§ 556.906 Termination of the period of liability and cancellation of financial assurance. This section defines the terms and conditions under which BOEM will terminate the period of liability of, or cancel, financial assurance. Terminating the period of liability ends the period during which obligations continue to accrue, but does not relieve the financial assurance provider of the responsibility for obligations that accrued during the period of liability. Canceling a financial assurance instrument relieves the financial assurance provider of all liability. The liabilities that accrue during a period of liability include obligations that started to accrue prior to the beginning of the period of liability and had not been met, and obligations that begin accruing during the period of liability. ( a ) When you or your financial assurance provider request termination: ( 1 ) The Regional Director will terminate the period of liability under your financial assurance within 90 calendar days after BOEM receives the request; and
( 2 ) If you intend to continue operations, or have not met all decommissioning obligations, within 90 calendar days after BOEM receives your termination request, you must provide replacement financial assurance of an equivalent amount.
( b ) If you provide replacement financial assurance, the Regional Director will cancel your previous financial assurance and the previous financial assurance provider will not retain any liability, provided that: ( 1 ) The amount of the new financial assurance is equal to or greater than that of the financial assurance that was cancelled, or you provide an alternative form of financial assurance, and the Regional Director determines that the alternative form of financial assurance provides a level of security equal to or greater than that provided by the financial assurance that is proposed to be cancelled;
( 2 ) For financial assurance submitted under § 556.900(a), § 556.901(a) or (b), § 550.166(a) of this subchapter, or § 550.1011(a) of this subchapter, the new financial assurance provider agrees to assume all outstanding obligations that accrued during the period of liability that was terminated; and
( 3 ) For supplemental financial assurance submitted under § 556.901(d), § 550.166(b) of this subchapter, or § 550.1011(d) of this subchapter, the new financial assurance provider 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 financial assurance submitted under § 556.900(a), § 556.901(a) or (b), § 550.166(a) of this subchapter, or § 550.1011(a) of this subchapter. The Regional Director will notify the provider of the new financial assurance of the amount required.
( c ) This paragraph (c) applies if the period of liability is terminated, but the financial assurance is not replaced with financial assurance of an equivalent amount pursuant to paragraph (b) of this section. The financial assurance provider will continue to be responsible for obligations that accrued prior to the termination of the period of liability: ( 1 ) Until the obligations are satisfied; and
( 2 ) For additional periods of time in accordance with paragraph (d) of this section.
( d ) BOEM will cancel the financial assurance for your lease or grant, and the Regional Director will return any pledged financial assurance, as shown in the following table: For the following:
Your financial assurance will be reduced or cancelled, or your pledged financial assurance will be returned: (1) Financial assurance submitted under § 556.900(a), § 556.901(a) or (b), § 550.166(a) of this subchapter, or § 550.1011(a) of this subchapter.
(i) 7 years after the lease or grant expires or is terminated, 6 years after the Regional Director determines that you have completed all covered obligations, or at the conclusion of any appeals or litigation related to your covered obligations, whichever is the latest. The Regional Director will reduce the amount of your financial assurance or return a portion of your pledged financial assurance if the Regional Director determines that less than the full amount of the financial assurance or pledged financial assurance is required to cover any potential obligations.
(ii) [Reserved] (2) Financial assurance submitted under § 556.901(d), § 550.166(b) of this subchapter, or § 550.1011(d) of this subchapter.
(i) When the lease or grant expires or is terminated and the Regional Director determines you have met your covered obligations, unless the Regional Director:
(A) Determines that the future potential liability resulting from any undetected problem is greater than the amount of the financial assurance submitted under § 556.900(a), § 556.901(a) or (b), § 550.166(a) of this subchapter, or § 550.1011(a) of this subchapter; and
(B) Notifies the provider of financial assurance submitted under § 556.901(d), § 550.166(b) of this subchapter, or 550.1011(d) of this subchapter that the Regional Director will wait 7 years before cancelling all or a part of such financial assurance (or longer period as necessary to complete any appeals or judicial litigation related to your secured obligations).
(ii) At any time when:
(A) BOEM has determined, using the criteria set forth in § 556.901(d)(1), as applicable, that you no longer need to provide the supplemental financial assurance for your lease, RUE grant, or pipeline ROW grant.
(B) The operations for which the supplemental financial assurance was provided ceased prior to accrual of any decommissioning obligation; or,
(C) Cancellation of the financial assurance is appropriate because, under the regulations, BOEM determines such financial assurance never should have been required. (3) Third-party Guarantee under § 556.901(d), § 550.166(b) of this subchapter, or § 550.1011(d) of this subchapter.
(i) When the Regional Director determines you have met your obligations secured by the guarantee (or longer period as necessary to complete any appeals or judicial litigation related to your obligations secured by the guarantee).
(ii) [Reserved]
( e ) For all financial assurance, the Regional Director may reinstate your financial assurance as if no cancellation had occurred if: ( 1 ) A person makes a payment under the lease, RUE grant, or pipeline ROW grant, and the payment is rescinded or must be returned 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, RUE grant, or pipeline ROW grant and the representation was materially false when the financial assurance was cancelled.
[89 FR 39516, Apr. 24, 2024]