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Govt. ‘penalises’ Exxon on flaring but country ultimately has to pay
By Kiana Wilburg
Chartered Accountant, Christopher Ram.
Kaieteur News – Vice President, Dr. Bharrat Jagdeo, would have informed the nation last week via his Facebook Page that the Environmental Protection Agency (EPA) will be imposing a US$30 penalty on every tonne of Carbon Dioxide equivalent (CO2e) ExxonMobil flares after May 13, 2021. But what has not been disclosed, until today, is that Guyana will ultimately have to foot that bill.
This is as a consequence of the Stability Clause in the Stabroek Block Production Sharing Agreement (PSA).
At Article 32.2 of the PSA it states, “After the signing of this Agreement and in conformance with Article 15, the Government shall not increase the economic burdens of Contractor under this Agreement by applying to this Agreement or the operations conducted thereunder any increase of or any new petroleum related fiscal obligation, including, but not limited to, any new taxes whatsoever, any new royalty, duties, fees, charges, value-added tax (VAT) or other imposts.”
It goes on to state at Article 32.3, “If at any time after the signing of this Agreement there is a change in the laws of Guyana whether through the amendment of existing laws (including the hydrocarbons law, the customs code or tax code) or the enactment of new laws or a change having the force of law in the interpretation, implementation or application thereof (whether the change is specific to the Agreement, the Contractor or of general application) and such change has a materially adverse effect on the economic benefits, including those resulting from the fiscal regime provided by this Agreement, accruing to the Contractor hereunder during the term of this Agreement, the Government shall promptly take any and all affirmative actions to restore the lost or impaired economic benefits to Contractor, so that Contractor receives the same economic benefit under the Agreement that it would have received prior to the change in law or its interpretation, application, or implementation. The foregoing obligation shall include the obligation to resolve promptly by whatever means may be necessary any conflict or anomaly between this Agreement and any such new or amended legislation, including by way of exemption, legislation, decree and/or other authoritative acts.”
In light of the fact that Guyana has no legislation predating the signing of the contract, which sets out the US$30 penalty for flaring, it therefore means that Guyana will ultimately have to compensate ExxonMobil.
Chartered Accountant, Christopher Ram, who has studied the agreement in-depth and has a Masters Degree in Oil and Gas from Reading University in England, also agreed with Kaieteur News last evening as he noted that Guyana is basically paying this new penalty tax thanks to the Stabilisation Clause. He said too that if the oil giant allows a compromise, Guyana would have to pay at least half it.
Furthermore, Ram in a letter published by Stabroek News on Saturday also criticised the modified Liza Phase One Permit as he noted that a perusal of the amendments shows that the payment of the US$30 penalty “applies only” to flaring in excess of timelines for “flaring events.”
The Chartered Accountant said, “Guyanese now wait with bated breath to understand what ‘excess of timelines for flaring events’ really means but clearly there is no longer even an attempt at the prohibition on flaring.”
Further to this, Ram articulated that it is unclear whether the Environmental Protection Agency (EPA) has the capacity or the equipment to measure the Carbon Dioxide equivalent (CO2e) impact of flaring. And even if it did, this measure he contended is imprecise and inadequate. “At best, this can only be seen as a first and necessary step, but one undertaken without full statutory teeth,” expressed the Chartered Accountant.
Among other points he raised, Ram held the view that the Government is perhaps neglecting a few of its key duties as enshrined in Constitution—protect the environment for the benefit of present and future generations; prevent pollution and ecological degradation; promote conservation; secure sustainable development and use of natural resources while promoting justifiable economic and social development. The Chartered Accountant said the administration must once and for all, stand up to ExxonMobil and cease neglecting its duties to the people in the name of development.
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