Jul 02, 2017 News
What Guyana needs to know about ExxonMobil— Pt 3…ExxonMobil history of underpaying royalties to nations
When contractual deals go wrong, the first place both parties may turn to for fair judgment is the court.
US oil giant, ExxonMobil, has faced a wave of litigation reaching from environmental matters, the alleged deception of its shareholders to even the underpayment of royalties.
Here are some instances in which ExxonMobil has been sued in relation to the underpayment of royalties to nations.
ExxonMobil was fined US$74 billion after the courts in Chad ruled that the country was underpaid royalties to which it was entitled from the oil giant.
Research indicates that the fine itself is about five times more than Chad’s Gross Domestic Product, which the World Bank estimates at US$13 billion.
The fine imposed against the company was handed down October 5, last, by the High Court in the capital, N’Djamena. The ruling was in reaction to a protest from the Finance Ministry in Chad that a group led by the ExxonMobil giant did not honour its tax commitments.
According to www.bloomberg.com, the court also demanded that the Texas-based oil explorer pay US$819 million in overdue royalties.
Legal minds believe that Chad would not see most of the money as ordered by the court.
ExxonMobil has since said that it disagreed with the Chadian court’s ruling. At the time of the judgment, it was examining other options.
In 2003, ExxonMobil was found to be defrauding the state of Alabama of royalty payments and was ordered by the courts to pay up more than US$100 million in back-pay royalties.
According to www.classaction.org., in August 2012, a Kansas judge approved a US$54 million settlement with landowners who claimed they were underpaid royalties when ExxonMobil made deductions for expenses that occurred downstream of their wells.
The settlement also ended a lawsuit filed in Kansas state court against ExxonMobil over royalties dating back to 2000.
Similar situations occurred in the American/Indian Federal lands.
PREPARING FOR THE WORST
With the aforementioned in mind, it is not unreasonable for citizens to be worried or cautious when it comes to the nation’s future relations with ExxonMobil as it relates to the payment of royalties.
More importantly, given ExxonMobil’s history in the foregoing cases, it would not be impractical for Guyanese to question whether the state is preparing the legal framework to deal with the worst to come with the oil and gas superpower.
What Guyana needs to know about ExxonMobil—Pt 4…ExxonMobil shows two faces to investors, partners
According to www.theguardian.com, (https://www.theguardian.com/business/2017/may/31/exxonmobil-climate-change-cost-shareholders)
ExxonMobil was forced to be more frank with its shareholders regarding the effect climate change will have on the operations and profitability of the company.
The report by the Guardian notes that Climate Change poses a real threat to the sustainability and the manner in which ExxonMobil will continue to operate its business in the future. Climate Change, the article notes, is a “material financial threat” for ExxonMobil.
But that is not all. ExxonMobil is currently under investigation by the Offices of the New York Attorney General and Massachusetts for being deceitful about climate change, something the company, of course, has denied.
According to the www.nytimes.com, (https://www.nytimes.com/2015/11/06/science/exxon-mobil-under-investigation-in-new-york-over-climate-statements.html), an investigation is being carried out to determine whether the company has been truthful to the public on the issue of climate change or if it deceived its investors about the impact the challenging issue can have on the business.
Attorney General Eric T. Schneiderman issued a subpoena to Exxon Mobil, for extensive financial records, emails and other documents that would be helpful to the investigation, the NY Times reported.
The media outlet said, “The investigation focuses on whether statements the company made to investors about climate risks as recently as this year were consistent with the company’s own long-running scientific research.”
“The inquiry would include a period of at least a decade during which ExxonMobil funded outside groups that sought to undermine climate science, even as its in-house scientists were outlining the potential consequences — and uncertainties — to company executives.”
In short, ExxonMobil was actually paying lobbyists to deny the impact of climate change.
ExxonMobil has been accused over the years of funding certain groups and government officials/parties to promote disinformation about the effects of climate change. It has of course denied this to the end, but the media reports on this matter are overwhelming.
The Guardian (www.theguardian.com) is just one media site which has placed this issue in the spotlight. The news entity has reported that ExxonMobil has been funding anti-climate groups such as the American Legislative Exchange Council (Alec). It based this conclusion on tax records. (https://www.theguardian.com/environment/2015/jul/15/exxon-mobil-gave-millions-climate-denying-lawmakers)
In addition to the aforementioned, civil proceedings have been filed against ExxonMobil by some of its own shareholders who feel deceived by the company regarding the truth about climate change and the toll it will take on the business’s fortunes as most nations are being encouraged to move in the direction of cleaner sources of energy.
According to www.insideclimatenews.org. (https://insideclimatenews.org/news/18112016/exxon-climate-change-research-oil-reserves-stranded-assets-lawsuit), the deception by ExxonMobil led to the investors paying inflated prices for Exxon stock and subjected them to financial losses because the company knew the value of its oil reserves was less than what it was telling investors. This was also noted in the lawsuit which was filed in a Texas federal court this year. (See link for full lawsuit: https://www.documentcloud.org/documents/3215695-Class-Action-Exxon-Complaint.html).
ExxonMobil submits poor EIA to Guyana, but still gets permit
Oil giant ExxonMobil, it seems, is already getting its way in Guyana with the government accepting from the company an Environmental Impact Assessment (EIA) that leaves much to be desired.
The company was still granted an environmental permit.
An EIA is referred to as a process of evaluating the likely environmental impacts of a proposed project or development, taking into account inter-related socio-economic, cultural and human-health impacts, both beneficial and adverse.
If the EIA process is successful, it identifies alternatives and mitigation measures to reduce the environmental impact of a proposed project.
In general, the benefits of EIA include better environmental planning and design of a proposal. A well-designed project can minimize risks and impacts on the environment and people, and thereby avoid associated costs of remedial treatment or compensation for damage.
So hands down, EIAs are crucial. Countries around the world ensure that an EIA is satisfactory before giving the go ahead for projects. But Exxon has been given a free ride.
The company submitted an EIA that is said to be way below international standards. In fact, Kaieteur News has learnt that the document which ExxonMobil submitted to the Environmental Protection Agency (EPA) is even below ExxonMobil’s own standards when compared to EIAs that the company prepared to do drilling in other countries.
Further, a source at the EPA said that it is not a case where the agency did not know that Guyana is being shafted in this area. The source said that the EPA found the assessment “less than adequate” but felt obliged to grant the permit based on posture of the government on the issue.
– Ex T&T Energy Minister warns Guyana
The Zen proverb, “It takes a wise man to learn from his mistakes but an even wiser man to learn from the mistakes of others,” encapsulates the advice offered to Guyana by former Energy Minister of Trinidad and Tobago, Kevin Ramnarine.
Ramnarine said that Guyana would be wise to learn from the mistakes of numerous countries around the world with oil industries.
Ramnarine was invited earlier this year by the Guyana Oil and Gas Association (GOGA) to deliver a presentation here. He made several important points and offered key advice based on the experience of Trinidad and Tobago as well as other countries. He noted, extensively, the mistakes made by his country as well as the things she got right.
Seemingly over-expectant, Ramnarine said, “With the opportunity that oil presents, I think that Guyana is more than capable of learning from all the experiences available to them to create a uniquely better outcome for themselves.” He said that perhaps the single most important event in the economic history of Guyana was the declaration by ExxonMobil of its discovery of crude oil in its Liza-1 well.
Ramnarine said that in preparing his presentation, he pondered extensively on what he would do if he was in President David Granger’s shoes at such an important time in Guyana’s history.
He listed about six areas of concern which he thinks imperatively need to be addressed.
Birthed from one of Ramnarine’s concerns is the question: How can Guyana avoid the gloomy fate sealed by some other countries with oil?
The politician said, “I would be concerned about Guyana going down the road of ruin taken by some oil-based economies. I would contemplate the words of one of the founders of OPEC (Organization of the Petroleum Exporting Countries), a Venezuelan named Juan Pablo Pérez Alfonso. In 1975, he said: “I call petroleum the devil’s excrement. It brings trouble…Look at this locura—waste, corruption, consumption, our public services falling apart. And debt, debt we shall have for years.”
Venezuela is a prime example of “Resource Curse Thesis” and “Dutch Disease”. In fact, there is a spectrum that starts with Venezuela and ends with Norway, and you have to determine where you want to be on that spectrum.”
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