Unlimited insurance coverage unheard of but parent companies can be held liable – Guyana EPA

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Guyana’s Environmental Protection Agency (EPA) has reiterated its commitment to ensuring the country holds no liability in the unlikely event of an oil spill in the offshore Stabroek Block. 

Current Permits are held by ExxonMobil Corp. subsidiary, Esso Exploration and Production Guyana Limited (EEPGL) and its partners, Hess Guyana and CNOOC. 

According to the EPA, liability can default to the parent company of any permit holder if they fail to fulfil their responsibilities. 

“…it must be emphasized that beyond Permit conditions, and the EPA Act which addresses the liability of Permit Holders and ensures that environmental damage will not go unpunished or unremedied, through the vicarious liability principle, a Parent Company can be held liable for unfulfilled obligations (default) of its subsidiaries,” the Agency affirmed. 

Recent articles in the local media on oil spill insurance prompted the response from the EPA. The Agency pointed out that when it issued the Liza 1 Permit, it “relied on self-insurance” – which aligned with the 2016 Stabroek Block agreement. 

The EPA noted that this type of “Financial Assurance” is commonly used in the industry. Updated oil spill insurance demands have been included in the revised Liza 1 Permit and all other approved Permits for Exxon’s additional Sabroek Block developments. There is a ‘per occurrence’ insurance coverage of US$600 million related to oil spills. There is also the capping stack requirement included in the Yellowtail Permit. Guyana would be the only country in the region to have one readily available. 

While there have been calls for the EPA to demand “unlimited coverage” insurance, the EPA outlined that insurers are “disinclined” and have never provided that level of coverage. 

“It is unheard of to this day, to reasonably require unlimited coverage insurance…clarification sought from local insurers would confirm that there is nothing like unlimited or full cover insurance where liability is concerned because one cannot put an exact number to future/potential claims,” the Agency explained.  

The EPA said it is examining and identifying appropriate and other effective forms of Financial Assurance for oil spills and other environmental liabilities. 

“This is ongoing and when completed, the public will be duly updated,” it said. 


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