Home News Govt’s response to AFC press statement – insurance and full liability coverage
The EPA noted inaccuracies in a recent press release by the AFC, repeating certain statements made by the former head of the EPA, Vince Adams. The EPA offers the following response to provide clarity to the public, to avoid any further confusion on the subject of insurance and liability coverage.
The Environmental Protection Agency is guided first and foremost by the Environmental Protection Act and its suite of regulations. Where the risk of oil spills is concerned, financial assurance is provided for in sections 30 and 31 of the Environmental Protection Act.
It must be made clear that only Liza 1 permit, issued in 2017, did not have a specific requirement for insurance coverage. Whilst the insurance requirement was introduced in Liza 2, it was only in the Payara, Yellowtail, and the recently renewed Liza 1 Permits were the requirement for insurance coverage and parent guarantee clearly defined.
In Yellowtail Permit, it is ensured that EEPGL is held liable for all costs associated with clean up, restoration, and compensation for any pollution damage which may occur as a consequence of the project. EEPGL is also required to have Financial Assurance, which includes a combination of Insurance which must “cover well control, and/or clean up and third-party liability on terms that are market standard for the type of coverage”.
The EPA is in receipt of insurance policies from EEPGL for all permits issued; namely: Liza 1, Liza 2, Payara, and is currently awaiting Yellowtail insurance policy. Each of these insurance policies has been executed and has coverage of a total of US$600 million per occurrence of a spill in the event. This per occurrence value covers third party liabilities, clean up and well control.
None of the insurance policies provided has US$2.5 billion coverage for oil spill, as is purported by the former EPA Head.
Parent Company/Affiliate Guarantee
The EPA was presented with a draft parent company/ affiliate guarantee, and is engaging EEPGL on its proposed total guarantee of US$2 billion from an affiliate company in the event EEPGL and its coventurers default. The EPA is ensuring that the circumstances under which the affiliate guarantee will be operationalized, and the specific obligations covered, are clear and acceptable. The EP A in the Yellowtail and renewed Liza 1 permits require that a Parent Company/Affiliate Guarantee Agreement is provided, which indemnifies and keeps indemnified the EPA and the Government of Guyana in the event EEPGL and its coventurers fail to meet their environmental obligations under the Permit.
Further, the EPA requires that the financial assurance (US$2 billion) provided must 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.
It is also ensured that this value can be renegotiated to cover for increasing risks in the Stabroek Block as a result of increasing projects.
The requirement for insurance and parent guarantee, and the terms and conditions for each of these were strengthened in the recent Permits issued; namely Payara, Yellowtail and renewed Liza 1, in late 2020 and 2022 respectively. The EPA is not in possession of any documentation that indicates any commitment by EEPGL to the former Head to provide US$2.5 billion in insurance coverage. If this is available, the EPA humbly asks that Vince Adams provide a copy to the EPA and/or the public.
A draft Parent company/ Affiliate Guarantee received in 2021, and offering guaranteed coverage of US2 billion, is being negotiated by the EPA at this time.