The Tribune

* Oil explorer: 'It's mountains out of molehills'

* AG confirms two sides now in 'reconciliation'

* Cheque paid but Gov't refuses to accept

File pics of Carl Bethel QC, Simon Potter and Stena IceMAX drill ship

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas Petroleum Company (BPC) yesterday warned against "making mountains out of molehills" after it was revealed the Government had refused to accept its payment of outstanding licence fees.

Carl Bethel QC, the attorney general, disclosed to Tribune Business that the two parties were now engaged in a "reconciliation process" to resolve the dispute over how much the oil explorer owes to the Public Treasury.

"They've sent the money, sent a cheque, but we've not accepted it," he said in response to this newspaper's inquiries. "They've tendered what they say the amount is, but we don't agree. We're now engaged in discussions that we call a 'reconciliation'.

"I inquired of my senior officials and am informed that there remains a difference of opinion. BPC has tendered what it says are the outstanding licence fees. The parties have now embarked on a 'reconciliation' process in an effort to settle the dispute."

Documents seen by Tribune Business reveal that BPC's outstanding licence fees, some of which date back to before 2018, were supposed to be determined, settled and paid by end-April 2020 - almost eight months before it began drilling its exploratory Perseverance One well in waters some 90 miles west of Andros.

Romauld Ferreira, minister of the environment and housing, in the February 25, 2020, letter that granted BPC the Environmental Authorisation (EA) approval that is now the subject of environmental activists' Judicial Review challenge, laid out the timetable for resolving the issue.

"Finally, within 30 days of the date hereof, BPC and the ministry shall enter into a side letter agreement in relation to any outstanding licence fees up to the end of 2018, having regard to any reconciliation of payments that might be necessary," stated the letter, which was signed by both Mr Ferreira and Simon Potter, BPC's chief executive.

"Within 60 days of the date hereof, BPC shall pay to the ministry any and all outstanding licence fees (if any) for the period up to 2018 and, in addition, shall pay any licence fees as determined by the minister for the periods 2019 and 2020."

The EA letter does not explicitly tie the Government's Perseverance One approval to payment of these licence fees. However, the matter has dragged on unresolved for many months, and is likely to be seized upon by oil exploration opponents who will be questioning why BPC has been allowed to drill with the issue still outstanding.

However, Mr Potter, in an e-mailed reply to Tribune Business inquiries, downplayed the matter by asserting that the "reconciliation" was "a basic, auditable business practice" that involves "a comparatively minor amount" of monies.

"For anything to be suggested beyond this is little more than another instance of those who might be opposed to BPC’s lawful activities seeking to make mountains out of molehills by misrepresenting what are basic business matters and practices," Mr Potter told this newspaper.

"BPC has held its licences in The Bahamas since 2007, and has paid licence fees to the Government since that time, which in aggregate amount to millions of dollars. As is the case in any business setting, there is a normal process whereby fees payable by BPC to Government are checked, reconciled and audited for correctness - most especially for a publicly-listed company such as BPC, where such payments have to be clearly and transparently accounted for."

Mr Potter continued: "Given the various extensions to the licences agreed with the Government, including most recently as a result of force majeure occasioned by the COVID-19 pandemic, a comparatively minor amount of licence fees remains outstanding.

"As the attorney general has correctly acknowledged, the exact amount remains to be to be finally checked and reconciled between the Government and BPC. Again, as the attorney general has acknowledged, during 2020 BPC had offered to pay an amount to the Government in advance pending this final reconciliation, but the Government’s preference was to complete the final reconciliation first, and BPC is currently engaged with the Government in that process.

"This is a basic, auditable business practice and, as noted, the amount involved is relatively minor in the context of more than a decade of substantial licence fee payments by BPC to the Government."

Neither Mr Bethel nor Mr Potter divulged a dollar value for the amount of licence fees said to be outstanding, or the difference in their sides' respective valuations. However, an idea can be gleaned from a BPC release earlier this year in which it said the $900,000 raised from Bahamian investors who bought into its mutual fund would "adequately cover" this payment.

This indicates, at least from BPC's perspective, that the sum involved is less than $1m. Its May release confirmed that itself and the Government "had "agreed a process seeking final agreement" on the outstanding licence fees at the time EA was granted.

It added that the final agreement and payment awaited confirmation by the Public Treasury that past payments recorded in BPC's audited financial statements in 2012 and 2015 were received.

"This confirmation process has been somewhat delayed owing to the State of Emergency declared, and ongoing business disruption caused, by the national response to the COVID-19 outbreak in The Bahamas," BPC said then. "However, subject to said confirmation, the company expects that an appropriate side-letter agreement can be finalised in due course and the outstanding amount paid.

"The amount of outstanding fees is agreed in principle and is expected to be finalised shortly. The amount would be adequately covered by the proceeds of receipts from subscription for the fund shares which, as noted, is expected to be received shortly by the company."

The outstanding licence fees "dispute" emerged as one potential obstacle to a speedy trial of the Judicial Review challenge to BPC's permits and approvals was removed at yesterday's Supreme Court hearing when the Government withdrew its demand that the environmental activists pay $200,000 as "security for costs".

This, if approved by the court, would have required Waterkeepers Bahamas and Save the Bays to come up with a $200,000 bond to cover the Government's legal costs before any hearing of the action's merits could proceed.

“We applaud the Government for respecting the rule of law and the judicial process,” attorneys for the two groups said in a statement. “They have removed a major obstacle to the hearing of this case.

"So many times in the past public interest litigation has been derailed and priced out of justice by security for cost applications, which would require those bringing actions in the public interest to ensure due process and lawful development to put up funds before they can actually have their day in court."

They continued: “Initially, the Government did apply for security, but yesterday indicated to the court that it was withdrawing. From the beginning, we have sought to have a trial on the merits of the case and avoid delays and obstructions that prevent us accessing the courts until it is too late.

"Time is of the essence, the drill bit is turning, and if we are successful it would be a shame for this to have been an exercise in futility. The Government has taken a huge step in the direction of the swift administration of justice and we thank them for their responsible behaviour.”

Justice Petra Hanna-Adderley yesterday reserved her decision on whether to add BPC as a "respondent" party to the Judicial Review action. If the oil explorer was added, its own $100,000 "security for costs" demand would be the only obstacle to a full trial, and it has shown little sign of giving ground on this point.