Collins v. Environmental Protection Agency, No. 2022-HC-DEM-CIV-FDA-1314

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Collins v. Environmental Protection Agency, No. 2022-HC-DEM-CIV-FDA-1314 (May 3, 2023)
High Court of the Supreme Court of Judicature of Guyana, Constitutional Administrative Division

Two citizens of Guyana (“Applicants”) alleged that the Environmental Protection Agency (“Agency”) breached its statutory duties under the Environmental Protection Act No. 11 of 1996 (“Act”) by failing to enforce the financial assurance conditions of an Environmental Permit for petroleum production. Prior to the proceeding, the Agency approved the permit for Esso Exploration and Production Guyana Ltd. (“Esso”), an affiliate of EXXON Mobil Corporation, to conduct offshore oil development. Collins v. Environmental Protection Agency, No. 2022-HC-DEM-CIV-FDA-1314, p. 7 (May 3, 2023). As a condition of the permit, Esso was required to provide financial assurance to compensate for any pollution damages that might arise from its petroleum production activities. Applicants requested copies of these assurances from the Agency, but the Agency refused to comply and the Applicants brought suit. Id., p.10. Esso was later included in the proceedings as an Added Respondent. Id., p.9.

The Court considered four issues. The first issue was whether the Applicants had standing. The second issue was whether the Agency had a duty to disclose information regarding Esso’s compliance with its permit conditions despite no express duty under the Act. The third issue was whether Esso had complied with its obligation to provide insurance, undertakings, and indemnities within a reasonable time. The final issue was whether the Agency had breached its statutory duties by allowing Esso to continue its petroleum production activities despite Esso’s non-compliance with its financial assurance obligations.

The Court first addressed allegations that the Applicants were “meddlesome busybodies” who lacked standing to seek judicial review of the Agency’s oversight of Esso’s petroleum development activities. Id., p. 15. Noting that the case raised public interest environmental concerns, the Court rejected the notion that it should adopt a strict view on standing in part because the Constitution of Guyana creates a justiciable right to a safe and healthy environment. Id., pp. 16-17. The Judicial Review Act also mandates a broad approach to standing, recognizing the role of public interest litigation to vindicate the rule of law. Id., p. 15; see also Judicial Review Act 2010, secs. 4(1), 7(4).

The Court identified another important consideration that influenced its view of the Applicants’ standing, which was the Agency’s demonstrable lack of experience and expertise to discharge its supervisory functions in the oil and gas sector. The Court explained: “Restrictions on standing in such an environment of weak institutions without capacity lends to disaster and a denial of access to justice.” Id., p. 22. The Court concluded its standing analysis very powerfully, stating:

Every citizen of this land would equally possess standing to make this inqury, and I do so hold. If the unthinkable occurs and there is an event resulting in the release of hydrocarbons or contaminants in the course of the [oil company’s] operations, the consequences will be devastating not only to the citizens of this land and the environment but to inhabitants of neighboring states and territories as well.

Id., p. 23.

Turning to the issue of secrecy, the Court held that the Agency was required to disclose information regarding Esso’s compliance with its permit conditions because the cornerstone of the Act, is “transparency, inclusivity, public interest, public participation and complete disclosure.” Id., p. 25. Here, where Esso’s non-compliance with permit conditions posed a “detriment [to] the livelihood of the members of the public,” the public had a right to the information. Id., p. 28. The Court went so far as to hold that, as a matter of law, public interest can override even a legislative express prohibition against disclosure. Id., p. 27.

After reviewing the Environmental Permit, the Court concluded that the duties, liabilities and obligations imposed on Esso were clear and unambiguous, and the company assumed unlimited liability for all costs of clean up, restoration, and compensation for any damage arising out of the company’s petroleum operations. Id., p. 36.  Incorporating the “polluter pays” principle, the permit also required Esso to provide, within a reasonable period of time, financial assurances to cover its environmental liabilities in the form of: 1) insurance; and 2) an unlimited parent company/affiliate undertaking that provides indemnification to the Agency and the government of Guyana. Id., p. 36-37.

The Court held that Esso did not fulfill its obligation to provide insurance, undertakings, and indemnities within a reasonable amount of time. The Court determined that the insurance Esso held did not meet the conditions and stipulations of the permit, which required “environmental liability insurance ‘as is customary in the international petroleum industry.’” Id., p. 50. The Court also observed that the insurance was not obtained from a company with standing that “equates to Grade A plus. Id.

Furthermore, it had been eleven months since the Agency issued the permit and Esso had still not provided a legally binding agreement in which its affiliate, EXXON, would agree to provide indemnification for any liabilities Esso was unable to cover. Id., p. 49. Given the potential risk of harm petroleum production can cause, the court held that a delay of eleven months was far from reasonable. Id.

The Agency and Esso argued that the reason for the delay was that Esso was liable only for reasonably credible costs, expenses and liabilities, which required an estimate that was currently being developed. Id., pp.43-44. The Court held that the permit mandated uncapped liability as per condition 14:01, which states “[t]he Permit Holder is liable for all costs associated with clean up, restoration and compensation for any damages.” Id., p. 34. This provision encompasses discharges no matter how they occur, as well as the release of any contaminant. Id., p. 35. Although condition 13.40 added that “financial assurance shall 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,” the Court explained that this provision did not create any ambiguity considering the clear intent of uncapped liability. Id., pp. 37, 45. In other words, the Environmental Permit mandated uncapped liability; therefore, the financial assurance was required to cover an unlimited amount of damages, not a lesser amount decided between the Agency and Esso. Id., p. 47.

Finally, the Court held that the Agency breached its statutory duties by allowing Esso to continue petroleum production activities despite the company’s non-compliance with its financial assurance obligations. Id., p. 52. The potential environmental harm posed by the activity was high yet the Agency had taken no meaningful steps to assure compliance. Id. Although the Agency had an obligation to ensure the conditions of the permit, as well as the right to issue an Enforcement Notice or even cancel the permit, the Agency did nothing. Id., p. 53. Furthermore, the Court was particularly aggrieved that the Agency had lied under oath regarding Esso’s compliance. Id., p. 52.

The Court granted an Order of Mandamus directed to the Agency to issue an Enforcement Notice directed to Esso to fulfill its financial assurance obligations within 30 days. Id., p. 56.  The Court also awarded costs to the Applicants. Id.