Monday August 25 2014

Govt should formulate oil pipeline regulations

By Daniel Makubuya

Oil pipeline transport is usually provided by private users mostly oil and gas companies for their own ancillary purposes or by a common carrier acting on behalf of all the shippers linked to the pipeline. Whether the pipeline is run and operated by the oil companies or a private common carrier, it is important to note in both scenarios their activities would be entirely guided by the need to maximise profit. The implications of this for the government and the citizenry are worth considering.
Government must start exercising its mind on how best the pipeline can serve national economic and social interests whilst simultaneously addressing the commercial interest of oil corporations.

For the oil corporations, although the initial construction of pipelines is difficult and expensive, once the pipes are built and properly maintained, they represent the safest and most economical means of transporting oil and gas products. The government on the other hand should be concerned with whether the pipeline once constructed is operated to meet safety and environmental standards.

Before we consider the implications for the government, first we must reflect on whether the government has put sufficient regulations in place given the now realistic prospect of the oil pipeline. If not, what form would these regulations take and would they be regulated by a single government department, say the ministry of energy, or would this be regulated by different government bodies and authorities.

Take the United States for instance, pipelines there are regulated by different government agencies. The department of transport regulates the operation of the pipelines, the environmental protections agency regulates spills and releases, while the occupational safety and health administration promulgates standards covering worker’s health and safety.

In addition, there are a number of industry organisations, such as the American Petroleum Institute and the American Gas Association which along side the government agencies publish recommended practices covering pipeline operations. The Canadians appear to have veered towards a similar regulatory model. Compare that to the United Kingdom where the industry is substantially regulated by a single government agency. Similarly, in Nigeria all regulatory powers are conferred on the Ministry of Petroleum Resources.

Another consideration for the government is who would be responsible for environmental disasters that are almost inevitable with the existence of such an extensive pipeline mostly expected to run over ground. Would it be the owner of the pipeline or the operator of the pipeline who is often responsible for managing risks and hazards on the pipeline? In the event of non-compliance, how would the regulations be enforced? In the United Kingdom breaches of regulations can result in criminal prosecution punishable by unlimited fines and terms of imprisonment or imposition of a prohibition or improvement notices.

Further, breaches of regulations will often result in strict liability, that is, if it is proven that a breach has occurred, there will be no defence available. These implications and many others should be born in mind by the government when regulating the activities of commercial entities whose allegiance to the citizenry of Uganda is secondary to their need to reward shareholders or owners.

From a social perspective, its important to note that unlike other modes of transport such as roads and railway that improve access for the communities through which they traverse, oil pipelines by their nature impose constraints on communities and when located close to villages are potentially hazardous to life. The pipeline regulations would require the input of the department of physical planning to review the pipeline routes and monitor its impact on local communities. In additional to strict environmental standards, the pipeline regulations need to review existing legal provisions and adequately compensate land owners as land is the major source of conflict and litigation in rural communities.

These and other considerations need to form part of the government discussion when formulating oil pipeline regulations if we are to dodge the so-called paradox of plenty, where the resource development fails to generate the expected social benefits as seen recently in the Niger Delta Basin.

Mr Makubuya is a barrister with Capital Law Partners & Advocates