In landmark ruling, High Court orders EPA to ensure ExxonMobil issues insurance guarantee for Stabroek Block


By Vishani Ragobeer

In a landmark ruling on Wednesday, High Court Judge Sandil Kissoon ordered Guyana’s Environmental Protection Agency (EPA) to issue an Enforcement Notice directing ExxonMobil’s Guyana subsidiary to provide unlimited liability parent guarantee for its operations in the Stabroek Block within 30 days.

EEPGL (Esso Exploration and Production Guyana Limited) is the local subsidiary which, since 2019, has been producing oil in the prolific Stabroek Block offshore Guyana.

ExxonMobil Corporation and its partners only last week announced a US$12.7 billion investment in Guyana. This will be for their fifth and most expensive offshore oil project in Guyana and is expected to take production to over one million barrels of oil within the next four years.

Justice Kissoon, in a ruling issued on Wednesday, said the local subsidiary company should provide unlimited insurance for its operations in the Stabroek Block. And if the company is unable to offer those unlimited financial assurance, then its parent company (ExxonMobil) must provide an unlimited parent guarantee to cater for any adverse events such as an oil spill.

If no such guarantee is in place to indemnify the State, then it was noted that the State is liable for all that occurs.

The Attorney General’s Chambers, in a statement for the EPA and the Government of Guyana, said it was their “considered view that the Environmental Permit imposes no obligation on the Permit Holder to provide an unlimited Parent Company Guarantee Agreement and/or Affiliate Company Guarantee Agreement.”

They held that the judge “fell into error in his findings” and said “the ruling can have profound ramifications and grave economic and other impacts on the public interest and national development.”

“As a result, the decision of the Learned Judge will be appealed and orders will be sought to stay its effect until the hearing and determination of the appeal,” the Attorney General Chambers stated.

Justice Kissoon ruled that the EPA is in breach of its statutory duty by its failure and/or omissions to enforce compliance by EEPGL to provide the unlimited parent guarantee and to indemnify and keep indemnified the Agency and the Government of Guyana against all environmental obligation of the permit holder (EEPGL) and the co-venturers within the Stabroek Block (Hess and CNOOC).

The judge declared that EEPGL failed to comply with its financial assurance obligation stipulated in the renewed Environmental Permit for the parent guarantee, and that EEPGL has to satisfy unlimited and uncapped liability for all costs associated with clean up restoration and compensation for any discharge from any contaminant offshore. Further, a declaration that EEPGL failed to comply with it’s financial assurance obligation to provide environmental liability insurance as customary was granted.

Another declaration was granted that the EPA was in breach of its statutory duties by failing to and/or omissions to enforce compliance by EEPGL on its financial assurance obligations.

Justice Kissoon ruled on proceedings brought by Frederick Collins and Godfrey Whyte. And the ruling handed down was critical of the EPA and what EEPGL has been doing.

“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 optimising production at the Liza Phase 1 Petroleum Production Project in the Stabroek Block offshore Guyana,” Justice Kissoon said in his ruling.

The Court found that there is clear, expressed and unambiguous language in the renewed Environmental Permit indicating that the permit holder (EEPGL) assumes unlimited liability for all costs of clean up, restoration and compensation for any damage from any discharge of any contaminant.

“The unlimited liability which is exclusively that of the Permit Holder, Esso, is by no means unusual in any sense, in that Esso, together with its co-venturers, are engaged in Petroleum Production activities in the Stabroek Block, for profit,” the ruling further stated.

EEPGL and the Agency argued, inter alia, that it only has to cover “reasonably credible costs, expenses and liabilities” that may arise from the breach of the permit. They do not agree that EEPGL has to provide unlimited insurance to deal with any adverse event such as an oil spill.

But the Court ruled otherwise.

“These arguments on the part of Esso and the Agency are entirely without merit and have no basis in law, fact and circumstance,” the ruling stated clearly.

Furthermore, the ruling highlighted the shortcomings of the EPA.
In fact, it was noted that EEPGL engaged in this course of action because of the omissions of a “derelict, pliant and submissive” EPA.

For instance, Justice Kissoon said even where there is an “express prohibition” against disclosure in the subject legislature of the Public Authority (in this case, the EPA), such a disclosure is construed as subject to disclosure in the public interest. That means, in the interest of public health, safety or protection of the environment.

But the EPA, the ruling said, has not fulfilled its duties.

“The approach adopted by the EPA, in the course of these proceedings, was inconsistent with its mandate and statutory functions, which is one of transparency and accountability to engender trust and confidence of the citizens and members of the public whose behalf and in whose interest it carries out its functions as a Public Authority in the public interest,” the ruling stated.

ExxonMobil has made multiple discoveries in the Stabroek Block. The two production vessels currently operating offshore produce an estimated 375,000 barrels of oil per day.

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