EPA issues statement debunking claims by AFC on Full Liability Coverage

Aug 06, 2022 News

See below statement by the Environmental Protection Agency (EPA) on full liability coverage.

Kaieteur News – The EPA noted inaccuracies in a recent press release by the AFC repeating certain statements made by the former head of the EPA, Vincent Adams. The EPA offers the following response to provide clarity to the public to avoid any further confusion on the subject of insurance and liability coverage.

The Environmental Protection Agency is guided first and foremost by the Environmental Protection Act and its suite of regulations. Where the risk of oil spills is concerned, financial assurance is provided for Sections 30 and 31 of the Environmental Protection Act.

Insurance

It must be made clear that only Liza 1 permit issued in 2017 did not have a specific requirement for insurance coverage. Whilst the insurance requirement was introduced in Liza 2, it was only in the Payara, Yellowtail and the recently renewed Liza 1 Permits were the requirement for insurance coverage and parent guarantee clearly defined.

In Yellowtail Permit, it is ensured that EEPGL is held liable for all costs associated with clean up, restoration and compensation for any pollution damage, which may occur as consequence of the project. 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”,

The EPA is in receipt of insurance policies from EEPGL for all permits issued namely Liza1, Liza 2, Payara and is currently awaiting Yellowtail insurance policy. Each of these insurance policies have been executed and has coverage of a total of US$600 million per occurrence of a spill event This per occurrence value covers third party liabilities, clean up and well control.

None of the insurance policies provided has US$2.5 billion coverage for oil spill as is purported by the former EPA Head.

Parent Company/Affiliate Guarantee

The EPA was presented with a draft parent company/affiliate guarantee and is engaging EEPGL on its proposed total guarantee of US$2 billion from an affiliate company in the event EEPGL and its Co-Venturers default. The EPA is ensuring that the circumstances under which the affiliate guarantee will be operationalized and the specific obligations covered are clear and acceptable. The EP A in the Yellowtail and renewed Liza 1 permits require that a Parent Company/Affiliate Guarantee Agreement is provided 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. Further, the EPA required that the financial assurance (US$2 billion) 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. Liabilities are considered to include costs associated with responding to an incident, clean-up and remediation and monitoring.

It is also ensured that this value can be renegotiated to cover for increasing risks in the Stabroek block as a result of increasing projects.

Conclusion

The requirement for insurance and parent guarantee and the terms and conditions for each of these were strengthened in the recent Permits issued namely Payara, Yellowtail and renewed Liza 1 in late 2020, and 2022 respectively. The EPA is not in possession of any documentation that indicated any commitment by EEPGL to the Former Head to provide US$2.5 billion in insurance coverage. If this is available, the EPA humbly ask that Vincent Adams provides a copy to the EPA and or the public.

A draft Parent company/Affiliate Guarantee received in 2021 and offering guaranteed coverage of US$2 billion is being negotiated by the EPA at this time.

End Statement