Oil Spill Financial Responsibility for Offshore Facilities

DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Parts 250 and 253

RIN 1010-AC33

Oil Spill Financial Responsibility for Offshore Facilities

AGENCY: Minerals Management Service (MMS), Interior.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final regulation establishes new requirements for

demonstrating oil spill financial responsibility (OSFR) for removal

costs and damages caused by oil discharges and substantial threats of

oil discharges from oil and gas exploration and production facilities

and associated pipelines. This rule applies to the Outer Continental

Shelf (OCS), State waters seaward of the line of ordinary low water

along that portion of the coast that is in direct contact with the open

sea, and certain coastal inland waters. This rule implements the

authority of the Oil Pollution Act (OPA) of 1990.

DATES: This final regulation is effective October 13, 1998. However,

the information collection aspects of this rule will not become

effective until approved by the Office of Management and Budget (OMB).

MMS will publish a document at that time in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Steve Waddell, Adjudication Unit

Supervisor, at (504) 736-1710.

SUPPLEMENTARY INFORMATION: Title I of OPA (33 U.S.C. 2701 et seq.), as

amended by section 1125 of the Coast Guard Authorization Act of 1996

(Pub. L. 104-324), provides at section 1016 that parties responsible

for offshore facilities must establish and maintain OSFR for those

facilities according to methods determined acceptable to the President.

Section 1016 supersedes the OSFR provisions of the Outer Continental

Shelf Lands Act (OCSLA). The Executive Order (E.O.) implementing OPA

(E.O. 12777; October 18, 1991) assigned the OSFR certification function

to the Department of the Interior (DOI). The Secretary of the Interior,

in turn, delegated this function to MMS.

This regulation replaces the current OSFR regulation at 33 CFR part

135, which was written to implement the OCSLA. The OCSLA regulation is

limited to facilities located in the OCS and sets the amount of OSFR

that must be demonstrated by responsible parties at $35 million. The

regulation published today covers both the OCS and certain State

waters. The regulation requires responsible parties to demonstrate as

much as $150 million in OSFR if MMS determines that it is justified by

the risks from potential oil spills from covered offshore facilities

(COFs).

The minimum amount of OSFR that must be demonstrated is $35 million

for COFs located in the OCS and $10 million for COFs located in State

waters. The regulation provides an exemption for persons responsible

for facilities having a potential worst case oil-spill discharge of

1,000 barrels (bbls) or less, unless the risks posed by a facility

justify a lower threshold volume.

Background

The existing OSFR program for offshore facilities was developed

under Title III of the OCSLA and initially administered by the U.S.

Coast Guard (USCG). OPA replaced and rescinded the OCSLA OSFR

requirements. However, section 1016(h) of OPA provides that any

regulation relating to OSFR remains in force until superseded by a new

regulation issued under OPA. The OSFR regulations for offshore

facilities in the OCS (33 CFR part 135) will be phased out according to

the timetable specified in Sec. 253.44.

The Secretary of Transportation has authority for vessel oil

pollution financial responsibility, and the USCG regulates the oil-

spill financial responsibility program for vessels. A mobile offshore

drilling unit (MODU) is classified as a vessel. However, a well drilled

from a MODU is classified as an offshore facility under this rule.

Upon request from the USCG, MMS will provide available information

for any COF involved in an oil pollution incident (i.e., oil-spill

discharge or a substantial threat of a discharge) including:

(1) The lease, permit, or right-of-use and easement (RUE) for the

area in which the COF is located;

(2) The designated applicant and guarantors and their contacts for

claims;

(3) U.S. agents for service of process;

(4) Amounts indemnified; and

(5) List of all responsible parties.

Analysis of Comments on the Proposed Rule and Changes for the Final

Rule

A Notice of Proposed Rulemaking (NPR) was published on March 25,

1997 (62 FR 14052-14079). We received 28 written comments. We also

received oral comments during a public workshop on the proposed rule

that MMS sponsored in New Orleans, Louisiana, on June 5, 1997. All of

the comments were considered in developing this final regulation. The

[[Page 42700]]

rulemaking issues raised in the comments and the MMS responses are

presented below.

General Applicability

For clarity and completeness, we have added in the final rule a

definition of ``oil spill financial responsibility,'' referred to by

the acronym ``OSFR,'' which is used throughout the rule. It refers to

the requirements of section 1016 of OPA to evidence the capability to

meet one's liabilities under Title I of OPA for removal costs and

damages, as those terms are defined in OPA. The term was explained in

the preamble to the proposed rule, but not expressly defined in the

rule itself.

Types of Facilities--Several commenters asked us to clarify whether

their facilities are covered by this OSFR regulation. The types of

facilities that might be subject to MMS OSFR are specified in the 1996

amendments to OPA. They include offshore facilities used for exploring

for, drilling for, or producing oil. They also include facilities other

than vessels that are used to transport oil from drilling, exploration,

or production facilities.

Several commenters asked us to verify that shore-based petroleum

terminals, refineries, marinas, and appurtenances such as pipelines are

not subject to this regulation. We agree. The only facilities that can

be COFs under this rule are those used for exploring for, drilling for,

or producing oil, and facilities used to transport oil from drilling,

exploration, or production facilities. None of the facilities

identified above fits these categories.

One commenter asked us to clarify that a pipeline cannot be a COF

unless it is connected to a COF. We disagree. A pipeline can be a COF

if it is used to transport oil from a facility engaged in oil

exploration, drilling, or production. However, that facility does not

need to be located within the geographic area covered by this rule or

have a worst case oil-spill discharge volume greater than 1,000 bbls.

Thus, your pipeline can be a COF, even if the exploration, drilling, or

production facility to which it connects is not a COF. As noted in the

previous paragraph, the terminal or other shore-based facility to which

the pipeline connects would not be a COF.

One commenter asked us to clarify how this regulation applies to a

MODU. The concern was that the wording of the proposed definition of a

COF is confusing with respect to a MODU. We agree. It is important that

we make clear the distinction between a MODU and a well drilled from a

MODU. A MODU cannot be a COF under this regulation because it is a

vessel. The OSFR for a vessel is covered in the regulations

administered by the USCG (see 33 CFR part 138). However, a well drilled

from a MODU may be a COF if it meets all the COF criteria listed in

Sec. 253.3. The definition of COF has been revised for the final rule

to clarify that a well drilled from a MODU may be a COF, but that a

MODU is not a COF. The revision incorporates most of the language

suggested by the commenter. However, the reference to MODU has been

retained to emphasize that a well drilled from a MODU may be a COF.

Natural Gas Condensate--Several natural gas interests asserted that

facilities producing or transporting natural gas condensate should not

be subject to OSFR requirements because condensate is not oil. Further,

one commenter stated that applicability of this rule to a facility

should depend on whether the facility handles condensate that is

``recoverable'' (i.e., possible to remove from the water before it

becomes highly dispersed or evaporates into the atmosphere).

We disagree with both comments. Condensate is petroleum, and

petroleum is expressly included in OPA's statutory definition of oil.

As such, facilities that handle condensate must be addressed by this

regulation. This makes practical sense because condensates exhibit

properties that could cause damages that are subject to claims under

the OPA, even if the condensate discharge leading to the claim is

difficult to ``recover.'' Therefore, you must demonstrate OSFR for any

facility that handles condensate if it meets the COF criteria included

in Sec. 253.3.

One commenter said that we should exclude gas condensate from our

definition of oil because the Department of Transportation (DOT) did

not include condensate in the oil definition used for its OPA-based

regulation on response plans for onshore oil pipelines. We do not

agree. The OSFR rule implements the OPA requirement that valid claims

resulting from an oil-spill discharge are paid by the person(s)

responsible for the discharge. As explained in the previous paragraph,

we have determined that condensate is a form of petroleum that is

covered under OPA. Further, there is ample evidence that condensate

discharges can cause damages which are compensable under the Act. Thus,

it is appropriate for MMS to apply OSFR requirements to a facility that

handles condensate, if the facility satisfies the COF criteria

specified in Sec. 253.3. Whether it is either necessary or practical to

require plans to respond to condensate discharges is a matter that is

beyond the scope of this rulemaking.

Private Lands--One commenter offered that this rule should not

apply to facilities located on private property. We disagree, because

OPA's definition of a responsible party for an offshore facility

applies to a person who holds a lease, permit, or RUE granted under

applicable state law, regardless of the identity of the grantor.

Covered Offshore Facility

Facility--One commenter asked us to clarify what the term

``facility'' means. The proposed regulation characterized a facility as

any structure or group of structures (including wells), etc. The

commenter's question is whether a single facility can represent more

than one COF. The commenter cited an example in which a production

facility might have an oil storage capacity greater than 1,000 bbls,

and one or more wells with a worst case oil-spill discharge of greater

than 1,000 bbls.

A single facility cannot constitute more than one COF. Although an

oil production facility may have several components each with a worst

case oil-spill discharge potential of greater than 1,000 bbls, it is

the facility, rather than its components, that is the COF. The

components of a facility include a pipeline connected to the production

structure, unless the pipeline is located on a RUE. However, a

structure-related well that is completed at a remote location (e.g.,

satellite well completed at the seafloor) may be considered a discrete

facility that could be a separate COF.

In determing the worst case oil-spill discharge for a COF, the

extent that a pipeline connected to a production structure contributes

to the worst case discharge will depend on the potential for a

structure incident to cause a discharge from the pipeline. For example,

the volume of the potential discharge from a connected pipeline should

depend on the use and placement of flow-controlled shutoff devices in

the pipeline. This approach is consistent with the MMS response

planning regulation which requires you to sum the volumes of all the

platform components that might discharge oil. If the rule allowed you

to separately consider the COF potential of each platform component, it

would ignore the potential for the failure of one component to lead to

the failure of others. This would not be consistent with the purposes

of OPA because the volume of a discharge from a facility caused by

multiple component failures would be greater than the worst case oil-

spill discharge volume calculated for any individual component. We have

[[Page 42701]]

revised the COF definition to clarify this issue (see Sec. 253.3).

Geography--Another factor you must consider in determining whether

your facility is a COF is its location. According to the statute, the

OSFR requirement applies to the OCS, State waters seaward of the

coastline (see the definition at Sec. 253.3), and coastal inland

waters, like bays and estuaries, that lie seaward of the line of

ordinary low water along that portion of the coast that is not in

direct contact with the open sea. The proposed rule described the area

covered by OSFR as an area along the coast, affected by the tides, and

submerged even during low tide. To determine the landward limit of this

area, we considered two options: include all submerged coastal areas

subject to tidal influence; or those within a band 50 to 100 miles

inland from the coast. We proposed the first option and asked for

comments on both options.

Commenters expressed concerns that the proposed options arbitrarily

and inappropriately included areas that lie too far inland from the

coast and were not limited to bays and estuaries as suggested in OPA.

Also, the commenters asked us to limit OSFR jurisdiction to inland

waters that open to the sea. One commenter asked MMS to develop a map

showing the inland jurisdictional limit because it would be difficult

for you to determine whether a facility located in an inland area is

covered by the rule.

In recognition of arguments presented in the comments, we reviewed

our interpretations of the statutory language ``along the coast'' and

``coastal inland waters.'' Although we do not accept that OSFR

jurisdiction should be limited to the extent suggested by some

commenters, we agree that it is appropriate to limit the inland areas

described in the proposed rule based on the following considerations.

There are no applicable statutory definitions for the phrases

``along the coast'' and ``coastal inland waters.'' As such, there is no

specific guidance for identifying inland areas that should be subject

to this rule. The only specific geographic alternative offered in the

comments was to limit OSFR coverage to areas that share a common border

with the ``coastline,'' as defined in the Submerged Lands Act. We did

not accept this alternative because it does not include any inland

waters that are not in direct contact with the open sea. Instead, we

relied on our assessment of the intent of OPA to establish the

geographic scope of the offshore facility OSFR program.

The common definition of coast is the land next to the sea, or

seashore. Thus, it is reasonable for us to interpret ``along the

coast'' to mean along the seashore, which forms the boundary between

the land and the sea. The seaward extent of the seashore is depicted on

maps as a line; the shoreline. We believe it is reasonable to interpret

``coastal inland waters'' to mean the submerged area that is located

near the shoreline, but not considered part of the open sea. To help us

more precisely define the types of submerged areas that should be

covered, the statute includes the examples of ``bays and estuaries.''

Therefore, we believe that the intent of OPA is met by limiting the

scope of this rule to bodies of water which, like bays and estuaries,

are indentations of the coastline, and which connect with the open sea,

either directly or through one or more other bays.

It is also practical to use the U.S. Geological Survey (USGS)

Geographic Names Information System (GNIS) to identify specific

submerged areas that should be subject to the rule. The GNIS contains a

submerged feature class, ``bay,'' that includes the types of features

we think OPA intended for OSFR purposes. The GNIS is the federally

recognized source of geographic names for all known places, features,

and areas in the U.S. that are identified by a proper name. Each

feature is located by State, county, and geographic coordinates; and

referenced to the appropriate USGS topographic map on which it appears.

The GNIS bay feature class is defined as an ``indentation of a

coastline or shoreline enclosing a part of a body of water; a body of

water partly surrounded by land.'' The features in the GNIS bay class

include the bays and estuaries cited in OPA as examples of the types of

water bodies that should be covered by this rule. Other features in the

bay class include arm, bight, cove, gulf, inlet, and sound.

It is also practical to use USGS topographic maps to identify the

shoreline and the submerged areas subject to OSFR because both are

depicted on USGS maps, the USGS established and maintains the national

mapping standards, and USGS maps are readily available to the public.

Thus, we have defined the limits of the coastal inland areas subject to

OSFR using specific USGS maps, and those maps are listed in the

Appendix.

The USGS produces topographic maps of various scales for each

State. We chose scales of 1:63,360 (15-minute quadrangle) for Alaska

and 1:24,000 (7.5-minute quadrangle) for all other States because these

are the map scales used for the GNIS. The specific maps included in the

Appendix were chosen because they depict areas proximate to the

shoreline, where oil and gas facilities exist now or may be placed in

the foreseeable future. The maps listed in the Appendix depict a narrow

band along the coast that extends approximately 20 miles inland for

Alaska and 10 miles inland for other States. We may need to add maps to

the Appendix if we determine that additional areas along the coast

contain facilities that should be subject to this rule. You will be

allowed to comment on any changes before we add maps to the list.

For OSFR purposes, the area within the coastal band created by the

listed maps is limited to the GNIS bays depicted on the maps. The data

on GNIS bays are publicly available from USGS in formats ranging from

hard copy reports to digital data on the Internet. For clarity we

included definitions for bay and GNIS in the final rule. Your facility

could be a COF if it is located in a GNIS bay depicted on a listed map

that is connected to the sea either directly or through other bays.

Where any portion of a bay is included on a listed map, this rule

applies to the entire bay. Also, it is important to note that a

feature's name does not necessarily indicate which GNIS feature class

it represents.

Worst Case Oil-spill Discharge Calculations--Many commenters

expressed concerns about our proposed method for calculating the worst

case oil-spill discharge volume for a facility. The greatest concern is

over the method we prescribed for calculating the worst case volume for

a well located seaward of the coastline. The proposed rule requires you

to use the formula included in the MMS regulation on Response Plans for

Facilities Located Seaward of the Coast Line (see Sec. 253.14). The

commenters asked us to clarify the relationship between a planned 30-

day response to uncontrolled flow from a well and the OSFR worst case

volume for that well. The commenters assert that it would be

inappropriate to calculate the worst case volume for a well by

multiplying the estimated daily uncontrolled discharge rate times 30

days. The commenters reason that it does not account for the volume of

oil that would be recovered during those 30 days as a result of cleanup

efforts.

We reviewed the alternative method offered by one commenter for

calculating the worst case discharge for a facility. That method

subtracts the volume of oil assumed to be recovered from the total

volume discharged from the facility, including the well. In effect,

[[Page 42702]]

it eliminates from the OSFR dollar amount calculation all of the oil

that is recovered during cleanup. We disagree with this approach

because it does not account for the cost associated with recovering the

oil. The purpose of OSFR is to ensure that the designated applicant is

able to pay for cleanup as well as damages. Also, the suggested

alternative does not consider that some damage may occur before the oil

is removed from the water. As such, it would be inappropriate to

subtract the total volume of oil removed from the water from the volume

used to determine an appropriate OSFR dollar amount. We believe that,

for OSFR purposes, the worst case discharge for a well should account

for a portion of oil that is removed from the water during the period

of uncontrolled flow from a well.

In response to the comment that some allowance should be made for

oil that is recovered during cleanup, the final rule incorporates a 4-

day multiplier which is a discounting factor that you must use to

calculate the worst case oil-spill discharge volume for a well located

seaward of the coastline. It is based on a formula that fixes the daily

volume of uncontrolled flow from a well at 75 percent of the volume

calculated for the previous day. For example, if you determine that the

initial daily volume of uncontrolled flow from your well is 1,000 bbls,

the worst case volume attributed to the second day is 750 bbls, or 75

percent of the first-day volume. Similarly, the volume attributed to

the third day is about 565 bbls, or 75 percent of the second-day

volume. When this algorithm is extended to 30 days, the sum of the

daily worst case volumes equals approximately 4 times the volume

discharged on the first day. Rather than asking you to make a complex

calculation for each well, the final rule only requires that you

multiply the worst case volume for the first day of uncontrolled flow

by 4, and use the product as the well's worst case oil-spill discharge

volume. We believe this change clarifies how the worst case volume for

a well must be calculated, and, in our judgment, establishes a

reasonable credit for ongoing cleanup activities.

MMS also considered whether it would be appropriate to create

credits for cleanup of discharges from sources other than a well (e.g.,

pipelines, oil storage vessels). We did not find it appropriate for the

following reasons. Discharges from these sources tend to be pre-

response and of short duration. The potential for the cleanup to reduce

damages from these discharges is much smaller than for an ongoing

discharge because the response activity is least effective at the time

of the initial discharge. As such, the potential for damages from

initial discharges is greater because less of the oil is likely to be

recovered, and the oil that is recovered later has had more time and

opportunity to do damage. Also, for any given volume of oil, initial

discharges tend to cost more to recover than sustained discharges

because there is more time for initial discharges to spread.

One commenter said that OSFR should not be based on the worst case

volumes calculated using the MMS response planning regulation, because

that regulation discounts the capacity of spill response equipment by

80 percent. We disagree with this comment. The worst case oil-spill

scenario in the oil-spill response regulation is calculated

independently of the capacity of the oil-spill response equipment.

Thus, no relation exists between the oil-spill response equipment and

the determination of the worst case spill-volume for OSFR purposes.

Finally, one commenter questioned how a worst case can be

calculated for a well that will not be drilled until after a COF

determination must be made. For wells drilled seaward of the coastline,

the method you must use to calculate a worst case discharge for an

exploration well is included in the MMS response planning regulations.

If the worst case volume that you calculate for an undrilled well is

greater than 1,000 bbls, the well may be a COF (see additional COF

criteria on facility type and location). It would be inconsistent with

the purposes of OPA to allow you to defer the COF determination and

OSFR demonstration (if needed) until after the well is completed,

because an oil spill can occur during drilling.

Number of OSFR Layers

One commenter asked us to create more OSFR amount layers (see

Sec. 253.13(b)) in order to minimize insurance costs. For example, the

commenter noted that a worst case oil-spill discharge volume of 35,000

bbls requires $35 million in OSFR while a volume of 35,001 bbls

requires $70 million.

We did not create more OSFR amount layers for the final rule. We

believe that very few designated applicants will use insurance to

demonstrate OSFR for amounts over $35 million. We expect that

designated applicants with COFs that have worst case oil-spill

discharge volumes of more than 35,000 bbls will probably use self-

insurance or an indemnity. Also, if more OSFR amount layers were

allowed, a small change in the worst case volume might lead to

additional expense and delay for the designated applicants who use

insurance or surety bonds as OSFR to obtain the additional OSFR

evidence needed.

Self-insurance as OSFR Evidence

Most of the comments we received on self-insurance fall into two

categories. One category of concern is the recommendations presented in

the MMS-funded review by Talley and Associates of the proposed self-

insurance formulas. The other category includes commenters' suggestions

for revising the proposed formulas.

Report of Talley and Associates--The report identified a need to

define several terms that were used in the proposed self-insurance

formulas. There also is general agreement among commenters that the

terms we used should be defined in the final OSFR regulation. We

disagree for the following reasons. All the terms used in the self-

insurance formulas are commonly used in business and accounting. As

such, the meanings of those terms should be well understood. Further,

the self-insurance terms we used were taken from the types of financial

statements that you normally prepare on an annual basis for other

purposes. The meanings of the terms as applied to OSFR are the same as

they are for purposes of reporting to the Securities and Exchange

Commission (SEC) (e.g., Form 10-K and Form 20-F) or preparing other

documents that must conform with U.S. Generally Accepted Accounting

Principles (GAAP). For these reasons, it is unnecessary to define the

OSFR self-insurance terms in the regulation.

The report makes several recommendations for developing self-

insurance formulas that better reflect the future financial stability

of a designated applicant. Commenters opposed these changes, including

the suggested multiple regression analysis, because they are

unnecessarily complex and would lead to higher OSFR compliance costs.

We agree with the commenters, and this final rule does not incorporate

any changes to the self-insurance formulas that are recommended in the

Talley and Associates report.

Self-insurance Formulas--Commenters made several recommendations

for modifying the self-insurance formulas in the proposed rule. All of

the recommendations have the net effect of making a greater self-

insurance allowance than the formulas we proposed. Specific

recommendations included using values of 2 or 6 rather than 10 as a net

worth divisor, using the greater rather than the lesser of the 2 net

[[Page 42703]]

worth amounts calculated, allowing a portion of paid up pollution

insurance to be added to identifiable assets, and factoring the

designated applicant's most recent bond rating into the self-insurance

calculation (see Sec. 253.25). We did not adopt any of these

recommendations. MMS performed an analysis to test divisors from one

through 20 using 72 recent self-insurance applications received over a

1-year period. The divisor of 10 created self-insurance indemnity

opportunities for all the companies that we think would be able to

cover incident liabilities that might arise over a 6-year period after

the incident. Using Standard & Poors Compustat, we analyzed 338

publicly traded companies for the past 6 years to ensure that

potentially insolvent companies could be identified. The results

indicated that the self-insurance formulas we proposed provide the

needed consistency and reliability, while remaining simple for you to

use.

One commenter suggested that we replace the term ``value'' in the

net worth and net assets formulas with either ``amount'' or ``figure,''

because it might be confused with another, more subjective, use of the

term (e.g., fair market value). We agree, and the term ``amount''

replaces ``value'' in the final rule in Secs. 253.23 to 253.28. Also,

the basis for determining the net unencumbered asset value you submit

must be the same basis you use to prepare your audited annual financial

statements. For example, if historical book value minus accumulated

depreciation and amortization is used for your audited annual financial

statements, then you must use historical book value minus accumulated

depreciation and amortization for unencumbered and unimpaired U.S.

assets. This requirement is in Sec. 253.27(b).

One commenter asked us to clarify whether the value of the

unencumbered net assets you must reserve for self-insurance must be

twice the dollar amount of self-insurance you want to demonstrate. The

proposed rule requires you to identify the assets you want to reserve

and promise that they won't be encumbered during the period covered by

the self-insurance (see Secs. 253.26(a) and (c)). Although the proposed

rule did not indicate explicitly, you must reserve to MMS $2.00 in

unencumbered assets for every dollar of self-insurance you want to

demonstrate. For example, if you want to qualify for $35 million in

self-insurance, then you must reserve for possible future claims

unencumbered and unimpaired plant, property, or equipment (i.e., long-

term assets held for use) that has a value of $70 million. Also, the

amount of net unencumbered assets shown on your audited financial

statements must be at least $70 million and the amount shown for

stockholder's/owner's equity must be at least $140 million. Section

253.26 of the rule makes this requirement clear.

One commenter suggested that a financial instrument is a better

form of collateral to use in unencumbered assets calculations because

it is more portable and liquid than property, plant, and equipment. We

disagree. The unencumbered assets formulas are intended to focus more

on fiscal stability than financial liquidity. We believe that property,

plant and equipment are good long-term indicators of financial

stability. This is important from the OSFR perspective because you

qualify for self-insurance or indemnity based on financial information

that is historical, rather than real-time. Also, you might be liable

for a claim made as long as 6 years after an incident occurs at a COF

that you self-insured or indemnified. Thus, it is desirable that

property, plant, and equipment are not readily liquidated or

compromised because it helps insure that those assets will be available

to meet OSFR obligations over an extended time period.

One commenter asked us to include the ``SEC-10'' measure of

discounted estimated future net cash inflows from proved oil and gas

reserves in the formulas for calculating the allowable self-insurance

amount. The commenter offered that this measure could be made more

conservative by subtracting the designated applicant's long-term debt

from the SEC-10 value and dividing the difference by 2. We think the

commenter may not fully understand what is included in the self-

insurance formulas. This item is a component of stockholder's/owner's

equity, so it is already considered in both the net worth test

(Sec. 253.25) and the unencumbered net assets test (Sec. 253.28).

Therefore, no change to the formulas was needed.

One commenter asked that we include an additional ``working

capital'' test to the suite of self-insurance formulas included in the

rule. The formula suggested for this test is: Working capital equals

current U.S. assets minus current worldwide liabilities. A working

capital test would be used in the same manner that the USCG applies it

in the regulations on OSFR for vessels. We reviewed the working assets

test used by the USCG and find it unsuited to this OSFR regulation

because it unduly penalizes companies that have world-wide operations,

and it does not provide adequate assurance that claims for cleanup and

damages would be paid. As such, we did not include a working assets

test in the rule.

One commenter asked why we did not include insurance proceeds in

the net worth calculation. We did not include insurance proceeds in the

net worth calculation because the test uses the results of audited

annual financial statements produced in accordance with U.S. GAAP, or

equivalent, and their adequacy is attested to by an independent auditor

using U.S. generally accepted auditing standards (GAAS), or equivalent.

Since neither GAAP nor GAAS recognizes insurance proceeds until they

are actually paid, we do not believe that it is justified to

incorporate these potential future payments. Once insurance payments

are made, they are incorporated in the receiving company's audited

annual financial statements and will then be considered in the MMS net

worth test.

We did not adopt the suggestion to establish a self-insurance

allowance based on a combination of bond ratings and net worth because

the information used in the MMS net worth test is the basis for the

ratings given for corporate bonds. If consideration of corporate bond

ratings were included in the MMS net worth test, it would be similar to

considering the same financial information twice.

One commenter said we should eliminate the requirement for an

independent auditor's assessment of the value of unencumbered assets

because the auditor may not know the value of the assets. MMS disagrees

with this comment. Section 253.27(b) specifies that an independent

auditor certify that:

``(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 in the audited annual financial statements

is for long-term assets held for use.''

This is exactly the type of information that the independent

auditor is required to address during the audit of a company's

financial statements by the generally accepted auditing standards of

the United States of America (GAAP) and that are required to be

addressed by the SEC. Therefore, no change has been made to the

regulation relative to this comment.

Finally, one commenter asked how MMS would secure or monitor

reserved assets to ensure they remain unencumbered. The regulation

requires

[[Page 42704]]

you to submit to MMS a written promise that you will not compromise the

availability of assets that you reserve for OSFR purposes (see

Sec. 253.26(c)). This promise is the only form of security MMS

requires. We recognize the potential for impropriety regarding the

maintenance of reserved assets, such as selling them. However, an OSFR

demonstration based on self-insurance is valid for no more than 1-year,

so the asset profiles are reviewed frequently by MMS and your auditor

during the process of preparing the audited financial statements for

your next fiscal year. Finally, the regulation requires you to report

any change in your financial condition, including a change in

unencumbered assets, that would adversely affect a valid OSFR

demonstration (see Sec. 253.15(c)). The potential imposition of a civil

penalty for not complying with this requirement, and possibly other

operational restrictions for failing to maintain acceptable OSFR

evidence, should provide sufficient incentive for you to make

alternative OSFR arrangements before compromising reserved assets. For

these reasons the rule does not require you to formally pledge any of

your assets to MMS, and we will not take possession of any assets. To

clarify, the word ``pledged'' was replaced by ``reserved'' in the final

rule.

Insurance as OSFR Evidence

Insurer Liability--Some commenters questioned the willingness of

the insurance industry to participate as guarantors in this OSFR

program because there are broader guarantor liabilities under OPA than

there were under the OCSLA. Although the responsible party's oil-spill

liabilities are greater under OPA than under the OCSLA, you should not

infer that the OPA OSFR provisions or this rule extend guarantor

liabilities beyond the amount of OSFR that is provided. OPA states that

``nothing in the Act shall impose liability with respect to an incident

on any guarantor for damages or removal costs which exceed, in the

aggregate, the amount of financial responsibility required under this

Act which that guarantor has provided for a responsible party.'' (See

OPA, section 1016 (g)). This protection went into effect when OPA was

signed into law in 1990, and it does not change because of this rule.

One commenter asked us to clarify how OPA's joint and several

liability provision applies to a guarantor that shares the risk covered

by an insurance guaranty. The concern is that an individual insurer

might be subject to liability beyond its specified quota share of the

guaranty. Our intent is to limit an insurer's liability to the quota

share of risk indicated on an insurance certificate that we accept as

OSFR evidence. This limit to guarantor liability is now specified in

Sec. 253.61(b) of the rule.

Insurance Layers--The proposed rule allowed you to use insurance as

OSFR evidence if it is packaged in four or fewer insurance

certificates, and a certificate covers one of the allowed amounts.

Several commenters asked us to remove the proposed restrictions on both

the number of layers allowed and amount covered by each layer. The

commenters argued that restrictions on insurance layers may result in

higher insurance costs because the limits we proposed may not be the

most economical way to allocate insurance risk. Also, the commenters

said that the insurance industry has no technical limitations related

to the number of layers that can be developed or the amount included in

a particular layer.

We have not removed any of these restrictions on the number of

layers allowed or the amounts within a layer. The reason we placed a

limit on the number of insurance certificates and the amounts in the

OSFR layers is that in the past we received insurance certificates that

did not add up to the total amount of coverage indicated. We found that

insurance certificate problems likely would increase with the number of

certificates. Many times the problem was associated with ``horizontal''

layering, which is the allocation of risk within an insurance sub-

layer. Verifying that the total amount of the certificate was properly

allocated among participating insurers is a burdensome process that can

delay our acceptance of OSFR evidence. Also, submission of an

inaccurate certificate might result in a civil penalty. Therefore, to

minimize insurance certificate problems, we decided to limit the number

of insurance layers by establishing a minimum size for each layer and

requiring that the certificate indicate each participant's quota share

in the total amount covered by the certificate.

Insurer Qualifications--The proposed rule provided that you could

use insurers that are syndicates of Lloyds of London (Lloyds), members

of the Institute of London Underwriters (ILU), or other insurers that

have achieved a rating of ``secure'' by an insurer rating service

acceptable to MMS. One commenter recommended that we make all insurers

subject to the same qualifying standards. That is, if any insurer must

be rated secure in order to participate in MMS OSFR, then all must be

rated secure to participate. The commenter argued that the double

standard in the proposed rule puts insurers that must pass a ratings

test at an unfair competitive advantage.

In the past, insurance rating services did not assess the claims

paying ability of some insurers that industry typically has used to

demonstrate OSFR. We did not want to exclude Lloyds or the ILU from

participating as guarantors under this regulation because both

insurance syndicates have been the main insurers of current OCSLA OSFR

Certificates. They also have internal processes that prevent loss of

OSFR coverage if one of their member companies fails. However, there is

no longer any need to give these syndicates special dispensation

because both are now rated for claims paying ability. In the ILU case,

all members must maintain a ``secure'' rating from Standard & Poors.

Lloyds has been rated by Standard & Poors since October 1997. Section

253.29(a) of the final regulation has been revised so that the same

rating standard is applied to all insurers.

Insurance Deductible--One commenter asked us to clarify that self-

insurance may be used as an insurance deductible in the OSFR base

layer. We allow you to apply any of the approved non-insurance forms of

OSFR evidence (e.g., indemnity, self-insurance, surety bond) toward an

insurance deductible, provided that it is applied to the insurance

certificate that covers your base OSFR amount layer. See

Sec. 253.29(c)(5) of the rule.

Corporate Captive Insurance--One commenter asked us to allow you to

use corporate captive insurance as OSFR evidence. The rule allows you

to use any insurance company as an OSFR guarantor, provided that the

company has achieved the required ``secure'' rating for claims paying

ability.

Insurance Expiration--The proposed regulation requires you to

submit an insurance certificate specifying that termination of an

insurance policy will not affect liability for claims arising from an

incident (i.e., oil-spill discharge or substantial threat of the

discharge of oil) that occurs on or before the termination date (see

Sec. 253.41(a)). One commenter asked us to delete this requirement

because insurance companies probably will not accept the condition.

Except for ``quit claim'' insurance policies, it is standard

practice for insurance companies to pay claims after the policy term

ends, as indicated by payments made for damage claims for exposure to

asbestos and other hazardous materials several years before. OPA makes

guarantors subject to

[[Page 42705]]

liability for claims made up to 6 years after an oil-spill discharge

occurs. Thus, this final rule retains the post-termination liability

requirement.

Fax Binder--One commenter asked us to continue to allow you to use

a fax ``binder'' as temporary evidence of insurance. We agree, and a

fax binder provision is included in Sec. 253.29(d) of the final rule.

Insurance Certificate (Form MMS-1019)--One commenter objected to

the insurance certificate because it appears to permit an agent or

broker to bind the participating insurers by signing the certificate.

The commenter offered that brokers and agents generally are not

representatives of the participating insurers and, thus, cannot commit

them to any OSFR risk. We agree that an insurance agent or broker may

not have the authority to bind an insurer. We do not agree that the

signature of the agent or broker has the effect of binding any of the

participating insurers. That is why Sec. 253.29(b)(2) of the rule

requires you to submit to MMS an authorized signature for each

participating insurer. The broker or agent signature merely attests

that the certificate was prepared according to the rules and that

changes will be reported, upon demand, to you and MMS. Therefore, no

revision of the proposed rule was needed to respond to the comment.

One commenter misinterpreted the facility coverage option check

boxes on the certificate to extend the insurance coverage from COFs to

all of the designated applicant's facilities. It is not our intent to

have an insurance certificate apply to a facility that is not a COF,

and Form MMS-1019 was revised to eliminate any ambiguity.

One commenter expressed concerns that insurers may not be willing

to participate in a certificate by checking the box on Form MMS-1019

that established coverage for all COFs on a lease, permit, or RUE. We

disagree. MMS has received an increasing number of insurance

certificates with the ``general option'' box checked. Therefore, we

made no change to the form.

Direct Purchase of Insurance--Several commenters asked that this

rule and associated insurance certificate (Form MMS-1019) provide for

the case where the designated applicant purchases insurance directly

from the insurer, rather than using an insurance agent or broker. The

commenters suggested that in this case it would be appropriate for each

insurer to sign the insurance certificate. However, the commenters

believe it would be inappropriate for MMS to require a signature from

an agent or broker.

You may purchase OSFR coverage directly from insurance companies.

If you do, you act as your own insurance agent or broker. Therefore,

you must sign Form MMS-1019 in the space provided for the agent or

broker's signature. By signing, you certify that the information

contained in the insurance certificate is accurate and the named

insurers comply with the requirement of Sec. 253.29. The insurance

underwriters must sign the Form MMS-1019 in every case.

Guarantee as OSFR Evidence

In order to avoid possible confusion between the meanings and

applications of the terms ``guarantee'' and ``guaranty,'' we have

changed ``guarantee'' to ``indemnity'' for the final rule.

One commenter asked why we allow only one indemnitor to provide a

guarantee (i.e., indemnity) for a designated applicant (see

Sec. 253.30(a)). The proposed limit on indemnitors appeared to be

inconsistent with Sec. 253.32 which would allow pools of guarantors.

The commenter asked us to allow more than one indemnitor as long as all

the appropriate self-insurance tests are passed and one indemnitor is

designated as the primary guarantor.

We understand how the commenter might be confused by the apparent

inconsistency between the two sections of the rule that were cited.

Section 253.32 of the proposed rule should have listed ``pooling''

instead of ``pools of guarantors'' as a possible alternative method for

demonstrating OSFR. Pooling is a method that might be proposed by some

designated applicants to share the cost of demonstrating OSFR. For

example, two or more designated applicants might form a partnership

(i.e., pool) that provides an OSFR indemnity for all of the partners

who are also its corporate affiliates or subsidiaries. The amount of

the indemnity would be determined using the procedures in Sec. 253.30.

The partnership's financial resources would come from commitments of

property, plant and equipment made by the pool members. Each pool

member would use the indemnity as a basis for demonstrating OSFR. For

this final rule the term ``pooling'' has replaced ``pools of

guarantors'' in Sec. 253.32. As specified in the rule, the specific

terms of a pooling arrangement, or any alternative method for

demonstrating OSFR, must be acceptable to MMS.

MMS will allow only one indemnitor to provide an indemnity as OSFR

evidence under either Sec. 253.30(a) or Sec. 253.32. This approach is

consistent with the OCSLA OSFR program operated under 33 CFR part 135,

first by the USCG and then, after October 1992, by MMS. When the USCG

first started operating the OCSLA OSFR program in the late 1970's, more

than one indemnitor was allowed for any one OSFR demonstration.

However, this proved to be unworkable because the failure of any one of

the indemnitors could and did cause the failure of the whole package of

OSFR evidence. Once the USCG began allowing only one indemnitor per

OSFR application, there was a significantly greater amount of stability

in OSFR demonstrations. We believe that it is necessary to maintain

this stability, and thus this limitation on indemnities, to provide the

necessary protection for potential claimants under OPA.

One commenter correctly observed that the indemnitor provisions of

Sec. 253.30 are structured so that only a corporate relative of the

designated applicant may provide an OSFR indemnity. To clarify, we made

this limitation explicit in Sec. 253.30(b) of the final rule. This rule

prevents an indemnitor from assuming an unacceptable amount of OSFR

risk. Without this restriction on who may provide an indemnity, it

would be possible for a single indemnitor to provide an indemnity for

all the designated applicants and all the offshore facilities subject

to this regulation. We believe a single indemnitor scenario would

threaten the security of the entire OSFR program because there would be

no reasonable assurance that the obligations attendant to all the

indemnities could be met. We also believe that the corporate affiliate

requirement fosters the OPA objective to ensure that claims are

resolved in an orderly and expeditious manner. If the designated

applicant and the indemnitor share non-OSFR business objectives, then

the potential for disputes over who will pay a claim should be

minimized. Likewise, the corporate affiliate requirement should

maximize the potential for timely settlement of valid claims without

resorting to the Oil Spill Liability Trust Fund.

One commenter noted that Sec. 253.30 bases the amount of an

indemnitor's indemnity solely on financial strength requirements.

Further, the commenter asserts that no security would be lost if we

allowed an insurer to be an indemnitor provided that we find the

insurer acceptable based on the insurer's rating of claims paying

ability. We do not believe it would be in the best interest of

potential claimants to allow an insurer to act as an indemnitor based

on its rating or status. This rating

[[Page 42706]]

or status typically considers the following financial, operating, and

market issues:

Leverage and capitalization;

Holding companies and their associated capital structures;

Reinsurance;

Adequacy of loss reserves policy;

Quality and diversification of assets;

Liquidity;

Profitability of insurance operations;

Revenue composition, diversification, and volatility;

Management experience and objectives in the insurance

business;

Market risk;

Competitive market position;

Spread of risk; and

Event risk.

Although some of these issues are common financial considerations

for any company, most are specific to the insurance industry. In

addition, they are quite different than the self-insurance

considerations and tests described or referred to in Sec. 253.30. There

are instances where insurance companies are partial lessees of OCS

offshore facilities, and there may be instances where they are partial

lessees of State offshore facilities. In this capacity, an insurance

company can be identified as a designated applicant and may submit

financial information in accordance with Secs. 253.21 thru 253.28 to

evidence self-insurance capability. Likewise, if an insurance company

is a corporate parent or affiliate of a designated applicant, it may

submit financial information in accordance with Sec. 253.30 to evidence

indemnitor capability.

Designated Applicant

Many oil and gas industry interests expressed dissatisfaction with

the proposed requirement that a single ``designated applicant''

demonstrate OSFR for all the COFs on a lease, permit, or RUE. The

principal objections are that the designated applicant concept is

inconsistent with the way MMS approaches management of lease

operations, and it fails to recognize that the COFs on a lease, permit,

or RUE might be operated by different parties. The commenters are

concerned that the proposed, area-based approach to demonstrating OSFR

will result in needless paperwork and confusion, and force one

responsible party to assume liability for another's operations. As a

result, the commenters consider an area-based OSFR demonstration

unworkable.

We do not accept the argument that demonstrating OSFR on an area-

specific basis will result in improper assignment of liability for a

COF. It is OPA, not this regulation, that defines who is liable for

cleanup and damages related to a COF incident. The OPA prescribes that

all parties with an ownership or working interest in a lease, permit,

or RUE are jointly and severally liable for oil-spill discharges from

facilities on that lease, permit, or RUE. Thus, the rule on who

demonstrates OSFR for a COF on a lease, permit, or RUE cannot excuse

from liability anyone whom the statute makes liable.

The main reason the proposed rule required one designated applicant

to demonstrate OSFR on a permit or area-specific basis is that it would

make it easier for us to accurately track COFs and ensure continuous

OSFR coverage for all COFs. However, we share the concerns that the

proposed area-based OSFR demonstration may cause confusion for

responsible parties and possibly result in unneeded duplication of

effort. In response, this final regulation does not require you to

demonstrate OSFR on a lease, permit, or RUE basis. Instead, you must

demonstrate OSFR on a COF-specific basis. The designated applicant

concept is retained in the final rule in the sense that any responsible

party or other party approved by MMS may demonstrate OSFR for a COF.

This means that a lessee, operator, or other approved person may be a

designated applicant. This change between proposed and final rule

affected many sections of the regulation.

Although this final rule allows you to demonstrate OSFR on a COF-

specific basis, it retains the requirement for one OSFR demonstration

per COF. As discussed above in the preamble section on Facility, it

would be inconsistent with the purposes of OPA to allow OSFR coverage

for a single facility to be sub-divided, because it tends to understate

the worst case oil-spill discharge volume for a facility and would

frustrate the claims process should a discharge occur. This means that

if there is more than one operator for a COF, you must decide who will

demonstrate OSFR for the COF.

The final rule also requires you to submit and maintain a single

OSFR demonstration for all your COFs. We believe this is essential in

order to track OSFR coverage for COFs and to ensure continuous OSFR

coverage.

One commenter recommended that we require the owner or operator of

a COF to be the designated applicant because it is consistent with

OPA's polluter-pays premise, eliminates involvement of lessees with no

knowledge of COF operations, and creates compatibility with the spill

response planning regulations. We did not adopt this recommendation

because OPA provides that any responsible party for a COF may

demonstrate OSFR for the COF, and all responsible parties are jointly

and severally liable for cleanup and damages resulting from a COF

incident.

Amending an OSFR Demonstration

The comments we received on the proposed procedures for amending an

existing OSFR demonstration focused on timing and methods. Some

commenters are confused about the meaning of the terms ``add'' and

``drop.'' Some commenters believe that we should not require you to

submit to us any information about adds or drops because we already get

that information at the time we consider your request for approval of

an assignment of lease ownership or working interest. If the COF is not

on the OCS, the commenters suggested that we should obtain information

about adds and drops from the appropriate State officials.

We have considered the comments we received on Amending an OSFR

Demonstration and we find that the proposed requirements are necessary

for the following reasons. First, we are not sure that we can obtain

the necessary information about non-OCS COFs from the States.

Therefore, you must provide information about changes in responsibility

for non-OCS COFs. If the States accept the responsibility for providing

that information in the future, then we will revisit the requirement

that you must provide it to us.

Also, for OCS COFs, you may decide to transfer designated applicant

responsibilities to another person without requesting MMS to approve an

assignment of lease ownership or operating rights. In these cases, we

would not have the information needed to accurately track OSFR

coverage. Again, you must provide the information we need to monitor

compliance with this regulation, to ensure that there is an OSFR

demonstration for each COF, and to clearly establish to whom a claim

should be presented.

Implementation Schedule

The proposed regulation required you to submit OSFR evidence that

covers all your COFs to MMS within 60 days after the effective date of

the regulation. Commenters from both the oil and gas and insurance

industries objected to this compliance schedule. One objection is based

on concerns that the rule would go into effect before some of you are

required to prepare facility response plans under the MMS response

planning regulations. The methods you

[[Page 42707]]

must use to calculate worst case oil-spill discharge volumes for

facilities located seaward of the coastline are in those regulations.

Some commenters believe it would be an unnecessary burden to require

worst case discharge calculations under the OSFR rule unless it is

coordinated with the requirement for oil-spill response planning

purposes. The commenters recommended that the effective date of this

regulation be deferred until after you must comply with the MMS

response plan rule. Insurance industry interests expressed concerns

that a 60-day compliance window will generate an overwhelming

administrative burden on insurance providers because a large number of

designated applicants will request insurance coverage over a short

period of time. One commenter suggested that this problem could be

mitigated if a designated applicant were allowed to defer submittal of

OSFR evidence under this rule until the OSFR demonstrations they made

under the current rule covering OCS facilities expire.

We do not find the arguments for linking OSFR demonstrations and

MMS response plan compliance compelling. It is not necessary for you to

prepare an MMS response plan in order to do worst case oil-spill

discharge calculations for your facilities. Likewise, we do not accept

that requiring you to do these calculations is burdensome. If you do

not have to prepare an MMS response plan before you must submit your

OSFR demonstration, the worst case data that is generated to support

the demonstration can later be used to prepare a response plan. Also,

the MMS response plan regulations do not prohibit you from developing a

response plan at the time you must submit an OSFR demonstration under

this regulation. Finally, we believe that OSFR for COFs not covered

under the current OCS OSFR program should be established as soon as

practicable. For these reasons, we find that the benefits of

implementing this new OSFR program in a timely fashion outweigh the

potential burdens cited in the comments.

We share the concerns expressed by commenters that you must be

given sufficient time to assemble acceptable OSFR evidence. This is

especially important if you rely primarily on insurance to demonstrate

OSFR, or if you are not currently subject to the OCS OSFR program that

this regulation replaces. Therefore, we have revised the language in

Sec. 253.44 so that submissions of OSFR demonstrations will be staged

over the 180-day period following the effective date of the regulation.

If you are demonstrating OSFR for any OCS facility on the effective

date, you must submit OSFR evidence for all your COFs before any of

your existing OSFR coverage expires, or within 180 days after the

effective date of the rule, whichever is earlier. If you are not

demonstrating OSFR for an OCS facility, you must submit OSFR evidence

for all your COFs within 180 days after the effective date of this

regulation. We expect this implementation schedule to spread OSFR

submissions out over a period of months, and give insurers and

designated applicants with no prior OSFR experience sufficient time to

prepare acceptable evidence.

Claims for Cleanup and Damages

Direct Action--One commenter stated that the proposed rule, in

Sec. 253.41(d), should mirror the statutory language word-for-word

regarding the circumstances under which a guarantor is subject to

direct action. The concern is that insurance companies will hesitate to

participate if they believe the regulation broadens the statutory

language.

This section merely provides that OSFR evidence submitted by a

designated applicant must include a statement by the instrument insurer

agreeing to the direct action terms and conditions established by OPA.

The terms and conditions cited in the section are entirely consistent

with those in OPA. The rule does not ``broaden'' the statutory

language. Thus, no change to Sec. 253.41(d) is necessary.

Defenses Against Direct Action--OPA provides that MMS may, by

regulation, designate defenses available to guarantors in addition to

the two categories of defenses specifically established by OPA, (1)

defenses that are available to the responsible party, or (2) the

defense that the incident (oil-spill discharge or substantial threat of

the discharge of oil) was caused by the willful misconduct of the

assured. MMS did not establish additional defenses in the proposed

regulation. One commenter said that MMS should, at the very least,

allow insurance companies a defense whenever the insured commits fraud

or makes misrepresentations in the course of procuring the underlying

OSFR policy.

Allowing such a defense is inconsistent with two objectives of the

OSFR program: Ensure that claims for oil-spill damages and cleanup

costs are paid promptly; and make responsible parties or their

guarantors pay claims rather than the Oil Spill Liability Trust Fund

(Fund).

Limiting the types of defenses guarantors may use to avoid payment

of claims is consistent with and furthers the achievement of these

objectives. Furthermore, there is no evidence that fraud and

misrepresentation have been a problem in the current OSFR program. We

will monitor this situation.

Insolvency as a Condition for Direct Action--One commenter said

that MMS had incorrectly suggested in Sec. 253.61(a)(1) that the mere

assertion of insolvency is sufficient to allow a claimant to present a

claim directly to the guarantor. The commenter stated that the

responsible party must actually be insolvent as a condition for direct

action.

The section cited is meant to state, not merely suggest, that a

responsible party's claim of insolvency is sufficient to permit

claimants to proceed with direct action against guarantors. Our

interpretation is that if a responsible party denies or fails to pay a

claim asserting that he or she is insolvent and further asserts that

the conditions of his or her insolvency are equivalent to the

insolvency criteria set forth at OPA section 1016(f)(2), then claimants

may proceed against the responsible party's guarantor. The phrase, ``as

defined under section 101(31) of Title 11, United States Code and

applying generally accepted accounting principles,'' simply defines the

word ``insolvent'' and does not establish a requirement that MMS or

others actually verify the responsible party's financial status. The

commenter also seems to suggest that claimants might make self-serving

assertions that the designated applicant was insolvent. The statute and

the proposed regulation both state that a claimant may proceed against

a guarantor when a responsible party denies or fails to pay a claim

because of insolvency. We do not believe it is unreasonable to expect

that the guarantor contact the designated applicant to verify that the

designated applicant, in fact, has denied or failed to pay a claim

because of insolvency.

The commenter, consistent with the above comments, stated that MMS

should establish through regulations a process whereby MMS would make

an official determination of insolvency. Again, all that is required in

order for claimants to present claims to a guarantor is for the

designated applicant to deny or fail to pay a claim citing insolvency.

One of the principal objectives of OPA is to ensure that people who

suffer damage from an oil spill are compensated quickly to minimize

their economic loss and hardship. Establishing a regulatory process

that might require a lengthy insolvency determination procedure before

compensation could begin would

[[Page 42708]]

be totally inconsistent with that objective.

Accordingly, we are not changing the regulation in response to

comments about requiring MMS to determine insolvency as a condition for

direct action.

Bankruptcy/Insolvency of All Responsible Parties--One commenter

said that ALL responsible parties, not just the designated applicant,

must be bankrupt or insolvent before a claim may be presented directly

to a guarantor.

The 1996 OPA amendments provide that ``a responsible party,''

rather than all responsible parties, will provide evidence of financial

responsibility. Thus, the statute allows one party (i.e., the

designated applicant) to make the demonstration on behalf of all

responsible parties, rather than requiring a demonstration by each

responsible party. The designated applicant is, in effect, an agent for

the other parties. Since all parties are not required to obtain

evidence of financial responsibility, it is not reasonable to require

that all responsible parties be bankrupt or insolvent before claims can

be presented to the guarantor. Furthermore, such a requirement would

slow the processing and payment of claims contrary to OPA's objective

of ensuring that people who suffer damage as a result of a spill are

compensated expeditiously to minimize their economic loss and hardship.

We will not change the regulation to require that all responsible

parties be bankrupt or insolvent before a claim may be presented to a

guarantor. We revised Sec. 253.60 of the final rule to clarify that, in

accordance with the statute, a claimant may present a claim first to

the guarantor if the designated applicant (i.e., responsible party) has

filed a petition for bankruptcy. (See Sec. 253.60(a)).

90-day Trigger for Court Action--One commenter said that the 90-day

trigger for taking court action against the guarantor (see

Sec. 253.60(b)(5)) was inappropriate and could result in needless

litigation. Since the 90-day time period begins when the claim is filed

with the designated applicant, there is no assurance that the guarantor

will have a reasonable time to examine the claim before being sued.

We recognize the validity of the comment. However, it is beyond our

authority to rectify the situation because the OPA provisions are quite

explicit on this issue, and they are implemented by the courts, not

MMS. OPA section 1013(c) clearly states that if a claim is not settled

by payment within 90 days by the person to whom the claim was

submitted, the claimant may elect to commence an action in court

against the responsible party or guarantor or to present the claim to

the Fund.

We do require, however, that designated applicants notify their

guarantor(s) within 15 calendar days of a receipt of a claim. Moreover,

once a facility has been designated a source of a spill under OPA

section 1014, we would expect the designated applicant and the

guarantor to work closely together in the review of claims.

During the course of our review of proposed Sec. 253.60 that was

prompted by this comment, we discovered that it did not explicitly

identify the relationship between advertising a claim and the 90-day

trigger for direct action. The statute provides that, absent denial by

the responsible party (i.e., designated applicant) or guarantor, a

claimant must wait at least 90 days after the date that the incident

source and claims procedures are advertised before a claim may be

presented to the Fund. This limitation is now covered in paragraph

Sec. 253.60(b), and the term ``source of the incident'' was added to

the list of terms in Sec. 253.3.

Advertising Requirements--One commenter said that USCG regulations

(33 CFR 136.301) must be modified to make the responsible party do the

initial advertising of claims procedures.

Without addressing the merits of the comment, such a change cannot

be made in this rule because advertising of claims was neither a

subject of the proposed rule nor a matter within our jurisdiction. Any

change in USCG regulations would have to be made by that agency, not

MMS. To clarify that procedures for advertising claims is within USCG

jurisdiction, rather than MMS jurisdiction, we added the term

``advertise'' to the list of terms in Sec. 253.3.

OSFR Forms--This final regulation does not include the MMS forms

that you must use to submit information supporting your OSFR

demonstration. They will be published in a separate Federal Register

document announcing that they have been approved by OMB. These forms

will reflect our consideration of comments we received on their format

and content.

Civil Penalty Regulations--MMS is amending the regulations at 30

CFR 250.1404 to include violations of the OSFR requirements (reference

Sec. 253.51 of the OSFR rule). MMS will process OSFR penalties under 30

CFR 250.1400 using the penalty assessment matrix presented in the

proposed OSFR rule (62 FR 14056). To obtain a copy of the OSFR penalty

matrix, send your request to the address listed in Sec. 253.45.

Regulatory Flexibility Act--Several commenters said we did not

properly assess the effects of this rule on small businesses. In

particular, the commenters disagreed with our estimates of the number

of small businesses that will be affected and the costs of compliance.

We agree. In response, we revised our analysis using data provided by

the commenters, our reassessment of the likely cost of OSFR insurance,

the decreased geographic area covered by the final rule, and the

estimates of information collection costs. In general, we increased our

estimate of the number of small businesses that would be affected and

decreased the estimated per-business cost of compliance. We do not

agree with the comment that the costs of complying with this regulation

threaten the viability of many small businesses, because our estimated

annual compliance cost is only $14,000 per business (e.g., designated

applicant). See the analysis presented later in this notice of final

rulemaking on the Regulatory Flexibility Act.

Paperwork Reduction Act--We received numerous comments on the

information collection associated with this regulation. In general, the

commenters asserted that we underestimated the paperwork burden, or

that we asked for information we already have or don't need.

One commenter said that the frequency of responses from designated

applicants will be monthly or perhaps weekly, rather than annually, as

stated in the NPR. To clarify, we stated in the NPR that a designated

applicant will submit information at least once per year. Although we

do not agree that response frequency will be monthly or weekly for most

designated applicants, we have reviewed and raised our estimates of

reporting frequency for this final regulation. The principal bases for

these estimates are historical data on the OCSLA OSFR program, requests

for OCS drilling permits, and OCS assignment or transfer requests.

These data are good indicators of possible COF changes that would

require you to submit OSFR information under this rule.

The commenters also said that the underestimate of reporting

frequency leads to a significant underestimate of reporting costs. We

have revised the costs to account for the revised estimates of the

reporting frequency and the associated reporting burden hours.

Some commenters said we should not require any data on COF changes

because MMS or the States already require you to submit the information

for other purposes (e.g., request for

[[Page 42709]]

approval of drilling plan, production plan, or drilling permit).

Further, the commenters believe we should make arrangements with the

States to obtain data you submit to them about non-OCS COFs. We

disagree for the reasons presented above in the discussion on Amending

an OSFR Demonstration.

One commenter suggested that it is unnecessary for us to require

any information about a designated applicant's COFs, if the designated

applicant is the designated operator and demonstrates the maximum OSFR

amount (i.e., $150 million). We disagree, except for information about

worst case oil-spill discharge volumes (see Sec. 253.14(b)). Our

reasons are the same as those presented above in the discussion on

Amending an OSFR Demonstration. Thus, you must specify the COFs covered

by your OSFR demonstration even if the amount of OSFR you demonstrate

is $150 million.

Takings Implication Assessment--Several commenters suggested that

the owners of some small companies that must comply with this rule will

not be able to pay the associated costs. Also, if we award a $25,000

civil penalty for each day of non-compliance, the penalty would amount

to nearly $10,000,000 per year. On those bases the commenters believe

we must prepare a Takings Implications Assessment because the net

effect of the rule could be a taking.

We disagree. Based on information we received from commenters about

the number of small companies affected by the proposed rule,

information we gathered about the likely cost of OSFR insurance, and

the reduced area along the coast that is covered by the final rule, we

re-evaluated the compliance costs. We now estimate that the companies

that will be affected most significantly by this rule will spend about

$14,000 per year to comply. We could find no evidence that any company

with a COF will be subject to a taking because of this incremental

economic burden. Moreover, we do not agree that penalties for non-

compliance with this rule should be considered in assessing a possible

taking.

Author: Raymond L. Beittel, Performance and Safety Branch, MMS,

prepared this document.

E.O. 12886

This final rule is not a significant rule requiring review by the

OMB under E.O. 12866.

All of the oil and gas companies currently operating in the OCS,

including those considered to be small businesses, had to comply with

the existing OSFR regulations (i.e., 33 CFR part 135). MMS does not

expect that these companies will incur any significant operating cost

increases from complying with this rule. Also, of the estimated 45 oil

and gas companies operating in State coastal waters that would be

affected by the rule, about half hold, have applied for, or have held a

Certificate of Financial Responsibility under 33 CFR part 135. If 25

companies operating in State coastal waters are subject to OSFR for the

first time and each company uses only insurance to demonstrate OSFR,

the estimated annual cost of the insurance is $10,000 per company.

Also, we estimate that the annual administrative cost to each of these

25 companies will be approximately $4,000. Overall, the annual,

incremental, industry-wide cost of compliance is estimated to be

$350,000.

This rule does not generate any adverse effects on competition,

investment, productivity, innovation, or the ability of U.S.-based

enterprises to compete with foreign-based enterprises in domestic or

export markets. Therefore, OMB review of this final rule under E.O.

12866 is unnecessary.

Regulatory Flexibility Act

Approximately 200 businesses will pay the costs of complying with

this regulation. These 200 businesses will demonstrate OSFR to MMS on

behalf of themselves and approximately 400 other holders of oil and gas

leases, permits and RUEs that are subject to the rule. Although some

other businesses, such as insurance brokers, also may be affected

because they have OSFR-related agreements with designated applicants,

none are expected to incur any compliance costs. See the discussion

below for Paperwork Reduction Act for more information on estimates of

the total number of affected businesses.

We estimate that the total annual cost of compliance with this new

regulation will be $7.1 million. This estimate represents the sum of

the estimated annual administrative costs (i.e., $800,000) and the

estimated cost of OSFR evidence using insurance or a surety (i.e., $6.3

million). See the discussion below on Reporting and Recordkeeping

``Hour'' Burden for more information administrative cost estimates. The

figure for annual cost of OSFR evidence was derived using the

assumptions that 90 percent of the 200 designated applicants will

demonstrate an average of $35 million in financial responsibility using

insurance or a surety that costs $35,000.

Most of the estimated 200 businesses affected by this new

regulation demonstrated OSFR under the previous regulation. We estimate

that the annual cost of compliance with the previous OSFR rule was $5.9

million. This figure represents the sum of the estimated annual

administrative costs (i.e., $1.1 million) and estimated annual cost of

OSFR evidence using insurance or a surety (i.e., $4.8 million). The

figure for the annual cost of OSFR evidence under the previous program

was derived using the assumptions that insurance-or surety-based

demonstrations were made for 1,200 OCS facilities at an average cost of

$4,000 per facility. Although the cost of compliance for this new rule

is estimated to be higher than for the previous OSFR rule, we expect

that the de minimis provision in the rule will exclude some small

businesses from the requirement to demonstrate OSFR.

Approximately 45 of the estimated 200 businesses that we expect to

be affected by this regulation have oil and gas facilities located in

State waters where Federal OSFR requirements did not previously apply.

Of these 45 businesses, about 35 could be considered small businesses

under Small Business Administration criteria. Each of the remaining 10

businesses employs more than 500 people, so none of them meet the Small

Business Administration small business criteria. Based, in part, on

data received in comments on the proposed rule, we estimate that 25 of

the 35 small businesses with State oil and gas facilities will be

required to demonstrate OSFR for the first time. The remaining 10

affected small businesses demonstrated OSFR for facilities located in

the OCS under the previous regulation. Based on our knowledge of the

types of oil and gas facilities that are owned or operated by the

estimated 25 newly-regulated small businesses, we expect that each

business will be required to demonstrate $10 million in OSFR.

It is reasonable to assume that each of the estimated 25 newly-

regulated small businesses will use OSFR evidence that costs no more

than insurance, and that the annual premium for a $10 million OSFR

insurance policy will be about $10,000. Further, it is conservative to

assume that, in addition to insurance costs, each small business will

incur approximately $4,000 in annual administrative costs. This $4,000

figure represents the total estimated annual administrative cost (i.e.,

approximately $800,000) divided by the total number of affected

businesses (i.e., 200). See the discussion below on Reporting and

Recordkeeping ``Hour'' Burden for more information on administrative

cost estimates. When the estimated annual administrative cost (i.e.,

$4,000) is added to the estimated annual cost of

[[Page 42710]]

OSFR insurance (i.e., $10,000), the total estimated annual cost of

compliance for each of the 25 newly-regulated small businesses equals

$14,000. Further, when the estimated annual newly-affected small

business compliance cost (i.e., $14,000) is multiplied by the total

number of newly-affected small businesses (i.e., 25), the total

incremental annual economic impact on small businesses equals $350,000.

We do not believe this amount represents a substantial economic effect

on small business.

The amount of oil a company produces and the volumes of the

associated worst case oil-spill discharges are generally proportional

to the company's size. We do not expect smaller companies to be the

designated applicants for any COFs that have a worst case oil-spill

discharge volume of greater than 35,000 bbls. If a smaller company

acquires an interest in a COF with a very large worst case oil-spill

discharge volume, such as a deepwater facility in the Gulf of Mexico,

we expect the company will do so in partnership with a larger company

that can demonstrate OSFR using self-insurance. We further expect that

the larger company will be selected as the designated applicant and

demonstrate OSFR on behalf of the smaller partner. Therefore, we do not

expect that implementing this regulation will require small businesses

to demonstrate OSFR for amounts greater than $35 million.

This OSFR regulation will have no adverse effect on oil company

service industries, such as the supply vessel and service vessel

industries. The persons responsible for these vessels are not governed

by this regulation but must comply with separate Coast Guard OSFR

requirements under 33 CFR part 138.

Your comments are important. The Small Business and Agriculture

Regulatory Enforcement Ombudsman and 10 Regional Fairness Boards were

established to receive comments from small business about Federal

agency enforcement actions. The Ombudsman will annually evaluate the

enforcement activities and rate each agency's responsiveness to small

business. If you wish to comment on the enforcement actions of MMS,

call toll-free (888) 734-3247.

Paperwork Reduction Act (PRA) of 1995

As part of the proposed rulemaking process, we submitted the

information collection requirements in 30 CFR part 253 and the related

forms to OMB for approval. A discussion of the comments received on the

information collection aspects of the proposed rule is included earlier

in the preamble. Based on changes made in this rule and to the forms,

we have submitted a revised information collection package to OMB for

approval under section 3507(d) of the PRA. The PRA provides that an

agency may not conduct or sponsor, and a person is not required to

respond to, a collection of information unless it displays a currently

valid OMB control number. The information collection aspects of this

final rule will not take effect until approved by OMB. We will publish

a document in the Federal Register announcing the OMB approval of the

revised collection of information and forms associated with 30 CFR part

253. The title of this collection of information is ``30 CFR Part 253,

Oil Spill Financial Responsibility for Offshore Facilities.''

We invite the public and other Federal agencies to comment on this

collection of information. Send comments regarding any aspect of the

collection to the Office of Information and Regulatory Affairs, OMB,

Attention Desk Officer for the Department of the Interior (OMB control

number 1010-0106), 725 17th Street, NW., Washington, DC 20503. Send a

copy of your comments to the Minerals Management Service; Mail Stop

4230; 1849 C Street, NW., Washington, DC 20240. OMB is required to make

a decision concerning the collection of information contained in this

final rule between 30 and 60 days after publication of this document in

the Federal Register. Therefore, your comments are best assured of

being considered by OMB if OMB receives them by September 10, 1998.

Section 3506(c)(2)(a) of the PRA requires each agency to

specifically solicit comments to: (a) Evaluate whether the proposed

collection of information is necessary for the agency to perform its

duties, including whether the information is useful; (b) evaluate the

accuracy of the agency's estimate of the burden of the proposed

collection of information; (c) enhance the quality, usefulness, and

clarity of the information to be collected; and (d) minimize the burden

on the respondents, including the use of automated collection

techniques or other forms of information technology.

The final rule for 30 CFR part 253 makes very few changes to the

information collection requirements approved for the proposed

rulemaking. We have modified several of the proposed forms for minor

editorial corrections and to more clearly title the forms and some of

the headings within the forms. In addition, we proposed separate

reporting forms for the two categories of covered offshore facilities:

(1) Lease listing, and (2) permit or RUE listing. Separate report forms

for changes to these listings were also proposed. We have collapsed

those four forms into two. This will enable respondents to report any

covered offshore facility on the same form (MMS-1021) and submit

subsequent changes on the same form (MMS-1022), regardless of the type

of covered offshore facility.

In addition, Form MMS-1017, Designation of Applicant, was changed.

In the proposed rule, respondents would submit a separate form for each

covered offshore facility. In the final rule, respondents will submit

one form for all covered offshore facilities for which they are the

Designated Applicant. The new page 2 for Form MMS-1017 will be used to

provide a description of the applicable facilities. The hour burden of

preparing this form does not change as the same time will be necessary

to research and gather the information. However, the information will

now be included on the form submitted to MMS.

Some of the respondents will be the approximately 600 holders of

leases, permits, and RUEs in the OCS and in certain State coastal

waters who will appoint approximately 200 designated applicants to

submit OSFR evidence to MMS under this regulation. Other respondents

will be the designated applicants' insurance agents and brokers,

bonding companies, and indemnitors. MMS receives approximately 2,600

responses each year under the OSFR regulation that this final

regulation replaces. The frequency of submission under the new

regulation will vary, but most will respond at least once per year.

Reporting and Recordkeeping ``Hour'' Burden: We estimate the total

annual burden of this collection of information to be 22,181 reporting

hours and zero recordkeeping hours. Based on $35 per hour, the total

burden hour cost to respondents is estimated to be $776,335. The public

reporting burden for this information will vary by form and collection,

as shown below. The burden per response is averaged to be 5 hours,

including the time for reviewing instructions, searching existing data

sources, gathering and maintaining the data needed, and completing and

reviewing the information collection. The information collected

consists of the following, and the estimated burden for each is shown

in parentheses:

[[Page 42711]]

Form MMS-1016, Designated Applicant Information

Certification (1 hour).

Form MMS-1017, Designation of Applicant (9 hours).

Form MMS-1018, Self-insurance or Indemnity Information (1

hour).

Form MMS-1019, Insurance Certificate (120 hours).

Form MMS-1020, Surety Bond (24 hours).

Form MMS-1021, Covered Offshore Facilities (3 hours).

Form MMS-1022, Covered Offshore Facility Changes (1 hour).

Letter requesting a determination of applicability of the

regulation (2 hours).

Proposal to accept an alternative method to demonstrate

OSFR (no burden--we anticipate no requests but have provided the option

in the rule).

Written notice to MMS of change in ability to comply (1

hour).

Claims (assessment of the burden associated with claims is

the responsibility of the USCG as part of its rulemaking on claims

against the Oil Spill Liability Trust Fund. See 33 CFR parts 135, 136,

and 137).

Reporting and Recordkeeping ``Cost'' Burden: In submitting the

collection of information in the proposed rule to OMB for approval, we

included an estimate of the costs for demonstrating OSFR as a reporting

and recordkeeping cost burden. It has since been determined that this

is considered a ``regulatory'' burden rather than a ``paperwork''

burden as defined by the PRA. Therefore, there are no reporting or

recordkeeping cost burdens contained in this final rule.

Takings Implication Assessment

DOI has determined that this rule does not represent a governmental

action capable of interfering with constitutionally protected property

rights. The annual, incremental cost of complying with this regulation

for approximately 25 businesses will be limited to about $14,000 per

business per year. We do not believe that paying this cost will result

in any takings. Thus, DOI does not need to prepare a Takings

Implication Assessment under E.O. 12630, Governmental Actions and

Interference with Constitutionally Protected Property Rights.

E.O. 12988

DOI has certified to OMB that this rule meets the applicable reform

standards provided in section 3(a) and 3(b)(2) of E.O. 12988.

Unfunded Mandates Reform Act of 1995

DOI has determined and certifies under the Unfunded Mandates Reform

Act, 2 U.S.C. 1502 et seq., that this rule will not impose a cost of

$100 million or more in any given year on State, local, and tribal

governments or the private sector.

National Environmental Policy Act

The DOI Manual (Part 516 DM 5, Appendix 10.4) specifies that

issuing or modifying regulations normally does not have a significant

effect on the environment, either individually or cumulatively. As

such, this rulemaking is categorically excluded from the requirement to

prepare either an environmental assessment or an environmental impact

statement. MMS reviewed the rule according to agency procedures and

verified that none of the exceptions to the categorical exclusion

apply.

List of Subjects

30 CFR Part 250

Administrative practice and procedure, Continental shelf,

Environmental impact statements, Environmental protection, Government

contracts, Investigations, Minerals Management Service, Oil and gas

exploration, Penalties, Pipelines, Public lands--mineral resources,

Public lands--rights-of-way, Reporting and recordkeeping requirements,

and Sulfur.

30 CFR Part 253

Continental shelf, Environmental protection, Insurance, Oil and gas

exploration, Oil pollution, Penalties, Pipelines, Public lands--mineral

resources, Public lands--rights-of-way, Reporting and recordkeeping

requirements, and Surety bonds.

Dated: July 17, 1998.

Sylvia V. Baca,

Assistant Secretary, Land and Minerals Management.

For the reasons stated in the preamble, the Minerals Management

Service (MMS) amends part 250 and adds a new part 253 to Chapter II of

Title 30 of the CFR as follows:

PART 250--OIL AND GAS AND SULPHUR OPERATIONS ON THE OUTER

CONTINENTAL SHELF

1. The authority citation for part 250 continues to read as

follows:

Authority: 43 U.S.C. 1334.

Subpart N--Outer Continental Shelf (OCS) Civil Penalties

2. In Sec. 250.1404, paragraph (d) is added to read as follows:

Sec. 250.1404 Which violations will MMS review for potential civil

penalties?

* * * * *

(d) Violations of the oil spill financial responsibility

requirements at 30 CFR part 253.

3. Part 253 is added to read as follows:

PART 253--OIL SPILL FINANCIAL RESPONSIBILITY FOR OFFSHORE

FACILITIES

Subpart A--General

Sec.

253.1 What is the purpose of this part?

253.3 How are the terms used in this regulation defined?

253.5 What is the authority for collecting Oil Spill Financial

Responsibility (OSFR) information?

Subpart B--Applicability and Amount of OSFR

253.10 What facilities does this part cover?

253.11 Who must demonstrate OSFR?

253.12 May I ask MMS for a determination of whether I must

demonstrate OSFR?

253.13 How much OSFR must I demonstrate?

253.14 How do I determine the worst case oil-spill discharge

volume?

253.15 What are my general OSFR compliance responsibilities?

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

net 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?

[[Page 42712]]

Subpart D--Requirements for Submitting OSFR Information

253.40 What OSFR evidence must I submit to MMS?

253.41 What terms must I include in my OSFR evidence?

253.42 How can I amend my list of COFs?

253.43 When is my OSFR demonstration or the amendment to my OSFR

demonstration effective?

253.44 When must I comply with this subpart?

253.45 Where do I send my OSFR evidence?

Subpart E--Revocation and Penalties

253.50 How can MMS refuse or invalidate my OSFR evidence?

253.51 What are the penalties for not complying with this part?

Subpart F--Claims for Oil-Spill Removal Costs and Damages

253.60 To whom may I present a claim?

253.61 When is a guarantor subject to direct action for claims?

253.62 What are the designated applicant's notification obligations

regarding a claim?

Appendix--List of U.S. Geological Survey Topographic Maps

Authority: 33 U.S.C. 2701 et seq.

Subpart A--General

Sec. 253.1 What is the purpose of this part?

This part establishes the requirements for demonstrating OSFR for

covered offshore facilities (COFs) under Title I of the Oil Pollution

Act of 1990 (OPA), as amended, 33 U.S.C. 2701 et seq.

Sec. 253.3 How are the terms used in this regulation defined?

Terms used in this part have the following meaning:

Advertise means publication of the notice of designation of the

source of the incident and the procedures by which the claims may be

presented, according to 33 CFR part 136, subpart D.

Bay means a body of water included in the Geographic Names

Information System (GNIS) bay feature class. A GNIS bay includes an

arm, bay, bight, cove, estuary, gulf, inlet, or sound.

Claim means a written request, for a specific sum, for compensation

for damages or removal costs resulting from an oil-spill discharge or a

substantial threat of the discharge of oil.

Claimant means any person or government who presents a claim for

compensation under OPA.

Coastline means the line of ordinary low water along that portion

of the coast that is in direct contact with the open sea which marks

the seaward limit of inland waters.

Covered offshore facility (COF) means a facility:

(1) That includes any structure and all its components (including

wells completed at the structure and the associated pipelines),

equipment, pipeline, or device (other than a vessel or other than a

pipeline or deepwater port licensed under the Deepwater Port Act of

1974 (33 U.S.C. 1501 et seq.)) used for exploring for, drilling for, or

producing oil or for transporting oil from such facilities. This

includes a well drilled from a mobile offshore drilling unit (MODU) and

the associated riser and well control equipment from the moment a drill

shaft or other device first touches the seabed for purposes of

exploring for, drilling for, or producing oil, but it does not include

the MODU; and

(2) That is located:

(i) Seaward of the coastline; or

(ii) In any portion of a bay that is:

(A) Connected to the sea, either directly or through one or more

other bays; and

(B) Depicted in whole or in part on any USGS map listed in the

Appendix to this part, or on any map published by the USGS that is a

successor to and covers all or part of the same area as a listed map.

Where any portion of a bay is included on a listed map, this rule

applies to the entire bay; and

(3) That has a worst case oil-spill discharge potential of more

than 1,000 bbls of oil, or a lesser volume if the Director determines

in writing that the oil-spill discharge risk justifies the requirement

to demonstrate OSFR.

Designated applicant means a person the responsible parties

designate to demonstrate OSFR for a COF on a lease, permit, or right-

of-use and easement.

Director means the Director of the Minerals Management Service.

Fund means the Oil Spill Liability Trust Fund established by

section 9509 of the Internal Revenue Code of 1986 as amended (26 U.S.C.

9509).

Geographic Names Information System (GNIS) means the database

developed by the USGS in cooperation with the U.S. Board of Geographic

Names which contains the federally-recognized geographic names for all

known places, features, and areas in the United States that are

identified by a proper name. Each feature is located by state, county,

and geographic coordinates and is referenced to the appropriate

1:24,000-scale or 1:63,360-scale USGS topographic map on which it is

shown.

Guarantor means a person other than a responsible party who

provides OSFR evidence for a designated applicant.

Guaranty means any acceptable form of OSFR evidence provided by a

guarantor including an indemnity, insurance, or surety bond.

Incident means any occurrence or series of occurrences having the

same origin that results in the discharge or substantial threat of the

discharge of oil.

Indemnity means an agreement to indemnify a designated applicant

upon its satisfaction of a claim.

Indemnitor means a person providing an indemnity for a designated

applicant.

Independent accountant means a certified public accountant who is

certified by a state, or a chartered accountant certified by the

government of jurisdiction within the country of incorporation of the

company proposing to use one of the self-insurance evidence methods

specified in this subpart.

Insolvent has the meaning set forth in 11 U.S.C. 101, and generally

refers to a financial condition in which the sum of a person's debts is

greater than the value of the person's assets.

Lease means any form of authorization issued under the Outer

Continental Shelf Lands Act or state law which allows oil and gas

exploration and production in the area covered by the authorization.

Lessee means a person holding a leasehold interest in an oil or gas

lease including an owner of record title or a holder of operating

rights (working interest owner).

Oil means oil of any kind or in any form, except as excluded by

paragraph (2) of this definition.

(1) Oil includes:

(i) Petroleum, fuel oil, sludge, oil refuse, and oil mixed with

wastes other than dredged spoil;

(ii) Hydrocarbons produced at the wellhead in liquid form;

(iii) Gas condensate that has been separated from gas before

pipeline injection.

(2) Oil does not include petroleum, including crude oil or any

fraction thereof, which is specifically listed or designated as a

hazardous substance under subparagraphs (A) through (F) of section

101(14) of the Comprehensive Environmental Response, Compensation, and

Liability Act (CERCLA) (42 U.S.C. 9601).

Oil Spill Financial Responsibility (OSFR) means the capability and

means by which a responsible party for a covered offshore facility will

meet removal costs and damages for which it is liable under Title I of

the Oil Pollution Act of 1990, as amended (33 CFR 2701 et seq.), with

respect to both oil-spill discharges and substantial threats of the

discharge of oil.

Outer Continental Shelf (OCS) has the same meaning as the term

``Outer Continental Shelf'' defined in section

[[Page 42713]]

2(a) of the OCS Lands Act (OCSLA) (43 U.S.C. 1331(a)).

Permit means an authorization, license, or permit for geological

exploration issued under section 11 of the OCSLA (43 U.S.C. 1340) or

applicable state law.

Person means an individual, corporation, partnership, association

(including a trust or limited liability company), state, municipality,

commission or political subdivision of a state, or any interstate body.

Pipeline means the pipeline segments and any associated equipment

or appurtenances used or intended for use in the transportation of oil

or natural gas.

Responsible party has the following meanings:

(1) For a COF that is a pipeline, responsible party means any

person owning or operating the pipeline;

(2) For a COF that is not a pipeline, responsible party means

either the lessee or permittee of the area in which the COF is located,

or the holder of a right-of-use and easement granted under applicable

state law or the OCSLA (43 U.S.C. 1301-1356) for the area in which the

COF is located (if the holder is a different person than the lessee or

permittee). A Federal agency, State, municipality, commission, or

political subdivision of a state, or any interstate body that as owner

transfers possession and right to use the property to another person by

lease, assignment, or permit is not a responsible party; and

(3) For an abandoned COF, responsible party means any person who

would have been a responsible party for the COF immediately before

abandonment.

Right-of-use and easement (RUE) means any authorization to use the

OCS or submerged land for purposes other than those authorized by a

lease or permit, as defined herein. It includes pipeline rights-of-way.

Source of the incident means the facility from which oil was

discharged or which poses a substantial threat of discharging oil, as

designated by the Director, National Pollution Funds Center, according

to 33 CFR part 136, subpart D.

State means the several States of the United States, the District

of Columbia, the Commonwealth of Puerto Rico, Guam, American Samoa, the

United States Virgin Islands, the Commonwealth of the Northern

Marianas, and any other territory or possession of the United States.

Sec. 253.5 What is the authority for collecting Oil Spill Financial

Responsibility (OSFR) information?

(a) The Office of Management and Budget (OMB) has approved the

information collection requirements in this part 253 under 44 U.S.C.

3501 et seq. and assigned OMB control number 1010-0106.

(b) MMS collects the information to ensure that the designated

applicant for a COF has the financial resources necessary to pay for

cleanup and damages that could be caused by oil discharges from the

COF. MMS uses the information to ensure compliance of offshore lessees,

owners, and operators of covered facilities with OPA; to establish

eligibility of designated applicants for OSFR certification (OSFRC);

and to establish a reference source of names, addresses, and telephone

numbers of responsible parties for covered facilities and their

designated agents, guarantors, and U.S. agents for service of process

for claims associated with oil pollution from designated covered

facilities. The requirement to provide the information is mandatory. No

information submitted for OSFRC is confidential or proprietary.

(c) An agency may not conduct or sponsor, and a person is not

required to respond to, a collection of information unless it displays

a currently valid OMB control number.

(d) Send comments regarding any aspect of the collection of

information under this part, including suggestions for reducing the

burden, to the Information Collection Clearance Officer, Minerals

Management Service, Mail Stop 4230, 1849 C Street, NW, Washington, DC

20240; and to the Office of Information and Regulatory Affairs, Office

of Management and Budget, Attention: Desk Officer for the Department of

the Interior (1010-0106), 725 17th Street NW., Washington, DC 20503.

Subpart B--Applicability and Amount of OSFR

Sec. 253.10 What facilities does this part cover?

(a) This part applies to any COF on any lease or permit issued or

on any RUE granted under the OCSLA or applicable state law.

(b) For a pipeline COF that extends onto land, this part applies to

that portion of the pipeline lying seaward of the first accessible flow

shut-off device on land.

Sec. 253.11 Who must demonstrate OSFR?

(a) A designated applicant must demonstrate OSFR. A designated

applicant may be a responsible party or another person authorized under

this section. Each COF must have a single designated applicant.

(1) If there is more than one responsible party, those responsible

parties must use Form MMS-1017 to select a designated applicant. The

designated applicant must submit Form MMS-1016 and agree to demonstrate

OSFR on behalf of all the responsible parties.

(2) If you are a designated applicant who is not a responsible

party, you must agree to be liable for claims made under OPA jointly

and severally with the responsible parties.

(b) The designated applicant for a COF on a lease must be either:

(1) A lessee; or

(2) The designated operator for the OCS lease under 30 CFR 250.108

or the unit operator designated under a Federally approved unit

including the OCS lease. For a lease or unit not in the OCS, the

operator designated under the lease or unit operating agreement for the

lease may be the designated applicant only if the operator has agreed

to be responsible for compliance with all the laws and regulations

applicable to the lease or unit.

(c) The designated applicant for a COF on a permit must be the

permittee.

(d) The designated applicant for a COF on a RUE must be the holder

of the RUE or, if there is a pipeline on the RUE, the owner or operator

of the pipeline.

(e) MMS may require the designated applicant for a lease, permit,

or RUE to be a person other than a person identified in paragraphs (b)

through (d) of this section if MMS determines that a person identified

in paragraphs (b) through (d) cannot adequately demonstrate OSFR.

(f) If you are a responsible party and you fail to designate an

applicant, then you must demonstrate OSFR under the requirements of

this part.

Sec. 253.12 May I ask MMS for a determination of whether I must

demonstrate OSFR?

You may submit to MMS a request for a determination of OSFR

applicability. Address the request to the office identified in

Sec. 253.45. You must include in your request any information that will

assist MMS in making the determination. MMS may require you to submit

other information before making a determination of OSFR applicability.

Sec. 253.13 How much OSFR must I demonstrate?

(a) The following general parameters apply to the amount of OSFR

that you must demonstrate:

[[Page 42714]]

------------------------------------------------------------------------

If you are the designated applicant for Then you must demonstrate

------------------------------------------------------------------------

Only one COF........................... The amount of OSFR that applies

to the COF.

------------------------------------------------------------------------

More than one COF...................... The highest amount of OSFR that

applies to any one of the

COFs.

------------------------------------------------------------------------

(b) You must demonstrate OSFR in the amounts specified in this

section:

(1) For a COF located wholly or partially in the OCS you must

demonstrate OSFR in accordance with the following table:

------------------------------------------------------------------------

Applicable

COF worst case oil-spill discharge volume amount of OSFR

------------------------------------------------------------------------

Over 1,000 bbls but not more than 35,000 bbls........... $35,000,000

------------------------------------------------------------------------

Over 35,000 but not more than 70,000 bbls............... 70,000,000

------------------------------------------------------------------------

Over 70,000 but not more than 105,000 bbls.............. 105,000,000

------------------------------------------------------------------------

Over 105,000 bbls....................................... 150,000,000

------------------------------------------------------------------------

(2) For a COF not located in the OCS you must demonstrate OSFR in

accordance with the following table:

------------------------------------------------------------------------

Applicable

COF worst case oil-spill discharge volume amount of OSFR

------------------------------------------------------------------------

Over 1,000 bbls but not more than 10,000 bbls........... $10,000,000

------------------------------------------------------------------------

Over 10,000 but not more than 35,000 bbls............... 35,000,000

------------------------------------------------------------------------

Over 35,000 but not more than 70,000 bbls............... 70,000,000

------------------------------------------------------------------------

Over 70,000 but not more than 105,000 bbls.............. 105,000,000

------------------------------------------------------------------------

Over 105,000 bbls....................................... 150,000,000

------------------------------------------------------------------------

(3) The Director may determine that you must demonstrate an amount

of OSFR greater than the amount in paragraphs (b)(1) and (2) of this

section based on the relative operational, environmental, human health,

and other risks that your COF poses. The Director may require an amount

that is one or more levels higher than the amount indicated in

paragraph (b)(1) or (2) of this section for your COF. The Director will

not require an OSFR demonstration that exceeds $150 million.

(4) You must demonstrate OSFR in the lowest amount specified in the

applicable table in paragraph (b)(1) or (b)(2) for a facility with a

potential worst case oil-spill discharge of 1,000 bbls or less if the

Director notifies you in writing that the demonstration is justified by

the risks of the potential oil-spill discharge.

Sec. 253.14 How do I determine the worst case oil-spill discharge

volume?

(a) To calculate the amount of OSFR you must demonstrate for a

facility under Sec. 253.13(b), you must use the worst case oil-spill

discharge volume that you determined under whichever of the following

regulations applies:

(1) 30 CFR Part 254--Response Plans for Facilities Located Seaward

of the Coast Line, except that the volume of the worst case oil-spill

discharge for a well must be four times the uncontrolled flow volume

that you estimate for the first 24 hours.

(2) 40 CFR Part 112--Oil Pollution Prevention; or

(3) 49 CFR Part 194--Response Plans for Onshore Oil Pipelines.

(b) If you are a designated applicant and you choose to demonstrate

$150 million in OSFR, you are not required to determine any worst case

oil-spill discharge volumes, since that is the maximum amount of OSFR

required under this part.

Sec. 253.15 What are my general OSFR compliance responsibilities?

(a) You must maintain continuous OSFR coverage for all your leases,

permits, and RUEs with COFs for which you are the designated applicant.

(b) You must ensure that new OSFR evidence is submitted before your

current evidence lapses or is canceled and that coverage for your new

COF is submitted before the COF goes into operation.

(c) If you use self-insurance to demonstrate OSFR and find that you

no longer qualify to self-insure the required OSFR amount based upon

your latest audited annual financial statements, then you must

demonstrate OSFR using other methods acceptable to MMS by whichever of

the following dates comes first:

(1) Sixty calendar days after you receive your latest audited

annual financial statement; or

(2) The first calendar day of the 5th month after the close of your

fiscal year.

(d) You may use a surety bond to demonstrate OSFR. If you find that

your bonding company has lost its state license or has had its U.S.

Treasury Department certification revoked, then you must replace the

surety bond within 15 calendar days using a method of OSFR that is

acceptable to MMS.

(e) You must notify MMS in writing within 15 calendar days after a

change occurs that would prevent you from meeting your OSFR obligations

(e.g., if you or your indemnitor petition for bankruptcy under Chapters

7 or 11 of Title 11, U.S.C.). You must take any action MMS directs to

ensure an acceptable OSFR demonstration.

(f) If you deny payment of a claim presented to you under

Sec. 253.60(b) or (c)(4), then you must give the claimant a written

explanation for your denial.

[[Page 42715]]

Subpart C--Methods for Demonstrating OSFR

Sec. 253.20 What methods may I use to demonstrate OSFR?

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 Secs. 253.21 through 253.28;

(b) Insurance under Sec. 253.29;

(c) An indemnity under Sec. 253.30;

(d) A surety bond under Sec. 253.31; or

(e) An alternative method the Director approves under Sec. 253.32.

Sec. 253.21 How can I use self-insurance as OSFR evidence?

(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 Sec. 253.25 or an unencumbered net asset test under

Sec. 253.28.

(b) To establish the amount of self-insurance allowed, you must

submit evidence of your net worth under Sec. 253.23 or evidence of your

unencumbered assets under Sec. 253.26.

(c) You must identify a U.S. agent for service of process.

Sec. 253.22 How do I apply to use self-insurance as OSFR evidence?

(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.

Sec. 253.23 What information must I submit to support my net worth

demonstration?

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).

Sec. 253.24 When I submit audited annual financial statements to

verify my net worth, what standards must they meet?

(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.

Sec. 253.25 What financial test procedures must I use to determine the

amount of self-insurance allowed as OSFR evidence based on net worth?

(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.

Sec. 253.26 What information must I submit to support my unencumbered

assets demonstration?

You must support your unencumbered assets evaluation with the

information required by Sec. 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.

Sec. 253.27 When I submit audited annual financial statements to

verify my unencumbered assets, what standards must they meet?

Any audited annual financial statements that you submit must:

(a) Meet the standards in Sec. 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.

Sec. 253.28 What financial test procedures must I use to evaluate the

amount of self-insurance allowed as OSFR evidence based on unencumbered

assets?

(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.

[[Page 42716]]

Sec. 253.29 How can I use insurance as OSFR evidence?

(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 Sec. 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 Sec. 253.13;

(2) No more than one insurance certificate may be used to cover

each OSFR layer specified in Sec. 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.

Sec. 253.30 How can I use an indemnity as OSFR evidence?

(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 Sec. 253.41; and

(2) Does not exceed the amounts calculated using the net worth or

unencumbered assets tests specified under Secs. 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.

Sec. 253.31 How can I use a surety bond as OSFR evidence?

(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 Sec. 253.41.

Sec. 253.32 Are there alternative methods to demonstrate OSFR?

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

Sec. 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.

Subpart D--Requirements for Submitting OSFR Information

Sec. 253.40 What OSFR evidence must I submit to MMS?

(a) You must submit to MMS:

(1) A single demonstration of OSFR that covers all the COFs for

which you are the designated applicant;

(2) A completed and unaltered Form MMS-1016;

(3) MMS forms that identify your COFs (Form MMS-1021, Form MMS-

1022), and the methods you will use to demonstrate OSFR (Form MMS-1018,

Form MMS-1019, Form MMS-1020). Forms are available from the address

listed in Sec. 253.45;

(4) Any insurance certificates, indemnities, and surety bonds used

as OSFR evidence for the COFs for which you are the designated

applicant;

(5) A completed Form MMS-1017 for each responsible party, unless

you are the only responsible party for the COFs covered by your OSFR

demonstration; and

(6) Other financial instruments and information the Director

requires to support your OSFR demonstration under Sec. 253.32.

(b) Each MMS form you submit to MMS as part of your OSFR

demonstration must be signed. You also must attach to Form MMS-1016

proof of your authority to sign.

Sec. 253.41 What terms must I include in my OSFR evidence?

(a) Each instrument you submit as OSFR evidence must specify:

(1) The effective date, and except for a surety bond, the

expiration date;

(2) That termination of the instrument will not affect the

liability of the instrument issuer for claims arising from an incident

(i.e., oil-spill discharge or substantial threat of the discharge of

oil) that occurred on or before the effective date of termination;

(3) That the instrument will remain in force until the termination

date or until the earlier of:

(i) Thirty calendar days after MMS and the designated applicant

receive from the instrument issuer a notification of intent to cancel;

or

[[Page 42717]]

(ii) MMS receives from the designated applicant other acceptable

OSFR evidence; or

(iii) All the COFs to which the instrument applies are permanently

abandoned in compliance with 30 CFR part 250 or equivalent State

requirements;

(4) That the instrument issuer agrees to direct action for claims

made under OPA up to the guaranty amount, subject to the defenses in

paragraph (a)(6) of this section and following the procedures in

Sec. 253.60 of this part;

(5) An agent in the United States for service of process; and

(6) That the instrument issuer will not use any defenses against a

claim made under OPA except:

(i) The rights and defenses that would be available to a designated

applicant or responsible party for whom the guaranty was provided; and

(ii) The incident (i.e., oil-spill discharge or a substantial

threat of the discharge of oil) leading to the claim for removal costs

or damages was caused by willful misconduct of a responsible party for

whom the designated applicant demonstrated OSFR.

(b) You may not change, omit, or add limitations or exceptions to

the terms and conditions in an MMS form that you submit as part of your

OSFR demonstration. If you attempt to do this, MMS will disregard the

changes, omissions, additions, limitations, or exceptions and by

operation of this rule MMS will consider the form to contain all the

terms and conditions included on the original MMS form.

Sec. 253.42 How can I amend my list of COFs?

(a) If you want to add a COF that is not identified in your current

OSFR demonstration, you must submit to MMS a completed Form MMS-1022.

If applicable, you also must submit any additional indemnities, surety

bonds, insurance certificates, or other instruments required to extend

the coverage of your original OSFR demonstration to the COFs to be

added. You do not need to resubmit previously accepted audited annual

financial statements for the current fiscal year.

(b) If you want to drop a COF identified in your current OSFR

demonstration, you must submit to MMS a completed Form MMS-1022. You

must continue to demonstrate OSFR for the COF until MMS approves OSFR

evidence for the COF from another designated applicant, or OSFR is no

longer required (e.g., until a well that is a COF is properly plugged

and abandoned).

Sec. 253.43 When is my OSFR demonstration or the amendment to my OSFR

demonstration effective?

(a) MMS will notify you in writing when we approve your OSFR

demonstration. If we find that you have not submitted all the

information needed to demonstrate OSFR, we may require you to provide

additional information before we determine whether your OSFR evidence

is acceptable.

(b) Except in the case of self-insurance or an indemnity, MMS

acceptance of OSFR evidence is valid until the surety bond, insurance

certificate, or other accepted OSFR instrument expires or is canceled.

In the case of self-insurance or indemnity, acceptance is valid until

the first day of the 5th month after the close of your or your

indemnitor's current fiscal year.

Sec. 253.44 When must I comply with this part?

If you are the designated applicant for one or more COFs covered by

a Certificate of Financial Responsibility (CFR) issued under 33 CFR

part 135 that expires after October 13, 1998, you must submit to MMS

your evidence of OSFR for all your COFs no later than the earliest date

that an existing CFR for any of your COFs expires. All other designated

applicants must submit to MMS evidence of OSFR for their COFs no later

than April 8, 1999.

Sec. 253.45 Where do I send my OSFR evidence?

Address all correspondence and required submissions related to this

part to: U.S. Department of the Interior, Minerals Management Service,

Gulf of Mexico Region, Oil Spill Financial Responsibility Program, 1201

Elmwood Park Boulevard, New Orleans, Louisiana 70123.

Subpart E--Revocation and Penalties

Sec. 253.50 How can MMS refuse or invalidate my OSFR evidence?

(a) If MMS determines that any OSFR evidence you submit fails to

comply with the requirements of this part, we may not accept it. If we

do not accept your OSFR evidence, then we will send you a written

notification stating:

(1) That your evidence is not acceptable;

(2) Why your evidence is unacceptable; and

(3) The amount of time you are allowed to submit acceptable

evidence without being subject to civil penalty under Sec. 253.51.

(b) MMS may immediately and without prior notice invalidate your

OSFR demonstration if you:

(1) Are no longer eligible to be the designated applicant for a COF

included in your demonstration; or

(2) Permit the cancellation or termination of the insurance policy,

surety bond, or indemnity upon which the continued validity of the

demonstration is based.

(c) If MMS determines you are not complying with the requirements

of this part for any reason other than paragraph (b) of this section,

we will notify you of our intent to invalidate your OSFR demonstration

and specify the corrective action needed. Unless you take the

corrective action MMS specifies within 15 calendar days from the date

you receive such a notice, we will invalidate your OSFR demonstration.

Sec. 253.51 What are the penalties for not complying with this part?

(a) If you fail to comply with the financial responsibility

requirements of OPA at 33 U.S.C. 2716 or with the requirements of this

part, then you may be liable for a civil penalty of up to $25,000 per

COF per day of violation (that is, each day a COF is operated without

acceptable evidence of OSFR).

(b) MMS will determine the date of a noncompliance. MMS will assess

penalties in accordance with an OSFR penalty schedule using the

procedures found at 30 CFR part 250, subpart N. You may obtain a copy

of the penalty schedule from MMS at the address in Sec. 253.45.

(c) MMS may assess a civil penalty against you that is greater or

less than the amount in the penalty schedule after taking into account

the factors in section 4303(a) of OPA (33 U.S.C. 2716a).

(d) If you fail to correct a deficiency in the OSFR evidence for a

COF, then the Director may suspend operation of a COF in the OCS under

30 CFR 250.110 or seek judicial relief, including an order suspending

the operation of any COF.

Subpart F--Claims for Oil-Spill Removal Costs and Damages

Sec. 253.60 To whom may I present a claim?

(a) If you are a claimant, you must present your claim first to the

designated applicant for the COF that is the source of the incident

resulting in your claim. If, however, the designated applicant has

filed a petition for bankruptcy under 11 U.S.C. chapter 7 or 11, you

may present your claim first to any of the designated applicant's

guarantors.

(b) If the claim you present to the designated applicant or

guarantor is denied or not paid within 90 days after you first present

it or advertising begins,

[[Page 42718]]

whichever is later, then you may seek any of the following remedies

that apply:

------------------------------------------------------------------------

If the reason for denial or

nonpayment is then you may elect to

------------------------------------------------------------------------

(1) Not an assertion of (i) Present your claim to any of the

insolvency or petition in responsible parties for the COF; or

bankruptcy under 11 U.S.C. (ii) Initiate a lawsuit against the

chapter 7 or 11. designated applicant and/or any of the

responsible parties for the COF; or

(iii) Present your claim to the Fund

using the procedures at 33 CFR part 136.

------------------------------------------------------------------------

(2) An assertion of (i) Pursue any of the remedies in items

insolvency or petition in (1)(i) through (iii) of this table; or

bankruptcy under 11 U.S.C. (ii) Present your claim to any of the

chapter 7 or 11. designated applicant's guarantors; or

(iii) Initiate a lawsuit against any of

the designated applicant's guarantors.

------------------------------------------------------------------------

(c) If no one has resolved your claim to your satisfaction using

the remedy that you elected under paragraph (b) of this section, then

you may pursue another available remedy, unless the Fund has denied

your claim or a court of competent jurisdiction has ruled against your

claim. You may not pursue more than one remedy at a time.

(d) You may ask MMS to assist you in determining whether a

guarantor may be liable for your claim. Send your request for

assistance to the address listed in Sec. 253.45. You must include any

information you have regarding the existence or identity of possible

guarantors.

Sec. 253.61 When is a guarantor subject to direct action for claims?

(a) If you are a guarantor, then you are subject to direct action

for any claim asserted by:

(1) The United States for any compensation paid by the Fund under

OPA, including compensation claim processing costs; and

(2) A claimant other than the United States if the designated

applicant has:

(i) Denied or failed to pay a claim because of being insolvent; or

(ii) Filed a petition in bankruptcy under 11 U.S.C. chapters 7 or

11.

(b) If you participate in an insurance guaranty for a COF incident

(i.e., oil-spill discharge or substantial threat of the discharge of

oil) that is subject to claims under this part, then your maximum,

aggregate liability for those claims is equal to your quota share of

the insurance guaranty.

Sec. 253.62 What are the designated applicant's notification

obligations regarding a claim?

If you are a designated applicant, and you receive a claim for

removal costs and damages, then within 15 calendar days of receipt of a

claim you must notify:

(a) Your guarantors; and

(b) The responsible parties for whom you are acting as the

designated applicant.

Appendix--List of U.S. Geological Survey Topographic Maps

Alabama (1:24,000 scale): Bellefontaine; Bon Secour Bay;

Bridgehead; Coden; Daphne; Fort Morgan; Fort Morgan NW; Grand Bay;

Grand Bay SW; Gulf Shores; Heron Bay; Hollingers Island; Isle Aux

Herbes; Kreole; Lillian; Little Dauphin Island; Little Point Clear;

Magnolia Springs; Mobile; Orange Beach; Perdido Beach; Petit Bois

Island; Petit Bois Pass; Pine Beach; Point Clear; Saint Andrews Bay;

West Pensacola.

Alaska (1:63,360 scale): Afognak (A-1, A-2, A-3, A-4, A-5, A-

0&B-0, B-1, B-2, B-3, C-1&2, C-2&3, C-5, C-6, D-1, D-4, D-5);

Anchorage (A-1, A-2, A-3, A-4, A-8, B-7, B-8); Barrow (A-1, A-2, A-

3, A-4, A-5, B-3, B-4); Baird Mts. (A-6); Barter Island (A-3, A-4,

A-5); Beechy Point (A-1, A-2, B-1, B-2, B-3, B-4, B-5, C-4, C-5);

Bering Glacier (A-1, A-2, A-3, A-4, A-5, A-6, A-7, A-8); Black (A-1,

A-2, B-1, C-1); Blying Sound (C-7, C-8, D-1&2, D-3, D-4, D-5, D-6,

D-7, D-8); Candle (D-6); Cordova (A-1, A-2, A-3, A-4, A-7&8, B-2, B-

3, B-4, B-5, B-6, B-7, B-8, C-5, C-6, C-7, C-8, D-6, D-7, D-8); De

Long Mts. (D-4, D-5); Demarcation Point (C-1, C-2, D-2, D-3);

Flaxman Island (A-1, A-3, A-4, A-5, B-5); Harrison Bay (B-1, B-2, B-

3, B-4, C-1, C-3, C-4, C-5, D-4, D-5); Icy Bay (D1, D-2&3); Iliamna

(A-2, A-3, A-4, B-2, B-3, C-1, C-2, D-1); Karluk (A-1, A-2, B-2, B-

3, C-1, C-2, C-4&5, C-6); Kenai (A-4, A-5, A-7, A-8, B-4, B-6, B-7,

B-8, C-4, C-5, C-6, C-7, D-1, D-2, D-3, D-4, D-5); Kodiak (A-3, A-4,

A-5, A-6, B-1&2, B-3, B-4, B-6, C-1, C-2, C-3, C-5, C-6, D-1, D-2,

D-3, D-4, D-5, D-6); Kotzebue (A-1, A-2, A-3, A-4, B-4, B-6, C-1, C-

4, C-5, C-6, D-1, D-2); Kwiguk (C-6, D-6); Meade River (D-1, D-3, D-

4, D-5); Middleton Island (B-7, D-1&2); Mt. Katmai (A-1, A-2, A-3;

B-1); Mt. Michelson (D-1, D-2, D-3); Mt. St. Elias (A-5); Noatak (A-

1, A-2, A-3, A-4, B-4, C-4, C-5, D-6, D-7); Nome (B-1, C-1, C-2, C-

3, D-3, D-4, D-7); Norton Bay (A-4, B-4, B-5, B-6, C-4, C-5, C-6, D-

4, D-5, D-6); Point Hope (A-1, A-2, B-2, B-3, C-2, C-3, D-1, D-2);

Point Lay (A-3&4, B-2&3, C-2, D-1, D-2); Selawik (A-5, A-6, B-5, B-

6, C-5, C-6, D-6); Seldovia (A-3, A-4, A-5, A-6, B-1, B-2, B-3, B-4,

B-5, B-6, C-1, C-2, C-3, C-4, C-5, D-1, D-3, D-4, D-5, D-8); Seward

(A-1, A-2, A-3, A-4, A-5, A-6, A-7, B-1, B-2, B-3, B-4, B-5, C-1, C-

2, C-3, C-4, C-5, D-1, D-2, D-3, D-4, D-5, D-6, D-7, D-8);

Shishmaref (A-2, A-3, A-4, B-1, B-2, B-3); Solomon (B-2, B-3, B-6,

C-1, C-2, C-3, C-4, C-5, C-6); St. Michael (A-2, A-3, A-4, A-5, A-6,

B-1, B-2, C-1, C-2); Teller (A-2, A-3, A-4, B-3, B-4, B-5, B-6, C-6,

C-7, D-4, D-5, D-6, D-8); Teshekpuk (D-1, D-2, D-3, D-4, D-5);

Tyonek (A-1, A-2, A-3, A-4, B-1, B-2); Unalakleet (B-5, B-6, C-4, C-

5, D-4); Valdez (A-7, A-8); Wainwright (A-5, A-6&7, B-2, B-3, B-4,

B-5&6, C-2, C-3 , D-1, D-2; Yakutat (A-1, A-2, A-2, B-3, B-4, B-5,

C-4, C-5, C-6, C-7, C-8, D-3, D-4, D-5, D-6, D-8).

California (1:24,000 scale): Arroyo Grande NE; Beverly Hills;

Carpinteria; Casmalia; Dana Point; Del Mar; Dos Pueblos Canyon;

Encinitas; Gaviota; Goleta; Guadalupe; Imperial Beach; Laguna Beach;

La Jolla; Las Pulgas Canyon; Lompoc Hills; Long Beach; Los Alamitos;

Malibu Beach; Morro Bay South; National City; Newport Beach; Oceano;

Oceanside; Oxnard; Pismo Beach; Pitas Point; Point Arguello; Point

Conception; Point Dune; Point Loma; Point Mugu; Point Sal; Port San

Luis; Rancho Santa Fe; Redondo Beach; Sacate; San Clemente; San Juan

Capistrano; San Luis Rey; San Onofre Bluff; San Pedro; Santa

Barbara; Saticoy; Seal Beach; Surf; Tajiguas; Topanga; Torrance;

Tranquillon Mountain; Triunfo Pass; Tustin; Venice; Ventura; White

Ledge Peak.

Florida (1:24,000 scale): Allanton; Alligator Bay; Anna Maria;

Apalachicola; Aripeka; Bayport; Beacon Beach; Beacon Hill; Bee

Ridge; Belle Meade; Belle Meade NW; Beverly; Big Lostmans Bay; Bird

Keys; Bokeelia; Bonita Springs; Bradenton; Bradenton Beach; Bruce;

Bunker; Cape Romano; Cape Saint George; Cape San Blas; Captiva;

Carrabelle; Cedar Key; Chassahowitzka; Chassahowitzka Bay; Chiefland

SW; Choctaw Beach; Chokoloskee; Clearwater; Clive Key; Cobb Rocks;

Cockroach Bay; Crawfordville East; Crooked Island; Crooked Point;

Cross City SW; Crystal River; Destin; Dog Island; Dunedin; East

Pass; Egmont Key; El Jobean; Elfers; Englewood; Englewood NW;

Estero; Everglades City; Fivay Junction; Flamingo; Fort Barrancas;

Fort Myers Beach; Fort Myers SW; Fort Walton Beach; Freeport; Gandy

Bridge; Garcon Point; Gator Hook Swamp; Gibsonton; Goose Island;

Grayton Beach; Green Point; Gulf Breeze; Harney River; Harold SE;

Holley; Holt SW; Homosassa; Horseshoe Beach; Indian Pass; Jackson

River; Jena; Keaton Beach; Laguna Beach; Lake Ingraham East; Lake

Ingraham West; Lake Wimico; Laurel; Lebanon Station; Lighthouse

Point; Lillian; Long Point; Lostmans River Ranger Station; Manlin

Hammock; Marco Island; Mary Esther; Matlacha; McIntyre;

[[Page 42719]]

Milton South; Miramar Beach; Myakka River; Naples North; Naples

South; Navarre; New Inlet; Niceville; Nutall Rise; Ochopee;

Okefenokee Slough; Oldsmar; Orange Beach; Oriole Beach; Overstreet;

Ozello; Pace; Palmetto; Panama City; Panama City Beach; Panther Key;

Pass-A-Grille Beach; Pavillion Key; Pensacola; Perdido Bay; Pickett

Bay; Pine Island Center; Placida; Plover Key; Point Washington; Port

Boca Grande; Port Richey; Port Richey NE; Port Saint Joe; Port

Tampa; Punta Gorda; Punta Gorda SE; Punta Gorda SW; Red Head; Red

Level; Rock Islands; Royal Palm Hammock; Safety Harbor; Saint Joseph

Point; Saint Joseph Spit; Saint Marks; Saint Marks NE; Saint

Petersburg; Saint Teresa Beach; Salem SW; Sandy Key; Sanibel;

Sarasota; Seahorse Key; Seminole; Seminole Hills; Shark Point; Shark

River Island; Shired Island; Snipe Island; Sopchoppy; South of

Holley; Southport; Sprague Island; Spring Creek; Springfield;

Steinhatchee; Steinhatchee SE; Steinhatchee SW; Sugar Hill; Sumner;

Suwannee; Tampa; Tarpon Springs; Valparaiso; Venice; Vista;

Waccassasa Bay; Ward Basin; Warrior Swamp; Weavers Station; Weeki

Wachee Spring; West Bay; West Pass; West Pensacola; Whitewater Bay

West; Withlacoochee Bay; Wulfert; Yankeetown.

Louisiana (1:24,000 scale): Alligator Point; Barataria Pass;

Bastian Bay; Bay Batiste; Bay Coquette; Bay Courant; Bay Dosgris;

Bay Ronquille; Bay Tambour; Bayou Blanc; Bayou Lucien; Belle Isle;

Belle Pass; Big Constance Lake; Black Bay North; Black Bay South;

Breton Islands; Breton Islands SE; Buras; Burrwood Bayou East;

Burwood Bayou West; Calumet Island; Cameron; Caminada Pass; Cat

Island; Cat Island Pass; Central Isles Dernieres; Chandeleur Light;

Chef Mentur; Cheniere Au Tigre; Cocodrie; Coquille Point; Cow

Island; Creole; Cypremort Point; Deep Lake; Dixon Bay; Dog Lake;

Door Point; East Bay Junop; Eastern Isles; Dernieres; Ellerslie;

Empire; English Lookout; False Mouth Bayou; Fearman Lake; Floating

Turf Bayou; Fourleague Bay; Franklin; Freemason Island; Garden

Island Pass; Grand Bayou; Grand Bayou du Large; Grand Chenier; Grand

Gosier Islands; Grand Isle; Hackberry Beach; Hammock Lake; Happy

Jack; Hebert Lake; Hell Hole Bayou; Hog Bayou; Holly Beach;

Intercoastal City; Isle Au Pitre; Jacko Bay; Johnson Bayou; Kemper;

Lake Athanasio; Lake Cuatro Caballo; Lake Eloi; Lake Eugene; Lake

Felicity; Lake La Graisse; Lake Merchant; Lake Point; Lake Salve;

Lake Tambour; Leeville; Lena Lagoon; Lost Lake; Main Pass;

Malheureux Point; Marone Point; Martello Castle; Mink Bayou;

Mitchell Key; Morgan City SW; Morgan Harbor; Mound Point; Mulberry

Island East; Mulberry Island West; New Harbor Islands; North

Islands; Oak Mound Bayou; Oyster Bayou; Pass A Loutre East; Pass A

Loutre West; Pass du Bois; Pass Tante Phine; Pecan Island; Pelican

Pass; Peveto Beach; Pilottown; Plumb Bayou; Point Au Fer; Point Au

Fer NE; Point Chevreuil; Point Chicot; Port Arthur South; Port

Sulphur; Pte. Aux Marchuttes; Proctor Point; Pumpkin Islands;

Redfish Point; Rollover Lake; Sabine Pass; Saint Joe Pass; Smith

Bayou; South of South Pass; South Pass; Stake Islands; Taylor Pass;

Texas Point; Three Mile Bay; Tigre Lagoon; Timbalier Island;

Triumph; Venice; Weeks; West of Johnson Bayou; Western Isles

Dernieres; Wilkinson Bay; Yscloskey.

Mississippi (1:24,000 scale): Bay Saint Louis; Biloxi; Cat

Island; Chandeleur Light; Deer Island; Dog Keys Pass; English

Lookout; Gautier North; Gautier South; Grand Bay SW; Gulfport North;

Gulfport NW; Gulfport South; Horn Island East; Horn Island West;

Isle Au Pitre; Kreole; Ocean Springs; Pascagoula North; Pascagoula

South; Pass Christian; Petit Bois Island; Saint Joe Pass; Ship

Island; Waveland.

Texas (1:24,000 scale): Allyns Bright; Anahuac; Aransas Pass;

Austwell; Bacliff; Bayside; Big Hill Bayou; Brown Cedar Cut; Caplen;

Carancahua Pass; Cedar Lakes East; Cedar Lakes West; Cedar Lane NE;

Christmas Point; Clam Lake; Corpus Christi; Cove; Crane Islands NW;

Crane Islands SW; Decros Point; Dressing Point; Estes; Flake;

Freeport; Frozen Point; Galveston; Green Island; Hawk Island; High

Island; Hitchcock; Hoskins Mound; Jones Creek; Keller Bay; Kleberg

Point; La Comal; La Leona; La Parra Ranch NE; Laguna Vista; Lake

Austin; Lake Como; Lake Stephenson; Lamar; Long Island; Los Amigos;

Windmill; Maria Estella Well; Matagorda; Matagorda SW; Mesquite Bay;

Mission Bay; Morgans Point; Mosquito Point; Mouth of Rio Grande; Mud

Lake; North of Port Isabel NW; North of Port Isabel SW; Oak Island;

Olivia; Oso Creek NE; Oyster Creek; Palacios; Palacios NE; Palacios

Point; Palacios SE; Panther Point; Panther Point NE; Pass Cavallo

SW; Pita Island; Point Comfort; Point of Rocks; Port Aransas; Port

Arthur South; Port Bolivar; Port Ingleside; Port Isabel; Port Isabel

NW; Port Lavaca East; Port Mansfield; Port O'Connor; Portland;

Potrero Cortado; Potrero Lopeno NW; Potrero Lopeno SE; Potrero

Lopeno SW; Rockport; Sabine Pass; San Luis Pass; Sargent; Sea Isle;

Seadrift; Seadrift NE; Smith Point; South Bird Island; South Bird

Island NW; South Bird Island SE; South of Palacios Point; South of

Potrero Lopeno NE; South of Potrero Lopeno NW; South of Potrero

Lopeno SE; South of Star Lake; St. Charles Bay; St. Charles Bay SE;

St. Charles Bay SW; Star Lake; Texas City; Texas Point; The Jetties;

Three Islands; Tivoli SE; Turtle Bay; Umbrella Point; Virginia

Point; West of Johnson Bayou; Whites Ranch; Yarborough Pass.

[FR Doc. 98-21096 Filed 8-10-98; 8:45 am]

BILLING CODE 4310-MR-P