PIA amendment and exigency of 10% allocation to host communities

President Muhammadu Buhari’s recent proposed amendment to the newly-passed Petroleum Industry Act (PIA), which he assented to on August 16, must have taken many by surprise considering that the legislation, which was first presented to the National Assembly in 2008 for action, has still not fully addressed the concerns of all stakeholders in the oil and gas sector especially the host communities whose environment had been degraded by the oil companies for decades.

We are, therefore, particularly disappointed and concerned that the major grouse of the affected communities for an upward review of annual contribution to the Host Communities Development Trust Fund by oil operators from three to a minimum 10 per cent of their profits was totally ignored in the planned amendment.

It is our view, the Presidency should, as a matter of national importance, bow to the demand of the communities if the Federal Government is genuinely committed to the enthronement of lasting peace and tranquility in the oil and gas-bearing communities who continue to bear the brunt of devastating environmental hazards wreaked on them by international oil companies, IOCs.

Buhari had in a letter sent to the Senate, which was read by Senate President, Dr. Ahmad Lawan, explained that the amendment became necessary after a thorough review of the administrative structure of both the Upstream Regulatory Commission and Nigerian Midstream and Downstream Petroleum Regulatory Authority as contained in the PIA.

Specifically, he sought the Red Chamber’s expansion of the non-executive board members of each of the two regulatory institutions from two to six each in order to reflect the Federal Character principle, remove the Ministries of Petroleum Resources and Finance from the boards of the two institutions as well as exempting executive directors of Nigerian Midstream and Downstream Petroleum Regulatory Authority, who are civil servants, from Senate confirmation process.

The letter partly read:” Needless to add that this amendment will provide a sense of participation and inclusion to almost every section of the country in the decision making of strategic institutions such as the oil industry. If this amendment is approved, it will now increase the number of the non-executive members from two to six, that is one person from each of the six geo-political zones of the country”.

But we consider the planned amendment as falling short of the expectations of the people of the Niger Delta and all oil-bearing communities which Nigeria heavily relies upon for economic survival and therefore, totally unacceptable and against the overall interest of the host communities and justice.

For the purposes of clarity, it must be emphasized that the PIA, among several objectives, is designed to establishing good governance, best practices, and ease of doing business in the oil and gas industry by clarifying roles and responsibilities of officials and institutions, enable frontier exploration, mandate improved environmental compliance, and transform NNPC into a commercially-viable enterprise.

We further observe that when fully implemented, the law will also bring about the restructuring of institutions, attracts local and foreign investors, and enhance transparency and accountability in the oil and gas industry.

To address the decades-long neglect of the people, it further provides for the creation of a Host Communities Development Trust Fund in which the oil operators are obliged to incorporate for the benefit of the host communities and shall make an annual contribution based on a certain percentage of their yearly operating expenditure as well as other far-reaching reforms.

It should also be noted that the law also provides for an Environmental Remediation Fund for which oil companies are required to make financial contribution annually for the rehabilitation or management of negative environmental impact with respect to the license or lease. Financial contributions will depend on the size of the petroleum operations and the level of environmental risk that may exist.

We recall very vividly that when the PIB was passed into law and assented to by Mr. President, there were cries by the host communities for the National Assembly to address the grave injustice inherent in the law even as the House of Representatives voted for five per cent contribution to the Host Communities Development Trust Fund but which the Senate, against popular wish, reduced to three per cent which was later ratified by the Conference Committee of both Chambers.

However, in our estimation, all hopes appear not lost in the struggle for a just and equitable percentage contribution by the oil operators and consequently challenge representatives of the oil communities in the National Assembly to immediately propose an amendment for an upward review to the contributory fund should the Presidency refuses to do so.

Similarly, the people of the Niger Delta must continue to sustain their agitation until victory is won and wholeheartedly agree with the position of the Ijaw National Congress, INC, President, Prof. Benjamin Okaba, on the issue, that the three per cent contribution to the Fund meant for oil-bearing communities is grossly inadequate and should be increased to 10 per cent compared with the present 97per cent that will be retained by the investors.

It is a matter of great concern that whereas the executive had proposed 10 per cent for the controversial frontier basins exploration fund which is meant for exploration of oil in other frontier basins, the federal lawmakers in their wisdom in passing the bill into law, increased the figure to 30 per cent of the proposed Nigerian National Petroleum Corporation, NNPC, Limited oil profit on the ground that frontier basins are not an “exclusive reserve of a part of a country” and that “frontier basins are areas with oil prospects”.

We however, find merits in the stand of the INC that since the people of northern states are entitled to 100 per cent ownership of their God-endowed solid minerals including  gold being exploited in Zamfara State, acceding to the 10 per cent requested should not be regarded as excessive for the oil communities considering the enormous ecological damages the people have suffered over the decades and for peace to reign supreme.

More importantly, it is our candid view that the host communities should be allowed to judiciously manage the three per cent allocation to the Host Community Trust Fund in the PIA to avoid a situation whereby the locals would complain of being shortchanged by the state or local governments since the primary goal of the intervention is to bring development closer to the grassroots and, therefore, putting them first is crucial to the attainment of such objective.

We are equally worried that the demand for a minimum allocation of 10 per cent to the development fund was copiously stated by the people before, during and after the public hearing as well as when the federal lawmakers visited the host communities for an on-the-spot assessment of their plight all to no avail.

Significantly also, though one of the major objectives of the PIA is to build the confidence of investors in the oil and gas industry, as well as ensure reasonable profits for the investors and companies, such encouragement must not be at the detriment of the communities where the resources are domiciled.

Therefore in our view, the interest of the people should be paramount and must be so recognized which is why demand for the ten percent should be taken as the acceptable minimum in line with international best practices in the sector. It is only by so doing that the current relative peace and harmony can be sustained in the once volatile Niger Delta region which the inherent injustice in the PIA unfortunately, can’t guarantee.