ExxonMobil lodges US$2B affiliate insurance guarantee with EPA

…in keeping with court order, even as company continues appeal

Esso Exploration and Production Guyana Limited (EEPGL) has lodged a US$2 Billion affiliate insurance guarantee with the Environmental Protection Agency (EPA) in keeping with a Court of Appeal ruling last week that gave the company 10 days to comply.

This announcement was made by EEPGL Vice President and Business Services Manager Phillip Rietema, during an engagement with members of the media on Wednesday. According to Rietema, the $2 Billion affiliate guarantee was lodged with the EPA last Friday… well ahead of the 10 days requirement.
“The stay of the order was on Thursday last week. And it also required us to also lodge the $2 Billion guarantee, amongst the three Co-Vees. And we were with the EPA on Friday and they signed that and it’s been lodged,” Rietema said.
Exxon, through its local subsidiary EEPGL, is the operator of and holds 45 per cent interest in the Stabroek block. Exxon’s remaining Co-Venture partners in the Stabroek block are CNOOC Petroleum Guyana Limited, a wholly-owned subsidiary of Chinese company CNOOC Limited that holds a 25 per cent interest in the Exxon administered Stabroek block, and Hess Guyana Exploration Ltd, which holds 30 per cent interest.
In September 2022, the President of the Transparency Institute of Guyana Inc (TIGI), Fredericks Collins, and Guyanese citizen Godfrey Whyte had moved to the court to get the EPA to implement the liability clause in the permit issued to ExxonMobil (Guyana) for its operations.
They wanted the court to ensure Esso Exploration and Production Guyana Limited (EEPGL) takes full financial accountability in the case of harm, loss, and damage to the environment from a well blowout, oil spill, or other failures in the Stabroek Block.
On the issue of whether the EPA acted in breach of its statutory duty and unreasonably permitted Esso to carry out petroleum production operations in the absence of compliance with the terms of the permit, Justice Sandil Kissoon ruled that the EPA has committed an illegality, acted unlawfully, ultra vires, unreasonably, in defiance of logic, irrationally, and without any jurisdiction.
Hence, the court ordered that the agency issues the Enforcement Notice to EEPGL on or before May 9 to provide an unlimited Parent Company Guarantee Agreement and/or unlimited liability Affiliate Company Guarantee, and failure to do so would result in the suspension of its Environmental Permit.
But last week, Exxon was granted a stay of this judgement by Appeal’s Court Judge Rishi Persaud, who put a hold on the lower court’s order that Exxon provide the unlimited Parent company guarantee… as long as the oil company lodged, within 10 days, the US$2 Billion guarantee.
EPA Executive Director Kemraj Parsram had confirmed to this publication that the Agency had issued EEPGL with the Enforcement Notice. But since Justice Kissoon’s order was suspended by the Appeals Court, the notice no longer applies.
In analyzing the main issue raised in the appeal, Justice Persaud had said that Condition 14 (3) of the Environmental Permit provides a formula that guides the form, quantity, and quality of the financial insurance. He said it must be guided by an estimate of reasonably credible costs, and is not expected to be addressed in estimable costs which can be recovered by civil action.
He had also pointed out that Justice Kissoon’s coercive order against the EPA was a cause for concern. In this regard, Justice Persaud concluded, “It seems, on the face of it, that [Justice Kissoon] misconstrued the processes in relation to the acquisition of insurance, and ignored the [EPA’s] discretion under Condition 14 (5) to consider any rating equivalent, as it deems appropriate.”
According to Justice Persaud, it appeared in this particular case that EPA can be considered “an expert body”, which ought to have prompted judicial restraint. He added, “Surely, that body [EPA] is better placed to evaluate such complex and non-legal matters within its expertise.”
Additionally, he was keen to point out that Justice Kissoon’s order “may have coerced” the EPA to perform an act that is not within the parameters of the governing legislation; that is, the requirement for unlimited insurance. (G3)