Govt. will wait until Liza-1 environmental permit expires to impose new standards – But says nothing about clawing back value

Feb 15, 2021 News

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Kaieteur News- The Liza Phase One environmental permit lacks requirements for comprehensive insurance for natural disasters and bears no provisions to fine ExxonMobil for flaring, as does the Payara permit. Though the Environmental Protection Agency (EPA) has the authority to bring the document in line with new standards at any given time, Vice President, Dr. Bharrat Jagdeo said during a press conference last Monday that government will not seek to impose newer standards until the document expires next year.
Additionally, despite calls for permits to be used as bargaining chips to secure better fiscal terms in Guyana’s petroleum agreement with ExxonMobil and partners for their Stabroek block operations, the Vice President made no mention of intention to do so, consistent with his previous statement that it is “wishful thinking” to use a permit to get a better deal.
“So the Liza-1 permit comes to an end in June, next year. And we’ve made it clear that once it comes to an end, the new permit will be issued consistent with the Payara conditions.” Dr. Jagdeo told reporters.

A 2020 High Court ruling by Justice Joanne Barlow had corrected an issue in the permit caused by the former David Granger administration, which had granted the permit a lifespan in excess of 20 years, with an expiration year of 2040. This was inconsistent with the law, which allowed for a maximum lifespan of five years. The Liza Phase One environmental permit is now set to expire in June, next year.
Dr. Jagdeo last Monday said that he received feedback from some commentators who thought that the Payara permit is not that different from the Liza Phase One permit, and that the Payara provisions did not sufficiently address the issue of flaring.
“That is patently false,” the Vice President said, “Absolutely false.”
He pointed to provisions in the Payara environmental permit which govern the treatment of flaring, waste management and safety audits, adding that these matters are not sufficiently addressed in the Liza Phase One permit.
Most prominent was his mention of the system of fines put in place for flaring. There are no provisions for fines for gas flaring in the Liza Phase One environmental. Notably, when asked about a provision in the Stabroek PSA which allows ExxonMobil to recover expenses incurred paying taxes, levies and other charges, Dr. Jagdeo said that government would have a dispute with the contractor if it seeks to recover fines.
ExxonMobil is currently flaring gas at its Liza Phase One operations. Dr. Jagdeo said he has instructed the EPA to explore options for flaring before the expiry of the permit.
When it comes to the lack of comprehensive insurance in the Liza Phase One permit, ExxonMobil’s current operations always carry a risk of disaster, such as a large oil spill. With the current insurance provision, Guyana would only be insured to a limited extent for a disaster at Liza Phase One, since ExxonMobil’s local subsidiary, Esso Exploration and Production Guyana Limited (EEPGL) is held liable, instead of the better endowed parent company.
When asked about this during the same press conference, the Vice President made no commitment to go back and fix the insurance provision in the permit immediately. He said that he believes the parent companies of each Stabroek block co-venturer would pick up the insurance bill in the case of a disaster.
Kaieteur News has shown that the law gives the EPA the power to update permits at any time, in order to keep up with new environmental standards. Section 13 of the Liza Phase One permit, which speaks to Institutional Authority, states: “The EPA reserves the right to review and amend the conditions attached to this Permit in accordance with Regulation 14 of the Environmental Protection (Authorizations) Regulations, 2000.”
Similarly, the Regulations state in Section 14 (1): “The Agency may at any time by notice in writing to the holder of the permit, cancel or suspend an environmental authorization or impose such conditions as the Agency considers appropriate in addition to or in place of the existing conditions, with effect from such date as the Agency may specify provided that the cancellation, suspension or modification shall not give rise to an additional adverse effect.”
Then in 14 (2): “The Agency may cancel, suspend or modify an environmental authorization during its currency for any of the following reasons… the Agency establishes new or revised standards…”
Also noticeable during Dr. Jagdeo’s presser conference was the absence of a commitment to use the environmental permit as leverage for better terms in the controversial Stabroek block PSA. However, this absence is consistent with previous statements he had made in response to calls to use the Payara production licence as leverage.
He made the comments during a press conference last October, in response to commentators like former Petroleum advisor to President David Granger, Dr. Jan Mangal, who had said “We need a fair contract before approving the Payara project.”
“There is a group,” Jagdeo had said, “that believes we should have held up Payara and not issue the licence, and use it as leverage to change the production [sharing] agreement. And it’s wishful thinking, frankly speaking. It’s wishful thinking that you could have done that now.”
The Vice President had said that the global energy transition to renewable energy and the economic hardship in the industry signaled by the divestment of tens of billions of dollars in assets, are reason for Guyana to count itself lucky as an investment destination for international oil companies. He had also noted that the People’s Progressive Party Civic (PPP/C) has already made it clear it will not renegotiate the deal.

 

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