At the heart of the Commission’s proposals is a belief that the systemic nature of the failures of regulation, legislation and politics that have fuelled the tide of pollution that has engulfed Bayelsa requires a systemic response. The whole ecosystem of regulation and legislation will need to be transformed to help galvanise a sea change in the behaviour of oil producers. Incremental solutions alone will not work and may exacerbate the fragmentation and incoherence of the regulatory system as it stands today. The history of regulation and the use of mechanisms like EITI show that more of the same will not be enough.
To be successful reform will need to be rooted in a set of clear foundational principles that are consistently applied.
It will also need to be informed by international experience, but not dictated by it. Best practice can provide a roadmap for change. Whilst international practice cannot simply be cut and pasted into the Nigerian context, it can serve as a basis for transforming Nigeria’s ecosystem of regulation and law.455
The Commission has studied the regulatory and legal regimes of a number of different countries and consulted with a wide range of international and domestic experts. It has identified through its research 11 key principles of reform which should underpin changes to the regulatory regime.
Undertake fundamental reform of the regulatory regime.
Overhaul the regulatory regime to transform the effectiveness of environmental regulation of oil production. Key elements include:
Large scale changes to the regulatory landscape will be complicated, time-consuming and difficult to deliver. Three key changes, we believe, are essential.
First, the responsibility for the commercial development of Nigeria’s oil assets must be separated from regulatory functions to prevent insolvable conflicts of interest. The Commission proposes that regulatory functions, as they relate to the environment, be separated from the commercial aspects of the industry. Under this arrangement, some aspects of regulation of the oil sector – such as monitoring fulfilment of contractual terms – will remain with the regulator. But regulation of the environmental conduct of the oil industry should be moved out of the regulator, along with all responsibility for setting environmental standards and enforcing action against any breaches. As shown earlier, the PIA combines technical regulation and commercial regulation in the NUPRC as far as the upstream sub-sector is concerned. The drawback to this approach is that commercial interests will trump ensuring that technical aspects relating to standards and guidelines for environmental protection are strictly adhered to.
Second, all responsibility for environmental regulation of oil activities should be moved to the Ministry of the Environment (MoE). That includes responsibility for setting standards and enforcing them. Reflecting this shift, the remits of other agencies, as they relate to the environmental regulation of the oil sector, should also be rationalised and transferred where possible to the MoE.
Third, the remit of NOSDRA should be expanded. NOSDRA should remain a clean-up, detection and response agency; broader environmental regulation of the oil industry should be handled by a separate part of the MoE. However, the scope of the agency’s remit should be expanded to cover all forms of hydrocarbon pollution, including flaring. Critically, NOSDRA should also be granted enforcement powers to allow it to effectively execute its remit and act on non-compliance.
Formal powers, resources and capabilities should reflect the previously mentioned migration of regulatory responsibilities.
Formerly, the DPR, whose responsibilities have now been transferred to the NUPRC and NMDPRA, wielded substantial, although admittedly blunt, enforcement powers. Unfortunately, it rarely used them. As they relate to environmental regulation, these powers should be transferred to the MoE. A process should also be undertaken to map where environmental regulatory and enforcement powers currently lie to facilitate the transfer of these powers to the MoE. New powers may also be needed to provide a full portfolio of enforcement tools to ensure effective environmental supervision and the legislation currently in place should be developed as part of this process.
A similar process should be undertaken for NOSDRA. Inevitably, there will be cases where the MoE’s or NOSDRA’s new remit will potentially conflict with that of another agency, even after environmental activities are consolidated into the MoE. In such cases, a clear set of protocols should be developed, outlining each agency’s decision rights and also outlining how they will work together to handle cases that straddle the boundary between their remits.
The resourcing and capacities of the MoE and NOSDRA should also be overhauled to reflect their newly enhanced remits and powers. The supervision of the oil sector has long been under-resourced in Nigeria. There needs to be significant investment in expanding supervision capacity across government departments, supporting it with the right training and tools, including logistical support and inspection equipment. In the case of the MoE, this will require, among other things, the revision and renewal of wage scales and career paths. The Ministry often struggles to attract the most experienced staff, as other departments, in particular the DPR, paid higher wages and was seen as more prestigious. The Ministry’s capacity will need to be dramatically strengthened to enable it to apply a proactive supervisory regime effectively.
The same is true for NOSDRA. There will need to be a transformative overhaul of its capacity to enable it to discharge its duties effectively and operate independently of the oil producers it is meant to supervise. This will require not just an expansion and substantial upskilling of its staff, but a significant upgrade in its response infrastructure and assets.
The Commission has studied the capacity and capabilities of clean-up agencies in a range of jurisdictions, including Australia, Norway and the UK. All operate with significant logistical infrastructure so that they can access spill sites rapidly. They maintain strategic stockpiles of specialised spill-fighting equipment in key locations, including fixed wing capabilities to monitor and track spills and, in the case of offshore incidents, assist in dispersal if necessary. The purpose of this capacity is not to displace the role of the oil companies, who still have primary responsibility for containing and cleaning up spills, but to complement and support them to ensure containment is rapid, clean-up is comprehensive, and any enforcement is effective.
The Commission believes that both the MoE’s and NOSDRA’s capacity, and the budget to fund it, will need to be expanded significantly to bring it into line with international practice. One possibility is for this expansion to be financed through a regulatory surcharge placed on every barrel of oil pumped. Oil producers already pay a small charge to the International Tanker Owners Pollution Federation (ITOPF) for every barrel of oil shipped on the high seas to contribute towards the global industry’s spill preparedness infrastructure. The Commission believes the same principle could usefully be extended to Nigeria to help cover the costs of rigorous environmental oversight of the industry.
The Ministry of the Environment should undertake a detailed review of international practice, supported by external experts, and update regulations to reflect the standards seen in best practice jurisdictions.
As part of this process, EGASPIN should be overhauled, with, for instance, the difference between target and intervention levels abolished and the levels of toxins considered actionable brought into line with guidance from the WHO and other jurisdictions. Its guidance should also be extended to cover the full range of contaminants cited by other jurisdictions.
In addition, technical regulation should be significantly modified. Among the changes that should be made are:
High standards should be married with a much more proactive regulatory approach. At the moment, environmental supervision appears to follow a purely reactive model, mobilising only once an incident has occurred. Reflecting practice seen both internationally and in other sectors, such as financial services, including those within Nigeria, there should be a move to an active supervision regime, with inspections and examinations being undertaken on a regular basis regardless of whether or not there have been incidents.
Regulators should conduct ongoing testing and reviews of oil producers’ plans and processes, supported by regular on-site inspections of facilities, pipelines and other assets. Regulators should also make regular, unannounced visits to sites to check compliance with regulation, with significant sanctions for breaches.
In tandem with this, enforcement should be significantly stepped up. New regulation will mean little if it is not enforced. As was noted in earlier chapters, oil producers regularly breach regulations with few consequences. This permissiveness should end, replaced by a zero-tolerance regime to help drive change in the culture and practices of oil producers.
This shift in regulatory doctrine should be supported by a change in the resourcing and capacity of the MoE and NOSDRA, and an increase in the agencies’ skill levels both through training of existing staff and the recruitment of outside experts.
At the heart of this new approach should be a complete revamp of the regulatory process for the investigation and remediation of pollution incidents. The JIV process should be replaced by an independent, regulator-led approach. Such a process should provide only a limited role for the oil companies, with all inspections, investigations and analyses, as well as interactions with local communities, conducted independently of the companies.
This proposed approach may not require an extensive restructuring of the steps of the investigation process itself. Many countries operate processes that are, on paper at least, similar to the JIV. The main difference lies in the way the processes are run, how decisions and determinations are made and the content of the relationship between the oil companies and the regulators.
In the jurisdictions the Commission has reviewed, when a spill is reported, government officials are deployed to assess the situation, decide the best course of action and gather evidence to make a determination about the causes of and potential culpability for any leak. The oil operator – often supported by shared industry infrastructure – normally has responsibility for undertaking clean-up operations, but, depending on the determination of government officials overseeing the incident, government and other clean-up capacity may also be deployed to complement and assist their efforts.
In these countries, the oil companies work with the regulator and provide input into their assessment, as do local communities and other stakeholders. But the decisions are ultimately the regulator’s and they act independently of the oil companies. This reflects regulator best practice in other sectors, such as financial services. None of this is to idealise the process in other countries. Oil companies still play an outsized role and often wield a degree of influence over regulatory determinations and decision-making. But the process is at least somewhat impartial.
By contrast, in Nigeria, as has been outlined in previous chapters, the process has been ‘captured’ by the oil companies. The steps of the process are similar, but they are fundamentally driven by the oil companies, who control access to spill sites and appear to strongly influence NOSDRA’s assessment of spills and the determinations of culpability. Furthermore, as the primary concern of the oil companies appears to be avoiding liability for compensation, JIV inspections tend to be focused heavily on influencing the official assessment of a spill’s cause rather than identifying what should be done to remediate it. Evidence gathered repeatedly shows that oil companies’ influence distorts the process, turning it from a spill assessment into a liability management exercise.
This difference goes to the core of how the JIV process needs to change. The Commission believes that the JIV needs to be re-established as a truly independent, regulator-led process. NOSDRA should lead and manage all stages of the process, including independently accessing all sites. Like other stakeholders, oil companies should be allowed to provide evidence to NOSDRA, but no more.
To limit the ability of the oil companies to wield undue influence, the nature of the on-the-ground assessments themselves should be changed to focus on evidence gathering and remediation.
Determinations of causes and culpability should no longer be made on the spot. Instead, on-the-ground JIV assessments should be focused on gathering and cataloguing evidence from the broadest range of sources, with the ultimate determinations of spill causes being made by a separate NOSDRA analytic team on the basis of the evidence collected, and, if necessary, further site visits.
Beyond evidence gathering, JIV assessments should focus far more on what needs to be done to stop any further spills and ensure the effective clean-up of spill sites. A methodology heavily informed by SCAT should be used, and the composition of JIV teams should be extended to include scientists and clean-up specialists who can provide an expert, independent determination of what clean-up work needs to be undertaken. This assessment should also be supported by the use of best practice techniques, such as aerial assessment and chemical analysis of samples.
On the basis of this type of review, the NOSDRA inspection team should make directive determinations about what kind of remediation approach is required. It should not be left to the operator alone to decide how best to clean up the pollution they have caused. The decisions of the JIV team about how clean-up should be undertaken should be backed by strict enforcement powers, with strong, dissuasive fines for failure to implement or non-compliance.
The NOSDRA-led processes should be buttressed by radical transparency and outside scrutiny. All evidence collected through JIV assessments, including the basis for any decisions, should be published in easily accessible form to allow third parties to review evidence and scrutinise decisions. In addition, the NOSDRA teams that assess evidence gathered on JIV visits and make decisions on the causes of spills should make extensive use of outside experts, including those based outside Nigeria.
The success of this approach will rest ultimately on the capacity of the agency and the skill of its staff. As outlined previously, NOSDRA’s budgets and capacity will need to be significantly increased, and its staff dramatically upskilled, with a mixture of extensive training and the hiring of significant numbers of outside experts - both domestic and international - to add the specialised knowledge and experience required. The PIA does not deal with the conduct of JIVs or responses to oil spills. Ideally, these issues would be covered in the new and revised regulations projected to be made in pursuance of the Act.
A reformed regulatory architecture should be complemented by fundamental changes to the legal framework for oil production and procedures for dispute resolution.
Develop robust dispute resolution procedures to ensure Recommendation 6 polluters pay and to give all fast and effective access to justice.
Reform the legal framework governing pollution incidents and the dispute resolution systems supporting it. Key elements include:
The Commission believes that six changes to the legal regime and jurisprudence relating to the environmental impact of the oil industry will be important to reducing the risk of pollution in future.
First, reflecting the Commission’s seventh principle of regulatory reform, the legislation that currently makes it incumbent on victims to prove that companies have been negligent if they are to secure compensation, must be replaced to enshrine the principle of no-fault liability. This will remove the burden of proof from the victims. This will transform the ability of individuals and communities to seek compensation for the harm done by pollution and will also radically sharpen the incentives oil producers face to invest in pipeline integrity and effective security measures.
Second, the law should be changed to allow for class actions in the Nigerian courts. Allowing for collective legal action will help individuals who would not otherwise have the means to seek restitution and will also permit communities to seek redress collectively. As well as improving individuals’ access to justice, it will also help forge a powerful lever for change: as the US experience shows, class actions will expose offending companies to far greater claims and, in so doing, sharpen their incentives to address the causes of pollution.
Third, the legislation covering the environmental regulation of the oil industry should be updated to strengthen sanctions. The fines and other sanctions provided for in legislation are currently too limited and the terms of their use too circumscribed to be dissuasive. They should be significantly enhanced and diversified, and regulators should be granted more latitude in imposing them. Tied to this, enforcement powers should be aligned with the regulatory regime outlined in the previous section.
Fourth, the legal framework governing pollution should be updated to introduce the concept of individual as well as corporate liability. In other regulatory fields, mechanisms of individual accountability have been used to help catalyse changes in corporate priorities and behaviour. For instance, in the UK, following the global financial crisis, regulators introduced the ‘Senior Manager Regime’ (SMR) to hold leaders of large banks directly accountable under law for the actions they take.459 The introduction of such a framework in the oil industry – which would see named executives potentially exposed to criminal sanctions if they failed to take reasonable steps to prevent pollution and appropriately manage leak risks – could help enhance the incentives of decision-makers in the oil sector in terms of stemming oil pollution.
Fifth, the law should be strengthened in a number of places to explicitly forbid or restrict certain activities. In this respect, the PIA merely makes the continued flaring of gas an offence, and continues the practice of allowing companies to pay a fine for gas flaring. The PIA requires companies to simply provide a gas flaring elimination plan within 12 months but disappointingly, does not explicitly set a date when gas flaring has to end.460
Sixth, a mechanism should be introduced to revisit some of the jurisprudence surrounding regulation in Nigeria. Supreme Court rulings that have had the effect of preventing executive agencies from imposing administrative sanctions, such as fines, without a trial, threaten to undermine the ability of regulators to effectively supervise the oil sector and take enforcement action should breaches be identified.
Changes to legislation should be accompanied by reforms to ensure rapid access to fair compensation and, if necessary, to dispute resolution and justice.
The Commission has studied the approaches used in a number of countries and in a variety of major incidents and its recommendations draw on their experience.
In the event of a pollution incident, a compensation fund should rapidly be established and capitalised by the oil company in question, ideally in days not weeks. The initial size of the fund should be determined primarily by NOSDRA after their initial assessment of the damage done and be subject to revision. As in the case of the Deepwater Horizon spill in the Gulf of Mexico, individuals should be able to make rapid small claims to the fund to cover the immediate loss of income they have suffered without compromising their ability to make more substantive claims against the oil company later on, or to pursue court action.461 Successful claimants should receive payments within days.462
Subsequently, individuals should be able to apply to the fund for larger, substantive compensation payments to make up for the full degree of the harm they have suffered. These larger payments, if accepted, would stand in full and final settlement of any claim. There should be a highly streamlined and simplified applications process, and independent on-the-ground support should be given to individuals wishing to file a claim. Reflecting the proposed legal changes outlined above, there should also be an option to pursue class action claims through this mechanism. The administration of the fund should be subject to oversight by NOSDRA and the MoE.
Complementing this approach, the basis for determining compensation payments should be substantially overhauled. The 1997 Oil Producers’ Trade Section of the Lagos Chamber of Commerce and Industry framework is substantially out of date and systematically underestimates the scale of losses suffered.
This updated approach to compensation should be supported by a new independent dispute resolution procedure to allow individuals and communities to challenge both awards made by polluters and remedial action taken if they believe it to be insufficient. In effect, even if the NUPRC or NMDPRA determine the amount of compensation payable and the time frame, it is equally crucial that the mechanism for challenging the same either by the companies or the victims of pollution be one that is quick and effective without necessarily going through litigation, with its consequences for costs and delay.
Learning the lessons from the criticism levelled at the Bodo Mediation Initiative,463 this procedure should be completely independent of the oil companies and complement rather than replace access to the courts. The mechanism – which should be an independent, free standing institution separate from the IOCs, the Federal and State Governments and the Bayelsa Recovery Agency – should be presided over by legal, environmental and sectoral experts, both domestic and international, who are nominated by neutral international bodies such as the UN or by professional associations and local communities. An appeal mechanism that refers cases to international experts should also be introduced. All final rulings should be binding and have the force of a court judgement.
The panel should aim to process all cases in a 12-month timeframe. This mechanism would be the first of its kind anywhere in the world, and could set the standard for other jurisdictions. The panel should have the power to award damages and compel producers, regulators and other stakeholders to take action. Reflecting the EU’s Aarhus Principles (which protect the public’s key rights on environmental issues), communities as well as individuals should have the right to pursue redress through this mechanism.464 The mechanism should be overseen by an independent international organisation. Evidence gathering should be undertaken by independent investigators employed by the panel. To assist communities and individuals in accessing this dispute procedure, a legal advice and representation service should also be put in place.
Alongside this, provision should be made for better access to the courts both by individual litigants and by classes of plaintiffs, both in Nigeria and abroad. A fund should be made available to support litigation on behalf of people who have legitimate cases against the oil companies or other stakeholders, including the potential to fund exceptional cases in international courts to allow suits against global parent companies.465 This will become particularly valuable in light of the recent Supreme Court ruling in London and the Appeal Court ruling in the Hague, confirming that polluted communities in Nigeria can bring their legal claims against Royal Dutch Shell for pollution involving its subsidiary (SPDC) before the English and Dutch Courts.
Under Nigeria’s constitution, the responsibility for regulating the petroleum industry falls exclusively to the Federal Government.
However, the Commission believes that the Bayelsa State Government has a significant role to play. Nigeria, unfortunately, has a long history of regulatory failure. As is articulated in our eleventh principle of good regulation, we believe that rigorous scrutiny of the activity of federal regulators by state and local government, as well as international actors, is a critical safeguard against regulatory capture by vested interests. Moreover, the state has a powerful and legitimate role to play in protecting the local environment and ensuring the health and wellbeing of the local population. These factors provide the basis for re-imagining the role of the state government in ensuring the oil sector meets its environmental obligations.
There is significant precedent for the state playing such a strong role, even where the Federal Government has primary competence. Although mining is similarly an activity reserved for the Federation, the terms of the Minerals and Mining Act (2007) provide for an important role for the state. In contrast, the PIA does not adopt the same approach as the Minerals and Mining Act, but rather concentrates regulatory powers over the sector in the institutions it has created at the federal level.
Establish an expanded role for state government in fighting oil pollution.
Enhance the role of state government in ensuring action is taken to prevent hydrocarbon pollution:
State governments already have some powers under the Land Use Act that can potentially be used to take limited punitive action against oil company operators in cases of breach or failure to comply with regulatory legislation. These powers should be used more diligently and systematically.
However, reflecting this analysis, the Commission believes that the role of state government in scrutinising both the conduct of oil companies and the federal regulators who supervise them should be expanded. As the environment is clearly a matter over which states have jurisdiction under the constitution, this ought to cover the environmental impacts of the oil industry operating in their states. State governments’ environment agencies should be empowered to undertake their own independent inspections of oil facilities on their territory and report any findings for action to federal authorities. They should also have a formal role in monitoring and auditing regulatory findings, enforcement action and action by companies to remedy any regulatory breaches, including the implementation of pollution clean-up programmes, with any failures reported to the federal authorities. NOSDRA and the MoE’s legal powers and processes should be updated to make a formal complaint from a state government sufficient grounds for initiating action against an oil company.
This should be underpinned by an expansion of state statutes covering hydrocarbon pollution. Given that the environment is a residual matter in the Nigerian constitution, the Bayelsa State House of Assembly should enact legislation that imposes stringent criminal sanctions on operators whose actions and/or inactions inflict harm on the state’s residents and their environment. This would be controversial and might be opposed both by the IOCs and the Federal Government. But gaining clarity on the role of the state and broadening the scope of its powers would help ensure regulations are appropriately enforced without fear or favour.
All of this may require increased investment in the inspection and review capacity of states’ environmental protection agencies.
In addition, the law should enshrine the right of the state government to act using its existing powers under the Land Use Act and other elements of federal and state legislation should federal agencies repeatedly fail to take action on the basis of formal complaints from the state government. We appreciate the difficulties in implementing such an approach and its limits and practical trigger points would need to be carefully thought through. However, we believe this ‘break the glass’ mechanism, allowing state governments to act in extreme cases where the Federal Government refuses to, will help provide a vital bulwark against regulatory capture.
Under the Land Use Act, states have the power to revoke the rights of occupancy of an occupier who contravenes the conditions contained in the statutory or customary right of occupancy. So, in order to control pollution, a governor of a state may, at the point of issuing the right of occupancy to an applicant, impose conditions requiring occupiers not to violate the human environment. Where such violation of pollution occurs, the terms of the contract would have been fundamentally breached in order to automatically authorise the governor to either revoke that occupancy or to take steps in that regard. The Commission believes that these powers should be used where the IOCs or the Federal Government fail to meet their obligations on pollution prevention and control.
As well as acting as a source of scrutiny, the state government should also act as a channel for voice. The Commission believes that state and local government should be at the heart of efforts to ensure consistent community input into the regulatory process, organising regular town hall meetings and leading efforts in affected communities to build community consensus around what action they want to see.
Finally, the Commission believes that the state government also has a significant role to play in helping to coordinate and integrate many of the economic, social, environmental and health services that will be required in future remediation initiatives. The Commission is clear that in the event of hydrocarbon pollution, oil companies should be under an obligation not just to clean up contaminants, but to provide economic, environmental and health interventions, whether directly or through massive increases in support and funding for existing government programmes, to address the broader impacts of pollution. The state government should play a major role in overseeing the portfolio of these interventions to ensure not only that they take place, but also that they are effectively integrated within the broader spectrum of state and local initiatives.
Develop frameworks for enhanced scrutiny of oil Recommendation 8 company behaviour both internationally and in their home jurisdictions.
Transform the scrutiny of and pressure on IOC conduct both internationally and in their countries of domicile. Measures include:
Mirroring the increased role for actors below state level, the Commission also proposes a widening role for those above, with a broadening of international oversight. This will play a vital function in ensuring that international standards are adhered to, and providing an external check and balance to guard against the risk of renewed regulatory capture. The Commission proposes a two-fold approach.
A number of international initiatives setting standards for and monitoring the behaviour of governments in resource-dependent economies already exist. For instance, EITI provides global oversight of payments to governments by extractive firms, including oil producers, to reduce the risk of corruption.
The effectiveness of such initiatives is debatable – Nigeria scores highly on the EITI index despite its oil industry continuing to be plagued with issues of corruption on an endemic scale – but they can help to provide transparency and bring international pressure to bear on the authorities in lower performing countries.466
While international frameworks exist to address issues such as corruption and financial crime, there are no such mechanisms either for issues of narrow environmental conduct or pollution, or broader concerns regarding corporate conduct and citizenship in host countries aside from the problem of corruption.
The Commission proposes that an international framework be established to specifically scrutinise the environmental behaviour and impact of international companies in host countries, including whether action taken to address any issues reflects international practices, and whether there are any connected issues of corruption or undue influence.
Greater scrutiny of IOCs’ environmental behaviour in the international arena should be accompanied by enhanced oversight of parent companies in their home jurisdictions. A number of countries already apply world-wide jurisdiction to their citizens and companies for specific classes of offences. For instance, it is illegal for an employee or agent of a UK company to pay a bribe anywhere in the world, regardless of whether the bribe was paid in the UK or even whether it was illegal in the jurisdiction where the activity took place. The US Foreign Corrupt Practices Act (FCPA) enshrines even more draconian restrictions and marries them with very large sanctions.467
Such legislation exists mainly to stamp out corruption. But the Commission believes that this approach should be extended to broader issues of gross corporate malfeasance, including pollution. Legislation in the home jurisdictions of the IOCs should be enacted to render it a breach of domestic law for IOCs and other international companies to behave in a grossly negligent fashion that may cause environmental damage in host countries. The law should be structured to look through corporate structure – as anti-corruption legislation does so that parent companies can be held to account for the behaviour of subsidiaries and JVs where they exercise either a controlling interest or de facto operational control. The legislation could be carefully calibrated to set a minimum materiality threshold to prevent vexatious lawsuits and regulatory action.
Such legislation would open the way for regulatory and legal action in IOCs’ home countries. This is far more likely to have an effect on polluters’ behaviour than action taken in Nigeria.468
In line with the duty of states to ensure their companies respect the human rights of the communities in which they operate under the UN Guiding Principles on Business and Human Rights, a number of countries have already enacted similar laws. France, for instance, put such a law on the statute books back in 2017 (although critical elements of the law were subsequently struck out), and Switzerland has just done the same.469 The Commission strongly urges the home countries of the largest IOCs, such as the US, UK, Netherlands and Italy, to follow suit. This will provide perhaps a strong mechanism to hold oil companies to account and help enforce higher standards of corporate environmental behaviour.
Overhaul IOC approaches to community engagement to ensure transparency, accountability and voice.
The PIA has introduced legal requirements for oil and gas companies to standardise practices for development project investments in host communities, including setting up trusts to manage community development expenditure. The Commission is concerned that the PIA disproportionately empowers companies relative to the host communities, local governments and the state government and entrenches and increases the risk of more divide and rule tactics being employed by companies. These tactics pit communities against each other in the competition over development goods and could continue to generate the types of communal conflicts associated with GMOU processes in the past.
By unfairly placing the responsibility for policing petroleum infrastructure on the host communities, the Commission is concerned that PIA would exacerbate conflicts between communities and companies over sabotage claims. The Commission also believes that there is a risk of incentivising those working for the oil companies to prevent protests, which may then provoke intra-communal wars. The PIA does not define what is meant by ‘the community’ and how the company may determine who to consult with. The Commission believes that the Government of Bayelsa State should intervene, in line with its Constitutional mandate, to bridge this definitional gap and reduce potential tensions. The government and the oil and gas companies should ensure that the new PIA Boards of Trustees, Management Committees, and Host Communities Advisory Committees of the community development trusts are fully inclusive of diverse community interests and are managed with full transparency. In parallel, an independent body that can provide regulatory scrutiny and scientific analysis, should be established to ensure that mechanisms exist to enable the voices of the most affected communities in Bayelsa to be consistently heard throughout the process.
To help address the cycles of conflict and the breakdown of social cohesion that have been the product of – and at times contributed to – Bayelsa’s pollution crisis, regulatory and legal reforms will need to be accompanied by profound changes to the way communities are engaged by the IOCs to ensure that the voices of the people of Bayelsa are heard.
As was outlined in previous chapters, the flaws in oil companies’ engagement with their host communities have arguably exacerbated both the security issues and the social dislocation that have accompanied the tide of pollution fallout that Bayelsa faces. The exclusion of many communities from GMOU agreements has fuelled intercommunal tensions, while the competition for control of resources has stoked conflict within communities, in particular between established community leaders and a younger generation who have seen few benefits. Furthermore, all too often oil companies have failed to deliver on the commitments made through GMOUs to host communities, further inflaming relationships.
Underlying this, all too often, is a disconnect between the IOCs and host communities, and, within the IOCs themselves, between the company departments engaging with communities and those undertaking the core business of hydrocarbon extraction. Often, IOC personnel responsible for ‘community engagement’ tend to be less senior and are not even based in Bayelsa. Moreover, their activities are rarely joined up with those operating oil infrastructure on the ground, or, indeed, those responsible for remediating any pollution incidents. This siloed approach within the IOCs may go some way to explaining why the oil operators so often fail to deliver on their commitments to communities.
Moreover, the community engagement architecture has on occasions been abused by companies to frustrate regulation. GMOUs and MOUs have often been used to bring pressure to bear on communities not to exercise their rights to claim compensation, clean-up and remediation in the event of environmental damage. The case of Eni (Agip) and Twon-Brass speaks volumes in this regard. The Commission also heard testimonies and received evidence about deep divisions in communities allegedly created by the tendency of Eni (Agip) to selectively favour particular groups in order to undermine claims for clean-up or compensation.470
There is unfortunately no quick fix to this problem. Unpicking the complex dynamics of inter- and intra-communal conflict, rebuilding support for local communal institutions, and restoring trust between communities and oil producers, will take time and significant investment and a fundamental change of operating practises on the part of the IOCs.
However, the Commission believes that the patchwork of GMOUs and MOUs should have been revisited before the PIA institutionalised this as best practice. Ideally the coverage of these agreements should be extended to downstream communities and, crucially, the oil companies should be held to their obligations. Regulatory mechanisms should be established to review delivery of the benefits promised in GMOUs and to rapidly remedy the situation where commitments have not been kept. The process should be highly transparent and there should be strong communication and engagement with the communities in question to identify their potential areas of concern and grievance, and share clear information about what resources would be provided to each community.
Longer term, there is a question over whether the GMOU approach is the right one. The Commission believes that potential alternatives should be taken into account before the PIA operationalises the host community development trust model. For instance, the legal framework set out by the Minerals and Mining Act 2007 legally empowers local communities and provides for them to negotiate directly with oil producers to conclude legally binding Community Development Agreements (CDAs).472 These could have provided a better model for the PIA. Such CDAs cover all the areas touched on by GMOUs and could provide a better vehicle for enforcing the oil companies’ obligations, although they leave the issue of indirectly affected communities unanswered.
As well as ensuring that the voice of impacted communities is heard and responded to, any programme of regulatory and legal transformation will need to build in mechanisms to allow both the operation of the regulators and the process of reform itself to be scrutinised.
The history of proposed regulatory and legal changes in Nigeria suggests that all too often, rhetoric and expectations fail to match reality and measures that appear to promise real change are often undermined in the detail of implementation.
First, the system should be built on a foundation of radical transparency. Wherever possible, all regulatory data, reports, supervisory reviews and decisions should be published. For instance, the Commission believes it is worth exploring whether there should be a presumption that all reports from any inspection of an oil facility should be released. The same could hold true for all oil company plans submitted to the regulator. While this step is unusual, it might make sense in the Nigerian context, providing a useful tool to help minimise the risk of regulatory capture.
Second, the regulatory system should include an arms’ length formal scrutiny body. This body’s role could be akin to that of the National Audit Office in the UK, providing formal external scrutiny of regulatory performance. The body should also include independent scientific capacity to give it the ability to conduct its own expert assessment of the performance of the oil companies and regulations on the ground. The body could sit independently of ministers and report directly to the National Assembly.
Third, the ecosystem must include a strong role for NGOs. Local organisations such as ERA and BANGOF (Bayelsa Non-Governmental Organisations Forum) provide an invaluable source of scrutiny and challenge and potential ways should be explored to help them play an active role in monitoring both the development and the activity of the regulatory system.
Finally, there must be a strong role for community voice. Throughout these recommendations, the Commission has emphasised a strong role for the voices of the victims of pollution. Both through how regulations operate on the ground and through its governance, there must be a place at the table for those from affected communities. As outlined above, the state and local government have a role in making sure there are strong processes to communicate with and hear the concerns of communities. There may also be a case for other forums, including local advisory councils.
Establish a legally binding, effective legacy and decommissioning regime.
Steps should be taken to ensure IOCs integrate decommissioning into the entire life cycle planning of their oil and gas operations according to international standards. Such measures will oblige IOCs to fulfil their environmental and social responsibilities for the legacies that their oil and gas operations have left behind. This will include the impacts of pollution and contamination from spills, along with effluent waste disposal, dredging, gas flaring and other associated hazards.
The PIA currently requires licence holders to establish decommissioning and abandonment funds to be domiciled and managed by separate institutions and to prepare and submit decommissioning and abandonment plans. These funds are to be at the disposal of the regulatory authorities in the event that oil companies default on meeting their decommissioning obligations. In relation to these provisions, the Commission proposes that on a forward-looking basis, the funds to be contributed to decommissioning and abandonment funds should be paid by oil producers as a percentage of every barrel pumped towards a decommissioning trust for each oil field. At the same time, the MoE or an independent body should carry out a performance assessment of the remediation needed, including addressing all environmental, economic, social and health impacts, and ensure the plan meets those requirements. As part of this, given the damaging impact of pollution from the Nigerian oil industry in general and gas flaring in particular to global CO2 emissions, a full accounting of the liability of transnational JV partners for such emissions should also be included in such an assessment. This is to ensure that Bayelsa is effectively covered for any claim arising from future action on climate change.
For wells that are no longer producing or face a limited remaining operational life, the MoE should assess the clean-up and decommissioning measures needed and should be empowered to require the well owners to undertake the work. Where companies seek to divest of a well / and field, a portion of the sale price should be set aside by the regulator to cover decommissioning costs. Clawback provisions should also be explored to allow the authorities to recover remediation costs from owners who have already divested of wells and other asset decommissioning costs. In addition, targeted investments should be included to expand the MoE’s decommissioning review and enforcement capacity.
As many of Bayelsa’s wells begin to approach the end of their productive lives, it is critical that an effective decommissioning regime is put in place. All of this may require targeted investments to expand the MoE’s decommissioning review and enforcement capacity. The tragedy of Oloibiri, left devastated by decades of pollution and ineffective decommissioning, shows the price of getting this wrong.
The proposals outlined in this chapter, together with those articulated in Chapter Four, could help bring an end to the pollution crisis in Bayelsa. They provide a unified vision for a system of regulation that will help halt the continuing epidemic of pollution and drive effective clean-up.
But a huge challenge lies in their implementation.
There has been no shortage of reports written about the pollution crisis in the Niger Delta and the measures required to stop it. Yet little action has been taken. It is not enough to articulate the scale of the problem and outline solutions. We must also mobilise public opinion and stakeholders both within Nigeria and beyond to push for their adoption. Words must be matched by action. Chapter Six articulates our call to action.
