The Government of Guyana, through its regulatory arm, the Environmental Protection Agency (EPA), has bound ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), to a five-year permit for the Yellowtail project which contains strict provisions governing flaring and insurance for oil spill response.
The permit strictly prohibits routine flaring and venting, and specifies that flaring is only permissible during commissioning, start-up and special circumstances. It also goes further to maintain payments in instances where flaring is conducted beyond permitted durations. In fact, any flaring allowed would see the permit holder being charged US$45 per tonne of Carbon Dioxide equivalent.
With respect to oil spill response and financial assurance, the permit requires EEPGL to procure a Capping Stack to be maintained, tested, and stored in Guyana. For those who may not be aware, a capping stack is a large well closure device that connects to the top of the blowout preventer (BOP) and is capable of sealing off a well. It is a form of modern technology (available post the Gulf of Mexico, Macando incident) to cap a well in event of a loss of well control, and failure of the blowout preventer (BOP).
Additionally, EEPGL is required to maintain access to at least one (1) overseas subscription service, to allow mobilization of a Capping Stack to the project location. This serves to fortify safety and emergency response efforts since wells would be swiftly capped in the event of a well blow-out.
The permit also ensures that EEPGL is held liable for all costs associated with clean up, restoration and compensation for any pollution damage which may occur as consequence of the project. EEPGL is also required to have financial assurance which includes a combination of Insurance to “cover well control, and/or clean up and third-party liability on terms that are market standard for the type of coverage.”
It is also required to provide the EPA with a Parent Company/Affiliate Guarantee Agreement which indemnifies and keeps indemnified the EPA and the Government of Guyana in the event EEPGL and its Co-Venturers fail to meet their environmental obligations under the Permit. Further, the financial assurance 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.
In seeking to ensure EEPGL meets its obligations to prevent and mitigate environmental harm, the permit imposes comprehensive requirements for monitoring and management of any impacts affecting biological, physical, and socio-economic resources within the Area of Influence of the project, including targeted and updated environmental baseline studies. The Permit also requires EEPGL to submit safety case information, including a risk assessment prior to drilling and development of wells.
