Justice Kissoon’s ruling…
Kaieteur News – International Financial Analyst, Tom Sanzillo believes that the intervention by the Government of Guyana (GoG) to be part of the appeal case challenging the ruling which ordered that ExxonMobil provide Guyana with unlimited parent company guarantee appears to underscore the point that the revenue Guyana expects from oil production takes priority over the nation’s environmental law.
Sanzillo is the Director of Financial Analysis for the Institute for Energy Economics and Financial Analysis (IEEFA), which examines issues related to energy markets, trends and policies. IEEFA’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.
In an analysis published on Wednesday, Sanzillo underscored that among several controversies involving ExxonMobil Esso Exploration and Product Limited (EEPGL), Hess and China National Offshore Oil Corporation’s (CNOOC) offshore oil drilling project and the oil spill cleanup insurance litigation in Guyana has taken center stage.
Sanzillo explained that the High Court here excoriated ExxonMobil and the Guyana Environmental Protection Agency (EPA) for its lax enforcement of permit provisions that protected Guyana in the event of an oil spill, making it clear that the company would be responsible for the costs of a cleanup. “The oil giant’s environmental permit issued by Guyana required two forms of financial assurance—industry standard environmental liability insurance for a stated amount, and a separate parent company guarantee/indemnity from ExxonMobil to cover everything not paid by its local affiliate and to indemnify the government of Guyana and the regulator for all costs in the event of a spill,” Sanzillo added.
He pointed out that although the government had the right under the permit to demand insurance coverage providing a full guarantee of all costs in the event of a spill, it did not enforce that right.
Kaieteur News had reported that an application was filed in the High Court on September 13 by Attorneys Seenath Jairam, SC, Melinda Janki, and Abiola Wong-Inniss. In the case, Guyanese activists, Godfrey Whyte and Frederick Collins said that their resort to the court is to make sure that the company takes full financial responsibility in case of harm, loss, and damage to the environment. As a result, Sanzillo related the High Court found that Guyana’s residents were left financially exposed to the costs of such an oil spill cleanup and to potential costs in neighbouring countries. He added, “The lower court ruling insisted that the law be applied and that ExxonMobil as the parent company provide the insurance and full guarantee/indemnity or the permit would be suspended. Suspension would mean a halt to ExxonMobil’s operations, pending compliance with the court order.”
However, ExxonMobil and the EPA appealed the lower court ruling. Pending a decision on the merits of the appeal, the judge recently issued a stay of the lower court’s decision, allowing the drilling to continue, on the condition that ExxonMobil put up US$2 billion in affiliate guarantees. He said the appeal court’s ruling for the oil company to post a bond of US$2 billion has, “shifted the rest of the liability for any potential oil spill back onto the people of Guyana.”
Sanzillo noted that, newspapers and lawyers described the interim decision as a loss for the plaintiffs, since it allows drilling to continue, and it raises the concern that the people of Guyana would bear any cleanup costs that exceed US$2 billion. The Financial Analyst explained that in an unusual step by an environmental regulator, the attorney for EPA, hailed the fact that the government had successfully compromised the unlimited guarantee. He also pointed out that the country’s Attorney General Anil Nandlall, SC, applied to the court to represent the interests of the Guyanese government. Sanzillo said such move by the government appears that the country’s environmental laws are not as important as the expected oil revenues the country would receive.
To this, he underscored that, “Arguing for the erosion of contractual rights in court and failing to enforce existing ones are extraordinary actions being taken by public agencies charged with protecting the public interest.”
Sanzillo added that Guyana’s agreements with ExxonMobil are contracts and as many have pointed out, the profit-sharing agreement gave away many rights to ExxonMobil. “A key element of the contract is to clearly define what happens in the event of an oil spill, but the government of Guyana has apparently chosen to ignore this responsibility. The industry, and ExxonMobil in particular, has addressed the issue of liability in other settings many times in the past. The lawsuit and appeal demonstrate that the terms of the contract related to oil spill cleanup of Guyana and its neighbors is shrouded in in secrecy and confusion,” the Financial Analyst said.
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