“We are 298 days away from pumping the first oil and so far everything is on target”- Anthony Djokoto, senior legal adviser at Tullow Oil Ghana Limited.
It’s a recognisable fact that the oil and gas industry is regulated throughout its entire process through diverse environmental, health and safety laws. The issue of regulating the petroleum industry has precisely been the dilemma of many oil-rich countries especially the developing states. Oil extraction, transport, refining and consumption are regulated to describe and evaluate the impacts on human health and biodiversity.
By virtue of the fact that oil development is a ‘dirty’ business and as such contributes tremendously to carbon dioxide emissions, regulating the oil and gas industry has remained an issue of greater importance.
It is, however, worrying to note that environmental and health regulations in developing countries appear to be weaker in dealing with the oil and gas industry. The US Energy Information Administration has once reported that “Nigeria does not have a pollution control policy and the laws that do exist are not enforced. It is also reported that Ecuador lacked environmental regulations until 1990, and the dependence on oil revenue has since hindered environmental law enforcements.
The idea behind this article is therefore to bring to light the need for Ghana to attach greater importance to regulating the emerging oil and gas industry if the country is to significantly defeat the ‘Resource Curse’.
Focusing on the ideal Ghana is no exception if environmental and health regulations are said to be weaker and unenforceable in developing countries considering the bleak experiences in the mining industry. Tullow Oil Ghana has asserted that they are 298 days away from pumping the first oil and Ghana is yet to have a specific regulatory and legal framework governing the upstream and midstream sectors. It will interest you to know that the legal and regulatory frameworks in use today date from the 1980s when the country was under Military rule. The legal frameworks include: The GNPC Law of 1983 (PNDC Law 64) which assigned to the GNPC the right to undertake exploration, development and production of petroleum; the Petroleum (Exploration and Production) Law of 1984 (PNDC Law 84), which placed responsibility for regulating the hydrocarbons sector with the Ministry of Energy, though carried out by the GNPC, also allowed the GNPC to enter into partnership with foreign investors; and Petroleum Income Tax Law of 1987 (PNDC Law 188) (Credit: Ghana’s big test: Oil’s challenge to democratic development- An Oxfam America/ISODEC Report, 2009). Are we going to deal with oil companies with these frameworks that covered only oil exploration? Nonetheless, it was good news when Daily Graphic reported on January 14, 2010 that the draft bill for the oil sector in under the scrutiny of the Attorney General. It is our fervent hope that this framework would have all the capacity to deal with the anomalies inherent in the oil and gas sector.
Believe it or not, oil companies are the most difficult corporate groups to deal with in the extractive industry and it would be disastrous for Ghana if legal framework that is dated, weak and contain gaps is to be used to govern the oil and gas industry.
The regulation of the oil sector is, thus, the most important phase that deserves urgent attention. What the country should know is that oil companies have strong incentives to maximize profits and the availability of weak and unenforceable environmental and health laws could lead to gruesome abuse. A group of Nigerian farmers and fishermen are suing Shell over oil spills that have polluted their lands. The country is advised to strengthen its laws since oil spills are spontaneous and most times deliberate on the part of companies in order to make room for adequate compensation to those who would be affected. Whether or not there would be unlimited controversies in the oil sector would depend on the nature o our legal and regulatory framework.
Setting the Parameters
Any loophole in broad patchwork of regulations would allow companies to skirt the law and operate their plants in a manner dangerous to public health. In the State of Alaska when it was discovered that oil companies minimised royalty payments by under-reporting the effective price of oil and over-reporting their costs, it was through harder prosecution that compelled oil companies to pay the more than a billion dollar that they had avoided paying the state. This means it takes formidable and holistic legal and regulatory frameworks to avoid and mitigate the anomalies in the oil and gas sector with regards to public health, protection of biodiversity and ecosystems. The capacity of the parameter depends strongly on the type of Environmental Management Framework (EMF) that would be put in place to avoid and mitigate environmental and social risks. A case of oil production in the Niger Delta reveals a considerable unlimited controversy and tensions between communities and oil companies. The effects of oil production and consumption on livelihoods in the Niger Delta are believed to be the factor that triggered the civil wars and tensions. Having many lessons around the globe, it rests on Ghana to adopt a sound and all-encompassing Environmental Management Framework that would provide safety to lives of people and flora and fauna. The EMF should clearly specify the cost of oil spills, gas flaring and venting apart from prohibiting these practices for a safe environment. The EMF should cater for the lives of fishermen, local farmers and people most affected by exploration and production as a strategy of containing and managing grievances. It should be noted that grievances of the people that was neglected partly contributed to the formation of Movement for the Emancipation of the Niger Delta (MEND) in Nigeria and Front for the Liberation of the Enclave of Cabinda (FLEC) in Angola. Effective EMF and strong legal framework should solve the grievances of the local people especially for communities at the coast of Western Region that would directly and indirectly be affected by the oil production.
In addition, the EMF should be governed by an independent and legal multi-sectoral body that comprise of government representatives, non-governmental organizations and civil society groups on the environment. The body should be funded by the government and not solely on external funds to ensure consistency in its operations. Chad have the Comité Technique Rationale de Suivi et de Contrôle (CTNSC) as a government body with the oversight role of the environmental and social impacts of the petroleum sector. Ghana should follow suit in order to ensure optimum benefits of the sector.
The report by ‘The Chronicle’ on the oil spill by Kosmos Energy and Tullow Oil raises upwelling concerns for the development of a vibrant regulatory framework for the oil sector. It was reported on December 26, 20009 that Kosmos spilled over 700 barrels of a substance said to be a mixture of oil and mud. Also, Tullow Oil spilled some 37 litres of oil on January 1, 2010 as a result of breakage of their link pipes. It should be noted that this is just the beginning of the showdown in the industry. It is therefore, imperative for the country to enact strong legal and regulatory laws to prosecute companies for dangerous spillages. All that Deputy Director of EPA could say was that “a team of technocrats, headed by the Executive Director of EPA, had embarked on a trip to the Jubilee Field to ascertain the level of spillage or otherwise” EPA cannot help than to merely ascertain because even if the spillage occurred, the oil companies cannot be held responsible since there is no legal framework for the oil sector for now.
Though it’s said that legal and regulatory framework would soon be brought for cabinet review, the question is would it has the capacity to control operations of oil companies especially when it is not a year old? If production should start later this year as Tullow is determined to, should we expect anything beneficial especially when the impending legal and regulatory framework has not been tried and tested? It will not necessarily matter if the framework to be adopted is all encompassing and formidable.
If Tullow is 298 days away from pumping the first oil, how prepared is the country to manage the benefits and risks? It is against this backdrop that I support the voices opting for production to start in 2011 to adequately prepare and strengthen the capacity of institutions and regulations to face the rigours of oil and gas production. Haste makes great waste.
It’s not an exaggeration to say that the Environmental Protection Agency (EPA) does not have the capacity to regulate the oil industry. It is, however, significant that the Minister of Environment, Science and Technology, Mrs. Sherry Aryittey in a ‘Meet the Press’ on January 12, 2010 stressed that the government is collaborating with Norwegian Consortium to help strengthen the capacity of EPA. Only this would not a mere formality. The government should know that weak and inadequate environment and health laws have also incapacitated the abilities of the EPA. Therefore, let environmental and health laws be clear, adequate and strong to contain all anomalies that serve as risk to ensuring sustainable development.
Conclusion
Ghanaians should not be swayed into concentrating largely on revenues that the country would garner from the oil and gas industry. If viable, potent legal and regulatory framework is not met, certainly optimum revenues would elude the country. It is important to state that if Ghana does not approach the oil find with sobriety, the country would in no way be different from Nigeria, Gabon, Equatorial Guinea and Angola. The country cannot afford to repeat the same mistakes in the mining industry where laws are weak, inadequate and unenforceable. I trust that the government as a matter of importance would undertake the right approaches towards regulating the oil and gas sector. We should spare no effort in expediently ensuring safe environmental and health conditions of the local people.
The author Stephen Yeboah is at the Department of Planning, Kwame Nkrumah University of Science and Technology, Kumasi-Ghana. [stephenyeboah110@yahoo.com]
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