Wednesday’s decision by Justice Sandil Kissoon finding ExxonMobil’s subsidiary, EEPGL in flagrant breach of its insurance obligations in relation to the Liza-1 project is a monumental victory for citizen activism in an oil and gas sector that has been heavily cloaked in opacity which this government and its predecessor have been clearly complicit in permitting.
The Applicants, Frederick Collins and Godfrey Whyte successfully contended that the Environmental Protection Agency (EPA) abrogated its statutory duties and functions when it failed and/or omitted to mandate compliance by Esso Exploration and Production (Guyana) Limited (EEPGL) with its obligations for financial assurance and liability for Pollution Damage, inclusive of unlimited Parent Company guarantees, indemnities and insurance as set out and stipulated at Condition 14 of the Environmental Permit (Renewed) N0. 201 607 05 and issued by the EPA on the 31/05/2022.
Messrs Collins and Whyte and their legal team must be applauded for joining a small number of persons who have unstintingly dedicated their time and energy in defending the interest of Guyana and its people and in this respect ensuring that this country is indemnified to the fullest extent possible by Exxon and its co-partners for what is an industry attended by high risks and moreso with the increasing number of oil platforms and the literal pressing of the foot on the gas pedal with the acquiescence of this government.
The immediate issue of interest is the judge’s order to the EPA for rapid compliance by ExxonMobil/EEPGL as non-compliance will result in a suspension of the environmental permit and presumably production from the platform which has been in operation since December 2019.
The judge granted an Order of Mandamus directed to the EPA to issue an Enforcement Notice pursuant to Section 26(1) and (2) of the Environmental Protection Act, on or before 9/05/23, directed to EEPGL to perform its obligations under Condition 14:10 and 14:05 of the Environmental Permit (Renewed) No. 206 607 05 issued on the 31/05/22 and to provide, within 30 days thereafter, on or before 10/06/23, the unlimited liability Parent Company Guarantee Agreement and/or unlimited liability Affiliate Company Guarantee to indemnify and keep indemnified the Government of Guyana and the Agency against all such environmental obligations of Esso and its Co-venturers within the Stabroek block, together with Environmental liability insurance as is customary in the international petroleum industry failing which the Environmental Permit (Renewed) dated 31/05/22 stands suspended.
Government spokespersons have already signalled that an appeal will be filed and a stay sought. ExxonMobil has also said that it is studying the decision.
The judge’s decision was scathing in its consideration of the EPA’s disposition towards the permit which he described as clearly setting out the insurance obligations of the company. Sufficiency of insurance coverage by EEPGL has been unremittingly raised by many commentators, including the dismissed former Head of the EPA, Dr Vincent Adams, along with the widely held view that the EPA has been commandeered by the PPP/C government to waive critical requirements and green light Exxon’s plans in the unrelenting drive to extract oil as fast as possible no matter the risk of environmental damage and the climate change hazards.
An appeal of the decision could very well affirm the morass that the EPA finds itself in and further embarrass this administration.
In stark language, Justice Kissoon ruled that the EPA had abdicated the exclusive statutory responsibilities entrusted to it by Parliament under the Environmental Protection Act 1996 and the Environmental Protection Regulations 2000 to ensure due compliance by EEPGL with Condition 14 of the Environmental Permit.
“The EPA has relegated itself to (a) state of laxity of enforcement and condonation compounded by a lack of vigilance thereby putting this nation and its people in grave potential danger of calamitous disaster.
“In the course of these proceedings, the Court found on the evidence before it that Esso Exploration and Production Guyana Limited was engaged in a disingenuous attempt which was calculated to deceive when it sought to dilute its liabilities and settled obligations stipulated and expressed in clear unambiguous terms at Condition 14 of the Environmental Permit (Renewed) while simultaneously optimizing production at the Liza Phase 1 Petroleum Production Project in the Stabroek Block Offshore Guyana.
“Esso Exploration and Production Guyana Limited engaged in a course of action made permissible only by the omissions of a derelict, pliant and submissive Environmental Protection Agency”, the judge stated.
The court also rebuked the EPA for subterfuge and unaccountability.
“The Agency, in its filing before the Court, sought refuge in silence, concealment, avoidance and secrecy. Such conduct is nothing short of reprehensible and inconsistent with its mandate and functions”, he stated.
The Judge pointed out that Condition 14 ‘Financial Assurance and Liability for Pollution Damage’ provides at 14:1 that the Permit Holder is liable for all costs associated with clean-up, restoration and compensation for any damages caused by a discharge of any contaminant including the cost of all investigations into pollution incidents or discharge of contaminants conducted at the instance of the Agency.
This sub-Condition he said is all-encompassing in several aspects. Under it the Permit Holder, Esso,
(a) Assumes liability for all costs
(b) Assumes liability for any damages
(c) Liability accrues to the Permit Holder from any discharge howsoever it occurs (d) Liability for discharge flows from the release of any contaminant.
“The Court finds and holds that in the circumstances of the clear, express, unambiguous language of the stipulation at Condition 14:01 of the Environmental Permit (Renewed), the Permit Holder assumed unlimited liability for all costs of clean up, restoration and compensation for any damage from any discharge of any contaminant”, the judge said.
Justice Kissoon underlined that it must be borne in mind at all times that the liability under Condition 14 is not a shared one between the state of Guyana and Esso but is exclusively the liability of Esso, uncapped and unlimited, for which it is obligated to provide an unlimited Parent Company Guarantee consistent therewith.
The judge found the current insurance held by EEPGL as non-compliant with its obligations.
He stated “I have reviewed the evidence before the Court and the conflicting submissions on the issue of the performance by Esso with its insurance obligations. I have reviewed the Policy before the Court which the Applicants have vociferously attacked on multiple grounds. 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)”.
Further, he said that the insurance had not been obtained by the Permit Holder from an insurance company of standing that equates to Grade A Plus and he said that the agency had engaged in a course of action to undermine and erode the terms and conditions of its own Environmental Permit.
In a statement on Wednesday following the ruling, Attorney General Anil Nandlall SC said that the EPA and the Government of Guyana are of the considered view that the Environmental Permit imposes no obligation on the Permit Holder to supply an unlimited Parent Company Guarantee Agreement and/or Affiliate Company Guarantee Agreement.
He then went on to say that “This ruling can have profound ramifications and grave economic and other impacts on the public interest and national development”. It was ironic that the Attorney General did not, among his concerns, reflect a recognition of the grave dangers that can be posed to this country were there to be an environmental catastrophe in the Atlantic amid an insufficiency of insurance coverage – again a reflection of this reckless government tilt towards ExxonMobil and unrestrained oil production.
There must be urgent compliance by both the EPA and EEPGL with the court’s decision.
