Latest update November 29th, 2024 1:00 AM
EPA submitted unsigned US$600M Exxon insurance to High Court one week before expiry
Kaieteur News – The Environmental Protection Agency (EPA) in arguing against the need for an unlimited parent company guarantee submitted an unsigned insurance policy to the High Court on January 23, 2023, that would expire a week later.
The stamp used by Exxon’s subsidiary on the insurance policy submitted by the EPA
The EPA was required to make submissions as a respondent in a matter that was brought by two citizens, for the parent company guarantee requirement outlined in the Liza One Permit to be enforced.
In an attempt to convince the Court that there is adequate protection, the regulator submitted the US$600 million insurance policy provided by Exxon. In the document seen by this newspaper, it is understood that the policy covers both the Liza One and Liza Two projects. It took effect on February 1, 2022 and expired on January 31, 2023.
It is so far unclear whether the policy has been renewed since it expired over three months ago. Efforts made by Kaieteur News to clarify were unsuccessful up to press time.
Nevertheless, the policy covers three Sections including ‘Physical Damage and/ or Physical Loss; Liabilities and; Operator Extra Expense’.
Not only was the policy almost expired when it was submitted, but it was also unsigned by the insurer, Aon UK Limited- a company wholly owned by ExxonMobil Corporation. Instead of attaching the signature of a senior official attached to the insurance company, as is customary, the insurance firm used a business stamp.
This raises questions regarding the legality of the document, since there is no official signature attached. It also creates a fear that the policy, already seen as inadequate, could now also be unavailable should an unfortunate event occur offshore in the Stabroek Block. An oil spill, according to the environmental impact assessments (EIAs) conducted by Exxon can potentially impact 12 Caribbean islands.
It was reported that the EPA lost the Court case to the Guyanese men, who told High Court Judge, Justice Sandil Kissoon that the burdens of a spill, not covered by the limited insurance would be on the backs of Guyanese, should the parent company of EEPGL not sign the parent company guarantee, required under the Liza One Environmental Permit.
Justice Kissoon in his May 3, 2023 ruling on the unlimited parent company guarantee also ruled that the insurance provided by EEPGL was not in keeping with industry standards.
The Judge noted, “I do find and hold that the insurance obtained by the Permit Holder from its Affiliate Company, AON UK Ltd, captioned “ Energy Package Policy”, and purporting to indemnify the Permit Holder and its Co-Venturers, both for the Liza Phase 1 and Phase 2 Projects, which benefit from separate environmental permits, does not satisfy the stipulation and obligation set out at Condition 14:5 of the Environmental Permit ( Renewed) which imposed an express and specific obligation on Esso to obtain environmental liability insurance in accordance with the prerequisites identified thereunder which threshold this policy does not satisfy.”
He said the policy provided does not constitute what is considered environmental liability insurance “as is customary in the international petroleum industry” and for the petroleum production operations under the Permit.
Further, Justice Kissoon said the insurance has not been obtained by the Permit Holder from an insurance company of standing that equates to Grade A Plus. “The Respondent Agency has failed and/or omitted to take any step to hire an independent insurance consultant to guide its actions and conduct as it relates to the quality, type and nature of the insurance demanded by Condition 14:5. The Agency has further abrogated its function by simply issuing a letter to Esso and to acknowledge receipt of the copy of the insurance,” he said while noted that the business of the Agency is not a “clerical one”.
The EPA has since filed an appeal of the ruling. EEPGL has applied to join the case.
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