ExxonM ordered to lodge US$2B parent guarantee within 10 days

Jun 09, 2023 Court Stories, ExxonMobil, Features / Columnists, News, Oil & Gas

…but Court of Appeal stays Justice Kissoon’s order for company to provide unlimited guarantee for oil spills by Saturday

Kaieteur News – Appellate Judge Rishi Persaud on Thursday ordered ExxonMobil to provide Guyana with a US$2B parent company guarantee within the next ten days or its operating licence will be suspended.

Appeal Judge Rishi Persaud

Justice Persaud made the order when he decided put on hold the suspension order issued by High Court Judge, Sandil Kissoon against ExxonMobil’s Esso Exploration and Product Limited (EEPGL) to provide Guyana with unlimited parent company guarantee by June 10, 2023 or its licence will be suspended. The oil major has indicated it will not be able to provide such a guarantee and the Environmental Protection Agency (EPA) and the oil company appealed the matter. During the appeal they asked for a stay of the suspension order as it could be disastrous to the country as well as the oil company. After hearing arguments from both sides, Justice Persaud delivered his judgment on Thursday. The stay of the suspension order will be in force until the hearing and determination of the full appeal case.

The appeal case is premised on the decision of Justice Kissoon in an application filed in the High Court on September 13 by Attorneys Seenath Jairam, SC, Melinda Janki, and Abiola Wong-Inniss. In the case, Guyanese activists, Godfrey Whyte and Frederick Collins said that their resort to the court is to make sure that the company takes full financial responsibility in case of harm, loss, and damage to the environment.

They noted that “an oil spill would be devastating for our country and Region as many Guyanese and Caribbean peoples depend on the ocean for their livelihoods. That is why we have decided that the time has come to take matters to the court for relief.”

Kissoon had handed down a strongly worded decision as to why the oil subsidiary must provide adequate financial assurance by its parent company Exxon Mobil to cater for all the damages to the environment in the event of a blowout or massive spill in the Guyana oil field.

According to Justice Kissoon, the EPA as the statutory regulatory body failed to enforce condition 14 of the permit which it granted to the oil subsidiary, Esso which stipulates the need for an unlimited liability Parent Company Guarantee Agreement and/or unlimited liability Affiliate Company Guarantee, to cover and keep protected the Government of Guyana and the Agency against all such environmental obligations within the Stabroek block, together with Environmental liability insurance as is customary in international petroleum industry, in accordance with the conditions listed in the permit from an insurance company standing and repute that equates to Grade A Plus as envisaged by Condition 14:05 of the permit. A failure to comply with the order, the judge said would have resulted in the permit being suspended. Thursday’s decision touched only on the suspension order, which has since been put on hold, but the substantive case will go forward and is to be heard by the full Court of Appeal panel.

In its appeal, the EPA had said that the trial court erred in law in interpretation, consideration and application of the combined effect of Clause 14 of the Environmental Permit issued to EEPGL, and erroneously concluded that the financial assurance must be provided by EEPGL. The EPA argued that the trial court erred in law and misconstrued the Environmental Protection Act and its Regulations to determine that the Appellant, a statutory body had specific statutory powers which in fact it did not.

The EPA argued too that the trial court erred in law and misconstrued the substance and effect and wrongly ascribed to it an interpretation superior to the Environmental Protection Act and thereby ascribed meaning to it which was expressly contrary to the specific provisions of the said Act and its Regulations.

Further, the EPA submitted that the trial court erred in law in directing and determining the exact manner of the exercise of the discretion of the EPA in a manner contrary to established law and practice. In effect the EPA said that the trial court substituted its own discretion as the decision of the EPA when the Agency at all material times, had exercised its discretion and acted well within it statutory and regulatory powers. As a result, the EPA had applied for a stay of execution of the judgment of the Court as it contends that irreparable harm would be suffered by the nation’s economy.

Meanwhile, Director of the EPA, Kemraj Parsram in an affidavit inter alia said that he was advised that the grave disruption to the national economy coupled with the good prospect of success of the Appeal is sufficient for the court to grant of a stay of execution of the order and judgment of the High Court.

Parsram said that the court orders are quite coercive; including its mandate to the EPA to serve a statutory notice on EEPGL, and if no adequate response is received then the permit stands suspended. According to the EPA Head, the judgment will have severe consequences and the direction of the Court has the effect of removing entirely the discretion of the agency.
He noted Guyana as a nation now earns billions of dollars annually from the petroleum activities conducted on the Liza 1 and Liza 2 fields; both are subject to the permit suspension or cancellation which will have a catastrophic effect on national funds for development and also the private sector which supports the activities on the said Liza 1 and 2 fields.