NGO seeks urgent amendment of PIA, says regulations for HCDTs may backfire

Oredola Adeola

The Stakeholder Democracy Network (SDN), an International non-governmental organization, has called for urgent amendments in the provisions of the Petroleum Industry Act (PIA) targeted toward host community development regulations, warning that if the regulations for Host Community Development Trusts (HCDTs), are not properly defined for the beneficiaries, it will create tensions across the Niger Delta.

The NGO made a research document exclusively obtained by EnergyDay on Tuesday.

The SDN in the research findings noted that the provisions of the PIA targeted towards host community development create both opportunities and challenges for the Niger Delta communities and other stakeholders.

It said, “We are encouraged by the vast increase in spending that is expected but concerned that without amendments, the regulations will create tensions across the Niger Delta.

“Under the PIA, there are regulations for Host Community Development Trusts (HCDTs), which will channel huge amounts of resources towards community development, and effectively replace corporate social responsibility (CSR) projects for oil and gas companies.

“The Federal Government of Nigeria (FGN) estimates that the total contribution to HCDTs will be US$500-800 million per year (NGN200-330 billion), around ten times the average annual CSR spending by oil and gas companies (US$72 million or NGN19 billion).

“The estimated total allocation to HCDTs is almost as much as the Niger Delta Development Commission’s (NDDC) average annual budget (US$806 million or NGN206 billion), which will continue to be spent in parallel. This creates a huge opportunity for coordinated community development spending,” the executive summary stated.

SDN further noted that more funding for community development is welcome, but cautioned that historically, the main challenge has not been the lack of funds, but the failure to manage this properly, to ensure it benefits communities.

It said, “The HCDTs mean that these funds are flowing directly to communities, rather than through government institutions, where inefficiencies historically stemmed from.

“HCDT governance structures are rapidly being established to manage these finances. However, the structure prescribed by the regulator places too much power in the hands of oil and gas companies to determine the projects to be delivered, and the people who will oversee these decisions (the Board of Trustees).

“This could lead to disputes and increased tensions between communities and companies.

“Moreover, there will be no transparency in how the companies’ contributions are calculated, so communities will not be able to verify if they are receiving what they are due.

“Contributions should be equal to 3% of operating expenses, but companies do not currently publish this figure,” the report revealed.

SDN, therefore, expressed worry that the HCDTs seek to incentivise communities to protect the industry’s infrastructure from sabotage, oil theft, and artisanal refining but have no provisions or any form of support in place to help them achieve this.

It said, “Instead, they will be penalised under a provision in the PIA which states that deductions can be made to HCDTs for the cost of damage from ‘third-party’ incidents.

“The regulations expanded the definition to include the cost of products lost and operational costs during the period of downtime. If implemented, these deductions could cost HCDTs up to US$1 billion per year (NGN458 billion) – theoretically wiping out all contributions. This is unjust.

“Protecting the integrity of infrastructure should be the responsibility of companies and the government. Communities are important stakeholders in these efforts, but would need extensive support to tackle organised criminal networks, which are often armed and working in complicity with the security agencies and some government officials.

“Lumping this responsibility on communities – then punishing them for the actions of a few – will likely increase hostilities,” the report stated.

SDN further observed that the current regulations provide basic guidance. It also cautioned that in order to avoid future disputes, the regulator needs to specify uniform, transparent, and accountable approaches for calculating operating expenses, clustering communities, distributing allocations among HCDTs, and establishing mechanisms to manage projects.

The right group, therefore, charged the 10th National Assembly to amend the provision in the regulations that deduct funds for third-party damage. It revealed that such a provision is out of step with the PIA.

It stated that more broadly, SDN maintains that this provision should be removed entirely, as it will not achieve what it intends to, and will lead to tensions across communities.

Florence Ibok-Abasi, SDN’s Country Director, in her remark on the report, emphasised that effective resource governance is a panacea for community development.

Ibok-Abasi further noted that paying lip service to this will only sustain the cycle of deprivation in host communities and further weaken the relationship between citizens and the state which has often led to conflicts in the Niger Delta.