Independent consultant relied on Exxon’s data to determine US$2B parent guarantee – EPA Head tells High Court

May 28, 2023 News

Kaieteur News – The independent consultant that determined a US$2B parent guarantee was sufficient enough for ExxonMobil Corporation to provide Guyana for oil spill costs not satisfied by its subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), did not utilize data from the Environmental Protection Agency (EPA) to arrive at said sum.

EPA Head, Kemraj Parsram

That consultant relied on information provided to it by its paymaster—EEPGL.

This much was revealed by EPA’s Head, Kemraj Parsram in response to a court case filed by two Guyanese last year September. The two men, Frederick Collins and Godfrey Whyte had approached the court for a declaration that EEPGL was in breach of its Liza Phase One Permit which requires the provision of an unlimited parent guarantee.

In a May 3, 2023 ruling, Justice Sandil Kissoon ruled that EEPGL was in breach of its permit as it failed to furnish the country with an unlimited parent and/or affiliate guarantee for a potential oil spill in the Stabroek Block. The court ruled that in the absence of this guarantee, should there be a catastrophic oil spill, then the burden of those liabilities would rest on Guyanese. The court gave EEPGL up to June 10, 2023 to comply or face the suspension of its permit.

In the submissions made to the court by Parsram, the EPA Head said he disagreed with the contention that the permit calls for an unlimited parent guarantee. The EPA official highlighted that Condition 14.3 provides that the forms of financial assurance to be provided by EEPGL shall be guided by an estimate of the sum of the reasonably credible costs, expenses and liabilities that may arise from any breaches of the permit.

Parsram said too that the EPA is satisfied that EEPGL has been and is in compliance with its permit for the Liza Phase One Project.

Following the issuance of the renewed Liza Phase One permit on May 31, 2022, Parsram said EEPGL on August 15, 2022 declared and submitted its insurance policy totalling US$600M and a summary of the same to the EPA. He said it provides through AON, a British-American multinational financial provider of risk mitigation products including environmental risk, commercial risk, health risk and other solutions.

Regarding the parent and or affiliate agreements, Parsram said EEPGL had declared and submitted a draft parent or affiliate agreement which is being negotiated with involvement from the Office of the Attorney General. In explaining the efforts that went into the crafting of the document, Parsram said the consultant who provided this negotiated US$2B sum was retained between August-September 2022.

Importantly, Pararam said the data required to calculate the estimate is complex and more refined than the data which was readily available by the EPA. “It requires inter alia, metaocean data, oil spill modeling and an in-depth analysis of anticipated costs (including socio-economic costs. EEPGL was therefore required to develop the necessary data set in order to calculate the most credible estimate…” Kaieteur News understands that data was also required from an Ecosystem Services and Dependencies Study.

Parsram further explained that the data for this was being collected by EEPGL over a period of nine months beginning January 2022. It gathered data on ecosystem services in Guyana including the benefits that people obtain from the natural environment, including natural resources that underpin basic human health and survival needs, support economic activities and provide cultural fulfillment.

The study was completed and submitted for EPA’s review on January 4, 2023. Parsram said a draft report of the consultant’s findings was required by January 31, 2023. This is just about three months before Justice Kissoon had issued his landmark ruling on the case.

Parsram also argued that the draft parent or affiliate agreement is subject to confidentiality but was prepared to make a draft agreement available to the judge for review.

He also categorically stated that at all times; EEPGL was in compliance with the permit.

Applicants to the case, Collins and Whyte, disagreed wholeheartedly with Parsram’s conclusion. They contended that the permit requires unlimited parent guarantee and nothing less.

“If that is the mindset of the Executive Director of the Agency then heaven help Guyana, the people of Guyana, the Government of Guyana, the environment of Guyana and the peoples and environments of the Caribbean,” they said in their court submissions.

The fate of EEPGL and the EPA’s appeals to Justice Kissoon’s will be announced on May 29. 2023.

• It requires inter alia, metaocean data