Latest update December 16th, 2024 9:00 AM
Complete liability coverage for oil spills to indemnify our Caribbean Island neighbours
Dear Editor,
Our angelic lawyers and appellate judges are debating in medieval terms whether ‘assurance’ or ‘insurance’ or ‘full liability coverage’ or ‘complete indemnity’ can all sit on the head of a pin. Meanwhile, let us consider why we need such security instruments.
Since the PEMEX oil spill at the Ixtoc-I well in the Gulf of Campeche in 1971 (3 million barrels and nine months of uncapped flow), slicks travelling across oceans to adjacent countries have sometimes had devastating effects on coastal communities. The more recent Environmental Impact Assessments by ERM for EEPGL (Esso Exploration and Production (Guyana) Limited) point out the possibility of Exxon spills contaminating up to 12 of our Caribbean Island colleagues/sister countries.
Our generally muddy shores are not associated with beach-based tourism but for our Caribbean friends, travel and tourism can be huge parts of their economies. For 10 of the 12 countries for which I could find comparable data for pre-COVID 2019 travel, here are the national values and what each represents as a percentage of GDP; table in alphabetic order of country name.
It is a legal oddity that there are international conventions about avoidance, mitigation and control of spills from oil field vessels and oil tankers but not from subsea oil wells. The EIAs show the low probability/very high impact of a worst-case disaster, a Tier III loss of well control, that is, a massive blow-out. We need to cover our sovereign responsibility over Guyana’s Exclusive Economic Zone – where Exxon has the 2016 PSA over the Stabroek Tract and contracts to operate other Tracts. The Government as represented by the Environmental Protection Agency can see from this table that loss of the annual travel and tourism value of nearly USD 29 billions is nowhere near covered by a collateral security of only USD 2 billion from EEPGL and/or its parent company ExxonMobil.
In the absence of the parent company letter from ExxonMobil to cover completely the liabilities, our Caribbean Island friends may be asking in a quite unfriendly letter for USD 27 billions of dollars of compensation for oiled beaches, to be paid by the Guyanese taxpayer. And that would be just for one year. Add more for loss of income over the several-to-many years to clean and restore the beaches and fisheries. Such a claim would bankrupt Guyana. Surely our legal eagles can understand the need to enforce the EPA requirement for complete indemnity to cover liabilities in the oil sector? – see EPA’s firm statement on 11 April 2022 – ‘Should EEPGL or its co-venturers default on their self-insurance, the Yellowtail Permit, like the Liza 2 and Payara Permit, demands a guarantee from the parent company ExxonMobil, that fully indemnifies the Government of Guyana’, https://oilnow.gy/featured/yellowtail-permit-armed-with-most-superior-provisions-for-insurance-oil-spill-prevention-management-epa-officials/ .
Editor, here is an excerpt from an exchange between Rod Henson of EEPGL and me in July 2018, as reported in the Guyana Chronicle:
‘“Might we be liable as a country if Caribbean countries then sue us for potentially messing up their waters?” asked Bulkan. In response, the EEPGL Country Manager made it clear that if his company is found liable in any such circumstance, it would have to pay.
“At the end of the day, we would enact procedures we already have in place for spill management,” he stated.
Meanwhile, Executive Director of the Environmental Protection Agency (EPA), Khemraj Parsram, noted that trans-boundary liability, “Discussions are being held with regard to agreements and partnerships with countries like Trinidad…those discussions are ongoing and we are not ready to present the results of that.”
Several questions were asked in light of the recent oil spill in the Gulf of Paria, Trinidad and Tobago, and according to Henson, Guyana is prepared to deal with any such eventuality.’ (Guyana Chronicle, 2018, July 10. Liza Phase 2 to pose only ‘minor risks’ to environment – EIA. http://guyanachronicle.com/2018/07/10/liza-phase-2-to-pose-only-minor-risks-to-environment-eia).
Editor, almost 5 years have passed since Mr. Henson of EEPGL gave his word at a public meeting on the EIA for EEPGL’s Liza Phase 2 Project. Why is Guyana still waiting for a one-sentence Parent Company Guarantee, as required in their Environmental Permit?
Regards,
Janette Bulkan
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