Assurances by the Environmental Protection Agency (EPA) that it is currently engaging Esso Exploration and Production Guyana Limited (EEPGL) on a proposed total guarantee of US$2billion to complement the US$600 million insurance policies for Liza 1, Liza 2 and Payara permits has not found favour with former Head of the EPA, Dr. Vincent Adams, who has warned that should ExxonMobil be allowed to renege on signing an unlimited guarantee agreement, Guyana could be left to pay billions, should an oil spill occur.
In a statement, the EPA explained that it is in receipt of insurance policies from EEPGL for all permits issued, namely Liza1, Liza 2, and Payara. However, it is awaiting the Yellowtail insurance policy. “Each of these insurance policies have been executed and has coverage of a total of US$600 million per occurrence of a spill event. This per occurrence value covers third party liabilities, clean up and well control,” the agency explained.
While refuting claims that the insurance policies provided have a US$2.5 billion coverage for oil spill, the EPA confirmed that it is engaging EEPGL on its proposed total guarantee of US$2billion from an affiliate company in the event EEPGL and its coventurers default.
According to the EPA, it is doing its best to ensure that the affiliate guarantee is “clear” and “acceptable.”
“EPA required 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 explained.
But Dr. Adams, in a Letter to the Editor on Saturday, described the US$600 million insurance policy as “pathetic.”
While explaining a long-held position that EEPGL had agreed to “unlimited coverage/full liability,” Dr. Adams pointed to Section 12 of the Liza 2 Permit which states that the permit holder shall have insurance. He reminded that Section 12.6 states that the permit holder shall be strictly liable for any discharge or release of pollution, contaminant in any amount.
“What the above undoubtedly states and signed off by Mr. Henson of Exxon, are the unambiguous requirements for insurance by EEPGL, plus a written guarantee agreement from parent companies Exxon, CNOOC and Hess to cover all costs over and above the insurance value to pay for damages “in any amount…if EEPGL fails to do so”,” Dr. Adams said.
He said that “in any amount” meant “unlimited amount” and therefore, the insurance plus parent company guarantee would add up to unlimited/full coverage.
Dr. Adams said the EPA must now explain to the people of Guyana why it is allowing Exxon to renege on signing an unlimited guarantee agreement already enshrined in the permit and replacing it with a meagre total coverage of $2.6 Billion USD ($2 Billion parent company guarantee + $600 Million in insurance).
In making a case for full coverage, he pointed to the cost of the Macondo spill in the Gulf of Mexico exceeded $70 Billion USD.
“This means that the EPA is accepting that if there occurs a Macondo size spill, Guyana would be left holding the bag to cover the remaining $68 Billion which is about 34 times our entire national budget, not to mention the long-lasting devastation and even bankruptcies of economies throughout the Caribbean. Even a spill as little as one-tenth the size of the Macondo, would cost three times the total $2.6 Billion Exxon’s coverage that the EPA is so giddy about, and over three times Guyana’s entire national budget,” Dr. Adams explained.
He added: “It is therefore a most heinous act against not only the people of Guyana, but also against our Caribbean and South American neighbours, for the EPA to now be stooping to Exxon in cutting back the unlimited/full liability protection (in the Permit as shown above), down to their proposed cap of only $2.6 Billion USD.”
But ExxonMobil Guyana Spokesperson, Janelle Persaud, in a statement last Friday, maintained that Rod Henson, the former President of ExxonMobil Guyana, never signed any document committing to ‘unlimited liability coverage comprising of insurance plus parent company guarantee’, as claimed by Dr. Adams claimed.
“After repeatedly making these claims, it only seems appropriate that Dr. Adams produce the “documents” he claims were signed,” Persaud said challenging Dr. Adams to provide the evidence.
ExxonMobil Guyana, she said, maintains full insurance coverage that meets international industry standards for all of its petroleum activities in Guyana.
“As previously stated, our first priority for all operations is to prevent adverse events by utilising the best technologies, processes, and people in our operations. In the unlikely situation that an event occurs, we have established response personnel, procedures, and equipment aligned with the principles of the International Convention on Oil Pollution Preparedness, Response and Cooperation (OPRC), the Caribbean Island Oil Pollution Preparedness Response and Cooperation (OPRC), and the National Oil Spill Response Plan of Guyana,” Persaud assured.