VP Jagdeo defends controversial Oil Spill Law with no unlimited parent CO. guarantee

May 23, 2025 News

---

Kaieteur News- Although the recently passed Oil Pollution Prevention, Preparedness, Response and Responsibility Bill makes no mention of an unlimited parent company guarantee to shield Guyana from bearing the burden of the costs of any oil spill, Vice President Bharrat Jagdeo has defended the controversial law.

During his weekly press conference on Thursday at Freedom House, the chief policymaker for the sector responded to concerns raised this week by several persons regarding the lack of comprehensive coverage in the event of an oil spill. Some stakeholders even argued that the Bill was passed to undo a High Court ruling for unlimited oil spill protection.

He explained that while critics interpret Clause 21 to mean that parent companies will be shielded from liabilities under the Act, this was not the case. Clause 21 states, “An indemnification or any like agreement shall be invalid for the purposes of transferring the liability of a responsible party under this act.”

To this end, Jagdeo explained, “So they are saying this indemnification is invalid, so the indemnification from the parent guarantee in the past is invalid. If you read the whole sentence, it says, “for the purposes of transferring the liability of a responsible party under the act”. It defines this. So if you are the party responsible for the spill, you can’t go and sign an agreement or say, I have an agreement with someone else and transfer that liability. You’re responsible for it. You can’t transfer the liability. Has nothing, absolutely nothing to do with the parent guarantee, that indemnification.”

Furthermore, the VP pointed to Clause 27 of the law, which makes it clear that evidence of financial assurance shall be provided to the satisfaction of the competent national authority. According to 27 (1) of the law, “A responsible party shall maintain and provide evidence of financial assurance to the satisfaction of the Competent National Authority.”

Meanwhile, 27 (2) goes on to say, “Financial assurance shall be in accordance with the Petroleum Activities Act and the Environmental Protection Act.”

To this end, Jagdeo argued that the Environmental Protection Act requires the licenced operator to take full responsibility for liabilities under the Act. He explained, “If your assets can’t meet those liabilities, you have to now give me a document which shows that you can cover all the liabilities from the parent company.”

It is important to note that the VP made no mention of an unlimited parent company guarantee but rather a “document” from the parent company. In large operations such as oil production, giant corporations such as Exxon Mobil create limited liability companies (child) to operate in the host country. This, therefore, requires the child company to sign off on contracts, protecting the assets and resources of the parent company in the process.

Recognising this loophole, the former Executive Director of the Environmental Protection Agency (EPA), Dr. Vincent Adams, inserted a provision into the Development Permits for Exxon. The Permits required an unlimited parent company guarantee (a signed document by Exxon Mobil Corporation) assuring that the giant would handle all costs that the limited company fails to cover.

It would also be apposite to note that the Government of Guyana (GoG) has appealed a ruling by High Court Judge, Justice Sandil Kisson, for Exxon to provide an unlimited guarantee from the parent company to satisfy all costs. Moreover, it was after the May 3, 2023 ruling that government modified the previously issued permits, including a new provision to reverse the need for an “unlimited guarantee”.

It was reported that Condition 14.3 of the Yellowtail Permit states, “The above individually or a combination shall at least be guided by an estimate of the sum of the reasonably credible costs, expenses, and liabilities that may arise from any breaches of this permit. Liabilities are considered to include costs associated with responding to an incident, clean-up and remediation and monitoring. The estimation is not expected to address unidentifiable or inestimable costs which may be associated with compensation for loss and ongoing damage to other parties, and which are able to be pursued through civil action.” The Liza One, Liza Two and Payara Permits were modified to feature this new provision introduced by the People’s Progressive Party (PPP) regime.

The first two Permits for the Liza One and Liza Two oil projects were approved by the previous Coalition government, while the third project, Payara, was approved by the PPP government. These Permits did not previously feature this provision. After this change was exposed by Kaieteur News, Jagdeo defended the insertion of the new requirement that forces citizens to fight for oil spill compensation in Court.

---

• defends, Jagdeo, Law, oil, Parent Company Guarantee, spill

---