EPA issues enforcement notice to Exxon as court deliberates on stay of execution

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Guyana’s Environmental Protection Agency (EPA) has served Stabroek Block operator, Esso Exploration and Production Guyana Limited (EEPGL) with a notice to provide an unlimited parent and/or affiliate company guarantee. This revelation was made on Wednesday by the EPA’s lawyer, Sanjeev Datadin before Appellate Court Judge, Justice Rishi Persaud.

Datadin told OilNOW that the enforcement notice brings the EPA into compliance with the ruling issued by High Court Judge, Justice Sandil Kissoon on May 3, 2023. That judgment was handed down for a case filed by Attorneys-at-Law, Seenath Jairam SC and Melinda Janki on behalf of Guyanese activists, Godfrey Whyte and Frederick Collins.

Datadin said the notice expressly states what was ordered by Justice Kissoon. His ruling called for the provision of an “unlimited liability parent company guarantee 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 from an insurance company with standing and repute that equates to Grade A Plus.” The Liza Phase 1 environmental permit would be suspended if this order is not complied with by June 10. 

Apart from the notice being issued, the EPA has filed an appeal calling for a pause on the order until a full hearing and determination is made on its case to set aside Justice Kissoon’s ruling in its entirety.

During Wednesday’s hearing on the application for a stay by the EPA, Datadin told the court in no uncertain terms that the High Court Judge misinterpreted the demands of the Liza Phase 1 Permit. Datadin said nothing in the permit calls for unlimited financial assurances.

Datadin pointed to Condition 14.3 of the permit which he said outlines that the forms of financial assurance for the Liza 1 Project ought to be guided by an estimate.

That permit provision says, “The forms of financial assurance shall 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. The estimation is not expected to address unidentifiable or inestimable costs which may be associated with compensation for loss and ongoing damage to other parties which are able to be pursued through civil action.”

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Datadin said, “To say unlimited guarantee makes a mockery of the clear words of the permit…The court has therefore invented unlimited guarantee…” He further contended that this impossibility has perhaps crept into the psyche of the courts from some sections of the media.

His position was also supported by Lead Counsel for EEPGL, Edward Luckhoo. He too argued that Condition 14.3 clearly contemplates financial assurance to be guided by an estimate. The lawyer also noted that the permit at 14.10 (b) states that the affiliate (s) must have sufficient financial strength for the potential liability to be covered, thereby reinforcing that there must be a definite sum.

The affidavit submitted by EEPGL President, Alistair Routledge also held the foregoing view. Expounding on these arguments, Routledge said the High Court failed to take into consideration Section 31 of the Act which created a discretion on the part of the other Appellant/Respondent (being the EPA) to require financial assurance, and in particular, Section 31(2) which contemplates that there be a specific amount of the financial assurance to be provided. He said nothing in the law, which supersedes the permit, calls for unlimited forms of financial assurance. 

Routledge further noted that if the permit is suspended, then substantial losses would be incurred to EEPGL. He said in this regard that Exxon which produces about 4.5 million barrels per month from the project could lose US$337.5 million per month or US$4 billion per annum.

Routledge also explained in his submissions that the Liza Petroleum Production Licence is for a limited term of time, adding that the appellant may be unable to recover lost production implicated by suspension of the permit. 

If EEPGL is vindicated on the appeal, he said it would be unable to recover lost sums as they would have been forfeited due to the enforced closure of production while the appeal is pending.

The EEPGL Head also warned that Guyana would be faced with huge revenue shortfalls and would be unable to carry out some of its programmes for national development if the permit is suspended. 

It was further noted that the suspension of the permit, without further clarity on what continued maintenance operations are allowed, including running the power generation facilities at the offshore project, creates unacceptable and increased environmental risk as it does not allow proper maintenance of facilities and equipment to maintain the safety and integrity of offshore operations.

As for the lawyers representing Whyte and Collins, they argued that the permit bounds Exxon to cover all costs associated with an oil spill. Jairam in particular said nowhere in the permit states that there should be a cap on the financial assurance to be provided to cover legitimate liabilities.

Jairam argued that a US$2 billion guarantee, which was recently negotiated between EEPGL and regulators, is inadequate. He said, “These accidents on the high seas cost billions upon billions, a US$2 billion (guarantee) would be a drop in the ocean…”

Prior to hearing arguments for and against the application to stay the guarantee order, Justice Persaud was presented with a request by Attorney General, Anil Nandlall to join the case. His application would be heard in full on June 22 at 9:30 am.

Justice Persaud has since committed to issuing his ruling on the application for a stay on or before June 7, 2023.

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