Chiagozie Hilary-Nwokonko May 21 2018 Proposed oil spill amendment bill will significantly affect oil and gas industry Streamsowers & Köhn | Energy & Natural Resources - Nigeria Chiagozie Hilary-Nwokonko Energy & Natural Resources IntroductionKey amendmentsLikely impactIntroductionThe National Oil Spill Detection and Response Agency Act (Amendment) Bill 2018 (SB 557) seeks to amend the National Oil Spill Detection and Response Agency (Establishment, Etc) Act 2006. The bill was introduced in the Senate by Senator Oluremi Tinubu (Lagos Central, Lagos State) on November 30 2017 and underwent its second reading on January 24 2018, when it was referred to the Senate Committee on Environment. Many of the changes introduced by the bill will have a significant impact on the oil and gas industry.Key amendmentsName changesThe bill seeks to shorten the title of the act to the National Oil Pollution Management Agency (Establishment, Etc) Act 2006. As such, the National Oil Spill Detection and Response Agency will be renamed the National Oil Pollution Management Agency. This name change will be reflected throughout the act.Governing board membersThe bill seeks to amend Section 2 of the act by reducing the number of governing board members:the number of various government ministry and National Oil Pollution Management Agency representatives will be reduced from 16 to seven; andthe number of Oil Producers Trade Section representatives will be reduced from seven to four.National Oil Pollution Management Agency's functionsThe bill expands the National Oil Pollution Management Agency's functions listed in Section 6 of the act to include, among other things:enforcing international treaties, protocols, conventions and agreements relating to the oil and gas industry; andensuring oil industry operators subscribe to and are members of Clean Nigeria Associates and other related associations.Reporting requirements for gas pipeline and storage facility ownersSection 6(2)(b) of the bill introduces a requirement for owners of gas pipeline and storage facilities to report gas leaks to the agency within 24 hours and imposes a penalty of N2 million for each day of default. The bill seeks to modernise the way in which oil spills can be reported by including fax and email in the list of acceptable methods of communication contained in the act. The bill also increases the penalty for failing to report an oil spill and mandates the submission of an action plan to remediate damages at oil-impacted sites within two weeks of spillage.Decommissioning or abandoning drill sites and oil facilitiesSections 7 to 9 of the proposed bill seek to grant the National Oil Pollution Management Agency the power to monitor the process of decommissioning or abandoning drill sites and oil facilities, as well as oil and gas industry operational areas, in accordance with the guidelines and procedures issued by the agency. Further, the bill mandates that:decommissioned and abandoned sites be returned to their natural state by the oil facility owner; andthe agency be notified before the decommissioning and abandonment process commences.Failure to comply with these requirements will attract penalties as deemed fit by the agency.Assessing integrity of oil facilitiesUnder the bill, the agency must establish a programme for assessing the integrity of oil facilities, including pipelines, well heads, storage facilities, barges and vessels. The agency must ensure that these oil and gas operators comply with its specifications, guidelines and regulations. The agency is further mandated to create a programme for the assessment and monitoring of oil and gas facilities. These powers will lead to the development of new agency guidelines and regulations, which may impose additional obligations and reporting requirements on oil companies.New levy for oil companiesThe bill seeks to create additional sources of funding for the agency to enforce all legislation in the petroleum sector by:allocating 2.5% of the ecological fund annually; andimposing a levy on oil companies calculated at 0.5% of their operations funds.The bill fails to define both 'operation funds' and 'oil companies'. The levy will thus be an additional cost of doing business for oil companies.Inspecting oil facilitiesIn addition to the agency's functions in the event of a spill, as contained in Section 19 of the existing act, the bill seeks to introduce the power to "inspect oil and gas facilities with a view to ensuring full compliance with existing environmental legislations on oil and gas pollution".Rule-makingSection 10 of the bill seeks to amend Section 26 of the act and confer additional rule-making powers on the National Oil Pollution Management Agency, which will allow it to issue regulations, specifications and standards on matters connected to the act for the oil and gas industry. In addition, it introduces penalties for individuals and corporate bodies which contravene rules made pursuant to the act, including:for individuals:a minimum fine of N500,000 and an additional fine of N50,000 for each day that the offence continues; ora minimum of two years' imprisonment; andfor body corporates:a minimum fine of N2 million and an additional fine of N500,000 for each day that the offence continues; orimprisonment.Inspections, investigations and prosecutionsThe bill seeks to grant the National Oil Pollution Management Agency inspection, investigative and prosecutorial powers with the introduction of Sections 27 to 31. The proposed Section 27 grants the agency's officers, on the provision of identification and pursuant to a court warrant, the power to enter and search any premises – including land, vehicle, vessel tankers, barges, floating production storage and offloading units and oil and gas facilities – in order to inspect, search and investigate a suspected contravention of the legislation relating to oil and gas waste management, among other things. The bill also:allows for the procedural steps of seizing and storing items; andpermits the agency to obtain a court order to suspend activities or seal or close premises.However, the bill does not indicate whether such court orders can be sought ex parte or by providing notice to the oil companies concerned. This lack of clarity could be subject to abuse, as oil facilities could be sealed or invaded by agency officers without the owners being given an opportunity to be heard.The proposed Section 28 provides penalties for obstructing an agency officer from acting in accordance with his or her powers, as conferred in Section 27, including:for individuals:a minimum fine of N300,000 and an additional fine of N50,000 for each day that the offence continues; orimprisonment of no less than two years; andfor body corporates:a minimum fine of N5 million and an additional fine of N500,000 for each day that the offence continues; orimprisonment.The proposed Section 29 provides for a one-month pre-action notice before an action can be commenced against the agency. It also bestows prosecutorial powers on agency officers (with the consent of the attorney general) to conduct criminal proceedings for offences contained in the bill and regulations made pursuant thereto. However, this power is subject to those of the attorney general, as contained in Section 174 of the Constitution.Overriding lawThe proposed Section 30 seeks to make the bill the overriding law concerning oil, oily wastes pollution and gas leakages in the oil and gas sector. If the provisions of another law are inconsistent with those of the bill, the other law will, to the extent of any inconsistency, be null and void. The bill also seeks to repeal any law that grants another government establishment or agency functions similar to those of the National Oil Pollution Management Agency to the extent of the duplication of responsibilities or functions.Assisting in oil spill disasters The proposed Section 31 gives the agency the power to demand from any person or oil and gas operator any equipment, facilities and personnel that will assist a speedy and effective clean-up and rescue operation during an oil spill disaster. It also seeks to make it an offence to fail to assist during an oil spill disaster without reasonable cause, which will be punishable with a fine of N500,000, two years' imprisonment or both. The bill also provides that the agency must ensure that the operator responsible for the pollution, on behalf of which the said equipment is requisitioned, pays for the loss of or damages to the requisitioned equipment, personnel or facility.JurisdictionThe bill seeks to amend the interpretation section by substituting Section 27 of the existing act with a new Section 32. This section, by its definition of a 'court', proposes to grant concurrent jurisdiction to the Federal or State High Court. However, it is arguable whether such concurrent jurisdiction can constitute sustained inspection, investigative and prosecutorial powers in light of Section 251(n) of the Constitution, which addresses the Federal High Court's jurisdiction. Section 32 also defines Tier 1, Tier 2 and Tier 3 spills, with Tier 1 being operational spills (ie, less than seven tonnes) and Tier 3 being larger spills (ie, more than 700 tonnes).Likely impactThe bill seeks to strengthen the National Oil Pollution Management Agency by expanding its functions and powers to enforce all legislation in the petroleum sector in relation to oil and gas pollution. It makes it mandatory for oil industry operators in Nigeria to subscribe to and be bona fide members of Clean Nigeria Associates or any other association that the agency names. It also provides for a 24-hour reporting system by letter, fax or email after the occurrence of gas leakages or oil spills with the imposition of a fine of N2 million for each day that the offence is not reported by the gas pipeline or storage facility owner or the oil spiller. Considering the enormous powers being vested in the agency, including the power to make regulations, if the bill is passed in its existing form, it will have a significant effect on the operations of the oil and gas industry.For further information on this topic please contact Chiagozie Hilary-Nwokonko at Streamsowers & Köhn by telephone (+234 1 271 2276) or email ([email protected]). The Streamsowers & Köhn website can be accessed at www.sskohn.com.