Nandall flays Trotman statement on impromptu inspections of Exxon operations

Former Attorney General, Anil Nandlall has skewered statements by Minister of Natural Resources, Raphael Trotman that impromptu inspections can be made by the government of ExxonMobil’s operations even though the agreement signed mandates seven days’ notice.

Nandlall yesterday also said that Trotman’s statement that the Guyana Revenue Authority (GRA) has a right to instant inspections of the oil operations is superfluous as ExxonMobil under the controversial 2016 Production Sharing Agreement (PSA) is not paying any taxes.

Trotman’s statements to Stabroek News which were reported in yesterday’s edition have been seen as an attempt to deflect criticisms of provisions of the PSA which appear heavily weighted in favour of ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL).

In a statement yesterday, Nandlall said that Trotman’s  position that the GRA can without notice visit the offshore operations of ExxonMobil and affiliates is “far-fetched” since the GRA will not collect any monies in taxes from the contract and as such has no reason to visit. Under the PSA, the Government of Guyana pays taxes on behalf of EEPGL.

“No taxes are chargeable on the oil operations or any activity connected therewith, either done by the contractor, or its affiliates, or its subsidiaries. The contract exempts the entire operations from every form of taxation,” Nandall said yesterday.

Further, he added, “As a result, GRA has no business inspecting those operations. It is Mr. Trotman’s contract that has removed GRA completely from the oil operations, and that is one of the major planks of criticism against the contract.”

Trotman told this newspaper during an interview last week that if government believes or has evidence that there are illegalities in ExxonMobil’s and partners’ operations offshore, it will make an impromptu visit despite the contract saying that the minister must give seven days’ notice.

“I will say this: If there is a need for an immediate inspection, it will be done. It will be done,” the Natural Resources Minister, an attorney and former Speaker of the National Assembly, told Stabroek News.

“If we suspect at any time that there is anything illegal or believe there is a violation of our law, or an act of criminality is being perpetuated, we would [visit immediately],” he added.

He also referenced the GRA.

“It is not unreasonable in contracts to give reasonable notice…at the same time, our laws give certain powers to GRA for instance to have instant inspections. What you have there [in the contract] is a period of reasonableness which is standard in most contracts,” he said.

Within the remit of the GRA also, Trotman said, was the conducting of audits of invoices submitted by company.

The Auditor General was also singled out when Trotman was asked if government would be seeking to have the $460M in pre- contract costs submitted by EEPGL audited.

He added that various agencies were responsible for different aspects of works under the contract and it is for this reason that one would see an overlapping of responsibilities when the proposed Department of Energy is formed.

‘Does not apply’

However, Nandlall said that while Trotman’s reference to the law is accurate and instant inspections by the GRA are catered for, the facts are that those laws do not apply to this contract.

“I would advise that clause 15 of the (PSA) and other related clauses be carefully read so that one can appreciate the large volume of taxation and by extension laws, which do not apply to the oil operations,” he added.

Nandlall said that while he is also a politician, he is pleading with the populace to analyze the contract from an impartial perspective and it is here they would discern that the seven days’ notice clause was implemented in 2016, when the modified contract was signed between the APNU+AFC government and EEPGL.

For the former Attorney General, it is mind-boggling why any government would acquiesce to a request for one week’s notice, at the sole discretion of the company.

“The 1999 contract was exploratory and terms were different. This is what the contract will be for the duration of that project and it clearly expresses that you have to give seven days’ notice and permission has to be granted by the company. Now what happens if the company says no you cannot visit?” Nandlall questioned while stressing that contracts are tightly worded and binding documents for a purpose.  It is for this reason that when Trotman says that government can also fly to the location without notice if it suspects any illegalities, that Nandall posits that it would be a contract breach and would open this country to serious litigation from Exxon and its partners.

“How does Minister Trotman conceive the Government making impromptu visits to the oil operations when the contract expressly and specifically provides that the Minister, through his duly appointed representative, must give at least seven days’ notice before they can be allowed to observe the petroleum operations conducted by the contractor? This clause is expressed in very clear and unambiguous language. It means exactly what it says, that is, the contractor is entitled, as of right, under the contract, to seven days notice before any visit can be made by the Minister or those authorized by the Minister. What this means is that the Government may attempt impromptu visits, but unless that seven days notice is given in the manner provided for by the contract, the contractor reserves the right to prevent the Government access to the operations,” Nandall said.

“Is Minister Trotman saying that the Government will not respect, obey and comply with its contractual obligations? Is Minister Trotman saying that the Government will breach, violate and disregard its contractual duties?” he further questioned.

‘Most significantly’

But “most significantly”, Nandlall says  that  when the clause, which requires the seven days’ notice, is read in conjunction with other related clauses, one gets the clear impression that the collective intent of the contract is to prevent the Government from accessing certain types of data, in respect of the oil operations.

It is for this reason, he says, that the government has to zoom in on and decipher why the company was adamant that the clause be crafted in the way it is.

“Even where the seven days’ notice is given, there are express prohibitions against the Minister interfering with the petroleum operations and there are a whole host of records and reports, which are deemed `confidential’ and to which the Minister has no access. Mr. Trotman’s comparing the petroleum contract to that of a simple landlord and tenant contract is quite unfortunate. It does not help his case. The petroleum contract is obviously sui generis (in a class by itself),” he said.

“The better thing for Mr Trotman to have done is to admit that the Government is in a conundrum from which it cannot extricate itself,” he added.

While advising that the contract not be scrapped, British Professor of Economics and Public Policy, Sir Paul Collier, has emphasized that getting the best out of the contract would come only if there are strict oversight measures in place.  He told the press, following a meeting with President David Granger and his Cabinet late last month, that stringent measures will be needed to monitor the accuracy of tax and cost submissions.  He also said that capacity building needed to be addressed.

“Don’t assume that you can just trust them to pay the right amount of tax. They don’t,” he said, as he gave an example where a Nigerian Finance Minister had the books of oil companies in that country audited for the first time and discovered that about US$350M was owed.

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