lessee(s).

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