Capping stack to arrive in Guyana by month-end – EPA Head

The content originally appeared on: INews Guyana

Guyana is set to welcome a capping stack to mitigate large oil spills, according to Executive Director of the Environmental Protection Agency (EPA), Khemraj Parsram who highlighted that this piece of equipment will be the first of its kind in the region.

Capping stacks are placed over blown-out wells as a cap to stop or redirect the flow of hydrocarbons and buy engineers time to seal the well permanently.

It is on this note, that Parsram stated that part of the EPA’s permit to oil companies deal with the prevention of oil spills. One requirement that this permit seeks out is for the country to be equipped with the best technology.

In this regard, he highlighted that by the end of the month, Guyana will be equipped with the first capping stack in the region. This is the centerpiece of a containment system kept in readiness at an onshore location.

“With the capping stack, we ask them to have it in the country and it’s actually on its way right now. So it should be by the end of this month, it should be in Guyana. So it’s the first time in this region that we’re actually having one in the country.”

However, Parsram highlighted that the Environmental Protection Act is clear about full liability as such he noted that the EPA, over the past two to three years has examined what the Act outlines about financial assurance and how those requirements can be strengthened.

“One key thing, the law the Environmental Protection Act is clear about is full liability. What it means is if you are a permit holder, you are fully responsible and fully liable for any pollution that you cause. And that doesn’t have to be proven. But how does that transfer to the securitization of your liability? And so, what we’ve done over the past two years or three years, we looked at what our Act says about financial assurance and strengthen those requirements as well as looking at what exists in other jurisdictions” he stated.

Parsram noted that every year the EPA requests an annual declaration from oil companies of their liquidity, or their financial statements, to show that they have enough money to cover liabilities.

He noted that in the event of an environmental disaster such as an oil spill and relief efforts are costing more than the estimated amount there is a clause that states that the beneficiary which is the EPA and the guarantor can negotiate to fulfill the excess cost.

“Now, even if something happens, a spill does occur, and we’re in the middle of it and we realise there’s a default, and we have to go to this guarantee then we find that, oh, it’s probably costing more, then there’s a clause that says that the beneficiary, which is EPA, and the guarantor can negotiate to fulfill the cost over that. So in essence, it is an open with a floor, and as your liabilities are coming to place, then you cover the cost. But irrespective of what happens, at the end of the day the polluter will have to stand the full cost.”

Back in April, ExxonMobil Guyana President, Alistair Routledge reported that a capping stack is imminent while noting that the government mandated that the company has one in-country in case of a large spill.

“We did commit to purchasing one [a capping stack] that will be arriving in Guyana in the next few weeks.”

Routledge has stated that having a capping stack in-country is “further assurance that we want to make sure that we’re taking care of the environment in Guyana.”

Guyana remains protected from any liability with three layers of defense should an oil spill occur; a sum that amounted to more than US$20 billion as of 2023.

There is a US$2 billion guarantee, to be tapped if Exxon’s insurance policy and its assets are not enough to respond to the impacts and fallout associated with an oil spill. The environmental liability insurance is US$600 million. Once this runs out, Exxon would have to rely on its assets and those of its Stabroek Block partners, Hess and CNOOC, to cover additional expenses. This total was more than US$18 billion as of the end of 2022. An update on the value of the Stabroek Block co-venturers’ assets is expected in the second quarter of 2024.