By Chevy Devonish
In a previous article we examined how the Caribbean Court of Justice (“CCJ”) in Attorney General of Guyana v Environmental Protection Agency [2024] CCJ 16 (AJ) GY, to my mind, settled the important question of: Whether Guyana’s Attorney General (“AG”) should be permitted to join litigation concerning petroleum development projects operated by ExxonMobil Guyana Limited (“ExxonMobil”)?
Until then, there were inconsistent rulings by various High Court judges on the subject, and only after months (at least) of litigation.
I have said that this decision by Guyana’s apex court, along with another High Court decision are likely to make it easier (though not absolutely guaranteed) for Guyana’s AG to join litigation related to ExxonMobil’s projects despite efforts by litigants to resist his participation.
Today we will examine the case of Ramon Gaskin v. Minister of Natural Resources et al [2024] CCJ 14 (AJ) GY and its implications. Since this article attempts to summarise a 73-page judgment, it will not be as concise as my typical articles.
The effect of the CCJ’s Gaskin Decision
The effect of this decision is that it is permissible for the Environmental Protection Agency (“EPA”) to grant an Environmental Permit (“EP”) to the operator of an oil and has consortium if it qualifies, particularly if all members of the consortium share environmental liability/responsibility under the relevant petroleum sharing agreement and EPs. Further, in such a case, it is permissible for all members of the consortium to be granted a Petroleum Production Licence (“PPL”) based on that EP.
This case therefore confirms, if not clarifies the approach current and future oil and gas developers under other petroleum sharing agreements must take in seeking their permits and licences. It also gives confidence, if not guidance to the EPA and the Ministry of Natural Resources (“MNR”) regarding the legality of the grant of EPs and PPLs to oil and gas consortiums.
Why was the case filed?
This case, filed in 2018 by Ramon Gaskin (now deceased), concerned authorisations related to the Liza Phase 1 Project in the Stabroek Block.
Though Hess Guyana Exploration Limited (“Hess”) and CNOOC Nexen Petroleum Guyana Limited (now CNOOC Petroleum Guyana Limited (“CPGL”)) are ExxonMobil Guyana’s co-venturers under the Petroleum Sharing Agreement 2016 (“PSA 2016”), ExxonMobil Guyana alone had applied for and was granted an EP (Ref No.: 20160705-EEDPF) to operate Phase 1 of the Liza Project.
Thereafter, on ExxonMobil’s application, a PPL was granted to all three co-venturers as “Joint Venture Licensees” on 15th June 2017.
Gaskin’s argument was that the grant by the Minister of Natural Resources of a PPL to all the co-venturers breached section 14 Environmental Protection Act, Cap 20:05, Laws of Guyana (“EP Act”).
Section 14 of the EP Act states that development consent (a PPL) cannot be given (for an oil and gas project) until environmental authorisation (an EP) was first obtained. Gaskin reasoned that since the three companies are co-venturers under PSA 2016, section 14 of the EP Act required them all to be granted individual environmental authorisation (EPs) before a PPL was granted. As this was not done, he argued, the MNR had no power to issue a PPL in the name of the co-venturers under section 35 of the (now repealed) Petroleum (Exploration and Production) Act, Cap 65:04.
The CCJ’s Decision
The High Court, the CoA, and now the CCJ have rejected these arguments.
According to the CCJ, the grant of the PPL by the MNR to the co-venturers was lawful for four (4) reasons:
- The requirements of section 14 of the EP Act were satisfied if the sole operator of the Liza 1 Project (ExxonMobil Guyana) applied for and was granted an EP;
- The inclusion of ExxonMobil Guyana (as sole operator) and Hess and CPGL (as financial partners) in the PPL accords with international oil and gas industry practice;
- All three co-venturers have joint and separate liability for environmental harm under PSA 2016, and the Liza 1 Project EP; and
- There was no increased risk of harm to the environment by including HESS and CPGL to the PPL.
The requirements of section 14 of the EP Act were satisfied if the sole operator of the Liza 1 Project (ExxonMobil Guyana) applied for and was granted an EP.
The CCJ has said that the language of sections 13 (1) and 14 of the EP Act, and Regulation 17 (2) (b) of the EPA Regulations suggests that environmental authorisation/the EP is granted for a project, in this case, the Liza Phase 1 Project.
This can be seen as a conceptual shift, as perhaps the most common or popular understanding (at least among those not familiar with oil and gas operations) was that the authorisation/ EP is granted to an applicant to carry out a project.
This thinking clearly influenced Gaskin’s the view that the co-venturers must all be granted EPs to obtain their PPLs.
Notably, ExxonMobil Guyana is the sole “Operator” under Clause 2.2 (a) of PSA 2016 and is responsible for “the day-to-day activities” of the projects under PSA 2016. The CCJ said that as sole Operator, ExxonMobil alone is practicably able to comply with the requirements of a developer under the EP Act, and was the only one of the co-venturers who could give undertakings to abide by the terms and conditions of the authorisation/EP.
It therefore made sense, the CCJ decided, that ExxonMobil would be the company granted the EP after fulfilling the obligations required under the EP Act.
The CCJ also said that to require all members of a co-venture (including mere financial partners) to obtain an EP would be inefficient, and result in “a multiplicity of unnecessary applications.”
The inclusion of ExxonMobil Guyana (as sole operator) and Hess and CPGL (as financial partners) in the PPL accords with international oil and gas industry practice
The CCJ examined international oil and gas industry practice in detail and found that in “Joint Operating Agreements (JOAs)”, such as the Co-Venture arrangement under PSA 2016, two or more natural or legal persons usually combine to carry out a single business enterprise.
In that enterprise, the CCJ said, one operator is identified to undertake petroleum production, while the participation of non-operators is restricted to financial contributions to facilitate the performance of operations.
Consequently, the CCJ found that it was proper for the ExxonMobil Guyana, as the sole operator carrying out operations that could adversely affect the environment, to execute the PPL on behalf of itself and its fellow joint venturers. Further, the CCJ decided that it was necessary for Hess and CPGL to be included in the PPL so that, as financial partners, they could secure financing from financiers who would require the PPL as proof of the rights of the Hess and CPGL in the joint venture.
Shared Liability and Risk of Environmental Harm
The CCJ noted that Clause 2.3 of the PSA 2016 states that the duties, obligations, and liabilities of the o-venturers under the PSA and any licence issued pursuant to the PSA are joint and several. Further, the CCJ noted that the “Contractor” under the PSA 2016 (ExxonMobil Guyana, Hess and CPGL) is required to indemnify the Government of Guyana (“GoG”) in relation to any damage caused to a third party.
The CCJ also noted that the Renewed 2023 EP for the Liza 1 Project requires that the co-venturers provide assurances that they will and can fulfill obligations to satisfy any environmental liabilities which flow from their operations. The co-venturers have since lodged proof of insurance policies and guarantee and indemnity agreements.
There was no increased risk of harm to the environment by including HESS and CPGL to the PPL
Finally, and simply, the CCJ said that since ExxonMobil Guyana was the sole operator under the PSA 2016 and was therefore the only entity capable of engaging in activities which would result in environmental damage, the inclusion of Hess and CPGL in the PPL for the Liza 1 Project posed no increased risk of harm to the environment.
Conclusion
With this decision, the CCJ has confirmed that the process by which consortium apply for their permits and licences, and by which those authorisations are granted accord with local law and international practice.
There are several other consortiums under other PSAs. If those consortiums have followed this approach, they are assured that any permits or licences granted can withstand judicial scrutiny. However, if this is not the case, they have had ample time to correct any issues.
I will, in future articles examine those PSAs and their attending authorisations as they have not been scrutanised as much given that they are not yet involved in production.
This article does not canvass every important aspect of this judgment. Rajnauth-Lee JCCJ said some important things on the interpretation of Article 149J of the Constitution of Guyana. The Judge’s reasoning on that point will, no doubt, become relevant in another ongoing action currently before the High Court.
About the Author
Chevy Devonish is a Senior Legal Advisor at the Attorney General’s Chambers, a Legal Advisor at the Ministry of Parliamentary Affairs and Governance, a lecturer at the University of Guyana, and has worked as a legislative analyst. He can be reached at [email protected]
