The Bureau of Ocean Energy management (BOEM) has issued a notice to lessees and operators to clarify requirements for general financial assurance applicable to oil, gas, and sulfur leases, pipeline rights-of-way, and right-of-use-and-easement.
BOEM requires that entities engaging in activities on the Outer Continental Shelf (OCS) demonstrate sufficient financial wherewithal to meet all of their legal obligations.
According to the BOEM policy, lessees and operators are required to provide general financial assurance before BOEM will issue a new lease, grant, or a geological and geophysical (G&G) permit for the drilling of a deep stratigraphic test well; approve the assignment or transfer of an existing lease or grant interest; or approve an operational activity plan. The BOEM may require general financial assurance before the issuance of G&G permit for the drilling of a shallow test well.
BOEM will also review general financial assurance coverage after any corporate merger or consolidation, business conversion, and/or name change; and upon the submission or revision of exploration plans (EP), draft proposed programs (DPP), or development operation coordination documents (DOCD). The required general financial assurance must be in place before activities under a plan or relevant permit may commence.
The amount of general financial assurance coverage required will depend on the level of activity on a lease within three BOEM designations: pre-operational, exploration, and development.
General financial assurance may be provided in the form of bonds issued by a surety certified by the U.S. Department of the Treasury, or U.S. Treasury securities that are negotiable at the time of submission for an amount at least equal to the value of the required general financial assurance.
For more information, please view the full notice.