[Federal Register Volume 63, Number 154 (Tuesday, August 11, 1998)]
[Rules and Regulations]
[Pages 42699-42719]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-21096]


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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.

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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