Host Community Rights Advocates - HCRA

NMDPRA revokes DPR regulations - The Nation Newspaper The Nation Newspaper NMDPRA revokes DPR regulations

HCRA's SUBMISSION/RECOMMENDATIONS TO NMDPRA IN COMPLIANCE WITH THE CALL FOR SUBMISSION TOWARD THE FINALIZATION OF THE NMDPRA REGULATIONS IN COMPLIANCE WITH THE PIA 2021.

(Pls. Reference Our Earlier Post Below For Traction):

20th September 2024

Dr. Joseph Tolorunse
Authority Secretary and Legal Adviser
Plot 1012 Cadastral Zone A00 Central Business District
PMB 609, Garki, Abuja, FCT.

Dear Sir,
RECOMMENDATIONS FOR MIDSTREAM AND DOWNSTREAM OPERATIONS UNDER THE NMDPRA HOST COMMUNITY DEVELOPMENT TRUST REGULATIONS 2024
INTRODUCTION

The Host Community Rights Advocates (HCRA), a non-profit and non-governmental organisation (NGO) dedicated to empowering
and advocating for communities impacted by oil and gas operations in Nigeria, commends the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) for developing the regulatory framework for Host Community Development Trusts (HCDTs) under the Petroleum Industry Act (PIA) 2021.

As NMDPRA finalizes the framework, it is essential that the regulations ensure fairness, transparency, and equity for all host communities, particularly those in midstream and downstream sectors. These communities, affected by pipeline infrastructure, depots, and tank farms, deserve appropriate consideration under the Host Community Development Trust (HCDT) system. This submission provides recommendations aimed at ensuring that midstream and downstream host communities are properly represented and adequately benefit from the HCDT framework..

RECOMMENDATIONS FOR MIDSTREAM HOST COMMUNITIES
The midstream oil and gas sector in Nigeria plays a significant role in processing, transporting, and distributing natural gas and crude oil. Communities hosting pipeline infrastructure or related midstream activities have unique needs that must be addressed through appropriate regulations.

1. Proportional Sharing of HCDT Based on Revenue Contributions
The distribution of HCDT funds should be proportionate to the revenue generated by host communities. For instance, where Accugas operates gas sales to large customers such as Calabar Generation Company and Lafarge Cement Plant, these host communities contribute a significant share of Accugas's revenue. Consequently, their contributions should be reflected in the proportional allocation of 3% of operating expenses as mandated by the PIA.

PIA Reference: Section 240 (2)(a) – Establishing the 3% funding for HCDTs.

Recommendation: HCDT contributions in the midstream sector should be calculated based on revenue contributions from host communities, ensuring a fair distribution of the 3% operating expense allocation mandated by the PIA, so that those generating higher revenues receive a fair share of the benefits and are not overlooked. This would create transparency and fairness in the allocation process.

2. Clear Regulation on Fulfilment of Outstanding Community Development Projects and Social Impact Engagements
There should be a regulatory requirement to ensure that, operators are compelled by regulation to fulfil outstanding commitments, such as MOUs to host communities before embarking on new community development projects under the HCDT structure. This provision ensures that operators who have delayed or neglected previous commitments (such as social impact or community development projects) are held accountable. These regulations will prevent operators from avoiding their historical obligations and will ensure that communities benefit from prior commitments made by operators and are not neglected once the HCDT is implemented.

PIA Reference: Section 240 (2)(e) – Community development projects funded by HCDTs.

Recommendation: We propose that NMDPRA introduce clear regulations mandating operators to discharge any outstanding obligations related to community development projects before initiating the new HCDT framework. This will ensure that historical commitments are honoured, maintaining the trust of host communities. Operators with outstanding obligations must discharge their commitments in full, particularly where social impact engagements have been delayed, incomplete or neglected.

3. Mandatory Pre- and Post-Environmental Impact Assessments (EIAs)
The environmental impact of pipeline operations, especially in sensitive regions like Cross River State, is a critical concern for host communities. Operators should be required to conduct both pre- and post-EIAs for their infrastructure projects. These assessments should be made available to host communities, allowing them to understand the environmental and social impacts of oil and gas operations.

PIA Reference: Section 233 (1)(a) – Environmental management in midstream and downstream sectors.

Recommendation: NMDPRA regulations should mandate that operators in the midstream and downstream sectors publicly disclose pre- and post-EIAs for any major pipeline, processing facility, depots, tank farms etc. This ensures that environmental safeguards are in place and host communities are fully informed about the potential risks and mitigations. Regular monitoring of environmental standards must be mandatory to protect local ecosystems and public health.

4. Fair and Equitable Administration of HCDTs Where Host Communities Span Multiple States
Where pipeline infrastructure spans multiple states, as in the case of Accugas’s 128 km and 68 km pipelines between Cross River and Akwa Ibom fair and equitable administration of the HCDT is crucial. Host communities from both states should be equitably represented and should receive benefits in line with their respective contributions to the operator's success. The allocation of funds should reflect each community’s contribution, and there should be no disproportionate benefit to communities in one state over another.

PIA Reference: Section 242 (1) – Establishing HCDTs for host communities.

Recommendation: HCDT administration must ensure that where pipeline infrastructure crosses multiple states, the allocation of funds and representation on Trust, Management and Advisory committees are done fairly, with due consideration for the communities' contributions to the operator’s revenue.

5. Regular Environmental Safety Audits
Pipeline infrastructure presents environmental and safety risks to host communities. To ensure safety and compliance, operators should be subject to regular audits of their environmental safety practices. Any violations of safety standards should be met with clear penalties, ensuring that host communities are protected.

PIA Reference: Section 233 (2) – Safety audits and compliance in midstream operations.

Recommendation: NMDPRA regulations should mandate regular environmental safety audits of midstream operators, particularly for pipeline operations. Penalties should be enforced for violations of safety and environmental standards.

6. Recognition of All Host Communities Contributing to Revenue
All host communities that contribute to the revenue generation of an operator, whether directly or indirectly, should be recognized under the HCDT. This includes communities that may be connected through third-party pipeline infrastructure but still play a crucial role in the operator's overall success.

PIA Reference: Section 240 (1) – Definition of host communities.

Recommendation: Regulations should ensure that host communities affected by third-party infrastructure receive the same benefits under the HCDT as those directly under operator-owned pipelines.

7. Mechanism for Allocating HCDT Between Upstream and Midstream Host Communities
There must be a clear mechanism for determining how HCDT funds are allocated between upstream production communities and midstream host communities that host gas sales customers. In cases like Accugas, which operates in both sectors, the share of HCDT contributions should reflect the distinct roles these communities play in revenue generation. This mechanism would ensure that both production facilities and pipeline sales communities are compensated fairly for their contributions. Communities that host production facilities should be allocated funds commensurate with the risks and contributions associated with production, while midstream host communities, which generate significant revenue through sales, should receive their fair share.

PIA Reference: Section 240 (3)(c) – Funding distribution for HCDTs.

Recommendation: NMDPRA should develop a framework for the equitable distribution of HCDT funds between upstream and midstream communities, ensuring that both sectors are adequately represented.

RECOMMENDATIONS FOR DOWNSTREAM HOST COMMUNITIES
The downstream sector has distinct challenges, especially for communities hosting depots and tank farms. These communities face significant environmental, social, and economic impacts and must be considered within the broader HCDT framework.

1. Specific Clauses for Host Communities in the Downstream Sector (Depots and Tank Farms)
Specific clauses, similar to how pipeline communities are accommodated in the midstream sector. should be included in the regulations to address the unique concerns of host communities in the downstream sector, particularly those hosting depots and tank farms. These communities face unique challenges, including environmental pollution and social impacts such as emissions, oil spills, traffic congestion, and health risks, which are distinct from the midstream sector. By explicitly including these communities under the HCDT, their rights can be protected, and operators will be held accountable for the impact of their operations.

PIA Reference: Section 240 (2)(d) – Addressing community-specific issues under HCDTs.

Recommendation: NMDPRA should establish specific clauses within the HCDT regulations for downstream host communities, ensuring that depots and tank farms are treated with the same level of environmental and social accountability as pipeline communities in the midstream sector.

ADDITIONAL IMPORTANT PROVISIONS FOR MIDSTREAM AND DOWNSTREAM SECTORS
1. Transparency in HCDT Operations
All operators, whether in the midstream or downstream sectors, should be subject to annual reporting requirements detailing their HCDT contributions, the disbursement of funds, and community development projects. These reports should be made publicly available and presented to the host communities in question.

PIA Reference: Section 245 (1) – Reporting and accountability requirements for HCDTs.

Recommendation: NMDPRA should enforce transparency by requiring annual reports on HCDT activities to be made publicly available.

2. Legal Framework for Conflict Resolution
Disputes between operators and host communities over the disbursement of HCDT funds or environmental compliance should be subject to a clear legal framework. NMDPRA should establish a dispute resolution mechanism that allows communities to seek legal remedies for non-compliance.

PIA Reference: Section 247 – Dispute resolution mechanisms for host communities.

Recommendation: NMDPRA should establish a robust legal framework for conflict resolution, allowing host communities to seek legal remedies for non-compliance.

3. Grievance Redress Mechanism
Aside from the arbitration clause, an unambiguous process should be established for communities to raise concerns and grievances with operators, ensuring timely and fair resolutions.

PIA Reference: Section 247 (3) – Grievance mechanisms for host communities.

Recommendation: NMDPRA should implement a structured grievance redress system to ensure host communities' concerns are addressed fairly and promptly.

CONCLUSION
The above recommendations seek to ensure that midstream and downstream host communities are equitably represented and benefit from the HCDT framework under the PIA 2021. The inclusion of these provisions will help NMDPRA build a sustainable, transparent, and inclusive regulatory framework for the oil and gas industry, fostering trust and mutual benefit between operators and host communities across Nigeria.

The recommendations proposed will also ensure that all host communities, regardless of their contribution to production or sales, receive the economic, social, and environmental benefits they are entitled to under the PIA 2021.

Yours sincerely,
Dr. Maurice Ekong
Lead Coordinator,
Host Community Rights Advocates (HCRA)
08138988980
[email protected]

Send a message to learn more