Exxon’s Stabroek Block operations: Court order for unlimited guarantee “makes a mockery” of Environmental Permit – Datadin

…chances of EPA’s appeal succeeding is like a “snowball in hell fire”— respondents’ lawyer

Justice Sandil Kissoon’s order for ExxonMobil to provide unlimited parent company guarantee for its and its co-venturers oil operations offshore in the Stabroek Block in the event of an oil spill “makes a mockery” of the 2022 Environmental Permit granted to that American multinational company by the Environmental Protection Agency (EPA).
This has been the position advanced by EPA’s lawyer Sanjeev Datadin as he argued why the agency’s

appeal against Justice Kissoon’s ruling has a reasonable prospect of success.
In a May 3 judgement, Justice Sandil Kissoon, among other things, directed the EPA to issue Exxon’s local affiliate, Esso Exploration and Production (Guyana) Limited (EEPGL), with an Enforcement Notice on or before May 9, for the company to provide, within 30 days, an unlimited parent company guarantee agreement and/or unlimited liability affiliate company guarantee, together with environmental liability insurance, as is customary in the international petroleum industry.
Non-compliance would result in suspension of the permit. The oil company has until June 8 to conform, since it has already been issued with the notice.

Mockery
Datadin, in his arguments, said that this case relates to the statutory interpretation of the Environmental Permit.
“This is a simple issue of interpretation. The existence of insurance has never prevented something from happening. Insurance is to compensate when the event occurs. The insurance will only be applicable whenever the ill befalls. All that the guarantee will try to do is make it right after the fact”.

He argued that Justice Kissoon considered “extraneous matters” when arriving at his decision, in particular that order. “Unlimited guarantee makes a mockery of the clear words in the permit”, Datadin submitted, adding that the permit refers to a “fixed sum”, and not an unlimited guarantee. To speak of the guarantee as a protector of an event befalling is erroneous, Datadin added.
Reliance of the respondents — President of the Transparency Institute of Guyana Inc (TIGI), Fredericks Collins, and Guyanese citizen Godfrey Whyte — on the argument of an unbalanced contract between Exxon and the Government, Datadin argued, is of no importance to this matter.
“If you’re unhappy with the contract”, there are other things that can be done, he pointed out.

In further arguing his case, the EPA counsel contended that since an unlimited guarantee does not exist in the permit or Environmental Protection Act, the lower court fell into error.
Datadin further added, “Unlimited has come about through a misinterpretation. The court has invented an unlimited guarantee…and [held] this incorrect interpretation as a weapon…”
By making such a coercive order, Datadin said, Justice Kissoon usurped the functions of the EPA under the Act and bypassed all the other options available.
“The court is now performing the functions of a statutory body [EPA].”
In public law, he noted, the court does not interfere with the discretion given to State entities, but rather examines whether this discretion is being exercised in accordance with applicable laws. He therefore questioned where is Esso’s “right to be heard”.
“And if you don’t comply [with the order] Esso is out… shut down the wells, fire the employees…,” added Datadin who maintained that the EPA has an arguable case.

Not required
Esso’s Senior Counsel, Edward Luckhoo, on the other hand, submitted that Condition 14 of the Environmental Permit does not require an unlimited guarantee.
Maintaining that Justice Kissoon misinterpreted the clear language of this condition, he said that what it does provide for is an estimate of a finite sum, noting that the formula for arriving at that sum is set out therein.

He also rejected Justice Kissoon’S calling the absence of unlimited guarantee “self-serving”, and reiterated that the interpretation of Condition 14 “is a matter of law, and law alone.”
According to him, no evidence was produced to support Justice Kissoon’s conclusion that Esso is an asset-less subsidiary of ExxonMobil. In fact, the Senior Counsel was keen to point out that Esso has assets amounting to trillions of dollars, and that the 2017 permit did not contain a requirement for financial assurance at all. This, he said, only came into existence when the permit was renewed in 2022.
By using the 2017 Impact Assessment as a guide for requiring an unlimited guarantee, Luckhoo argued, Justice Kissoon considered matters outside the evidence, and thus fell into error.
“Pellucid and specific” were used by Luckhoo to describe Condition 14 of the permit. As such, he insisted that the oil company has complied with the requirements of the Environmental Permit, and is willing to comply with the formula set out therein for calculating a fixed sum.
Having regard to the foregoing, Senior Counsel Luckhoo asserted that Esso’s appeal against the lower court’s ruling has an excellent prospect of success.

Snowball in hell fire
But Senior Counsel Seenath Jairam, who is among the lawyers representing Whyte and Collins, begged to differ, contending that the chances of EPA’s grounds of appeal succeeding are like a “snowball in hell fire”.
To make his case in regard to the need for an unlimited parent company guarantee, he highlighted that an oil spill could have catastrophic effects on the environment.
“Esso has been carrying out oil operations in the open high sea without financial guarantee. An oil spill could send back Guyana to the Ice Age if there is no insurance, because it is not easy to contain”, argued the Senior Counsel.
From practicality and common sense, he reasoned, insurance does not cover all your damages, hence the need for a parent company guarantee, which according to him “does not cost [Exxon] a cent, but just requires it to show that it has the financial capacity to restore and rehabilitate the environment in the event an oil spill occurs.”
According to Jairam, the permit mandates that Exxon and its co-venturers shall be jointly and severally liable for any loss or damages, or pollution to the environment.
“The point is, this guarantee is intended to kick in where the insurance stops. What is the difficulty about this? The parent company guarantee is backed by financial assets… The guarantee is a cost of doing business…they [Exxon] agreed to this,” Senior Counsel Jairam noted.
In the absence of such a guarantee, he said, the Environmental Permit should have already been cancelled by the EPA. He also objected to Datadin’s request for a stay.
Justice Persaud will rule in the new week on the merits of the appeal, as well as on Datadin’s application for a stay.

Disingenuous attempt
In September 2022, Collins and Whyte had moved to the court to get the EPA to enforce the liability clause in the permit issued to ExxonMobil for its operations. They wanted the court to ensure EEPGL takes full financial responsibility 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 Kissoon ruled that the EPA has committed an illegality, acted unlawfully, ultra vires, unreasonably, in defiance of logic, irrationally, and without any jurisdiction.
He, inter alia, found that Esso was engaged in a “disingenuous attempt” which was calculated to deceive when it sought to dilute its liabilities and settled obligations stipulated and expressed in Condition 14 of the permit, while simultaneously optimising production in the Stabroek Block.
“The insurance obtained by the EEPGL from its Affiliate Company AON UK Ltd, both for the Liza Phase 1 and Phase 2 Projects, does not satisfy the stipulation and obligation set out at Condition 14:5 of the Environmental Permit, or even what is considered environmental liability insurance according to international standards of the petroleum industry,” Justice Kissoon held.
In the end, EPA and Esso were ordered to pay Whyte and Collins $1.5 million in court costs.

Grave economic impact
Meanwhile, Attorney General Anil Nandlall, SC, had pointed out after the ruling that the Environmental Permit imposes no obligation on the permit holder to provide an unlimited parent company guarantee agreement and/or affiliate company guarantee agreement.
The AG also pointed out that Justice Kissoon’s ruling can have profound ramifications and grave economic as well as other impacts on the public interest and national development.
He revealed that EPA and EEPGL had spent almost a year negotiating a parent guarantee and indemnity agreement to the tune of US$2B in liability coverage, in compliance with EEPGL’s financial assurance obligations under the Environmental Permit and the Environmental Protection Act.
“These negotiations only concluded [recently]. These negotiations and their material details were placed before the court for its consideration, but unfortunately to no avail,” a statement from the Attorney General’s Chambers had disclosed.
There are several pending court cases challenging various aspects of ExxonMobil’s operations offshore Guyana. (Feona Morrison)