THE PETROLEUM INDUSTRY ACT, DRIVING PETROLEUM INDUSTRY DEVELOPMENT THROUGH SUSTAINABLE PEACE IN HOST COMMUNITIES

THE PETROLEUM INDUSTRY ACT, DRIVING PETROLEUM INDUSTRY DEVELOPMENT THROUGH SUSTAINABLE PEACE IN HOST COMMUNITIES (the second series) ~ by Olubor Uyi Esq.
Over the years, a major impediment to the successful development of the oil and gas industry is the incessant friction between host communities and oil producing companies. This restiveness in the oil producing areas has always been attributed to economic and infrastructural neglect suffered by most host communities. Even though they are made to suffer huge ecological degradation to ensure the sustainable economic viability of the country. Thus, when the Petroleum Industry Act (PIA) was being debated, a lot of consideration was given to ameliorate the hardship faced by host communities, in order to ensure a harmonious working relationship with the oil producing companies. Which would invariably rub off on the peace and economic stability of the country.
 In ensuring the realization of this objective. Section 115 of the PIA re-enacts the provisions of the Constitution and the Land Use Act. By insisting that adequate compensation is paid by holders of license and permits before they can acquire land to carry out their operations. Thereafter, they are to proceed to obtain a C of O from the Governor. Not only that. Licensees or lessees shall not exercise any of the powers or rights bestowed upon them by the License or Lease by entering upon any Land adjudged to be sacred by a Customary Court. These provisions are in place to stave off unwarranted face off between licensees or lessees and host communities.
To foster a harmonious relationship between the host communities and the licensees or lessees (Settlors). Chapter three of the PIA was dedicated to the creation of a Host Community Development Trust (HCDT). Which will see the creation of a Host Community Development Trust Fund (HCDTF) which shall be funded by the Settlor for the benefit of the host communities. Under section 240 of the PIA. The Settlor is mandated to contribute an amount equal to 3% of its actual annual operating expenditure of the preceding financial year in the Upstream petroleum operations affecting the Host Communities. Although, a lot of groups have criticized the sum to be contributed to the HCDTF as being too meagre. Nevertheless, I think it is a fair start which can be adjusted in the future. However, my major concern is why is the fund contribution limited to only the Upstream sector. When in fact, a lot of activities are taking place in the midstream and downstream sector, especially with the modern wave of oil refineries in the country. The Host Communities would definitely bear the brunt of their operations. It would have definitely been reasonable to have extended the HCTDF to certain part of the Midstream and Downstream operations.
Another discomfort I have in relation to the management of the HCDT is the multiplicity of groups to oversee the management of this process. The PIA makes provision for a Board of Trustees, which will set up a management committee to manage the funds. Then, the Board of Trustees and the Management Committee will then come together to set up the host community advisory committee. I imagine the rationale behind the establishment of three different groups is to entrench good governance, decentralization of duties as well as ensure there is check and balance in the management of the host community development trust. However, this may end up being counterproductive. Which may lead to infighting and excessive allotment of funds to managerial functions, as opposed to development objectives. Although, the PIA places a cap of 5% on managerial expenditure. We hope that the managers of this fund would adhere to the expenditure cap placed by the PIA.
Aside from the HCDTF. There are other clauses in the PIA which protects the Host Communities from environmental degradation arising from Petroleum Operations. For instance, Sections 232 and 233 of the PIA provide for the creation of an Abandonment and decommissioning Fund to be financed by a licensee or lessee, which shall be held by a financial Institution in the form of an escrow account for the payment of abandonment and decommissioning cost.
Also, section 104 of the PIA prescribes the establishment of gas flaring penalties to be paid by licensees or lessees who vent natural gas, except in instances highlighted under the subsection. And such fine to be paid would not be eligible to cost recovery or be tax deductible. These monies received as gas flaring penalties shall be applied for the environmental remediation of the host communities.
In a nutshell, it is expected that with the implementation of policies to engender a harmonious relationship between the licensees or lessees and host communities. The realization of a petroleum industry that would be robustly beneficial to the Federal Republic of Nigeria and its citizens is close in sight, as host communities would now have a tremendous interest in protecting petroleum infrastructures in their communities.

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