Kaieteur News – Bharrat Jagdeo either does not understand or is being plain ingenuous about the basis for Justice Sandil Kissoon’s recent decision. In that ruling the learned judge ordered the Environmental Protection (EPA) to issue an Enforcement Notice no later than this Tuesday directing Esso Exploration and Production Guyana Limited (EEPGL), a locally-incorporated subsidiary of Exxon Mobil, to provide within 30 days thereafter the unlimited Parent Company Guarantee Agreement and/or unlimited limited Affiliate Company Guarantee in accordance with Article 14 of the Liza 1 Environmental Permit.
The oil companies are supposed to purchase insurance to cover the cost of clean-ups, damages and losses resulting from any oil spill. However, cost of clean-ups, damages and losses from major oil spills can run into billions of dollars.
This is why civil society activists, including Glenn Lall, the publisher of this newspaper, have been pressing, for years, for unlimited liability protection. Lall and others have been asking for the oil companies to provide guarantees that in the event of an oil spill the country will be covered for all liabilities.
No insurance company is ever going to provide unlimited liability insurance. As such, Lall and the activists agitated for any insurance to be backed by a parent company guarantee to cover any difference between the total liabilities and the oil spill insurance.
In others words, whatever amount the insurance cannot cover will be underwritten by the parent companies of Exxon, Hess and CNOOC. The insurance plus the parent company guarantee will give unlimited liability protection.
To give an example, suppose there is a major oil spill and the cost of the clean-up, plus losses and damages total US$5B. Suppose that the local oil company only has US$2B in oil spill insurance. It means that there is a difference of US$3B which is not covered. With a parent company guarantee, Guyana will be assured that the head office of Exxon will pay the remaining US$3B. In that way, Guyana would be fully compensated for the damage and losses plus the clean-up costs from any oil spill.
It took a long, bruising fight by Glenn Lall and others for the government to finally come around to demanding full liability protection within the Liza 1 Environmental Permit. That Permit was first signed in 2017 and was renewed including in 2021 and 2022. In the original permit and right up to 2021, there were only 13 articles in the environmental permit. No provision was made for full liability coverage up to 2021.
In 2022, under the PPP/C, it was reported that there was an additional article, Article 14 which, according to this newspaper, requires “the permit holder must, as soon as reasonably practicable, provide from the Parent Company or Affiliate companies of the permit holder and its co-venturers one or more legally binding agreements to the agency in which they undertake to provide adequate financial resources to cover any environmental disaster they cause, and to keep indemnified, the agency and the government against all costs.”
So this is what the PPP/C signed as part of the renewal of the Environmental Permit. In other words, it was the PPP/C which approved the Permit on the basis of full liability protection as understood to mean insurance plus, parent or affiliate companies’ guarantees.
It was therefore shocking to learn that the government is claiming that both itself and the EPA are of the view that the environmental permit, imposes no obligation on the permit holder to provide an unlimited Parent Company Guarantee Agreement and /or Affiliate Company Guarantee. So what then was the intention of Article 14 which was added when the Permit was renewed?
The PPP/C should have been happy with this judgment. It got what it wanted. It was the PPP/C which was pressing for such indemnity against oil spills. In fact, in relation to the approval of the new field development plans, the government has said it would be pressing for parent company guarantees to cover any liabilities beyond that covered by insurance.
So why is the PPP/C appealing the decision? This is not a case of economic nationalism as Jagdeo wants to imply. This is a straight case of law. The judge is merely interpreting the very provision which the PPP/C government placed into the Environmental Permit for the LIZA 1 project.
Jagdeo however has a different take. He is criticizing the judgment by saying that there is no such thing as unlimited insurance coverage. The judge never said anything about unlimited insurance coverage.
The judge ordered that the EPA enforce the provision by inserting it into the Environmental Permit. The judge ordered that the EPA demand that there be unlimited parent company guarantee and/or unlimited liability Affiliate Company Guarantee. Is this not what is implied by Article 14 of the Permit?
Don’t ask Jagdeo! He is seeking refuge in political arguments about economic nationalism. But just for argument’s sake, if demanding unlimited liability coverage is economic nationalism, what is wrong with that?
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