A Case for Retributive Punishment in Cases of Gas Flaring in Nigeria

Table of Contents

Chapter 1 – Introduction
1.1 Meaning of Gas Flaring
1.2 Gas Flaring in Nigeria
1.2.1 Historical Background
1.2.2 Current Developments in Gas Flaring in Nigeria
1.2.3 Attempts at stopping gas flaring in Nigeria
1.2.4 Effects of gas flaring in Nigeria
1.2.5 Challenges to Gas Utilisation in Nigeria

Chapter 2–The Regulatory Regime for Gas Flaring in Nigeria
2.1 Historical Trends in Gas Flaring Regulations
2.2 Analysis of the Current Regulatory Regime
2.2.1 The Associated Gas Re-Injection Act,
2.2.2 Associated Gas Framework Arrangements
2.2.3 Other Project Specific Fiscal Incentives
2.3 Philosophical Underpinnings of the Current Regulatory Regime
2.4 Shortcomings of the Present Regulatory Regime

Chapter 3 – A Case for Retributive Punishment
3.1 Meaning of Retributive Justice
3.2 Justification for Adopting Retributive Punishment in Gas Flaring Regulation

Chapter 4 – Conclusion

References

A Case for Retributive Punishment in Cases of Gas Flaring in Nigeria.

ADEDOKUN LUQMAN ADEBAYO^[1]

Chapter 1 – Introduction

1.1 Meaning of Gas Flaring

Gas flaring is the burning of natural gas that is generated as by-product or consequence of crude oil production activities^[2]. Gas flaring is a major concern globally because of its impact on the society. It is therefore not a surprise that efforts are being made to combat gas flaring all over the world and Nigeria is not excluded from this drive. In Nigeria, policies have been formulated and laws and regulations passed to ensure that gas flaring comes to an end^[3].

Similar to what obtains in other international jurisdictions, the characteristic feature of the law is to make provisions prohibiting gas flaring and enacting penal provisions to punish oil producing companies that are guilty of gas flaring. However, while some jurisdictions have made significant progress in reducing gas flaring, Nigeria has only leapfrogged in the same direction for decades. Typically, accusing finger is being pointed to slack penal regime that is not strong enough to deter oil companies from flaring associated gas. The aim of this paper is to review the current regulatory regime especially in relation to the penal provisions and make a case for the need to have more punitive penal provisions in our law.

In addressing the issue identified above, this paper attempts to review the existing regulatory regime, examine how much progress Nigeria has made at nipping the scourge of gas flaring in the bud over the years and then conclude on the need to inject more punitive provisions in our law.

1.2 Gas Flaring in Nigeria

1.2.1 Historical Background

As mentioned earlier, gas flaring is closely related to crude oil production. As crude oil gained increasing prominence within the Nigerian economy over the past decades, its production level progressively increased and so was the amount of gas that is flared. The increase in production coupled with other constraints to gas utilization, which are later addressed in this paper, have made Nigeria, and the Niger Delta region of Nigeria in particular, the focus of climate change and other environmental issues as we know today. The climate change discussion began after environmental pollution associated with oil production in the Niger Delta region burgeoned and became part of the global discussion. Oil production companies, such as Shell, have engaged in methods that have disregarded human lives and the environment during their oil-drilling process. Thus, the Niger Delta ecosystem changed drastically once Shell arrived in the area in the 1950’s.^[4]

1.2.2 Current Developments in Gas Flaring in Nigeria

Increase in crude oil production and the inability of the government and the oil companies to address the key constraints to gas utilization have made Nigeria to be one of the leading nations in the world in the flaring of associated gas today. Nigeria is currently occupying the unenviable position of being the country with the second largest volume of gas flared in the world^[5]. For example, in 2013, it is estimated that Nigeria flared 428 bcf of the associated gas it produced, which is equivalent to about 15% of the total gas produced^[6]. In 2011, Nigeria flared about 10% of the total volume of gas flared globally.

1.2.3 Attempts at stopping gas flaring in Nigeria

Nigerian governments, in realization of the global trend at curbing gas flaring and in view of the unattractive position occupied by Nigeria on the global scale of gas flaring, have over the years adopted a number of methods at stopping gas flaring. The initial attempt at combating the menace of gas flaring in Nigeria was via a policy statement issued by the General Yakubu Gowon administration in 1969^[7].As the 1969 policy statement did not yield any real result, the government started using statutory instruments to regulate gas flaring. Between 1969 and 1979 two federal statutes were passed: the Petroleum Act of 1969 and the Associated Gas Re-injection Act, 1979^[8].

In addition to adopting policy statements and statutory instruments at curbing gas flaring, Nigerian government has recently partnered with other countries with similar gas flaring challenges under the auspices of the Global Gas Flaring Reduction public private partnership (GGFR^[9] ). An important contribution of this initiative to attempts at combating gas flaring in Nigeria is the unique approach it adopted in fostering collaboration between the international oil companies and oil producing countries in order to have a concerted effort at fighting gas flaring.

1.2.4 Effects of gas flaring in Nigeria

The fact is that flaring associated gas may be unavoidable in certain circumstances especially as part of oilfield safety measure during an oilfield emergency^[10]. However, the global concern about the need to stop gas flaring stems from the negative impacts it has on the local community in which the flaring is taking place and the global community at large. One major effect of gas flaring is its hazardous impact on the environment which manifests in various ways such as air pollution and global warming. Specific environmental damage in the Niger Delta region of Nigeria due to gas flaring includes acid rain, acidification of the soil thereby causing poor agricultural produce^[11] etc.

In addition, gas flaring constitutes significant health problems as pollutants released during gas flaring has been known to cause such diseases as cancer as well as neurological, reproductive and developmental disorders^[12].Not only is gas flaring dangerous to health and the environment, it is also a serious economic waste. Gas flared could otherwise have been utilised as energy source and/or source of revenue for Nigeria. It is estimated that the value of gas flared in Nigeria annually is about US$1.8 billion^[13].

1.2.5 Challenges to Gas Utilisation in Nigeria

There are three ways by which associated gas could ^[14] be dealt with when generated. First, it could be collected, processed and utilised as a viable source of energy^[15]. Secondly, the associated gas could be recycled by re-injecting it into the ground primarily to increase oil well pressure or to make the gas available for future use. Lastly, the gas could be flared as a waste product from the crude oil production. Notwithstanding the available options, challenges associated with gas utilisation and recycling has made gas flaring a compelling option for oil companies. One of such challenges is the huge cost of providing the necessary infrastructure for gas utilisation and re-injection. Secondly, Nigerian domestic gas market is regulated and as such gas utilisation projects are not economically viable due to government intervention in gas pricing. Lastly, the regulatory regime for gas flaring is quite inefficient, ineffective, inconsistent and uncertain thereby making enforcement of laws difficult.

Chapter 2–The Regulatory Regime for Gas Flaring in Nigeria

2.1 Historical Trends in Gas Flaring Regulations

Attempts at regulating gas flaring in Nigeria started about 46 years ago when in 1969 the General Yakubu Gowon administration issued an executive order to oil producing companies to stop gas flaring within 5 years of the order.

Later in 1969, Nigeria went beyond issuing an executive order to promulgate the Petroleum Act of 1969 which impacts indirectly on gas flaring. The Petroleum (Drilling and Production) Regulations of 1969^[16] requires a licensee or lessee to submit to the Minister of Petroleum any feasibility study or programme or proposals that it may have for the utilisation of any natural gas produced from its crude oil production activities^[17]. Apart from this requirement to submit proposal for gas utilisation, neither the 1969 Act nor the Regulations made thereunder made any other specific provisions regarding gas flaring.

Statutory intervention directed at curbing gas flaring got scaled up when the Associated Gas Re-Injection Act was passed in 1979 (AGR Act)^[18]. The AGR Act declared in clear terms that gas flaring in Nigeria is unlawful. In 1984, the Associated Gas Re-Injection (Continuous Flaring of Gas) Regulations was also passed pursuant to section 5 of the AGR Act.

2.2 Analysis of the Current Regulatory Regime

2.2.1 The Associated Gas Re-Injection Act, 1979

The AGR Act in section 3 (1) clearly prohibits any company engaged in the production of oil and gas from flaring associated gas with effect from the 1st of January, 1984 except a written permission of the Minister of Petroleum is obtained^[19]. However, within the intervening periods of commencement of the AGR Act and the deadline to stop gas flaring set in section 3 (1), the law requires every oil producing company in Nigeria to submit to the Minister of Petroleum not later than 1st April, 1980 a preliminary programme for utilisation of associated gas and projects to re-inject associated gas not utilised^[20]. In addition, the AGR Act requires oil and gas producing companies in Nigeria to submit to the Minister of Petroleum not later than 1st October, 1980 detailed plans for implementation of re-injection of associated gas or schemes for viable utilisation of such gas^[21].

In order to prevent oil companies from flaring associated gas, the AGR Act introduced, for the first time, penal provisions against any infringement of section 3 (1). Section 4 (1) of AGR Act prescribes a mandatory forfeiture of the concession in respect of the field(s) in which contravention of section 3 (1) occurs. In addition to forfeiture granted to an oil company that has contravened section 3 (1), the Minister of Petroleum may also withhold all or any entitlements due to such company towards the cost of completion or implementation of a desirable re-injection scheme, or the repair or restoration of any reservoir in the field in accordance with good oil field practice.

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^[1] PhD Student in the field of Environmental Law and Sustainable Development at the Atlantic International University, Honolulu, Hawai, United States.

^[2] Gas flaring is closely (though not solely) associated with crude oil production because geological evidence shows that crude oil and natural gas are typically found together in the same reservoir and so both are usually generated by the same production process.

^[3] The most important statute passed in Nigeria on gas flaring is the Associated Gas Re-Injection Act, Cap A25, Laws of Federation of Nigeria, 2004.

^[4] Gas Flaring in Nigeria‘s Niger Delta: Failed Promises and Reviving Community Voices by Eferiekose Ukala

^[5] Russia occupies the number 1 position in the world in terms of volume of gas flared.

^[6] Country Analysis Brief: Nigeria by US Energy Information Administration page 13. Updated on 27th February, 2015.

^[7] See a discussion of this in chapter 2 of this paper.

^[8] Ibid.

^[9] This is a World Bank initiative launched at the World Summit on Sustainable Development in August 2002.

^[10] Global Gas Flaring Reduction Partnership: Improving energy efficiency and mitigating impact on climate change.

^[11] Negative effects of gas flaring: The Nigerian experience by Anslem O. Ajugwo – Journal of Environmental Pollution and Human Health 2013 1 (1) pp. 6 – 8.

^[12] Anslem O. Ajugwo op. cit.

^[13] Daily Trust newspaper of 10 July 2013 viewed at www.allafrica.com/stories/201307100997 on 16 April 2015.

^[14] See Global Gas Flaring Reduction Partnership: Improving energy efficiency and mitigating impact on climate change

^[15] For example by using it to generate power for oilfield installations or selling to households etc.

^[16] Passed pursuant to section 9 (1) (b) (iii) of the Petroleum Act 1969.

^[17] See Regulation 42.

^[18] Associated Gas Re-Injection Act Cap. A25 Laws of Federation of Nigeria, 2004.

^[19] Section 3 (1) AGR Act.

^[20] Section 1 (a) and (b).

^[21] Section 2 (a) and (b).