Today, we continue our series on the Oil Pollution Prevention, Preparedness, Response, and Responsibility Act of 2025 (OPPPRR) by seeking to clarify the nature of, and differences between, two critical concepts: environmental liability and financial assurance.
These concepts continue to be conflated and used interchangeably in public discourses in Guyana. This has led to calls, as well as court orders, for unlimited liability coverage, which would comprise both insurance and a parent company guarantee, covering all liabilities, even those exceeding the insurance limit.
In at least one court case, the applicants argued that the absence of an uncapped parent company guarantee to indemnify Guyana makes Guyana liable for all that occurs in the event of a spill or other related eventuality (see Page 48 of Collins and Whyte v EPA 2022-HC-DEM-CIV-FDA-1314). The conflation and confusion persist, despite efforts by Exxon Mobil Guyana Inc. and other stakeholders to clarify these concepts.
In today’s article, we demonstrate why there is already unlimited liability in Guyana for oil spills, and why calls for unlimited insurance or parent guarantee may be misplaced.
Environmental Liability: Responsibility Without Limits
The OPPPRR states that a responsible party is liable for all damages caused by an oil spill incident, including removal, removal costs, restoration, etc. (see section 17 of the OPPPRR). Environmental liability refers to the legal obligation to prevent, remediate, or mitigate environmental harm. Under the OPPPRR, responsible parties are fully liable for a range of matters, including loss of taxes, royalties, profits, and natural resources, as well as damage to real or personal property and economic losses resulting therefrom. (see section 19 of the OPPPRR).
Under the EP Act and the OPPPRR, both natural and legal persons are required, among other things, to take preventive measures, implement immediate spill response, and restore affected environments in the event of a spill (sections 8–15 and 23 of the OPPPRR).
Importantly, there is no statutory cap on liability, unlike in other jurisdictions, such as the United States (US). In other words, liability or responsibility for environmental harm is, by law, unlimited. This legal and factual reality seems elusive in most conversations on the subject.
Financial Assurance: A Safety Net with Limits
Unlike liability, however, financial assurance is not unlimited in Guyana. Unlike liability rules, which are concerned with responsibility for environmental harm, financial assurance refers to the measures through which potential polluters establish, before the fact, adequate financial resources to correct and compensate for environmental damage that may arise in the future (see James Boyd, ‘Financial Responsibility for Environmental Obligations: An Analysis of Environmental Bonding and Assurance Rules’).
Financial assurance, therefore, seeks to establish security, and as such, it is often subject to limits and exceptions. This reflects the reality that, in high-risk industries, potential liabilities can be too large, if not impractical, to be underwritten without specified caps. Indeed, requirements for an unlimited financial assurance could see the providers of these assurances guarantee sums up to or exceeding their market capitalisation. Limits provide a mechanism through which environmental protection can be pursued in conjunction with economic development.
In apparent support of the balance between environmental protection and economic viability, section 31 of the EP Act requires the amount of financial assurance to be specified in any Environmental Permit requiring the same.
Furthermore, it provides for financial assurance to be reduced or released in stages, and for Environmental Permits to be amended to change or include requirements regarding financial assurance. To reinforce this, the OPPPRR ensures that financial assurance is determined in accordance with the Petroleum Activities Act 2023 and the EP Act (see section 27).
In 2022, ExxonMobil Guyana stated that it holds a US$600 million per-occurrence insurance policy and a US$2 billion guarantee to cover potential damages resulting from petroleum development. In 2023, the company provided a US$2 billion guarantee to the EPA. Evidence of the policy and assurance was published in Guyana’s Official Gazette.
Unlimited Liability, Limited Assurance: Is This Enough for Guyana’s Oil and Gas Sector?
Evidently, in the Guyana context, liability for environmental harm is unlimited, whereas financial assurance is designed to be specified and adjustable. So, is this a strength or a weakness? Does the absence of unlimited financial assurance suggest a gap in the country’s environmental regulatory framework?
To explore this, it may be helpful to consider Guyana’s framework alongside that of the U.S., whose framework has also been tested on an unprecedented scale, most notably during the 2010 Deepwater Horizon disaster.
Under the Oil Pollution Act of 1990, widely regarded as the most comprehensive oil pollution regime in the world, environmental liability is generally limited, with exceptions for gross negligence, willful misconduct, or violations of applicable federal safety, construction, or operating regulations (33 § 2704(c)(1)(A)–(B)). Similarly, financial assurance requirements are set in fixed, risk-adjusted amounts and remain subject to regulatory discretion. There seems to be no expectation of “uncapped” or “unlimited” financial assurance. Importantly, despite the statutory caps on financial assurance, British Petroleum (BP), which caused the massive oil spill in the Gulf of Mexico, eventually paid out tens of billions of dollars in damages for cleanup, restoration, and claims by affected persons.
Viewed in this light, Guyana’s regulatory approach seems consistent with international practice.
Final Thoughts
It is clear that liability rules identify who is responsible and to what extent, while financial assurance provides proof of ability to respond. For Guyana, the legal framework permits specified and adjustable financial assurance, while liability for environmental harm remains uncapped.
This column is co-authored by Frances Carryl, a seasoned attorney with advanced law degrees, extensive academic and practical experience in Corporate, Oil and Gas, and Environmental Law, and a solid background in legal research and environmental regulation.
