Thursday, July 24, 2008

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NTL clarifies the method of Gulf of Mexico OCS Region (GOMR) regarding the implementation of requirements for general lease surety bonds that are present in 30 CFR 256, Subpart I. However, these securities are obligatory to make sure that you act in accordance with regulatory and lease requirements for including rents, royalties, environmental damage and clean-up activities fully that are not linked to oil spills, abandonment and site-clearance, and other lease obligations.

Before the Minerals Management Service (MMS) issues a new lease or approving a lease assignment previously with operational activity plan, you must be able to afford a general lease surety bond. And specifically, the GOMR will begin a review of your bonding coverages when you are presenting a request for a change of designated operator of a lease; an initial Exploration Plan (EP), an initial Development and Production Plan (DPP), an initial Development Operations Coordination Document (DOCD), or a significant revision to an approved EP, DPP, or DOCD; or a request for assignment of a lease with an approved EP, DPP, or DOCD.

The authorized MMS officer may consent you to provide the required general lease surety bond after we have decided for approving an assignment only if it is for a good cause. But it should be before beginning an operational activity under the pertinent plan. The submittal of a general lease surety bond by the designated operator, 30 CFR 256.52(c), does not relieve any of the lessees of their obligations to comply with the terms and conditions of the lease. The level of activity on your lease specifies the amount of general lease surety bond coverage.

The GOMR will designate each lease as No Operations, Exploration, or Development as follows:

1.No Operations - A $50,000 lease-specific or $300,000 area-wide general lease surety bond for leases with non-approval operational activity plan of MMS or for leases under an MMS-approved operational activity plan but with no submittal to MMS of assignment or operational activity plans. If you have provided an applicable lease-specific or area-wide lease surety bond, you do not need to offer this bond according to one of the following higher requirements.

2.Exploration - A $200,000 lease-specific or $1,000,000 area-wide general lease surety bond for leases in a proposed EP or a significant revision to an approved EP, or for a proposed assignment of a lease with an approved EP. You do not need to provide this bond if you have provided an applicable lease-specific or area-wide general lease surety bond as per one of the following higher requirements.

3.Development - A $500,000 lease-specific or $3,000,000 area-wide general lease surety bond for leases in a proposed DPP or DOCD to an approved DPP or DOCD, or for a proposed assignment of a lease with an approved DPP or DOCD.

To gratify the requirement for giving the general lease surety bonds, you may have to provide bonds that are issued by a surety certified by the U.S. Department of the Treasury or from U.S. Treasury securities and are negotiable at the time of submission for an amount of cash that is equal to the value of the required bond. The authorized MMS officer may endorse several options to U.S. Treasury-certified bonds and to the U.S. Treasury securities if the interests of the U.S. Government are protected to the same extent as such historically accepted financial instruments.

At present, GOMR accepts a bond from U.S. Treasury-certified sureties and U.S. Treasury securities that have a cash value at the time of purchase equal to the required amount. And at present, the GOMR will consider optional instruments that provide the same degree of security as these are accepted. The GOMR has considered unacceptable such alternatives as letters of credit or production escrow accounts historically as well as for informational perspectives.
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