ExxonMobil says has appealed insurance ruling
Fifteen days after a historic High Court decision finding it in breach of insurance requirements for the Liza-1 well, ExxonMobil yesterday announced that it had filed its own appeal against the judgment.
A terse statement from the company was the first announcement of an appeal but the company did not supply any of its filings. The May 3rd decision had been surprisingly appealed by the Environmental Protection Agency on May 9th but up to that point there had been no word from ExxonMobil on what it would do.
In its statement yesterday, ExxonMobil said: “In light of some recent misreporting, we wanted to take a moment to clarify that ExxonMobil Guyana supports the EPA’s appeal of the recent High Court ruling and filed our own appeal last week.
“The court failed to recognize the ability of the Stabroek block co-venturers to meet our financial obligations, which are supplemented by the insurance that we already have in place and the agreement we reached with the EPA for financial guarantees that exceed industry benchmarks”. The company did not identify the misreporting.
Justice Kissoon’s decision has put ExxonMobil and the government on the back foot as non-compliance could lead to the cancellation of the environmental permit for Liza-1
and a halt to its operations. The same would likely apply to Liza-2.
The EPA’s case came up last week before Court of
Appeal judge Rishi Persaud and hearings have been fixed on the question of whether the EPA’s appeal has a chance of succeeding.
It is unclear from the ExxonMobil release if the company has applied to join the EPA case against the judge’s decision or it has filed a separate case.
In the meanwhile, ExxonMobil’s Annual General Meeting set for May 31st will see several questions on the financial ramifications for shareholders as a result of Justice Kissoon’s decision.
Mercy Investment Services has tendered an appeal to shareholders to vote for Ballot Item No 10 seeking a report on the costs and impact of a worst-case oil spill from Exxon’s operations in Guyana’s Atlantic waters.
Based on a document filed with US Securities and Exchange Commission (SEC), Mary Minette on behalf of Mercy Investment Services has written to shareholders seeking support for the ballot measure.
She said: “Ballot Item Number 10 seeks disclosures that would allow investors to better evaluate the scope of potential liability associated with a worst-case spill.
“Asset managers and other fiduciaries that seek to exercise due diligence in managing portfolio risks would be well advised to vote in favor of this proposal, bringing into clearer transparency the potential costs and risks associated with a worst-case spill scenario in Guyana”.
Anna Marie Lyles, Ph.D, has also reached out to shareholders based on documents filed with the SEC. She wants support for item 14 on the agenda of the Annual General Meeting “which requests
an actuarial assessment of the potential cumulative litigation risk from current environment-related litigation, at ExxonMobil’s … annual meeting of shareholders on May 31, 2023”
She asserted that the Company faces a variety of types of litigation risk throughout the United States and in other countries, including Guyana “where it has one of its most important new strategic production sites”.
Lyles views the Company’s specific disclosure of these risks to investors as inadequate because it does not enable shareholders to assess the level of risk to their investment;
She also said loss of trust in the Company, arising from operational and reputational issues connected to the litigation and Esso’s operations in Guyana, may compound these litigation risks.
She added that shareholders need an outside, professional evaluation of the cumulative litigation risks facing the Company in order to have confidence that the board and management are exercising proper oversight of these “rapidly evolving legal challenges”.
Vote against
ExxonMobil has since urged shareholders to vote against both questions 10 and 14 among others.
A May 17th letter to shareholders by Vice President, Investor Relations, Jennifer K. Driscoll made an appeal to shareholder.
“First, I want to invite you to join the 2023 Exxon Mobil Corporation virtual Annual Meeting on May 31, 2023, beginning at 9:30 a.m. Central. During the meeting, Chairman and CEO Darren Woods will highlight the record results we delivered in 2022, including industryleading earnings, cash flows, and shareholder returns. We’ll also discuss our work to grow supplies of the energy and products the world needs while reducing greenhouse gas emissions intensity of our operations. This includes our plans to invest approximately (US) $17 billion from 2022 through 2027 on lower-emission initiatives to reduce our own emissions and the emissions of others.
“Second, I want to express my sincere appreciation for your continued investment in the company. Your support as a top shareholder is helping our efforts to meet society’s needs for more energy while reducing emissions – and to generate attractive returns for investors like you.
“Third, I want to make sure your voice is heard and encourage you to vote your shares. There are more than a dozen items up for a vote this year. Our Board is recommending that you vote FOR Items 1-3, for one-year frequency on Item 4, and AGAINST Items 5-16. The Board provides careful analysis of each proposal along with the reasons for its recommendations in our proxy statement”, she said.
On May3rd, Justice Kissoon said the EPA had abdicated its responsibilities “…thereby putting this nation and its people in grave potential danger of calamitous disaster.”
The judge bluntly said that the circumstances giving rise to the action disclosed the existence of an “egregious” state of affairs that has engulfed the agency which he described as “submissive,” and in a quagmire of its own making.
Justice Kissoon had said that in the course of the proceedings, the court found on the evidence that EEPGL 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 at Condition 14 of the Environmental Permit (Renewed) while simultaneously optimising production at the Liza Phase 1 Petroleum Production Project in the Stabroek Block Offshore Guyana.”
Directly calling out the EPA, the judge said EEPGL “engaged in a course of action made permissible only by the omissions of a derelict, pliant and submissive Environmental Protection Agency.”
He said that the proceedings brought to the fore the adage, “but for the vigilance of citizens society shall perish.”
The court said it found that Esso was never in doubt as to what its liabilities were as captured under Condition 14 of the Permit, as the stipulations were neither unusual, unique or unauthorised.
The judge ordered the EPA to issue an Enforcement Notice pursuant to Section 26 (1) and (2) of the Environmental Protection Act, no later than this past Tuesday, directing EEPGL to perform its obligations under the Permit and to provide, within 30 days thereafter, the unlimited liability Parent Company Guarantee Agreement and/or unlimited liability Affiliate Company Guarantee to indemnify and keep indemnified the Government of Guyana and the agency against all such environmental obligations of Esso and its co-venturers within the Stabroek block, together with environmental liability insurance as is customary in the international petroleum industry in accordance with the Conditions 14 from an insurance company standing and repute that equates to Grade A Plus as envisaged by Condition 14.
Failure to comply with the order, the judge has said, would result in the Permit being suspended.
President of the Transparency Institute of Guyana Inc (TIGI) Fredericks Collins and another Guyanese citizen, Godfrey Whyte, had moved to the court last year to get the EPA to enforce the liability clause in the permits issued to ExxonMobil Guyana for its offshore oil operations.
The litigants had said that the resort to the court was to make sure that the company took full financial responsibility in case of harm, loss and damage to the environment. ExxonMobil’s local affiliate, EEPGL, has agreed in the permit to provide insurance and an unlimited parent company indemnity to cover all environmental loss and damage that might result from a well blowout, oil spill or other failures in the Liza 1 Development Project in Guyana’s Stabroek Block.
The duo, through their battery of attorneys led by Senior Counsel Seenath Jairam, had told the court that “…the agency, through its human minds, including its officers has failed or omitted to carry out or to show that it has carried out its legal duties and or obligations thereby amounting to misfeasance in public office by them and by failing or omitting to act, has acted unreasonably, irregularly or improperly and or has abused its power.”