§ 556.905 Third-party guarantees. ( a ) The Regional Director may accept a third-party guarantee to satisfy a supplemental financial assurance demand made pursuant to § 556.901(d), § 550.166(b) of this subchapter, or § 550.1011(d) of this subchapter, if: ( 1 ) The guarantor meets the credit rating or proxy credit rating criterion set forth in § 556.901(d)(1) or (2), as applicable; and
( 2 ) The guarantor or guaranteed party submits a third-party guarantee agreement containing each of the provisions in paragraph (d) of this section.
( b ) Notwithstanding § 556.902(a)(3), a third-party guarantor may, as agreed to by BOEM at the time the third-party guarantee is provided, limit its cumulative obligations to a fixed dollar amount or limit its obligations so as to cover the performance of one or more specific lease obligations (with no fixed dollar amount).
( c ) If, during the life of your third-party guarantee, your guarantor no longer meets the criterion referred to in paragraph (a)(1) of this section, you must, within 72 hours of so learning: ( 1 ) Notify the Regional Director; and
( 2 ) Submit, and subsequently maintain, a surety bond or other financial assurance covering those obligations previously secured by the third-party guarantee.
( d ) 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 to bring the lease or grant into compliance with its terms or any applicable regulation, to the extent covered by the guarantee; or
( ii ) Be liable under the third-party guarantee agreement to provide, within 7 calendar days, sufficient funds for the Regional Director to complete such corrective action to the extent covered by the guarantee. Such payment does not result in the cancellation of the guarantee, but instead reduces the remaining value of the guarantee in an amount equal to the payment.
( 2 ) If your guarantor wishes to terminate the period of liability under its guarantee, it must: ( i ) Notify you and the Regional Director at least 90 calendar 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 liabilities that accrued or began accruing prior to the termination and responsible for all work and workmanship performed during the period of liability.
( 3 ) Before the termination of the period of liability of the third-party guarantee, you must provide acceptable replacement financial assurance.
( e ) 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 supplemental financial assurance and return of pledged financial assurance in § 556.906(b) and/or (d)(3).
( f ) The guarantor or guaranteed party must submit a third-party guarantee agreement that meets the following criteria: ( 1 ) The third-party guarantee agreement must be executed by your guarantor and all persons and parties bound by the agreement.
( 2 ) The third-party guarantee agreement must bind, jointly and severally, each person and party executing the agreement.
( 3 ) When your guarantor is a corporate entity, two corporate officers who are authorized to bind the corporation must sign the third-party guarantee agreement.
( g ) Your corporate guarantor and any other corporate entities bound by the third-party guarantee agreement must provide the Regional Director copies of: ( 1 ) The authorization of the signatory corporate officials to bind their respective corporations;
( 2 ) An affidavit certifying that the agreement is valid under all applicable laws; and
( 3 ) Each corporation's corporate authorization to enter into the third-party guarantee agreement.
( h ) If your third-party guarantor or another party bound by the third-party guarantee agreement is a partnership, joint venture, or syndicate, the third-party guarantee agreement must: ( 1 ) Bind each partner or party who has a beneficial interest in your guarantor; and
( 2 ) Provide that each member of the partnership, joint venture, or syndicate is jointly and severally liable for the obligations secured by the guarantee.
( i ) The third-party guarantee agreement must provide that, in the event forfeiture is called for under § 556.907, your guarantor will either: ( 1 ) Take corrective action to bring your lease or grant into compliance with its terms, and the regulations, to the extent covered by the guarantee; or
( 2 ) Provide sufficient funds within 7 calendar days to permit the Regional Director to complete such corrective action to the extent covered by the guarantee.
( j ) 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 not in compliance with any regulation applicable to such lease or grant, the guarantor: ( 1 ) Will not challenge the determination; and
( 2 ) Will remedy the default to the extent covered by the guarantee.
( k ) Each third-party guarantee agreement is deemed to contain all terms and conditions contained in paragraphs (d), (i), and (j) of this section, even if the guarantor has omitted these terms from the third-party guarantee agreement.
[89 FR 31596, Apr. 24, 2024]