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Govt. secretly inserts provision in Liza 1, 2 and Payara Permits to shield ExxonMobil from all oil spill costs
Kaieteur News – The Government of Guyana (GoG) through the Environmental Protection Agency (EPA) has modified the Liza One, Liza Two and Payara Permits, granted to ExxonMobil Guyana Limited (EMGL), reversing the legal requirement for an unlimited parent company guarantee to cover oil spills.
High Court Judge, Justice Sandil Kissoon
EPA Executive Director, Kemraj Parsram
Kaieteur News understands that a provision was initially inserted into the Yellowtail Permit for the fourth deepwater development, dated March 2022. That Permit outlined new conditions with regard to oil spill protection for the country.
While Condition 14 of the Permit requires Exxon to provide a Parent Company/Affiliate (of Operator and Co-Venturers (CoVs)) guarantee, it is clear that the coverage for oil spill protection is not unlimited. In fact, citizens who suffer ongoing loss from such an event will have to take Exxon to Court for compensation.
Condition 14.3 of the Yellowtail Permit states, “The above individually or a combination shall at least be guided by an estimate of the sum of the reasonably credible costs, expenses, and liabilities that may arise from any breaches of this permit. Liabilities are considered to include costs associated with responding to an incident, clean-up and remediation and monitoring. The estimation is not expected to address unidentifiable or inestimable costs which may be associated with compensation for loss and ongoing damage to other parties, and which are able to be pursued through civil action.”
President ExxonMobil Guyana Limited, Alistair Routledge
In the meantime, government has modified all of the previously issued Permits granted to Exxon, protecting the multinational corporation from all oil spill costs. The Liza One, Liza Two and Payara Permits have been modified to feature this new provision introduced by the People’s Progressive Party (PPP) regime.
The first two Permits for the Liza One and Liza Two oil projects were approved by the previous Coalition government while the third project, Payara was approved by the PPP government. These Permits did not previously feature this provision.
Two citizens, Frederick Collins and Godfrey Whyte had taken the Environmental Protection Agency (EPA) to Court for failing to enforce compliance with the Liza One Permit, requiring an unlimited guarantee for oil spills. Though the Court ruled in favour of the litigants, the ruling was appealed and is still ongoing in the Court of Appeal. Exxon, EPA and the government are fighting against the provision of an unlimited oil spill guarantee.
High Court Judge, Justice Sandil Kissoon in his ruling underscored the importance of an unlimited parent company guarantee. “If the unthinkable occurs, and there is an event in the Stabroek Block resulting in the release of hydrocarbons then Esso, and to the extent that it is unable to do so as it is largely an assetless subsidiary without financial resources, then EXXON, the Parent Company comes into play.”
The court noted that EXXON continues to derive a benefit from the operations of its subsidiary and will cover the liabilities and obligations of Esso as stipulated at Condition 14:01. As such, Justice Kissoon reasoned that “If, however, that event occurs and there is no uncapped Parent Company Guarantee in place to indemnify the State, then the State is liable for all that occurs. It is simply not open to the permit holder to say it is engaged in a frolic of its own, aided and abetted by the EPA, to unilaterally, arbitrarily and unlawfully cap its unlimited liability and financial assurance.”
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