FLCL (FULL LIABILITY COVERAGE LETTER) MUST NOT BE CONFUSED WITH AN ACTUAL INSURANCE POLICY

May 07, 2023 Letters

Kaieteur News – From an international news source, I read the following:

“According to a recent ruling by the High Court in Guyana, ExxonMobil must provide unlimited insurance coverage for its operations in Guyana’s Stabroek Block. The company was directed to provide unlimited Parent Company Guarantee Agreement, together with Environmental liability insurance, as is customary in the international petroleum industry”.

Former EPA chief, Dr. Vincent Adams has said many times, it is not insurance (as in a regular insurance policy) issued by Insurance Companies – and for which premiums must be paid.

It is, he explained, an FLCL. Let us repeat those initials a few times, so it becomes embedded at the tip of our tongues. FLCL stands for Full Liability Coverage Letter. It is simply a letter to be written on Exxon’s letterhead stationery and signed by its CEO, Darren Woods.

The letter must state: “The permit holder [Exxon/EEPGL] assumes unlimited liability for all costs of clean up, restoration and compensation for any damage from any discharge of any contaminant”.

This letter costs not a penny. No premiums have to be paid to insurance companies. However, in the event of a major Oil Spill, the Guyanese people would expect the State’s Attorney-General to use that letter in a Court of Law to force Exxon and its partners (CNOOC, Hess) to fulfill the terms of that letter. What is the benefit of this letter to the Guyanese people? They can go to sleep at night without having to worry that their State could go bankrupt in the event of a major oil spill.

Following Guyana’s High Court ruling, AG Nandlall has issued a press release stating his office intends to appeal the ruling, stating it is his considered view that the “Environmental Permit imposes no obligation on the Permit Holder to provide an unlimited Parent Company Guarantee Agreement”. If Mr. Nandlall were to read the language on the permit issued for Liza 1, he would notice that the permit does require unlimited parent company guarantee.

Why would AG Nandlall want to appeal this ruling? Judge made an error, he says. The language in the permit seems clear – it does require unlimited liability parent guarantee. The precedent from Exxon Valdez (1989) and BP’s Deepwater Horizon (2010) is that those companies, Exxon and BP, covered up to the last dollar of damages in billions of dollars. Why should it be any different if there were ever a Spill in Guyana?

The real story here is that Exxon does not want to commit itself to full liability coverage, as has been the international standard and precedent. It wants Guyana to be on the hook for all liabilities in excess of the $600 million policy reportedly taken out. In the event of a major oil spill, Guyana would surely go bankrupt. Whose responsibility is it to stop this from happening?

Of course, it is the chief legal officer of the State, the Attorney-General. I am befuddled about what could be the real reason why AG Nandlall wants to appeal this ruling.

I wish to advise the following: The State of Guyana has gotten a great ruling in its favour, thanks to High Court Judge, Sandil Kissoon. Take this ruling (Judge’s Declaration orders) in hand, Mr. Nandlall and summon CEO Darren Woods to a face-to-face meeting – and negotiate a resolution to this matter. Take Dr. Adams with you.

Explain to him, it is just an FLCL that costs not a penny in premiums. All oil drilling is done on a Wing and a Prayer – hoping a spill never occurs. But if one were to occur, full compensation for damages is the responsibility of Exxon, not Guyana’s.

There is a great history lesson that this case can teach us. All developing/emerging nations want a strong Judiciary. Chief Justice John Marshall (1801–1835) performed that role for the United States. Historians say John Marshall read the constitution – and from that he established the law. He added flesh and bones to the law. We are at that point in Guyana’s development of the law. Do not let an Oil Giant operate in Guyana without an FLCL guarantee. Make Guyana’s Judiciary stand strong, not weak. Make Guyana a proud nation.

Appealing the ruling of Judge Sandil Kissoon is tantamount to surrendering to Exxon – and putting Guyana at risk of bankruptcy. For the security and protection of the State of Guyana, do not appeal this ruling. Go for a negotiated resolution of the matter.

Mike Persaud

AG Nandlall, Exxon’s letterhead stationery and signed by its CEO, ExxonMobil, Guyana, Nandlall and summon, Sandil Kissoon

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FLCL (FULL LIABILITY COVERAGE LETTER) MUST NOT BE CONFUSED WITH AN ACTUAL INSURANCE POLICY

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