For the umpteenth time, another version of the Petroleum Industry Bill (PIB) 2020 has just been transmitted to the National Assembly for legislative consideration and, hopefully, passage. As far back as 2000, former President Olusegun Obasanjo’s administration constituted the Oil and Gas Sector Reform Implementation Committee (OGIC) mandated to harmonize the 16 legislations that governed the industry and produce a comprehensive legislation that would overhaul the Nigerian oil and gas industry.
The Committee worked for four years and produced the first draft of the Petroleum Industry Bill (PIB). Afterwards, a technical committee which Nigeria’s former petroleum minister, Mrs. Diezani Allison Madueke inaugurated on January 17, 2012 reviewed the PIB, which was then transmitted to the National Assembly as an executive bill. The bill did not pass despite the extensive stakeholder consultations, legislative deliberations and public hearings conducted across the country. Post 2015, the bill was split into different charters to ease its passage. Though one of the charters, the Petroleum Industry Governance Bill (PIGB), secured the nod of the Nigerian Senate and the House of Representatives in 2017 and 2018, the president withheld assent.
The 20-year long delay in passing the bill despite its touted objectives of improving technical, operational, environmental and regulatory efficiency in Nigeria’s oil industry operations, is creating an overhang of doubt regarding whether or not the latest bill will pass this time around. With the relaunch of the bill, environmentally-degraded communities that bear the brunt of petroleum operations watch with bated breath whether the new PIB holds promise of a better deal for them in terms of environmental protection, economic benefits, equity stakes, infrastructure development, job creation and opportunities for participation. It was against this backdrop that Spaces for Change examined the provisions of the new PIB to assess the quality and extent of legal protection it offers communities against exploitation and environmental damage.
Overall, the PIB weaves together many upsides and downsides when measured against its clearly-defined policy goals. On the positive side, PIB 2020 does contain robust provisions aimed at protecting the environment against the adverse impact of oil and gas operations, which can cause damage to public and private property, indigenous communities and their livelihoods. In particular, a combination of provisions strives to remedy some of the notable shortcomings in extant environmental regulations such as duplicative regulation, weak enforcement of standards, overlapping regulatory powers, hostility between operators and host communities etc.
First off, oil industry operations are stratified into upstream and downstream petroleum sectors, administered by the Nigerian Upstream Regulatory Commission (The Commission) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (The Authority) respectively. The Commission and The Authority bear responsibility to ensure strict implementation of environmental policies, laws and regulations for upstream and downstream petroleum operations respectively. In doing this, they will adopt both penal and corrective measures to enhance industry compliance to environmental regulations. Penal measures include the revocation of licenses and leases granted to licensees who flout applicable regulations. The corrective enforcement measures the Commission may require of operators include the payment of fair and adequate compensation to the persons or communities directly affected by damage or injury to their property, land or venerated objects in the course of petroleum operations. Indeed, the suspension and revocation of licenses and leases for failure to comply with environmental obligations required by law or the provisions of the license or permit stand out as the most potent weapon the upstream and downstream regulatory bodies shall deploy to enforce compliance with environmental standards.
Another provision of particular significance is the requirement for an Environmental Management Plan (EMP) to be in place between six months to one year after a license is granted in respect of upstream and midstream petroleum operations. The use of chemicals in upstream operations is also outlawed except with the approval of the Commission. Operators are also prohibited from entering or occupying areas earmarked for public purposes or held to be sacred, or privately owned or legally occupied land. Any damage or destruction of any building or property; or to the surface of the land will attract compensation payable to the person in lawful occupation of the land or area.
The Environmental Remediation Fund is also a laudable feature of the PIB and particularly responds to the growing clamour by environmentally-degraded communities in the Niger Delta for the clean-up of their polluted lands and water sources. As a condition for the grant of a license or lease and prior to the approval of the environmental management plan, operators are required to pay the prescribed financial contribution for the rehabilitation or management of negative environmental impacts with respect to their license or lease. Financial contributions payable into the Fund depends on the size of the petroleum operations and the level of environmental risk that may exist. If passed into law, the Fund will enable regulators to mobilize the resources much needed to clean up polluted communities, create employment for restive youths and for addressing any future damage caused to the host community. Drawing up environmental plans and the setting up of a remediation fund also form part of measures to enhance compliance with good oilfield practices as well as health, safety and environmental (HSE) standards.
What happens when onshore and offshore installations cease operations, or have become obsolete and production contracts with multinational and indigenous oil companies expire? Oil operators are required to submit to the Commission or Authority, a programme setting out their decommissioning program that aligns with good international petroleum industry practices and environmental development. The decommissioning programme aims to restore the disused site to as far as possible to its original condition. All operators are required to set up and manage an abandonment fund and the Commission or Authority retains the right to access and use such funds if the operator fails to fulfil their obligations.
Prohibition of flaring or venting of natural gas is a welcome development in the PIB. Violators will pay a penalty prescribed pursuant to the Flare Gas (Prevention of Waste and Pollution) Regulations. The fines paid for gas flaring are not subject to tax deduction. To give more teeth to regulatory action, the Commission or Authority are empowered to impose sanctions and penalties assessed against any person for contravening environmental and other regulations. What is more: The PIB also provides for the creation of a Host Communities Development Trust. The oil operators, described as settlors, are obligated to incorporate a trust for the benefit of the host communities, and shall make an annual contribution to the host Community Development Trust Fund of an amount equal to 2.5% of its actual operating expenditure. The utilization of this fund will take into consideration the host community needs from a social, environmental, and economic perspective.
Indeed, the litany of arrangements proposed above are praiseworthy, and if implemented, will lay the foundation for stronger environmental protection for the benefit of communities in and around the extractive zones. However, huge gaps remain. Topping the list of numerous downsides, certain prohibitions are not absolute. For instance, gas flaring, though prohibited, will be condoned in certain circumstances such as where it is required for facility start-up; or for strategic operational reasons, including testing. Absence of a specified limit to the scope of operational reasons, this provision could be exploited to harm the environment, increasing communities’ vulnerability to health hazards. Furthermore, while the Bill requires operators to compensate for damage to sacred sites, commercial trees, individual or community property, it does not clarify the procedure or mechanism through which affected persons and communities can seek compensation or for ensuring that the legitimate concerns of those affected by environmental damage are addressed.
The bill’s major design flaw is the non-inclusive arrangements proposed for the administration of the Host Community Development Trust. The planned framework for delivering community development trusts is neither empowering nor beneficial to oil producing communities. It not only relegates host and impacted communities to the role of mere spectators in the management of the trusts, but also overlooks the existing community structures, the tradititonal institutions, including cultural and statutory organizations that have historically been responsible for undertaking community development in the host communities.
As if that is not enough, some of the expansive regulatory powers for environmental matters in the petroleum industry vested on the Commission and Authority overlaps with the statutory responsibilities of the Oil and Gas Division of the Federal Ministry of Environment (FMOE). In its website, FMOE affirms that it carries out review of environmental compliance monitoring reports submitted by operators in the oil and gas industry, monitors upstream and downstream operations including implementation of Federal Government’s gas flare down policy, gas gathering processing and utilization projects as well as the monitoring and certification of facilities decommissioning and oil wells closure. Likewise, section 232 (11) of the PIB empowers the Commission or Authority to ensure current and expired licensees or lessees carry out any remaining or unfulfilled decommissioning and abandonment obligations. The Commission will also ensure lessees’ compliance with domestic gas delivery obligations, including the elimination of natural gas flaring and venting. What this means is that the overlapping regulatory powers between enforcement agencies will persist which could offer polluters the advantage of cherry-picking which regulator to obey.
Regardless of the major shortcomings detailed above, the draft statute ushers a new vista of opportunity for stakeholders, including communities, to participate and engage in the scheduled legislative processes in order to ensure the persisting regulatory gaps identified are plugged. Faced with the lingering economic crisis compounded by COVID-19, it has become imperative to explore ways of securing the speedy passage of the Bill to facilitate structural reforms, and in the process, unlock billions of dollars of delayed investments and revenues that will be re-channeled towards environmental clean-ups, infrastructural development and poverty eradication within and beyond the resource extraction zones.
Ibezim-Ohaeri is the director of policy and research at Spaces for Change (www.spacesforchange.org). She can be reached via email@example.com.