Explain “dangerous” reversal of full coverage insurance requirement – Former EPA boss to Govt.

Feb 27, 2022 News

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…says Exxon had agreed to cover damages beyond US$2.5B

“As protector of the nation’s economy, environment and health, the Government owes it to its people, to explain why it has taken such a dangerous step in taking the country from agreed upon full liability coverage to no coverage.” – Dr. Vincent Adams.

Kaieteur News – Guyana’s Vice President, Bharrat Jagdeo recently said that the Environmental Protection Agency (E PA) has assumed the responsibility of securing an insurance policy from the country’s major oil operator, ExxonMobil, in the event of an oil spill.

The coverage being negotiated, he said, was around US$2 billion but the former head of the EPA, Dr. Vincent Adams is demanding that the People’s Progressive Party Civic (PPP/C) government explain its decision to reverse an agreement, which the EPA formerly had with the operator to not only guarantee US$2.5 billion from its subsidiary, Esso Exploration and Production Guyana Limited (EEPGL) but also cover damages that exceed this amount.
In a letter to this newspaper, Dr. Adams explained that prior to his services being terminated in August 2020 by the incumbent administration, ExxonMobil had agreed to offer the country full coverage insurance, since its permit for the second project, Liza Phase 2 was being held at ransom.
According to him, “Exxon did indeed agree in writing, to have full liability coverage, and we were close to celebrating ‘mission accomplished’ when at the last moment in August 2020, defeat was snatched from the jaws of victory by the incoming PPP/C Government, when they inexplicably, stopped finalisation of the EPA/Exxon Agreement to realise this full liability coverage”.

He went on to explain that the Liza 1 project was the first to receive an oil and gas permit by the EPA in June 2017, issued by Mr. Kemraj Parsram, the current Head of the EPA who was at the time the acting head, prior to Dr. Adams’ appointment.This permit was issued to the company with “self insurance” as allowed by the 2016 Petroleum Agreement, between the Coalition government and permit holder EEPGL, which acts under the guidance of ExxonMobil, Hess, and China National Offshore Oil Corporation (CNOOC).Self-insurance, Dr. Adams clarified, means that EEPGL would bear all financial liabilities thus is exempt from having to obtain any outside insurance. “However, the snag in this deal is that EEPGL, as a newly formed limited liability company, did not, and does not, have any assets to cover any such liabilities,” he explained.
Cognisant of this fact, the former EPA boss said that efforts were then made by himself and team to bring Exxon to the table to discuss the insurance policy.

In fact, he said that Exxon was clearly told that the flaws in the Liza 1 permit would have to be corrected before its second and future projects could be approved.
After several months of delay, ExxonMobil finally agreed to offer Guyana full coverage insurance, Dr. Adams said. He detailed, in his more than 1,000 words missive, that Exxon obtained the highest insurance available on the market, to the value of US$2.5 billion, “proclaiming it to be adequate coverage”.However, given that BP’s Macondo spill in the Gulf of Mexico was costing approximately US$70 billion, the former EPA head said that this offer was denied since such a meager coverage could leave Guyana bankrupt as well as expose the country to lawsuits from neighbouring countries affected by a possible spill.
To this end, he said that the EPA then demanded that the parent companies –ExxonMobil, Hess and CNOOC – cover all liability costs over and above the $2.5 billion insurance.
“Exxon eventually acceded to our immovable demand for parent companies cover above the $2.5 billion insurance; but asked that we sign the Liza 2 Permit, so as to maintain confidence in their investors, while affording time for the parent companies to agree upon how they will share the liabilities,” Dr. Adams shared.
He added, “Exxon’s request was deemed an easy no-risk concession, since the Liza 2 start-up was not scheduled until three years hence in 2022, and couldn’t start anyway without the Agreement. Therefore, we issued the Liza 2 Permit in mid-2019, requiring full coverage to be carried by a combination of the $2.5 billion insurance, with all of the remainder to be carried by EEPGL’s parent companies”.
Subsequent to the issuance of the Liza 2 permit when the agreement was nearing finalisation, Dr. Adams said he and the Attorney that was handling the matter at the EPA, were removed from their posts in August 2020.
The following month, he said, he was shocked to see that Exxon’s third project, the Payara development, had been approved without the formerly agreed upon full coverage insurance.
In this regard, the former Executive Director of the EPA wrote, “As protector of the nation’s economy, environment and health, the Government owes it to its people, to explain why it has taken such a dangerous step in taking the country from agreed upon full liability coverage to no coverage”.
Elaborating on the importance of full coverage insurance, Dr. Adams said that Guyana’s rapid increase in oil operations over the next few years will also bring with it equivalent dangers associated with an oil spill.
He reasoned, “The gross inadequacy of the Government’s oil spill Emergency Response Plan, which I refused to sign due to documented justifiable reasons; and the Environmental Impact Assessments (EIAs) showing that a major spill could be just as devastating or worse than the BP Macondo spill, with oil washing away the Caribbean beaches and their economies all the way to Jamaica, resulting in Guyana’s and its neighbouring countries environmental destruction, obliteration of the fishing industry, and economic bankruptcy including possible lawsuits from neighbouring countries and other affected parties,” all highlight the need for an adequate insurance coverage.
Last week, the Shadow Oil and Gas Minister on the Opposition benches of the National Assembly, David Patterson submitted a Motion to Parliament calling for liability insurance coverage in the event of an oil spill disaster.
He proposed that Exxon’s fourth project, the Yellowtail Development, be used as leverage by the government to ensure that the country gets full coverage insurance.

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