Third-Party Guarantees

30 CFR §556.905(a) establishes that “The Regional Director may accept a third-party guarantee instead of an additional bond under §556.901(d) if:

(1) The guarantee meets the criteria in paragraph (c) of this section;

(2) The guarantee includes the terms specified in paragraph (d) of this section;

(3) The guarantor's total outstanding and proposed guarantees do not exceed 25 percent of its unencumbered net worth in the United States; and

(4) The guarantor submits an indemnity agreement meeting the criteria in paragraph (e) of this section.”

The amount a guarantor will be able to guarantee will be calculated on the following:

3PG% = Continuous Operations + Bond Rating + Current Ratio + Fixed Assets

Total Acceptable Third-Party Guarantee = 3PG%* Lesser of Unencumbered Net Worth in the United states or Modified Net Worth

If BOEM determines that a lessee must provide additional security for its decommissioning liabilities, BOEM will send a demand letter to the lessee. If a third-party submits a guarantee to satisfy the demand, then the third-party guarantee can be limited to the decommissioning liability described in the demand letter.

More information on the criteria in paragraph (c) can be found in the following links:

Operations   Rating   Net   Current   Assets in the US