Shortchanged: How the Senate’s Petroleum Industry Governance Bill (PIGB) Fails the Environment and Local Communities

Based on the text of the Press Conference by the Alone (Alone), June 21, 2017, Abuja

The Petroleum Industry Governance Bill (PIGB) was passed by the Senate in May 2017 (the Federal House of Representatives is still working on the bill). Alone has undertaken a thorough study of the PIGB. The result of our examination is contained in the briefing paper, “The Petroleum Industry Governance Bill (PIGB), 2017: Implications for the Environment and Local Communities”.

Our analysis clearly shows that PIGB as passed by the Senate is seriously flawed. It does not provide for health, safety and environment (HSE) concerns. There is no provision for an end to gas flaring. There is a lack of independence for regulators and a glaring neglect of host communities’ interest in the proposed new institutions. The provisions of the PIGB as passed by the Senate do not demonstrate an understanding of the need to guarantee energy access as a right of citizens. Moreover, the powers and functions of the new institutions like the Petroleum Regulatory Commission created under the Bill do not reflect current global best practices. Our conclusion is that the version of the PIGB as passed by the Senate is an unconscionable attempt to legalize the appropriation of national oil and gas assets to some powerful private interests.

Specifically, the ill-advised separation of a hitherto comprehensive bill into bits (by the Senate) has created a sufficient setback to a holistic and more effective effort to revamp the energy sector in Nigeria for the benefit of citizens.

On the provisions of the bill proper, it is strange that the Senate is swift to create new institutions in the industry including the National Oil Company, the Nigeria Petroleum Assets Management Company, the National Petroleum Regulatory Commission, the Ministry of Petroleum Incorporated and the Petroleum Equalization Fund etc., without first creating the enabling environment on which these entities will thrive. The vacuum of the non-effective and clear-cut provision(s) for Health, Safety and Environment in the bill is disturbing and lamentable. In point of fact, the bill does not have any part or section dealing with environmental protection. In its current form, the PIGB cedes virtually all powers on environmental regulation from the Ministry of Environment to the New Petroleum Regulatory Commission. Sadly, the Commission is saddled with functions that are conflicting with each other. For example, Section 5(f) mandates the Commission to “promote an enabling environment for investments in the petroleum industry” and in doing so “ensure that regulations are fair and balanced for all classes of lessees, licensees, permit holders, consumers and other stakeholders” (as we find in Section 5(g)). Now the question is, how will a commission charged with the task of promoting conditions for maximum profitability of investments in one stroke, turn round in another stroke to rigorously enforce environmental regulations against the same commercial entities?

The original Petroleum Industry Bill (PIB) which was before the National Assembly between 2008 and 2015 had made it clear that the Ministry of Environment shall have overriding authority on environmental matters. This neutrality and independence was necessary to appropriately enforce environmental regulations. Worryingly, in the PIGB, all provisions giving the Federal Ministry of Environment powers on environmental issues were struck out. By so doing, the Senate is causing the country to lose out on the opportunity of a new legislation to correct the lapses in our regulation of environmental issues in the Petroleum Sector. The logical consequence of this line of action is the exacerbation of environmental crisis and conflicts in Nigeria. We call on the National Assembly to promptly return to the 2015 version of the PIB as regards to the environment as it has clear and effective environmental protection provisions and regulations for the petroleum industry.

On the creation of governance and other Institutions by the bill, several ambiguities abound and surround many of these institutions, raising questions as to their purpose and intents. For example, the Petroleum Equalisation Fund (which is to take over assets and liabilities of the existing Petroleum Equalisation Fund), would be funded primarily by way of a fuel levy in respect of all fuel sold and distributed within the Federation. This shall be charged subject to the approval of the Minister. Monies in the Fund are to be given to petroleum marketers for any losses in maintaining uniform price for petroleum products across Nigeria (See Sections 36, 37 and 56 of the enacted bill). The provision for a Petroleum Equalisation Fund does not provide a mechanism for dealing with the massive corruption that has attended the management of such funds in the past. It is our view that the Nigerian government should ensure fair pricing of petroleum products to protect national energy security, including guarantying access to energy services. However, this should be done with the understanding of the need to eradicate structures that protects corrupt practices. In many ways, the PIGB may actually undermine existing legal regimes intended to tackle corruption in the petroleum industry in Nigeria.

The same vagueness applies to the “Ministry of Petroleum Incorporated”, created in the bill (Sec. 76(3) to “hold on behalf of the government shares….”. The bill did not clearly provide for or state the relationship between this entity and the Ministry of Petroleum Resources. Similar lack of clarity and confusion applies to several other institutions created by the bill including the Nigerian Petroleum Regulatory Commission, the Nigerian Assets Management Company, the National Petroleum Company, etc.

One of the tools for making environmental polluters accountable for their actions is litigation. In such cases, the typical claimants are individuals; families and communities where oil and gas corporations operate. The expectation is that a law like the PIGB that seeks to create a new governance structure for the petroleum industry should expand the opportunity for people to use the legal process as a means of making companies, government institutions and agencies accountable for environmental pollution. Regrettably, sections 31 and 61 of the PIGB as currently drafted places restrictions on the exercise of the enforcement of civil rights as the limitation of action is shorter than the time provided for civil action under the Statutes of Limitation. The PIGB provides a maximum of 12 months period for suits against the institutions and agencies created under the PIGB, a member of the governing boards or an employee in respect of their functions and powers under the Act to be instituted against them. After 12 months such cause of action would lapse.

Claimants in oil and gas pollution are known to have difficulties with collating evidence, raising money to fund their case and other structural problems with litigation against oil companies. Therefore, the 12 months limitation of cause of action in this respect is not in the interest of the poor people who are most times the victims of the oil politics in Nigeria. It is suggested that the general laws of limitation be application to the oil industry.
At this juncture, we would like to pertinently point out that whereas Nigeria is said to be a federal entity where Justice, Equity and Fairness is supposedly in place, yet a look at the legal regime governing natural resource extractives of Solid Minerals on one hand and Oil and Gas on the other hand, call this supposed truism to question. Under the Minerals and Mining Act, 2007 lives and livelihoods of of communities and individuals are better respected. Section 3(1)(c) of the Mining Act provides that

“no mineral title granted under this Act shall authorize exploration or exploitation of mineral resources on, or, in, or the erection of beacons on or the occupation of any land – occupied by any town, village, market, burial ground or cemetery, ancestral, sacred or archaeological site, appropriated for a railway or sited within fifty meters for a railway, or which is the site of, or within fifty meters of, any government or public building, reservoir, dam or public road;”.

In the PIGB passed by the Senate, unlimited and unqualified powers are given to the Nigeria Petroleum Regulatory Commission by section 6(1)(s) to issue petroleum licences at will and with no regard whatsoever for lives and property of landowners and communities in oil-bearing areas. This has been the unjust old order and has been sadly retained by the Senate in the PIGB.
Furthermore, unlike in the PIGB where the decisions of the Minister is solely on the recommendation of the Commission, the Mining Act provides for proper consultation with and consent of land owners even before the grant of mining title to a mining company. This can be seen in section 102 which provides that:

(2) The Minister shall, before granting a mining lease on any private or any stateland –
(a) cause the owner or occupier of the land to be informed of the intention of the Minister to grant the lease; and
(b) require the owner or occupier of the land to state in writing within the period specified by the Regulations made under this Act, the rate of annual surface rent which the owner desires should be paid to him by the lessee for the land occupied or used by it for or in connection with its mining operations.

The Mining Act thus clearly recognizes and provides for prior and informed consent and adequate compensation for local/community land owners; this is also in line with global best practices in extractives. However, the positive provisions of the Mining Act, which protects communities in sites of solid mineral extraction, are clearly, purposely or otherwise, left out in the PIGB. This may by same stroke also explain the excision from the bill, of the part on Host Community Fund (or Participation). In an apparent departure from the preceding PIB, the PIGB does not even pretend to remember or consider oil-bearing land and water owning communities.

It is all not bad news. We note that the bill has made some worthy landmarks as regards pruning the hitherto overbearing powers of the Minister in the Industry to free it from meddlesomeness and lack of institutional independence (for the entities in the sector). However, the PIG Bill in its present state is not comprehensive enough and lacks clarity of intention. Restructuring of the oil and gas industry must not only be to serve the commercial interest of multinational oil companies and a few local businesses but the general interest of the country and her people.

In conclusion, a comprehensive package of the intended new legal regime for the Nigerian petroleum industry should be tabled before the National Assembly and other stakeholders for consideration simultaneously. That will show transparency on the part of government and give opportunity for relevant stakeholders, civil society organisations, environmentalists and sustainable development advocates to do proper analysis of the legal regime to ascertain its relevance to issues of environmental protection, termination of gas flares, fiscal accountability and transparency, easy access to justice and host community development and equity. Anything less may not be good for the petroleum industry, stakeholders and the Nigerian populace.