The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The government has full legal authority not to renew Bahamas Petroleum Company’s (BPC) oil exploration licences, a major environmental organisation has told the prime minister.

Steve Mashuda, managing attorney for Earthjustice, told Dr Hubert Minnis in a May 13, 2021, letter its analysis suggests that neither the Petroleum Act nor BPC’s existing licences impose a legal obligation on the government that it must extend them into a third three-year term.

“Based on these available authorities, we conclude that the Government of The Bahamas has broad discretion under the law to deny BPC’s request for renewal of its licenses and that BPC has no right of renewal,” he wrote.

“In addition, such denial is not only within the lawful authority of The Bahamas, but it is also consistent with the Government of The Bahamas’ public opposition to offshore drilling activities as well as its nationally determined commitments under the Paris Agreement.”

Mr Mashuda argued that while BPC’s first licence renewal in 2012 was non-discretionary, provided that it met certain conditions, later renewals are entirely at the Government’s choice based on paragraph 43 of the oil explorer’s 2007 licence agreement.

That paragraph provides for two further renewals for periods of no more than three years, with the area covered by the licences to reduce by 50 percent each time. BPC is now seeking the first of these two renewals.

“This discretion is reiterated through the Petroleum Act,” Mr Mashuda said, “where ‘[t]he term for which a licence may be further renewed by the minister, shall not exceed a period of three years’.

“The Petroleum Regulations further reaffirm this discretion, using language similar to the 2007 licence agreement, when referring to a request for a second renewal: ‘and thereafter may, in his discretion, renew for two successive periods each not exceeding three years as to fifty per centum of the licensed area’.

“Neither the licence itself, nor the subsequently enacted provisions of the Petroleum Act and its regulations, place any limitations on the minister’s discretion to deny a subsequent renewal. Additionally, we evaluated the Minister’s discretion to consider either a general extension or an extension due to force majeure. In both cases, we similarly concluded that the minister retains the discretion to deny both requests.”

The Earthjustice conclusions, of accurate, will place more pressure on the Prime Minister and his Cabinet to live up to their publicly stated opposition to oil drilling in Bahamian waters by rejecting BPC’s licence renewal request. Dr Minnis and his Cabinet have repeatedly said they were bound by a legally watertight agreement to let BPC drill its Perseverance One exploratory well.

Neither Carl Bethel QC, attorney general, nor Romauld Ferreira, minister of the environment and housing, returned Tribune Business calls yesterday seeking comment. The Earthjustice letter was also released right after Eytan Uliel, BPC’s incoming chief executive, told investors it was “our right to extend” the company’s four oil exploration licences beyond their end-June 2021 expiration.

He said on a recent podcast: “We were required to submit the application to extend the licence. “It’s not so much an application, because we have the right to... It’s our right to extend it.

“We have submitted all the paperwork required. It was required three months before June 30. That’s now been submitted to and there’s a process we go through in terms of renewal, but that’s all in train.”

Earthjustice’s Mr Mashuda, meanwhile, argued that BPC’s outstanding licence fees were just one of several reasons not to renew the company’s licences. He added: “BPC has recently made abundantly clear that it lacks the ability to fulfill the future obligations that would attach to a renewal.

“It is notable that for any operations under a renewal licence, BPC currently seeks ‘a funding and operating partner for the next stage of exploration activity in The Bahamas’, demonstrating through its efforts to farm-out the licence agreements that it does not have the assets or operational capacity to utilize the licences.”

Mr Mashuda continued: “The Petroleum Act requires both the technical and financial capability of the applicant be taken into consideration in the initial application for the licence, and further requires the minister to consider ‘any other particulars which the minister may deem appropriate’ when considering a renewal request.

“It is axiomatic and prudent that the Government of The Bahamas weigh BPC’s technical and financial capacity as part of its discretionary consideration of the renewal request. The Government of The Bahamas has no obligation to take on or accommodate problems caused by BPC’s past miscalculations. BPC must demonstrate its own capabilities and not rely upon a future potential farm-out to fulfill its obligations under a renewed licence agreement........

“The Government of The Bahamas should exercise its discretion to consider whether it is in the best interest of the country to grant a renewal to a company that is currently seeking to farm out its licences to an undetermined entity.”