EPA serves oil company with enforcement notice for unlimited liability guarantee coverage

EPA serves oil company with enforcement notice for unlimited liability guarantee coverage

The Environmental Protection Agency (EPA) has served Esso Exploration and Production Guyana Limited (EEPGL) with an Enforcement Notice directing it to have an Unlimited Liability Parent Company Guarantee in place as stipulated by the High Court.

The EPA’s Attorney, Sanjeev Datadin made the disclosure in the Court of Appeal today as the EPA ‘teamed up’ with the oil company to challenge the High Court’s decision that an unlimited Parent Company Guarantee Agreement be in place within 30 days.

“The notice as required has been issued…The notice has been issued, and it has been issued subject to these proceedings,” Datadin told Justice of Appeal, Rishi Persaud as he heard preliminary arguments on whether the appeal has prospect of succeeding.

The 30-day ultimatum was given by High Court Judge, Sandil Kissoon. The judge ruled that the oil company must provide an unlimited Parent Company Guarantee Agreement in accordance with the Environmental Permit for the Liza Petroleum Production Project in the Stabroek Block or face suspension.
But Datadin, in representing the interest of the EPA, told the Court of Appeal that the High Court judge erred in law. He argued that the Environmental Protection Act and the Environmental Permit do not provide for an unlimited parent company guarantee agreement but rather for a specified number to be stated.
“Both the permit and the Act make reference to a fixed sum,” Datadin argued.

He also told the court that in keeping with the legal framework, an insurance policy to the tune of US$600M was secured for the Liza Phase 1 Development Project, while negotiations on an affiliate company guarantee have advanced. That guarantee, according to Exxon, has been begged at US$2B.

Noting that both the EPA and the oil company have abided with the Environmental Protection Act, Mr. Datadin maintained that there is no requirement under the Environmental Permit for there to be unlimited guarantee.

“There is no where in the permit or the act that unlimited exist. Unlimited has come about through a misunderstanding or a misinterpretation, and now the court is saying unlimited, and if you don’t do this within the stated time, this unlimited guarantee and assurance, then the permit is suspended,” he said.
He argued further that the Court by ordering the EPA to issue the Enforcement Notice has usurped the powers of the Environmental Protection Agency, and has therefore, overreached its power.

The oil company’s Attorney, Senior Counsel Edward Luckhoo put forward similar arguments, telling the Court of Appeal that the Environmental Permit does not require an unlimited parent or affiliate guarantee.
He said the High Court, in its decision, introduced the concept of an unlimited guarantee.
“The trial judge entirely misinterpreted condition 14 of the permit,” the Senior Counsel said while adding that the legal framework provides for a specified amount.

But Senior Counsel Seenath Jairam – the attorney for the First and Second Respondents Frederick Collins and Godfrey Whyte – told the Court that Counsel for EPA and EEPGL should desist from cherry-picking bits and pieces from Condition 14 of the Environmental Permit.

The Senior Counsel told the Court that Esso has been conducting oil operations offshore Guyana without complying with Condition 14 of the Environmental Permit as a whole. He reasoned that should an oil spill occur, the country could be set back for decades as a result of such devastation if there is no insurance in place.

Senior Counsel Jairam said that under Condition 14, the permit holder is liable for all costs associated with the clean-up, restoration and damages caused by the discharged of any contaminant.

He argued that insurance never covers all damages, hence the need for a parent company guarantee.
“The parent company guarantee doesn’t cost them a penny. It’s simply, you assure that you have the ability to pay in the event that you are called upon, and since Esso has been boasting that it operates optimally…then there is no risk,” he told the court while challenging the oil company to provide the unlimited parent company guarantee.

A date for the ruling will be announced subsequently.

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