30 C.F.R. Subpart C—Methods for Demonstrating OSFR
Title 30 - Mineral Resources
As the designated applicant, you may satisfy your OSFR requirements by using one or a combination of the following methods to demonstrate OSFR: (a) Self-insurance under §§253.21 through 253.28; (b) Insurance under §253.29; (c) An indemnity under §253.30; (d) A surety bond under §253.31; or (e) An alternative method the Director approves under §253.32. (a) If you use self-insurance to satisfy all or part of your obligation to demonstrate OSFR, you must annually pass either a net worth test under §253.25 or an unencumbered net asset test under §253.28. (b) To establish the amount of self-insurance allowed, you must submit evidence of your net worth under §253.23 or evidence of your unencumbered assets under §253.26. (c) You must identify a U.S. agent for service of process. (a) You must submit a complete Form MMS–1018 with each application to demonstrate OSFR using self-insurance. (b) You must submit your application to renew OSFR using self-insurance by the first calendar day of the 5th month after the close of your fiscal year. You may submit to MMS your initial application to demonstrate OSFR using self-insurance at any time. You must support your net worth evaluation with information contained in your previous fiscal year's audited annual financial statement. (a) Audited annual financial statements must be in the form of: (1) An annual report, prepared in accordance with the generally accepted accounting practices (GAAP) of the United States or other international accounting practices determined to be equivalent by MMS; or (2) A Form 10–K or Form 20–F, prepared in accordance with Securities and Exchange Commission regulations. (b) Audited annual financial statements must be submitted together with a letter signed by your treasurer highlighting: (1) The State or the country of incorporation; (2) The total amount of the stockholders' equity as shown on the balance sheet; (3) The net amount of the plant, property, and equipment shown on the balance sheet; and (4) The net amount of the identifiable U.S. assets and the identifiable total assets in the auditor's notes to the financial statement (i.e., a geographic segmented business note). (a) Your audited annual financial statements must be bound. (b) Your audited annual financial statements must include the unqualified opinion of an independent accountant that states: (1) The financial statements are free from material misstatement, and (2) The audit was conducted in accordance with the generally accepted auditing standards (GAAS) of the United States, or other international auditing standards that MMS determines to be equivalent. (c) The financial information you submit must be expressed in U.S. dollars. If this information was originally reported in another form of currency, you must convert it to U.S. dollars using the conversion factor that was effective on the last day of the fiscal year pertinent to your financial statements. You also must identify the source of the currency exchange rate. (a) Divide the total amount of the stockholders'/owners' equity listed on the balance sheet by ten. (b) Divide the net amount of the identifiable U.S. assets by the net amount of the identifiable total assets. (c) Multiply the net amount of plant, property, and equipment shown on the balance sheet by the number calculated under paragraph (b) of this section and divide the resultant product by ten. (d) The smaller of the numbers calculated under paragraphs (a) or (c) of this section is the maximum allowable amount you may use to demonstrate OSFR under this method. You must support your unencumbered assets evaluation with the information required by §253.23(a) and a list of reserved, unencumbered, and unimpaired U.S. assets whose value will not be affected by an oil discharge from a COF. The assets must be plant, property, or equipment held for use. You must submit a letter signed by your treasurer: (a) Identifying which assets are reserved; (b) Certifying that the assets are unencumbered, including contingent encumbrances; (c) Promising that the identified assets will not be sold, subjected to a security interest, or otherwise encumbered throughout the specified fiscal year; and (d) Specifying: (1) The State or the country of incorporation; (2) The total amount of the stockholders'/owners' equity listed on the balance sheet; (3) The identification and location of the reserved U.S. assets; and (4) The value of the reserved U.S. assets less accumulated depreciation and amortization, using the same valuation method used in your audited annual financial statement and expressed in U.S. dollars. The net value of the reserved assets must be at least two times the self-insurance amount requested for demonstration. Any audited annual financial statements that you submit must: (a) Meet the standards in §253.24; and (b) Include a certification by the independent accountant who audited the financial statements that states: (1) The value of the unencumbered assets is reasonable and uses the same valuation method used in your audited annual financial statements; (2) Any existing encumbrances are noted; (3) The assets are long-term assets held for use; and (4) The valuation method used in the audited annual financial statements is for long-term assets held for use. (a) Divide the total amount of the stockholders'/owners' equity listed on the balance sheet by 4. (b) Divide the value of the unencumbered U.S. assets by 2. (c) The smaller number calculated under paragraphs (a) or (b) of this section is the maximum allowable amount you may use to demonstrate OSFR under this method. (a) If you use insurance to satisfy all or part of your obligation to demonstrate OSFR, you may use only insurance certificates issued by insurers that have achieved a “Secure” rating for claims paying ability in their latest review by A.M. Best's Insurance Reports, Standard & Poor's Insurance Rating Services, or other equivalent rating made by a rating service acceptable to MMS. (b) You must submit information about your insurers to MMS on a completed and unaltered Form MMS–1019. The information you submit must: (1) Include all the information required by §253.41 and (2) Be executed on one original insurance certificate (i.e., Form MMS–1019) for each OSFR layer (see paragraph (c) of this section ), showing all participating insurers and their proportion (quota share) of this risk. The certificate must bear the original signatures of each insurer's underwriter or of their lead underwriters, underwriting managers, or delegated brokers, depending on who is authorized to bind the underwriter. (3) For each insurance company on the insurance certificate, indicate the insurer's claims-paying-ability rating and the rating service that issued the rating. (c) The insurance evidence you provide to MMS as OSFR evidence may be divided into layers, subject to the following restrictions: (1) The total amount of OSFR evidence must equal the total amount you must demonstrate under §253.13; (2) No more than one insurance certificate may be used to cover each OSFR layer specified in §253.13(b) (i.e., four layers for an OCS COF, and five layers for a non-OCS COF); (3) You may use one insurance certificate to cover any number of consecutive OSFR layers; (4) Each insurer's participation in the covered insurance risk must be on a proportional (quota share) basis, must be expressed as a percentage of a whole layer, and the certificate must not contain intermediate, horizontal layers; (5) You may use an insurance deductible. If you use more than one insurance certificate, the deductible amount must apply only to the certificate that covers the base OSFR amount layer. To satisfy an insurance deductible, you may use only those methods that are acceptable as evidence of OSFR under this part; and (6) You must identify a U.S. agent for service of process on each insurance certificate you submit to MMS. The agent may be different for each insurance certificate. (d) You may submit to MMS a temporary insurance confirmation (fax binder) for each insurance certificate you use as OSFR evidence. Submit your fax binder on Form MMS–1019, and each form must include the signature of an underwriter for at least one of the participating insurers. MMS will accept your fax binder as OSFR evidence during a period that ends 90 days after the date that you need the insurance to demonstrate OSFR. (a) You may use only one indemnity issued by only one indemnitor to satisfy all or part of your obligation to demonstrate OSFR. (b) Your indemnitor must be your corporate parent or affiliate. (c) Your indemnitor must complete a Form MMS–1018 and provide an indemnity that: (1) Includes all the information required by §253.41; and (2) Does not exceed the amounts calculated using the net worth or unencumbered assets tests specified under §§253.21 through 253.28. (d) You must submit your application to renew OSFR using an indemnity by the first calendar day of the 5th month after the close of your indemnitor's fiscal year. You may submit to MMS your initial application to demonstrate OSFR using an indemnity at any time. (e) Your indemnitor must identify a U.S. agent for service of process. (a) Each bonding company that issues a surety bond that you submit to MMS as OSFR evidence must: (1) Be licensed to do business in the State in which the surety bond is executed; (2) Be certified by the U.S. Treasury Department as an acceptable surety for Federal obligations and listed in the current Treasury Circular No. 570; (3) Provide the surety bond on Form MMS–1020; and (4) Be in compliance with applicable statutes regulating surety company participation in insurance-type risks. (b) A surety bond that you submit as OSFR evidence must include all the information required by §253.41. The Director may accept other methods to demonstrate OSFR that provide equivalent assurance of timely satisfaction of claims. This may include pooling, letters of credit, pledges of treasury notes, or other comparable methods. Submit your proposal, together with all the supporting documents, to the Director at the address listed in §253.45. The Director's decision whether to approve your alternative method to evidence OSFR is by this rule committed to the Director's sole discretion and is not subject to administrative appeal under 30 CFR part 290 or 43 CFR part 4.
Title 30: Mineral Resources
PART 253—OIL SPILL FINANCIAL RESPONSIBILITY FOR OFFSHORE FACILITIES
Subpart C—Methods for Demonstrating OSFR
§ 253.20 What methods may I use to demonstrate OSFR?
§ 253.21 How can I use self-insurance as OSFR evidence?
§ 253.22 How do I apply to use self-insurance as OSFR evidence?
§ 253.23 What information must I submit to support my net worth demonstration?
§ 253.24 When I submit audited annual financial statements to verify my net worth, what standards must they meet?
§ 253.25 What financial test procedures must I use to determine the amount of self-insurance allowed as OSFR evidence based on net worth?
§ 253.26 What information must I submit to support my unencumbered assets demonstration?
§ 253.27 When I submit audited annual financial statements to verify my unencumbered assets, what standards must they meet?
§ 253.28 What financial test procedures must I use to evaluate the amount of self-insurance allowed as OSFR evidence based on unencumbered assets?
§ 253.29 How can I use insurance as OSFR evidence?
§ 253.30 How can I use an indemnity as OSFR evidence?
§ 253.31 How can I use a surety bond as OSFR evidence?
§ 253.32 Are there alternative methods to demonstrate OSFR?
