How Exxon Captured a Country Without Firing a Shot

Could Guyana’s Exxon ruling scare big oil off risky exploration?

Guyana High Court: EPA and ExxonMobil Put Country At Grave Risk

Debunking the "Moral Case" for Fossil Fuels

 Welcome back to Drilled. I'm Amy Westervelt. This week there was some huge news related to our most recent season in Guyana. A verdict came through on one of the cases that we covered, the one that Melinda janky filed that had to do with insurance, and particularly with something called financial assurance.

The case argued that Guyana’s Environmental Protection Agency, its EPA had failed to require proof from so Exxon's subsidiary in Guyana, and from ExxonMobil itself of the sort of liability coverage needed for a risky offshore oil project like the one that's happening offshore. Guyana right now. The law asks not only for an insurance policy from the local operator, but also for an unlimited guarantee from the parent company, in this case, ExxonMobil, that it will cover any damages related to the particular activity that's being permitted in this case, oil drilling.

Part of the argument was that an oil spill offshore Guyana would not only impact Guyana, but could potentially impact multiple other countries nearby. In fact, Exxon's own environmental impact assessment for its most recent well, indicated that a massive oil spill offshore Guyana could impact up to 14 Caribbean countries.

Those are all countries that depend on fishing and tourism for their economies. What this case argued was that the government was allowing Exxon to ramp up production quickly to get around certain permitting requirements while also. Not requiring that it had this level of liability coverage opening up the country of Guyana to enormous financial risk.

Because imagine if there was a deep-water offshore blowout and it did impact 14 Caribbean countries. Where would those countries go looking to cover those damages? If there was no policy in place requiring Exxon to pay for those damages, those countries would be coming to the government of Kenya. The judge in this case issued an absolutely blistering ruling against Exxon and the Guyanese e p A.

He called what's been happening in egregious state of affairs that has engulfed the Environmental Protection Agency in a quagmire of its own making. He also wrote that quote in the course of these proceedings. The court found on the evidence before it that so exploration and production Guyana Limited 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 clear unambiguous terms while simultaneously optimizing production at the Liza Phase one. Petroleum production project in the Stop. Brick Block offshore Guyana. He goes on to write, so exploration and production. Guyana Limited, engaged in a course of action made permissible only by the omissions of a derelict client and submissive environmental protection agency elsewhere in the ruling.

He writes, “These matters were not unknown to Esso, or the E p A and consistent with the benefits of its petroleum production activities to which Esso is entitled, comes the burden of fulfilling its obligations under the permit. And the agency sought refuge in silence, avoidance, concealment, and secrecy, notwithstanding the grave, potential danger and consequences to the state and citizens if an event occurred at the Liza Phase one petroleum production facilities in the Stabroek block offshore Guyana, in absence of such financial assurances.”

He concludes that the Environmental Protection Agency is in breach of its statutory duty by its failure and or omissions to enforce compliance by Esso Exploration and Production Guyana Limited of its financial assurance obligations. He orders the Environmental Protection Agency to issue an enforcement notice on or before May 9th, less than a week from the date of the ruling directed to Esso Exploration and Production Guyana Limited to perform its obligations first to provide within 30 days the Unlimited Liability Parent Company guarantee agreement and or an unlimited liability affiliate company guarantee to indemnify and keep indemnified the government of Guyana and the agency against all such environmental obligations of es. So, and its covens within the stop block. They also have to provide proof of environmental liability insurance, as is customary in international petroleum industry in accordance with the conditions of its permit.

It says if they fail to provide both of these things, it's permit suspended. The judge also tackled the question of standing in this case, which is really, really interesting. Esso had argued that the particular plaintiffs bringing this case-- two individual citizens, one of whom we actually heard from this season, Frederick Collins.

Collins is the president of Transparency Guyana International. However, the organization that he works for was not a party to this case. He was a plaintiff in this case, as an individual, as was Mr. Godfrey Whyte. Esso argued that these two men had no standing, that Guyanese citizens can't bring a case like this because it has to do with the regulatory structure and the company and that, and they referred to these plaintiffs as meddlesome. Meddlesome, busy bodies.

The judge said, Yeah, no, actually citizens need to be able to bring cases that are in the public interest, especially in situations like this, where there are major environmental implications. So that's a huge precedent to set too. I caught up with Melinda janky the date after the ruling came out to hear what she thought about it, and to hear what kind of message this sends, what kind of precedent it sets both in Guyana and beyond.

That conversation is coming up after this quick break.

So first I'd love to get just your initial reaction to the ruling, uh, when you, when it first, first came out.

 I think it's an excellent ruling. I mean, the judge said that the EPAs lax behavior had put this nation and its people in grave danger of calas disaster, and so immediately what you have is a very strong statement of the situation as it is. Remember, Exxon has, so the Exxon subsidiary has admitted in court that they've been using faulty equipment and they've admitted in public that they're operating above the safety limits.

So that's very dangerous for Guyana, and it means that if there's an any kind of oil spill, disaster, blow out, whatever, God forbid any of that should happen. Guyana would be liable for all of that because the insurance is not in place and the parent company guarantee is not in place. And the judge has corrected that by ordering the EPA to enforce the environmental permit.

I mean, where else in the world would you have. Such dangerous deep water operations going on without proper insurance and without having the finance in place to protect the home country.

 Yeah. Yeah. Um, I'm, I'm curious, I know that the government has said that they plan to appeal and, and whatnot, but I'm assuming that the ruling. Is the ruling, um, in the meantime, and, and they are under pressure to correct this fairly quickly.

 just be clear, the government cannot appeal this ruling. They're not a party to the, to the case,

 so the only the EPA or Esso can appeal. And the EPA is not the government. The EPA is an independent statutory authority. Now, if the government is instructing the EPA a to appeal, then that's clearly unlawful and that, and if the EPA were to then act on the basis of instructions from the politicians, that action would be unlawful and it would be open to judicial review on the grounds that it, that the E P O was carrying out, um, instructions that.

 So, so that's, well it's a very foolish course of action for any government to take. Is to say publicly that they're going to appeal a case that they're not a party to, and therefore implying that they have some control over an an independent statutory authority.

 Yeah. That's interesting. That's very interesting.

 Yeah, it's an independent statutory authority. I mean, I wrote the legislation that set this thing

 Yeah. Yeah, I thought that was really interesting actually too, that, that it, at, at several points in the ruling, um, the judge mentioned how Esso had tried to sort of tell the court what some of these laws meant. And I, I wanted to get your take on, on that, that approach that they've taken, um, in this case.

 Look the, I mean, Esso obviously has to be advised by its own lawyers, and I can't comment on that. We put in our submissions and clearly the judge has ruled on the basis that he thinks he agrees with our submissions and he's given a judgment that is based. On law and legal principle, um, es o's views on, on what the law says are completely irrelevant.

I mean, Esso, so these, these are business people. The business model depends on polluting the atmosphere and the ocean with greenhouse gases, they make them money outta destroying the climate and making the ocean more acid. I mean, that's what they do. Law is not their concern. They take advice from their lawyers.

 I, I'm, I'm curious. To hear what you think, like what, what kind of message this sends, um, both in Guyana and beyond to all of the countries that oil majors are operating in. What kind of precedent does this set and sort of message does it send.

 Oh, I think there's some really significant messages here. I mean, the top line, two ordinary citizens in this little country, which most people can't find on the map, two of them have gone to court and they've beaten. The e p, but they've also beaten Exxon Mobil, and this is really a victory for the people by the people.

I think we have to give full kudos to his honor. Justice sandal ki he put the rule of law above the interests of Exxon Mobil, and that's massive. That's what every judge in every country should be doing, and I think this decision sets the standard for judges everywhere, not just in Guyana, but across the world.

 Is there any sense that. The judge's ruling will be politicized in some way that, that, you know, it will get the sort of, um, oh, he's just against the p p p or, or whatever. That kind of reaction from, from folks.

 This is a decision that puts guy, the interests of Guyana and the nation. Foremost, it's a decision that upholds the rule of law. It's a decision that says you so took a business decision. To accept this permit and you signed for it and you agreed to provide the insurance, and you agreed to provide the parent company, the unlimited parent company guarantee.

And you the E P A have a job to enforce that permit. So you all. Need to provide that insurance and that unlimited parent company guarantee. Now, if anybody tries to politicize that decision, they are going to look extremely foolish. The government is already looking silly by saying that it's going to appeal the decision, and people are asked, why is the government taking this attitude and appearing to be on the side of Esso rather than on the side of the country?

This ruling once, once the insurance and, and the guarantee are in place, means that Guyana is no longer potentially liable for billions of US dollars. So who would actually question that? Why would anybody question a decision by the judge, which says, enforce the permit, comply with your obligations and make sure that this country does not suffer as a result of your.

Default or bad behavior. I mean, he didn't use those exact words. That's what I'm saying.

 Yeah, I mean, I thought that was really interesting about this case in general, just the extent to which, so and the EPA were really partners. Um, yeah. You know, talking about this stuff, and I'm, I'm curious for your thoughts on that too, just, just the extent to which the EPA seemed to be very much, I don't know, just sort of complying with the way that, that so slash Exxon wanted to handle things.

 Oh, I think it's clear from the decision that the relationship between the e p A and and Esso has not been a re the relationship that you would expect from the regulator and the entity being regulated. The E P A has been far too compliant, hasn't done its job, and so has. Been allowed to get away with breaching its permit.

And the result of that, the judge says, um, that lack of vigilance by the EPA and its lack of enforcement has put the, and I'm quoting now. Put this nation and its people in grave, potential danger of calamitous disaster. So the E p A has been completely irresponsible. The judge has corrected that situation, and everybody in the country should be cheering this decision.

Every politician, every business person, every activist, academic student, everybody should be cheering this decision because it's protecting Guyana. It's protecting every single one of us.

 Yeah. Well, it also really seems like a, a good, um, proof point that the court is not. Being influenced by either the government or corporate interests, which should make anyone in any country feel like, okay, we have a functional court system. This is good.

 Yeah, I think this, this judge deserves. Real, um, recognition and praise from around the world for taking, for taking this position. This is a, a country that is very new to oil and gas, and he says that, uh, we've seen politicians across the divide, whether it's the P P P or the out new or the A f C or whoever.

Um, all completely pro oil. Irresponsibly. So throwing caution to the winds, uh, overexcited about, um, Guyana becoming an oil producer, and now you've got the voice of reason coming in and saying, wait a minute, there is something called the rule of law, and we're going to uphold it. There are rules here to protect the people of Guyana and the environment of Guyana and the Caribbean, and this judge is going to uphold those rules.

 Yeah. Yeah, I thought that that his, um, his stance on standing was also really important. You know, this idea that, look, um, especially when it comes to things like environmental regulation, it's, IM, it's important to. Protect the ability of citizens to bring public interest suits, and I'm, I'm curious what you thought about that, that part as well.

 I'm impressed you, you really have read the decision.

 Yes, I've, I've highlighted many parts. Yeah.

 So I think what you have there is, um, A really good statement of judicial review. Judicial review is basically the rule of law in action, and we depend on citizens to go to court and say, look, there isn't. There is abuse of power by this public authority, and you, the court want you to step in and put a stop.

To this abuse and by ruling on standing in this way, the judge is basically saying, in the modern era, everybody has a, right now, every citizen has a right to go to court to protect the public interest, and that traditional rules on standing are inappropriate for the situation that we are in now. And that actually we have to have these rules of standing.

This is a really good modern decision based on up to date legal principles.

 Well, I was just saying to someone this morning, like I, that I, I would love to see a ruling. Like this from the US Supreme Court, and it feels like totally wishful thinking. Um, so, so yeah, it was, it was, it was, uh, a good read. Um, okay. Excellent. Um, I guess, yeah, what are just the next steps for you on this case?

Are you sort of waiting to see if, if anything gets filed and then, and then, you know, proceed, um, from there? Are you looking at. Okay. If, if the government, you know, is making public statements about this, then possibly that could be a case as well. I, I know there might be things you can't discuss, but, um, to the extent that you can share what's, what's next on this for you?

 Well, to be honest, I think the most important thing right now is to get people in Guyana to understand the immense significance of this case. The judge has put the rule of law above the interests of ExxonMobil. So all of those people who've been running around saying, oh, you can't do anything. You can't do anything.

Um, now they don't have an excuse. Uh, red Thread, which is a group of, of activists. Women were out on Wednesday, um, protesting and campaigning in order for, um, to get the insurance in place. And people were saying to them that they support Red Thread, but they don't think they'll get anywhere on insurance.

And of course, this ruling comes out saying that Esso has to provide the insurance. And I think that sends a really important message to people. Um, and it says, stop. Giving away to despair. Stop looking for excuses. Actually, you have the power to act. So act because it brings results. And again, this, this is two people, two ordinary citizens who went to court.

There's no CS o involved in this. I know the Bloomberg article says it's Transparency Institute, GU Inc. But it's not. It's Fred Collins and, and Godfrey White, two individuals.

 So the next step, I think the really important thing is to get people to understand that they have this power and that they have an obligation to protect democracy in Guyana.

They have the power to stand up instead of just complaining about things not being right. They have, they can act and, and they will

 Right. And that the court will actually hear them and, um, and rule accordingly. That that is, it's so important for people to feel like it's not a lost cause to take a case like this to

 Yep. I think this also sends a message to the judiciary because we have. We have had a case, the Gaskin case before, the Chief Justice, where the Chief Justice took over a year to give a decision. Um, and that's in breach of national law, specifically in breach of the time limit for Judicial Decisions Act, and in breach of the cases in the Caribbean Court of Justice, which is our highest court of appeal.

This case, justice Cassoon, took from start to finish in eight months.

 Yeah, I was shocked at how quickly the, the ruling came out.

 is what you want in a judicial review case because every day in which you're waiting for a decision is a day in which a public authority, and in this case, Esso, is acting unlawfully. So judicial review is always urgent. The the judges are expected to move swiftly, and the judge in this case has shown that it is possible to do that.

So that sends a very clear message to, to the rest of the judiciary. Um, we have, we have another case before the Chief Justice in which, um, the, the hearing ended in May last year. It's again, may, and we still have not had a decision from the Chief Justice, even though we've written several letters. So I, I think, um, looking ahead, I would hope.

To see decisions coming a lot faster on these judicial review decisions. Now, it's not acceptable, I think, to be waiting for a year for a decision, and it's, it's certainly contrary to national law and contrary to the rulings of the Caribbean Court of Justice. So it's a most unfortunate situation in these other, in the other cases that I mentioned.

 I also thought it was really interesting how many times the judge emphasized that the issue of, you know, whether or not the law requires financial assurance and this, this, um, parent company guarantee. Like he, he said sort of over and over again, like, it's not complicated because, because you know, asso and the.

Had kind of messaged that like, oh, the law's really complicated. It's open to interpretation. Um, and I, I don't know, that seemed really important to me too, that, that like he sort of repeated over and over again like, look, this is not actually that complicated of an issue. The law says this. It's very clear.

 Yes, I, I agree completely with, with the judge. I have no idea why. Um, Thought it was complicated. And if it was, if they did think it was complicated, um, surely they would've obtained, uh, competent legal advice before signing a document that they thought was complicated. So if they didn't, so if they thought it was complicated and they didn't get properly legal advice, what's going on there?

If it was complicated and they got properly legal advice, why are you coming back and saying you don't understand it, or it's, or it's complicated, you know?

 I know it almost, it seemed to me more like something they wanted to convince the public of that like this. Oh, actually the problem is that this law is complicated and open to interpretation. Um, I don't know. It, it was, I. Yeah, I don't know. That's what it seemed like to me because they mentioned it in a lot of their marketing videos too, that like, you know, it's, it's comp, it's a complex issue, but don't worry, we have the right insurance in place.

And, um, and, and like, I, you know, it was interesting to me that this, so far of all the court cases, this is the only one that I've seen sort of multiple Exxon videos about.

 Son is of course entitled to say whatever they want. The question is whether people believe them. The question is whether people trust what ExxonMobil says. Um, and I, I think perhaps a more important question is whether they're investors and the market have confidence in ExxonMobil and its business plan and the things that it's saying.

 Yeah, that should be interesting because actually the, the, the main group. That they have messaged to about how great it is that they're moving so quickly is shareholders. Um, so it'll be interesting to see if that tune changes.

 Yes. I mean, I wonder whether they've thought this one through, because to be operating above the safety levels of your fbs, so your floating production storage, offloading vessels, and to be using faulty equipment, those are not. Um, items that would fill a shareholder with confidence, particularly when you think that this is dangerous.

Deep water drilling, this is 120 miles offshore. The oil is about a mile below the, the ocean is about a mile deep, and the oil is, um, you know, I think about another mile below the seabed. This is extremely dangerous. And then when you add to that, Clearly a lax regulator. In fact, the message to shareholders is not, look, it's wonderful.

We're moving so fast. It seems to me that one could reasonably conclude from the operations and the lax regulation that this is a very risky operation. And in fact, shareholders might want to think about, um, the implications.

 Yeah. But again, you know, that's why it's important to have. A judge that reminds the EPA of its job.

 Yes. I think this also has implications for business because what business requires, above all else, is a level playing field rules that apply to everybody and that are enforced equally against all of this in entities in the sector. Now, if you've got one, one operator, think they have a collaborative relationship with the regulator.

That's actually really bad for business and really bad for the country.

 Yeah. You wanna attract investment and yet you are boasting that there's a collaborative relationship between the regulator. Um, and one of the entities and the government is saying they want to attract investment that they want to develop, and yet they can't even meet the very basic standards that you require for business, which is a, which is, um, a level playing field.

A market in which everybody, everybody knows what the rules are and all the entities in that market obey the rules. And they know that the rules are going to be enforced equally against all of them, no favors for anybody. Otherwise, you're distorting competition.

 That's it for this bonus episode. Thanks for listening. We will have a more detailed story on this ruling on our website@drilledpodcast.com. I'll also have a story in The Intercept coming this week. We might have something in The Guardian as well, so keep an eye out. There's a lot more coming on this story.

Thanks for listening, and we'll see you next time.

Transcription

The day after our planned season finale last week, we got some incredible news from Guyana: the High Court ruled against the oil company and the government in the big insurance case Melinda Janki filed. We caught up with Janki shortly after the verdict was released for this conversation.

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