Section 556.907 - Forfeiture of bonds or other financial assuranceThis section explains how a bond or other financial assurance may be forfeited.
(a) The Regional Director will call for forfeiture of all or part of the bond, or other form of financial assurance, including a guarantee you provide under this part, if:(1) You, or any party with the obligation to comply, refuse to comply with any term or condition of your lease, RUE grant, pipeline ROW grant, or any BOEM or BSEE order, or any applicable regulation, or the Regional Director determines that you are unable to so comply; or(2) You default on one of the conditions under which the Regional Director accepts your bond, third-party guarantee, and/or other form of financial assurance.(b) The Regional Director may pursue forfeiture of your surety bond or other financial assurance without first making demands for performance against any other record title owner, operating rights owner, grant holder, or other person authorized to perform lease or grant obligations.(c) The Regional Director will:(1) Notify you, your surety, guarantor, or the financial institution holding or providing your financial assurance, of a determination to call for forfeiture of your financial assurance, whether it takes the form of a surety bond, guarantee, funds, or other type of financial assurance. (i) This notice will be in writing and will provide the reason for the forfeiture and the amount to be forfeited.(ii) The Regional Director will determine the amount to be forfeited based upon an estimate of the total cost of corrective action to bring your lease or grant into compliance, subject, in the case of a guarantee, to any limitation in the guarantee authorized by § 556.905(b) .(2) Advise you and your financial assurance provider that forfeiture may be avoided if, within five business days:(i) You agree to and demonstrate that you will bring your lease or grant into compliance within the timeframe the Regional Director prescribes; or(ii) The provider of your financial assurance agrees to and demonstrates that it will complete the corrective action to bring your lease or grant into compliance within the timeframe the Regional Director prescribes, even if the cost of compliance exceeds the amount of that financial assurance.(d) If the Regional Director finds you are in default under paragraph (a)(1) or (2) of this section, the Regional Director may cause the forfeiture of any financial assurance provided to ensure your compliance with BOEM and BSEE orders, the terms and conditions of your lease or grant, and the regulations in this chapter and chapters II and XII of this title.(e) If the Regional Director determines that your financial assurance is forfeited, the Regional Director will:(1) Collect the forfeited amount; and(2) Use the funds collected to bring your lease or grant into compliance and to correct any default.(f) If the amount the Regional Director collects under your financial assurance is insufficient to pay the full cost of corrective action, the Regional Director may: (1) Take or direct action to obtain full compliance with your lease or grant and the regulations in this chapter; and(2) Recover from you, any other record title owner, operating rights owner, co-grant holder or, to the extent covered by the guarantee, any third-party guarantor responsible under this subpart, all costs in excess of the amount the Regional Director collects under your forfeited financial assurance.(g) If the amount that the Regional Director collects under your forfeited financial assurance exceeds the costs of taking the corrective action required to bring your lease or grant into compliance with its terms and the regulations in this chapter, BOEM and BSEE orders, and chapters II and XII of this title, the Regional Director will return the excess funds to the party from whom they were collected.(h) The Regional Director may pay the funds from the forfeited financial assurance to a co- or predecessor lessee or third party who is taking the corrective action required to obtain partial or full compliance with the regulations, BOEM or BSEE orders, and/or the terms of your lease or grant. 81 FR 18152, 3/30/2016; 89 FR 31597, 47081, 6/29/2024