How frequently does MMS review supplemental bond requirements?

MMS will review each company that has met the MMS supplemental bond criteria annually to insure that they continue to meet the criteria. Additionally, MMS will review supplemental bond requirements when liabilities on a lease, ROW, or RUE change.

Where can I find the supplemental bond regulations and guidance?

30 CFR 256 includes the regulations addressing supplemental bonds. MMS NTL 2003-N06 provides a detailed explanation of the regulations.

What is the purpose of the supplemental bond?

A supplemental bond is used to ensure that a lessee or lessees are capable of complying with the laws and regulations associated with the decommissioning of an offshore oil and gas facility, including pipelines, in Federal waters.

What percentage of ownership is adequate for MMS to use a lessee’s financial capability to meet the MMS Supplemental Bond Criteria?

No percentage standard is set, since lessees are joint and severally liable for all non-monetary obligations.

Will MMS allocate decommissioning costs by the percentage of ownership?

Non-monetary liabilities are joint and several and are not distributed by percentage of ownership. MMS holds each lessee responsible for 100% of all non-monetary obligations. Additionally, former lessees are liable for decommissioning liability that accrued during their tenure as a lessee.

How will MMS handle Limited Liability Company (LLC) expiration dates?

Generally, when a LLC has a lifetime less than the remaining platform life, we will not approve them as a Guarantor for supplemental bonds.

Will MMS use a scrap allowance to reduce decommissioning costs to determine the supplemental bond requirement?

Scrap value allowance will not be used to offset the decommissioning costs for supplemental bond purposes.

What if I disagree with the MMS estimate of decommissioning costs for my OCS lease and related facilities?

A lessee or operator may provide MMS with a 3^rd Party decommissioning estimate for our consideration. Additionally, approximately 45 days will be allowed to provide MMS with information you wish us to consider when we establish the monetary level of your Supplemental Bond.

Are decommissioning obligations limited to the MMS decommissioning cost estimate?

No, lessees are liable for complete decommissioning of the lease and associated facilities including site clearance and restoration, no matter the cost.

How are heavy lift vessel mobilization and demobilization (Mob/Demob) costs shared between facilities in establishing a supplemental bond?

Mob/Demob costs are assumed to be shared between platforms included in the decommissioning scenarios used in the MMS POCSR Offshore Facility Decommissioning Cost Report dated September 17, 2004. The number of platforms in the scenarios ranges from 2 to 6. MMS may consider other cost distributions when establishing the dollar amount of the supplemental bond.

Will MMS include pipeline or power cable removal in state waters or onshore in the decommissioning cost estimates?

MMS does not consider decommissioning costs for facilities not located on the OCS.

Does MMS assume pipelines and power cables will be removed in the decommissioning cost estimates?

For purposes of establishing decommissioning costs for supplemental bonding, pipelines and power cables are assumed to be abandoned in place. However, per MMS regulations, they may only be abandoned in place if MMS determines that they do not constitute a hazard (obstruction) to navigation and commercial fishing operations, unduly interfere with other uses of the OCS, or have adverse environmental effects. Therefore, each pipeline or power cable will be evaluated for spanning and conflicts with other users and uses of the OCS, and partial or total removal may be required at the time of decommissioning.

Has MMS established an order of precedence in the event the current lessees fail to complete their decommissioning obligations?

MMS will inform prior lessees or their successors when decommissioning is scheduled to begin on a lease. If the current lessee or lessees fail to complete their decommissioning obligations MMS will pursue other avenues; including but not limited to calling surety bonds and requiring former lessees to fulfill the remaining obligations.

Who should be contacted with questions on supplemental bonds for decommissioning?

Contact:
Jaron Ming
Policy Analyst, ORM
MMS Pacific OCS Region
770 Paseo Camarillo, 2^nd Floor
Camarillo, CA 93010
(805) 389-7514