Acceptable Forms of Supplemental Bonds

The lessee must submit one of the following to meet the supplemental bond obligation within 45 days thereby following MMS written notification:

1. A lease-specific supplemental bond, United States Treasury Securities, or a swapping form of supplemental security approved by us, in the full amount required. The lessee must report us within 15 days and should take necessary actions to convene the supplemental bond obligation only if the value of the lessee’s security falls below this amount, or if the U.S. Treasury no longer indicates that the company that issued the bond is more adequate.

2. As per 30 CFR 256.56, a sketch to MMS for review and agreement whereby the lessee commends to fully fund a lease-specific abandonment escrow account. Also the lessee must fund a lease-specific desertion account entirely within four years or by the starting of the year in which it is projected that only 80 percent of the originally recoverable in general reserves have been produced, whichever will work out earlier.

3. The plan mentioned above must include the following:

• An initial payment into the lease-specific abandonment escrow account equal to or greater than 50 percent of the approximation of the collective potential lease abandonment liability. The MMS may endorse an earlier payment of less than 50 percent by subsequently reviewing the third-party estimate of the proved producing reserves for the lease at the lessee’s request, if it determines that the lesser amount doesn’t generate a risk to the Government.
  
• A prescribed time schedule for making specified incremental payments in amounts that will ensure that the amount in the lease abandonment account will increase at a faster rate than the rate at which the originally recoverable reserves are being produced from the lease.
  
• A commitment by the financial institution in which the lessee established the lease-specific abandonment account for notifying us the date and amount of the initial deposit and of each incremental payment into the account.
  
• A risk insurance policy for the benefit of MMS that swathes the residual liability in the event of any catastrophic failure banned the overall closing of the remaining payments. But on existing policies, this requirement has been met, in the past, by having MMS as a beneficiary plan.

MMS will assess all the above-described information and commend it either as submitted or requested precise revisions. This plan will examine both the initial payment amount as well as the time schedule exactly for making specified incremental payments based on an analysis of current, past, and projected rates of production from the leasehold, or cash flow for facilities utilized by ROW, distinctiveness of the producing reservoir, plugging and abandonment information available in MMS’s databases.