Increased flaring fine, financial assurance set out in renewed Liza 1 permit

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The Environmental Protection Agency (EPA) has renewed the environmental permit for ExxonMobil’s operations in the Liza Phase 1 project in the Stabroek Block offshore Guyana. The permit was renewed on Tuesday, the same day the original permit expired.

In this renewed permit, Esso Exploration and Production Guyana Limited (EEPGL) – ExxonMobil’s local affiliate – is now required to pay US $50 per tonne of carbon dioxide equivalent (CO2e) that is flared.

Because the company continues to experience mechanical challenges offshore, it has been paying US$45 per tonne of CO2e to compensate for the natural gas emitted. Flaring is a major environmental concern, as it generates harmful greenhouse gases which are responsible for changes in the world’s climate. With these changes, harmful disasters such as flooding are being experienced more frequently.

Meanwhile, the new permit also specifies that EEPGL is now required to have financial assurance, which includes a combination of insurance that caters for mishaps offshore, guided by an estimate of the credible costs, expenses and liabilities that may arise from breaches of the environmental permit.

As per Guyana’s Environmental Protection Act, the Environmental Protection Agency (EPA) may require this “financial assurance” from a company seeking environmental authorisation for a project such as a new development in oil fields offshore.

This type of insurance is needed “for measures appropriate to prevent the adverse effects (such as oil spills) upon and following the cessation or closing of the works.”

Read below the full press release issued by the EPA:

The Environmental Protection Agency (EPA) has renewed the Environmental Permit for the Liza Phase 1 Project within the Stabroek Block, Offshore Guyana, for a further period of five (5) years. This renewal was entirely in keeping with the Environmental Protection Act Cap 20:05, and comes following the EPA’s careful consideration of Esso Exploration and Production Guyana Limited’s (EEPGL) compliance with the first iteration of the Environmental Permit for the Liza Phase 1 Project.

The Liza Phase 1 Project was the first petroleum development project to have been permitted in the Stabroek Block. Progressing from the knowledge and experience gained during the course of this project, the renewed permit specifies further conditions and standards which will ensure that all environmental and social safeguards are taken for the protection of human health and the environment.

Key provisions in the Permit

Flaring

The Permit strictly prohibits routine flaring and venting, and specifies that flaring is only permissible during commissioning, start-up and special circumstances. The Permit also goes further to require the Permit Holder to pay US$50 per tonne of carbon dioxide equivalents (CO2e) emitted as a result of flaring in excess of permitted periods. This marks the highest sum to be levied in the event flaring is above stipulated limits  and payable in these circumstances, progressing from US$30 under the first Environmental Permit (modified) for the Liza Phase 1 Project.

Financial assurance

Among the notable conditions, the Permit ensures that EEPGL

is held liable for all costs associated with clean up, restoration and compensation for any pollution damage which may occur as a consequence of the project. EEPGL is also required to have Financial Assurance which includes a combination of Insurance which must “cover well control, and/or clean up and third-party liability on terms that are market standard for the type of coverage”, and a Parent Company/Affiliate Guarantee Agreement which indemnifies and keeps indemnified the EPA and the Government of Guyana in the event EEPGL and its Co-Venturers fail to meet their environmental obligations under the Permit. Further, the financial assurance provided must 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.

Monitoring

The Permit makes provision for the targeted monitoring of the effects of effluent discharges from the Project within the Area of Influence. The effluent streams to be monitored include, but are not limited to produced water, bilge water, cooling water and grey water. The Permit requires the submission of the effects of these discharges every six (6) months. Further, EEPGL is required to submit safety case information, including a Risk Assessment prior to the drilling and development of wells.

Grievance mechanism

Further, EEPGL is also enjoined to establish and maintain a Grievance Mechanism in keeping with the World Bank’s Approach to Grievance Redress in projects, to ensure that complaints from individuals and communities who may be affected by the project are received and addressed. There is a requirement for reporting the same and what actions were taken to address the grievances to the EPA.

The full text of the renewed Environmental Permit for the Liza Phase 1 Project is available for download on the EPA’s website at www.epaguyana.org.

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