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Title 30: Mineral Resources

PART 581=E2=80=94LEASING OF = MINERALS OTHER THAN OIL,=20 GAS, AND SULPHUR IN THE OUTER CONTINENTAL SHELF

Contents

Subpart=20 A=E2=80=94General

=C2=A7 581.0  = Authority=20 for information collection.
=C2=A7 581.1  = Purpose=20 and applicability.
=C2=A7 581.2  = Authority.
=C2=A7 581.3  = Definitions.
=C2=A7 581.4  = Qualifications=20 of lessees.
=C2=A7 581.5  = False=20 statements.
=C2=A7 581.6  = Appeals.
=C2=A7 581.7  = Disclosure=20 of information to the public.
=C2=A7 581.8  = Rights=20 to minerals.
=C2=A7 581.9  = ; Jurisdictional=20 controversies.

Subpart=20 B=E2=80=94Leasing Procedures

=C2=A7 581.11  = ; Unsolicited=20 request for a lease sale.
=C2=A7 581.12  = ; Request=20 for OCS mineral information and interest.
=C2=A7 581.13  = ; Joint=20 State/Federal coordination.
=C2=A7 581.14  = ; OCS=20 mining area identification.
=C2=A7 581.15  = ; Tract=20 size.
=C2=A7 581.16  = ; Proposed=20 leasing notice.
=C2=A7 581.17  = ; Leasing=20 notice.
=C2=A7 581.18  = ; Bidding=20 system.
=C2=A7 581.19  = ; Lease=20 term.
=C2=A7 581.20 &nbs= p; Submission=20 of bids.
=C2=A7 581.21 &nbs= p; Award=20 of leases.
=C2=A7 581.22 &nbs= p; Lease=20 form.
=C2=A7 581.23 &nbs= p; Effective=20 date of leases.

Subpart=20 C=E2=80=94Financial Considerations

=C2=A7 581.26  = ; Payments.
=C2=A7 581.27  = ; Annual=20 rental.
=C2=A7 581.28  = ; Royalty.
=C2=A7 581.29  = ; Royalty=20 valuation.
=C2=A7 581.30  = ; Minimum=20 royalty.
=C2=A7 581.31  = ; Overriding=20 royalties.
=C2=A7 581.32  = ; Waiver,=20 suspension, or reduction of rental, minimum royalty, or production = royalty.
=C2=A7 581.33  = ; Bonds=20 and bonding requirements.

Subpart=20 D=E2=80=94Assignments and Lease Extensions

=C2=A7 581.40  = ; Assignment=20 of leases or interests therein.
=C2=A7 581.41  = ; Requirements=20 for filing for transfers.
=C2=A7 581.42  = ; Effect=20 of assignment on particular lease.
=C2=A7 581.43  = ; Effect=20 of suspensions on lease term.

Subpart=20 E=E2=80=94Termination of Leases

=C2=A7 581.46 = ; Relinquishment=20 of leases or parts of leases.
=C2=A7 581.47 = ; Cancellation=20 of leases.

Authority: 31=20 U.S.C. 9701, 43 U.S.C. 1334.

Source: 76=20 FR 64623, Oct. 18, 2011, unless otherwise noted.

= Back to=20 Top

Subpart A=E2=80=94General

= Back to=20 Top

=C2=A7 581.0 Authority for=20 information collection.

The information collection requirements contained in part 581 = have been=20 approved by the Office of Management and Budget under 44 U.S.C. = 3507 and=20 assigned clearance number 1010-0082. The information is being = collected to=20 determine if the applicant for a lease on the Outer Continental = Shelf=20 (OCS) is qualified to hold such a lease or to determine if a = requested=20 action is warranted. The information will be used to make those=20 determinations. An applicant must respond to obtain or retain a=20 benefit.

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=C2=A7 581.1 Purpose and=20 applicability.

The purpose of these regulations is to establish procedures = under which=20 the Secretary of the Interior (Secretary) will exercise the = authority=20 granted to administer a leasing program for minerals other than = oil, gas,=20 and sulphur in the OCS. The rules in this part apply exclusively = to=20 leasing activities for minerals other than oil, gas, and sulphur = in the=20 OCS pursuant to the Act.

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=C2=A7 581.2 Authority.

The Act authorizes the Secretary to grant leases for any = mineral other=20 than oil, gas, and sulphur in any area of the OCS to the qualified = persons=20 offering the highest cash bonuses on the basis of competitive = bidding upon=20 such royalty, rental, and other terms and conditions as the = Secretary may=20 prescribe at the time of offering the area for lease (43 U.S.C. = 1337(k)).=20 The Secretary is to administer the leasing provisions of the Act = and=20 prescribe the rules and regulations necessary to carry out those=20 provisions (43 U.S.C. 1334(a)).

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=C2=A7 581.3 Definitions.

When used in this part, the following terms shall have the = following=20 meaning:

Act means the OCS = Lands Act, as=20 amended (43 U.S.C. 1331 et = seq.=20 ).

Adjacent State means = with=20 respect to any activity proposed, conducted, or approved under = this part,=20 any coastal State=E2=80=94

(1) That is, or is proposed to be, receiving for processing, = refining,=20 or transshipping OCS mineral resources commercially recovered from = the=20 seabed;

(2) That is used, or is scheduled to be used, as a support base = for=20 prospecting, exploration, testing, and mining activities; or

(3) In which there is a reasonable probability of significant = effect on=20 land or water uses from such activity.

Director means the = Director of=20 the Bureau of Ocean Energy Management (BOEM) of the U.S. = Department of the=20 Interior or an official authorized to act on the Director's = behalf.

Governor means the = Governor of=20 a State or the person or entity designated by, or pursuant to, = State law=20 to exercise the powers granted to such Governor pursuant to the = Act.

Lease means any form = of=20 authorization which is issued under section 8 of the Act and which = authorizes exploration for, and development and production of, = minerals,=20 or the area covered by that authorization, whichever is required = by the=20 context.

Lessee means the = person=20 authorized by a lease, or an approved assignment thereof, to = explore for=20 and develop and produce the leased deposits in accordance with the = regulations in this chapter. The term includes all persons holding = that=20 authority by or through the lessee.

OCS mineral means a = mineral=20 deposit or accretion found on or below the surface of the seabed = but does=20 not include oil, gas, sulphur; salt or sand and gravel intended = for use in=20 association with the development of oil, gas, or sulphur; or = source=20 materials essential to production of fissionable materials which = are=20 reserved to the United States pursuant to section 12(e) of the = Act.

Outer Continental = Shelf means=20 all submerged lands lying seaward and outside of the area of lands = beneath=20 navigable waters as defined in section 2 of the Submerged Lands = Act (43=20 U.S.C. 1301) and of which the subsoil and seabed appertain to the = United=20 States and are subject to its jurisdiction and control.

Overriding royalty = means a=20 royalty created out of the lessee's interest which is over and = above the=20 royalty reserved to the lessor in the original lease.

Person means a = citizen or=20 national of the United States; an alien lawfully admitted for = permanent=20 residency in the United States as defined in 8 U.S.C. 1101(a)(20); = a=20 private, public, or municipal corporation organized under the laws = of the=20 United States or of any State or territory thereof; an association = of such=20 citizens, nationals, resident aliens or private, public, or = municipal=20 corporations, States, or political subdivisions of States; or = anyone=20 operating in a manner provided for by treaty or other applicable=20 international agreements. The term does not include Federal = Agencies.

Secretary means the = Secretary=20 of the Interior or an official authorized to act on the = Secretary's=20 behalf.

= Back to=20 Top

=C2=A7 581.4 Qualifications=20 of lessees.

(a) In accordance with section 8(k) of the Act, leases shall be = awarded=20 only to qualified persons offering the highest cash bonus bid.

(b) Mineral leases issued pursuant to section 8 of the Act may = be held=20 only by:

(1) Citizens and nationals of the United States;

(2) Aliens lawfully admitted for permanent residence in the = United=20 States as defined in 8 U.S.C. 1101(a)(20);

(3) Private, public, or municipal corporations organized under = the laws=20 of the United States or of any State or of the District of = Columbia or=20 territory thereof; or

(4) Associations of such citizens, nationals, resident aliens, = or=20 private, public, or municipal corporations, States, or political=20 subdivisions of States.

= Back to=20 Top

=C2=A7 581.5 False=20 statements.

Under the provisions of 18 U.S.C. 1001, it is a crime = punishable by up=20 to 5 years imprisonment or a fine of $10,000, or both, for anyone=20 knowingly and willfully to submit or cause to be submitted to any = Agency=20 of the United States any false or fraudulent statement(s) to any = matters=20 within the Agency's jurisdiction.

= Back to=20 Top

=C2=A7 581.6 Appeals.

Any party adversely affected by a decision of a BOEM official = made=20 pursuant to the provisions of this part shall have the right of = appeal=20 pursuant to 30 CFR part 590, except as provided otherwise in = =C2=A7 581.21=20 of this part.

= Back to=20 Top

=C2=A7 581.7 Disclosure of=20 information to the public.

The Secretary shall make data and information available to the = public=20 in accordance with the requirements and subject to the limitations = of the=20 Act, the Freedom of Information Act (5 U.S.C. 552), and the = implementing=20 regulations (30 CFR parts 580, 582, and 43 CFR part 2).

= Back to=20 Top

=C2=A7 581.8 Rights to=20 minerals.

(a) Unless otherwise specified in the leasing notice, a lease = for OCS=20 minerals shall include rights to all minerals within the leased = area=20 except the following;

(1) Minerals subject to rights granted by existing leases;

(2) Oil;

(3) Gas;

(4) Sulphur;

(5) Minerals produced in direct association with oil, gas, or=20 sulphur;

(6) Salt deposits which are identified in the leasing notice as = being=20 reserved;

(7) Sand and gravel deposits which are identified in the = leasing notice=20 as being reserved; and

(8) Source materials essential to production of fissionable = materials=20 which are reserved pursuant to section 12(a) of the Act.

(b) When an OCS mineral lease issued under this part limits the = minerals to which rights are granted, such lease shall include = rights to=20 minerals produced in direct association with the OCS mineral = specified in=20 the lease but not the rights to minerals specifically = reserved.

(c) The existence of an OCS mineral, oil and gas, or sulphur = lease=20 shall not preclude the issuance of a lease(s) for other OCS = minerals in=20 the same area. However, no OCS mineral lease shall authorize or = permit the=20 lessee thereunder to unreasonably interfere with or endanger = operations=20 under an existing OCS mineral, oil and gas, or sulphur lease.

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=C2=A7 581.9 Jurisdictional=20 controversies.

In the event of a controversy between the United States and a = State as=20 to whether certain lands are subject to Federal or State = jurisdiction (43=20 U.S.C. 1336), either the Governor or the Secretary may initiate=20 negotiations in an attempt to settle the jurisdictional = controversy. With=20 the concurrence of the Attorney General, the Secretary may enter = into an=20 agreement with a State with respect to OCS mineral activities = under the=20 Act or under State authority and to payment and impounding of = rents,=20 royalties, and other sums and with respect to the offering of = lands for=20 lease pending settlement of the controversy.

= Back to=20 Top

Subpart B=E2=80=94Leasing Procedures

= Back to=20 Top

=C2=A7 581.11 Unsolicited=20 request for a lease sale.

(a) Any person may at any time request that OCS minerals be = offered for=20 lease. A request that OCS minerals be offered for lease shall be = submitted=20 to the Director and shall contain the following information:

(1) The area to be offered for lease.

(2) The OCS minerals of primary interest.

(3) The available OCS mineral resource and environmental = information=20 pertaining to the area of interest to be offered for lease which = supports=20 the request.

(b) Within 45 days after receipt of a request submitted under = paragraph=20 (a) of this section, the Director shall either initiate steps = leading to=20 the offer of OCS minerals for lease and notify the applicant of = the action=20 taken or inform the applicant of the reasons for not initiating = steps=20 leading to the offer of OCS minerals for lease.

(c) Any interested party may at any time submit information to = the=20 Director concerning the scheduling of proposed lease sales of OCS = minerals=20 in any area of the OCS. Such information may include but not be = limited to=20 any of the following:

(1) Benefits of conducting a lease sale in an area.

(2) Costs of conducting a lease sale in an area.

(3) Geohazards which could be encountered in an area.

(4) Geological information about an area and mineral resource=20 potential.

(5) Environmental information about an area.

(6) Information about known archaeological resources in an = area.

= Back to=20 Top

=C2=A7 581.12 Request for=20 OCS mineral information and interest.

(a) When considering whether to offer OCS minerals for lease, = the=20 Secretary, upon the Department of the Interior's own initiative or = as a=20 result of a submission under =C2=A7 581.11, may request = indications of=20 interest in the leasing of a specific OCS mineral, a group of OCS=20 minerals, or all OCS minerals in the area being considered for = lease.=20 Requests for information and interest shall be published in the = Federal=20 Register and may be published elsewhere.

(b) States and local governments, industry, other Federal = Agencies, and=20 all interested parties (including the public) may respond to a = request for=20 information and interest. All information provided to the = Secretary will=20 be considered in the decision whether to proceed with additional = steps=20 leading to the offering of OCS minerals for lease.

(c) The Secretary may request specific information concerning = the=20 offering of a specific OCS mineral, a group of OCS minerals, or = all OCS=20 minerals in a broad area for lease or the offering of one or more = discrete=20 tracts which represent a minable orebody. The Secretary's request = may ask=20 for comments on OCS areas which have been determined to warrant = special=20 consideration and analysis. Requests may be for comments = concerning=20 geological conditions or archaeological resources on the seabed; = multiple=20 uses of the area proposed for leasing, including navigation, = recreation=20 and fisheries; and other socioeconomic, biological, and = environmental=20 information relating to the area proposed for leasing.

= Back to=20 Top

=C2=A7 581.13 Joint=20 State/Federal coordination.

(a) The Secretary may invite the adjacent State Governor(s) to = join in,=20 or the adjacent State Governor(s) may request that the Secretary = join in,=20 the establishment of a State/Federal task force or some other = joint=20 planning or coordination arrangement when industry interest exists = for OCS=20 mineral leasing or geological information appears to support the = leasing=20 of OCS minerals in specific areas. Participation in joint = State/Federal=20 task forces or other arrangements will afford the adjacent State=20 Governor(s) opportunity for access to available data and = information about=20 the area; knowledge of progress made in the leasing process and of = the=20 results of subsequent exploration and development activities; = facilitate=20 the resolution of issues of mutual interest; and provide a = mechanism for=20 planning, coordination, consultation, and other activities which = the=20 Secretary and the Governor(s) may identify as contributing to the = leasing=20 process.

(b) State/Federal task forces or other such arrangements are to = be=20 constituted pursuant to such terms and conditions (consistent with = Federal=20 law and these regulations) as the Secretary and the adjacent State = Governor(s) may agree.

(c) State/Federal task forces or other such arrangements will = provide a=20 forum which the Secretary and adjacent State Governor(s) may use = for=20 planning, consultation, and coordination on concerns associated = with the=20 offering of OCS minerals other than oil, gas, or sulphur for = lease.

(d) With respect to the activities authorized under these = regulations=20 each State/Federal task force may make recommendations to the = Secretary=20 and adjacent State Governor(s) concerning:

(1) The identification of areas in which OCS minerals might be = offered=20 for lease;

(2) The potential for conflicts between the exploration and = development=20 of OCS mineral resources, other users and uses of the area, and = means for=20 resolution or mitigation of these conflicts;

(3) The economic feasibility of developing OCS mineral = resources in the=20 area proposed for leasing;

(4) Potential environmental problems and measures that might be = taken=20 to mitigate these problems;

(5) Development of guidelines and procedures for safe, = environmentally=20 responsible exploration and development practices; and

(6) Other issues of concern to the Secretary and adjacent State = Governor(s).

(e) State/Federal task forces or other such arrangements might = also be=20 used to conduct or oversee research, studies, or reports (e.g.,=20 Environmental Impact Statements).

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=C2=A7 581.14 OCS mining=20 area identification.

The Secretary, after considering the available OCS mineral = resources=20 and environmental data and information, the recommendation of any = joint=20 State/Federal task force established pursuant to = =C2=A7 581.13 of this=20 part, and the comments received from interested parties, shall = select the=20 tracts to be considered for offering for lease. The selected = tracts will=20 be considered in the environmental analysis conducted for the = proposed=20 lease offering.

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=C2=A7 581.15 Tract=20 size.

The size of the tracts to be offered for lease shall be as = determined=20 by the Secretary and specified in the leasing notice. It is = intended that=20 tracts offered for lease be sufficiently large to include = potentially=20 minable OCS mineral orebodies. When the presence of any minable = orebody is=20 unknown and additional prospecting is needed to discover and = delineate OCS=20 minerals, the size of tracts specified in the leasing notice may = be=20 relatively large.

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=C2=A7 581.16 Proposed=20 leasing notice.

(a) Prior to offering OCS minerals in an area for lease, the = Director=20 shall assess the available information including recommendations = of any=20 joint State/Federal task force established pursuant to = =C2=A7 581.13 of=20 this part to determine lease sale procedures to be prescribed and = to=20 develop a proposed leasing notice which sets out the proposed = primary term=20 of the OCS mineral leases to be offered; lease stipulations = including=20 measures to mitigate potentially adverse impacts on the = environment; and=20 such rental, royalty, and other terms and conditions as the = Secretary may=20 prescribe in the leasing notice.

(b) The proposed leasing notice shall be sent to the = Governor(s) of any=20 adjacent State(s), and a Notice of its availability shall be = published in=20 the Federal=20 Register at least 60 days prior to the publication of the = leasing=20 notice.

(c) Written comments of the adjacent State Governor(s) = submitted within=20 60 days after publication of the Notice of Availability of the = proposed=20 leasing notice shall be considered by the Secretary.

(d) Prior to publication of the leasing notice, the Secretary = shall=20 respond in writing to the comments of the adjacent State = Governor(s)=20 stating the reasons for accepting or rejecting the Governor's=20 recommendations, or for implementing any alternative mutually = acceptable=20 approach identified in consultation with the Governor(s) as a = means to=20 provide a reasonable balance between the National interest and the = well=20 being of the citizens of the adjacent State.

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=C2=A7 581.17 Leasing=20 notice.

(a) The Director shall publish the leasing notice in the Federal=20 Register at least 30 days prior to the date that OCS = minerals will=20 be offered for lease. The leasing notice shall state whether oral = or=20 sealed bids or a combination thereof will be used; the place, = date, and=20 time at which sealed bids shall be filed; and the place, date, and = time at=20 which sealed bids shall be opened and/or oral bids received. The = leasing=20 notice shall contain or reference a description of the tract(s) to = be=20 offered for lease; specify the mineral(s) to be offered for lease = (if less=20 than all OCS minerals are being offered); specify the period of = time the=20 primary term of the lease shall cover; and any stipulation(s), = term(s),=20 and condition(s) of the offer to lease (43 U.S.C. 1337(k)).

(b) The leasing notice shall contain a reference to the OCS = minerals=20 lease form which shall be issued to successful bidders.

= Back to=20 Top

=C2=A7 581.18 Bidding=20 system.

(a) The OCS minerals shall be offered by competitive, cash = bonus=20 bidding under terms and conditions specified in the leasing notice = and in=20 accordance with all applicable laws and regulations.

(b)(1) When the leasing notice specifies the use of sealed = bids, such=20 bids received in response to the leasing notice shall be opened at = the=20 place, date, and time specified in the leasing notice. The sole = purpose of=20 opening bids is to publicly announce and record the bids received, = and no=20 bids shall be accepted or rejected at that time.

(2) The Secretary reserves the right to reject any and all = sealed bids=20 received for any tract, regardless of the amount offered.

(3) In the event the highest bids are tie bids when using = sealed=20 bidding procedures, the tied bidders may be permitted to submit = oral bids=20 to determine the highest cash bonus bidder.

(c)(1) When the leasing notice specifies the use of oral bids, = oral=20 bids shall be received at the place, time, and date and in = accordance with=20 the procedures specified in the leasing notice.

(2) The Secretary reserves the right to reject all oral bids = received=20 for any tract, regardless of the amount offered.

(d) When the leasing notice specifies the use of deferred cash = bonus=20 bidding, bids shall be received in accordance with paragraph (b) = or (c) of=20 this section, as appropriate. The high bid will be determined = based upon=20 the net present value of each total bid. The appropriate discount = rate=20 will be specified in the leasing notice. High bidders using the = deferred=20 bonus option shall pay a minimum of 20 percent of the cash bonus = bid prior=20 to lease issuance. At least a total of 60 percent of the cash = bonus bid=20 shall be due on or before the 5th anniversary of the lease, and = payment of=20 the remainder of the cash bonus bid shall be due on the 10th = anniversary=20 of the lease. The lessee shall submit a bond guaranteeing payment = of the=20 deferred portion of the bonus, in accordance with = =C2=A7 581.33.

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=C2=A7 581.19 Lease=20 term.

An OCS mineral lease for OCS minerals other than sand and = gravel shall=20 be for a primary term of not less than 20 years as stipulated in = the=20 leasing notice. The primary lease term for each OCS mineral shall = be=20 determined based on exploration and development requirements for = the OCS=20 minerals being offered by the Secretary. An OCS mineral lease for = sand and=20 gravel shall be for a primary term of 10 years unless otherwise = stipulated=20 in the leasing notice. A lease will continue beyond the specified = primary=20 term for so long thereafter as leased OCS minerals are being = produced in=20 accordance with an approved mining operation or the lessee is = otherwise in=20 compliance with provisions of the lease and the regulations in = this=20 chapter under which a lessee can earn continuance of the OCS = mineral lease=20 in effect.

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=C2=A7 581.20 Submission of=20 bids.

(a) If the bidder is an individual, a statement of citizenship = shall=20 accompany the bid.

(b) If the bidder is an association (including a partnership), = the bid=20 shall be accompanied by a certified statement indicating the State = in=20 which it is registered and that the association is authorized to = hold=20 mineral leases on the OCS, or appropriate reference to statements = or=20 records previously submitted to a BOEM OCS office (including = material=20 submitted in compliance with prior regulations).

(1) Either a statement certified by the corporate Secretary or=20 Assistant Secretary over the corporate seal showing the State in = which it=20 was incorporated and that it is authorized to hold mineral leases = on the=20 OCS or appropriate reference to statements or record previously = submitted=20 to a BOEM OCS office (including material submitted in compliance = with=20 prior regulations).

(2) Evidence of authority of persons signing to bind the = corporation.=20 Such evidence may be in the form of a certified copy of either the = minutes=20 of the board of directors or of the bylaws indicating that the = person=20 signing has authority to do so, or a certificate to that effect = signed by=20 the Secretary or Assistant Secretary of the corporation over the = corporate=20 seal, or appropriate reference to statements or records previously = submitted to a BOEM OCS office (including material submitted in = compliance=20 with prior regulations). Bidders are advised to keep their filings = current.

(3) The bid shall be executed in conformance with corporate=20 requirements.

(d) Bidders should be aware of the provisions of 18 U.S.C. = 1860, which=20 prohibits unlawful combination or intimidation of bidders.

(e) When sealed bidding is specified in the leasing notice, a = separate=20 sealed bid shall be submitted for each bid unit that is bid upon = as=20 described in the leasing notice. A bid may not be submitted for = less than=20 a bidding unit identified in the leasing notice.

(f) When oral bidding is specified in the leasing notice, = information=20 which must accompany a bid pursuant to paragraph (a), (b), or (c) = of this=20 section, shall be presented to BOEM at the lease sale prior to the = offering of an oral bid.

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=C2=A7 581.21 Award of=20 leases.

(a)(1) The decision of the Director on bids shall be the final = action=20 of the Department, subject only to reconsideration by the = Secretary,=20 pursuant to a written request in accordance with paragraph (a)(2) = of this=20 section. The delegation of review authority to the Office of = Hearings and=20 Appeals shall not be applicable to decisions on high bids for = leases in=20 the OCS.

(2) Any bidder whose bid is rejected by the Director may file a = written=20 request for reconsideration with the Secretary within 15 days of = notice of=20 rejection, accompanied by a statement of reasons with a copy to = the=20 Director. The Secretary shall respond in writing either affirming = or=20 reversing the decision.

(b) Written notice of the Director's action in accepting or = rejecting=20 bids shall be transmitted promptly to those bidders whose deposits = have=20 been held. If a bid is accepted, such notice shall transmit three = copies=20 of the lease form to the successful bidder. As provided in = =C2=A7 581.26=20 of this part, the bidder shall, not later than the 10th business = day after=20 receipt of the lease, execute the lease, pay the first year's = rental, and=20 unless payment of a portion of the bid is deferred, pay the = balance of the=20 bonus bid. When payment of a portion of the bid is deferred, the=20 successful bidder shall also file a bond to guarantee payment of = the=20 deferred portion as required in =C2=A7 581.33. Deposits shall = be refunded=20 on high bids subsequently rejected. When three copies of the lease = have=20 been executed by the successful bidder and returned to the = Director, the=20 lease shall be executed on behalf of the United States; and one = fully=20 executed copy shall be transmitted to the successful bidder.

(c) If the successful bidder fails to execute the lease within = the=20 prescribed time or to otherwise comply with the applicable = regulations,=20 the successful bidder's deposit shall be forfeited and disposed of = in the=20 same manner as other receipts under the Act.

(d) If, before the lease is executed on behalf of the United = States,=20 the land which would be subject to the lease is withdrawn or = restricted=20 from leasing, the deposit shall be refunded.

(e) If the awarded lease is executed by an agent acting on = behalf of=20 the bidder, the bidder shall submit with the executed lease, = evidence that=20 the agent is authorized to act on behalf of the bidder.

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=C2=A7 581.22 Lease=20 form.

The OCS mineral leases shall be issued on the lease form = prescribed by=20 the Secretary in the leasing notice.

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=C2=A7 581.23 Effective date=20 of leases.

Leases issued under the regulations in this part shall be dated = and=20 become effective as of the first day of the month following the = date=20 leases are signed on behalf of the lessor except that, upon = written=20 request, a lease may be dated and become effective as of the first = day of=20 the month within which it is signed on behalf of the lessor.

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Subpart C=E2=80=94Financial Considerations

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=C2=A7 581.26 Payments.

(a) For sealed bids, a bonus bid deposit of a specified = percentage of=20 the total amount bid is required to be submitted with the bid. The = percentage of bonus bid required to be deposited will be specified = in the=20 leasing notice. The remittance may be made in cash or by Federal = Reserve=20 check, commercial check, bank draft, money order, certified check, = or=20 cashier's check made payable to =E2=80=9CDepartment of the = Interior=E2=80=94BOEM.=E2=80=9D Payment=20 of this portion of the bonus bid may not be made by Electronic = Funds=20 Transfer.

(b) For oral bids, a bonus bid deposit of a specified = percentage of the=20 total amount bid must be submitted to the official designated in = the=20 leasing notice following the completion of the oral bidding. The=20 percentage of bonus bid required to be deposited will be specified = in the=20 leasing notice. Payment of this portion of the bonus bid must be = made by=20 Electronic Fund Transfer within the timeframe specified in the = leasing=20 notice.

(c) The deposit received from high bidders will be placed in a = Treasury=20 account pending acceptance or rejection of the bid. Other bids = submitted=20 under paragraph (a) of this section will be returned to the = bidders. If=20 the high bid is subsequently rejected, an amount equal to that = deposited=20 with the high bid will be returned according to applicable=20 regulations.

(d) The balance of the winning bonus bid and all rentals and = royalties=20 must be paid in accordance with the terms and conditions of this = part, the=20 Leasing Notice, and Subchapter A of this chapter.

(e) For each lease issued pursuant to this subpart, there shall = be one=20 person identified who shall be solely responsible for all payments = due and=20 payable under the provisions of the lease. The single responsible = person=20 shall be designated as the payor for the lease and shall be so = identified=20 on the Solid Minerals Production and Royalty Report (P&R) = (Form=20 ONRR-4430) in accordance with 30 CFR 1210.201 of this title. The=20 designated person shall be responsible for all bonus, rental, and = royalty=20 payments.

(f) Royalty shall be computed at the rate specified in the = leasing=20 notice, and paid in value unless the Secretary elects to have the = royalty=20 delivered in kind.

(g) For leases which provide for minimum royalty payments, each = lessee=20 shall pay the minimum royalty specified in the lease at the end of = each=20 lease year beginning with the lease year in which production = royalty is=20 paid (whether the full amount specified in the lease or 1=E2=81=842 the amount = specified=20 in the lease pursuant to =C2=A7 581.28(b) on this part) of = OCS minerals=20 produced (sold, transferred, used, or otherwise disposed of) from = the=20 leasehold.

(h)(1) Unless stated otherwise in the lease, product valuation = will be=20 in accordance with the regulations in part 1206 of chapter XII. = The value=20 used in the computation of royalty shall be determined by the = Director of=20 the Office of Natural Resources Revenue. The value, for royalty = purposes,=20 shall be the gross proceeds received by the lessee for produced = substances=20 at the point the product is produced and placed in its first = marketable=20 condition, consistent with prevailing practices in the industry. = In=20 establishing the value, the Director shall consider, in this = order:

(i) The price received by the lessee;

(ii) Commodity and spot market transactions;

(iii) Any other valuation method proposed by the lessee and = approved by=20 the Director; and

(iv) Value or cost netback.

(2) For non-arm's length transactions, the first benchmark will = only be=20 accepted if it is not less than the second benchmark.

(i) All payors must submit payments and payment forms and = maintain=20 auditable records in accordance with 30 CFR chapter XII, = Subchapter=20 A=E2=80=94Natural Resources Revenue.

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=C2=A7 581.27 Annual=20 rental.

(a) The annual lease rental shall be due and payable in = accordance with=20 the provisions of this section. No rental shall be due or payable = under a=20 lease commencing with the first lease anniversary date following = the=20 commencement of royalty payments on leasehold production computed = on the=20 basis of the royalty rate specified in the lease except that = annual rental=20 shall be due for any year in which production from the leasehold = is not=20 subject to royalty pursuant to =C2=A7 581.28.

(b) Unless otherwise specified in the leasing notice and = subsequently=20 issued lease, no annual rental payment shall be due during the = first 5=20 years in the life of a lease.

(c) The leasee shall pay an annual rental in the amount = specified in=20 the leasing notice and subsequently issued lease not later than = the last=20 day prior to the commencement of the rental year.

(d) A rental adjustment schedule and amount may be specified in = a=20 leasing notice and subsequently issued lease when a variance is = warranted=20 by geologic, geographic, technical, or economic conditions.

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=C2=A7 581.28 Royalty.

(a) The royalty due the lessor on OCS minerals produced ( i.e., sold, transferred, used, = or=20 otherwise disposed of) from a lease shall be set out in a separate = schedule attached to and made a part of each lease and shall be as = specified in the leasing notice. The royalty due on production = shall be=20 based on a percentage of the value or amount of the OCS mineral(s) = produced, a sum assessed per unit of product, or other such method = as the=20 Secretary may prescribe in the leasing notice. When the royalty = specified=20 is a sum assessed per unit of product, the amount of the royalty = shall be=20 subject to an annual adjustment based on changes in the = appropriate price=20 index, when specified in the leasing notice. When the royalty is = specified=20 as a percentage of the value or amount of the OCS minerals = produced, the=20 Secretary will notify the lessee when and where royalty is to be = delivered=20 in kind. Unless stated otherwise in the lease, product valuation = will be=20 in accordance with the regulations in part 1206 of chapter XII. = The value=20 used in the computation of royalty shall be determined by the = Director of=20 the Office of Natural Resources Revenue.

(b) When prescribed in the leasing notice and subsequently = issued=20 lease, royalty due on OCS minerals produced from a leasehold will = be=20 reduced for up to any 5 consecutive years, as specified by the = lessee=20 prior to the commencement of production, during the 1st through = 15th year=20 in the life of the lease. No royalty shall be due in any year of = the=20 specified 5-year period that occurs during the 1st through 10th = years in=20 the life of the lease, and a royalty of one-half the amount = specified in=20 the lease shall be due in any year of the specified 5-year period = that=20 occurs in the 11th through 15th year in the life of the lease. The = lessee=20 shall pay the amount specified in the lease rental for any royalty = free=20 year. The minimum royalty specified in the lease shall apply = during any=20 year of reduced royalty.

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=C2=A7 581.29 Royalty=20 valuation.

Unless stated otherwise in the leasing notice and subsequently = issued=20 lease, product valuation will be in accordance with the = regulations in=20 part 1206 of chapter XII. The value used in the computation of = royalty=20 shall be determined by the Director of the Office of Natural = Resources=20 Revenue.

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=C2=A7 581.30 Minimum=20 royalty.

Unless otherwise specified in the leasing notice, each lease = issued=20 pursuant to the regulations in this part shall require the payment = of a=20 specified minimum annual royalty beginning with the year in which = OCS=20 minerals are produced (sold, transferred, used, or otherwise = disposed of)=20 from the leasehold except that the annual rentals shall apply = during any=20 year that royalty free production is in effect pursuant to=20 =C2=A7 581.28(b). Minimum royalty payments shall be offset by = royalty paid=20 on production during the lease year. Minimum royalty payments are = due at=20 the beginning of the lease year and payable by the end of the = month=20 following the end of the lease year for which they are due.

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=C2=A7 581.31 Overriding=20 royalties.

(a) Subject to the approval of the Secretary, an overriding = royalty=20 interest may be created by an assignment pursuant to section 8(e) = of the=20 Act. The Secretary may deny approval of an assignment which = creates an=20 overriding royalty on a lease whenever that denial is determined = to be in=20 the interest of conservation, necessary to prevent premature = abandonment=20 of a producing mine, or to make possible the mining of = economically=20 marginal or low-grade ore deposits. In any case, the total of = applicable=20 overriding royalties may not exceed 2.5 percent or one-half the = base=20 royalty due the Federal Government, whichever is less.

(b) No transfer or agreement may be made which creates an = overriding=20 royalty interest unless the owner of that interest files an = agreement in=20 writing that such interest is subject to the limitations provided = in=20 =C2=A7 581.30 of this part, paragraph (a) of this section, = and=20 =C2=A7 581.32 of this part.

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=C2=A7 581.32 Waiver,=20 suspension, or reduction of rental, minimum royalty, or production = royalty.

(a) The Secretary may waive, suspend, or reduce the rental, = minimum=20 royalty, and/or production royalty prescribed in a lease for a = specified=20 time period when the Secretary determines that it is in the = National=20 interest, it will result in the conservation of natural resources = of the=20 OCS, it will promote development, or the mine cannot be = successfully=20 operated under existing conditions.

(b) An application for waiver, suspension, or reduction of = rental,=20 minimum royalty, or production royalty under paragraph (a) of this = section=20 shall be filed in duplicate with the Director. The application = shall=20 contain the serial number(s) of the lease(s), the name of the = lessee(s) of=20 record, and the operator(s) if applicable. The application shall=20 either:

(1)(i) Show the location and extent of all mining operations = and a=20 tabulated statement of the minerals mined and subject to royalty = for each=20 of the last 12 months immediately prior to filing the = application:

(ii) Contain a detailed statement of expenses and costs of = operating=20 the lease, the income from the sale of any lease products, and the = amount=20 of all overriding royalties and payments out of production paid to = others=20 than the United States; and

(iii) All facts showing whether or not the mine(s) can be = successfully=20 operated under the royalty fixed in the lease; or

(2) If no production has occurred from the lease, show that the = lease=20 cannot be successfully operated under the rental, royalty, and = other=20 conditions specified in the lease.

(c) The applicant for a waiver, suspension, or reduction under = this=20 section shall file documentation that the lessee and the royalty = holders=20 agree to a reduction of all other royalties from the lease so that = the=20 aggregate of all other royalties does not exceed one-half the = amount of=20 the reduced royalties that would be paid to the United States.

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=C2=A7 581.33 Bonds and=20 bonding requirements.

(a) When the leasing notice specifies that payment of a portion = of the=20 bonus bid can be deferred, the lessee shall be required to submit = a surety=20 or personal bond to guarantee payment of a deferred portion of the = bid.=20 Upon the payment of the full amount of the cash bonus bid, the = lessee's=20 bond will be released.

(b) All bonds to guarantee payment of the deferred portion of = the high=20 cash bonus bid furnished by the lessee must be in a form or on a = form=20 approved by the Associate Director for BOEM. A single copy of the = required=20 form is to be executed by the principal or, in the case of surety = bonds,=20 by both the principal and an acceptable surety.

(1) Only those surety bonds issued by qualified surety = companies=20 approved by the Department of the Treasury shall be accepted (see=20 Department of the Treasury Circular No. 570 and any supplemental = or=20 replacement circulars).

(2) Personal bonds shall be accompanied by a cashier's check, = certified=20 check, or negotiable U.S. Treasury bonds of an equal value to the = amount=20 specified in the bond. Negotiable Treasury bonds shall be = accompanied by a=20 proper conveyance of full authority to the Director to sell such=20 securities in case of default in the performance of the terms and=20 conditions of the lease.

(c) Prior to the commencement of any activity on a lease(s), = the lessee=20 shall submit a surety or personal bond as described in = =C2=A7 582.40 of=20 this title. Prior to the approval of a Delineation, Testing, or = Mining=20 Plan, the bond amount shall be adjusted, if appropriate, to cover = the=20 operations and activities described in the proposed plan.

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Subpart D=E2=80=94Assignments and Lease = Extensions

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=C2=A7 581.40 Assignment of=20 leases or interests therein.

(a) Subject to the approval of the Secretary, a lease may be = assigned,=20 in whole or in part, pursuant to section 8(e) of the Act to anyone = qualified to hold a lease.

(b) Any approved assignment shall be deemed to be effective on = the=20 first day of the lease month following the date that it is = submitted to=20 the Director for approval unless by written request the parties = request=20 that the effective date be the first of the month in which the = Director=20 approves the assignment.

(c) The assignor shall be liable for all obligations under the = lease=20 occurring prior to the effective date of an assignment.

(d) The assignee shall be liable for all obligations under the = lease=20 occurring on or after the effective date of an assignment and = shall comply=20 with all terms and conditions of the lease and applicable = regulations=20 issued under the Act.

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=C2=A7 581.41 Requirements=20 for filing for transfers.

(a)(1) All instruments of transfer of a lease or of an interest = therein=20 including subleases and assignments of record interest shall be = filed in=20 triplicate for approval within 90 days from the date of final = execution.=20 They shall include a statement over the transferee's own signature = with=20 respect to citizenship and qualifications similar to that required = of a=20 lessee and shall contain all of the terms and conditions agreed = upon by=20 the parties thereto.

(2) An application for approval of any instrument required to = be filed=20 will not be accepted unless a nonrefundable fee of $50 is paid=20 electronically through Pay.gov at:=20 https://www.pay.gov/paygov/ and a=20 copy of the Pay.gov = confirmation=20 receipt page is included with your application. For any document = you are=20 not required to file by these regulations but which you submit for = record=20 purposes, you must also pay electronically through Pay.gov a nonrefundable fee of = $50 per=20 lease affected, and you must include a copy of the Pay.gov confirmation receipt = page with=20 your document. Such documents may be rejected at the discretion of = the=20 authorized officer.

(b) An attorney in fact signing on behalf of the holder of a = lease or=20 sublease, shall furnish evidence of authority to execute the = assignment or=20 application for approval and the statement required by = =C2=A7 581.20 of=20 this part.

(c) Where an assignment creates separate leases, a bond shall = be=20 furnished for each of the resulting leases in the amount = prescribed in=20 =C2=A7 582.40 of this title. Where an assignment does not = create separate=20 leases, the assignee, if the assignment so provides and the surety = consents, may become a joint principal on the bond with the = assignor.

(d) An heir or devisee of a deceased holder of a lease or any = interest=20 therein shall be recognized as the lawful successor to such lease = or=20 interest if evidence of status as an heir or devisee is furnished = in the=20 form of:

(1) A certified copy of an appropriate order or decree of the = court=20 having jurisdiction over the distribution of the estate, or

(2) If no court action is necessary, the statement of two = disinterested=20 persons having knowledge of the fact or a certified copy of the = will.

(e) The heirs or devisee shall file statements that they are = the=20 persons named as successors to the estate with evidence of their=20 qualifications to hold such lease or interest therein.

(f) In the event an heir or devisee is unable to qualify to = hold the=20 lease or interest, the heir or devisee shall be recognized as the = lawful=20 successor of the deceased and be entitled to hold the lease for a = period=20 not to exceed 2 years from the date of death of the predecessor in = interest.

(g) Each obligation under any lease and under the regulations = in this=20 part shall inure to the heirs, executors, administrators, = successors, or=20 assignees of the lease.

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=C2=A7 581.42 Effect of=20 assignment on particular lease.

(a) When an assignment is made of all the record title to a = portion of=20 the acreage in a lease, the assigned and retained portions of the = lease=20 area become segregated into separate and distinct leases. In such = a case,=20 the assignee becomes a lessee of the Government as to the = segregated tract=20 that is the subject of the assignment and is bound by the terms of = the=20 lease as though the lease had been obtained from the United States = in the=20 assignee's own name, and the assignment, after its approval, shall = be the=20 basis of a new record. Royalty, minimum royalty, and annual rental = provisions of the lease shall apply separately to each segregated=20 portion.

(b) Each lease of an OCS mineral created by the segregation of = a lease=20 under paragraph (a) of this section shall continue in full force = and=20 effect for the remainder of the primary term of the original lease = and so=20 long thereafter as minerals are produced from the portion of the = lease=20 created by segregation in accordance with operations approved by = the=20 Director or the lessee is otherwise in compliance with provisions = of the=20 lease or regulations for earning the continuation of the lease in=20 effect.

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=C2=A7 581.43 Effect of=20 suspensions on lease term.

(a) If the BSEE Director orders the suspension of either = operations or=20 production, or both, with respect to any lease in its primary = term, the=20 primary term of the lease shall be extended by a period of time = equivalent=20 to the period of the directed suspension.

(b) If the BSEE Director orders or approves the suspension of = either=20 operations or production, or both, with respect to any lease that = is in=20 force beyond its primary term, the term of the lease shall not be = deemed=20 to expire so long as the suspension remains in effect.

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Subpart E=E2=80=94Termination of Leases

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=C2=A7 581.46 Relinquishment=20 of leases or parts of leases.

(a) A lease or any part thereof may be surrendered by the = record title=20 holder by filing a written relinquishment with the Director. A=20 relinquishment shall take effect on the date it is filed subject = to the=20 continued obligation of the lessee and the surety to:

(1) Make all payments due, including any accrued rentals and = royalties;=20 and

(2) Abandon all operations, remove all facilities, and clear = the land=20 to be relinquished to the satisfaction of the Director.

(b) Upon relinquishment of a lease, the data and information = submitted=20 under the lease will no longer be held confidential and will be = available=20 to the public.

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=C2=A7 581.47 Cancellation=20 of leases.

(a) Whenever the owner of a nonproducing lease fails to comply = with any=20 of the provisions of the Act, the lease, or the regulations issued = under=20 the Act, and the default continues for a period of 30 days after = mailing=20 of notice by registered or certified letter to the lease owner at = the=20 owner's record post office address, the Secretary may cancel the = lease=20 pursuant to section 5(c) of the Act, and the lessee shall not be = entitled=20 to compensation. Any such cancellation is subject to judicial = review as=20 provided by section 23(b) of the Act.

(b) Whenever the owner of any producing lease fails to comply = with any=20 of the provisions of the Act, the lease, or the regulations issued = under=20 the Act, the Secretary may cancel the lease only after judicial=20 proceedings pursuant to section 5(d) of the Act, and the lessee = shall not=20 be entitled to compensation.

(c) Any lease issued under the Act, whether producing or not, = may be=20 canceled by the Secretary upon proof that it was obtained by fraud = or=20 misrepresentation and after notice and opportunity to be heard has = been=20 afforded to the lessee.

(d) The Secretary may cancel a lease in accordance with the=20 following:

(1) Cancellation may occur at any time if the Secretary = determines=20 after a hearing that:

(i) Continued activity pursuant to such lease would probably = cause=20 serious harm or damage to life (including fish and other aquatic = life), to=20 property, to any mineral (in areas leased or not leased), to the = National=20 security or defense, or to the marine, coastal, or human = environment;

(ii) The threat of harm or damage will not disappear or = decrease to an=20 acceptable extent within a reasonable period of time; and

(iii) The advantages of cancellation outweigh the advantages of = continuing such lease in force;

(2) Cancellation shall not occur unless and until operations = under such=20 lease shall have been under suspension or temporary prohibition by = the=20 Secretary, with due extension of any lease term continuously for a = period=20 of 5 years, or for a lesser period upon request of the lessee; = and

(3) Cancellation shall entitle the lessee to receive such = compensation=20 as is shown to the Secretary as being equal to the lesser of:

(i) The fair value of the canceled rights as of the date of=20 cancellation, taking into account both anticipated revenues from = the lease=20 and anticipated costs, including costs of compliance with all = applicable=20 regulations and operating orders, liability for cleanup costs or = damages,=20 or both, and all other costs reasonably anticipated on the lease, = or

(ii) The excess, if any, over the lessee's revenues from the = lease=20 (plus interest thereon from the date of receipt to date of = reimbursement)=20 of all consideration paid for the lease and all direct = expenditures made=20 by the lessee after the date of issuance of such lease and in = connection=20 with exploration or development, or both, pursuant to the lease = (plus=20 interest on such consideration and such expenditures from date of = payment=20 to date of reimbursement), except that in the case of joint leases = which=20 are canceled due to the failure of one or more partners to = exercise due=20 diligence, the innocent parties shall have the right to seek = damages for=20 such loss from the responsible party or parties and the right to = acquire=20 the interests of the negligent party or parties and be issued the = lease in=20 question.

(iii) The lessee shall not be entitled to compensation where = one of the=20 following circumstances exists when a lease is canceled:

(A) A producing lease is forfeited or is canceled pursuant to = section=20 (5)(d) of the Act;

(B) A Testing Plan or Mining Plan is disapproved because of the = lessee's failure to demonstrate compliance with the requirements = of=20 applicable Federal Law; or

(C) The lessee(s) of a nonproducing lease fails to comply with = a=20 provision of the Act, the lease, or regulations issued under the = Act, and=20 the noncompliance continues for a period of 30 days or more after = the=20 mailing of a notice of noncompliance by registered or certified = letter to=20 the lessee(s).

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