Trotman’s new Agreement
Today’s column seeks to address an issue which has largely gone under the radar because Mr. Raphael Trotman, the Minister of Natural Resources has been less than forthcoming in disclosing his actions in relation to ExxonMobil since the APNU+AFC Government took office in 2015. On every occasion that Mr. Trotman was asked about ExxonMobil (Exxon) he has always answered rather evasively, and only that he had negotiated an increase in the royalty from 1 % to 2%. In my research for a Moray House presentation last Friday on the challenges and opportunities posed by the discovery of oil in offshore Guyana, I realised Mr. Trotman actually did more than that.
Some background would be useful from the following timeline.
– June 14, 1999: Petroleum Agreement and Prospecting Licence signed by President Janet Jagan as responsible Minister for approximately 600 blocks.
– Sept. 29, 2001: Exxon declares force majeure due to hostile action by Surinamese naval vessels against the CGX oil rig and drillship C.E.Thornton.
– Sept. 7, 2007 UN pronounces on Guyana/Suriname dispute.
– October 2008: Exxon lifts Force majeure status.
– October 2008: An Addendum and Extension Deed to the Petroleum Prospecting License signed, modifying the Contract Area, the relinquishment obligation, and the initial period.
– Aug. 2, 2016: Official Gazette reveals that a new agreement was signed between Guyana and Exxon and its JV partners on 27 June 2016. That document has not been released to the public or the National Assembly.
The big Why
The big question is why did Minister Trotman sign a new Agreement with Exxon almost a year after it had notified him of the discovery of oil in significant quantities. Mr. Trotman is presumed to know the Petroleum Exploration and Production Act and that such an agreement covers the entire period during which there is a valid prospecting or production licence. While I have serious concerns with certain elements of the 2008 Addendum, the PPP/C did not modify the 1999 Agreement. That the Contract Area and the relinquishment obligation were modified by the PPP/C are serious matters which Trotman had an excellent opportunity to address, if not redress.
Instead, by his inexplicable and apparently uninformed if not reckless action in signing a new Agreement, Mr. Trotman effectively waived Guyana’s rights to correct some obvious errors by the PPP/C Government. In the first place, Janet Jagan granted the company a Prospecting Licence over approximately six hundred blocks when the law sets a limit of sixty blocks, except where special reasons exist for a larger number. It would not be easy to justify an excess of nine times. The law requires that any extension be accompanied by a reduction of 50% of the remaining blocks still covered by a Prospecting Licence, so that at the first extension 300 blocks should have been given up. One can only speculate that the modification in 2008 was to provide that such relinquishment would not apply.
Did the lawyer in Mr. Trotman not tell him that, if all he did was renegotiate the rate of royalty Guyana will receive, all he had to do was sign an Addendum to the 1999 Agreement as the PPP/C did in relation to their Prospecting Licence. Mr. Trotman has publicly embarrassed himself in failing to understand a 1997 legislative amendment in relation to confidentiality. To think that a new 2016 Agreement is the result of a similar failure to understand the relationship between the Petroleum Agreement and the Petroleum Licences is frightening.
After all, it would be well-nigh impossible to correct any conceptual errors at this stage, both on legal and practical grounds. That means that Guyanese now and later will have to live with Mr. Trotman’s misconception for the thirty-year span of a production licence.
The issue is whether section 10 of the Petroleum Exploration and Production Act allows the Minister to scrap one agreement lawfully made and to substitute therefor a completely new agreement. He may wish to argue that his decision to repeal the old agreement and enter into a new one cannot be the subject of judicial review as it is a private contractual agreement between two parties. The Interpretation and General Clauses Act, Cap. 2:01 is also on his side by providing that words in the singular include the plural and the power to enter into an agreement must be read as including the power to enter into more than one agreement.
The Guyana Constitution does not set any limits on the powers of a Minister who is appointed by the President in whom Article 99 vests executive authority, such authority being exercisable by him through officers subordinate to him. The Constitution also establishes a Cabinet of persons consisting of the President, the Prime Minister, the Vice Presidents and such other Ministers appointed to it by the President.
The Judicial Review Act, Cap. 3:06 enacted in 2010 provides for any act or omission of a Minister, public body, public authority, etc. to be subject to judicial review but such “act or omission must have a public element in the sense that it affects public law rights, obligations or expectations.” It is accepted the courts have no power to interfere with the actions taken by administrative authorities in exercise of discretionary power. In Small v. Moss, the Supreme Court of the United States observed: “Into that field (of administrative discretion) the court may not enter.” And in Administrative Law by Wade, 5th Edn. at page 355, it is stated that: “Statutory power conferred for public purposes is conferred as it were upon trust, not absolutely – that is to say, it can validly be used only in the right and proper way which Parliament when conferring it is presumed to have intended.”
In a recent local case, Hon. Justice Ian Chang, Chief Justice (ag.) in B.K. International Inc v Ministry of Local Government and Regional Development reasoned that a contract between two parties involving public expense and public health and welfare had elements of public law and that any decision thereon was subject to judicial review.
While the case for review of the 2016 Agreement on strictly jurisprudential grounds may have some merit, the success of any action to set aside the Agreement must be considered extremely low, despite any significant reduction of revenues to the State as a result of the replacement of the Agreement.