12th May 2023
The Government of Guyana is set to appeal a High Court ruling that the country’s Environmental Protection Agency (EPA) erroneously applied insurance obligations in its deal with ExxonMobil subsidiary, Esso Exploration and Production Guyana Limited (EEPGL).
The Court said that the EPA breached its statutory duty by failing to enforce compliance over its financial assurance obligations.
The ruling has ordered the environmental watchdog to issue an enforcement notice to EEPGL requiring the company to provide an unlimited Parent Company Guarantee Agreement, unlimited liability Affiliate Company Guarantee, and environmental liability insurance.
The Court made it clear that EEPGL must provide a liability agreement from an insurance company by 10 June 2023. Failure to comply could result in the suspension of the company’s environmental permit.
The ruling comes months after the EPA and EEPGL spent almost a year negotiating a Parent Guarantee and Indemnity Agreement of up to US$2bn in liability coverage.
Details of this agreement and ongoing negotiations were reportedly presented to the Court as evidence but were unsuccessful in swaying its opinion.
“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,” said the ruling.
ExxonMobil said that the company is reviewing the court’s decision and evaluating potential next steps. “It is disappointing that the court failed to appreciate and acknowledge the financial capabilities of
ExxonMobil Guyana and its co-venturers to meet their obligations, the insurance we already have in place, and the progress towards agreeing to a guarantee that exceeds industry benchmarks,” said the statement.
“ExxonMobil Guyana and our Stabroek Block co-venturers have adequate and appropriate insurance and proposed guarantees in an amount that exceeds industry precedents and an estimate of potential liability,” added the oil giant.
The Irfaan Ali Government said that the ruling could have grave economic and other impacts on the public interest and national development.
Attorney General and Legal Affairs Minister, Anil Nandlall said that he is of the 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,” adding that the “learned Judge fell into error in his findings”.
Vice President Bharrat Jagdeo cautioned against the embrace of ‘economic nationalism’ by local bodies, arguing that the country’s courts must make predictable decisions that are “well-reasoned”.
“We’re not going to take [the court ruling] in a manner that’s hostile but we need to make sure that our institutions don’t act based on economic nationalism or the peripheral noise out there. We’re playing the big leagues now,” said Jagdeo, adding that Guyana was now attracting large volumes of capital from around the world.
The case was filed in September 2022 by President of the Transparency Institute of Guyana Inc (TIGI) Fredericks Collins and another Guyanese citizen, Godfrey Whyte. The Court also ruled that the EPA and EEPGL pay the plaintiffs’ legal costs.
There are currently several other undecided court cases which are challenging different facets of ExxonMobil’s operations in Guyana.
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Photo Credit: Katherine Welles via Shutterstock.
