Stabroek Block operations: ExxonMobil must provide unlimited insurance — High Court rules

…failure to comply within 30 days would result in suspension of licence

…Govt to appeal decision

Demerara High Court Judge Sandil Kissoon has ruled in favour of the Environmental Protection Agency (EPA) enforcing the liability clause in the Environmental Permit granted to ExxonMobil (Guyana) for its offshore oil operations in the Stabroek Block.
Consequently, by an Order of Mandamus, EPA was directed to issue ExxonMobil’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, 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. Failing to comply would result in the suspension of the permit dated May 31, 2022, the Judge has declared.
According to the Judge, the guarantees are to indemnify and keep indemnified Guyana and the EPA against all environmental obligations of Esso and its co-venturers within the Stabroek Block.
In September 2022, 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.
Referring to Esso’s agreement in the permit to provide insurance and an unlimited parent company indemnity to cover all environmental loss and damage that might result from a well blowout, oil spill, or other failures in the Stabroek Block, the litigants went to court to ensure that Esso takes full financial accountability in the case of harm, loss, and damage to the environment.
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 held that the EPA has committed an illegality, acted unlawfully, ultra vires, unreasonably, in defiance of logic, irrationally, and without any jurisdiction.
The Judge said, “The [EPA] failed to take any meaningful step, or any step whatsoever, to assess what was provided to it by Esso, the permit holder, purportedly as environmental liability insurance, when it was not in fact in keeping with Condition 14:05 of the licence.”
The High Court 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,” the court further found.
Despite Esso, through its public pronouncements, having communicated its intention to increase production levels in its petroleum production facilities, Justice Kissoon pointed out that EPA has failed to suspend and/or cancel the renewed permit, notwithstanding the potential catastrophic consequences to the environment, citizens and the State. He therefore declared that Condition 14 of the permit imposes on Esso “unlimited and uncapped liability for all costs associated with clean up, restoration, and compensation for all damages caused by any discharge of any contaminant arising from its exploration, development, and petroleum production activities within the Stabroek Block offshore Guyana.”
Collins had contended that he cannot drive his car without insurance, and, as such, it is incomprehensible that the EPA would allow Esso to operate without insurance.
An oil spill, he submitted, would be devasting not only to Guyana, but the wider Caribbean, as people depend on the ocean for their livelihoods.
EPA and Esso, the respondents, were ordered by the High Court Judge to pay Whyte and Collins $1.5M in costs. Whyte and Collins were represented by Senior Counsel Seenath Jairam and Attorneys-at-Law Melinda Janki and Abiola Wong-Inniss. The EPA was represented by Attorneys-at-Law Francis Carryl, Shareefah Parks and Naiomi Alsopp, and Esso was represented by Edward Luckhoo, SC, Andrew Pollard, SC, and Eleanor Luckhoo.
There are several court cases challenging various aspects of ExxonMobil’s operations offshore Guyana. (G1)

Meanwhile on Wednesday evening, the Attorney General in a statement said that the Government as a major stakeholder noted the ruling by Justice Sandil Kissoon and the several declarations granted. These are that the Environmental Protection Agency of Guyana (EPA) breached its statutory duty by failing to enforce compliance by Esso Exploration and Production Guyana Limited (EEPGL) of its Financial Assurance obligations to provide an unlimited Parent Company Guarantee Agreement and/or Affiliate Company Guarantee Agreement to indemnify and keep indemnified the EPA and the Government of Guyana against all environmental obligations of the Permit Holder and Co-Venturers within the Stabroek Block, Offshore Guyana.
“The EPA and the Government of Guyana are of the considered view 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. In this regard, we hold the respectful opinion that the Learned Judge fell into error in his findings. This ruling can have profound ramifications and grave economic and other impacts on the public interest and national development. As a result, the decision of the Learned Judge will be appealed and orders will be sought to stay its effect until the hearing and determination of the appeal,” the statement read.
The AG noted that the EPA and EEPGL spent almost a year negotiating a Parent Guarantee and Indemnity Agreement to the tune of US$2 billion in liability coverage in compliance with EEPGL’s financial assurance obligations under the Environmental Permit and the Environmental Protection Act. “These negotiations only concluded last week. These negotiations and their material details were placed before the Court for its consideration, but unfortunately to no avail,” the statement said.