Leasing of Sulphur or Oil and Gas and Bonding Requirements in the Outer Continental Shelf

Derivation Table for 30 CFR Part 250—Oil and Gas and Sulphur Operations in the Outer Continental Shelf

Derivation Table for 30 CFR Part 256—Leasing of Sulphur or Oil and Gas and Bonding Requirements in the Outer Continental Shelf

Derivation Table for 30 CFR Part 260—Outer Continental shelf Oil and Gas Leasing, Subpart D

Dated: May 11, 2009.

Ned Farquhar,

Acting Assistant Secretary—Land and Minerals Management.

(c) Nature and quantities of material used in the plugs;

(d) If you cut and pull away any casing string, you must submit:

(1) A description of the methods used, including information on explosives used;

(2) Size and amount of casing removed; and

(3) Casing removed depth.

(e) Expenses of plugging and abandonment with supporting documentation.

3. Amend § 250.1729 by:

(A) Revising paragraphs (b) and (c), and

(B) Adding paragraph (d) to read as follows:

(b) A description of any mitigation measures you took;

(c) A statement signed by your authorized representative that certifies that the types and amount of explosives you used in removing the platform or other facility were consistent with those set forth in the approved removal application; and

(d) Expenses of removal of the platform or other approved decommissioning of the platform with supporting documentation.

3. Amend § 250.1743 by:

(A) Revising paragraphs (b)(6) and (b)(7), and

(B) Adding paragraph (b)(8) to read as follows:

(b) * * *

(6) The results of the survey, including a list of any debris removed or a statement from the trawling contractor that no objects were recovered;

(7) A post-trawling job plot or map showing the trawled area; and

(8) Expenses of site clearance with supporting documentation.

4. Revise part 256 to read as follows:

Subpart A—General Provisions

256.100

Information collection and proprietary information.

256.101

What are the consequences if I provide false information?

256.102

What does this part cover?

256.103

Definitions.

256.104

Service fees.

Subpart B—Oil and Gas 5-Year Leasing Program

256.200

What is the 5-year program?

256.201

Does MMS consult with interested parties while preparing the 5-year program?

256.202

How does MMS start the 5-year program preparation process?

256.203

What does MMS do before publishing a proposed program?

256.204

How do Governments and citizens comment on the proposed program?

256.205

What does MMS do before approving a final program or a significant revision?

256.206

Does MMS offer blocks in a sale that is not on the 5-year program schedule?

Subpart C—Preparing for a Lease Sale

256.300

What is a call for information?

256.301

What does MMS do with the information from the call?

256.302

What does MMS do if identified areas are within 3 miles of the seaward boundary of a coastal State?

256.303

What happens with an approved proposed notice of sale?

256.304

What role do affected States have?

256.305

What does MMS do with comments and recommendations received on the proposed notice?

256.306

How does MMS conduct a lease sale?

Subpart D—Issuance of a Lease Qualifications

256.400

Who may become a lessee?

256.401

How do I show that I am qualified to be a lessee?

256.402

Who may not become a lessee or acquire an interest in a lease?

256.403

What do the non-procurement debarment rules require that I do?

256.404

When must I notify MMS of mergers, name changes, or changes of business form?

How To Bid

256.410

How do I submit a bid?

Restrictions on Joint Bidding

256.411

Are there restrictions on bidding with others and do they affect my ability to bid?

256.412

When must I file a statement of production?

256.413

How do I determine my production for purposes of the restricted joint bidders list?

256.414

Are exemptions from the bidding restrictions possible?

How Does MMS Act on Bids?

256.416

What does MMS do with my bid?

256.417

What may I do if my bid is rejected?

Awarding the Lease

256.420

What happens if I am the successful high bidder?

256.421

When is my lease effective?

Subpart E—Financial Accountability and Risk Management General Bonds

256.500

What security must I provide when I obtain my lease?

256.501

Do my general bonding requirements change as activities progress on my lease?

256.502

What instruments other than a surety bond may I use to provide the required security?

256.503

What general requirements must my bond or other security meet?

256.504

Must my surety bond cover the payment obligations of my co-lessees and designated operators?

256.505

What happens if my co-lessees or designated operators exclude my payment obligations from their bond?

Supplemental Bonds

256.510

Can MMS require that I post a supplemental bond?

256.511

May I use a third-party guaranty to meet the supplemental bonding requirement?

256.512

May I use a lease, right-of-way (ROW), or right-of-use and easement (RUE)-specific decommissioning account to meet the supplemental bonding requirement?

Changes in Bonding or Security

256.520

What do I do if my bond lapses?

256.521

What happens if the value of my bond or other security is reduced?

256.522

What happens if my surety wants to terminate the period of liability of my bond?

256.523

What happens if my surety wants to cancel my bond?

256.524

Why might MMS call for forfeiture of my bond?

256.525

How will I know about this forfeiture?

256.526

What if correcting my default requires a change in the amount of my bond?

Subpart F—Maintaining a Lease Initial Period of a Lease

256.600

What is the initial period of my oil and gas lease?

256.601

How may I maintain my oil and gas lease beyond the initial period?

256.602

What is the initial period of my sulphur lease?

256.603.

How may I maintain my sulphur lease beyond the initial period?

Lease Obligations

256.605

What are my obligations as a record title holder?

256.606

What are my rights and obligations as an operating rights owner?

Transferring Interest in All or Part of a Lease

256.610

May I sell, exchange, assign, or otherwise transfer my lease?

256.611

May I assign all or part of my lease interest?

256.612

May I assign operating rights?

256.613

How do I seek approval of an assignment?

256.614

How do I transfer the interest of a deceased leaseholder?

256.615

What if I want to assign interests in more than one lease at the same time?

256.616

What is the effect of an assignment on an assignor's liability?

256.617

May I specify an effective date of the assignment?

256.618

What is the effect of an assignment on an assignee's liability?

256.619

As a restricted joint bidder, may I assign interest to another restricted joint bidder?

256.620

Are there any interests I may assign without MMS approval?

256.621

What reports must I submit for lease term pipelines when MMS approves a lease assignment?

Helium

256.630

What must a lessee do if MMS elects to extract helium from a lease?

Subpart G—Ending a Lease

256.700

How does a lease end?

256.701

May I end the lease myself?

256.702

Will MMS end my lease?

Subpart H—[Reserved] Subpart I—Bonus or Royalty Credits for Exchange of Certain Leases

256.900

Which leases may I exchange for a bonus or royalty credit?

256.901

How much bonus or royalty credit will MMS grant in exchange for a lease?

256.902

What must I do to obtain a bonus or royalty credit?

256.903

How is the bonus or royalty credit allocated among multiple lease owners?

256.904

How may I use the bonus or royalty credit?

256.905

How do I transfer a bonus or royalty credit to another person?

(a) Information collection (IC). (1) The Office of Management and Budget (OMB) approved the collection of information under 44 U.S.C. 3501 et seq., and assigned OMB Control Number 1010-xxxx. The title of this IC is 30 CFR part 256, Leasing of Sulphur or Oil and Gas and Bonding Requirements in the Outer Continental Shelf and 30 CFR part 260, Outer Continental Shelf Oil and Gas Leasing. The MMS collects the information to determine if applicants seeking to obtain a lease on the Outer Continental Shelf (OCS) are qualified to hold such a lease and can meet the monetary and non-monetary requirements of a lease. Responses to this collection are required to obtain or retain a benefit or are mandatory under 43 U.S.C. 1331 et seq. The MMS will protect proprietary information collected according to section 26 of the OCS Lands Act (OCSLA), 43 U.S.C. 1352, and this section.

(2) The Paperwork Reduction Act of 1995 requires us to inform the public that an agency may not conduct or sponsor, and you are not required to respond to, a collection of information unless it displays a currently valid OMB control number.

(3) Send comments regarding any aspect of the collection of information under this part, including suggestions for reducing the burden, to the IC Clearance Officer, Minerals Management Service, Mail Stop 5438, 1849 C Street, NW., Washington, DC 20240.

(b) Proprietary information. Specific indications of interest in an area by industry received in response to a Call for Information issued by the Secretary is proprietary information.

(1) The MMS will handle requests for indications of interest in an area and any other proprietary or privileged information you submit, according to the regulations in 43 CFR part 2.

(2) Upon request, MMS will provide relative summary indications of interest in areas to a Call for Information for a proposed sale.

Under 18 U.S.C. 1001, it is a crime to knowingly and willfully make any false, fictitious, or fraudulent statements or representations to any U.S. governmental entity regarding any matter within its jurisdiction.

These regulations establish the procedures the Secretary of the Interior and MMS will use to administer a leasing program for minerals on the submerged lands of the OCS, under the OCSLA, 43 U.S.C. 1331 et seq.

As used in this part, the term:

Act means the OCS Lands Act as amended (43 U.S.C. 1331 et seq.).

Affected State means, with respect to any program, plan, lease sale, or other activity, proposed, conducted, or approved pursuant to the provisions of the Act, any State:

(1) The laws of which are, pursuant to section 4(a)(2) of the Act, 43 U.S.C. 1333(a)(2), to be the law of the United States for the portion of the OCS on which such activity is, or is proposed to be, conducted;

(2) Which is, or is proposed to be, directly connected by transportation facilities to any artificial island or structure referred to in section 4(a)(1) of the Act, 43 U.S.C. 1333(a)(1);

(3) Which is receiving, or in accordance with the proposed activity will receive, oil for processing, refining, or transshipment which was extracted from the OCS and transported directly to such State by means of vessels or by a combination of means including vessels;

(4) Which is designated by the Secretary of the Interior as a State in which there is a substantial probability of significant impact on or damage to the coastal, marine, or human environment; or a State in which there will be significant changes in the social, governmental, or economic infrastructure, resulting from the exploration, development, and production of oil and gas anywhere on the OCS; or

(5) In which the Secretary of the Interior finds that because of such activity, there is, or would be, a significant risk of serious damage to the marine or coastal environment in the event of any oil spill, blowout, or release of oil or gas from vessels, pipelines, or other transshipment facilities due to factors such as prevailing winds and currents.

Bidding Unit means portions of two or more blocks combined for bidding purposes that may be bid upon as a single administrative unit and will become a single lease. The term tract, as defined in this section, may also be used.

Bonus or royalty credit means a legal instrument or other written documentation, or an entry in an account managed by the Secretary that a bidder or lessee may use in lieu of any other monetary payment for—

(1) A bonus due for a lease on the OCS; or

(2) A royalty due on oil or gas production from any lease located in the Gulf of Mexico.

Central planning area means the Central Gulf of Mexico Planning Area of the OCS, as designated in the document entitled, “Draft Proposed Program Outer Continental Shelf Oil and Gas Leasing Program 2007-2012,” dated February 2006.

Coastal environment means the physical, atmospheric, and biological components, conditions, and factors that interactively determine the state, condition, and quality of the terrestrial ecosystem from the shoreline inward to the boundaries of the coastal zone.

Coastal zone means the coastal waters (including the lands therein and thereunder) and the adjacent shorelands (including the water therein and thereunder), strongly influenced by each other and in proximity to the shorelines of several coastal States, and includes islands, transition and intertidal areas, salt marshes, wetlands, and beaches, whose zone extends seaward to the outer limit of the U.S. territorial sea and extends inland from the shore lines to the extent necessary to control shorelands; the uses of which have a direct and significant impact on the coastal waters, and the inward boundaries of which may be identified by several coastal States, under section 305(b)(1) of the Coastal Zone Management Act (CZMA) of 1972, 16 U.S.C. 1454(b)(1).

Coastline means the line of ordinary low water along that portion of the coast in direct contact with the open sea and the line marking the seaward limit of inland waters.

Desoto Canyon OPD means the official protraction diagram designated as Desoto Canyon which has a western edge located at the universal transverse mercator (UTM) X coordinate 1,346,400 in the North American Datum of 1927 (NAD 27).

Destin Dome OPD means the official protraction diagram designated as Destin Dome which has a western edge located at the universal transverse mercator (UTM) X coordinate 1,393,920 in the NAD 27.

Director means the Director of MMS of the U.S. Department of the Interior, or an official authorized to act on the Director's behalf.

Eastern planning area means the Eastern Gulf of Mexico Planning Area of the OCS, as designated in the document entitled “Draft Proposed Program Outer Continental Shelf Oil and Gas Leasing Program 2007-2012,” dated February 2006.

General bond means a bond with the amount fixed by regulations. The amount of the bond required is determined by the level of activity on the lease, right-of-way, or right-of-use and easement.

Human environment means the physical, social, and economic components, conditions, and factors that interactively determine the state, condition, and quality of living conditions, employment, and health of those affected, directly or indirectly, by activities occurring on the OCS.

Marine environment means the physical, atmospheric, and biological components, conditions, and factors which interactively determine the productivity, state, conditions, and quality of the marine ecosystem, including the waters of the high seas, the contiguous zone, transitional and intertidal areas, salt marshes, and wetlands within the coastal zone and on the OCS.

Mineral means oil, gas, and sulphur; it also includes sand, gravel, and salt used to facilitate the development and production of oil, gas, or sulphur.

OCS means the Outer Continental Shelf, as that term is defined in section 2(a) of the Act, 43 U.S.C. 1331(a).

Pensacola OPD means the official protraction diagram designated as Pensacola which has a western edge located at the universal transverse mercator (UTM) X coordinate 1,393,920 in the NAD 27.

Person means, in addition to a natural person, an association, a State, a political subdivision of a State, or a private, public, or municipal corporation.

Secretary means the Secretary of the Interior or a designated employee.

Supplemental bond means a bond required by MMS based upon potential lease decommissioning liabilities and/or other lease obligations that exceed the general bond.

Tract means an area of the OCS that is offered for sale as a single lease. The area may be a whole block, a portion of a block, or combined portions from multiple blocks. The term bidding unit, as defined previously, may also be used.

We, us, and our means the Minerals Management Service (MMS) of the Department of the Interior.

You means a lessee, the holder or owner of operating rights, a designated operator or agent of the lessee(s), a right of use and easement holder, State or Federal, and a pipeline right-of-way holder.

(a) The table in this paragraph shows the fees that you must pay to MMS for the services listed. The fees will be adjusted periodically according to the Implicit Price Deflator for Gross Domestic Product by publication of a document in the Federal Register. If a significant adjustment is needed to arrive at the new actual cost for any reason other than inflation, then a proposed rule containing the new fees will be published in the Federal Register for comment.

(b) Payment of the fees listed in paragraph (a) of this section must accompany the submission of the document for approval or filing, or be sent to an office identified by the Regional Director. Once a fee is paid, it is nonrefundable, even if your service request is withdrawn. If your request is returned to you as incomplete, you are not required to submit a new fee with the amended submission.

Section 18(a) of the Act, 43 U.S.C. 1344(a), requires the Secretary to prepare an oil and gas leasing program that consists of a 5-year schedule of proposed lease sales to best meet national energy needs, showing the size, timing, and location of leasing activity as precisely as possible. The MMS prepares the schedule to obtain the proper balance between the potential for environmental damage, the potential for discovery of oil and gas, and the potential for adverse impact on the coastal zone.

In preparing the 5-year program, MMS will consult with States and local governments, industry, and any other interested parties, primarily through public notice and comment procedures, as described in the sections that follow.

To begin preparation of the 5-year leasing program, MMS invites and considers nominations for any areas to be included or excluded from leasing, by doing the following:

(a) The MMS prepares and makes public, official protraction diagrams and leasing maps of OCS areas. Any area properly included on the official 5-year diagrams and maps may be offered for lease for any mineral not already leased.

(b) The MMS invites and considers any other suggestions and relevant information from Governors of affected States, local Governments, industry, Federal agencies, and other interested parties, through a publication of a request for information in the Federal Register. Local Governments must first submit their comments to their State Governor, before sending them to MMS.

(c) The MMS sends letters to the Governor of each affected State asking them to identify specific laws, goals, and policies that we should consider. We ask each State Governor as well as the Department of Commerce to identify the relationship between any oil and gas activity and the State coastal zone management program under sections 305 and 306 of the CZMA, 16 U.S.C. 1454 and 1455. The MMS will consider the coastal zone management program being developed or administered by an affected State under the CZMA.

(d) The MMS asks the Department of Energy for information on regional and national energy markets, OCS production goals, and transportation networks.

After considering the solicited comments and information described in § 256.202, we prepare a proposed leasing program.

(a) At least 60 days before publication of a proposed program, we send a draft of the proposed program to the Governor of each affected State, who may solicit comments from local Governments that may be affected by the proposed program.

(b) The MMS replies in writing to any comment from a Governor that is received at least 15 days before submission of the proposed program to Congress and its publication for comment in the Federal Register.

The MMS publishes the proposed program in the Federal Register for comment by the public. At the same time, we send the proposed program to the Governors of the affected States and to Congress and the Attorney General for review and comment.

(a) Governors are responsible for providing a copy of the proposed program to affected local Governments in their State. Local Governments may comment directly to us, but must also send their comments to the Governor of their State.

(b) All comments from any party are due within 90 days after publication in the Federal Register.

At least 60 days before approval, we submit a proposed final program or significant revision to the President and Congress. The MMS also submits any comments received and explains the reasons why we did not accept any specific recommendation of the Attorney General, or of a State or local Government.

(a) The MMS may offer blocks within a planning area included in the 5-year program in an otherwise unscheduled sale, if the block either:

(1) Received a bid that was rejected in an earlier sale;

(2) Had a high bid that was forfeited in a scheduled sale; or

(3) Is a development block subject to drainage.

(b) For an unscheduled sale, we may disclose the classification of the block as a development block. However, blocks in the Central or Western Gulf of Mexico (GOM) planning areas cannot be offered in a sale that is not on the schedule.

The MMS issues a call for information on areas proposed for leasing in the 5-year program, through publication in the Federal Register and other publications as desired. A call may include more than one proposed sale. We request comments on:

(a) Industry interest in the areas proposed for leasing;

(b) Geological conditions, including bottom hazards;

(c) Archaeological sites on the seabed or near shore;

(d) Multiple uses of the proposed leasing area including navigation, recreation, and fisheries;

(e) Other socioeconomic, biological, and environmental information; and

(f) Industry's nominations or indications of interest in specific blocks within areas proposed for leasing in the 5-year program for each sale.

In consultation with appropriate Federal agencies, we develop a proposal to recommend areas to the Secretary for further consideration for leasing and environmental analysis.

(a) The MMS considers all available environmental information, conflicts with other uses, resource potential, industry interest, and other relevant information, including comments received from State and local Governments and other interested parties in response to the call.

(b) The MMS evaluates the area identified for further consideration for the potential effects of leasing on the human, marine, and coastal environments, and to develop measures to mitigate adverse impacts for all the options to be analyzed. We inform the public of any additions or deletions from the area proposed for leasing in the 5-year program that result from the call process.

(c) The MMS prepares appropriate documentation under the National Environmental Policy Act (NEPA).

For areas proposed for leasing that are within 3 geographical miles seaward of the seaward boundary of a coastal State, as defined in and governed by section 1337(g)(2) of the Act, we provide the Governor of the coastal State, pursuant to the confidentiality requirements in part 251 of this chapter, the following:

(a) A schedule for leasing;

(b) All geographical, geological, and ecological characteristics of the areas proposed for leasing;

(c) An estimate of the oil and gas resources; and

(d) An identification of any field, geological structure, or trap that lies within 3 miles of the State's seaward boundary.

The MMS sends an approved proposed notice of sale to the Governors of affected States and publishes the notice of its availability in the Federal Register. The notice includes appropriate stipulations and conditions to mitigate potential adverse impacts on the environment, the Director's findings, and all comments and recommendations received on the proposal.

(a) Within 60 days after receiving the proposed notice of sale, Governors of affected States may submit comments and recommendations to MMS regarding the size, timing, and location of the proposed sale. Local Governments may comment to us directly, but must also send their comments to the Governor of their State.

(b) The MMS will provide a consistency determination to affected States that will indicate whether the proposed sale is consistent, to the maximum extent practicable, with the enforceable policies of the applicable coastal zone management programs.

The MMS considers all comments and recommendations received in response to the proposed notice of sale. We accept comments and recommendations from States and local Governments if we determine, after providing opportunity for consultation, that they provide for a reasonable balance between the national interest and the well being of the citizens of the State or locality. We send to each Governor written reasons for rejecting or adopting alternatives on how to address that Governor's recommendations.

(a) The MMS publishes a final notice of sale in the Federal Register and in other publications, as appropriate, at least 30 days before the date of the sale. The notice:

(1) States the place, time, and method for filing bids and the place, date, and hour for opening bids; and

(2) Contains or references a description of the area offered for lease and any stipulations, terms, and conditions of the sale.

(b) Tracts are offered for lease by competitive sealed bid in accordance with the terms and conditions in the final notice of sale and applicable laws and regulations. Tracts comprise an area not exceeding 5,760 acres, unless we find that a larger area is necessary for reasonable economic production.

You may become a lessee if you are:

(a) A citizen or national of the U.S.;

(b) An alien lawfully admitted for permanent residence in the U.S., as defined in 8 U.S.C. 1101(a)(20);

(c) A private, public, or municipal corporation organized under the laws of any State of the U.S., the District of Columbia, or any territory or insular possession subject to U.S. jurisdiction;

(d) An association of such citizens, nationals, resident aliens, or corporations;

(e) A State; or

(f) A political subdivision of States.

(a) Provide your MMS qualification number if you have qualified with us, in which case you will not need to provide the information in paragraph (b) or (c) of this section, unless we require it.

(b) An individual must submit a written statement of citizenship status attesting to U.S. citizenship. It need not be notarized nor give the age of the individual. A resident alien must submit an original or a photocopy of the Immigration and Naturalization Service form evidencing legal status of the resident alien.

(c) A corporation, association, or other entity must submit evidence (refer to the table in paragraph (d) of this section) acceptable to MMS that:

(1) It is qualified to hold mineral leases under this subpart;

(2) It is authorized to conduct business under the laws of its State;

(3) It is authorized to hold mineral leases in the OCS under the operating rules of its business; and

(4) The persons holding the titles listed are authorized to bind the corporation or association when conducting business with us.

(d) Acceptable evidence under paragraph (c) of this section includes, but is not limited to:

You may not become a lessee or acquire an interest in a lease if:

(a) You or your principals are excluded or disqualified from participating in transactions covered by the Federal non-procurement debarment and suspension system (2 CFR parts 180 and 1400), unless MMS explicitly has approved an exception for this transaction;

(b) You or your principals fail to meet or exercise due diligence under section 8(d) of the Act, 43 U.S.C. 1337(d) on any other OCS lease; or

(c) The MMS determines after notice and opportunity for a hearing under 30 CFR part 290, subpart A, that your operating performance is unacceptable under 30 CFR part 250 on any other OCS lease.

You must comply with the Department of the Interior's non-procurement debarment regulations at 2 CFR parts 180 and 1400.

(a) You must notify MMS if you know that you or your principals are excluded, disqualified, or convicted of crime as described in 2 CFR part 180 subpart I. You must make this notification before you sign a lease, assignment of record title interest, or transfer (assignment) of operating rights interest; or become a lease or unit operator. This paragraph does not apply if you have previously provided a statement disclosing this information, and we have received an exception from the Department of the Interior as described in 2 CFR 180.135.

(b) If you wish to enter into a covered transaction with another person at the next lower tier, you must first:

(1) Verify that the person is not excluded or disqualified under the requirements in 2 CFR part 180; and

(2) Require the person to:

(i) Comply with this subpart; and

(ii) Include the obligation to comply with this subpart in their contracts and other transactions.

(c) After you enter into a covered transaction, you must immediately notify MMS in writing if you learn that:

(1) You failed to disclose information earlier; or

(2) Due to changed circumstances, you or your principals now meet any of the criteria in 2 CFR 180.800.

You must immediately notify us of any merger, name change, or change of business form. The latest you may make this notification is 1 year after the earliest effective date or the date of filing the change or action with the Secretary of the State or other authorized official in the State of original registry.

How to Bid

(a) You must submit a separate sealed bid for each tract or bidding unit to the address provided and by the time specified in the notice of sale. You may not bid on less than an entire tract or bidding unit.

(b) You must include a deposit to cover all bids submitted. The notice of sale specifies the amount and method of payment.

(c) You may not submit a bid on an OCS lease if, after notice and hearing under 30 CFR part 290, the Secretary finds that you are not meeting the diligence requirements on any other OCS lease.

(d) If your high bid is rejected, then the decision of the authorized officer on bids must be the final decision of the Department, subject only to reconsideration by the Secretary, upon your written request as set out in § 256.417.

Restrictions on Joint Bidding

The Energy Policy and Conservation Act of 1975, 42 U.S.C. 6213, prohibits joint bidding by major oil and gas producers under the following circumstances:

(a) The MMS publishes a restricted joint bidders list twice yearly in the Federal Register. Persons appearing on this list are limited in their ability to submit joint bids (see paragraph (c) of this section). The list:

(1) Consists of the persons chargeable with an average worldwide daily production in excess of 1.6 million barrels of crude oil, liquefied petroleum products, or the Btu equivalent in natural gas, for the prior production period; and

(2) Is based upon the statement of production that you must file as required by § 256.412.

(b) If we place you on the restricted joint bidders list, we will send you a copy of the order placing you on the list. You may appeal this order to the Interior Board of Land Appeals under 30 CFR part 290, subpart A.

(c) If you are listed in the Federal Register in any group of restricted bidders, you may not bid:

(1) Jointly with another person in any other group of restricted bidders for the applicable 6-month bidding period; or

(2) Separately during the 6-month bidding period if you have an agreement with another restricted bidder that would result in joint ownership in an OCS lease.

(d) As a bidder, you are prohibited from unlawful combination with, or intimidation of, bidders under 18 U.S.C. 1860.

(a) You must file a statement of production if you had an average worldwide daily production of over 1.6 million barrels for the prior production period (determine your production using the method in § 256.413). Your statement must specify that you were chargeable with an average daily production in excess of 1.6 million barrels for the prior production period.

(b) The prior production periods are as follows:

(c) You must file the statement of production by the following deadlines:

(d) If you file a statement of production, MMS may require you to submit a detailed report of production.

(1) The detailed report must list crude oil, liquefied petroleum products, or Btu equivalent in natural gas chargeable for the prior production period.

(2) You must submit this report within 30 days after receiving the MMS request.

(3) The MMS may inspect and copy such documents, records of production, analyses, and other material to verify the accuracy of any earlier statements of production.

(e) If you submit a statement of production that misrepresents your chargeable production, we may cancel any of your leases that were awarded in reliance upon such statement.

(a) To determine the amount of production chargeable to you, add together:

(1) Your average daily production in barrels of crude oil, liquefied petroleum products, or the Btu equivalent in natural gas worldwide; and

(2) Your proportionate share of the average daily production owned by any entity which has an interest in you as the reporting person, and in which you have an interest.

(b) For the purpose of this section, average daily production includes production owned by:

(1) You;

(2) Every subsidiary of yours;

(3) Every person of which you are a subsidiary; and

(4) Every subsidiary of any person of which you are a subsidiary.

(c) For purposes of this section, interest means at least 5 percent ownership or control of you or the reporting person and includes any interest:

(1) From ownership of securities or other evidence of ownership; or

(2) By participation in any contract, agreement, or understanding regarding control of the person or their production of crude oil, liquefied petroleum products, or the Btu equivalent in natural gas.

(d) For purposes of this section, entity means a person that meets both of the following criteria:

(1) The entity is, in addition to a natural person, a corporation, partnership, association, joint-stock company, trust, fund, or any receiver, trustee in bankruptcy, or similar official acting for such a company; and

(2) Fifty (50) percent or more of the entity's stock or other interest having power to vote for the election of a controlling body, such as directors or trustees, is directly or indirectly owned, controlled, or held with the power to vote by another person.

The MMS may exempt you from the bidding restrictions if, after an opportunity for a hearing, we find that extremely high costs in an area would preclude exploration and development without an exemption.

How Does MMS Act on Bids?

(a) The MMS opens the sealed bids at the place, date, and hour specified in the notice of sale for the sole purpose of publicly announcing and recording the bids. We do not accept or reject any bids at that time.

(b) The MMS accepts or rejects all bids within 90 days, although we may extend that time if necessary. We reserve the right to reject any and all bids, regardless of the amount offered. If your bid is rejected, we will refund any money deposited with your bid plus any interest accrued.

(c) If the highest bids are tied, MMS will notify the tied bidders. Within 15 days after notification, the tied bidders may agree to accept the lease jointly, if not otherwise prohibited from bidding together. The tied bidders must notify MMS of their decision and submit a copy of their agreement to accept the lease jointly. Or, they may decide between themselves which bidder(s) will become the lessee, and notify MMS of their decision. If there is no such agreement, we will award the lease to the high bidder selected by lot.

(d) The MMS offers the Attorney General the opportunity to review the results of the sale before we accept the bids and issue the leases.

You may ask MMS in writing for reconsideration within 15 days of bid rejection. You will receive a written response either affirming or reversing the rejection.

Awarding the Lease

If you are the successful bidder, you will receive the appropriate number of copies of the lease on a form approved by MMS.

(a) When you receive the lease copies, within 11-business days after receipt, you must:

(1) Execute the lease;

(2) Pay the first year's rental;

(3) Pay the balance of the bonus, unless deferred under (b) below; and

(4) File a bond under subpart E of this part.

(b) If provided for in the notice of sale, we may defer any part of the bonus payment for up to 5 years after the sale according to a schedule included in the notice of sale. You must provide a bond acceptable to us for payment of a deferred bonus.

(c) If you do not execute and return the lease within 11 business days after receipt, or if you otherwise fail to comply with applicable regulations, your deposit will be forfeited and MMS may take appropriate action to collect the full amount bid, if so provided for in the notice of sale. However, we will return any deposit with interest if the tract is withdrawn from leasing before you execute the lease.

(d) If you use an agent to execute the lease, you must include evidence with the executed copies of the lease form that you authorized the agent to act for you. After you comply with all requirements in this section, and after we have executed the lease, we will send you an executed copy.

Your lease is effective on the first day of the month following the date that MMS executes the lease. You may request in writing, before we execute the lease, that your lease be effective as of the first day of the month in which we execute it.

(a) Before MMS will issue your lease or approve an assignment of an existing lease, you must provide one of the following general bonds on Form MMS-2028:

(1) A lease-specific $50,000 general bond that guarantees compliance with all terms and conditions of the lease; or

(2) An area-wide $300,000 general bond that guarantees compliance with all terms and conditions of all your leases in the area where your lease is located; or

(3) A lease-specific or area-wide general bond as required for exploration or development and production activities as specified in § 256.501.

(b) For the purpose of an area-wide bond, the areas are each planning area as administered by MMS.

(c) You have met the bonding requirement under this section if your designated lease operator provides a lease-specific or area-wide general bond that guarantees compliance with all terms and conditions of the lease, as required under § 256.501.

(d) The MMS may adjust the dollar amount of the general bonds described in this section by using the Implicit Price Deflator for Gross Domestic Product or a substantially equivalent index.

The table in this paragraph contains the general bond requirements for each stage of activity on your lease. Each bond must guarantee compliance with all terms and conditions of the lease. You may satisfy these bond requirements with a new bond or by increasing the amount of your existing bonds required under § 256.500.

You may pledge U.S. Department of Treasury securities or other types of security instruments if MMS determines that such security protects us to the same extent as the required bond. If you use a Treasury security:

(a) You must post 115 percent of your bonding amount.

(b) You must daily monitor the collateral value of your security. If the collateral value of your security, as determined in accordance with the 31 CFR part 225 Collateral Margins Table (which can be found at http://www.treasurydirect.gov ) falls below the required level of coverage, you must within 10-business days, pledge additional security to provide the required amount.

(c) You must include with your pledge, authority for us to sell the security and use the proceeds if we determine that you have failed to comply with any of the terms and conditions of your lease, right-of-way (ROW), or right-of-use and easement (RUE), any subsequent approval or authorization, or applicable regulations.

(a) Any bond or other security that you provide must:

(1) Be payable to MMS upon demand;

(2) Guarantee compliance under the lease and regulations of all of your non-monetary obligations and those of all lessees, operating rights owners, and operators on the lease; and

(3) Guarantee all of your monetary obligations.

(b) All surety bonds and Treasury notes must be on an official form approved by MMS. You may submit a bond on an approved form that you have reproduced. If the document you submit either advertently or inadvertently omits any terms and conditions that are included on the approved form, your bond is deemed to contain the omitted terms and conditions of the official form.

(c) The MMS reserves the right to require electronic filing with a 90-day notice published in the Federal Register.

(d) Surety bonds must be issued by a surety that the Treasury certifies as acceptable to provide bonds to Federal agencies by listing in the current Treasury Circular 570, as required by 31 CFR 223.16. You may obtain a copy of Circular 570 from the Treasury Web site at http://www.fms.treas.gov.

(e) You and a certified surety must execute your bond. When the surety is a corporation, an authorized corporate officer must sign the bond and attest to it over the corporate seal, and include the power of attorney authorizing said officer to bind the security.

(f) You may not terminate the period of liability of, or cancel your bond, except as provided in this subpart. Bonds must continue in full force and effect even though an event has occurred that could diminish, terminate, or cancel a surety's obligation under State law.

You may exclude from coverage the payment obligations of a co-lessee or designated operator from your bond by giving MMS a written statement specifying which co-lessees and designated operators are to be excluded. The exclusion of payment obligations from coverage does not exclude the non-payment obligations of the lease.

You must post a bond at the level specified in this subpart for the level of activity on the lease. We may require a lesser amount if you can demonstrate that your payment obligations are less than the bond amounts required.

Supplemental Bonds

(a) To ensure coverage of potential lease, ROW, or RUE decommissioning liabilities and/or other obligations, MMS may determine that you need to provide a supplemental bond as security in addition to the requirements under §§ 256.500 and 256.501 for general bonds. The Regional Director may require you to demonstrate the sufficiency of your bond to accomplish your lease obligations. You must submit supplemental bonds on Form MMS-2028A.

(b) A requirement to post a supplemental bond(s) will be based on the Regional Director's determination of the cost to meet all accrued and anticipated obligations of your lease(s), ROW(s), or RUE(s), including those arising from operating rights interests, and an evaluation of the probability that you will be able to carry out present and future financial obligations as demonstrated by:

(1) Financial capacity substantially in excess of existing and anticipated lease and other obligations, as evidenced by audited financial statements (including auditor's certificate, balance sheet, and profit and loss sheet);

(2) Projected financial strength significantly in excess of existing and future lease and other obligations based on the estimated value of your existing OCS lease production;

(3) Business stability based on 5 years of continuous operation and production of oil and gas or sulphur in the OCS or onshore;

(4) Reliability in meeting obligations based on credit ratings or trade references, including names and addresses of other lessees, drilling contractors, and suppliers with whom you have dealt; and

(5) A record of compliance with laws, regulations, and lease, ROW, or RUE terms.

(c) The MMS determines the amount of supplemental bond required to guarantee compliance. The Regional Director performs a case-specific analysis and considers such items as the potential underpayment of royalties; the cumulative obligations to abandon wells and remove platforms and facilities; and the requirement to clear the seafloor of obstructions.

(d) If your cumulative potential obligations and liabilities increase or decrease, MMS may adjust the amount of the supplemental bond required.

(1) The MMS will notify you of any proposed adjustment to your bond amount and give you an opportunity to comment.

(2) If you request a reduction, you must submit evidence to the Regional Director that the projected amount of royalties due the Government over the next 12 months, any past due royalties, other payment obligations, and the estimated costs of your required decommissioning and cleanup, are less than the required bond amount. If MMS agrees, we will reduce the amount of the supplemental bond required.

(e) Your supplemental bond must meet the requirements specified for general bonds under § 256.503. You may utilize U.S. Department of the Treasury securities or other types of security instruments that MMS determines protect us to the same extent as the required bond. If you use a Treasury security, you must meet the requirements specified for general bonds in § 256.502.

(a) You may use a third-party guaranty if the guarantor meets the criteria prescribed in paragraph (b) of this section and submits an agreement meeting the criteria prescribed in paragraph (c) of this section. The agreement must guarantee compliance with the obligations of all lessees, operating rights owners, and operators on the lease(s), ROW(s), and RUE(s).

(b) The MMS will consider the following factors in deciding whether to accept an agreement:

(1) The length of time that your guarantor has been in continuous operation as a business entity. You may exclude periods of interruption that are beyond the guarantor's control by demonstrating, to the satisfaction of the Regional Director, that the interruptions do not affect the likelihood of your guarantor remaining in business during exploration, development, production, and decommissioning operations on your lease(s), ROW(s), and RUE(s) covered by the indemnity agreement.

(2) Financial information available in the public record or submitted by your guarantor in sufficient detail to show us that your guarantor meets the criteria stated in paragraph (b)(4) of this section. Such detail includes:

(i) The current rating for its most recent bond issuance by a generally recognized bond rating service such as Moody's Investor Service or Standard and Poor's Corporation;

(ii) Your guarantor's net worth, taking into account liabilities for compliance with all terms and conditions of your lease, regulations, and other guarantees;

(iii) Your guarantor's ratio of current assets to current liabilities, taking into account liabilities for compliance with all terms and conditions of your lease, regulations, and other guarantees; and

(iv) Your guarantor's unencumbered domestic fixed assets.

(3) If the information in paragraph (b)(2) of this section is not publicly available, your guarantor must submit the information in the following table, to be updated annually within 90 days of the end of the fiscal year (FY) or as otherwise prescribed.

(4) Your guarantor's total outstanding and proposed guarantees must not exceed 25 percent of its unencumbered domestic net worth.

(c) Your guarantor must submit an agreement executed by the guarantor and all parties bound by the agreement. All parties are bound jointly and severally and must meet the qualifications set forth in §§ 256.400 and 256.401.

(1) When any party is a corporation, two corporate officers authorized to execute the indemnity agreement on behalf of the corporation must sign the agreement.

(2) When any party is a partnership, joint venture, or syndicate, the indemnity agreement must bind each party who has a beneficial interest in your guarantor and provide that, upon MMS demand under your guaranty, each party is jointly and severally liable for compliance with all terms and conditions of your lease(s), ROW(s), and RUE(s) covered by the agreement.

(3) When forfeiture of the guaranty is called for, the agreement must provide that your guarantor will either bring your lease(s), ROW(s), and RUE(s) into compliance or provide, within 7-calendar days, sufficient funds to permit MMS to complete corrective action.

(4) The guaranty agreement must contain a confession of judgment, providing that, if we determine that you are, or your operator or operating rights owner is, in default, the guarantor must not challenge the determination and must remedy the default.

(5) If you fail, or your operator or operating rights owner fails, to comply with any law, term, or regulation, your guarantor must either take corrective action or provide, within 7-calendar days or other agreed upon time period, sufficient funds for MMS to complete corrective action. Such compliance must not reduce your guarantor's liability.

(6) If your guarantor wants to terminate the period of liability, your guarantor must notify you and us at least 90 days before the proposed termination date, obtain our approval for termination of all or a specified portion of the guarantee for liabilities arising after that date, and remain liable for all your work performed during the period the agreement is in effect.

(7) Each guaranty submitted pursuant to this section is deemed to contain all the above terms, even if they are not actually in the agreement.

(d) If your guaranty is to be terminated, you must provide an acceptable replacement in the form of a bond or other security before the termination.

(a) The MMS may authorize you to establish a lease, ROW, or RUE-specific decommissioning account in a Federally-insured institution in lieu of a supplemental bond. The funds must not be withdrawn from the account without written approval by MMS.

(1) The funds must be payable to MMS and pledged to meet your decommissioning obligations.

(2) You must fully fund the account to cover all costs of decommissioning, including site clearance within the time we prescribe. The MMS will estimate the cost of decommissioning and site clearance.

(b) Any interest paid on the account will be treated as account funds unless MMS authorizes in writing that any interest be paid to the depositor.

(c) The Regional Director may allow you to pledge Treasury securities payable to MMS on demand to satisfy your obligation to make payments into the account. Acceptable Treasury securities and their collateral value are defined in 31 CFR part 380.

(d) The MMS may require you to create an overriding royalty or production payment obligation for the benefit of the account. The obligation may be associated with production from another lease.

Changes in Bonding or Security

(a) If your surety is decertified by the Treasury, becomes bankrupt or insolvent, or if your surety's charter or license is suspended or revoked, you must provide alternate security immediately. You must promptly inform MMS about the bond lapse and provide a new bond to us in the amount required under this subpart.

(b) You and your surety must notify MMS within 72 hours after you learn of any action filed alleging that you are, or your surety or guarantor is, insolvent or bankrupt, or has been decertified by the U.S. Treasury.

If the value of your bond or other security is reduced because of a default or any other reason, you must provide additional bond coverage sufficient to meet the requirements of this subpart within 45 days; however, MMS may specify a shorter period of time.

(a) Terminating the period of liability of a bond ends the period during which obligations continue to accrue, but does not relieve the surety of the responsibility for obligations and liabilities that accrued during the period of liability and before the date on which MMS terminates the period of liability under paragraph (b) of this section. The liabilities that accrue during a period of liability include:

(1) Obligations that started to accrue prior to the beginning of the period of liability and had not been met, and

(2) Obligations that began accruing during the period of liability.

(b) Your surety must submit its request to MMS to terminate the period of liability under its bond and notify you of that request. We will terminate that period of liability within 90 days after we receive the request. If you intend to continue operations, or have not met all end-of-lease obligations, we will require you to provide a replacement bond of equivalent value.

(c) If the period of liability is terminated but the bond is not cancelled under § 256.523, the surety that provided the bond must continue to be liable for accrued obligations until all obligations are satisfied.

(a) The MMS will cancel or release a bond and relieve the surety from accrued obligations only if:

(1) The MMS determines that there are no outstanding obligations; or

(2) You furnish a replacement bond or an alternative form of security in an amount equal to or greater than the bond to be cancelled to cover the terminated period of liability and:

(i) Before MMS will cancel a general bond prescribed under §§ 256.500 or 256.501 on the basis of a replacement bond, the surety issuing the new bond must expressly agree to assume all outstanding liabilities that accrued during the period of liability that was terminated.

(ii) Before MMS will cancel a supplemental bond on the basis of a replacement bond, the surety issuing the new bond must agree to assume that portion of the outstanding liabilities that accrued during the terminated period of liability that exceeds the coverage of the bond prescribed under §§ 256.500 or 256.501 and of which you were notified.

(b) When your lease ends, your surety(s) remain(s) responsible and MMS will retain any pledged security as shown in the table below:

(a) The MMS may call for forfeiture of all or part of the bond or pledged security or performance by your guarantor if:

(1) After notice and demand for performance by MMS, you refuse or fail, within the timeframe we prescribe, to comply with any term or condition of your lease; or

(2) You default on one of the conditions under which we accepted your bond.

(b) The MMS may pursue forfeiture without first making demands for performance against any other lessee, operating rights owner, or other person approved to perform lease obligations.

(a) The MMS will notify you and your surety or guarantor in writing of the call for forfeiture and provide the reasons for the forfeiture and the amount to be forfeited. We will base the amount upon our estimate of the total cost of corrective action to bring your lease into compliance.

(b) The MMS would advise you, your guarantor, and any surety that you may avoid forfeiture if, within 5 business days:

(1) You, or your guarantor, agree(s) to and demonstrate(s) that you will bring your lease into compliance within the timeframe we prescribe; or

(2) Your surety agrees to, and demonstrates that, it will bring your lease into compliance within the timeframe we prescribe, even if the cost of compliance exceeds the face amount of the bond.

(a) If MMS demands forfeiture of your bond, we will collect the forfeited amount and use the funds to bring your lease(s) into compliance and correct any default.

(b) If the amount collected under your bond is insufficient to pay the full cost of corrective action, MMS may take or direct action to obtain full compliance and recover all costs in excess of the forfeited bond from you, any co-lessee, operating rights owner, or responsible guarantor.

(c) If the amount collected under your bond exceeds the full cost of corrective action to bring your lease(s) into compliance, MMS will return the excess funds to the party from whom they were collected.

(a) The initial period of your oil and gas lease may range from 5 to 10 years. The MMS will specify the initial period in the notice of sale and in the lease instrument.

(b) For leases in water depths of 400 to 799 meters, unless otherwise provided for in the notice of sale, the initial period will be 8 years but you must begin an exploratory well within the first 5 years. Your lease will be subject to administrative cancellation after 5 years if you have not begun an exploratory well.

(a) You may maintain your oil and gas lease beyond the initial period as long as you are producing oil or gas in paying quantities, you are granted a suspension, or you are conducting approved drilling or well reworking operations, in accordance with 30 CFR part 250.

(b) You may maintain your oil and gas lease by producing from, or drilling or reworking approved directional wells under your lease that originates from the surface of the seabed adjacent to or adjoining your lease.

(c) You may maintain your oil and gas lease if your lease is being drained by a well on another lease and you are paying compensatory royalty.

(d) You may maintain your oil and gas lease if the lease, or part of the lease, is part of an MMS-approved unit agreement, and there either is production allocated to your lease, a suspension of unit operations, or the unit is conducting approved drilling or well-reworking operations in accordance with 30 CFR part 250.

Your sulphur lease will have an initial period of not more than 10 years. The MMS will announce the initial period prior to the lease sale. Your lease will be subject to administrative cancellation after 5 years if you have not begun an exploratory well.

You may maintain your sulphur lease after the initial period as long as you are producing sulphur in paying quantities; granted a suspension; or conducting drilling, reworking, plant construction, or other operations necessary to the production of sulphur.

Lease Obligations

(a) As a record title owner, you are responsible for all performance on the lease, including paying any rent and royalty due. If there is more than one record title or operating rights owner, each of you are jointly and severally liable for non-monetary lease obligations, including the obligation to protect the lease from drainage and to pay compensatory royalty that may be owed. You are also jointly and severally liable for plugging and abandonment obligations that accrue while you hold record title interest. For example, this means that if you own 50 percent record title interest, MMS may hold you responsible for 100 percent of the non-monetary obligations, if your joint owner(s) default(s).

(b) For monetary obligations, such as paying rent and royalty, your obligation is proportionate to your interest. For example, if you own 25 percent of the record title interest, you are liable for only 25 percent of the rent or royalty on production. As a record title owner, you also are secondarily liable for monetary obligations of any operating rights holders on the lease.

(a) As an operating rights owner, you have the right to enter the leased area to conduct drilling and related operations including production according to the lease terms and applicable regulations.

(b) You have the right to authorize another party to conduct operations on the lease.

(c) You are jointly and severally liable with other record title owners and operating rights holders in the lease for all non-monetary lease obligations pertaining to that portion of the lease subject to your operating rights.

(d) You are liable for monetary obligations pertaining to that portion of the lease subject to your operating rights with other operating rights holders in proportion to your share of such operating rights.

Transferring Interest in All or Part of a Lease

No lease issued under this part may be sold, exchanged, assigned, or otherwise transferred except with the approval of MMS.

You may assign all or part of your lease interest subject to MMS approval. Each instrument that creates or transfers an interest must describe the entire tract or describe, by officially designated subdivisions, the interest you propose to create or transfer. Officially designated subdivisions, or aliquot parts, are a half (1/2), a quarter (1/4), a quarter of a quarter (1/4 1/4), and a quarter of a quarter of a quarter (1/4 1/4 1/4). We may disapprove an assignment when the assignor or assignee has outstanding or unsatisfied obligations under this chapter.

You may assign your operating rights in all or part of your lease subject to MMS approval. However, you may create subleases of only two depth levels per aliquot part. Operating rights must be described by officially designated subdivisions, or aliquot parts, and limited to specific depths within those subdivisions.

(a) You must request approval of each assignment and submit to MMS two originals of each instrument that creates or transfers ownership of record title or operating rights within 90 days after the last party executes the transfer agreement. You must pay the service fee listed in § 256.104 with your request.

(1) All assignments must be on the appropriate form approved by MMS.

(i) Form MMS-150 entitled, Assignment of Record Title Interest in Federal OCS Oil and Gas Lease.

(ii) Form MMS-151 entitled, Assignment of Operating Rights Interest in Federal OCS Oil and Gas Lease.

(2) When an assignment is made of 100 percent of the record title interest in an officially designated subdivision of your lease, that assignment creates a new lease. Your assignee becomes the leaseholder of the newly segregated lease that is subject to all the terms and conditions of your original lease, including the requirement to furnish a bond in the amount required in subpart E of this part.

(b) Before MMS approves an assignment, we will consult with and consider the views of the Attorney General.

(a) If any of the leaseholders are deceased, you as heir or devisee must provide evidence as to who are the lawful successors in interest.

(b) You as heir or devisee must submit a certified copy of an appropriate court order or decree; or if no court action is necessary, a certified copy of the will or the statements of two disinterested parties with knowledge of the facts.

(c) You as heir or devisee must submit statements that you are the person named as successor in interest along with evidence of your qualifications to hold a lease under subpart D of this part.

(d) If you do not qualify to hold a lease under subpart D of this part, you will be recognized as the successor in interest, but must divest your interest in the lease within 2 years.

To assign interests in more than one lease at the same time, you must file a separate form and two originals of the instrument that creates or transfers ownership for each lease assigned. However, if all leases are being transferred to the same entity, you need submit only one application letter of request for approval.

As assignor, you are liable for all obligations, monetary and non-monetary, that accrued under your lease before MMS approves your assignment. Our approval of the assignment does not relieve you of these accrued obligations if your assignee, or any subsequent assignee, fails to perform. In addition, MMS may require you to bring the lease into compliance to the extent the obligation accrued before approval of your assignment, if your assignee or any subsequent assignee, fails to perform any obligation under the lease. You remain liable for all obligations if you create a sublease of operating rights only.

The MMS will record the assignment as effective on the date you specify. If you do not specify a date, the assignment is effective on the first day of the month following your request to assign. Regardless of the effective date, the date that we approve the assignment determines when the assignor's liabilities cease to accrue.

As assignee, you and any subsequent assignees are liable for all obligations that have accrued or will accrue after MMS approves the assignment. As assignee, you must comply with all the terms and conditions of the lease and regulations issued under the Act, remedy all existing environmental and operational problems on the lease, properly abandon all wells, and reclaim the site as required under 30 CFR part 250.

If you are a restricted joint bidder, you may assign all or part of your interest in a lease to another restricted joint bidder. However, if you want to assign less than your entire interest to another restricted joint bidder, you must submit to MMS a copy of any agreements relating to your acquisition of the lease or interest. The MMS may ask the Attorney General to review your request.

(a) You may create or transfer carried working interests, overriding royalty interests, or payments out of production without MMS approval. However, you must send us a copy of each instrument creating or transferring such interests for record purposes. For each lease affected, you must pay the service fee listed in § 256.104 with your documents submitted for record.

(b) If you submit documents for record purposes that are not required by these regulations, for each lease affected, you must pay the service fee listed in § 256.104 with your document submissions. The MMS may decline to accept for filing such documents and the service fee will not be refunded.

Within 30 calendar days after MMS approves an assignment of a lease, or approves a new designation of operator for a lease under § 250.143 or § 250.144, you (the new lessee or designated lease operator) must submit a report to the Regional Supervisor that:

(a) Lists every lease term pipeline (see definition at § 250.105), including decommissioned pipelines on the lease; and

(b) Indicates which pipelines remained as lease term pipelines after the lease assignment was approved by MMS.

Helium

(a) The MMS reserves the ownership of, and the right to extract, helium from all gas produced from your OCS lease. Under section 12(f) of the Act, 43 U.S.C. 1341(f), upon our request, you must deliver all or a specified portion of the gas containing helium to us at a point on the lease or an onshore processing facility that we designate.

(b) The MMS will determine reasonable compensation and pay you for any loss caused by the extraction of helium, except for the value of the helium itself. We may erect, maintain, and operate on your lease any reduction work and other equipment necessary for helium extraction. Our extraction of helium will be conducted in a manner to not cause substantial delays in the delivery of gas to your purchaser.

Your lease will expire by its own terms at the end of its initial period, if you have not taken actions to extend the lease through production in paying quantities, drilling operations, workover operations, or a suspension under 30 CFR part 250.

You may join with all record title owners to relinquish all or any officially designated subdivision of your lease at any time by filing three original copies of your request with MMS on Form MMS-152 entitled, Relinquishment of Federal OCS Oil and Gas Lease. The relinquishment is effective on the date of filing. Relinquishing your lease does not relieve you of any accrued obligations, either monetary or non-monetary.

(a) The MMS may cancel your lease under section 5(a) of the Act, 43 U.S.C. 1334(a), if we find that continued activity would probably cause serious harm or damage to life, property, any mineral, National security or defense, or to the marine, coastal, or human environment; that the threat or harm or damage will not disappear or decrease to an acceptable level within a reasonable period of time; and that the advantages of cancellation outweigh the advantages of continuing the lease. Refer to 30 CFR part 250, subpart A, for procedures on lease cancellation and compensation.

(b) The MMS may cancel your non-producing lease if you fail to comply with any provision of the Act, lease, or applicable regulations, if the failure continues for 30 days after we send you written notice of such failure. Cancellation is subject to judicial review under section 23(b) of the Act, 43 U.S.C. 1349(b).

(c) The MMS may cancel your producing lease if you fail to comply with any provision of the Act, lease, or applicable regulations, only after the judicial proceedings required under section 5(d) of the Act, 43 U.S.C. 1334(d).

(d) The MMS may cancel your lease if we find proof that the lease was obtained by fraud or misrepresentation. You will have notice and an opportunity to be heard prior to lease cancellation.

You may exchange a lease for a bonus or royalty credit if it:

(a) Was in effect on December 20, 2006, and

(b) Is located in:

(1) The Eastern planning area and within 125 miles of the coastline of the State of Florida, or

(2) The Central planning area and within the Desoto Canyon OPD, the Destin Dome OPD, or the Pensacola OPD and within 100 miles of the coastline of the State of Florida.

The amount of the bonus or royalty credit for an exchanged lease equals the sum of:

(a) The amount of the bonus payment; and

(b) All rental paid for the lease as of the date the lessee submits the request to exchange the lease under § 256.902 to MMS.

(a) To obtain the bonus or royalty credit, all of the record title interest owners in the lease must submit the following to the MMS Regional Supervisor for Leasing and Environment for the GOM on or before October 12, 2010:

(1) A written request to exchange the lease for the bonus or royalty credit, signed by all record title interest owners in the lease.

(2) The name and contact information for a person who will act as a contact for each record title interest owner.

(3) Documentation of each record title interest owner's percentage share in the lease.

(4) A list of all bonus and rental payments for that lease made by, or on behalf of, each of the current record title owners.

(5) A written relinquishment of the lease as described in § 256.701. Notwithstanding § 256.701, the relinquishment will become effective when the credit becomes effective under paragraph (b) of this section.

(b) The credit becomes effective when MMS issues a certification to the record title interest owners that the lease has qualified for the credit.

The MMS will allocate the bonus or royalty credit for an exchanged lease to the current record title interest owners in the same percentage share as each owner has in the lease as of the date of the request to exchange the lease.

(a) You may use a credit issued under this part in lieu of a monetary payment due under any lease in the Gulf of Mexico not subject to the revenue distribution provisions of section 8(g)(2) of the OCSLA (43 U.S.C. 1337(g)(2)) for either:

(1) A bonus for acquisition of an interest in a new lease; or

(2) Royalty due on oil and gas production after October 12, 2010.

(b) You may not use a bonus or royalty credit in lieu of delivering oil or gas taken as royalty-in-kind.

(c) If you have any credit that remains unused after 5 years from the date MMS issued the credit, MMS reserves the right to apply the remaining credit to your ongoing obligations.

(a) You may transfer your bonus or royalty credit to any other person by submitting to the MMS Adjudication Unit for the Gulf of Mexico two originally executed transfer letters of agreement.

(b) Authorized officers of all companies involved in transferring and receiving the credit must sign the transfer letters of agreement as indicated on the qualification card filed with MMS.

(c) A transfer letter of agreement must include:

(1) The effective date of the transfer,

(2) The OCS-G number for the lease that originally qualified for the credit,

(3) The amount of the credit being transferred,

(4) Company names punctuated exactly as filed on the qualification card at MMS, and

(5) A corporate seal, only if MMS used a corporate seal qualification process for your corporation.

(d) The transferee of a credit transferred under this section may use it in accordance with § 256.904 as soon as MMS sends a confirmation of the transfer to the transferee.

[FR Doc. E9-12155 Filed 5-26-09; 8:45 am]

BILLING CODE 4310-MR-P