48 Shell shrugs off Bonga fine

First published on 19 July 2012[1]

Shell’s reaction to the fine announced by the National Oil Spill Detection and Response Agency (NOSDRA) over its Bonga oil spill of December 2011 is in line with the oil companies’ stance of avoiding responsibility whenever possible.

We recall the case of the Ijaw Aborigines who took their complaints of years of environmental despoliation by Shell to the National Assembly (NASS) in 2000. The complainants demanded a compensation of US$1.5 billion from Shell and this was granted by the NASS. However, Shell rejected the outcome with almost the same reason given in the Bonga case. Shell claimed then that the NASS did not have the powers to penalise it or ask it to compensate the claimants. Their resistance was premised on a claim that the NASS was not a competent body to impose such a fine.

The Ijaw Aborigines went to the courts and obtained a ruling that the US$1.5 billion should be lodged in an account pending appeal. At the appeal, Shell among other pleadings wanted the court to decide ‘whether or not the investigative power or any of the powers of National Assembly under the 1999 Constitution… extends to the exercise of judicial powers and award of damages… Whether or no the Political Resolution of the National Assembly or any of its Committee made pursuant to a petition brought before the National Assembly or any of its committee, or at all, has any legal effect and/or legal consequences whatsoever.’

The appeal was recently decided with the justices agreeing with Shell that the National Assembly had conferred on itself judicial powers only the courts had constitutionally. They also saw the NASS as having breached the Doctrine of Separation of Powers. The oil company must be popping champagne on gaining this reprieve. However, the issue of the damaged environment and livelihoods remains unaddressed and the aggrieved people are still stuck in the mire.

Another case that highlights the way corporations frustrate poor communities is that of the heavily polluted Ejama-Ebubu community of Tai Eleme Local Government Area of Rivers State, Nigeria. The community sued Shell over a spill that occurred in 1970/1 and after a long-drawn and tortuous process won the case in July 2010 with an award of N15.4 billion or US$100 million as compensation for the massive pollution of their community. The case was first filed in 2001. This judgement has not been executed because the powerful oil company can always find a tiny technical point on which to delay or avoid acceptance of responsibility for their actions.

Reacting to their fine on the 2011 Bonga oil spill as announced by NOSDRA, a Shell spokesman reportedly claimed ‘We do not believe there is any basis in law for such a fine. Neither do we believe that SNEPCO has committed any infraction of Nigerian law to warrant such a fine.’[2]

Ghana is a new player in the oil sector. However, oil spills and oil company impunity started showing up before their first commercial shipment of crude oil. After three oil spill incidents in 2010 that country’s minister of environment set up a committee to review the situation to aid government decision on what steps to take. After due reviews the government slammed a US$35 million fine on the oil company, Kosmos.

Kosmos’ response was an outright rejection of the fine with the argument that the fine was ‘totally unlawful, unconstitutional, ultra vires and without basis.’[3] Kosmos argued that they couldn’t find where the Minister derived the power to fine it. They could not find any such authority under the Ghanaian Constitution or any other law of the country to impose a fine on any person on account of an oil spillage incident.

Kosmos’s kicking, screaming and bullying eventually earned it a drastically reduced fine. The company eventually paid US$15 million as a fine for the spills as well as for withholding data information on their operations.

The outlaw nature of the corporations is entrenched by weak regulatory frameworks within which they work. Consider the case of the several attempts in Nigeria to stop gas flaring. The numerous deadlines set for snuffing out the noxious flames have never been respected. And the fines paid for routine gas flaring are both minuscule and suspicious. Attempts by the previous NASS to criminalise the act could not be carried through as only the Senate did any significant work on the issue.

Just when we thought the current executive draft of the Petroleum Industry Bill (PIB) was setting a December 2012 deadline for halting the harmful practice we hear from the Presidency that the copies in the public space are ‘fake’ drafts of the PIBs. The ‘fake drafts’ also seek to place the burden of spills attributed to sabotage on local and state governments. Several issues arise from the shifting of burdens. First it would empower the oil companies to make more strident efforts to attribute spills to sabotage when actually they are results of their faulty equipment and negligence. Secondly, local governments and states do not have control over any of the existing security forces and so cannot be expected to police oil installations. Thirdly, it would further criminalise the victims and leave their environments degraded while the companies and their partner federal government dance to the bank without responsibility for their acts. And more.

A copy of the ‘authentic PIB’ obtained as this piece was being concluded shows that the provisions on gas flaring are hardly different from the status quo. There is no deadline for ending gas flaring and fines can only be as determined by the minister from time to time. The ‘fake’ PIB had stated that offenders would pay the commercial value of gas flared as a clear deterrent. With regard to the duty to restore environments polluted by oil spills due to sabotage, the ‘authentic PIB’ places the burden on local and state governments just as the ‘fake PIB’ provided. A cursory review of the ‘authentic PIB’ shows that there may be further watering down from the draft that went to the Federal Executive Council (FEC). But we cannot say for sure until we obtain the ‘authentic draft’ that went to the FEC.

It is clear that weak regulatory environments do not just happen. They are politically engineered to suit certain players.

We recall that WikiLeaks reports revealed a top Shell official, Ann Pickard, boasting that the company had infiltrated vital government ministries in Nigeria and so had privileged information about the internal workings of government. At another occasion she brashly stated that the company would not accept any new petroleum law that does not suit them and the politicians.

At an Oil and Gas conference in Abuja, Nigeria in February 2010, she stated that Nigeria’s crude production had been dwindling since 2005 and that the proposed PIB would worsen the situation. She described the draft PIB that was before the last National Assembly as a ‘cumbersome document.’ Analysts suspect that this posture may have sparked the numerous doctoring that the PIB drafts have seen over the past years.

An analysis of the Oil and Gas Conference noted that Shell’s alarmist position was unfounded. The report informs that Pedro Van Meurs, a world-renowned energy consultant, who was at the conference, dismissed Pickard’s alarm as a common past time of major oil companies. He saw Shell’s opposition ‘as the natural track taken by a company which mandate is chiefly the making of more and more profit for its shareholders.’ He added that he had ‘been advising governments all over the world for over 40 years and I know that this is a battle whereby the oil company will try to get out of the parliament the highest possible share. So they make loud noise so maybe somebody out there might be listening to them.’[4]

These instances of oil companies shrugging off penalties go deeper than the surface. Nations that depend on export of primary resources for revenue are essentially rent collectors as they often depend on external agencies or corporations to exploit resources found in their territories. As rent collectors they have limited control over what the actual operators do in the field as the operators actually present themselves (and are seen) as benefactors of the rentier states. And the states in turn are ready to pay scant attention to human and environmental rights abuses perpetuated by these operators. Examples abound in the case of Nigeria where human and environmental rights abuses have been documented continuously over the past decades. It is thus no news when these corporations ignore court orders or blatantly challenge government agencies that attempt to enforce any form of redress.

Companies will keep calling the bluff of Nigeria and other countries to which they pose as benefactors while in reality they are rapists. This will only stop with strengthening of citizens driven democracy, legislative activism and systemic change.


Comments are closed.