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DEPARTMENT OF THE INTERIOR
Bureau of Safety and Environmental
Enforcement
30 CFR Parts 250 and 290
Bureau of Ocean Energy Management
30 CFR Parts 550 and 556
[Docket ID: BOEM–2018–0033]
RIN 1082–AA02

Risk Management, Financial
Assurance and Loss Prevention
Bureau of Ocean Energy
Management (BOEM), Bureau of Safety
and Environmental Enforcement (BSEE),
Interior.
ACTION: Notice of proposed rulemaking
and request for comment.
AGENCY:

The Department of the
Interior (the Department), acting
through BOEM and BSEE, proposes to
streamline its evaluation criteria for
determining whether oil, gas and sulfur
lessees, right-of-use and easement (RUE)
grant holders, and pipeline right-of-way
grant holders may be required to
provide bonds or other security above
the prescribed amounts for base bonds
to ensure compliance with their Outer
Continental Shelf (OCS) obligations.
BOEM’s portion of the proposed rule
would also remove restrictive
provisions for third-party guarantees
and decommissioning accounts, and
would add new criteria under which
additional bonds and third-party
guarantees may be cancelled. Based on
the proposed framework, BOEM
estimates its amount of financial
assurance would decrease from $3.3
billion to $3.1 billion, although it would
provide greater protection as the
financial assurance would be focused on
the riskiest properties. BSEE’s portion of
this proposed rule would establish the
order in which BSEE could order
predecessor lessees, owners of operating
rights, or grant holders, who have
accrued decommissioning obligations,
to perform those obligations when the
current owners of a lease or grant fail to
do so. BSEE’s proposed provisions
would also clarify decommissioning
responsibilities for RUE grant holders
and require that any party appealing any
final decommissioning order provide a
surety bond to ensure that funding for
decommissioning is available if the
order is affirmed on appeal and the
liable party subsequently defaults.
DATES: Submit comments on the
substance of this rulemaking on or
before December 15, 2020. BOEM and

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SUMMARY:

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BSEE may not consider comments
received after this date. You may submit
comments to the Office of Management
and Budget (OMB) on the information
collection (IC) burden in this
rulemaking on or before November 16,
2020. This does not affect the deadline
for the public to comment to BOEM and
BSEE on the proposed regulations.
ADDRESSES: You may submit comments
on the rulemaking by any of the
following methods. Please reference
‘‘Risk Management, Financial Assurance
and Loss Prevention, RIN 1082–AA02.’’
Please include your name, return
address, and phone number or email
address, so we can contact you if we
have questions regarding your
submission.
• Federal rulemaking portal: http://
www.regulations.gov. In the entry
entitled, ‘‘Enter Keyword or ID,’’ enter
BOEM–2018–0033 then click search.
Follow the instructions to submit public
comments and view supporting and
related materials available for this
rulemaking. BOEM and BSEE may post
all submitted comments.
• Mail or delivery service: Send
comments on the BOEM portions of the
proposed rule to the Department of the
Interior, Bureau of Ocean Energy
Management, Office of Policy,
Regulation and Analysis, Attention:
Peter Meffert, 1849 C Street NW,
Mailstop DM5238, Washington, DC
20240. Send comments on the BSEE
portions of the proposed rule to
Department of the Interior, BSEE, Office
of Offshore Regulatory Programs
(OORP), Regulations and Standards
Branch, Attention—Kelly Odom, 45600
Woodland Rd, (Mail code VAE–ORP),
Sterling, VA 20166.
• Send comments on the IC in this
proposed rule to: Interior Desk Officer,
Office of Management and Budget; 202–
395–5806 (fax); or via the
www.reginfo.gov/public/do/PRAMain.
Find the information collection by
selecting ‘‘Currently under 30-day
Review—Open for Public Comments or
by using the search function. Please also
send a copy of comments on the BOEM
IC to BOEM, Office of Policy, Regulation
and Analysis, Attention: Anna
Atkinson, 45600 Woodland Road,
Sterling, VA 20166. Please send a copy
of any comments on the BSEE IC to
BSEE, OORP, Regulations and
Standards Branch, Attention: Nicole
Mason, 45600 Woodland Road, (Mail
code VAE–ORP), Sterling, VA 20166.
Public Availability of Comments:
Before including your name, return
address, phone number, email address,
or other personally identifiable
information in your comment, you

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should be aware that your entire
comment—including your personally
identifiable information—may be made
publicly available at any time. In order
for BOEM or BSEE to withhold from
disclosure your personally identifiable
information, you must identify any
information contained in the submittal
of your comments that, if released,
would constitute a clearly unwarranted
invasion of your personal privacy. You
must also briefly describe any possible
harmful consequences of the disclosure
of information, such as embarrassment,
injury, or other harm. While you can ask
us in your comment to withhold your
personally identifiable information from
public review, we cannot guarantee that
we will be able to do so.
For
questions on any BOEM issues, contact
Deanna Meyer-Pietruszka, Chief, Office
of Policy, Regulation and Analysis,
Bureau of Ocean Energy Management
(BOEM), at deanna.meyer-pietruszka@
boem.gov or at (202) 208–6352. For
questions on any BSEE issues, contact
Amy White, Bureau of Safety and
Environmental Enforcement (BSEE), at
[email protected] or at (703) 787–
1665.
To see a copy of either IC request
submitted to OMB, go to http://
www.reginfo.gov (select Information
Collection Review, Currently Under
Review). You may obtain a copy of the
supporting statement for BOEM’s new
collection of information by contacting
BOEM, Office of Policy, Regulation and
Analysis, Attention: Anna Atkinson, at
45600 Woodland Road, Sterling, VA
20166. You may obtain a copy of the
supporting statement for BSEE’s new
collection of information by contacting
BSEE, OORP, Regulations and
Standards Branch, Attention: Nicole
Mason, 45600 Woodland Road, (Mail
code VAE–ORP), Sterling, VA 20166.

FOR FURTHER INFORMATION CONTACT:

SUPPLEMENTARY INFORMATION:

Table of Contents
I. Background of BOEM Regulations
A. BOEM Statutory and Regulatory
Authority and Responsibilities
B. History of Bonding Regulations and
Guidance
C. Regulatory Reform—New Executive and
Secretary’s Orders
D. Purpose of BOEM’s Portion of the
Proposed Rulemaking
II. Background of BSEE Regulations
A. BSEE Statutory and Regulatory
Authority and Responsibilities
B. BSEE’s Decommissioning Regulations
and Guidance
C. Regulatory Reform
D. Stakeholder Engagement
E. Purpose of BSEE’s Portion of the
Proposed Rulemaking

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III. Proposed Revisions to BOEM Bond and
Other Security Requirements
A. Leases
B. Right-of-Use and Easement Grants
C. Pipeline Right-of-Way Grants
IV. Proposed Revisions to Other BOEM
Security Requirements
A. Third-party Guarantees
B. Lease-specific Abandonment Accounts
C. Cancellation of Additional Bonds
V. BOEM Evaluation Methodology
A. Credit Ratings
B. Valuing Proved Oil and Gas Reserves
VI. Proposed Revisions to BOEM Definitions
VII. Proposed Revisions to BSEE
Decommissioning Regulations
A. Decommissioning by Predecessors
B. Decommissioning of Rights-of-Use and
Easement
C. Bonding Requirement for Appeals of
Decommissioning Decisions and Orders
VIII. Section-by-Section Analysis
A. Regulations Proposed by BSEE
B. Regulations Proposed by BOEM
IX. Additional Comments Solicited by BOEM
and BSEE
X. Procedural Matters
A. Regulatory Planning and Review (E.O.
12866, 13563 and 13771)
B. Regulatory Flexibility Act
C. Small Business Regulatory Enforcement
Fairness Act
D. Unfunded Mandates Reform Act of 1995
E. Takings Implication Assessment (E.O.
12630)
F. Federalism (E.O. 13132)
G. Civil Justice Reform (E.O. 12988)
H. Consultation With Indian Tribes (E.O.
13175 and Departmental Policy)
I. Paperwork Reduction Act
J. National Environmental Policy Act
K. Data Quality Act
L. Effects on the Nation’s Energy Supply
(E.O. 13211)
M. Clarity of This Regulation

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I. Background of BOEM Regulations
A. BOEM Statutory and Regulatory
Authority and Responsibilities
BOEM derives its authority primarily
from the Outer Continental Shelf Lands
Act (OCSLA), 43 U.S.C. 1331–1356b,
which authorizes the Secretary of the
Interior (Secretary) to lease the OCS for
mineral development, and to regulate
oil and gas exploration, development,
and production operations on the OCS.
Section 5(a) of OCSLA (43 U.S.C.
1334(a)) authorizes the Secretary to
‘‘prescribe such rules and regulations as
may be necessary to carry out’’ the
‘‘provisions of [OCSLA] relating to the
leasing of the’’ OCS and ‘‘to provide for
the prevention of waste and
conservation of the natural resources of
the [OCS] and the protection of
correlative rights therein,’’ and provides
that ‘‘such rules and regulations shall,
as of their effective date, apply to all
operations conducted under a lease
issued or maintained under’’ OCSLA.
Section 5(b) of OCSLA provides that
‘‘compliance with regulations issued

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under’’ OCSLA shall be a condition of
‘‘[t]he issuance and continuance in
effect of any lease, or of any assignment
or other transfer of any lease, under the
provisions of’’ OCSLA.
BOEM is responsible for managing
development of the nation’s offshore
resources in an environmentally and
economically responsible way. The
Secretary, in Secretary’s Order 3299,
delegated the authority to BOEM to
carry out conventional (e.g., oil and gas)
and renewable energy-related functions
including, but not limited to, activities
involving resource evaluation, planning,
and leasing. Secretary’s Order 3299 also
assigned authority to BSEE, including,
but not limited to, enforcement of the
obligation to perform decommissioning.
BSEE provides estimates of
decommissioning costs to BOEM so that
the financial assurance required by
BOEM will be sufficient to cover the
cost to perform decommissioning,
thereby protecting the government from
incurring financial loss to the maximum
extent practicable. While BOEM has
program oversight for the financial
assurance requirements set forth in 30
CFR parts 550, 551, 556, 581, 582 and
585, this proposed rule pertains only to
the financial assurance requirements for
oil and gas or sulfur leases under Part
556, and associated right-of-use and
easement grants and pipeline right-ofway grants under Part 550.
B. History of Bonding Regulations and
Guidance
BOEM’s existing bonding regulations
for leases (30 CFR 556.900–907) and
pipeline right-of-way grants (30 CFR
550.1011) published by BOEM’s
predecessor, the Minerals Management
Service (MMS) on May 22, 1997 (62 FR
27948), provide the authority for the
Regional Director to require bonding for
leases and pipeline right-of-way grants.
Section 556.900(a) and § 556.901(a) and
(b) require lease-specific base bonds or
areawide base bonds in prescribed
amounts, depending on the level of
activity on a lease or leases. Section
556.901(d) authorizes the Regional
Director to require additional security
for leases above the prescribed amounts
for lease and areawide base bonds.
Similarly, § 550.1011 authorizes the
Regional Director to require an areawide
base bond in a prescribed amount and
additional security above the prescribed
amount for pipeline right-of-way grants.
BOEM’s existing bonding regulations
for right-of-use and easement grants (30
CFR 550.160 and 550.166), published by
the MMS on December 28, 1999 (64 FR
72756), provide the authority for the
Regional Director to require bonds or
other security for right-of-use and

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easement grants. Section 550.160, which
applies only to an applicant for a rightof-use and easement that serves an OCS
lease, provides that the applicant ‘‘must
meet bonding requirements.’’ While
there is no requirement for an applicant
for a right-of-use and easement that
serves an OCS lease to provide a base
bond in a prescribed amount, § 550.160
authorizes the Regional Director to
require bonding if the Regional Director
determines it is necessary.
Section 550.166 requires an applicant
for a right-of-use and easement that
serves a State lease to provide a base
bond of $500,000. Section 550.166 also
provides that BOEM may require
additional security above the prescribed
$500,000 base bond from the holder of
a right-of-use and easement that serves
a State lease to cover additional costs
and liabilities.
MMS, and now BOEM, has employed
the criteria for determining whether
additional security should be required
for leases to also determine whether
additional security should be required
for right-of-use and easement grants or
pipeline right-of-way grants, since there
are no criteria specified in the existing
Part 550 for these purposes. The existing
lease bonding regulations under
§ 556.901(d) provide five criteria the
bureau uses to determine whether a
lessee’s potential inability to carry out
present and future financial obligations
warrants a demand for additional
security. However, these regulations do
not specifically describe how the agency
weighs those criteria. To provide
guidance, MMS issued Notice to Lessees
(NTL) No. 98–18N, effective December
28, 1998, which provided details on
how it would apply these regulations
and the five criteria. This NTL was
replaced by NTL No. 2003–N06,
effective June 17, 2003, which was later
replaced by NTL No. 2008–N07,
effective August 28, 2008.
Pursuant to BOEM’s standard,
historical practice under NTL No. 2008–
N07, a lessee or grant holder that passed
established financial thresholds was
waived from providing additional
security to cover its decommissioning
liabilities. Additionally, co-lessees
(regardless of their own financial
strength), were not required to provide
additional security for the
decommissioning liability for that lease
if one lessee was waived. The
decommissioning liability on a lease, on
which there were two waived lessees,
was not attributed to either lessee in
calculating whether a lessee’s
cumulative potential decommissioning
liability was less than 50% of the
lessee’s net worth, which was the
standard for a lessee to qualify for a

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supplemental bonding waiver. The
policy was based on the assumption that
the chances were very remote that both
lessees would become financially
distressed and not be able to meet their
obligations. While NTL No. 2008–N07
was the most recent, fully implemented
NTL, BOEM did not fully enforce it
during the oil price collapse of 2014–
2016. BOEM was concerned that fully
enforcing NTL No. 2008–N07 would
have led to an increase of bond
demands that, in turn, would have
contributed to an increase in bankruptcy
filings.
Since 2009, there have been 30
corporate bankruptcies of offshore oil
and gas lessees involving owned or
partially owned offshore
decommissioning liability of
approximately $7.5 billion in total. This
figure includes properties with colessees and predecessors, and properties
held by companies that successfully
emerged from a Chapter 11
reorganization bankruptcy. While
BOEM cannot predict the outcomes of
bankruptcy proceedings, the actual
financial risk is significantly less than
the total offshore decommissioning
liability associated with offshore
corporate bankruptcies. Several of these
companies experienced financial
distress when oil prices fell sharply at
the end of 2014. Further, the fact that a
company entered bankruptcy does not
necessarily suggest that there would be
no private party responsible for
decommissioning costs, as company
assets may be sold, and predecessors
would retain their pre-existing
obligation to fund or perform the
decommissioning.
The fact that recent bankruptcies and
reorganizations have involved unbonded decommissioning liabilities
demonstrates that BOEM’s regulations
and the waiver criteria in NTL No.
2008–N07 were inadequate to protect
the public from potential responsibility
for OCS decommissioning liabilities,
especially during periods of low
hydrocarbon prices. Specifically, ATP
Oil & Gas was a mid-sized company
with a financial assurance waiver when
it filed for bankruptcy in 2012.
Similarly, Bennu Oil & Gas was waived
at the time of its bankruptcy filing, and
Energy XXI and Stone Energy did not
lose their waivers until less than 12
months prior to filing bankruptcy.
While most affected OCS properties
were ultimately sold or the companies
reorganized under Chapter 11 of the
U.S. Bankruptcy Code, several
bankruptcies, including those of ATP
and Bennu, demonstrated the
weaknesses in BOEM’s financial
assurance program. These weaknesses

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were apparent because the unsecured
decommissioning liabilities exceeded
the value of the leases to potential
purchasers or investors. BOEM cannot
forecast the outcome of bankruptcy
proceedings, which may lead to the
restructuring or liquidation of an
insolvent company, in addition to other
potential outcomes. If BOEM has
insufficient financial assurance at the
time of bankruptcy, BOEM may seek
legal avenues for obtaining funds in
bankruptcy proceedings, but outcomes
are not assured and there may be no
recourse for obtaining additional funds,
resulting in the Department of the
Interior’s needing to perform the
decommissioning with the cost coming
from the American taxpayer.
In 2009, MMS issued a proposed rule
(74 FR 25177) to rewrite the entirety of
the leasing provisions of Part 256 (now
designated as Part 556). However,
because of uncertainty associated with
revising the bonding requirements,
BOEM deferred revision of the bonding
regulations to a separate rulemaking.
This separate rulemaking commenced
August 14, 2014, with an advance notice
of proposed rulemaking (79 FR 49027)
to solicit ideas for improving the
bonding regulations.
In December 2015, the Government
Accountability Office (GAO) reviewed
BOEM’s financial assurance procedures
(see GAO–16–40, https://www.gao.gov/
products/GAO-16-40) (the GAO Report).
While acknowledging BOEM’s ongoing
efforts to update its policies, the GAO
Report recommended, inter alia, that
‘‘BOEM complete its plan to revise its
financial assurance procedures,
including the use of alternative
measures of financial strength.’’ GAO–
16–40 at 34. Following further analysis
and a series of stakeholder meetings in
2015 and 2016 to solicit industry input,
BOEM attempted to remedy the
weaknesses in its financial assurance
program as administered under NTL No.
2008–N07 with new NTL No. 2016–
N01, Requiring Additional Security,
which became effective September 12,
2016. NTL No. 2016–N01 sought to
clarify the procedures and explain how
BOEM would use the regulatory criteria
to determine if, and when, additional
security may be required for OCS leases,
right-of-use and easement grants, and
pipeline right-of-way grants. The NTL
continued to use net worth of a lessee
as a measure of financial strength
because this measure was required by
the regulations. The NTL also detailed
several changes in policy and refined
the criteria used to determine a lessee’s
or grant holder’s financial ability to
carry out its obligations. On August 29,
2016, BOEM requested GAO to close the

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above stated recommendation in the
GAO Report, stating that BOEM had
implemented the recommendation by
issuance of the NTL. GAO found that
the recommendation had been
implemented and closed the audit
recommendation later in fiscal year
2016. BOEM acknowledges that NTL
No. 2016–N01 was never fully
implemented. This proposed
rulemaking is another effort (in addition
to the partially implemented NTL) to
revise BOEM’s financial assurance
procedures, including the proposal to
use alternative measures to evaluate
financial strength.
In December 2016, BOEM began
implementing the NTL and issued
numerous orders to lessees and grant
holders to provide additional security
for ‘‘sole liability properties,’’ i.e.,
leases, right-of-use and easement grants,
and pipeline right-of-way grants for
which the lessee or grant holder is the
only party liable for meeting the lease or
grant obligations.
On January 6, 2017, BOEM issued a
Note to Stakeholders extending
implementation of NTL No. 2016–N01
for six months. The extension applied to
leases, right-of-use and easement grants,
and pipeline right-of-way grants for
which there were co-lessees,
predecessors in interest, or both, except
where BOEM determined there was a
substantial risk of nonperformance of
the interest holder’s decommissioning
obligation. The extension of the
implementation timeline allowed BOEM
an opportunity to evaluate whether
certain leases and grants were
considered to be sole liability
properties. Upon closer examination
and upon receiving feedback from
notified stakeholders regarding
inaccuracies in BOEM’s assessment of
sole liabilities, BOEM issued a second
Note to Stakeholders on February 17,
2017, announcing that it would
withdraw the December 2016 orders
issued on sole liability properties to
allow time for the new Administration
to review BOEM’s financial assurance
program.
C. Regulatory Reform—New Executive
and Secretary’s Orders
On March 28, 2017, the President
issued Executive Order (E.O.) 13783—
Promoting Energy Independence and
Economic Growth. Section 2 of the E.O.
directed Federal agencies to: Review all
existing regulations and other agency
actions that potentially burden the
development of domestic energy
resources; provide recommendations
that, to the extent permitted by law,
could alleviate or eliminate aspects of
agency actions that burden domestic

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energy production; and pursue
processes for implementing such
recommendations, as appropriate and
consistent with law. While section 2 of
the E.O. directed Federal agencies to
review regulations, section 2 did not
direct any particular changes or
outcomes.
On April 28, 2017, the President
issued E.O. 13795, Implementing an
America-First Offshore Energy Strategy,
which ordered the Secretary of the
Interior to direct the BOEM Director to
take all necessary steps consistent with
law to review BOEM’s NTL No. 2016–
N01 and determine whether
modifications are necessary, and if so, to
what extent, to ensure operator
compliance with lease terms while
minimizing unnecessary regulatory
burdens. This E.O. also required the
Secretary of the Interior to review
BOEM’s financial assurance regulatory
policy to determine the extent to which
additional regulation is necessary.
Secretary’s Order No. 3350 of May 1,
2017, America-First Offshore Energy
Strategy, followed on E.O. 13795 and
directed BOEM to promptly complete its
previously announced review of NTL
No. 2016–N01 and to ‘‘provide to the
Assistant Secretary—Land and Minerals
Management (ASLM), the Deputy
Secretary, and the Counselor to the
Secretary for Energy Policy, a report
describing the results of the review and
options for revising or rescinding NTL
No. 2016–N01.’’ Secretary’s Order No.
3350 further specified that BOEM’s
previously announced extension of the
implementation timelines for NTL No.
2016–N01 would remain in effect
pending completion of the review.
On June 22, 2017, BOEM issued a
third Note to Stakeholders announcing
that it was in the final stages of its
review of NTL No. 2016–N01, but had
determined that ‘‘more time was
necessary to work with industry and
other interested parties,’’ and therefore,
that it would be appropriate to extend
the implementation timeline beyond
June 30, ‘‘except in circumstances
where there would be a substantial risk
of nonperformance of the interest
holder’s decommissioning liabilities.’’
BOEM continued to review the
provisions of NTL No. 2016–N01 and
examine options for revising or
rescinding the NTL. BOEM also
continued to review its financial
assurance regulatory policy to
determine the extent to which
regulatory revision is necessary. As a
result, BOEM recognized the need to
develop a comprehensive program to
assist in identifying, prioritizing, and
managing the risks associated with
industry activities on the OCS.

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In October 2019, the President issued
E.O. 13891, Promoting the Rule of Law
Through Improved Agency Guidance
Documents, which, in recognition that
Americans deserve an open and fair
regulatory process, defines ‘‘significant
guidance documents’’ as having an
effect of $100 million or more, sets a
policy that guidance documents should
be non-binding, and encourages legally
binding requirements to be enacted
through notice and comment
rulemaking under the Administrative
Procedure Act. Because the NTL was
issued rather than moving forward with
the 2014 ANPRM, BOEM believes that
compliance with E.O. 13981 is best
achieved by rulemaking, which
provides for notice and comment.
D. Purpose of BOEM’s Portion of the
Proposed Rulemaking
BOEM’s goal for its financial
assurance program continues to be the
protection of the American taxpayers
from exposure to financial loss
associated with OCS development,
while ensuring that the financial
assurance program does not
detrimentally affect offshore investment
or position American offshore
exploration and production companies
at a competitive disadvantage. After
carefully considering the
recommendations of the GAO report, as
well as feedback received during the
review of NTL No. 2016–N01 indicating
that the policy changes identified in the
NTL could result in significant
economic hardships for companies
operating on the OCS, particularly
during times of low oil prices, BOEM
reconsidered its approach for
identifying, prioritizing, and managing
the risks associated with industry
activities on the OCS.
The proposed rule would implement
the recommendation of the GAO report
that BOEM look to alternative measures
of financial strength. Under the
proposed rule, instead of relying
primarily on net worth to determine
whether a lessee must provide
additional security, BOEM would
primarily consider a lessee’s or its
predecessor’s credit rating. Credit rating
agencies take many factors into account
when evaluating a company,
particularly those that emphasize cash
flow, such as debt-to-earnings ratios and
debt-to-funds from operations. A credit
rating would consider forward-looking
factors, including the income statement
and cash flow statement, which provide
a broader picture of how well a
company can meet its future liabilities.
On the other hand, a net worth analysis
tends to be backward-looking, because it
is calculated from a company’s balance

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sheet, which shows the current amount
of its assets and liabilities. A lessee’s
financial deterioration can occur
quickly. Relying on the more forwardlooking credit rating analysis, both to
determine whether additional security
may be necessary and to determine
whether a company can be a guarantor
on the OCS, would allow BOEM to
foresee a lessee’s possible financial
distress sufficiently ahead of time to
take appropriate action.
Further, the proposed rule’s new
approach would be rooted in the joint
and several liability of all lessees, colessees, and predecessor lessees for all
non-monetary obligations on a lease. In
most cases of default by a current lessee,
a predecessor lessee can be called upon
to perform decommissioning. This
proposed rule would rely on the
combined responsibility of all current
and predecessor lessees to perform
required decommissioning. Regardless
of the proposed rule, even in cases
where a predecessor divested its full
interest in a lease to another company
by assignment after accruing an
obligation to decommission certain
infrastructure (i.e., well, platform,
pipeline), the predecessor remains
jointly and severally liable for
decommissioning that infrastructure.
The proposed rule would acknowledge
the larger universe of companies to
whom BSEE can look for performance
under the law, and so would reduce the
circumstances under which BOEM
would need to require additional
security.
BOEM’s proposed regulatory changes
would allow the bureau to more
effectively address a number of complex
financial and legal issues (e.g., joint and
several liability and economic viability
of offshore assets) associated with
decommissioning liability on the OCS.
By addressing the issues through
rulemaking, BOEM will afford all
interested and potentially affected
parties the opportunity to provide
additional substantive comments to the
agency. This rulemaking need not be
concerned with general bond amounts,
nor is BOEM requesting comments on
the general bond amounts, because any
potential shortfall could be addressed
using the flexibility of the additional
security provisions.
In summary, BOEM is proposing this
rulemaking to clarify and simplify its
financial assurance requirements with
the ultimate goal of providing regulatory
changes that would continue to protect
taxpayers while providing certainty and
needed flexibility for OCS operators.

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II. Background of BSEE Regulations

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A. BSEE Statutory and Regulatory
Authority and Responsibilities
Like BOEM, BSEE derives its
authority primarily from OCSLA, which
authorizes the Secretary, as discussed in
part I.A, to regulate oil and gas
exploration, development, and
production operations on the OCS. As
previously stated, Secretary’s Order
3299 delegated authority to perform
certain of these regulatory functions to
BSEE. To carry out its responsibilities,
BSEE regulates offshore oil and gas
operations to enhance the safety of
exploration for and development of oil
and gas on the OCS, to ensure that those
operations protect the environment, to
conserve the natural resources of the
OCS, and to implement advancements
in technology. BSEE’s regulatory
program covers a wide range of facilities
and activities, including
decommissioning requirements, which
are the primary focus of this
rulemaking. Detailed information
concerning BSEE’s regulations and
guidance to the offshore oil and gas
industry may be found on BSEE’s
website at: http://www.bsee.gov/
Regulations-and-Guidance/index.
B. BSEE’s Decommissioning Regulations
and Guidance
On May 17, 2002, MMS issued
regulations that amended requirements
for plugging wells, decommissioning
platforms and pipelines, and clearing
sites. (See 67 FR 35398.) In 2011,
Secretary’s Order 3299 assigned
responsibility for certain MMS programs
and regulations, including the
decommissioning regulations, to BSEE.
On October 18, 2011, BSEE revised the
decommissioning regulations to reflect
BSEE’s role. (See 76 FR 64432.) On
August 22, 2012, BSEE amended the
decommissioning regulations to
implement certain safety
recommendations arising out of various
Deepwater Horizon reports and moved
the regulations to 30 CFR part 250
subpart Q. (See 77 FR 50856.)
The Subpart Q regulations generally
require that lessees and owners of
operating rights and pipeline right-ofway (ROW) grant holders decommission
wells, platforms and other facilities, and
pipelines when they are no longer
useful for operations, but no later than
one year after a lease or ROW
terminates.1 Failure to do so within this
1 Existing § 250.1703 generally requires lessees
and ROW grant holders to permanently plug all
wells, remove platforms and other facilities, and
decommission all pipelines when they are no
longer useful for operations and to clear the seafloor
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one-year period, absent BSEE’s
approval, will typically result in the
issuance of a Notice of Incident of
Noncompliance (INC)—the initial stage
of enforcement. Subpart Q also provides
BSEE with the authority to require the
decommissioning of wells, platforms
and other facilities, and pipelines when
no longer useful for operations on active
leases.
BSEE’s regulation, at 30 CFR
250.1701, also provides that lessees and
owners of operating rights are jointly
and severally liable for meeting
decommissioning obligations for
facilities on leases, including the
obligations related to lease term
pipelines, as the obligations accrue and
until each obligation is met.2 Likewise,
all holders of a ROW grant are jointly
and severally liable for meeting
decommissioning obligations for
facilities on their right-of-way,
including ROW pipelines, as the
obligations accrue and until each
obligation is met. (See id. at
250.1701(b)). Section 250.1702 explains
when lessees, operating rights owners,
and pipeline ROW grant holders accrue
decommissioning obligations. Section
250.1703 describes general requirements
for decommissioning of wells, platforms
and other facilities, and pipelines. In
particular, paragraph (g) of § 250.1703
requires that responsible parties
conduct all decommissioning activities
‘‘in a manner that is safe, does not
unreasonably interfere with other uses
of the OCS, and does not cause undue
or serious harm or damage to the . . .
environment.’’
BOEM regulations at 30 CFR 556.710
and 556.805 provide that lessees and
owners of operating rights, who assign
their interests, remain liable postassignment for all obligations they
accrued during the period in which they
owned their interest. Those regulations
also provide that BOEM and BSEE can
require such assignor predecessors to
perform those obligations if a
subsequent assignee fails to perform. Id.
In accordance with the joint and
several liability provisions of 30 CFR
part 250: Subpart Q and the residual
liability provisions of part 556, when
current lessees, operating rights owners,
or ROW holders fail to perform
right-of-way. Existing § 250.1710 requires that wells
be permanently plugged within one year after a
lease terminates, while § 250.1725 requires that
platforms and other facilities be removed within
one year after the lease or a pipeline right-of-way
terminates (unless BSEE approves maintaining the
structure for other uses). Sections 250.1750 and
250.1751 allow lessees and ROW grant holders to
decommission pipelines in place (i.e., without
removal) under certain conditions.
2 A similar requirement is imposed under existing
§ 250.146.

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decommissioning obligations, BSEE
typically orders all predecessors that
have accrued the defaulted obligation to
perform any required decommissioning.
If a right-of-use and easement (RUE)
grant holder fails to perform (when
obligated by the terms of the grant),
BSEE typically orders any lessees or
owners of operating rights that accrued
the relevant obligation prior to issuance
of the RUE to perform required
decommissioning. BSEE may issue such
orders without regard to whether a
predecessor’s ownership of interests in
a lease or grant was in recent years or
several decades before. For example, if
a predecessor divests its full interest in
a lease to another company by
assignment after accruing the obligation,
BSEE would still have the authority to
order the predecessor to perform
accrued obligations upon default by a
subsequent assignee, regardless of the
regulatory revisions in this proposed
rulemaking.
To provide guidance and additional
detail on the decommissioning
requirements, MMS issued NTL No.
2004–G06, Structure Removal
Operations (effective April 5, 2004).
MMS replaced this NTL in 2010 with
NTL No. 2010–G05, Decommissioning
Guidance for Wells and Platforms,
which BSEE in turn replaced in
December 2018 with NTL No. 2018–
G03, Idle Iron Decommissioning
Guidance for Wells and Platforms. The
2018 NTL states that BSEE may issue
orders to lessees and ROW grant holders
who fail to meet deadlines to
decommission, as specified in the NTL,
for wells and facilities on active leases
that are no longer useful for operations.
It also states that BSEE will typically
issue INCs if decommissioning does not
occur within one year after a lease or
ROW grant expires, terminates, or is
relinquished, to prompt the owners and
their operator to address problems that
occur when decommissioning is not
carried out in a timely manner. The
2018 NTL also states that, pursuant to
30 CFR 250.1711(a), BSEE will issue
orders to permanently plug any wells
that pose hazards to safety or the
environment.
C. Regulatory Reform
On February 24, 2017, the President
issued E.O. 13777, Enforcing the
Regulatory Reform Agenda, which
establishes two main goals for Federal
agencies in alleviating unnecessary
burdens placed on the American people:
(1) To improve implementation of the
regulatory reform initiatives and
policies specified in E.O. 13771
(Reducing Regulation and Controlling
Regulatory Costs), E.O. 12866, and E.O.

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13563 (Improving Regulation and
Regulatory Review); and
(2) To identify regulations for repeal,
replacement, or modification, that,
among other things, are outdated,
unnecessary, or ineffective; impose
costs that exceed benefits; or create a
serious inconsistency or otherwise
interfere with regulatory reform
initiatives and policies.
D. Stakeholder Engagement
On June 22, 2017, the Office of the
Secretary issued a Request for
Comments to solicit public input on
how the Department can improve
implementation of regulatory reform
initiatives and policies and identify
regulations for repeal, replacement, or
modification (see 82 FR 28429). As a
result, the Department received several
written comments, some of which
pertained to BOEM’s financial assurance
regulatory requirements, including
financial assurance for
decommissioning, and some of which
addressed BSEE’s procedures for
requiring performance of
decommissioning obligations by
predecessors when the current lessees
or grant holders fail to do so. The
commenters that addressed BSEE’s
procedures urged BSEE to focus
responsibility for decommissioning
liabilities on current lessees, regardless
of predecessors in title, inasmuch as
predecessors are not held responsible
for liabilities created after their
ownership terminates; and, in cases of
a default by current owners, to pursue
performance by predecessors in reverse
chronological order starting with the
most recent predecessor.
BSEE has considered the comments
from stakeholders and determined that
BSEE’s decommissioning regulations
could be revised to support the goals of
the Administration’s regulatory reform
initiatives, while also ensuring safety
and environmental protection.
Accordingly, BSEE proposes to revise
existing 30 CFR part 250: Subpart Q
regulations to address the order in
which predecessors will be ordered to
perform decommissioning if the current
lessees or grant holders fail to do so. In
addition, BSEE proposes to revise the
decommissioning regulations to
expressly include holders of RUE grants
among the parties who can accrue
obligations for decommissioning.
Finally, BSEE proposes to require
parties who file administrative appeals
of decommissioning decisions or orders
to post a surety bond in order to seek
to obtain a stay of that decision or order
pending the appeal, and thus minimize
any possibility that resources for the
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be unavailable following exhaustion of
appeals, such as if no other predecessors
exist to perform the decommissioning
activities.
E. Purpose of BSEE’s Portion of the
Proposed Rulemaking
Timely decommissioning of oil and
gas wells, platforms and other facilities,
and pipelines and related infrastructure
is a critical requirement for OCS
operators to adhere to, and when
necessary, for BSEE to enforce. If not
properly decommissioned, such
infrastructure could cause safety
hazards or environmental harm, or
become obstructions by interfering with
navigation or other uses of the OCS
(such as fishing and future resource
development). Under some conditions,
however, lessees or grant holders may
transfer platforms to artificial reef sites
maintained by coastal states, or ROW
grant holders may decommission
pipelines in place, in lieu of removal.
This proposed rule would not change
regulations governing the operational
aspects of decommissioning.
Under existing regulations, BSEE can
require a predecessor to bring a lease
into compliance if its assignee or any
subsequent assignee has failed to
perform an obligation that accrued prior
to assignment. BSEE’s proposed rule
would create a new procedure under
Subpart Q for establishing the sequence
in which BSEE will order predecessors
to carry out their accrued
decommissioning obligations when
current lessees or grant holders (or other
predecessors) fail to do so. Specifically,
after the current lessees or grant holders
have defaulted, BSEE would pursue
liable predecessors in reverse
chronological order through the chainof-title to perform their accrued
decommissioning obligations. Under
this approach, the most recent
predecessors would receive orders to
conduct decommissioning first, before
BSEE turns to predecessors more remote
in time.
This proposed change may provide
additional transparency and clarity for
BSEE and BOEM, as well as for the
public and the oil and gas industry, in
ensuring that decommissioning
requirements will be met. In light of the
proposed approach, lessees and grant
holders wanting to sell their leases or
grants may choose to consider
financially stronger companies as
potential purchasers or assignees. Under
the proposal, both parties to such
transactions would know in advance
that BSEE would turn first to the most
recent assignor to perform
decommissioning if the current lessee or
grant holder fails to perform its

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65909

decommissioning obligation; in that
case, the seller may well want some
assurance that the purchasing company
has the means to perform. Accordingly,
this additional transparency may result
in limiting the universe of potential
purchasers to more financially capable
companies that present a reduced risk of
default or are able to provide financial
assurances to the seller, thus assuring
that decommissioning can be
performed.
In addition, since the more recent
owners are more familiar with the
current state of the facilities than
previous owners, the proposed
approach would further ensure safer
and more efficient decommissioning.
Also, the more recent prior owners often
accrue liabilities for wells, pipelines, or
platform improvements for which
earlier owners have no liability because
these wells, pipelines, or platform
improvements were added after the
earlier owners had assigned their
interests. The more recent prior owners
are, therefore, the most likely
predecessor(s) who can be required to
fully decommission all facilities. In
summary, as proposed, it is reasonable
and efficient for BSEE to turn first to the
most recent owners when the current
owners do not perform all the
decommissioning obligations.
BSEE’s proposal would not exempt
any current lessees or grant holders, or
predecessors, from liability; each party
remains liable for its own accrued
obligations. The proposal would simply
establish a procedure through which
BSEE would prioritize its efforts toward
the groups of jointly and severally liable
predecessors by looking first to the most
recent in time, rather than looking
initially to all jointly and severally
liable predecessors. Details of the
proposal are found in part VII.A of this
proposed rule.
The proposed rule, if adopted, could
increase confidence that the cost of
decommissioning will be borne by the
more recent owners while still ensuring
that decommissioning is carried out in
a safe and environmentally responsible
manner. While there is no amount of
time which reduces or eliminates joint
and several liability of predecessors for
their accrued liabilities, defining an
order of recourse among predecessors
would eliminate some of the
unpredictability perceived in the past.
In addition, the proposed rule would
help BSEE to better address
maintenance and monitoring of facilities
in cases where all current owners’
default.
The proposed rule would also address
the decommissioning of OCS facilities
located on RUE grants. These grants

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authorize a RUE holder to use a portion
of the seabed at an OCS site not leased
by the RUE holder, in order to construct,
modify, or maintain platforms, artificial
islands, facilities, installations, and
other devices that support the
exploration, development, or
production of oil and gas from a RUE
holder’s nearby lease. BOEM’s financial
assurance regulations encompass RUEs
as a defined category of interest in OCS
lands, and provide that RUE grant
holders must comply with the same
bonding obligations as other lessees.
However, as a result of numerous
revisions of the regulations specific to
decommissioning, those regulations no
longer clearly address decommissioning
by RUE grant holders, so BSEE now
proposes to add RUE holders to the
parties that accrue obligations for
decommissioning. This is consistent
with BOEM’s existing process of
including the decommissioning
obligation in the terms of the RUE grant,
as well as the general understanding
typically captured in agreements
between RUE holders and facility
owners by which RUE holders secure
title to or rights to use existing facilities
originally installed when the tract was
subject to a lease. This proposed
amendment to the existing BSEE
regulations is discussed more
completely at part VII.B.
In addition, BSEE’s existing
regulations (at 30 CFR part 290) allow
parties adversely affected by a final
BSEE order or decision—including a
decommissioning-related decision or
order—to administratively appeal that
decision to the Interior Board of Land
Appeals (IBLA). Existing § 290.7(a)(2)
requires a party appealing a civil
penalty order issued by BSEE to post a
surety bond, in accordance with 30 CFR
250.1409, pending the appeal. There has
previously been no such bonding
requirement for appeals of
decommissioning orders.
Inasmuch as income generation from
a lease typically ceases well before
decommissioning orders are issued, an
appeal poses a risk to BSEE that, where
financial assurance was not already in
place, a lessee appealing a
decommissioning order may not have
the wherewithal to decommission after
a lengthy appeal has run its course and
the Board affirms BSEE’s order.
Moreover, the delay occasioned by the
appeal process may create a risk that
some or all other predecessors may have
deteriorated financial health by the time
BSEE turns to them for performance.
Thus, in order to avoid the possibility
of undue delays, and to ensure that
funds are available to meet the
decommissioning requirements in a safe

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and environmentally sound manner
when an unsuccessful appellant
subsequently defaults, BSEE proposes to
amend the 30 CFR part 250: Subpart Q
and Part 290 regulations as described in
part VII.C. Specifically, BSEE proposes
to require any party appealing a
decommissioning decision or order to
post a surety bond in order to seek to
obtain a stay of that decision or order
pending the appeal to ensure that the
necessary decommissioning activities
can be performed in a timely manner if
the appeal is denied and the
appellant(s) subsequently fail to perform
the required decommissioning
activities.
III. Proposed Revisions to BOEM Bonds
and Other Security Requirements
BOEM’s existing bonding and other
security regulatory framework has two
main components: (1) Base bonds,
generally required in amounts
prescribed by regulation, and (2) bonds
or other security above the prescribed
amounts that may be required by order
of the Regional Director upon
determination that an increased amount
is necessary to ensure compliance with
OCS obligations. BOEM’s objective is to
ensure that taxpayers never have to bear
the cost of meeting the obligations of
lessees and grant holders on the OCS. At
the same time, BOEM must balance this
objective against the costs and
disincentives to additional exploration,
development and production that are
imposed on lessees and grant holders by
increased amounts of surety bonds and
other security requirements. To
maintain a balanced framework, BOEM
proposes to: (1) Modify the evaluation
process for requiring additional
security; (2) streamline the evaluation
criteria; and (3) remove restrictive
provisions for third-party guarantees
and decommissioning accounts. The
proposed rule would allow the Regional
Director to require additional security
only when: (1) A lessee or grant holder
poses a substantial risk of becoming
financially unable to carry out its
obligations under the lease or grant; (2)
there is no co-lessee, co-grant holder, or
predecessor that is liable for those
obligations and that has sufficient
financial capacity to carry out the
obligations; and (3) the property is at or
near the end of its productive life, and
thus, may not have sufficient value to be
sold to another company that would
assume these obligations.
A. Leases
Each current lessee is jointly and
severally liable for the lease
decommissioning obligations, which
means that each lessee is liable up to the

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full amount of the relevant obligation
and that BOEM may pursue compliance
with the obligations from any one
lessee. As such, each lessee is liable for
all decommissioning obligations that
accrue during its ownership, as well as
those that accrued prior to its
ownership. In addition, a lessee that
transfers its interest to another party
continues to be liable for any
unperformed decommissioning
obligations that accrued prior to, or
during, the time that lessee owned an
interest in the lease.
BOEM’s additional security
evaluation process, contained in 30 CFR
556.901(d), is based on the current
lessee’s ability to carry out present and
future obligations. BOEM proposes to
expand this evaluation process to
include an evaluation of the ability of a
co-lessee, or a predecessor lessee, to
carry out present and future obligations.
This change recognizes the mitigation of
the risk occasioned by the joint and
several liability of all current and
predecessor lessees, which allows BSEE
to require co-lessees or predecessor
lessees, or both, to perform
decommissioning when a current lessee
is unable to perform. While the liability
for obligations between current and
predecessor lessees has always been
joint and several, this would be the first
time BOEM has explicitly considered
the ability of predecessor lessees to
carry out the present and future
obligations of current lessees when
determining the additional security
requirements for current lessees.
Under BOEM’s existing regulations,
the Regional Director’s evaluation of a
lessee’s potential need for additional
security for a lease is based on the
following five criteria: Financial
capacity; projected financial strength;
business stability; reliability in meeting
obligations based upon credit rating or
trade references; and record of
compliance with laws, regulations, and
lease terms. BOEM is proposing to
streamline its evaluation process by
using only two criteria to determine
whether additional security on a lease
may be required: (1) A credit rating,
either a credit rating from a Nationally
Recognized Statistical Rating
Organization (NRSRO), as identified by
the United States Securities and
Exchange Commission (SEC) pursuant
to its grant of authority under the Credit
Rating Agency Reform Act of 2006 and
its implementing regulations at 17 CFR
parts 240 and 249(b), or a proxy credit
rating determined by BOEM using
audited financial statements; and (2) the
value of proved oil and gas reserves.
These two criteria better align BOEM’s
evaluation process with accepted

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financial risk evaluation methods used
by the banking and finance industry.
Eliminating reliance on less relevant
information, such as length of time in
operation to determine business
stability, or trade references to
determine reliability in meeting
obligations, will simplify the process
and remove criteria that may not
accurately or consistently predict
potential financial distress.
BOEM proposes to eliminate the
‘‘business stability’’ criterion found in
existing § 556.901(d)(1)(iii). The existing
regulation bases business stability on
five years of continuous operation and
production of oil and gas, but BOEM
determined that there is little
correlation between being in business
for five or more years and a company’s
ability to carry out its present and future
obligations. BOEM met with S&P credit
analysts about their process for
considering business stability. S&P
credit analysts confirmed that business
stability is a factor in credit ratings,
however, S&P does not measure a
company’s business stability by merely
noting how long it has been since the
company was incorporated. BOEM
conducted an analysis of offshore
bankruptcies, including an assessment
of the number of years incorporated
prior to bankruptcy, and determined
that whether a company was in business
for five or more years had no
relationship to its likelihood to declare
bankruptcy.
BOEM also proposes to eliminate the
existing ‘‘record of compliance’’
criterion found in existing
§ 556.901(d)(1)(v). BOEM reviewed
BSEE’s INCs and Increased Oversight
List. BOEM’s review of these lists
confirmed the feedback BOEM received
in response to the NTL, which was that
companies with a large number of
properties and components tended to
receive a large number of INCs and had
a larger number of individual properties
on the Increased Oversight List.3 BOEM
has determined that the primary
predictor of the number of INCs a
company receives is not its financial
health, but the number of OCS
properties that it owns. BOEM
determined that a company’s record of
compliance did not correlate to its
overall financial health and, therefore, is
not an accurate indicator of the need for
financial assurance to assure that the
company carries out its present and
future OCS obligations. Offshore
companies with a large portfolio of
offshore assets inspected by BSEE
accumulated a far greater number of
3 Most recent data available at https://
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BSEE-issued Incidents of NonCompliance than offshore companies
with fewer offshore assets inspected by
BSEE, irrespective of the company’s
overall financial health. The ‘‘record of
compliance’’ criterion was also difficult
to fairly apply since not all
noncompliance is considered equal
evidence of a lack of commitment to
observe regulatory requirements.
BOEM proposes to replace the
existing ‘‘financial capacity’’ and
‘‘reliability’’ criteria in § 556.901(d)(1)
with issuer credit rating or proxy credit
rating. BOEM has found credit rating,
which had been a part of the reliability
criterion, to be the most reliable
indicator of financial ability. Credit
ratings provided by a NRSRO
incorporate a broad range of qualitative
and quantitative factors, and a business
entity’s credit rating represents its
overall credit risk, or its ability to meet
its financial commitments.
If a lessee does not have a credit
rating from a NRSRO, the lessee may
instead submit audited financial
statements, and BOEM will determine a
proxy credit rating using the S&P Credit
Analytics Credit Model, or a similar
widely accepted credit rating model.
Such audited financial information is
currently the basis of one of the five
criteria—the ‘‘financial capacity’’
criterion. In the proposed rule, this
information will be just one of the
considerations used for proxy credit
ratings, following credit rating agency
models.’’
BOEM has concluded that audited
financial statements, prepared in
accordance with Generally Accepted
Accounting Principles (GAAP) and
accompanied by an auditor’s certificate,
provide a level of certainty that the
financial statements accurately
represent the company’s economic
position and operational performance.
Using this audited financial information
to generate a proxy credit rating would
allow BOEM to accurately determine if
additional security is needed.
The proposed rule would allow the
Regional Director to require a lessee to
provide additional security if the lessee
does not have a credit rating from a
NRSRO that is greater than or equal to
either BB¥ from S&P Global Ratings
(S&P) or Ba3 from Moody’s Investor
Service (Moody’s); or a proxy credit
rating greater than or equal to either
BB¥ or Ba3 as determined by the
Regional Director based on audited
financial information including an
income statement, balance sheet, and
statement of cash flows, with an
accompanying auditor’s certificate.
Under existing BOEM regulations, colessees and predecessors are jointly and

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severally liable for accrued
decommissioning obligations, and the
risk that the government will be
responsible for the decommissioning
cost is reduced when those entities are
financially viable. Hence, BOEM may
determine not to require additional
security for properties with financially
viable co-lessees and predecessors. To
be considered financially viable, the colessee or predecessor would have to
meet the same credit rating or proxy
credit rating criteria as a lessee.
If the lessee does not meet the credit
rating or proxy credit rating criteria,
BOEM would review the lessee’s
obligations at the lease level and
determine whether to require additional
security for each lease owned by that
lessee. BOEM may require the lessee to
provide additional security on a leaseby-lease basis if a co-lessee does not
meet the credit rating or proxy credit
rating criteria.
If the co-lessee does not meet the
credit rating or proxy credit rating
criteria, BOEM would review the proved
oil and gas reserves on the lease. The
Regional Director may require the lessee
to provide additional security for that
lease if the net present value of those
proved reserves is less than or equal to
three times the cost of the
decommissioning (as estimated by
BSEE) associated with the production of
the reserves. As described in more detail
below, BOEM determined that
properties with a net present value of
proved oil and gas reserves exceeding
three times the decommissioning costs
associated with production of those
reserves pose minimal risk that the
government will be required to bear the
cost of decommissioning, because these
properties are more likely than other
properties to be purchased by another
company. That company would then
become liable for existing
decommissioning obligations, reducing
the risk that those costs would be borne
by the government. Consequently,
BOEM is proposing to use (and is
requesting comments on) this test—net
present value of proved oil and gas
reserves on the lease exceeding three
times the decommissioning costs
(decommissioning costs as estimated by
BSEE) associated with production of
those reserves—as the criterion to
replace the existing generalized
‘‘projected financial strength’’ criterion,
which considered whether the
estimated value of a lessee’s existing
lease production and proven reserves
was significantly in excess of the
lessee’s existing and future lease
obligations.
If neither the lessee nor any co-lessee
meets the credit rating or proxy credit

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rating criteria and there are not
sufficient oil and gas reserves on the
lease, BOEM would look to the credit
ratings of prior lessees. If no predecessor
lessee liable for decommissioning any
facilities on the lease meets the credit
rating or proxy credit rating criteria, the
Regional Director may require the lessee
to provide additional security.
Moreover, even if a predecessor meets
the credit rating or proxy credit rating
criteria, the Regional Director may
require the lessee to provide additional
security for decommissioning
obligations for which such a
predecessor is not liable.

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B. Right-of-Use and Easement Grants
BOEM’s regulations concerning rightof-use and easement grants for an OCS
lessee and a State lessee are found in 30
CFR 550.160 through 550.166. Section
550.160 provides that an applicant for a
right-of-use and easement that serves an
OCS lease ‘‘must meet bonding
requirements,’’ but the regulation does
not prescribe a base bond amount. The
proposed rule would replace this vague
requirement with a cross-reference to
the specific criteria governing bond
demands in § 550.166(d).
BOEM is proposing to revise the
bonding regulations to clarify that any
right-of-use and easement grant holder,
whether the right-of-use and easement
serves a State lease or serves an OCS
lease, may be required to provide
additional security for the right-of-use
and easement if the grant holder does
not meet the credit rating or proxy
credit rating criteria proposed to be used
for lessees. The value of proved oil and
gas reserves will not be considered
because a right-of-use and easement
grant does not entitle the holder to any
interest in oil and gas reserves.
However, this proposal would allow
consideration of the credit rating of a
predecessor right-of-use and easement
grant holder and a predecessor lessee,
i.e., a lessee that held interests in the
lease on which the right-of-use and
easement is now located and is liable for
accrued obligations for the facilities
thereon, which better aligns BOEM’s
evaluation process with accepted
financial risk evaluation methods used
by the banking and finance industry.
C. Pipeline Right-of-Way Grants
BOEM’s bonding requirements for
pipeline right-of-way grants, contained
in 30 CFR 550.1011, prescribe a
$300,000 area-wide base bond that
guarantees compliance with all the
terms and conditions of the pipeline
right-of-way grants held by a company
in an OCS area. BOEM may require a
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provide additional security if the
Regional Director determines that a
bond in excess of $300,000 is needed.
BOEM is proposing to revise the
bonding regulations to provide the
criteria under which the Regional
Director could demand a pipeline rightof-way grant holder to provide
additional security and that criteria is
similar to that proposed for lessees, i.e.,
when the grant holder does not meet the
credit rating or proxy credit rating
criteria proposed to be used for lessees.
BOEM would not consider proved
reserves because right-of-way grants do
not authorize holders to produce
hydrocarbon reserves. Another change
proposed by the rule—to allow
consideration of the credit rating or
proxy credit rating of a co-grant
holder—would better align BOEM’s
evaluation process with accepted
financial risk evaluation methods used
by the banking and finance industry.
BOEM also proposes to expand this
evaluation to include consideration of
the credit rating or proxy credit rating
of predecessor right-of-way grant
holders because they remain liable for
accrued decommissioning obligations
for facilities and pipelines on their
right-of-way until each obligation is
met.
IV. Proposed Revisions to Other BOEM
Security Requirements
A. Third-party Guarantees
BOEM is proposing to evaluate a
potential guarantor using the same
credit rating or proxy credit rating
criteria proposed for lessees. The value
of proved oil and gas reserves will not
be considered because the value of
proved reserves quantify only the
marketability of the lease interest being
covered by the guarantee, in which the
guarantor would not have an interest,
and is not used to describe the
guarantor’s overall financial strength.
The criteria to evaluate a guarantor
provided in the existing regulations
have proven difficult to apply. For
example, § 556.905(a)(3) provides that
the guarantor’s total outstanding and
proposed guarantees are not allowed to
exceed 25 percent of its unencumbered
net worth in the United States. A
company’s total outstanding and
proposed guarantees depends on
accurate information provided by the
guarantor, and BOEM has no way to
confirm whether the 25 percent
threshold has been exceeded at the time
of the application or afterward. The
same provision requires BOEM to
consider the unencumbered net worth
of the company in the United States,
while another provision,

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§ 556.905(c)(2)(iv), requires BOEM to
consider the guarantor’s unencumbered
fixed assets in the United States. Both
of these criteria are difficult to apply
when the company being evaluated has
domestic and international assets that
must be separated. Utilizing the same
financial evaluation criteria, i.e., issuer
credit rating or proxy credit rating, to
assess both guarantors and lessees as the
most relevant measure of future capacity
would provide consistency in
evaluations and avoid overreliance on
net worth, which was GAO’s concern.
To allow more flexibility in the use of
third-party guarantees, this proposed
rule would remove the requirement for
a third-party guarantee to ensure
compliance with the obligations of all
lessees, operating rights owners, and
operators on the lease. Additionally, the
proposed rule would allow a third-party
guarantee to be used as additional
security for a right-of-use and easement
grant and/or a right-of-way grant, as
well as a lease. Potential guarantors are
reluctant to provide a guarantee if they
cannot choose the entity for which they
are guaranteeing compliance or limit the
amount of their guarantee. This change
would allow a guarantor to limit its
guarantee to a subset of lease or grant
obligations, e.g., an amount sufficient to
cover a percentage of the
decommissioning liability in proportion
to the ownership percentage of a
particular lessee or grant holder, a
specific dollar amount, or a specific
facility.
By allowing a third-party guarantor to
guarantee only the obligations it wishes
to cover, BOEM would provide industry
with the flexibility to use the guarantee
to satisfy financial assurance
requirements without the burden of
forcing the guarantor to cover all the
risks associated with all parties on the
lease or grant or operations in which the
party they wish to guarantee has no
interest and over which this party may
have no control. Moreover, the proposal
to allow BOEM to accept a third-party
guarantee that is limited to specific
obligations does not reduce BOEM’s
protection because the combination of
all bonds and guarantees still would
have to ensure that all lease and grant
obligations are fully secured.
The proposed rule would also allow
BOEM to cancel a third-party guarantee
under the same terms and conditions
that apply to cancellation of additional
bonds and return of pledged security, as
provided in proposed § 556.906(d)(2).
Lastly, the existing regulation
somewhat confusedly refers to both a
‘‘guarantee’’ and an ‘‘indemnity
agreement’’ (which meant the same
thing), and the proposed rule clarifies

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that there is only one agreement
contemplated—the guarantee
agreement.
B. Lease-specific Abandonment
Accounts
Section 556.904 currently allows
lessees to establish a lease-specific
abandonment account in lieu of the
bond required in § 556.901(d). BOEM
proposes to rename these accounts
‘‘Decommissioning Accounts,’’ which is
the current terminology used in
industry, to remove any perceived
limitation to a single lease, and to allow
these accounts to be used to ensure
compliance with additional security
requirements for a right-of-use and
easement grant or a pipeline right-ofway grant as well as a lease. To make
these accounts more attractive to lessees
who may need to use this method,
BOEM also proposes to remove the
requirements to pledge Treasury
securities to fund the account before the
amount of funds in the account equals
the maximum amount insurable by the
Federal Deposit Insurance Corporation
(FDIC), which is currently $250,000.
BOEM notes that due to this current
requirement, lessees may have been
unwilling to use decommissioning
accounts since the vast majority of
decommissioning moneys would be in
the form of low-yield Treasury
securities. BOEM has determined that
the risk of loss through a bank failure is
minimal, so, as a practical matter, the
government’s security does not depend
on FDIC insurance.
C. Cancellation of Additional Bonds
BOEM proposes to revise § 556.906(d)
to add three additional circumstances
when BOEM may cancel an additional
bond, as discussed below in the analysis
of § 556.906.
V. BOEM Evaluation Methodology

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A. Credit Ratings
In this rulemaking, BOEM proposes to
use an ‘‘issuer credit rating’’ when
referring to ‘‘credit rating’’ to evaluate
the financial health of lessees and grant
holders doing business or offering
guarantees on the OCS. An evaluation of
S&P’s and Moody’s rating
methodologies revealed that the
analyses they perform to determine an
issuer credit rating are wide-ranging and
include factors beyond corporate
financials (such as history, senior
management, and commodity price
outlook). An issuer credit rating
provides the rating agencies’ opinions of
the entity’s ability to honor senior
unsecured debt and debt-like
obligations. It is common for lessees to

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have both an issuer credit rating and a
bond issuance rating. However, bond
issuance ratings are opinions of the
credit quality of a specific debt
obligation only, which can vary based
on the priority of a creditor’s claim in
bankruptcy or the extent to which assets
are pledged as collateral. Due to the
priority of claims associated with debt
and the limited purpose of bond
issuance ratings, BOEM proposes to
accept only issuer credit ratings from a
NRSRO, and references to credit rating
in this rulemaking refer only to an
issuer credit rating. BOEM proposes to
add ‘‘Issuer credit rating,’’ as defined by
S&P, as a newly defined term in Parts
550 and 556.
If an entity does not have an issuer
credit rating, BOEM proposes to
determine a proxy credit rating based on
audited financial information, including
an income statement, balance sheet,
statement of cash flows, and the
auditor’s certificate.
BOEM proposes to use S&P’s Credit
Analytics Credit Model to calculate
proxy credit ratings. This model would
allow BOEM to compare the company
with similar public companies in the
same industry segment. BOEM invites
comments on the appropriateness of
relying on this model, or other similar,
widely accepted credit rating models, to
generate proxy credit ratings.
In establishing the issuer credit rating
threshold of BB¥ (S&P) or Ba3
(Moody’s), an equivalent credit rating
provided by an SEC-recognized NRSRO,
or a proxy credit rating determined by
the Regional Director, BOEM seeks to
balance the financial risk to the
government and the taxpayer with
minimizing unnecessary regulatory
burdens as directed by Executive Order
13795. BOEM compared the historical
default rates for Moody’s credit ratings
and found the Ba3 credit rating was
equivalent to the S&P BB¥ credit rating.
BOEM reviewed historical default rates
across the entire credit rating spectrum,
as well as the credit profile of oil and
gas sector bankruptcies arising from the
commodity price downturn in 2014, to
determine an appropriate level of risk.
The average S&P one-year default rate
for BB¥ rated companies from 1981 to
2017 was 1.00%. The average S&P
historical one-year default rates of BB¥
rated companies are significantly better
than average default rates for B rated
companies (ranging from 2.08% to
7.15%) and C rated companies
(26.82%). On the higher end of BB
ratings at BB+, the average one-year
default rate (0.34%) is similar to the
average one-year default rate (0.25%) for
the lowest investment-grade rating of
BBB¥.

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BOEM believes that one-year default
rates are an appropriate measure of risk,
given BOEM’s policy of reviewing the
financial status of lessees/ROW holders/
RUE holders at a minimum on an
annual basis, the review typically
corresponding with the release of
audited annual financial statements. In
addition, BOEM continually monitors
company credit rating changes, market
reports, trade press, articles in major
news outlets, and quarterly financial
reports to review the financial status of
lessees/ROW holders/RUE holders
throughout the year and can demand
supplemental financial assurance
through the Regional Director’s
regulatory authority as a result of midyear changes in financial status.
BOEM invites comments on the
appropriateness of this approach of
relying on lessee and grant holder credit
ratings, including whether BOEM has
proposed an appropriate credit rating
threshold, and if not, what threshold or
set of thresholds would best protect
taxpayer interests while minimizing
unnecessary industry burdens. BOEM
also invites comments on the IRIA
generally, including the analytical
assumptions and the regulatory
alternatives analyzed. Specifically, the
IRIA analyzed a BBB¥ credit rating
alternative threshold and a no-action
alternative.
B. Valuing Proved Oil and Gas Reserves
Under the proposed rule, if a lessee
requests BOEM to take into account the
proved reserves on a particular lease to
determine whether additional security
is required, BOEM would require the
lessee to submit a reserve report for the
proved oil and gas reserves (as defined
by the SEC regulations at 17 CFR 210.4–
10(a)(22)) for the lease associated with
the asset to be decommissioned. The
reserve report should contain the
projected future production quantities
of proved oil and gas reserves, the
production cost for those reserves, and
the discounted future cash flows from
production. The reserve report would be
required to provide the net present
value of the proved oil and gas reserves
determined in accordance with the
accounting and reporting standards set
forth in SEC Regulation S–X at 17 CFR
210.4–10 and SEC Regulation S–K at 17
CFR 229.1200. BOEM would use the net
present value when determining
whether the value of the reserves
exceeds three times the cost of the
decommissioning (as estimated by
BSEE) associated with the production of
those reserves.
BOEM believes that a property with a
high enough ‘‘reserves-todecommissioning cost’’ ratio would

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likely be purchased by another lessee if
a current lessee defaults on its
obligations, thereby reducing the risk
that decommissioning costs would be
borne by the government, and
consequently reducing the need for
additional security.
A reserves-to-decommissioning cost
ratio of one-to-one would mean that the
estimated value of remaining oil and gas
reserves on a lease is equal to the cost
of decommissioning. BOEM does not
expect any new lessee to purchase a
property with a ratio of one-to-one as
the new lessee would not receive any
return on its investment once it bears
the cost of decommissioning. A
reserves-to-decommissioning cost ratio
below three-to-one might be considered
adequate to compensate a new lessee for
the cost of purchasing the lease and
assuming liability for all of the existing
decommissioning obligations. Based on
past experience, BOEM, however,
considers that a lease with a ratio below
three-to-one is often too risky to find a
new lessee that is willing to purchase it.
BOEM believes that a reserves-todecommissioning cost ratio that exceeds
three-to-one may provide enough risk
reduction that the Regional Director
may determine the lessee is not required
to provide additional security for that
lease. Three-to-one may be considered
an adequate ratio to provide time for the
lessee to provide bonds or another form
of financial assurance prior to the
property falling into a range where it
may not attract a purchaser.
Establishing an appropriate reservesto-decommissioning cost ratio is one
approach toward protecting the taxpayer
during periods of commodity price
volatility. Should commodity prices
decline in a manner similar to late 2014
through early 2016, BOEM believes a 3to-1 ratio means the property would
most likely retain its economic viability
and financial attractiveness to potential
buyers. BOEM requests comment on
whether this is in fact an appropriate
threshold, or if there are better
approaches and/or data sets available
for analysis that would allow BOEM to
provide better certainty that taxpayer
interests will ultimately be protected.
VI. Proposed Revisions to BOEM
Definitions
To implement the changes proposed
above, BOEM proposes to add or revise
several definitions in 30 CFR part 550
and Part 556. For proposed Part 550,
BOEM proposes to add new terms and
definitions for ‘‘Issuer credit rating,’’
‘‘Predecessor,’’ and ‘‘Security,’’ and to
revise the definition of ‘‘You.’’ BOEM
proposes to add a new term and
definition for ‘‘Right-of-Use and

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Easement’’ and remove the separate
definitions of ‘‘Right-of-use’’ and
‘‘Easement’’ in Part 550 because those
terms are not used in the existing
regulatory text. Similarly, for Part 556,
BOEM proposes to add new terms and
definitions for ‘‘Issuer credit rating’’ and
‘‘Predecessor,’’ remove the existing term
and definition of ‘‘Security or
securities’’ and add a new term and
definition for ‘‘Security,’’ and revise the
definitions of ‘‘Right-of-Use and
Easement (RUE)’’ and ‘‘You,’’ all of
which will match those in proposed
Part 550.
VII. Proposed Revisions to BSEE
Decommissioning Regulations
A. Decommissioning by Predecessors
Most of the decommissioning
provisions now located in 30 CFR part
250: Subpart Q became effective in
2002. Since that time, BSEE has become
aware that some industry stakeholders
believe that certain provisions can cause
uncertainty—and thus create planning
problems and potentially unnecessary
financial burdens—for lessees or grant
holders that long ago assigned their
interests. Specifically, some industry
stakeholders have expressed concern
that, when current lessees or grant
holders default or otherwise fail to
perform their decommissioning
obligations, simultaneous pursuit by
BSEE of any or all predecessors
(consistent with their joint and several
liability), without focusing first on the
most recent predecessors, may result in
confusion and inefficiency among the
parties. Those stakeholders also assert
that the current process may reduce
incentives for current and recent lessees
or grant holders to prepare to finance
decommissioning. Such outcomes,
according to those stakeholders, could
make it harder for BSEE to achieve the
safety and environmental goals of the
decommissioning regulations.
In particular, some stakeholders have
asserted that—since many leases have
been owned or operated by numerous
entities over many years—the
immediate predecessors of the current
lessees or grant holders are more likely
to be familiar with all of the facilities
and equipment on that lease that require
decommissioning than the earlier
predecessors whose connections with
operations are more remote. Thus, those
stakeholders suggested that the closer in
time predecessors are to current
operational conditions (e.g., status of
repair, maintenance and monitoring of
equipment), the more those
predecessors will know about any
existing or potential safety,
environmental, or other risks related to

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the decommissioning operations, and
the better able they will be to address
those risks.
Similarly, some stakeholders have
suggested that the most immediate
predecessors in the chain-of-title are in
a better position to understand the
financial security necessary for
decommissioning at a particular site,
and are more likely to have maintained
or obtained such security (e.g., through
private security arrangements with later
lessees or grant holders), in the event
that the current lessee or grant holder
defaults.
Accordingly, these stakeholders
recommended that, when the current
lessee or grant holder defaults, BSEE
should enforce predecessor
decommissioning obligations in a
reverse chronological sequence. Under
this approach, after a default, BSEE
would issue decommissioning orders to
the most recent predecessor(s) first
before turning to predecessors more
remote in time. The stakeholders
suggest that such an approach would
better ensure safety and environmental
protection, as well as provide greater
predictability and transparency as to
how BSEE enforces decommissioning
obligations, compared to the current
approach.
Although BSEE does not necessarily
agree with all of those stakeholders’
assertions, following such a reverse
chronological sequence among
predecessors may be a reasonable
approach to ensuring that the goals of
the decommissioning regulations are
met in a transparent manner—provided
that the regulations include appropriate
exceptions, under certain scenarios, in
order to ensure timely decommissioning
in a safe and environmentally
responsible manner. Accordingly,
without affecting the existing
requirement for joint and several
liability, proposed new § 250.1708, How
will BSEE enforce accrued
decommissioning obligations against
predecessors?, would create a reverse
chronological order of recourse among
predecessors, organized according to
periods of time during which a
particular designated operator(s) 4
approved by BOEM was in control of
operations. Under the proposed rule,
BSEE would identify the predecessor
lessees or grant holders who held their
interests during the designated
operator(s)’ tenure. After default by the
current lessees or grant holders (or a
prior group of predecessors), BSEE
4 By definition, the term ‘‘operator’’ means the
person ‘‘the lessee(s) designates as having control
or management of operations on the leased area or
a portion thereof during a given time period.’’ (See
30 CFR 250.105.)

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Federal Register / Vol. 85, No. 201 / Friday, October 16, 2020 / Proposed Rules
would issue orders to a ‘group’ of
temporally related predecessors to
perform their remaining accrued
decommissioning obligations. In
addition to the predecessors in the
relevant designated operator-based time
period, proposed § 250.1708 would
make clear that BSEE will issue orders
to other predecessors who assigned
interests to a defaulted lessee. The
proposed rule would also add a new
definition of ‘‘predecessor’’ to existing
§ 250.1700 to clarify the meaning of that
term as used in the other proposed
revisions to Subpart Q.
However, the proposed rule also
would provide that BSEE may deviate
from the reverse chronological order
(i.e., may issue decommissioning orders
to any or all other liable predecessors)
where previously ordered parties fail to
obtain approval of a decommissioning
plan, or fail to timely execute the
decommissioning according to the
approved decommissioning plan, as
required under proposed §§ 250.1704(b)
and 250.1708. When predecessors fail to
perform, unacceptable delays in
decommissioning are likely to occur.
Such delays could, in some cases, lead
to leaking wells or corrosion-laden
structures that may pose safety or
environmental risks, or other concerns
(as determined by a Regional
Supervisor), making it essential that
BSEE be able to deviate from a strict
chronological sequence.
Under the proposed rule, BSEE would
also be able to deviate from a strict
reverse chronological framework when
emergency conditions 5 or safety or
environmental threats arise (e.g., when
facilities are not properly maintained or
monitored) or when BSEE determines
that an unreasonable delay would
otherwise occur. The ability to address
exigent circumstances posed by
facilities and equipment awaiting
decommissioning is critical to the
accomplishment of the purposes of
Subpart Q. The exceptions proposed in
§ 250.1708(d) would confirm that BSEE
retains the authority to make demands
on the most capable predecessors when
risks associated with delay raise
concern about safety and environmental
protection or unobstructed use of the
OCS, while in the majority of situations
focusing demands on current owners
and the most recent predecessors.
Finally, proposed § 250.1708(b)
would require predecessors to identify
an entity to begin maintaining and
monitoring any facility identified in the
5 BSEE has noted that the cost and time to
permanently plug wells and remove infrastructure
damaged by storms is significantly higher than the
cost and time to decommission assets that have not
been damaged. (See NTL No. 2018–G03 at p. 1.)

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BSEE decommissioning order within 30
days of receiving the order. The
proposed rule would also require
predecessors to identify a designated
operator for decommissioning within 60
days of receiving an order, and to
submit a decommissioning plan that
includes the scope of work and
projected decommissioning schedule for
all wells, platforms, other facilities
within 90 days of receiving an order.
These proposed provisions would
ensure that the ordered
decommissioning proceeds in a timely
and structured fashion that ensures
safety and environmental protection.
B. Decommissioning of Rights-of-Use
and Easement
BSEE also proposes to revise the
decommissioning regulations with
respect to OCS facilities used under
RUE grants. These grants are similar to
ROW grants for pipelines, but allow the
holder to construct, modify, or maintain
platforms, artificial islands, facilities,
installations, and other devices on
parcels for which it does not hold a
lease authorizing development of that
parcel’s minerals. BOEM’s existing
regulations, at 30 CFR 550.105,
recognize ‘‘State lessees granted a rightof-use and easement’’ within BOEM’s
definition of ‘‘You’’ and provide that
RUE grant holders must comply with
bonding obligations (see § 550.160(c)).6
BSEE’s existing Subpart Q definition of
‘‘You’’ (see proposed § 250.1701
paragraph (d)) does not expressly
reference RUE grant holders. BSEE
proposes to add such language to that
definition and to expressly include RUE
grant holders as parties that can accrue
decommissioning obligations.
These proposed changes to BSEE’s
regulations would be consistent with
BOEM’s current practice of requiring
applicants to accept decommissioning
obligations as a term of RUE grants. RUE
grant holders are familiar with the
facilities and equipment on their RUEs;
and should be able to decommission
such infrastructure in a safe and
environmentally sound manner. Most
have expressly agreed to accept those
responsibilities in the RUE grant and in
agreements with those who owned the
infrastructure when the location was
leased. While the proposed revisions
would expressly extend
decommissioning obligations to RUE
grant holders, lessees that have also
accrued such obligations for facilities
and equipment on the RUE would retain
6 BOEM is also proposing to replace its existing
definitions of ‘‘easement’’ and ‘‘right of use’’ in
§ 550.105 with a single definition of ‘‘right-of-use
and easement.’’

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their joint and several liability for
satisfying those obligations under
§ 250.1701.
Accordingly, BSEE proposes to amend
§§ 250.1700 and 250.1701 in Subpart Q
to state that RUE grant holders will
accrue decommissioning obligations in
the same way as lessees, operating rights
holders, and ROW grant holders. The
proposed amendments would enhance
the completeness and transparency of
Subpart Q and would better ensure that
decommissioning of facilities located on
a RUE actually takes place in a timely
manner.
C. Bonding Requirement for Appeals of
Decommissioning Decisions and Orders
Part 290 of BSEE’s regulations allows
parties adversely affected by a final
BSEE order or decision, including a
decommissioning order or decision, to
administratively appeal that decision to
the IBLA. Part 290 also lays out certain
procedures for filing and pursuing such
appeals. While existing § 250.1409(b)(1)
requires a party filing an appeal of a
civil penalty order issued by BSEE to
post a surety bond pending the appeal,
there is currently no such bonding
requirement for appeals of
decommissioning orders. In the past, the
absence of an express bonding
requirement for decommissioning
appeals was of little or no practical
consequence because, when a current
lessee or grant holder failed to perform
its decommissioning obligations, BSEE
usually issued decommissioning orders
to all jointly and severally liable
predecessors at the same time. Thus,
even if one or more of the predecessors
appealed such an order, it was probable
that other predecessors would perform
the decommissioning on a timely basis.
However, under the proposed reverse
chronological approach toward
predecessors, it is likely that each
temporally related group of lessees or
grant holders ordered to perform
decommissioning at any given point
will be smaller in number than the
entire set of ‘‘any or all predecessors’’
ordered to decommission under BSEE’s
current approach. The smaller number
of entities in any chronological group
could increase the probability that
performance of decommissioning could
be delayed by appeals from a
predecessor or predecessors in that
group, or by a succession of appeals by
later groups of predecessors (assuming
that the IBLA grants a requested stay of
the decommissioning order pending the
appeal).7 The reduced pool of lessees or
7 Under existing § 290.7, a challenged order
remains in effect pending the appeal, unless the

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grant holders in the designated group of
predecessors, and the potential for such
resulting delays, could exacerbate the
possibility that the ultimately
responsible party(ies) might default or
otherwise be unavailable or unable to
perform decommissioning if the appeal
is ultimately unsuccessful. In such a
case, BSEE might have difficulty
ensuring that decommissioning will
actually be performed on a timely basis,
and without reliance on taxpayer funds,
absent the additional financial
assurance provided by the proposed
requirement to post a surety bond in
order to obtain a stay of a decision or
order pending appeal.
For example, by the time an appeal
has been filed and heard, and the
decommissioning order subsequently
affirmed by the IBLA (and potentially
thereafter by a Federal court), several
years may have passed. During this time
the appealing party may have lost its
financial capacity to fund or perform
decommissioning. The proposed bond,
however, would provide up-front
assurance that the appealing party will
nevertheless meet its financial
decommissioning obligations if the
appeal is denied. In the event that the
appeal is denied and the appealing
party defaults, and no other viable
predecessors exist at that point, BSEE
could use the proceeds of the forfeited
bond to arrange for decommissioning
without shifting that financial burden to
the public.
Further, even in cases where other
predecessors do exist, the passage of
time during the appeal may create
circumstances (e.g., deteriorating
infrastructure) that require
decommissioning on an expedited basis
to prevent adverse environmental or
safety impacts or to avoid interference
with other uses of the OCS. The
immediate availability of a forfeited
bond from an appellant that defaults
after its appeal is denied would
facilitate BSEE’s ability to ensure the
timely performance of decommissioning
activities. In this manner, the proposed
rule would allow BSEE to use funds
from forfeited bonds to arrange for
immediate decommissioning without
having to re-start the process for holding
additional parties responsible, which
potentially could be subject to similar
risks of additional defaults and delays.
In addition, the proposed bonding
requirement could deter a predecessor
from filing an appeal that is frivolous,
or designed solely to delay performance.
Accordingly, to ensure that the
decommissioning regulations fulfill all
IBLA, in its discretion, grants a stay, or BSEE agrees
to a stay.

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goals related to Subpart Q without
unnecessary cost to taxpayers, and to
reduce the risks of deteriorating
financial capacity during the pendency
of the appeal together with potential
delays associated with postponing
pursuit of predecessors, BSEE proposes
to amend its regulations to require any
predecessor who appeals a
decommissioning order or decision to
post a surety bond in order to obtain a
stay of that decision or order pending
the appeal. The bond would be in an
amount deemed sufficient by BSEE to
ensure that necessary decommissioning
activities can be timely performed if the
appellant loses the appeal and defaults
on its obligations.
VIII. Section-by-Section Analysis
A. Regulations Proposed by BSEE
BSEE proposes to revise the following
regulations:
Part 250—Oil and Gas and Sulfur
Operations in the Outer Continental
Shelf
§ 250.105 Definitions
This proposed rule would amend
§ 250.105 by removing the terms and
definitions for ‘‘Easement’’ and ‘‘Rightof-use’’ and replacing them with a new
term and definition for ‘‘Right-of-Use
and Easement.’’ The revision would
make BSEE’s regulations consistent with
BOEM’s, providing a clear definition for
the regulatory concept of a RUE as an
authorization to use a portion of the
seabed not encompassed by the holder’s
lease site in order to construct, modify,
or maintain platforms, artificial islands,
facilities, installations, and other
devices established to support the
exploration, development, or
production of oil and gas, mineral, or
energy resources on the OCS or a State
submerged lands lease.
§ 250.1700 What do the terms
‘‘decommissioning,’’ ‘‘obstructions,’’
and ‘‘facility’’ mean?
This proposed rule would revise the
title of this section to include the term
‘‘predecessor,’’ and would revise
paragraph (a)(2) to include the area of an
RUE, in addition to areas of a lease and
a pipeline ROW, among the areas that
must be returned through
decommissioning to a condition that
meets the requirements of BSEE and
other agencies that have jurisdiction
over decommissioning activities. This
revision aligns with the other proposed
revisions to the decommissioning
obligations associated with RUEs. The
proposed rule would also add a new
paragraph (d) defining the term
‘‘predecessor’’ to mean a prior lessee or

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owner of operating rights, or a prior
holder of a RUE grant or a pipeline
ROW grant, that is liable for accrued
obligations on that lease or grant. This
definition is designed to capture those
entities, including assignees, that
remain liable for the decommissioning
obligations that accrued during their
prior ownership of an interest in a lease,
an RUE grant, or a pipeline ROW grant
for purposes of the proposed provisions
establishing BSEE’s modified approach
toward enforcement of such obligations.
§ 250.1701 Who must meet the
decommissioning obligations in this
subpart?
This proposed rule would add a new
paragraph (c) to this section and redesignate the existing paragraph (c) as
paragraph (d). The new paragraph (c)
would clarify that all holders of a RUE
grant are jointly and severally liable,
along with other liable parties, for
meeting decommissioning obligations
on their RUE, including those pertaining
to a well, pipeline, platform, or other
facility, or an obstruction, as the
obligations accrue and until each
obligation is met. BSEE would also
revise the current definition of the term
‘‘you’’ in existing paragraph (c), which
would become paragraph (d) under the
proposed rule, to include RUE grant
holders and predecessors among the list
of parties categorized as ‘‘you’’ or ‘‘I’’ for
purposes of the Subpart Q
decommissioning regulations. These
revisions are designed to ensure
alignment between § 250.1701 and the
other proposed revisions to Subpart Q.
§ 250.1702 When do I accrue
decommissioning obligations?
This proposed rule would revise
paragraph (e) to clarify that all holders
of a ROW accrue the obligation to
decommission; re-designate paragraph
(f) as paragraph (g); and add a new
paragraph (f) to provide that an entity
accrues decommissioning obligations
when it is or becomes the holder of a
RUE grant on which there is a well,
pipeline, platform or other facility, or an
obstruction. These proposed changes are
designed to implement the RUE
decommissioning principles discussed
previously and to reflect BSEE practice
related to multiple ROW holders.
§ 250.1703 What are the general
requirements for decommissioning?
This proposed rule would revise
paragraph (e) to expand the current
provision for clearing obstructions to
require that a RUE grant holder clear the
seafloor of all obstructions created by its
RUE grant operations. This revision is
designed to ensure alignment between

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§ 250.1703 and the other proposed
revisions to Subpart Q, including the
RUE decommissioning principles
discussed previously.

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§ 250.1704 What decommissioning
applications and reports must I submit
and when must I submit them?
This proposed rule would add a new
paragraph (b) in the Table to provide
that predecessors must submit for BSEE
approval, within 90 days of receiving a
decommissioning order under proposed
§ 250.1708, a decommissioning plan
with a scope of work and schedule to
address wells, pipelines, and platforms.
This proposed revision is designed to
reflect the proposed changes to
§ 250.1708 regarding decommissioning
plans, discussed further below.
§ 250.1708 How will BSEE enforce
accrued decommissioning obligations
against predecessors?
The proposed rule would add a new
§ 250.1708 (in place of the currently
reserved § 250.1708). Paragraph (a) of
this section would provide that, when
holding predecessors responsible for
performing accrued decommissioning
obligations, BSEE will issue
decommissioning orders to such
predecessors in reverse chronological
order through the chain-of-title. BSEE
would issue such orders to groups of
predecessors organized according to
changes in the designated operator over
time, as well as to any predecessor who
assigned interests to a party that has
defaulted.
Proposed paragraph (b) would require
predecessors to identify a single entity
to begin maintaining and monitoring
any facility identified in the BSEE
decommissioning order within 30 days
of receiving the order. It would also
require predecessors, within 60 days of
receiving the order, to designate a single
entity as the operator for
decommissioning operations. Further,
within 90 days of receiving the order,
the predecessors must submit a
decommissioning plan that includes the
scope of work and projected
decommissioning schedule for all wells,
platforms and other facilities, pipelines,
and site clearance, as identified in the
order. Finally, proposed paragraph (b)
would require the predecessor to
perform the required decommissioning
in the time and manner specified by
BSEE in its decommissioning plan
approval.
Proposed paragraph (c) would specify
that failure by a predecessor to comply
with an order to maintain and monitor
a facility or to submit a
decommissioning plan, as required in
paragraph (b), may result in various

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enforcement actions, including civil
penalties and disqualification as an
operator.
Proposed paragraph (d) would allow
BSEE to depart from the reverse
chronological order sequence, and to
issue orders to any or all other
predecessors for the performance of
their respective accrued
decommissioning obligations, when: (1)
None of the predecessors who had been
ordered to perform obtains approval of
the decommissioning plan or executes
the decommissioning according to the
approved decommissioning plan; (2) the
Regional Supervisor determines that
there is an emergency condition, safety
concern, or environmental threat, such
as improperly maintained and
monitored facilities, leaking wells or
vessels, sustained casing pressure on
wells, or lack of required valve testing;
or (3) the Regional Supervisor
determines that applying the reverse
chronological sequence would
unreasonably delay decommissioning.
Proposed paragraph (e) would clarify
that BSEE’s issuance of orders to
additional predecessors will not relieve
any current lessee or grant holder, or
any other predecessor, of its obligations
to comply with any prior
decommissioning order or to satisfy its
accrued decommissioning obligations.
Proposed paragraph (f) would provide
that the appeal of any decommissioning
order does not prevent BSEE from
proceeding against other predecessors
pursuant to proposed paragraph (d).
§ 250.1709 What must I do to appeal a
BSEE final decommissioning decision or
order issued under this subpart?
BSEE’s proposed rule would replace
existing § 250.1709 of Subpart Q (which
is currently reserved) with a new
section that confirms the right of a
lessee or grant holder to appeal a final
decommissioning order or decision
issued under Subpart Q to the IBLA, in
accordance with the appeal procedures
in existing part 290 of BSEE’s
regulations. Proposed § 250.1709 would
require, in combination with proposed
revisions to existing § 290.7(a)(2), that a
lessee or grant holder appealing a
decommissioning decision or order
must post a surety bond in an amount
deemed by BSEE to be adequate to
ensure completion of decommissioning
if the lessee or grant holder loses its
appeal and subsequently defaults on its
obligation.
§ 250.1725 When do I have to remove
platforms and other facilities?
This proposed rule would expand the
first sentence of paragraph (a) to provide
that a RUE grant holder must remove all

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platforms and other facilities within 1
year after the RUE grant terminates,
unless the grant holder receives
approval to maintain the structure to
conduct other activities. This proposed
revision is designed to ensure alignment
between § 250.1725 and the other
proposed revisions to Subpart Q
regarding the RUE decommissioning
principles discussed previously.
Part 290—Appeal Procedures
§ 290.7 Do I have to comply with the
decision or order while my appeal is
pending?
The proposed rule would amend
paragraph (a)(2) to provide that any
person that appeals a decommissioning
decision or order must post a surety
bond in order to seek to obtain a stay of
that decision or order, in accordance
with proposed § 250.1709. This
proposed revision is designed to ensure
alignment between § 290.7 and the
proposed revision adding new
§ 250.1709 to Subpart Q.
B. Regulations Proposed by BOEM
BOEM is proposing to revise the
following regulations:
Part 550—Oil and Gas and Sulfur
Operations in the Outer Continental
Shelf
Subpart A—General
§ 550.105

Definitions

The proposed rule would add a
definition of ‘‘Issuer credit rating,’’
which is a newly defined term in this
part, for the reasons set forth above.
The proposed rule would also add a
definition of ‘‘Predecessor,’’ which is
another newly defined term in this part.
The definition would include those
entities, including assignees, that
remain liable for the obligations that
accrued during their prior ownership of
an interest in a lease (including the area
now subject to a right-of-use and
easement grant), a right-of-use and
easement grant, or a pipeline right-ofway grant. Those entities will be
considered in BOEM’s evaluation of a
current grant holder’s ability to carry
out accrued obligations.
BOEM would remove the terms
‘‘Easement,’’ and ‘‘Right-of-use,’’ neither
of which is used separately or applies to
any approved activities on the OCS. In
lieu of these two terms, and consistent
with the terms used in Part 550, BOEM
would add the term and a
corresponding definition for ‘‘Right-ofUse and Easement.’’
This proposed rule would also add a
new term and definition for ‘‘Security’’
to list the various methods that may be

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used to ensure compliance with OCS
obligations.
BOEM would also revise the
definition of the term ‘‘You’’ to include,
depending on the context of the
regulations, a bidder, a lessee (record
title owner), a sublessee (operating
rights owner), a right-of-use and
easement grant holder, a pipeline rightof-way grant holder, a predecessor, a
designated operator or agent of the
lessee or grant holder, or an applicant
seeking to become one of the above.

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§ 550.160 When will BOEM grant me a
right-of-use and easement, and what
requirements must I meet?
The proposed rule would revise the
introductory text of this section to
clarify that a right-of-use and easement
does not have to cover both leased and
unleased lands, but rather, BOEM may
grant a right-of-use and easement on
leased or unleased lands, or both. The
paragraph (a) introductory text would
also be revised by substituting ‘‘or’’ for
‘‘and’’ to clarify that the right-of-use and
easement may be needed to construct or
maintain facilities, but not necessarily
both, because the grant holder often
uses a facility constructed by another,
including either a predecessor lessee or
a predecessor grant holder.
BOEM also proposes to revise
paragraph (b) to provide that a right-ofuse and easement grant holder must
exercise the grant according to the terms
of the grant and the applicable
regulations of part 550, as well as the
requirements of Part 250, subpart Q of
this title.
BOEM also proposes to revise
paragraph (c) to update the citation to
BOEM’s lessee qualification
requirements, §§ 556.400 through
556.402, and to replace the authority
that is cited in this paragraph for
requiring a bond with a cross reference
to § 550.166(d), which BOEM also
proposes to revise to add specific
criteria for such demands, as provided
below.
§ 550.166 If BOEM grants me a rightof-use and easement, what surety bond
or other security must I provide?
The proposed rule would revise the
section heading to read, ‘‘If BOEM
grants me a right-of-use and easement,
what surety bond or other security must
I provide?’’ so that the bonding and
additional security requirements of this
section would apply, where specified, to
both a right-of-use and easement granted
to serve a State lease and one serving an
OCS lease.
Notwithstanding the change in the
section heading to cover all rights-of-use
and easement, the requirement to

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furnish a $500,000 bond still applies
only to right-of-use and easement grants
that serve State leases. Therefore, BOEM
proposes to revise paragraph (a) of this
section to make clear it applies only to
those grants.
BOEM also proposes to revise
paragraph (b) of this section to add that
the requirement to provide a $500,000
surety bond may be satisfied if the
operator of the right-of-use and
easement provides a surety bond in the
required amount.
BOEM proposes to add paragraph (c)
of this section to ensure that the general
administrative requirements for lease
bonds also apply to the $500,000 surety
bond required in paragraph (a) of this
section.
BOEM would also add paragraph (d)
introductory text in this section to
provide that, if BOEM grants a right-ofuse and easement that serves either an
OCS lease or a State lease, BOEM may
require the grant holder to provide
additional security to ensure
compliance with the obligations under
any right-of-use and easement. For a
right-of-use and easement grant that
serves a State lease, the required
additional security would be any
amount required above the $500,000
base bond. Since BOEM does not
require a standard base bond for a rightof-use and easement grant that serves an
OCS lease, the proposed additional
security provisions would authorize
BOEM to require security.
BOEM proposes to add paragraph
(d)(1) in this section to set forth the
criteria BOEM would use to evaluate the
ability of a right-of-use and easement
grant holder to carry out present and
future obligations and to determine
whether BOEM should require
additional security. BOEM would use
the same issuer credit rating or proxy
credit rating criteria to evaluate a rightof-use and easement grant holder as
BOEM proposes to apply to lessees, i.e.,
that the Regional Director may require a
grant holder to provide additional
security if the right-of-use and easement
grant holder does not have an issuer
credit rating or a proxy credit rating that
meets the criteria set forth in
§ 556.901(d)(1). Similar to lessees, the
vast majority of right-of-use and
easement holders are oil and gas
companies and, therefore, BOEM would
use the same financial criteria to
provide consistency in its analysis.
If the right-of-use and easement grant
holder does not meet the criteria set
forth in proposed (d)(1) of this section,
BOEM would review the obligations on
each right-of-use and easement grant
held by that grant holder and determine
whether to require additional security

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for each grant. BOEM proposes to add
paragraph (d)(2) to this section to
provide that the Regional Director may
require a grant holder to provide
additional security on a grant-by-grant
basis if a predecessor right-of-use and
easement grant holder or a predecessor
lessee liable for decommissioning any
facilities on the right-of-use and
easement does not meet the issuer credit
rating or proxy credit rating criteria
described above. Moreover, even if a
predecessor meets the credit rating or
proxy credit rating criteria, the Regional
Director may require the grant holder to
provide additional security for
decommissioning obligations for which
such a predecessor is not liable.
BOEM also proposes to update the
regulatory citation in existing § 550.166
(b)(1) and incorporate that paragraph
and citation into new paragraph (e)(1) to
provide that the additional security
must meet the requirements for lease
bonds or other security provided for in
§ 556.900(d) through (g) and § 556.902.
The proposed rule would also revise
the provisions of existing 550.166 (b)(2)
and incorporate them into a new
paragraph (e)(2) to ensure that any
additional security would cover costs
and liabilities for decommissioning the
facilities on the right-of-use and
easement in accordance with the
regulations set forth in part 250, subpart
Q of this title that apply to leases.
The proposed rule would also add
new paragraph (f) to provide that if a
right-of-use and easement grant holder
fails to replace a deficient bond or fails
to provide additional security upon
demand, BOEM may assess penalties,
request BSEE to suspend operations on
the right-of-use and easement, and
initiate action for cancellation of the
right-of-use and easement grant.
Subpart J—Pipelines and Pipeline
Rights-of-Way
§ 550.1011 Bond or Other Security
Requirements for Pipeline Right-of-Way
Grant Holders
The proposed rule would revise this
section in its entirety. The section
heading would be revised to read,
‘‘Bond or other security requirements
for pipeline right-of-way grant holders,’’
to clarify that a pipeline right-of-way
grant holder may meet the requirements
of this section by providing either a
bond, mentioned in the existing
regulation, or another form of security.
The proposed rule would also revise
paragraph (a) to remove the reference to
30 CFR part 256, which has no bonding
requirements, to add the word
‘‘pipeline’’ before ‘‘right-of-way,’’ and
add ‘‘grant’’ after ‘‘right-of-way’’ for

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clarification, and to provide that the
areawide bond required in paragraph (a)
is to guarantee compliance with all the
terms and conditions of all of the
pipeline right-of-way grants held in an
OCS area, as defined in § 556.900(b).
The proposed rule would also remove
the language, which states that the
requirement to provide an areawide
bond for a pipeline right-of-way grant
would be in addition to the bond
coverage required in 30 CFR part 556, as
unnecessary because it is clear that an
areawide bond provided for under Part
556 applies only to leases, not pipeline
right-of-way grants. The provisions in
Part 550 are freestanding provisions that
must be satisfied by a bond furnished
under Part 550 instead of by a bond
furnished under Part 556. Existing
paragraph (a)(2) would be removed
because additional security
requirements would be covered by new
paragraph (d). BOEM would also
remove paragraph (b), which defines the
three recognized OCS areas, because it
is made redundant by the reference to
§ 556.900(b) in revised paragraph (a).
BOEM also proposes to add new
paragraph (b) to provide that the
requirement under paragraph (a) to
furnish and maintain an areawide bond
may be satisfied if the operator or a cogrant holder provides an areawide bond
in the required amount.
BOEM also proposes to replace
paragraph (c) with a provision stating
that the requirements for lease bonds in
§ 556.900(d) through (g) and § 556.902
apply to the areawide bond required in
paragraph (a) of this section. BOEM
would remove existing paragraph (d),
which would be made redundant by this
new paragraph (c).
BOEM would add paragraph (d)
introductory text to provide that BOEM
may determine that additional security
is necessary to ensure compliance with
the obligations under a pipeline right-ofway grant. BOEM would also add new
paragraph (d)(1) to set forth the criteria
BOEM would use to evaluate the ability
of a pipeline right-of-way grant holder
to carry out present and future
obligations in order to determine
whether BOEM should require
additional security. No criteria are
specified in the existing regulations.
Pursuant to this proposed rule, BOEM
would use the same issuer credit rating
or proxy credit rating criteria to evaluate
a pipeline right-of-way grant holder as
BOEM proposes to apply to lessees in
556.901(d). BOEM would use the same
financial criteria to provide consistency
in its analysis.
Paragraphs (d)(2)(i) and (ii) would
provide that, if the pipeline right-of-way
grant holder does not meet the criteria

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in paragraph (d)(1), the Regional
Director may require the grant holder to
provide additional security on a grantby-grant basis if there is no co-grant
holder with an issuer credit rating or a
proxy credit rating that meets the
criteria set forth in § 556.901(d)(1) nor
predecessor pipeline right-of-way grant
holder liable for decommissioning any
facilities on the pipeline right-of-way
that has an issuer credit rating or a
proxy credit rating that meets the
criteria set forth in § 556.901(d)(1).
Moreover, even if a predecessor meets
the credit rating or proxy credit rating
criteria, the Regional Director may
require the grant holder to provide
additional security for decommissioning
obligations for which such a
predecessor is not liable.
BOEM also proposes to provide, in
new paragraph (e)(1), that the additional
security must meet the general
requirements for lease bonds or other
security provided in § 556.900(d)
through (g) and § 556.902.
The proposed rule would also
provide, in new paragraph (e)(2), that
any additional security for a pipeline
right-of-way would cover liabilities for
regulatory compliance and
decommissioning, in accordance with
the regulations set forth in part 250,
subpart Q of this title.
The proposed rule would also add
new paragraph (f) to provide that if a
pipeline right-of-way grant holder fails
to replace a deficient bond or fails to
provide additional security upon
demand, BOEM may assess penalties,
request BSEE to suspend operations on
the pipeline, and initiate action for
forfeiture of the pipeline right-of-way
grant in accordance with 30 CFR
250.1013.
Part 556—Leasing of Sulfur or Oil and
Gas and Bonding Requirements in the
Outer Continental Shelf
The proposed rule would make a
technical correction to the authority
citation for part 556 by removing the
citation of 43 U.S.C. 1801–1802, which
is erroneous because neither of these
two sections contains authority allowing
BOEM to issue or amend regulations.
The proposed rule would also remove
the citation to 43 U.S.C. 1331 note,
which is where the Gulf of Mexico
Energy Security Act of 2006 is set forth.
While this statute required BOEM to
issue regulations concerning the
availability of bonus or royalty credits
for exchanging eligible leases, the
deadline for applying for such a bonus
or royalty credit was October 14, 2010;
therefore, lessees may no longer apply
for such credits. BOEM no longer needs
the authority to issue regulations under

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this statute and has removed all
regulations on this topic from Part 556,
except for § 556.1000, which provides
that lessees may no longer apply for
such credits.
Subpart A—General Provisions
§ 556.105 Acronyms and Definitions
The proposed rule would add a
definition of ‘‘Issuer credit rating,’’
which is a newly defined term in this
part, for the reasons set forth above.
This proposed rule would add a new
term and definition for ‘‘Predecessor.’’
This definition would include those
entities, including assignees, that,
because of their prior ownership of an
interest in a lease, including record title
and operating rights interests, remain
liable for obligations that accrued
during their ownership. Those entities
would be considered in BOEM’s
evaluation of a current lessee’s ability to
carry out accrued obligations. This
definition would be the same as the
definition of ‘‘Predecessor’’ proposed for
§ 550.105.
The proposed rule would also revise
the definition of ‘‘Right-of-Use and
Easement (RUE)’’ to remove the
acronym ‘‘(RUE)’’ and to include the
words ‘‘to construct, modify or maintain
platforms.’’ This definition would be the
same as the definition of ‘‘Right-of-Use
and Easement’’ proposed for § 550.105.
The proposed rule would also replace
the definition for ‘‘Security or
securities’’ with a definition for
‘‘Security’’ to clarify the various
methods that can be used to ensure
compliance with OCS obligations. This
definition would be the same as the
definition of ‘‘Security’’ proposed for
§ 550.105.
The proposed rule would also revise
the definition of the term ‘‘You’’ to
include, depending on the context of the
regulations, a bidder, a lessee (record
title owner), a sublessee (operating
rights owner), a right-of-use and
easement grant holder, a pipeline rightof-way grant holder, a predecessor, a
designated operator or agent of the
lessee or grant holder, or an applicant
seeking to become one of the above.
Subpart I—Bonding or Other Financial
Assurance
§ 556.900 Bond or Other Security
Requirements for an Oil and Gas or
Sulfur Lease
The proposed rule would revise the
section heading to read, ‘‘Bond or other
security requirements for an oil and gas
or sulfur lease.’’
The proposed rule would revise
paragraph (a) introductory text to add
the words ‘‘or sublease’’ after the word

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‘‘assignment’’ to reflect that the transfer
of operating rights from a record title
owner creates a sublease. The proposed
rule would also add the words ‘‘interest
in an’’ before the words ‘‘existing lease’’
because an assignment or transfer under
Subparts G and H of this part may
include less than the entire lease. The
proposed rule would also revise
paragraph (a) introductory text to clarify
that record title owners and operating
rights owners for the lease are equally
obligated to maintain a bond in the
required amount.
BOEM also proposes to revise
paragraphs (a)(2) and (3) to change the
spelling of ‘‘area-wide’’ to ‘‘areawide’’
for consistency with the spelling of this
word in other sections of this part.
The proposed rule would also revise
paragraph (g) introductory text to add
the word ‘‘surety’’ before ‘‘bond’’ in two
places to clarify that the regulation is
referring to a ‘‘surety bond.’’
The proposed rule would revise
paragraph (h) introductory text to
replace the words ‘‘bond coverage’’ with
‘‘security’’ for consistency in
terminology. The proposed rule would
also revise paragraph (h)(2) to clarify
that BSEE, rather than BOEM, is the
agency with authority to suspend
production or other operations on a
lease.
§ 556.901 Bonds and Additional
Security
The proposed rule would revise the
section heading to read, ‘‘Bonds and
additional security,’’ because this
section covers both base bond and
additional security requirements.
The proposed rule would also revise
paragraph (a)(1)(i) introductory text to
insert the words ‘‘lease exploration’’
before ‘‘bond’’ for consistency with the
terminology used in paragraph (a)(1)(ii).
The proposed rule would also revise
paragraph (c) to remove the words
‘‘authorized officer’’ and replace them
with ‘‘Regional Director,’’ and remove
the words ‘‘lease bond coverage’’ and ‘‘a
lease surety bond’’ and replace them in
each instance with ‘‘security’’ to clarify
that the Regional Director can review
whether BOEM would be adequately
secured by a surety bond, or another
type of security, for an amount less than
the amount prescribed in paragraph
(b)(1), but not less than the estimated
cost for decommissioning.
BOEM proposes to revise paragraph
(d) introductory text to combine the
provisions of the existing paragraph (d)
introductory text and the existing
introductory paragraph (d)(1) to provide
that the Regional Director may
determine that additional security is
necessary to ensure compliance with the

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obligations under a lease based on an
evaluation of the lessee’s ability to carry
out present and future obligations on
the lease and that the Regional Director
may require a lessee to provide
additional security if the lessee does not
meet at least one of the criteria provided
below.
BOEM proposes to add new paragraph
(d)(1) to set forth the criteria BOEM
would use to evaluate the ability of a
lessee to carry out present and future
obligations. BOEM would use an issuer
credit rating from a nationally
recognized statistical rating organization
(NRSRO), as defined by the United
States Securities and Exchange
Commission (SEC), greater than or equal
to either BB¥ from Standard & Poor’s
Ratings Service or Ba3 from Moody’s
Investor Service, or a proxy credit rating
determined by the Regional Director
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 either BB¥ from Standard &
Poor’s Ratings Service or Ba3 from
Moody’s Investor Service.
BOEM proposes to add new paragraph
(d)(2) to set forth the criteria BOEM
would use if the lessee does not meet
the criteria in paragraph (d)(1). The
Regional Director may require a lessee
to provide additional security on a
lease-by-lease basis if no co-lessee has
an issuer credit rating or proxy credit
rating criteria that meets the criteria set
forth in paragraph (d)(1); there are no
proved oil and gas reserves on the lease,
as defined by the SEC at 17 CFR 210.4–
10(a)(22), the net present value of which
exceeds three times the cost of the
decommissioning (as estimated by
BSEE) associated with the production of
those reserves; and no predecessor
lessee liable for decommissioning any
facilities on the lease has an issuer
credit rating or a proxy credit rating that
meets the criteria set forth in paragraph
(d)(1). Moreover, even if a predecessor
meets the credit rating or proxy credit
rating criteria, the Regional Director
may require the lessee to provide
additional security for decommissioning
obligations for which such a
predecessor is not liable.
BOEM proposes to redesignate
existing paragraph (d)(2) as paragraph
(e) and revise it to provide that a lessee
may satisfy the Regional Director’s
demand for additional security either by
increasing the amount of its existing
bond or by providing additional bonds
or other security.
BOEM proposes to redesignate
existing paragraphs (e) and (f) as
paragraphs (f) and (g), respectively, and
revise them to remove the word ‘‘bond’’

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and replace it with ‘‘security,’’ a term
that includes a surety bond or another
type of security.
§ 556.902 General Requirements for
Bonds or Other Security
The proposed rule would revise the
section heading to read, ‘‘General
requirements for bonds or other
security,’’ to recognize that other types
of security, such as a pledge of Treasury
securities, may be provided under part
556.
The proposed rule would also revise
paragraph (a) to include ‘‘grant holder’’
and to include bonds provided under 30
CFR part 550. These revisions clarify
that the same general requirements for
bonds provided by lessees, operating
rights owners, or operators of leases,
also apply to bonds provided by rightof-use and easement grant and pipeline
right-of-way grant holders.
The proposed rule would also revise
paragraph (e)(2) to clarify that the use of
Treasury securities, instead of a bond,
requires a pledge of Treasury securities,
as provided in § 556.900(f).
§ 556.903 Lapse of Bond
The proposed rule would revise
paragraph (a) to reference a new bond
‘‘or other security’’ consistent with the
terminology used throughout this
subpart and to include references to the
bond and other security regulations for
right-of-use and easement grants and
pipeline right-of-way grants to ensure
that these grants are covered by the
provisions of this section. The proposed
rule would also revise paragraph (a) by
removing the words ‘‘terminates
immediately’’ and substituting ‘‘must be
replaced.’’
BOEM also proposes to revise the first
sentence of paragraph (b) by inserting
‘‘or financial institution’’ after
‘‘guarantor.’’ BOEM also proposes to
revise the third sentence of paragraph
(b) for consistency in terminology by
inserting the words ‘‘or other security’’
after the word ‘‘bonds’’ and inserting the
words ‘‘guarantor or financial
institution’’ after the word ‘‘surety’’ so
that this section would apply to a thirdparty guarantor and a financial
institution where a decommissioning
account is held.
§ 556.904 Decommissioning Accounts
The proposed rule would revise the
section heading to read,
‘‘Decommissioning accounts,’’ in
accordance with BOEM policy and
accepted terminology used in the
industry. The words ‘‘lease-specific’’
would be removed throughout this
section so that a decommissioning
account could be used in lieu of a bond

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Federal Register / Vol. 85, No. 201 / Friday, October 16, 2020 / Proposed Rules
for a lease or several leases, a right-ofuse and easement grant or a pipeline
right-of-way grant, or a combination
thereof.
BOEM proposes to revise paragraph
(a) to remove the term ‘‘lease-specific’’
and replace it with ‘‘decommissioning,’’
and to add references to the bonding
and other security regulations for rightof-use and easement grants and pipeline
right-of-way grants, consistent with the
changes above. The paragraph (a)
introductory text would also be revised
to provide that BOEM would authorize
a lessee or grant holder to establish a
decommissioning account at a federally
insured financial institution. The
proposed rule would also delete the
reference to paragraph (a)(3), which is
being revised and is no longer relevant
to withdrawal of funds from a
decommissioning account.
The proposed rule would revise
paragraph (a)(1) to remove the words
‘‘and pledged’’ and to provide that
funds in the account must be payable to
BOEM if BOEM determines the lessee or
grant holder has failed to meet its
decommissioning obligations.
The proposed rule would also revise
paragraph (a)(2) to remove the words
‘‘as estimated by BOEM’’ to clarify that
BOEM does not estimate
decommissioning costs, but rather uses
the estimates of decommissioning costs
determined by BSEE. The proposed rule
would also revise paragraph (a)(2) to
require funding of a decommissioning
account pursuant to the schedule that
the Regional Director prescribes.
The proposed rule would revise
paragraph (a)(3) to remove the
requirement to provide binding
instructions to purchase Treasury
securities for a decommissioning
account, which is currently BOEM’s
policy. The proposed rule would
replace the existing language with a new
provision providing that if you fail to
make the initial payment or any
scheduled payment into the
decommissioning account, you must
immediately submit, and subsequently
maintain, a bond or other security in an
amount equal to the remaining
unsecured portion of your estimated
decommissioning liability. This change
reflects BOEM’s current policy to order
bond or other security in the event the
payments into the decommissioning
account are not timely made.
The proposed rule would revise
paragraph (b) by removing ‘‘leasespecific’’ and substituting
‘‘decommissioning.’’
The proposed rule would also remove
paragraphs (c) and (d), which concern
the use of pledged Treasury securities to
fund a decommissioning account.

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Because of this revision, existing
paragraph (e) would be redesignated as
paragraph (c), which BOEM proposes to
revise to remove the word ‘‘pledged’’
and to provide that BOEM may require
a lessee to create an overriding royalty
or production payment obligation for
the benefit of an account established as
security for the decommissioning of a
lease.
§ 556.905 Third-Party Guarantees
The proposed rule would revise the
section heading to read, ‘‘Third-party
guarantees.’’ BOEM also proposes to
revise paragraph (a) to add the words
‘‘or other security’’ after the words
‘‘additional bond’’ and to reference
§§ 550.166(d) and 550.1011(d) to clarify
that a third-party guarantee may be used
instead of an additional bond or other
security required under § 550.166(d) for
right-of-use and easement grants,
§ 550.1011(d) for pipeline right-of-way
grants, or § 556.901(d) for leases.
BOEM would also revise paragraph
(a)(1) to clarify that the guarantor, not
the guarantee, must meet the criteria in
paragraph (c) and would revise
paragraph (a)(2) to require the guarantor
to submit a third-party guarantee
agreement containing each of the
provisions in paragraph (d) of this
section. As discussed below, paragraph
(d) is being revised to provide that the
terms previously required for indemnity
agreements must be included in a thirdparty guarantee agreement. This
terminology is changed to avoid any
inference that the government must
incur the expenses of decommissioning
before being indemnified by the
guarantor. The proposed rule would
also remove paragraphs (a)(3) and (4),
which have been superseded by other
revisions to this section.
The proposed rule would revise
paragraph (b) introductory text to
remove references to paragraphs (a)(3)
and (c)(3) of this section because the
criteria in these two paragraphs have
been superseded. The proposed rule
would replace these references with a
reference to paragraph (c) as proposed to
be revised. Because the cessation of
production is neither desirable nor
easily accomplished by an operator, the
proposed rule would also revise
paragraph (b)(2) to remove the
requirement that, when a guarantor
becomes unqualified, you must ‘‘cease
production until you comply with the
bond coverage requirements of this
subpart.’’ Instead, the language would
be revised to provide that you must
‘‘immediately submit and maintain a
bond or other security covering those
obligations previously secured by the
third-party guarantee.’’

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The proposed rule would revise
paragraph (c) to clarify that BOEM will
use an issuer credit rating or proxy
credit rating to evaluate a third-party
guarantor, and would remove the
requirement that a third-party guarantee
ensure compliance with all the
obligations of all lessees, all operating
rights owners, and operators on the
lease.
The proposed rule would revise
paragraph (d)(1) introductory text to
read ‘‘if you fail to comply with the
terms of any lease or grant covered by
the guarantee, or any applicable
regulation, your guarantor must either:’’
To be consistent with the revision of
paragraph (a) to allow the use of a thirdparty guarantee for a right-of-use and
easement grant or a pipeline right-ofway grant and to be consistent with the
revision to remove language from
paragraph (c) to allow a guarantor to
limit the obligations covered by a
guarantee.
The proposed rule would remove
subparagraph (d)(2) to be consistent
with the revision to remove language
from paragraph (c) to allow a guarantor
to limit the obligations covered by a
guarantee. As a result, existing
paragraph (d)(3) would be redesignated
as paragraph (d)(2) and paragraph (d)(4)
would be redesignated as paragraph
(d)(3).
The proposed rule would revise
redesignated subparagraphs (d)(2)(ii)
and (iii) to remove the words ‘‘your
guarantor’s’’ and replace them with the
word ‘‘the’’ to clarify that redesignated
paragraph (d)(2) applies to the guarantee
itself.
The proposed rule would revise new
paragraph (d)(3) to replace the term ‘‘a
suitable replacement security’’ with
‘‘acceptable replacement security’’ for
clarity.
The proposed rule would also add a
new paragraph (d)(4) to provide that
BOEM may cancel a third-party
guarantee under the same terms and
conditions as those proposed for
cancellation of additional bonds and
return of pledged security in
§ 556.906(d)(2) and (e).
BOEM also proposes to add new
paragraphs (d)(5) through (10) to revise
and incorporate all of the provisions of
existing paragraph (e), which would be
removed.
§ 556.906 Termination of the Period of
Liability and Cancellation of a Bond
The proposed rule would revise the
wording in paragraphs (b) and (d) of this
section to cite the bonding regulations
for right-of-use and easement grants and
pipeline right-of-way grants to ensure

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that they are covered under the terms of
this section.
The proposed rule would revise
paragraph (b)(1) to remove the word
‘‘terminated’’ in two instances and
replace it with ‘‘cancelled’’ to be
consistent with paragraph (b)
introductory text, which provides that
the Regional Director will cancel your
previous bond when you provide a
replacement bond, subject to the
conditions provided in paragraphs (b)(1)
through (3). BOEM would also remove
the word ‘‘for’’ before ‘‘by the bond’’ in
paragraph (b)(1) for grammatical
reasons.
The proposed rule would revise
paragraph (b)(2) to reference
§§ 550.166(a) and 550.1011(a) and
would revise paragraph (b)(3) to
reference §§ 550.166(d) and 556.1011(d).
BOEM also proposes to revise paragraph
(b)(3) to clarify that the notification
required under this section is to the
surety providing the new additional
bond.
The proposed rule would revise the
paragraph (d) introductory text to cover
bond cancellations and return of
pledged security, and would remove the
middle column of the table entitled,
‘‘The period of liability will end,’’
because it is redundant with provisions
of paragraphs (a), (b) and (c).
In paragraph (d)(1), in the column in
the table entitled, ‘‘For the following
type of bond,’’ BOEM proposes to
remove the words ‘‘type of bond’’ at the
top of the table so that this paragraph
would apply to bonds or other security,
as applicable. Paragraph (d)(1) would
also be revised to include a reference to
base bonds submitted under
§§ 550.166(a) and 550.1011(a). BOEM
would also revise paragraph (d)(2) in the
same column to include a reference to
bonds submitted under §§ 550.166(d)
and 550.1011(d).
The proposed rule would revise
paragraph (d)(2) in the column entitled,
‘‘Your bond will be cancelled,’’ to read,
‘‘Your bond will be reduced or
cancelled or your pledged security will
be returned,’’ to clarify that the bonds
may be reduced or cancelled and a
pledged security, or a portion thereof,
may be returned, and to specify other
circumstances under which the
Regional Director may cancel additional
bonds or return a pledged security.
While the existing criteria identify most
instances when cancellation of a bond is
appropriate, occasionally there are other
circumstances where cancellation
would be warranted. The proposed rule
would allow bond cancellation, at any
time, when BOEM determines, using the
criteria set forth in § 556.901(d), or
§ 550.166(d) or § 550.1011(d), as

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applicable, that a lessee or grant holder
no longer needs to provide the
additional bond for its lease, right-of-use
and easement grant, or pipeline right-ofway grant; when the operations for
which the bond was provided ceased
prior to accrual of any decommissioning
obligation; and when cancellation of the
bond is appropriate because BOEM
determines such bond never should
have been required under the
regulations.
The proposed rule would revise
introductory paragraph (e) to remove the
words ‘‘or release’’ because the term
‘‘release’’ is undefined and not used in
practice. Likewise, the proposed rule
would remove the words ‘‘or released’’
from paragraph (e)(2).
The proposed rule would also revise
paragraph (e) to reference right-of-use
and easement grants and pipeline rightof-way grants to provide that the
Regional Director may reinstate the
bonds on the same grounds as currently
provided for reinstatement of lease
bonds.
§ 556.907 Forfeiture of Bonds or Other
Securities
The proposed rule would revise the
section heading to read, ‘‘Forfeiture of
bonds or other securities’’ because the
use of ‘‘and/or’’ may be ambiguous. The
proposed rule would revise paragraph
(a)(1) to include bonds or other security
for right-of-use and easement grants and
pipeline right-of-way grants, in addition
to leases, in the forfeiture provisions of
this section. BOEM also proposes to
clarify that the Regional Director may
call for forfeiture of all or part of a bond
or other form of security, or demand
performance from a guarantor, if the
party who provided the bond refuses or
is unable to comply with any term or
condition of a lease, a right-of-use and
easement grant, or a pipeline right-ofway grant, as well as ‘‘any applicable
regulation.’’ Throughout this section,
BOEM proposes to add references to a
grant, a grant holder, and grant
obligations to implement the revisions
in paragraph (a)(1).
BOEM proposes to revise paragraph
(b) to include bonds or other security so
that BOEM may pursue forfeiture of a
bond or other security.
BOEM proposes to revise paragraph
(c)(1) to include ‘‘financial institution
holding your decommissioning
account’’ as one of the parties the
Regional Director would notify of a
determination to call for forfeiture of a
bond, security, or guarantee because a
bank or other financial institution may
hold funds subject to forfeiture.

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The proposed rule would revise the
wording of paragraph (c)(1)(ii) and
paragraph (d) for clarity.
BOEM proposes to revise paragraph
(c)(2)(ii) to add the words ‘‘even if the
cost of compliance exceeds the limit of
the guarantee’’ after the word
‘‘prescribes’’ to be consistent with the
revisions to § 556.905, which would
allow a guarantor to guarantee less than
all obligations of all lessees, grant
holders or operators.
BOEM proposes to revise paragraph
(f)(1) to include ‘‘grant’’ as well as lease.
BOEM also proposes to revise paragraph
(f)(2) to clarify that BOEM may recover
additional costs from a third-party
guarantor only to the extent covered by
the guarantee. This would be consistent
with the changes made to § 556.905 to
allow the use of limited third-party
guarantees.
This rulemaking would also reword
paragraph (g) for clarity.
IX. Additional Comments Solicited by
BOEM and BSEE
BOEM requests comments on how the
proposed rule would affect existing
contracts and agreements with respect
to responsibility for decommissioning
liabilities and other lease obligations.
BSEE requests comments on whether,
as some stakeholders have asserted,
issuing decommissioning orders first to
the predecessors nearest in time to the
current lessees or grant holders would
have positive safety and environmental
impacts because the most recent
predecessors should be more familiar
with the current circumstances at a
decommissioning site than more remote
predecessors. BSEE also requests
comments on any other potential effects
of the proposed changes on the timely
and effective completion of
decommissioning.
X. Procedural Matters
A. Regulatory Planning and Review
(E.O. 12866, 13563 and 13771)
E.O. 12866 provides that the Office of
Information and Regulatory Affairs
(OIRA) in the Office of Management and
Budget (OMB) will review all significant
rules. OIRA has reviewed this proposed
rule and determined that it is a
significant action E.O. 12866.
E.O. 13563 reaffirms the principles of
E.O. 12866 while calling for
improvements in the Nation’s regulatory
system to promote predictability, to
reduce uncertainty, and to use the best,
most innovative, and least burdensome
tools for achieving regulatory ends. The
E.O. directs agencies to consider
regulatory approaches that reduce
burdens and maintain flexibility and

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freedom of choice for the public where
these approaches are relevant, feasible,
and consistent with regulatory
objectives. E.O. 13563 emphasizes that
regulations must be based on the best
available science and that the
rulemaking process must allow for
public participation and an open
exchange of ideas. BOEM has developed
this rule in a manner consistent with
these requirements.
E.O. 13771 requires Federal agencies
to take proactive measures to reduce the
costs associated with complying with
Federal regulations. BOEM and BSEE
have evaluated this rulemaking based
on the requirements of E.O. 13771.

BOEM’s proposed changes are estimated
to reduce the private cost to lessees in
the form of bonding premiums. BSEE’s
proposed cost changes are not
estimated; but are expected to provide
regular and continuous benefits and
infrequent costs. Each agency has
drafted an Initial Regulatory Impact
Analysis (IRIA) detailing the estimated
impacts of its respective provisions of
this joint proposed rule. These reflect
both monetized and non-monetized
impacts, the costs and benefits of which
are discussed qualitatively in each
document. Both BOEM and BSEE’s
IRIAs are available in the public docket
for this rulemaking. Overall, important

aspects of this rule (e.g., regulatory
clarifications, refined procedures and
reduced bonding requirements) make
this rulemaking an E.O. 13771
deregulatory action.
BOEM expects this proposed rule to
reduce the private cost to lessees
through lower bonding premiums. The
table below summarizes BOEM’s
estimate of the decrease in bonding
premiums paid by lessees over a 10-year
and 20-year time horizon. Additional
information on the estimated transfers,
costs, and benefits can be found in the
IRIA posted in the public docket for this
proposed rule.

TOTAL ESTIMATED DECREASE IN BONDING PREMIUMS ASSOCIATED WITH BOEM’S PROPOSED AMENDMENTS
[2018$]
Year
10
10
20
20

Year
Year
Year
Year

Discounted at 3%

Annualized .................................................................................................................................
NPV ............................................................................................................................................
Annualized .................................................................................................................................
NPV ............................................................................................................................................

B. Regulatory Flexibility Act
The Regulatory Flexibility Act, 5
U.S.C. 601–612, requires agencies to
analyze the economic impact of
regulations when a significant economic
impact on a substantial number of small
entities is likely and to consider
regulatory alternatives that will achieve
the agency’s goals while minimizing the
burden on small entities. BOEM and
BSEE each provide an Initial Regulatory
Flexibility Analysis (IRFA), which
assesses the impact of this proposed
rule on small entities. Each of these are
in their respective IRIAs available in the
public docket for this rule.
As defined by the Small Business
Administration (SBA), a small entity is
one that is ‘‘independently owned and
operated and which is not dominant in
its field of operation.’’ What
characterizes a small business varies
from industry to industry. The proposed
rule would affect OCS lessees and rightof-use and easement grant and pipeline
right-of-way grant holders on the OCS.
The analysis shows that this includes
roughly 555 companies with ownership
interests in OCS leases and grants.
Entities that would operate under this

proposed rule are classified primarily
under North American Industry
Classification System (NAICS) codes
211120 (Crude Petroleum Extraction),
211130 (Natural Gas Extraction) and
486110 Pipeline Transportation of
Crude Oil and Natural Gas. For NAICS
classifications 211120 and 211130, the
Small Business Administration (SBA)
defines a small business as one with
fewer than 1,250 employees; for NAICS
code 486110, it is a business with fewer
than 1,500 employees. Based on this
criterion, approximately 386 (70
percent) of the businesses operating on
the OCS, subject to this proposed rule,
are considered small; the remaining
businesses are considered large entities.
The analysis shows that there are
about 386 small companies with active
operations or ownership interests on the
OCS. All of the operating businesses
meeting the SBA classification are
potentially impacted; therefore, BOEM
and BSEE expect that the proposed rule
would affect a substantial number of
small entities.
The BOEM portion of this proposed
rule is a deregulatory action. BOEM has
estimated the annualized decrease in

Discounted at 7%

$16,584,362
141,467,969
17,191,929
255,772,485

$16,473,168
115,700,639
16,988,417
179,975,527

private cost to lessees and allocated
those savings to small and large entities
based on their decommissioning
liabilities. BOEM’s analysis concludes
small companies would realize 23
percent ($3.3 million) of the decrease in
private costs to lessees from its
proposed changes and large companies
77 percent ($10.7 million). The agencies
recognize that there may be incremental
cost burdens to some affected small
entities, but the proprietary data is not
available for the agencies to estimate
those costs. The agencies are seeking
specific comment and feedback from
affected small entities on the costs
associated with this rulemaking.
BSEE concludes its proposed changes
would not result in any incremental
change to the existing burdens of small
entities because, if they accrued
decommissioning liability, they remain
liable for decommissioning under both
current regulations and these proposed
regulations, given that the joint and
several liability would remain the same.
Additional information about these
conclusions can be found in each
bureau’s respective IRFA for this
proposed rule.

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ESTIMATED ANNUAL DECREASE IN PRIVATE COST FOR SMALL AND LARGE LESSEES
[2018, $thousands]
Credit rating

Large co.

Small co.

Grand total

BB¥ and above ..........................................................................................................................
B+ and below ...............................................................................................................................

$10,665
40

$1,631
1,652

$12,296
1,691

Grand Total: ..........................................................................................................................

10,705

3,283

13,987

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Federal Register / Vol. 85, No. 201 / Friday, October 16, 2020 / Proposed Rules

The proposed changes are designed to
balance the risk of non-performance
with the costs and disincentives to
production that are associated with the
requirement to provide additional
security. BOEM and BSEE believe the
proposed action would strongly protect
the public from incurring
decommissioning costs and minimize
the financial assurance burden on small
entities.

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C. Small Business Regulatory
Enforcement Fairness Act
This proposed rule would revise the
financial assurance requirements for
OCS lessees and grant holders, and
would reduce the number of
circumstances in which financial
assurance will be required. The changes
would not have any negative impact on
the economy or any economic sector,
productivity, jobs, the environment, or
other units of government. BOEM’s
proposed changes would (1) modify the
evaluation process for requiring
additional security, (2) streamline the
evaluation criteria, and (3) remove
restrictive provisions for third-party
guarantees and decommissioning
accounts. BSEE’s proposed changes
would (1) clarify interested parties’
decommissioning liabilities, and (2)
provide industry with more explicit
decommissioning compliance
expectations. These changes reflect the
risk mitigation provided by BOEM’s and
BSEE’s joint and several liability
regulation, better align the evaluation
criteria with industry practices, reduce
bonding cost for industry, and provide
greater certainty to industry on fulfilling
accrued decommissioning obligations
while continuing to protect the public
from exposure to financial obligations
and liabilities arising from
noncompliant OCS exploration and
development.
Accordingly, this proposed rule is not
a major rule under 5 U.S.C. 804(2), the
Small Business Regulatory Enforcement
Fairness Act, because implementation of
this rule will not:
(a) Have an annual effect on the
economy of $100 million or more;
(b) cause a major increase in costs or
prices for consumers, individual
industries, Federal, State, or local
government agencies, or geographic
regions; or
(c) result in significant adverse effects
on competition, employment,
investment, productivity, innovation, or
the ability of U.S.-based enterprises to
compete with foreign-based enterprises.

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D. Unfunded Mandates Reform Act of
1995
This proposed rule does not impose
an unfunded mandate on State, local, or
tribal governments, or the private sector
of more than $100 million per year. This
rule does not have a significant or
unique effect on State, local, or tribal
governments or the private sector.
Moreover, the proposed rule would not
have disproportionate budgetary effects
on these governments. BOEM and BSEE
have also determined that this proposed
rule would not impose costs on the
private sector of more than $100 million
in a single year. A statement containing
the information required by the
Unfunded Mandates Reform Act (2
U.S.C. 1531 et seq.) is not required and
BOEM and BSEE have chosen not to
prepare such a statement.
E. Takings Implication Assessment (E.O.
12630)
This proposed rule does not affect a
taking of private property or otherwise
have takings implications under E.O.
12630. Therefore, a takings implication
assessment is not required.
F. Federalism (E.O. 13132)
Under the criteria in section 1 of E.O.
13132, this proposed rule does not have
sufficient federalism implications to
warrant the preparation of a federalism
summary impact statement. Therefore, a
federalism summary impact statement is
not required.
G. Civil Justice Reform (E.O. 12988)
This proposed rule complies with the
requirements of E.O. 12988.
Specifically, this rule:
(a) Meets the criteria of section 3(a)
requiring that all regulations be
reviewed to eliminate errors and
ambiguity and be written to minimize
litigation; and
(b) Meets the criteria of section 3(b)(2)
requiring that all regulations be written
in clear language and contain clear legal
standards.
H. Consultation With Indian Tribes
(E.O. 13175 and Departmental Policy)
(OEP To Advise)
BOEM and BSEE strive to strengthen
their government-to-government
relationships with American Indian and
Alaska Native Tribes through a
commitment to consultation with the
tribes and recognition of their right to
self-governance and tribal sovereignty.
We are also respectful of our
responsibilities for consultation with
Alaska Native Claims Settlement Act
(ANCSA) Corporations. We have
evaluated the proposed rule under the
Department of the Interior’s

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consultation policy, under Departmental
Manual Part 512, Chapters 4 and 5, and
under the criteria in E.O. 13175 and
determined that, while there are no
substantial direct effects on
environmental or cultural resources,
there may be economic impacts to one
Indian tribe and one ANCSA
Corporation. BOEM has invited
consultation with the Indian tribe and
the ANCSA Corporation to discuss
possible impacts and to solicit and fully
consider their views on the proposed
rulemaking.
I. Paperwork Reduction Act (PRA)
This proposed rule contains existing
and new information collection (IC)
requirements for both BSEE and BOEM
regulations, and a submission to the
OMB for review under the Paperwork
Reduction Act of 1995 (44 U.S.C. 3501
et seq.) is required. Therefore, an IC
request for each Bureau is being
submitted to OMB for review and
approval. BSEE and BOEM are seeking
to renew and extend IC requests for each
OMB control number listed below for
three years from approved date. We may
not conduct or sponsor and you are not
required to respond to a collection of
information unless it displays a
currently valid Office of Management
and Budget (OMB) control number. The
OMB has reviewed and approved the
information collection requirements
associated with risk management,
financial assurances, and loss
prevention and assigned the following
OMB control numbers:
• 1014–0010 (BSEE), ‘‘30 CFR 250,
Subpart Q—Decommissioning
Activities’’ (expires 04/30/2023, and in
accordance with 5 CFR 1320.10, an
agency may continue to conduct or
sponsor this collection of information
while the submission is pending at
OMB),
• 1010–0006 (BOEM), ‘‘Leasing of
Sulfur or Oil and Gas in the Outer
Continental Shelf (30 CFR parts 550,
Subpart J; 556, Subparts A through I,
and K; and 560, Subparts B and E)
(expires 01/31/2023), and
• 1010–0114 (BOEM), ‘‘30 CFR 550,
Subpart A, General, and Subpart K, Oil
and Gas Production Requirements
(expires 02/28/2023).
The IC aspects affecting each Bureau
are discussed separately. Instructions on
how to comment follow those
discussions.
BSEE Information Collection—30 CFR
Parts 250 and 290
This proposed rule would add new
collections of information under
regulations at 30 CFR part 250, subpart
Q, concerning the decommissioning

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Federal Register / Vol. 85, No. 201 / Friday, October 16, 2020 / Proposed Rules
regulatory requirements related to oil,
gas, and sulphur operations in the OCS.
These regulatory requirements are the
subject of this collection.
The new information collection
requirements identified below require
approval by OMB. BSEE uses the
information collected under the Subpart
Q regulations to ensure that operations
on the OCS are carried out in a safe and
environmentally protective manner, do
not interfere with the rights of other
users on the OCS, and balance the
conservation and development of OCS
resources. The following proposed
regulatory changes would affect the
annual burden hours; however, they
would not impact non-hour cost
burdens.
The proposed rule would clarify
decommissioning responsibilities,
including those requirements for RUE
grants, and would establish an order in
which predecessor lessees or grant
holders would be ordered to
decommission OCS facilities when the
current owner of the lease or grant fails
to do so. When holding predecessors
responsible for the performance of
accrued decommissioning obligations,
BSEE proposes to issue

decommissioning orders to predecessors
in reverse chronological order through
the chain-of-title, organized in groups
by designated operator(s).
This proposed rule would require
predecessors to submit a work plan and
schedule as directed under proposed
§§ 250.1704(b) and 250.1708. Given the
potentially lengthy process of holding
predecessors responsible, BSEE would
establish a step early in the process for
the predecessors to submit
decommissioning plans. BSEE considers
this necessary to protect the public from
incurring future decommissioning costs
and to prevent safety and environmental
risks posed by delayed performance of
decommissioning. Within 90 days of
receiving an order to perform
decommissioning under proposed
§ 250.1708(a), the predecessor would be
required to submit a work plan and
projected decommissioning schedule
that addresses all wells, platforms and
other facilities, pipelines, and site
clearance. This proposed requirement
would add an estimated 4,320 annual
burden hours to the existing OMB
control number (+4,320 annual burden
hours).

65925

Title of Collection: Revisions to
Regulations under 30 CFR part 250,
subpart Q—Decommissioning.
OMB Control Number: 1014–0010.
Form Number: None.
Type of Review: Revision of a
currently approved collection of
information.
Respondents/Affected Public:
Currently there are approximately 60
Oil and Gas Drilling and Production
Operators in the OCS. Not all the
potential respondents would submit
information at any given time, and some
may submit multiple times.
Total Estimated Number of Annual
Respondents: Not all of the potential
respondents will submit information in
any given year and some may submit
multiple times.
Total Estimated Number of Annual
Responses: 3,248 responses.
Total Estimated Number of Annual
Burden Hours: 15,997 hours.
Respondent’s Obligation: Mandatory.
Frequency of Collection: Submissions
are generally on occasion.
Total Estimated Annual Nonhour
Burden Cost: $1,143,556.

BURDEN TABLE—BURDEN BREAKDOWN
[New requirements due to the proposed rule shown in bold; Changes to existing requirements due to the proposed rule are italicized.]
Citation 30 CFR part 250
subpart Q

Reporting requirement *

Average
number of
annual
responses

Hour burden

Annual burden hours
(rounded)

Non-hour cost burdens

jbell on DSKJLSW7X2PROD with PROPOSALS2

General
1704(h); 1706(a), (f); 1712;
1715; 1716; 1721(a),(d),
(f)–(g); 1722(a), (b), (d);
1723(b); 1743(a); Sub G.

These sections contain references to information, approvals, requests, payments, etc., which are submitted
with an APM, the burdens for which are covered
under its own information collection.

APM burden covered under 1014–
0026.

1700 thru 1754 ....................

General departure and alternative compliance requests
not specifically covered elsewhere in Subpart Q regulations.

Burden covered under Subpart A
1014–0022.

0

1703; 1704 ...........................

Request approval for decommissioning ...........................

Burden included below.

0

1704(b); 1708 ......................

Submit work plan & schedule under § 250.1708(b)
that addresses all wells, platforms and other facilities, pipelines, and site clearance upon receiving
an order to perform decommissioning; additional
information as requested by BSEE.

1,440 ..............

3 submittals .........

4,320

1704(j), (k) ...........................

Submit to BSEE, within 120 days after completion of
each decommissioning activity (including pipelines), a
summary of expenditures incurred; any additional information that will support and/or verify the summary.

1 .....................

1,320 summaries
(including pipelines)/additional
information.

1,320

1704(j); NTL .........................

Request and obtain approval for extension of 120-day
reporting period; including justification.

15 min ............

75 requests ............

1704(j) ..................................

Submit certified statement attesting to accuracy of the
summary for expenditures incurred.

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Exempt from the PRA under 5 CFR
1320.3(i)(1).

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19
0

65926

Federal Register / Vol. 85, No. 201 / Friday, October 16, 2020 / Proposed Rules

BURDEN TABLE—BURDEN BREAKDOWN—Continued
[New requirements due to the proposed rule shown in bold; Changes to existing requirements due to the proposed rule are italicized.]
Average
number of
annual
responses

Annual burden hours
(rounded)

Citation 30 CFR part 250
subpart Q

Reporting requirement *

1712 .....................................

Required data if permanently plugging a well ..................

Requirement not considered Information Collection under 5 CFR
1320.3(h)(9).

1713 .....................................

Notify BSEE 48 hours before beginning operations to
permanently plug a well.

0.5 ..................

1721(f) ..................................

Install a protector structure designed according to 30
CFR part 250, Subpart I, and equipped with aids to
navigation. (These requests are processed via the appropriate Platform Application, 30 CFR part 250 Subpart I by the OSTS.).

Burden covered under Subpart I
1014–0011.

0

1721(e); 1722(e), (h)(1);
1741(c).

Identify and report subsea wellheads, casing stubs, or
other obstructions; mark wells protected by a dome;
mark location to be cleared as navigation hazard.

U.S. Coast Guard requirements.

0

1722(c), (g)(2); 1704(i) ........

Notify BSEE within 5 days if trawl does not pass over
protective device or causes damages to it; or if inspection reveals casing stub or mud line suspension is
no longer protected.

1 .....................

11 notices ..............

11

1722(f), (g)(3) .......................

Submit annual report on plans for re-entry to complete 2.5 ..................
or permanently abandon the well and inspection report.

98 reports ..............

245

1722(h) .................................

Request waiver of trawling test ........................................

4 requests ..............

6

1725(a) .................................

Requests to maintain the structure to conduct other activities are processed, evaluated and permitted by the
OSTS via the appropriate Platform Application process, 30 CFR part 250 Subpart I. (Other activities include but are not limited to activities conducted under
the grants of right-of-ways (ROWs), rights—of-use and
easement (RUEs), and alternate rights-of-use and
easement authority issued under 30 CFR part 250
Subpart J, 30 CFR 550.160, and/or 30 CFR part 585,
etc.).

1725(e) .................................

Notify BSEE 48 hours before beginning removal of platform and other facilities.

0.5 ..................

133 notices ............

67

1726; 1704(a) ......................

Submit initial decommissioning application in the Pacific
and Alaska OCS Regions.

20 ...................

2 application ..........

40

1727; 1728; 1730; 1703;
1704(c); 1725(b).

Submit final application and appropriate data to remove
platform or other subsea facility structures (This included alternate depth departures and/or approvals of
partial removal or toppling for conversion to an artificial reef.).

28 ...................

153 applications ....

4,284

Hour burden

1.5 ..................

725 notices ............

Burden covered under Subpart I
1014–0011.

0

363

0

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$4,684 fee × 153 = $716,652.
1729; 1704(d) ......................

Submit post platform or other facility removal report;
supporting documentation; signed statements, etc.

9.5 ..................

133 reports ............

1740; 1741(g) ......................

Request approval to use alternative methods of well site,
platform, or other facility clearance; contact pipeline
owner/operator before trawling to determine its condition.

12.75 ..............

30 requests/contacts.

383

1743(b); 1704(g), (i) .............

Verify permanently plugged well, platform, or other facility removal site cleared of obstructions; supporting
documentation; and submit certification letter.

5 .....................

117 certifications ...

585

1750; 1751; 1752; 1754;
1704(e).

Submit application to decommission pipeline in place or
remove pipeline (L/T or ROW).

10 ...................

142 L/T applications.

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1,420

Federal Register / Vol. 85, No. 201 / Friday, October 16, 2020 / Proposed Rules

65927

BURDEN TABLE—BURDEN BREAKDOWN—Continued
[New requirements due to the proposed rule shown in bold; Changes to existing requirements due to the proposed rule are italicized.]
Citation 30 CFR part 250
subpart Q

Reporting requirement *

Hour burden

Average
number of
annual
responses

Annual burden hours
(rounded)

$1,142 L/T decommission fee × 142 = $162,164.
10 ...................

122 ROW applications.

1,220

$2,170 ROW decommissioning fees × 122 =
$264,740.
1753; 1704(f) .......................

Submit post pipeline decommissioning report ..................

2.5 ..................

180 reports ............

450

Total Burden ...............

...........................................................................................

........................

3,248 responses ..

15,997

$1,143,556 Non-Hour Cost
Burdens.

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L/T = Lease Term.
ROW = Right of Way.

In addition, the PRA requires agencies
to estimate the total annual reporting
and recordkeeping non-hour cost
burden resulting from the collection of
information, and we solicit your
comments on this item. For reporting
and recordkeeping only, your response
should split the cost estimate into two
components: (1) Total capital and
startup cost component and (2) annual
operation, maintenance, and purchase
of service component. Your estimates
should consider the cost to generate,
maintain, and disclose or provide the
information. You should describe the
methods you use to estimate major cost
factors, including system and
technology acquisition, expected useful
life of capital equipment, discount
rate(s), and the period over which you
incur costs. Generally, your estimates
should not include equipment or
services purchased: (1) Before October
1, 1995; (2) to comply with
requirements not associated with the
information collection; (3) for reasons
other than to provide information or
keep records for the Government; or (4)
as part of customary and usual business
or private practices.
As part of our continuing effort to
reduce paperwork and respondent
burdens, we invite the public and other
Federal agencies to comment on any
aspect of this information collection,
including:
(1) Whether or not the collection of
information is necessary, including
whether or not the information will
have practical utility;
(2) The accuracy of our estimate of the
burden for this collection of
information;

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(3) Ways to enhance the quality,
utility, and clarity of the information to
be collected; and
(4) Ways to minimize the burden of
the collection of information on
respondents.
Send your comments and suggestions
on this information collection by the
date indicated in the DATES section to
the Desk Officer for the Department of
the Interior at OMB–OIRA at (202) 395–
5806 (fax) or via at the www.reginfo.gov
portal (online). You may view the
information collection request(s) at
http://www.reginfo.gov/public/do/
PRAMain. Please provide a copy of your
comments to the BSEE Information
Collection Clearance Officer (see the
ADDRESSES section). You may contact
Kye Mason, BSEE Information
Collection Clearance Officer at (703)
787–1607 with any questions. Please
reference Risk Management, Financial
Assurance and Loss Prevention (OMB
Control No. 1014–0010), in your
comments.
BOEM Information Collection—Parts
550 and 556
This proposed rule would modify
collections of information under 30 CFR
part 550, subparts A and J, and 30 CFR
part 556, subpart I, concerning bonding
and security requirements for leases,
pipeline right-of-way grants, and rightof-use easement grants. OMB has
reviewed and approved the information
collection requirements associated with
bonding and additional security
regulations for leases (30 CFR 556.900–
907), pipeline right-of-way grants (30
CFR 550.1011), and right-of-use
easement grants (30 CFR 550.160 and
550.166).

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BOEM recognized the need to develop
a comprehensive program to help
identify, prioritize, and manage the
financial risks associated with oil and
gas activities on the OCS. BOEM’s goal
for this program is to protect American
taxpayers from exposure to financial or
environmental risks from
nonperformance of obligations
associated with OCS leases and grants
while also assuring that its financial
assurance program does not negatively
impact offshore investment or
operations.
By moving forward with the proposed
regulations for the financial assurance
program, BOEM would be able to more
effectively address a number of complex
financial issues. The proposed
regulations would establish new criteria
that will reduce regulatory burdens and
compliance costs on Federal OCS oil,
gas, and sulfur lessees, grant holders
and operators. New criteria would help
determine whether OCS oil, gas and
sulfur lessees, and right-of-use and
easement grant and pipeline right-ofway grant holders would be required to
provide additional bonds or other
security (above prescribed amounts) to
ensure compliance with their
contractual and regulatory obligations to
BOEM. The proposed regulations would
streamline the evaluation criteria and
would allow BOEM to consider the
financial strength and reliability of a
lessee, a co-lessee, a co-holder of a
grant, and/or a predecessor, to
determine whether a lessee or grant
holder must provide additional security.
The regulations would also remove
overly restrictive provisions for thirdparty guarantees and decommissioning
accounts.

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65928

Federal Register / Vol. 85, No. 201 / Friday, October 16, 2020 / Proposed Rules

BOEM intends to modify OMB
Control Number 1010–0006 (expiration
January 31, 2023; 19,054 hours;
$766,053 non-hour costs), Leasing of
Sulfur or Oil and Gas in the Outer
Continental Shelf (30 CFR part 550,
subpart J; 556, Subparts A through I,
and K; and 560, Subparts B and E)); and
OMB Control Number 1010–0114
(expiration February 28, 2023; 18,323
hours; $165,492 non-hour costs), 30 CFR
part 550, subpart A, General, and
Subpart K, Oil and Gas Production
Requirements. If this proposed rule
becomes final and effective, the new
and changed provisions would reduce
the overall annual burden hours for
OMB Control Number 1010–0006 by 13
hours. The changed provisions for OMB
Control Number 1010–0114 would add
new and revise requirements in 30 CFR
part 550, subpart A, but would not
impact the overall burden hours for this
control number. However, the new and
modified requirements would be
significant enough to update the OMB
control number.
Title of Collection: 30 CFR parts 550
and 556, Risk Management, Financial
Assurance and Loss Prevention.
OMB Control Number: 1010–0006 and
1010–0114.
Form Number: None.
Type of Review: Revision of currently
approved collections.
Respondents/Affected Public: Federal
OCS oil, gas, and sulfur operators and
lessees, and right-of-use and easement
grant and pipeline right-of-way grant
holders.
Total Estimated Number of Annual
Responses: 10,305 responses for 1010–
0006, and 5,302 responses for 1010–
0114.
Total Estimated Number of Annual
Burden Hours: 19,041 hours for 1010–
0006, and 18,323 hours for 1010–0114.
Respondent’s Obligation: Responses
to this collection of information are
mandatory, or are required to obtain or
retain a benefit.
Frequency of Collection: The
frequency of response varies, but is
primarily on the occasion or as per the
requirement.
Total Estimated Annual Nonhour
Burden Cost: $766,053 for 1010–0006,
and $165,492 for 1010–0114.
The following is a brief explanation of
how the proposed regulatory changes
would affect the various subparts’ hour
and non-hour cost burdens:
30 CFR Part 550, Subpart A (OMB
Control Number 1010–0114)
Proposed § 550.160(b) would be
revised to clarify that a right-of-use and
easement grant holder must exercise the
grant according to the terms of the grant

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and the applicable regulations of part
550, as well as the requirements of part
250, subpart Q. The annual burden hour
would not change based on this
clarification.
Proposed § 550.160(c) would be
revised to update the lessee
qualification requirements previously
provided in § 556.35 (now obsolete),
with associated burden hours ‘‘to
establish a regional Company File as
required by BOEM,’’ to reflect the
requirements in BOEM’s existing
regulations at §§ 556.400 through
556.402, which requires a lessee to
demonstrate qualifications to hold a
lease on the OCS and to obtain a BOEM
qualification number. The burden is
currently identified in OMB Control
Number 1010–0114, and although the
description of the lessee qualification
requirements has changed slightly, the
annual burden would not change.
Proposed § 550.160(c) would also
clarify that the criteria to determine
when the holder of a right-of-use and
easement grant that serves an OCS lease
may be required to provide security by
replacing a vague reference to ‘‘bonding
requirements’’ with a cross-reference to
§ 550.166(d) and its criteria. The annual
burden hour would not change based on
this clarification.
Proposed § 550.166 (d)(1) relates to
BOEM’s determination of whether
additional security is necessary to
ensure compliance with the obligations
under a right-of-use and easement grant.
This determination will be based on
whether a right-of-use and easement
grant holder has the ability to carry out
present and future financial obligations.
The criteria proposed for the financial
determination include an issuer credit
rating, or a proxy credit rating based on
audited financial information. The
issuer credit rating and the audited
financial information on which BOEM
determines a proxy credit rating already
exist. The burden of determining a
proxy credit rating falls on BOEM. The
annual burdens placed on the grant
holder would be minimal and would be
included in the burden estimates for 30
CFR 556.901(d) found in OMB Control
Number 1010–0006.
New § 550.166(d)(2) would allow
BOEM to consider the issuer credit
rating or proxy credit rating of a
predecessor right-of-use and easement
grant holder or a predecessor lessee.
This is a new provision that may
slightly increase annual burden hours.
Burden change would be reflected in the
burden estimate for 30 CFR
556.901(d)(2) found in OMB Control
Number 1010–0006.

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30 CFR Part 550, Subpart J (OMB
Control Number 1010–0006)
Proposed § 550.1011(d)(1) relates to
BOEM’s determination of whether
additional security is necessary to
ensure compliance with the obligations
under a pipeline right-of-way grant.
This determination would be based on
whether a pipeline right-of-way grant
holder has the ability to carry out
present and future financial obligations.
The criteria proposed for the financial
determination include an issuer credit
rating or a proxy credit rating. The
issuer credit rating and the audited
financial information on which BOEM
determines a proxy credit rating already
exist. The burden of determining a
proxy credit rating falls on BOEM. The
annual burdens placed on the grant
holder would be minimal and would be
included in the burden estimates for 30
CFR 556.901(d).
Proposed § 550.1011(d)(2)(i) would
allow BOEM to consider the issuer
credit rating or proxy credit rating of a
co-grant holder. This is a new provision
that may slightly increase annual
burden hours. Burden change would be
reflected in the burden estimates for 30
CFR 556.901(d)(2).
Proposed § 550.1011(d)(2)(ii) would
allow BOEM to consider the issuer
credit rating or proxy credit rating of a
predecessor pipeline right-of-way grant
holder. This is a new provision that may
slightly increase annual burden hours.
Burden change would be reflected in the
burden estimates for 30 CFR
556.901(d)(2).
30 CFR Part 556, Subpart I (OMB
Control Number 1010–0006)
Proposed § 556.901(d)(1) relates to
BOEM’s determination of whether
additional security is necessary to
ensure compliance with the obligations
under a lease. This determination would
be based on the lessee’s ability to carry
out present and future financial
obligations as demonstrated by an issuer
credit rating or a proxy credit rating
determined by BOEM based on audited
financial information.
New § 556.901(d)(2)(i) would allow
BOEM to consider the issuer credit
rating or proxy credit rating of a colessee, and new § 556.901(d)(2)(ii)
would allow BOEM to consider the net
present value of proved oil and gas
reserves on the lease. There would be no
need to submit proved reserve
information if the lessee is not required
to provide additional bonding based on
its issuer credit rating, or proxy credit
rating, or those of its co-lessees or
predecessors. Under the existing
regulations, the Regional Director was to

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Federal Register / Vol. 85, No. 201 / Friday, October 16, 2020 / Proposed Rules
take this ‘‘financial strength’’
information into account in every case
when determining whether additional
security is necessary.
New § 556.901(d)(2)(iii) would allow
BOEM to consider the issuer credit
rating or proxy credit rating of a
predecessor lessee. This would not
change existing burden hour estimates.
This proposed requirement would likely
increase the number of respondents due
to additional companies’ preparing and
submitting an issuer credit rating or
audited financials so that BOEM can
determine proxy credit ratings.
The existing OMB approved hour
burden for each respondent to prepare
and submit the information for the
existing evaluation criteria requirements
is 3.5 hours. In this proposed rule, the
evaluation criteria would be streamlined
and would likely require less time for
the respondents to prepare and submit
the information, particularly for an
issuer credit rating or audited financials.
However, the time necessary for
companies to prepare and submit
information on the proved oil and gas
reserves would likely be greater than 3.5
hours. Therefore, BOEM proposes to
retain the 3.5 hour burden to reflect the
decrease in time required to prepare and
submit issuer credit ratings and audited
financials and the increase in time
required for preparing and submitting
information on proved reserves. When
the final rule becomes effective, the
related burden hours for all respondents
(a lessee, co-lessee, a co-grant holder,
and/or a predecessor) would be
included in OMB Control Number
1010–0006.
The OMB approved number of
respondents who currently submit
financial information under the existing
provisions is 166 respondents. Recently,
BOEM has seen the number of leases
decrease in the Gulf of Mexico.
Therefore, BOEM expects the overall
number of respondents, even with the
increase of new respondents related to
§ 556.901(d)(2), to be less than the
current 166 respondents. BOEM
estimates the new number of
respondents would be approximately
between 150 and 160 respondents.
When the final rule becomes effective,
BOEM will include the new number of
respondents in OMB Control Number
1010–0006.
The existing OMB approved annual
burden hours for § 556.901 related to
demonstrating financial worth/ability to
carry out present and future financial
obligations is 581 hours. With the
changes provided in the proposed rule
and described above, BOEM estimates
that the annual hour burden would
decrease by approximately 21 annual

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burden hours. This decrease in annual
burden hours would be reflected in
OMB Control Number 1010–0006 when
the final rule becomes effective.
Proposed revisions to § 556.904
would allow the Regional Director to
authorize a right-of-use and easement
grant holder and a pipeline right-of-way
grant holder, as well as a lessee, to
establish a decommissioning account as
additional security required under
§ 556.901(d), or § 550.166(d) or
§ 550.1011(d). BOEM also proposes to
remove the requirement to provide
instructions for the institution managing
the account to purchase Treasury
securities pledged to BOEM and to
actually use such Treasuries to fund the
account before the account equals the
maximum insurable amount determined
by the Federal Deposit Insurance
Corporation, currently $250,000. A new
provision is proposed under
§ 556.904(a)(3), which would require
immediate submission of a bond or
other security in the amount equal to
the remaining unsecured portion of the
estimated decommissioning liability
amount if the initial payment or any
scheduled payment into the
decommissioning account is not timely
made. This provision may increase the
annual burden hours slightly, and
would be reflected in OMB Control
Number 1010–0006.
Proposed § 556.905(b)(2) would be
revised to eliminate the requirement
that, when a guarantor becomes
unqualified, a lessee must cease
production, until bond coverage
requirements are met. The regulatory
provision would be replaced with a
requirement to immediately submit and
maintain a substitute bond or other
security. Both the existing and proposed
provisions require the lessee to provide
bond coverage; however, BOEM’s
current OMB Control Number 1010–
0006 does not quantify the burdens
associated with either situation.
Therefore, BOEM would add
approximately 8 annual burden hours to
OMB Control Number 1010–0006 for
any lessee whose guarantor became
unqualified.
Proposed § 556.905(c) relates to the
guarantor’s ability to carry out present
and future financial obligations, which
would be evaluated using an issuer
credit rating, or a proxy credit rating
based on audited financial information,
both of which exist independent of the
requirement for submitting them to
BOEM. Since BOEM would evaluate the
financial ability of the guarantor, the
burden would fall on BOEM. The
annual burdens placed on the guarantor
would be minimal and would be

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included in the burden estimates for
OMB Control Number 1010–0006.
Proposed § 556.905(c) would remove
the requirement that a guarantee ensure
compliance with all lessees’ or grant
holders’ obligations and the obligations
of all operators on the lease or grant.
This revision would allow a third-party
guarantor to limit the obligations
covered by the third-party guarantee. In
some situations, this change could
result in additional paperwork burden
due to additional bonds or other
security that must be provided to BOEM
to cover obligations previously covered
by a third-party guarantee. BOEM
estimates these occurrences to be low
and the annual burdens would be
included in the burden estimates for
OMB Control Number 1010–0006.
Proposed § 556.905(d) also replaces
the indemnity agreement with a thirdparty guarantee agreement with
comparable provisions. This change
would not impact annual burden hours.
Proposed § 556.905(d)(4) would
provide that a lessee or grant holder and
the guarantor under a third-party
guarantee may request BOEM to cancel
a third-party guarantee. BOEM would
cancel a third-party guarantee under the
same terms and conditions provided for
cancellation of additional bonds in
proposed § 556.906(d)(2). The existing
OMB burden under § 556.905 and
§ 556.906 would be expanded to include
this new provision. The current burden
for OMB Control Number 1010–0006 is
overestimated at 1⁄2 hour time by 378
responses. Therefore, the burden added
by the new provision for these types of
requests would be included in the
existing burden.
Proposed § 556.906(d)(2) would be
revised to add three additional
circumstances when BOEM may cancel
an additional bond or other security.
Proposed paragraphs
556.906(d)(2)(ii)(A) through (C) would
require a cancellation request from the
lessee or grant holder, or the surety,
based on assertions that one of these
three circumstances is present. BOEM
already receives these types of requests
and has approved the requests, where
warranted, on the basis of a departure
from the regulations. Therefore, the
existing OMB burden estimate for OMB
Control Number 1010–0006 includes
these requests.
Overall, this proposed rule would
result in the following adjustments in
hour burden, which would lead to an
overall reduction of 13 annual burden
hours:
• The hours per response for all
respondents (i.e., a lessee, a co-lessee, a
co-grant holder, and/or a predecessor)
who demonstrate financial worth/ability

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to carry out present and future financial
obligations, request approval of another
form of security, or request reduction in
amount of supplemental bond required,
along with the monitoring and
submission of required information, will
remain at 3.5 hours as approved by
OMB in OMB Control Number 1010–
0006. The number of responses for the
provisions related to §§ 550.160,
550.166, 550.1011, and 556.900 through
902 would decrease to 160 respondents
from 166 respondents due to program
changes as explained above. The related
existing and new provisions would
result in a decrease of 21 burden hours
from 581 to 560 annual burden hours,
which would be reflected in OMB
Control Number 1010–0006.
• The hours per response for
proposed § 556.905(b)(2) would be an
increase from 0 to 2 hours. The number
of responses for this provision would
increase from 0 to 4. Therefore, this new
provision would add 8 annual burden
hours to OMB Control Number 1010–
0006.
If this proposed rule becomes
effective, BOEM would use the existing
OMB control numbers for the affected
subparts discussed above and would
adjust their IC burdens accordingly.
The IC does not include questions of
a sensitive nature. BOEM will protect
proprietary information according to the
Freedom of Information Act (5 U.S.C.
552) and DOI implementing regulations
(43 CFR part 2), 30 CFR 556.104,
Information collection and proprietary
information, and 30 CFR 550.197, Data
and information to be made available to
the public or for limited inspection.
In addition, the PRA requires agencies
to estimate the total annual reporting
and recordkeeping non-hour cost
burden resulting from the collection of
information, and we solicit your
comments on this item. For reporting
and recordkeeping only, your response
should split the cost estimate into two
components: (1) Total capital and
startup cost component and (2) annual
operation, maintenance, and purchase
of service component. Your estimates
should consider the cost to generate,
maintain, and disclose or provide the
information. You should describe the
methods you use to estimate major cost
factors, including system and
technology acquisition, expected useful
life of capital equipment, discount
rate(s), and the period over which you
incur costs. Generally, your estimates
should not include equipment or
services purchased: (1) Before October
1, 1995; (2) to comply with
requirements not associated with the
information collection; (3) for reasons
other than to provide information or

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keep records for the Government; or (4)
as part of customary and usual business
or private practices.
As part of our continuing effort to
reduce paperwork and respondent
burdens, we invite the public and other
Federal agencies to comment on any
aspect of this information collection,
including:
(1) Whether or not the collection of
information is necessary, including
whether or not the information will
have practical utility;
(2) The accuracy of our estimate of the
burden for this collection of
information;
(3) Ways to enhance the quality,
utility, and clarity of the information to
be collected; and
(4) Ways to minimize the burden of
the collection of information on
respondents.
Send your comments and suggestions
on this information collection by the
date indicated in the DATES section to
the Desk Officer for the Department of
the Interior at OMB–OIRA at (202) 395–
5806 (fax) or via the www.reginfo.gov
portal (online). You may view the
information collection request(s) at
http://www.reginfo.gov/public/do/
PRAMain. Please provide a copy of your
comments to the BOEM Information
Collection Clearance Officer (see the
ADDRESSES section). You may contact
Anna Atkinson, BOEM Information
Collection Clearance Officer at (703)
787–1025 with any questions. Please
reference Risk Management, Financial
Assurance and Loss Prevention (OMB
Control No. 1010–0006), in your
comments.
J. National Environmental Policy Act
A detailed environmental analysis
under the National Environmental
Policy Act of 1969 (NEPA) is not
required if the proposed rule is covered
by a categorical exclusion (see 43 CFR
46.205). This proposed rule meets the
criteria set forth at 43 CFR 46.210(i) for
a Departmental Categorical Exclusion in
that this proposed rule is ‘‘. . . of an
administrative, financial, legal,
technical, or procedural nature . . . .’’
We have also determined that the
proposed rule does not involve any of
the extraordinary circumstances listed
in 43 CFR 46.215 that would require
further analysis under NEPA.
K. Data Quality Act
In developing this proposed rule, we
did not conduct or use a study,
experiment, or survey requiring peer
review under the Data Quality Act (Pub.
L. 106–554, app. C, sec. 515, 114 Stat.
2763, 2763A–153–154).

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L. Effects on the Nation’s Energy Supply
(E.O. 13211)
Under E.O. 13211, agencies are
required to prepare and submit to OMB
a Statement of Energy Effects for
‘‘significant energy actions.’’ This
should include a detailed statement of
any adverse effects on energy supply,
distribution, or use (including a
shortfall in supply, price increases, and
increased use of foreign supplies)
expected to result from the action and
a discussion of reasonable alternatives
and their effects.
The proposed rule is an E.O. 13771
deregulatory action and does not add
new regulatory compliance
requirements that would lead to adverse
effects on the nation’s energy supply,
distribution, or use. Rather, in
accordance with E.O. 13783, the
proposed regulatory changes will help
to reduce compliance burdens on the oil
and gas industry that may hinder the
continued development or use of
domestically produced energy
resources.
The BOEM regulatory changes are
expected to provide the oil and gas
industry with direct annualized
compliance cost savings of $17.0
million (7% discounting) over the
proposed rule’s 20-year analysis of the
rule’s effects. The compliance cost
savings experienced by the offshore oil
and gas industry under this proposed
rule will reduce the overall costs of OCS
operating companies. BSEE’s proposals
result in no cost impacts. Moreover,
since BSEE’s proposed regulatory
changes apply only to facilities that
occur after exploration, development
and production activities have ended,
those changes would not affect the
nation’s energy supply, distribution and
use. Reduced regulatory burdens do not
adversely affect productivity,
competition, or prices within the energy
sector. This proposed rule is not a
significant energy action under the
definition in E.O. 13211. Therefore, a
Statement of Energy Effects is not
required.
M. Clarity of This Regulation
BOEM is required by E.O. 12866, E.O.
12988, and by the Presidential
Memorandum of June 1, 1998, to write
all rules in plain language. This means
that each rule BOEM publishes must:
(1) Be logically organized;
(2) Use the active voice to address
readers directly;
(3) Use clear language rather than
jargon;
(4) Be divided into short sections and
sentences; and
(5) Use lists and tables wherever
possible.

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If you feel that BOEM or BSEE have
not met these requirements, send
comments by one of the methods listed
in the ADDRESSES section. To better help
BOEM and BSEE revise the proposed
rule, your comments should be as
specific as possible. For example, you
should specify the numbers of the
sections or paragraphs that you find
unclear, which sections or sentences are
too long, the sections where you feel
lists or tables would be useful, etc.

CHAPTER II—BUREAU OF SAFETY AND
ENVIRONMENTAL ENFORCEMENT,
DEPARTMENT OF THE INTERIOR
SUBCHAPTER B—OFFSHORE

PART 250—OIL AND GAS AND
SULFUR OPERATIONS IN THE OUTER
CONTINENTAL SHELF
1. The authority citation for part 250
continues to read as follows:

■

List of Subjects

Authority: 30 U.S.C. 1751; 31 U.S.C. 9701;
33 U.S.C. 1321(j)(1)(C); 43 U.S.C. 1334.

30 CFR Part 250

■

Administrative practice and
procedure, Continental shelf,
Environmental impact statements,
Environmental protection, Government
contracts, Investigations, Oil and gas
exploration, Penalties, Pipelines, Public
lands—mineral resources, Public
lands—rights of-way, Reporting and
recordkeeping requirements, Sulfur.
30 CFR Part 290
Administrative practice and
procedure.
30 CFR Part 550
Administrative practice and
procedure, Continental shelf,
Environmental impact statements,
Environmental protection, Federal
lands, Government contracts,
Investigations, Mineral resources, Oil
and gas exploration, Outer continental
shelf, Penalties, Pipelines, Reporting
and recordkeeping requirements, Rightsof-way, Sulfur.
30 CFR Part 556
Administrative practice and
procedure, Continental shelf,
Environmental protection, Federal
lands, Government contracts,
Intergovernmental relations, Oil and gas
exploration, Outer continental shelf,
Mineral resources, Reporting and
recordkeeping requirements.
Casey Hammond,
Principal Deputy Assistant Secretary,
Exercising the Authority of the Assistant
Secretary, Land and Minerals Management.

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TITLE 30—MINERAL RESOURCES

For the reasons stated in the
preamble, BOEM and BSEE propose to
amend 30 CFR parts 250, 290, 550, and
556 as follows:

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2. Amend § 250.105 by removing the
definitions of ‘‘Easement’’ and ‘‘Rightof-use’’ and adding in their place in
alphabetical order the definition for
‘‘Right-of-Use and Easement’’ to read as
follows:

§ 250.105

Definitions.

*

*
*
*
*
Right-of-Use and Easement means a
right to use a portion of the seabed at
an OCS site, other than on a lease you
own, to construct, modify, or maintain
platforms, artificial islands, facilities,
installations, and other devices,
established to support the exploration,
development, or production of oil and
gas, mineral, or energy resources from
an OCS or State submerged lands lease.
*
*
*
*
*
■ 3. Amend § 250.1700 by revising the
section heading and paragraph (a)(2),
and adding paragraph (d), to read as
follows:
§ 250.1700 What do the terms
‘‘decommissioning,’’ ‘‘obstructions,’’
‘‘facility,’’ and ‘‘predecessor’’ mean?

(a) * * *
(2) Returning the lease, pipeline rightof-way, or the area of a right-of-use and
easement to a condition that meets the
requirements of BSEE and other
agencies that have jurisdiction over
decommissioning activities.
*
*
*
*
*
(d) Predecessor means a prior lessee
or owner of operating rights, or a prior
holder of a right-of-use and easement
grant, or a pipeline right-of-way grant,
that is liable for accrued obligations on
that lease or grant.
■ 4. Revise § 250.1701 to read as
follows:
§ 250.1701 Who must meet the
decommissioning obligations in this
subpart?

(a) Lessees, owners of operating
rights, and their predecessors, are
jointly and severally liable for meeting
decommissioning obligations for
facilities on leases, including the
obligations related to lease-term

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pipelines, as the obligations accrue and
until each obligation is met.
(b) All holders of a right-of-way grant
and their predecessors are jointly and
severally liable for meeting
decommissioning obligations for
facilities on their right-of-way,
including right-of-way pipelines, as the
obligations accrue and until each
obligation is met.
(c) All right-of-use and easement grant
holders and prior lessees of the parcel
on whose leases there existed facilities
or obstructions that remain on the rightof-use and easement grant are jointly
and severally liable for meeting
decommissioning obligations, including
obligations for any well, pipeline,
platform or other facility, or an
obstruction, on their right-of-use and
easement, as the obligations accrue and
until each obligation is met.
(d) In this subpart, the terms ‘‘you’’ or
‘‘I’’ refer to lessees and owners of
operating rights, including their
predecessors, as to facilities installed
under the authority of a lease; to
pipeline right-of-way grant holders,
including their predecessors, as to
facilities installed under the authority of
a pipeline right-of-way grant; and to
right-of-use and easement grant holders,
including their predecessors, such as
former lessees of the parcel, as to
facilities constructed, modified, or
maintained under the authority of the
right-of-use and easement grant.
■ 5. Amend § 250.1702 by revising
paragraph (e), re-designating paragraph
(f) as paragraph (g), and adding new
paragraph (f), to read as follows:
§ 250.1702 When do I accrue
decommissioning obligations?

*

*
*
*
*
(e) Are or become a holder of a
pipeline right-of-way on which there is
a pipeline, platform, or other facility, or
an obstruction;
(f) Are or become the holder of a rightof-use and easement grant on which
there is a well, pipeline, platform, or
other facility, or an obstruction; or
*
*
*
*
*
■ 6. Amend § 250.1703 by revising
paragraph (e) to read as follows:
§ 250.1703 What are the general
requirements for decommissioning?

*

*
*
*
*
(e) Clear the seafloor of all
obstructions created by your lease,
pipeline right-way, or right-of-use and
easement operations;
*
*
*
*
*
■ 7. Amend § 250.1704 by redesignating
paragraphs (b) through (j) as paragraphs
(c) through (k) respectively, and adding
new paragraph (b) to read as follows:

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§ 250.1704 What decommissioning
applications and reports must I submit and
when must I submit them?

*

*

*

*

*

DECOMMISSIONING APPLICATIONS AND REPORTS TABLE
Decommissioning applications and reports

When to submit

*
*
(b) Submit decommissioning plan per
§ 250.1708(b)(3) that addresses all wells,
platforms and other facilities, pipelines, and
site clearance upon receiving an order to
perform decommissioning.

*
*
*
Within 90 days of receiving an order to perform decommissioning under § 250.1708(a).

*

■

*

*

8. Add § 250.1708 to read as follows:

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§ 250.1708 How will BSEE enforce accrued
decommissioning obligations against
predecessors?

(a) Except as provided in paragraph
(d) of this section, when holding
predecessors responsible for performing
accrued decommissioning obligations,
BSEE will issue decommissioning
orders to groups of predecessors who
held interests in the lease or grant
within the same general timeframe in
reverse chronological order. BSEE will
issue such orders to predecessors in
groups organized by the following:
(1) Changes in designated operator(s)
over time (i.e., all predecessors who
held relevant lease or grant interests
during the tenure of a particular
designated operator or during the tenure
of contemporaneous designated
operators); and
(2) Predecessors who assigned
interests to a lessee, owner of operating
rights, or grant holder that subsequently
defaulted.
(b) When BSEE issues an order to
predecessors to perform accrued
decommissioning obligations, the
predecessors must:
(1) Within 30 days of receiving the
order, begin maintaining and
monitoring, through a single entity
identified to BSEE, any facility,
including wells and pipelines as
identified by BSEE in the order, in
accordance with applicable
requirements under this part (including,
but not limited to, testing safety valves
and sensors, draining vessels, and
performing pollution inspections); and
(2) Within 60 days of receiving the
order, designate a single entity to serve
as operator for the decommissioning
operations;
(3) Within 90 days of receiving the
order, the entity identified in paragraph
(b)(2) of this section must submit a
decommissioning plan for approval by

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*

Instructions

*

the Regional Supervisor that includes
the scope of work and a reasonable
decommissioning schedule for all wells,
platforms and other facilities, pipelines,
and site clearance, as identified in the
order; and
(4) Perform the required
decommissioning in the time and
manner specified by BSEE in its
decommissioning plan approval.
(c) Failure to comply with the
obligations under paragraph (b) of this
section to maintain and monitor a
facility or to submit a decommissioning
plan may result in a Notice of Incident
of Noncompliance and potentially other
enforcement actions, including civil
penalties and disqualification as an
operator.
(d) Under certain circumstances,
BSEE may depart from the order of
recourse prescribed in paragraph (a) of
this section and issue orders to any or
all predecessors for the performance of
their respective accrued
decommissioning obligations. Those
circumstances include, but are not
limited to:
(1) Failure to obtain approval of a
decommissioning plan under paragraph
(b)(3) of this section or to execute
decommissioning according to the
approved decommissioning plan;
(2) Determination by the Regional
Supervisor that there is an emergency
condition, safety concern, or
environmental threat, including but not
limited to facilities not being properly
maintained and monitored in
accordance with applicable
requirements under this part; or
(3) Determination by the Regional
Supervisor that proceeding pursuant to
paragraph (a) of this section would
unreasonably delay decommissioning.
(e) BSEE’s issuance of orders to any
predecessors will not relieve any
current lessee or grant holder, or any
other predecessor, of its obligations to
comply with any prior

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*
*
Include
information
required
§ 250.1708(b)(2) and (3).

Sfmt 4702

*

under

*

decommissioning order or to satisfy any
accrued decommissioning obligations.
(f) A pending appeal, pursuant to 30
CFR part 290, of any decommissioning
order does not preclude BSEE from
proceeding against any or all
predecessors other than the appellant in
accordance with paragraph (d) of this
section.
■ 9. Add § 250.1709 to read as follows:
§ 250.1709 What must I do to appeal a
BSEE final decommissioning decision or
order issued under this subpart?

If you file an appeal, pursuant to 30
CFR part 290, of a BSEE decision or
order to perform any decommissioning
activity under subpart Q of this part, in
order to seek to obtain a stay of that
decision or order, you must post a
surety bond in an amount that BSEE
determines will be adequate to ensure
completion of the specified
decommissioning activities in the event
that your appeal is denied and you
thereafter fail to perform any of your
decommissioning obligations.
■ 10. Amend § 250.1725 by revising the
first sentence of paragraph (a) to read as
follows:
§ 250.1725 When do I have to remove
platforms and other facilities?

(a) You must remove all platforms and
other facilities within 1 year after the
lease, pipeline right-of-way, or right-ofuse and easement terminates, unless
you receive approval to maintain the
structure to conduct other activities.
* * *
*
*
*
*
*
SUBCHAPTER C—APPEALS

PART 290—APPEAL PROCEDURES
11. The authority citation for part 290
continues to read as follows:

■

Authority: 5 U.S.C. 305; 43 U.S.C. 1334.

12. Amend § 290.7 by revising
paragraph (a)(2) to read as follows:

■

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§ 290.7 Do I have to comply with the
decision or order while my appeal is
pending?

(a) * * *
(2) You post a surety bond under 30
CFR 250.1409 pending the appeal
challenging an order to pay a civil
penalty or under 30 CFR 250.1709
pending the appeal challenging a
decommissioning decision or order.
*
*
*
*
*
CHAPTER V—BUREAU OF OCEAN
ENERGY MANAGEMENT, DEPARTMENT OF
THE INTERIOR
SUBCHAPTER B—OFFSHORE

PART 550—OIL AND GAS AND
SULFUR OPERATIONS IN THE OUTER
CONTINENTAL SHELF
13. The authority citation for part 550
continues to read as follows:

■

Authority: 30 U.S.C. 1751; 31 U.S.C. 9701;
43 U.S.C. 1334.

Subpart A—General
14. Amend § 550.105 by:
a. Removing the definition of
‘‘Easement’’;
■ b. Adding definitions in alphabetical
order for ‘‘Issuer credit rating’’ and
‘‘Predecessor’’;
■ c. Removing the definition of ‘‘Rightof-use’’;
■ d. Adding definitions in alphabetical
order for ‘‘Right-of-Use and Easement’’
and ‘‘Security’’; and
■ e. Revising the definition of ‘‘You’’.
The additions and revision read as
follows:
■
■

§ 550.105

Definitions.

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*

*
*
*
*
Issuer credit rating means a forwardlooking opinion about an obligor’s
overall creditworthiness. This opinion
focuses on the obligor’s capacity and
willingness to meet its financial
commitments as they come due. It does
not apply to any specific financial
obligation, as it does not take into
account the nature of and provisions of
the obligation, its standing in
bankruptcy or liquidation, statutory
preferences, or the legality and
enforceability of the obligation.
*
*
*
*
*
Predecessor means a prior lessee or
owner of operating rights, or a prior
holder of a right-of-use and easement
grant or a pipeline right-of-way grant,
that is liable for accrued obligations on
that lease or grant.
*
*
*
*
*
Right-of-Use and Easement means a
right to use a portion of the seabed at
an OCS site other than on a lease you
own, to construct, modify or maintain

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platforms, artificial islands, facilities,
installations, and other devices,
established to support the exploration,
development, or production of oil and
gas, mineral, or energy resources from
an OCS or State submerged lands lease.
*
*
*
*
*
Security means a surety bond, a
pledge of Treasury securities, a
decommissioning account, a third-party
guarantee or any other form of financial
assurance provided to BOEM to ensure
compliance with obligations under a
lease, a right-of-use and easement grant,
or a pipeline right-of-way grant.
*
*
*
*
*
You, depending on the context of the
regulations, means a bidder, a lessee
(record title owner), a sublessee
(operating rights owner), a right-of-use
and easement grant holder, a pipeline
right-of-way grant holder, a predecessor,
a designated operator or agent of the
lessee or grant holder, or an applicant
seeking to become one of the above.
■ 15. Amend § 550.160 by revising the
introductory text and paragraphs (a)
introductory text, (b) and (c) to read as
follows:
§ 550.160 When will BOEM grant me a
right-of-use and easement, and what
requirements must I meet?

BOEM may grant you a right-of-use
and easement on leased or unleased
lands or both on the OCS, if you meet
these requirements:
(a) You must need the right-of-use and
easement to construct or maintain
platforms, artificial islands, facilities,
installations, and other devices at an
OCS site other than an OCS lease you
own, that are:
*
*
*
*
*
(b) You must exercise the right-of-use
and easement according to the terms of
the grant and the applicable regulations
of this part, as well as the requirements
of part 250, subpart Q of this title.
(c) You must meet the qualification
requirements at §§ 556.400 through
556.402 of this chapter and the bonding
requirements in § 550.166(d).
*
*
*
*
*
■ 16. Revise § 550.166 to read as
follows:
§ 550.166 If BOEM grants me a right-of-use
and easement, what surety bond or other
security must I provide?

(a) Before BOEM grants you a right-ofuse and easement on the OCS that
serves your State lease, you must
furnish the Regional Director a surety
bond for $500,000.
(b) The requirement to furnish a
surety bond under paragraph (a) of this
section may be satisfied if your operator
provides a surety bond in the required

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65933

amount that guarantees compliance
with all the terms and conditions of the
right-of-use and easement grant.
(c) The requirements for lease bonds
in § 556.900(d) through (g) and
§ 556.902 of this chapter apply to the
$500,000 surety bond required if BOEM
grants you a right-of-use and easement
to serve your State lease.
(d) If BOEM grants you a right-of-use
and easement that serves either an OCS
lease or a State lease, the Regional
Director may determine that additional
security (i.e., security above the amount
prescribed in paragraph (a) of this
section) is necessary to ensure
compliance with the obligations under
your right-of-use and easement grant
based on an evaluation of your ability to
carry out present and future obligations
on the right-of-use and easement. The
Regional Director may require you to
provide additional security if you do not
meet at least one of the criteria provided
in paragraphs (d)(1) or (2) of this
section:
(1) You have an issuer credit rating or
a proxy credit rating that meets the
criteria in § 556.901(d)(1) of this
chapter; or
(2) If you do not meet the criteria in
paragraph (d)(1) of this section, a
predecessor right-of-use and easement
grant holder or a predecessor lessee
liable for decommissioning any facilities
on your right-of-use and easement has
an issuer credit rating or a proxy credit
rating that meets the criteria set forth in
§ 556.901(d)(1) of this chapter. However,
the Regional Director may require you to
provide additional security for
decommissioning obligations for which
such a predecessor is not liable.
(e) This additional security must:
(1) Meet the requirements of
§ 556.900(d) through (g) and § 556.902
of this chapter; and
(2) Cover costs and liabilities for
regulatory compliance, well
abandonment, platform and structure
removal, and site clearance of the
seafloor of the right-of-use and
easement, in accordance with the
standards set forth in part 250, subpart
Q of this title.
(f) If you fail to replace a deficient
bond or fail to provide additional
security upon demand, the Regional
Director may:
(1) Assess penalties under subpart N
of this part;
(2) Request BSEE to suspend
operations on your right-of-use and
easement; and
(3) Initiate action for cancellation of
your right-of-use and easement grant.

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Subpart J—Pipelines and Pipeline
Rights-of-Way
17. Revise § 550.1011 to read as
follows:

■

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§ 550.1011 Bond or other security
requirements for pipeline right-of-way grant
holders.

(a) When you apply for or are the
holder of a pipeline right-of-way grant,
you must furnish and maintain a
$300,000 areawide bond that guarantees
compliance with all the terms and
conditions of all of the pipeline right-ofway grants you hold in an OCS area as
defined in § 556.900(b) of this chapter.
(b) The requirement to furnish and
maintain an areawide pipeline right-ofway bond under paragraph (a) of this
section may be satisfied if your operator
or a co-grant holder provides an
areawide pipeline right-of-way bond in
the required amount that guarantees
compliance with all the terms and
conditions of the grant.
(c) The requirements for lease bonds
in § 556.900(d) through (g) and
§ 556.902 of this chapter apply to the
areawide bond required in paragraph (a)
of this section.
(d) The Regional Director may
determine that additional security (i.e.,
security above the amount prescribed in
paragraph (a) of this section) is
necessary to ensure compliance with the
obligations under your pipeline right-ofway grant based on an evaluation of
your ability to carry out present and
future obligations on the pipeline rightof-way. The Regional Director may
require you to provide additional
security if you do not meet at least one
of the criteria provided in paragraphs
(d)(1) or (2) of this section:
(1) You have an issuer credit rating or
a proxy credit rating that meets the
criteria in § 556.901(d)(1) of this
chapter; or
(2) If you do not meet the criteria in
paragraph (d)(1) of this section:
(i) Your co-grant holder has an issuer
credit rating or a proxy credit rating that
meets the criteria in § 556.901(d)(1) of
this chapter; or
(ii) A predecessor pipeline right-ofway grant holder liable for
decommissioning any facilities on your
pipeline right-of-way has an issuer
credit rating or a proxy credit rating that
meets the criteria in § 556.901(d)(1) of
this chapter. However, the Regional
Director may require you to provide
additional security for decommissioning
obligations for which such a
predecessor is not liable.
(e) This additional security must:
(1) Meet the requirements of
§ 556.900(d) through (g) and § 556.902
of this chapter, and

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(2) Cover additional costs and
liabilities for regulatory compliance,
decommissioning of all pipelines, and
site clearance from the seafloor of all
obstructions created by your pipeline
right-of-way operations in accordance
with the standards set forth in part 250,
subpart Q of this title.
(f) If you fail to replace a deficient
bond or fail to provide additional
security upon demand, the Regional
Director may:
(1) Assess penalties under subpart N
of this part;
(2) Request BSEE to suspend
operations on your pipeline; and
(3) Initiate action for forfeiture of your
pipeline right-of-way grant in
accordance with § 250.1013 of this title.
PART 556—LEASING OF SULFUR OR
OIL AND GAS AND BONDING
REQUIREMENTS IN THE OUTER
CONTINENTAL SHELF
18. Revise the authority citation for
part 556 to read as follows:

■

Authority: 30 U.S.C. 1701 note; 30 U.S.C.
1711; 31 U.S.C. 9701; 42 U.S.C. 6213; 43
U.S.C. 1334.

Subpart A—General Provisions
19. Amend § 556.105 paragraph (b) by:
a. Adding definitions in alphabetical
order for ‘‘Issuer credit rating’’ and
‘‘Predecessor’’;
■ b. Revising the definition of ‘‘Right-ofUse and Easement (RUE)’’;
■ c. Adding a definition in alphabetical
order for ‘‘Security’’;
■ d. Removing the definition of
‘‘Security or securities’’; and
■ e. Revising the definition of ‘‘You’’.
The additions and revisions read as
follows:
■
■

§ 556.105

Acronyms and definitions.

*

*
*
*
*
(b) * * *
*
*
*
*
*
Issuer credit rating means a forwardlooking opinion about an obligor’s
overall creditworthiness. This opinion
focuses on the obligor’s capacity and
willingness to meet its financial
commitments as they come due. It does
not apply to any specific financial
obligation, as it does not take into
account the nature of and provisions of
the obligation, its standing in
bankruptcy or liquidation, statutory
preferences, or the legality and
enforceability of the obligation.
*
*
*
*
*
Predecessor means a prior lessee or
owner of operating rights, or a prior
holder of a right-of-use and easement
grant or a pipeline right-of-way grant,

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that is liable for accrued obligations on
that lease or grant.
*
*
*
*
*
Right-of-Use and Easement means a
right to use a portion of the seabed at
an OCS site other than on a lease you
own, to construct, modify or maintain
platforms, artificial islands, facilities,
installations, and other devices,
established to support the exploration,
development, or production of oil and
gas, mineral, or energy resources from
an OCS or State submerged lands lease.
*
*
*
*
*
Security means a surety bond, a
pledge of Treasury securities, a
decommissioning account, a third-party
guarantee or any other form of financial
assurance provided to BOEM to ensure
compliance with obligations under a
lease, a right-of-use and easement grant
or a pipeline right-of-way grant.
*
*
*
*
*
You, depending on the context of the
regulations, means a bidder, a lessee
(record title owner), a sublessee
(operating rights owner), a right-of-use
and easement grant holder, a pipeline
right-of-way grant holder, a predecessor,
a designated operator or agent of the
lessee or grant holder, or an applicant
seeking to become one of the above.
Subpart I—Bonding or Other Financial
Assurance
20. Amend § 556.900 by revising the
section heading and paragraphs (a)
introductory text, (a)(2) and (3), (g)
introductory text, and (h) to read as
follows:

■

§ 556.900 Bond or other security
requirements for an oil and gas or sulfur
lease.

*

*
*
*
*
(a) Before BOEM will issue a new
lease or approve the assignment or
sublease of an interest in an existing
lease, you or another record title or
operating rights owner of the lease must:
*
*
*
*
*
(2) Maintain a $300,000 areawide
bond that guarantees compliance with
all the terms and conditions of all your
oil and gas and sulfur leases in the area
where the lease is located; or
(3) Maintain a lease or areawide bond
in the amount required in § 556.901(a)
or (b).
*
*
*
*
*
(g) You may pledge alternative types
of security instruments instead of
providing a surety bond if the Regional
Director determines that the alternative
security protects the interests of the
United States to the same extent as the
required surety bond.
*
*
*
*
*

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(h) If you fail to replace a deficient
bond or to provide additional security
upon demand, the Regional Director
may:
(1) Assess penalties under part 550,
subpart N of this chapter;
(2) Request BSEE to suspend
production and other operations on
your lease in accordance with § 250.173
of this title; and
(3) Initiate action to cancel your lease.
■ 21. Amend § 556.901 by revising the
section heading and paragraphs (a)(1)(i)
introductory text and (c) through (f), and
adding paragraph (g) to read as follows:

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§ 556.901

Bonds and additional security.

(a) * * *
(1)(i) You must furnish the Regional
Director a $200,000 lease exploration
bond that guarantees compliance with
all the terms and conditions of the lease
by the earliest of:
*
*
*
*
*
(c) If you can demonstrate to the
satisfaction of the Regional Director that
you can satisfy your decommissioning
obligations for less than the amount of
security required under paragraph (a)(1)
or (b)(1) of this section, the Regional
Director may accept security in an
amount less than the prescribed
amount, but not less than the estimated
cost for decommissioning.
(d) The Regional Director may
determine that additional security (i.e.,
security above the amounts prescribed
in § 556.900(a) and paragraphs (a) and
(b) of this section) is necessary to ensure
compliance with the obligations under
your lease, the regulations in this
chapter, and the regulations in 30 CFR
chapters II and XII, based on an
evaluation of your ability to carry out
present and future obligations on the
lease. The Regional Director may require
you to provide additional security if you
do not meet at least one of the criteria
provided paragraphs (d)(1) or (2) of this
section:
(1) You have an issuer credit rating
from a nationally recognized statistical
rating organization (NRSRO), as defined
by the United States Securities and
Exchange Commission (SEC), greater
than or equal to either BB¥ from S&P
Global Ratings or Ba3 from Moody’s
Investor Service, or an equivalent credit
rating provided by an SEC-recognized
NRSRO, or a proxy credit rating
determined by the Regional Director
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 either BB¥ from S&P Global
Ratings or Ba3 from Moody’s Investor
Service or an equivalent credit rating

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provided by an SEC-recognized NRSRO;
or
(2) If you do not meet the criteria in
paragraph (d)(1) of this section:
(i) Your co-lessee has an issuer credit
rating or a proxy credit rating that meets
the criteria set forth in paragraph (d)(1)
of this section;
(ii) There are proved oil and gas
reserves on the lease, as defined by the
SEC at 17 CFR 210.4–10(a)(22), the net
present value of which exceeds three
times the cost of the decommissioning
associated with the production of those
reserves; or
(iii) A predecessor lessee liable for
decommissioning any facilities on your
lease has an issuer credit rating or a
proxy credit rating that meets the
criteria set forth in paragraph (d)(1) of
this section. However, the Regional
Director may require you to provide
additional security for decommissioning
obligations for which such a
predecessor is not liable.
(e) You may satisfy the Regional
Director’s demand for additional
security by increasing the amount of
your existing bond or by providing
additional bonds or other security.
(f) The Regional Director will
determine the amount of additional
security required to guarantee
compliance. The Regional Director will
consider potential underpayment of
royalty and cumulative
decommissioning obligations.
(g) If your cumulative potential
obligations and liabilities either increase
or decrease, the Regional Director may
adjust the amount of additional security
required.
(1) If the Regional Director proposes
an adjustment, the Regional Director
will:
(i) Notify you and the surety of any
proposed adjustment to the amount of
security required; and
(ii) Give you an opportunity to submit
written or oral comment on the
adjustment.
(2) If you request a reduction of the
amount of additional security required,
you must submit evidence to the
Regional Director demonstrating that the
projected amount of royalties due the
Government and the estimated costs of
decommissioning are less than the
required security amount. If the
Regional Director finds that the
evidence you submit is convincing, the
Regional Director will reduce the
amount of security required.
■ 22. Amend § 556.902 by revising the
section heading and paragraphs (a)
introductory text and (e)(2) to read as
follows:

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§ 556.902 General requirements for bonds
or other security.

(a) Any bond or other security that
you, as lessee, operating rights owner,
grant holder, or operator, provide under
this part, or under part 550 of this
chapter, must:
*
*
*
*
*
(e) * * *
(2) A pledge of Treasury securities as
provided in § 556.900(f);
*
*
*
*
*
■ 23. Revise § 556.903 to read as
follows:
§ 556.903

Lapse of bond.

(a) If your surety becomes bankrupt,
insolvent, or has its charter or license
suspended or revoked, any bond
coverage from that surety must be
replaced. In that event, you must notify
the Regional Director of the lapse of
your bond and promptly provide a new
bond or other security in the amount
required under §§ 556.900 and 556.901,
or § 550.166 or § 550.1011 of this
chapter.
(b) You must notify the Regional
Director of any action filed alleging that
you, your surety, guarantor or financial
institution are insolvent or bankrupt.
You must notify the Regional Director
within 72 hours of learning of such an
action. All bonds or other security must
require the surety, guarantor or financial
institution to provide this information
to you and directly to BOEM.
■ 24. Revise § 556.904 to read as
follows:
§ 556.904

Decommissioning accounts.

(a) The Regional Director may
authorize you to establish a
decommissioning account in a federally
insured financial institution in lieu of
the bond required under § 556.901(d),
or § 550.166(d) or § 550.1011(d) of this
chapter. The decommissioning account
must provide that funds may not be
withdrawn without the written approval
of the Regional Director.
(1) Funds in the account must be
payable upon demand to BOEM if
BOEM determines you have failed to
meet your decommissioning obligations.
(2) You must fully fund the account
to cover all decommissioning costs
pursuant to the schedule the Regional
Director prescribes.
(3) If you fail to make the initial
payment or any scheduled payment into
the decommissioning account, you must
immediately submit, and subsequently
maintain, a bond or other security in an
amount equal to the remaining
unsecured portion of your estimated
decommissioning liability.
(b) Any interest paid on funds in a
decommissioning account will be

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treated as other funds in the account
unless the Regional Director authorizes
in writing the payment of interest to the
party who deposits the funds.
(c) The Regional Director may require
you to create an overriding royalty or
production payment obligation for the
benefit of an account established as
security for the decommissioning of a
lease. The required obligation may be
associated with oil and gas or sulfur
production from a lease other than the
lease secured through the
decommissioning account.
■ 25. Revise § 556.905 to read as
follows:

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§ 556.905

Third-party guarantees.

(a) When the Regional Director may
accept a third-party guarantee. The
Regional Director may accept a thirdparty guarantee instead of an additional
bond or other security under
§ 556.901(d), or § 550.166(d) or
§ 550.1011(d) of this chapter, if:
(1) The guarantor meets the criteria in
paragraph (c) of this section; and
(2) The guarantor submits a thirdparty guarantee agreement containing
each of the provisions in paragraph (d)
of this section.
(b) What to do if your guarantor
becomes unqualified. If, during the life
of your third-party guarantee, your
guarantor no longer meets the criteria of
paragraph (c) of this section, you must:
(1) Notify the Regional Director
immediately; and
(2) Immediately submit, and
subsequently maintain, a bond or other
security covering those obligations
previously secured by the third-party
guarantee.
(c) Criteria for acceptable guarantees.
The Regional Director will accept your
third-party guarantee if the guarantor
has an issuer credit rating or a proxy
credit rating that meets the criteria in
§ 556.901(d)(1).
(d) Provisions required in all thirdparty guarantees. Your third-party
guarantee must contain each of the
following provisions:
(1) If you fail to comply with the
terms of any lease or grant covered by
the guarantee, or any applicable
regulation, your guarantor must either:
(i) Take corrective action that
complies with the terms of such lease or
grant, or any applicable regulation, to
the extent covered by the guarantee; or,
(ii) Be liable under the third-party
guarantee agreement, to the extent
covered by the guarantee, to provide,
within 7 calendar days, sufficient funds
for the Regional Director to complete
such corrective action.
(2) If your guarantor wishes to
terminate the period of liability under
its guarantee, it must:

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(i) Notify you and the Regional
Director at least 90 days before the
proposed termination date;
(ii) Obtain the Regional Director’s
approval for the termination of the
period of liability for all or a specified
portion of the guarantee; and
(iii) Remain liable for all work and
workmanship performed during the
period that the guarantee is in effect.
(3) You must provide acceptable
replacement security before the
termination of the period of liability
under your third-party guarantee.
(4) If you or your guarantor request
BOEM to cancel your third-party
guarantee, BOEM will cancel the
guarantee under the same terms and
conditions provided for cancellation of
additional bonds and return of pledged
security in § 556.906(d)(2) and (e).
(5) The guarantor must submit a thirdparty guarantee agreement that meets
the following criteria:
(i) The third-party guarantee
agreement must be executed by your
guarantor and all persons and parties
bound by the agreement.
(ii) The third-party guarantee
agreement must bind, jointly and
severally, each person and party
executing the agreement.
(iii) When your guarantor is a
corporate entity, two corporate officers
who are authorized to bind the
corporation must sign the third-party
guarantee agreement.
(6) Your guarantor and the other
corporate entities bound by the thirdparty guarantee agreement must provide
the Regional Director copies of:
(i) The authorization of the signatory
corporate officials to bind their
respective corporations;
(ii) An affidavit certifying that the
agreement is valid under all applicable
laws; and
(iii) Each corporation’s corporate
authorization to execute the third-party
guarantee agreement.
(7) If your third-party guarantor or
another party bound by the third-party
guarantee agreement is a partnership,
joint venture, or syndicate, the thirdparty guarantee agreement must:
(i) Bind each partner or party who has
a beneficial interest in your guarantor;
and
(ii) Provide that, upon demand by the
Regional Director under your third-party
guarantee, each partner is jointly and
severally liable for those obligations
secured by the guarantee.
(8) When forfeiture is called for under
§ 556.907, the third-party guarantee
agreement must provide that your
guarantor will either:
(i) Bring your lease or grant into
compliance; or

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(ii) Provide sufficient funds within 7
calendar days, to the extent covered by
the guarantee, to permit the Regional
Director to complete corrective action.
(9) The third-party guarantee
agreement must contain a confession of
judgment. It must provide that, if the
Regional Director determines that you
are in default of the lease or grant
covered by the guarantee or any
regulation applicable to such lease or
grant, the guarantor:
(i) Will not challenge the
determination; and
(ii) Will remedy the default to the
extent covered by the guarantee.
(10) Each third-party guarantee
agreement is deemed to contain all
terms and conditions contained in this
paragraph (d), even if the guarantor has
omitted these terms in the third-party
guarantee agreement.
■ 26. Amend § 556.906 by revising
paragraphs (b)(1) through (3), (d) and (e)
to read as follows:
§ 556.906 Termination of the period of
liability and cancellation of a bond.

*

*
*
*
*
(b) * * *
(1) The new bond is equal to or
greater than the bond that was
cancelled, or you provide an alternative
form of security, and the Regional
Director determines that the alternative
form of security provides a level of
security equal to or greater than that
provided by the bond that was
cancelled;
(2) For a base bond submitted under
§ 556.900(a) or § 556.901(a) or (b), or
§ 550.166(a) or § 550.1011(a) of this
chapter, the surety issuing the new bond
agrees to assume all outstanding
obligations that accrued during the
period of liability that was terminated;
and
(3) For additional bonds submitted
under § 556.901(d), or § 550.166(d) or
§ 550.1011(d) of this chapter, the surety
issuing the new additional bond agrees
to assume that portion of the
outstanding 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 surety
providing the new additional bond.
*
*
*
*
*
(d) BOEM will cancel the bond for
your lease or grant, the surety that
issued the bond will continue to be
responsible, and the Regional Director
may return any pledged security, as
shown in the following table:

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Federal Register / Vol. 85, No. 201 / Friday, October 16, 2020 / Proposed Rules
For the following

Your bond will be reduced or cancelled or your pledged security will be returned

(1) Base bonds submitted under § 556.900(a) or
§ 556.901(a) or (b), or § 550.166(a) or
§ 550.1011(a) of this chapter.

Seven years after the lease or grant expires or is terminated, six years after the Regional Director determines that you have completed all bonded obligations, or at the conclusion of
any appeals or litigation related to your bonded obligations, whichever is the latest. The Regional Director will reduce the amount of your bond or return a portion of your security if the
Regional Director determines that you need less than the full amount of the base bond to
meet any potential obligations.
(i) When the lease or grant expires or is terminated and the Regional Director determines you
have met your bonded obligations, unless the Regional Director:
(A) Determines that the future potential liability resulting from any undetected problem is greater than the amount of the base bond; and (B) Notifies the provider of the bond that the Regional Director will wait seven years before canceling all or a part of the additional bond (or
longer period as necessary to complete any appeals or judicial litigation related to your
bonded obligations).
(ii) At any time when:
(A) BOEM has determined, using the criteria set forth in § 556.901(d), or § 550.166(d) or
§ 550.1011(d) of this chapter, as applicable, that you no longer need to provide the additional bond for your lease, right-of-use and easement grant, or pipeline right-of-way grant.
(B) The operations for which the bond was provided ceased prior to accrual of any decommissioning obligation; or
(C) Cancellation of the bond is appropriate because, under the regulations, BOEM determines
such bond never should have been required.

(2)
Additional
bonds
submitted
under
§ 556.901(d),
or
§ 550.166(d)
or
§ 550.1011(d) of this chapter.

(e) For all bonds, the Regional
Director may reinstate your bond as if
no cancellation had occurred if:
(1) A person makes a payment under
the lease, right-of-use and easement
grant, or pipeline right-of-way grant,
and the payment is rescinded or must be
repaid 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, right-of-use
and easement grant, or pipeline right-ofway grant and the representation was
materially false when the bond was
cancelled.
■ 27. Amend § 556.907 by revising the
section heading and paragraphs (a)(1),
(b), (c)(1), (c)(1)(ii), (c)(2)(i) through (iii),
(d), (e)(2), (f)(1) and (2), and (g) to read
as follows:
§ 556.907 Forfeiture of bonds or other
securities.

*

*
*
*
*
(a) * * *
(1) You (the party who provided the
bond or other security) refuse, or the
Regional Director determines that you
are unable, to comply with any term or
condition of your lease, right-of-use and
easement grant, pipeline right-of-way
grant, or any applicable regulation; or
*
*
*
*
*
(b) The Regional Director may pursue
forfeiture of your bond or other security
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without first making demands for
performance against any lessee,
operating rights owner, grant holder, or
other person authorized to perform lease
or grant obligations.
(c) * * *
(1) Notify you, your surety, guarantor,
or financial institution holding your
decommissioning account, of a
determination to call for forfeiture of the
bond, security, guarantee, or funds.
*
*
*
*
*
(ii) The Regional Director will
determine the amount to be forfeited
based upon an estimate of the total cost
of corrective action to bring your lease
or grant into compliance.
(2) * * *
(i) You agree to and demonstrate that
you will bring your lease or grant into
compliance within the timeframe that
the Regional Director prescribes;
(ii) Your third-party guarantor agrees
to and demonstrates that it will
complete the corrective action to bring
your lease or grant into compliance
within the timeframe that the Regional
Director prescribes, even if the cost of
compliance exceeds the limit of the
guarantee; 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.

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(d) If the Regional Director finds you
are in default, he/she may cause the
forfeiture of any bonds and other
security provided to ensure your
compliance with the terms and
conditions of your lease or grant and the
regulations in this chapter and 30 CFR
chapters II and XII.
(e) * * *
(2) Use the funds collected to bring
your lease or grant into compliance and
to correct any default.
(f) * * *
(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-lessee,
operating rights owner, 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 the Regional Director
collects under your forfeited bond and
other security.
(g) If the amount that the Regional
Director collects under your forfeited
bond and other security exceeds the
costs of taking the corrective actions
required to obtain full compliance with
the terms and conditions of your lease
or grant and the regulations in this
chapter and 30 CFR chapters II and XII,
the Regional Director will return the
excess funds to the party from whom
they were collected.
[FR Doc. 2020–20827 Filed 10–15–20; 8:45 am]
BILLING CODE 4310–MR–P

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