I follow with daily frustration, the widespread misunderstanding of Full Liability Coverage which is being misconstrued as full liability insurance. There is no such thing as “full liability insurance”, since it is unrealistic for any insurance company to underwrite such a large sum. Thence, it was most painful to watch our Honourable Ministers argue against the Opposition’s Motion for Full Liability Coverage, as they used the ghost argument that full insurance would be cost prohibitive, when they should have known that the Motion explicitly only called for Full Liability Coverage and portrayed nothing about full liability insurance. At best, the Honourable Ministers did not read the Motion, and at worst, they deliberately misled the Guyanese people.
Full Liability Coverage as outlined in all EPA Permits, comprises of insurance plus a Parent Company Guarantee to cover “any amount” above the insurance. In mathematical parlance:
Full Liability Coverage = Insurance + Parent Company Guarantee.
The Parent Company Guaran-tee is absolutely necessary, not only because there is no insurance of that size, but also because the Permit Holder, EEPGL, is a newly formed Limited Liability Company (LLC) which has no such assets to cover such liabilities; and by definition of an LLC, is separate from its parent, ExxonMobil (EM), thus accountable for all of its debts, liabilities and responsibilities. Therefore, it is a common business strategy for major companies such as EM as Parent Companies, to create LLCs such as EEPGL to insulate the Parent Company from liabilities. To add insult to injury, EEPGL is registered in The Bahamas where, according to a recent Kaieteur News report, it paid a whopping US$2.2 B to its home office in The Bahamas for 2020 and 2021 – a sum that is more than three times all of the approximately US$600M oil money doled out to Guyana for those two years. Mr. Routledge, please explain to the Guyanese people why EM did not find us good enough to register EEPGL in Guyana, so that we could have reaped the benefits of those Billions of dollars that you are giving back to The Bahamas for doing nothing. Where is the gratefulness to our nation that has financially resuscitated your company?
It is critical to note that the Parent Company Guarantee is: (i) by far the predominant component of the Full Liability Coverage; (ii) only a letter of guarantee that does not cost Exxon a single penny; and (iii) provides Guyana with the guaranteed security against the nation’s bankruptcy. On the other hand, the insurance component is a tiny inconsequential amount, since it doesn’t matter whether it is $1 or $1B, the Parent Company Guarantee will cover “any amount” over that insurance value. It’s no different say, to a health insurance which may cover let’s say 80% of your medical bill, leaving you to cover the 20% above the insurance. In similar fashion, the Parent Company Guarantee will cover “any amount” above what the insurance covers.
Thank goodness, after much pressure, the Government was forced to recently let out that EEPGL has insurance to the tune of US$600M. Even if we believe this to be true, this amount is less than a mere 1% of the US$70B Macondo cost. This means that the Parent Company Guaran-tee will cover the remaining 99% in the event of a similar spill, thus freeing Guyana of any such liabilities that would bankrupt the country many times over. A US$70B liability would be approximately 35 times Guyana’s national budget; and even a spill of only 10% the size of the Macondo would be more than three times Guyana’s national budget.
Please be reminded Mr. Routledge that your signature is on all four of the EPA Permits which clearly enshrines the requirement for Full Liability Coverage. The Permits unambiguously spell out that EEPGL (i) “shall be liable for environmental damages in any amount”; (ii) “shall have insurance”; and (iii) “shall provide from the parent company, one or more legally binding agreements to pay environmental obligations if EEPGL fails to do so”. Sir, please be put on notice that your latest scheme to slash the unlimited Parent Company Guaran-tee to a measly US$2B is ill-advised and unpalatable to the people of Guyana. We can calculate that such a gimmick only adds up to US$2.6B coverage (US$600M insurance + US$2B Parent Company Guarantee) which is a piddly 3% of the Macondo spill costs and about 35 times Guyana’s national budget. We therefore vehemently ask: Who do you expect to pay the amount over that US$2.6B?
Mr. Routledge, please be informed that the people of Guyana have been hearing you and your cohorts loud and clear and take you very seriously, when you go around hyping that you will never walk away from your responsibilities to clean up any spills regardless of the amount. Well Sir, you fully well know that your words are not worth the hot air in which it is spewed, in the court of law. For that reason, Sir, prove to Guyana that you are worth the trust of our people by simply putting in writing, what you are promising, and what you have already agreed to do when you signed all four of the EPA Permits. Sir, again, that Parent Company Guarantee does not cost you a single penny, and as an added advantage, would provide an enormous incentive for a safer operation in the best interest of both Exxon and Guyana.
Sir, I don’t fault you for getting the feeling that the Guyanese people do not trust your words. How could we, when you have continued flouting our laws in operating both Liza 1 and Liza 2, without meeting the legal requirements for that signed Parent Company Guarantee? How could we, when you want to replace the currently required unlimited Parent Company Guarantee with a meagre $2B? How could we, when you unremittingly talk about only paying for “legitimate” and “reasonable” costs? And Sir, how could we, when you refused to pay a paltry fine of US$500 mandated by the EPA for six small spills? As you heard before Sir, we may be a third world country, but we have first world brains, and can read through the lines that you have no intentions of honouring your verbal promises, so we are simply demanding that you put these promises in writing.
Besides Sir, we can read what is happening in Peru with another major oil company not wanting to meet its obligations following a relatively minor spill of 12,000 barrels of oil contrasted to 5 million barrels from the Macondo. The Peru Government is having to endure the great pains of taking drastic steps including stopping company Executives like yourself from leaving the country and the filing of a US$4.5B lawsuit against the company; but most significantly, the Government is only now, retroactively putting legislation in place to protect itself in the event of a similar future situation. I therefore call upon the Government of Guyana to stop neglecting its first and foremost obligations of protecting and representing its people by taking lessons learned from Peru and not wait until a disaster to fix the problem. Peru may just be fortunate to have this happen with a small spill, we may not be that lucky! As the saying goes, don’t wait till night time to see with candle what you can see in bright daylight.
Best regards,
Dr. Vincent Adams
