U.S taxes crude, money placed in oil spill trust fund

Apr 08, 2022 News

– Guyana urged to follow suit

During an oil spill response exercise that was conducted by ExxonMobil Guyana.

Kaieteur News – In order to quickly mitigate the devastating impact of an oil spill, the United States of American (USA) Environmental Protection Agency (EPA) have a trust fund financed by a tax on oil that is available to clean up spills when the responsible party is incapable or unwilling to do so.

This is according to the U.S Oil Pollution Act (OPA) of 1990.
According to the OPA, the owner or operator [responsible party] of a facility from which oil is discharged is liable for the costs associated with the: containment, cleanup, and damages resulting from the spill. The OPA also requires oil storage facilities and vessels to submit to the Federal government plans detailing how they will respond to large discharges and requires the development of Area Contingency Plans to prepare and plan for oil spill response on a regional scale.
The US EPA’s first priority is to ensure that responsible parties pay to clean up their own oil releases. However, when the responsible party is unknown or refuses to pay, funds from the Oil Spill Liability Trust Fund (OSLTF) can be used to cover the cost of removal or damages.

A snippet of the U.S Oil Pollution Act (OPA) of 1990.

The OSLTF is a trust fund managed by the Federal government, primarily by the U.S. Coast Guard, and financed by a per-barrel tax on crude oil produced domestically in the U.S and on petroleum products imported to the U.S for consumption. The fund was created in 1986, but use of the fund was not authorized until the Oil Pollution Act’s passage in 1990. The funds may be used to cover the cost of federal, tribal, state, and claimant oil spill removal actions and damage assessments as well as unpaid liability and damages claims.
Notably, no more than US$1B may be withdrawn from the fund per spill incident, including up to US$500M for the initiation of natural resource damage assessments and claims in connection with any single incident.
While the US have their oil spill trust fund to cater for an oil disaster – Guyana on the other hand continues to allow American oil giant, ExxonMobil Guyana to operate offshore with only limited liability insurance, in the event of an inevitable oil spill.
In fact, the Head of Esso Exploration and Production Guyana Limited (EEPGL), Alistair Routledge, had defend the size of the insurance policy provided by the ExxonMobil subsidiary which has been the Operator of the oil rich Stabroek Block since 1999. Despite the company milking multi-billion dollar profits from Guyana’s oil wealth – Routledge defended the limited liability insurance of US$2B EEPGL is throwing at Guyana.
Three of the oil company’s operations, Liza One, Liza Two and Payara have been granted approval without proper insurance guarantees in place from the parent company. Guyana’s Environmental Protection Agency (EPA) recently granted approval to the company’s fourth project, Yellowtail development.
For that project, EEPGL is held liable for all costs associated with clean up, restoration and compensation for any pollution damage, which may occur as a consequence of the project. It also requires a Parent Company/Affiliate Guarantee Agreement, which indemnifies and keeps indemnified the EPA and the Government of Guyana in the event EEPGL and its Co-Venturers fail to meet their environmental obligations under the Permit.
Notably, according to deal Guyana’s government signed onto, EEPGL pays no tax but the company’s taxes is being paid by Guyana. Kaieteur News Publisher, Glenn Lall, in an historic move, had filed a case in Guyana’s High Court, which challenges some of the most repressive tax provisions of the Stabroek Block Production Sharing Agreement (PSA) with Exxon and its partners, Hess Corporation and CNOOC Petroleum Guyana Limited.

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