The PPP/C has a trick for every trade

May 09, 2023 Features / Columnists, Peeping Tom

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Kaieteur News – When the Environmental Protection Agency (EPA) announced that it had renewed the environmental permit for the Liza Phase 1 project, it issued a statement. In that statement the EPA said that, “the renewed permit specifies further conditions and standards which will ensure that all environmental and social safeguards are taken for the protection of human health and the environment.”

The statement went on to add that: “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. 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.” [Emphasis mine]”

It is therefore astonishing to have read a statement issued by the government in which it is claiming that neither the EPA nor government is of the considered view that that the Environmental Permit imposes an obligation on the Permit Holder to provide an unlimited Parent Company Guarantee Agreement and/or Affiliate Company Guarantee Agreement. “

The only way that the permit holder is going to be held liable for all costs associated with clean up, restoration and compensation is if the parent company or affiliate guarantee is unlimited in the sense that it covers all of the additional liabilities over and above that provided by insurance. Since no one knows what will be the total liability in the event of an oil spill, any parent company or affiliate guarantee must cover the difference between what is covered by insurance and the actual losses and costs.

As one former Director of the EPA noted in a recent letter to the media, “full liability coverage as enshrined in the [ environmental] permits, equals insurance plus a parent company guarantee to cover “any” costs above insurance. In mathematical parlance: Full Liability Coverage = Insurance + Parent Company Guarantee for all remaining costs.”

Given the words used in the Environmental Permit, it is incomprehensible how there can be a successful appeal of Justice Sandil Kissoon’s decision. In other words, the government will make it impossible to rebut the judge’s declarations.

The government would find itself in an absurd position if it appeals a decision which affirms what is written in the modified Environmental Permit for the Liza Phase 1 Project signed in May last year, conditions which the government itself issued. It is important that the government be held to the letter of the Article 14 of that permit.

No US$2B parent company guarantee can be said to fully indemnify Guyana for the losses, damages and clean ups costs associated with a major oil spill. That US$2B by itself cannot be said to be in conformity with Article 14 of the modified Environmental Permit signed in May of 2022 by the EPA.

The said Article is also consistent with a proposed motion which was tabled in the country’s National Assembly by the Hon. David Patterson. That Motion acknowledged that oil production is expected to increase rapidly to reach close to 1 million barrels per day by 2026. It also noted that an oil spill could wipe out our fishing grounds, aquatic vegetation and result in economic bankruptcy. The Motion called on the Government to “include full unlimited liability coverage for oil spills and other disasters related to petroleum production as a condition for granting approval for the proposed Yellowtail development and all other future petroleum development.”

The recent decision of the court is going to test the PPP/C’s resolve to ensure the country is indemnified against the losses and costs resulting from a major oil spill. The EPA has been given an Order to take certain actions related to securing such protection.

The PPP/C, however, government is a cunning creature. It would not be outside of the realm of the possible for the PPP/C to sign a new Environmental Permit, abdicating Article 14 of the last permit it issued.  It is now clear that the government is not in agreement with the court’s decision and since it is hardly likely that it can successfully appeal this decision, it may opt to negative the court’s decision by issuing a new permit. The public must be on the guard for any such duplicitous action on the part of the PPP/C government.

 

 

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• EEPGL and its Co-Venturers, Emphasis mine, Government of Guyana, Justice Sandil Kissoon’s

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