TL clarifies Gulf of Mexico OCS Region’s (GOMR) method of implementing the requirements for general lease security bonds, which are contained in 30 CFR 256, Part I. These securities are required to ensure that you comply with all regulatory and lease requirements, including rents and royalties that aren’t linked to oil spillages, abandonment or site-clearance and other lease obligations.
The Minerals Management Service will not issue a new lease, or approve a lease assignment with an operational activity plan. You must be able and able to pay a general lease security bond before the MMS issues a lease. The GOMR will review your bonding coverages when the GOMR receives a request to change the designated operator of a leasing agreement. This includes an initial Exploration Plan, an initial Development and Production Plan, an initial Development Operations Coordination Document, (DOCD), or a substantial revision to an EP, DPP or DOCD. Also, a request to assign a lease with an EP, DPP or DOCD.
If the assignment is good cause, an authorized MMS officer might consent to you providing the general lease surety bonds. It should be provided before any operational activity is initiated under the relevant plan. A general lease surety bonds submitted by designated operators (30 CFR 256.52(c)) does not relieve lessees from their obligation to follow the lease terms and conditions. The coverage of the general lease surety bonds depends on how active your lease is.
Each lease will be designated by the GOMR as either No Operations, Exploration, or development as follows:
1. No Operations – A $50,000 lease specific or $300,000. area-wide general lease surety for leases that have not been approved by MMS. This bond is for leases that are subject to an MMS-approved operating activity plan, but which do not submit to MMS for assignment or operational activity plans. You do not have to offer the bond if you have already provided an applicable lease-specific lease surety or area-wide bond.
2. Exploration – A $200,000 area-wide or lease-specific $1,000,000 general lease surety for leases in a proposal EP or significant revision to an existing EP. Also, for the proposed assignment of leases with an EP. If you have already provided an applicable lease-specific general lease surety bond or an area-wide general lease bond, this bond is not required.
3. Development – A $500,000 area-wide lease surety bond or a lease-specific, $3,000,000 general lease surety for leases in a DPP/DOCD to an approved DPP/DOCD or for a proposal assignment of a lease with a DPP/DOCD.
You may be required to submit bonds issued by U.S. Department of the Treasury sureties or U.S. Treasury securities to satisfy the requirement to give general lease surety bond. These bonds can be negotiable for cash equivalent to the amount of the required bond at the time of submission. If the U.S. Government’s interests are protected in the same way as other historically accepted financial instruments, the authorized MMS officer can endorse multiple options to U.S. Treasury certified bonds and U.S. Treasury security.
Currently, GOMR will accept a bond from U.S. Treasury certified sureties or U.S. Treasury securities with a cash value equal to the amount required. The GOMR is open to accepting optional instruments that offer the same level of security. Historically, the GOMR considered alternatives such as letters of credit and production escrow accounts unacceptable.
