The Status of Environmental Governance in the Nigerian Oil Gas Industry

Environmental governance refers to the formal and informal institutional mechanisms used by a society or a nation to address environmental issues and concerns that challenge it.

Environmental governance does not only deal with the kinds of top-down mechanisms frequently used by government to ensure regulatory compliance. It also includes actions taken by civil society groups, scientific community, businesses and the public, that can be used to improve environmental conditions. The Nigerian environment and natural resources are no less critical assets of the nation, representing the patrimony of the people, and no less deserving of good governance. Everyone has a role to play in environmental governance.

The Key Elements of Environmental Governance
a. Adequate environmental laws and regulations, and the government’s capacity to enforce these laws and oversee the implementation of environmental programmes, to promote the sustainable use of natural resources on a long-term basis.
b. Engaging businesses to take a proactive role in promoting best practices of producing goods and services, managing wastes, hazardous accident preparedness, and building environmentally based efficiencies into the company’s operation.
c. Providing transparency of information and enhancing participation of civil society groups {NGOs}, communities and the public in government decision-making activities concerning the environment and use of natural resources.

The key Actors in Environmental Governance
1. Government
a. Executive Arm:
i. Sufficient administrative authority and capacity (or political strength) to implement environmental policy and enforce regulations.
ii. Environmental policy approach that supports proactive and preventive methods which limit the extent and range of environmental degradation and natural resource destruction before they occur as against reactive measures which respond to environmental problems when they occur.
iv. Operation and maintenance of an easily accessible public registry of information relating to the environment.
v. Establishment of independent advisory commission to enhance scientific basis of environmental management. This commission should have a legal status and draw its membership from government, business, and civil society groups. The work of this commission should also be documented in a publicity released report.
vi. Ensuring inter-unit co–ordination and co-operation among various regulatory bodies at all levels of government, and avoiding jurisdictional overlap that may lead to weaknesses in implementation of environmental laws.
vii. Sufficient budgetary allocation for the activities of regulatory bodies.

b. Legislative Arm:
i. Providing an appropriate legal basis for all environmental policy tools.
ii. Removing the inconsistencies between environmental laws and the laws governing natural resources and energy.
iii. Oversight functions with respect to the executive’s activities.
iv. Capacity to carry out effective inquiries and analysis so as to inform the process of revising current laws and enacting new ones.

c. Judicial Arm:
i. A powerful and independent judiciary.
ii. Judges and magistrates trained in making decisions regarding to environmental liability and compensation cases.
iii. A fast – track tribunal or arbitrator to adjudicate environmental cases with reasonable dispatch.

2. Businesses
i. Best practices for production of goods and services in a manner that ensures regulatory compliance.
ii. Corporate responsibility.
iii. Independent environmental audits and annual public environmental reporting commensurate with annual financial reports.

3. Community, NGOs and the Public
i. Involvement of multiple stakeholders and the public in environmental policy making and implementation processes, including enforcement.
ii. Ensuring legal status of citizens and NGOs and providing them legal standing on behalf of injured parties and the degraded environment.

4. International Co-operation
Government’s commitment to play an active role in ratifying and implementing international environmental conventions and multilateral environmental agreements (MEAs).
Internationally Recognised Regulatory Responses in Mining and Oil & Gas Industry

The environmental effects of mining, oil & gas activity tend to increase in geographical area and intensity as the stages of mining (exploration, extraction, processing) advance. Direct impacts on land, disposal of associated waste, and pollution of water bodies and air are a serious environmental concern.

A. National Policies and Regulation
a. Land – Usages
It is essential to incorporate mining law into modern planning and land – use legislation. Mining is no longer automatically assigned precedence over other dominant land – usages such as agriculture, recreation and tourism, or at the expense of protection of forest and water resources. If mining wins the usage contest based on socio-economic needs, it has to conform to very stringent and costly mitigation obligation which may include compensation payments for environmental purposes. Mining laws should not only harmonise with environmental laws, but also promote sustainable development.

b. Environmental Impact Assessment (EIA) Process
This includes early and comprehensive environmental impact assessments; pollution prevention & control and other mitigation measures, monitoring and auditing activities, and emergency preparedness at the operational stage; and reclamation of the affected environment at the abandonment stage of the undertaking.

EIA can only be an important lever for sustainable development if adequate attention is given to the realm of social dimensions. EIA process should promote the socio–economic status and general well–being of host communities.

c. Command/Control Regulation (Prescriptive Approach)
The predominant approach towards environmental regulation in most nations is to prescribe specific limits for the three forms of emission (air, water, waste). More than one competent authority may also be responsible for regulating different waste streams.

d. Economic Instruments
i. The incorporation of external effects of industrial operations into the company’s internal calculus (internalization of environmental cost).
ii. Upgrading of mineral royalties to serve as a resource depletion fund and or reserves that the communities can fall back on when the oil & gas is eventually depleted.
iii. Obligation to post environmental performance and reclamation bonds large enough to cover the envisaged environmental damages.
iv. Tax credits for innovative technologies (not yet required by law) for controlling pollution and environmental damages.
v. Accelerated write–off of environmental retrofitting of existing facilities.
vii. ‘Soft’ environmental policy tools (pollution right trading and pollution taxes). These require a well–developed mechanism for metering pollution, and a reasonably effective and credible system of ascertaining actual pollution and assigning same to industrial operat

ors. The pollution trading and pollution taxes cannot stand alone at present but can serve to complement the prescriptive approach.

e. International Co-operation

A nation should make up its own environmental/development equation according to recognised standards, so as to avoid regional and trans-boundary impact of mining through water pollution, air pollution (including emission of greenhouse gases that cause global warming). Environmental sovereignty of a nation is circumscribed and States are liable under international law (both customary and treaty–based) when it comes to cross-border and global environmental damages. Moreso, most developed countries are increasingly considering a trade policy which imposes countervailing import duties on minerals from countries with a lax environmental management regime.

B. Enforcement and Compliance
a. Compliance is reinforced when environmental regulations are not only enforced by government, but when there are strong communities, NGO pressures on the operator and on the government agencies. In developed countries, there are political and legal avenues for the participation of local communities, NGOs and the public at the conception, construction, operation and abandonment stages of environmentally sensitive projects. A transparent and credible procedure for disclosure of information relating to the environment is a legal obligation and an essential part of community and public participation.

b. Environmental Liabilities
Legal standing for the NGOs and citizens to sue and collect damages at current market rate on behalf of injured parties and the environment.

The Nigerian Petroleum Industry Bill (PIB) 2008 and Environmental Governance.

The PIB 2008, an executive bill now pending before the National Assembly, seeks to address the administrative structure and institutional arrangement for up-stream, mid-stream and down-stream sub-sectors; indigenous oil companies and Nigerian content; transparency and openness in licensing, leasing, fiscal regulation and other financial matters; and health, safety and environmental issues. This write-up is more concerned with environmental safety concerns and royalties.

The bill offers to pay 25% and 5% royalties to the states and communities where the oil is produced, respectively. However, the bill requires the states and local governments to part with 1% and 0.5% of their royalties on an annual basis to establish and maintain a remediation fund in case of damage caused to the environment as a result of sabotage. The remediation levy is not only indefensible, but also unreasonable. There is no justification for the levy, as the federal government which duty is to prevent the sabotage in the first place is exempted from contributing to the remediation levy.

The PIB 2008 clearly seeks to run the remediation fund with deductions from royalties due to the oil-producing states and local governments. It is, however, unclear if the remediation fund will be used for environmental damages caused by crass negligence of operators relating to ruptured and over-aged pipelines and the routine practice of hazardous waste disposal in the environment.

If it is desirable to use deductions from annual royalties due to states and local governments to establish and maintain the remediation fund; It is equally not out of place to have a provision in our mining and environmental law which should require operators to post environmental performance and reclamation bonds large enough to remediate the envisaged environmental damages in the course of their operations.

The PIB requires every licensee or operator to, within three months of the coming into effect of the bill, submit an environmental quality management plan to the appropriate authority. The environmental management plan should deal with commitment to comply with relevant environmental laws and regulations. The bill also places requirement on the proposed Nigerian Petroleum Inspectorate to consult with the Federal and State ministries with the responsibility for environmental matters and other bodies within which the license or lease is situated in this regard.

The bill has no provision stipulating penalties for non-compliance with environmental standards. It also leaves no avenues for communities, NGOs and the public to take active part in environmental decisions-making and implementation concerning oil and gas activity.

The Way Forward

Enforcement of environmental laws and regulations is a major challenge in the Nigerian oil and gas industry. The government has continued to shamelessly demonstrate lack of capacity or political strength to enforce the laws by turning its blind eye to over 50 years of irresponsible oil & gas activity in Nigeria. Consequently, oil & gas operators currently run their businesses without adequate waste management facilities required by local and international laws.

The government’s capacity to enforce environmental laws and oversee the implementation of environmental programmes need to be overhauled, to ensure an effective and efficient enforcement regime that can address our numerous environmental problems associated with oil and gas activity.

There is also the need to allow combination of environmental group/citizen activism and powerful and independent judiciary to enforce environmental law. This has helped in many developed countries, serving as a deterrent to operators that might otherwise violate the law. All over the world, the NGOs and the public have become important watch-dogs of government and business environmental behavior.

In view of the foregoing, there is a need for improved environmental governance strategies in the Nigerian oil and gas industry, especially in relation to reinforcing regulatory compliance. This can be achieved by:

i. Using effective non-compliance penalty to create a deterrent to violators of environmental laws.
ii. Using penalty caps reasonably large enough to provide deterrence for non-compliance.
iii. Making it obligatory on operators to post environmental performance and reclamation bonds large enough to cover the cost of the envisaged environmental damages.
iv. Upgrading mineral royalties to serve as a resource depletion fund and or reserves which the oil-bearing communities can fall back on when the oil & gas is eventually depleted.
v. Strengthening civil penalties for pollution damages and criminal penalties for the most severe violations.
vi. Removing all political and judicial obstacles that can hinder the communities, NGOs and the public from participating in environmental decision-making and implementation.
vii. Disclosure of environmental liabilities of oil and gas companies and their community development projects.
viii. Establishing and maintaining an internet-based environmental information system, open to all interested persons, groups and communities.

In conclusion, environmental governance relating to enforcement in the oil and gas sector is at the lowest nadir or non-existent, impacting negatively on the socio-economic and general well-being of oil-bearing communities. It, therefore, becomes highly imperative for stakeholders to quickly secure enforcement of improved environmental governance strategies to ensure good environmental outcomes in the industry.

Written by
Tayo Akeem Yusuf
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