Production under new Liza 1 permit illegal without full coverage insurance — Fmr EPA Head

Jun 03, 2022 News

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Kaieteur News – Former Head of the Environmental Protection Agency (EPA) Dr. Vincent Adams, is of the view that the current production from the Liza I and II Floating Production Storage and Offloading Vessels—Liza Destiny and Unity is illegal.

This is since the operator of the Stabroek Block , within which the two oil fields are located—Esso Exploration and Production Guyana Limited (EEPGL), often times referred to as ExxonMobil Guyana, is yet to secure, unlimited insurance coverage from its parent company, above the US$2.5B that EEPGL had secured and committed.
The permit for the Liza 11 operations was signed a month after Dr. Adams was removed as head of that agency and replaced with the incumbent, Khemraj Parsram. Dr. Adams made the point while appearing as a guest on the ‘Glenn Lall Show’ last Wednesday and lamented the fact that despite the fact that written in the Environmental Permit was that EEPGL shall secure unlimited insurance coverage guaranteed by the parent company—ExxonMobil Corp—this was not done and government has still allowed the operations to proceed.

In fact, reported in another section of the media yesterday, government has already uplifted its first entitlement of one million barrels from the Liza II operations and is slated to collect a second within two weeks. According to Dr. Adams, “we have unlimited liability in the language but you guys not enforcing it,” referencing the clauses already in the permit.

He posited that with the recent resuscitation of talk about an assurance of up to US$2B in insurance, that the oil player was looking to have Guyanese cozy up to that idea after which that language that he had inserted into the permit during his stint there, would be removed.
Dr. Adams was adamant, “they should not have start up Liza II without them showing that they have it (unlimited insurance and parent company Guarantee, they should not have renewed Liza I until they have it.”

To this end, Dr. Adams suggested that the Liza II operations be challenged in the court since the company failed to meet the requirements in the permit, compounded by the fact that the EPA has failed to enforce the provisions, it would be a slam dunk case. International Lawyer, Melinda Janki who has been at the forefront of successful court action against ExxonMobil and the EPA also suggested that in her view, the renewal of the Liza I permit which expired on May 31 (Tuesday) last, in her view is illegal.

She too was at the time a guest of the ‘Glenn Lall Show’ and was asked to weigh in on the renewal of the Liza I Permit despite the publicly voiced opposition to such a move by activities, celebrities and technical and financial experts, domestically, regionally and Internationally.

According to Janki, “the EPA has stuck us with an environmental permit that is harmful to Guyana; (and) in my view that renewal is illegal.”
Lamenting the state of affairs, she used the occasion to also recall that back in December 2018 when Vice President Bharrat Jagdeo was then opposition leader, he had said ExxonMobil “is a very smart, big company and it looks out for its shareholders, he said that company walked in with maximum demands and our incompetent government trudged in there unprepared and stuck us with a contract that would harm us for decades into the future; Mr. Jagdeo said they sold our patrimony that is what he said in 2018.”
In 2022, however, Janki noted the stark departure from those utterances since government did not adhere to any of the advice proffered and still went ahead and renewed the permit despite the repeated failure on the part of EEPGL to meet the full requirements and that of the EPA in enforcing the relevant provisions of the permit.

According to Dr. Adams, government should have used the renewal of Liza I permit to correct the shortcomings in the Liza II permit especially as it relates to putting in place the unlimited insurance coverage guaranteed by the parent company. “They could have used Liza I and say I am not going to renew until you get the guarantee,” Dr. Adams said and reminded that back in 2020 just prior to his departure, the EPA and the three companies’ w3re nearing an agreement on insurance and how the operators would share that obligation.

He said, at the time he was not going to sign the Payara or Yellowtail permits until the insurance was put in place but after his removal from the EPA, these have since been approved.
The EPA on May 31, hours before the expiry of the permit, the EPA announced by way of a public missive that the Environmental Permission to continue production of oil from the Liza I oil Block had been renewed for a period of five years.

In making the announcement, the EPA said, “among the notable conditions, the Permit ensures that 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.”
According to the EPA,”EEPGL is also required to have Financial Assurance which includes a combination of Insurance which must “cover well control, and/or clean up and third-party liability on terms that are market standard for the type of coverage”, and 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.”

The EPA said that the financial assurance provided must be guided by an estimate of the sum of the reasonably credible costs, expenses, and liabilities that may arise from any breaches of this permit” and that “Liabilities are considered to include costs associated with responding to an incident, clean-up and remediation and monitoring.”
Despite pronouncements otherwise, according to the EPA, the renewal of the Liza I permit, is in keeping with the Environmental Protection Act Cap 20:05, and comes following the EPA’s careful consideration of EEPGL’s compliance with the first iteration of the Environmental Permit for the Liza Phase 1 Project.

 

 

 

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