Petroleum Host Community Development Bill, 2016: Key Findings

  • oil-and-gasoil-and-gasoil-and-gas
  • Definition of Host Community: The Petroleum Host Community Development Bill (PHCDB), 2016, expands the definition of the term, host community. It accommodates communities across the country either directly involved or affected by petroleum production operations. It is instructive to note that communities directly involved or affected by petroleum production operations do not experience the same levels of impact. This Bill does not recognize this differential. Rather, this expansive approach undercuts the PIB’s ultimate agenda to provide developmental remedy specifically for communities experiencing the extensive negative impacts on the environment associated with oil production.


  • Classification of Host Communities: The bill introduces upstream petroleum communities (UPC) and facility communities (FC). Note also that are pipeline communities (PCs).


  • Petroleum Communities Trust (PCT): A Petroleum Communities Trust (PCT) is to be established in every local government (LG) where there are upstream or facility communities. The Department of Petroleum Resources (DPR) should be responsible for classifying communities into UPC, FC and PCs. The classification process should be monitored to ensure proper identification and listing of all applicable communities in the disbursements.


  • Governance of the Petroleum Communities Trust: The PCT will be managed by a Board comprising 25% women & 25% youth below age 40. The PCT Board, as presently constituted lacks adequate oversight. The nomination or appointment procedure for PCT Board Members is also unclear. To strengthen community participation, 2/3 majority of the PCT Board should come from the petroleum host communities.


  • The Local Government’s Role is Merely Administrative: The Local Government’s role is merely administrative in the entire disbursement chain. It operates as a safe for the Fund, and remits monies whenever needed. The local government needs to be positioned to provide adequate regulatory oversight for the PCT.


  • Community Consultations: Whereas community consultations are obligatory, the prescribed procedure is vague. Further procedural clarity is needed, especially to define the roles of different stakeholders, and to develop a functional mechanism for enabling broad-based participation of all target groups within the community.


  • The Role of Non-governmental Organizations (NGOs) and Traditional Rulers: The bill is silent on the role of important stakeholders, such as traditional rulers, non-governmental organizations, faith-based organizations, etc that play an active part in ensuring that communities participate meaningfully in oil sector consultations and decision-making.
  • Inadequate Community Representation: Community representation on the Boards of the PCTs is inadequate. Expanding community representation on the Board of the PCT is recommended.


  • PCT Secretary, Too Powerful: The position of the secretary of the Board of the Petroleum Communities Trust (PCT) is too powerful. Consistent with the bill’s design as a community-empowering structure, that power should rest on the communities. The secretary slot should be specifically reserved for host communities, and not for an oil company representative as proposed. The position of the Secretary should also be rotational among participating communities in the local government, starting with the community with the highest share of oil production.


  • Penalties for Misconduct: The stipulated punishment (12 months) for mismanaging funds belonging to the PCT is inadequate to deter misappropriation. There should an additional requirement for misappropriated funds to be returned.



  • Access to Information: Community access to information regarding the disbursements needs to be improved. Publishing reports on the Boards’ websites is inadequate due to the low internet penetration in rural areas.


  • Community Development Agreements: Every company conducting petroleum operations, including operating an upstream, midstream or downstream facility, or owns pipelines,  are required to enter into Community Development Agreements for the purpose of transferring mutually agreed social and economic benefits from the company to the community. Several communities in the oil and gas production areas have executed similar agreements or memorandum of understanding (MOU) with oil companies operating in the area. The Bill needs to spell out the procedure for effective withdrawal or for harmonizing existing agreements with the about-to-be-created CDAs.


  • Establishment of a Restoration Fund: The PHCDB provides for a restoration fund, and imposes a Restoration Tax charged to companies, in order to ameliorate the effects of pollution and environmental hazards in petroleum host communities.  To avoid the bureaucracy associated with administering Funds of this nature, the Restoration Fund/Tax may operate as an insurance bond deposited in banks prior to the commencement of operations, or at any time thereafter, for existing companies. Companies shall be required to deposit bonds commensurate with the size of their oilfield operations. This bond should be accessible to communities in the event of pollution or environmental damage. Clean-up operations should be handled by agencies, with skilled manpower, set us for that purpose, such as the National Oil Spill Detection and Response Agency (NOSDRA).


  • Statutory Limitation Period: A statutory limitation provision sets time limits for pursing legal action against the Board, a member of the Board, Secretary or any employee of the Board. On one hand, is embeds accountability for official misconduct. On the other hand, this provision needs to take into account the time lag between when an incident occurs and it coming to the notice of the community. For this reason, the proposed limitation period is too restrictive and should not apply.


  • Offences: Any reduction by a Local Government in the amounts due to a Trust and Restoration Fund Act constitutes an offence. The punishment (12 months) is, however, inadequate to deter misappropriation. Criminalizing the act is sufficient. However, existing law should apply as regards the punishment for acts for financial misappropriation. There should be an additional requirement for misappropriated funds to be returned.


  • Low Environmental Protections for Host Communities: The PHCDB loosens the environmental protections for host communities espoused in the PIB-2012. It lacks robust provisions for the protection of human rights and community health, environmental safety and security; protection of cultural property and heritage; use and management of dangerous substances including the impacts on indigenous peoples, and their unique cultural systems and values. Slackening the environmental protections may provide an excuse for tensions to continue in oil producing areas, especially between oil companies and their host communities. Reinserting the environment-related provisions holds enormous potential for resolving the pervasive hostilities arising from environmental damage, governmental neglect, poverty and exclusion of local populations in the management of natural resources.

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