INTRODUCTION:
The Civil Society Organizations present here today recognize that
Government is fully committed to mainstreaming the Oil and Gas Sector. This
able leadership has been demonstrated by the changes made in the 2010 Petroleum
(Exploration, Development and Production) Bill and most of the recommendations
by Civil Society Organizations on such 2010 Bill then have been incorporated into
the 2012 bills now before review. For example, the 2010 Bill has since been
split into two Bills before your committee now: (i) The Petroleum (Exploration,
Development and Production) Bill 2012 (Bill No. 1) for upstream petroleum
activities and (ii) The
Petroleum (Refining, Gas Processing and Conversion, Transportation and Storage)
Bill 2012 (Bill No. 2) for downstream petroleum activities.
We
recognize that petroleum wealth has the potential to help raise millions of
Ugandans out of poverty, but it also runs the risk of plunging Uganda towards
the resource curse, if not well managed. This has created immense
expectations/anxiety amongst the population and this calls for increased public
participation. As such, many stakeholders have a strong vested interest in
promoting a solid legislative structure for the sector.
It’s
against the above background that Center
for Constitutional Governance (CCG), Global Rights Alert (GRA), Africa Center
for Energy Governance (AFIEGO), Pro Bio Diversity Conservationists in Uganda
(PROBICOU) and other members of the Publish What You Pay – Uganda are submitting their comments/recommendations on The
Petroleum (Exploration, Development and Production) Bill 2012 before your
committee today.
General Recommendations
The following are the
suggested guiding principles that should be the basis of formulating and
implementing the proposed petroleum Bills.
Guiding Principles
(i)
Institutional arrangements: There should be checks and balances with
institutions whose hierarchy for decision making and whose links with other
institutions are clear. These should promote inter and intra institutional
accountability;
(ii) Independence
and autonomy of the institutions: There should be legal safe guards against political
interference/undue influence that would otherwise promote patronage politics or
compromise the functioning of the institutions;
(iii)Transparency in decision making: There should be international best practices like
a statutory obligation to: publish all
information on the identity and
shareholders of all license holders, bidders and other applicants, disclose
the Production Sharing Agreements (PSAs) and make all decisions in accordance
with an open process and make such decisions generally accessible to the public.
The functioning of the Oil and Gas Sector should be in conformity with Article 41
of the Constitution on the right of access to information and with the Access
to Information Act 2005.
CLAUSE BY CLAUSE ANALYSIS OF BILL No. 1: THE PETROLEUM
(EXPLORATION, DEVELOPMENT AND PRODUCTION) BILL 2012
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CLAUSE
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PROVISION
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OBSERVATIONS/RECOMMENDATIONS
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Clause 1
Commencement
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Provision
This Act shall come into force on a date appointed by the Minister
by statutory instrument; and different days may be appointed for the Commencement
of different provisions.
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Observation
This
contradicts general legislative principles and may be subject to abuse.
Recommendation
An
Act is applied as a whole and all provisions are read and implemented in
harmony. The commencement for the whole Act should be uniform and indicated
on the Act itself.
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Clause 2
The
purpose of this Act
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Provision
There
is need to add a transparency objective consistent with sections 9(g) and
12(2)(d).
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Recommendation
Objective
(g) should be inserted and should read as follows: Ensuring transparency
through adopting and implementing the principles of EITI (Extractive Industry
Transparency Initiative) and joining other international bodies and adopting
other international principles and standards that reflect best practices that
promote transparency and accountability as they emerge.
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New clause 4 should be added after the
interpretation (clause 3)
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The
new clause should set out the general principles governing the implementation
of the Act.
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Recommendation:
Clause 4 should read as follows:
Guiding Principles:
(i)
Institutional arrangements: There should be checks and balances with
institutions whose hierarchy for decision making and whose links with other
institutions are clear. These should promote inter and intra institutional
accountability;
(ii)
Independence and autonomy of the institutions: There should be legal safe guards against
political interference/undue influence that would otherwise promote patronage
politics or compromise the functioning of the institutions;
(iii)Transparency in decision making: There should be international best practices
like a statutory obligation to publish all
information on the identity and
shareholders of all license
holders, bidders and other applicants, disclose the Production Sharing Agreements
(PSAs) and make all decisions in accordance with an open process and make
such decisions generally accessible to the public. The functioning of the Oil
and Gas Sector should be inconformity with Article 41 of the Constitution on
the right of access to information and with the Access to Information Act
2005.
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Clause 4
Compliance
with environmental principles
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Provision
Objective
5 of clause 4:
A
person who carries on the management of the production, transportation,
storage or treatment of waste arising out of petroleum activities without a
license commits an offence and on conviction is liable to a fine not
exceeding five thousand currency points or imprisonment not exceeding ten
years or both.
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Observation:
There
is no specific offence for non compliance with the environment.
Recommendation:
There
should be a new specific offence of non-compliance with the environmental
principles set out in the Act. The penalty for either lack of compliance with
the environmental principles set out in the Act or operating without a
license should be five times the cost of a license and the equipment and
facilities used to carry out the non-compliant petroleum activities should be
confiscated by the State.
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Clause 6
Prohibition of petroleum activities without
authorization
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Provision
(2) A
person who contravenes subsection (1) commits an offence and is liable on
conviction—(a) if an individual, to a fine not exceeding ten thousand currency
points or imprisonment not exceeding ten years or both; and (b) if a body
corporate, to a fine not exceeding one hundred thousand currency points.
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Observation:
The fine
for operating without license is less than the cost of a license This makes
it more attractive to operate illegally.
Recommendation:
The
fine should be five times the cost of a license The State should be able to recover
all proceeds from the non-compliant petroleum activities and also the parties
that are convicted of an offence should become ineligible to apply for future
licenses for the next ten years.
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Clause 7
Agreements with Government
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Provision
The
section covers licensing/Regulatory Authority.
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Observation:
Roles
must be separated between the regulatory/oversight function and the trading
function to avoid conflicts of interest.
The Petroleum
Authority ("Authority") should regulate/supervise petroleum activities
and the National Oil Company should carry out the trading.
Recommendation:
The Government may enter into an agreement
through either the National Oil Company or the Authority.
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Clause 9
Functions
of the Minister
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Provision
The
Minister shall be responsible for—
(a)
granting and revoking licenses;
(b)
initiating, developing and implementing oil and gas policy;
(c)
submitting draft legislation to Parliament; minister
(d)
issuing petroleum Regulations;
(e)
negotiating and endorsing petroleum agreements;
(f)
approving field development plans;
(g)
promoting and sustaining transparency in the petroleum
sector;
(h)
approving data management systems;
(i) Any
other function incidental or consequential to his or her functions.
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Observation:
The Minister
cannot be an institution in the Act. The Minister is responsible for the
implementation of the whole Act.
Recommendation:
There should be Specific Duties of the
Minister: These
should be
(a)
initiating,
developing and implementing oil and gas policy
(b)
submitting
draft legislation to Parliament;
(c)
issuing
petroleum regulations;
(d)
promoting
and sustaining transparency in the petroleum sector; and
(e)
Any
other function incidental or consequential to his or her functions.
The licensing/regulatory
work should go to the Authority and the trading work should go to the
National Oil Company (NOC).
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Clause 11
Functions
of the Authority
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Provision
(1)
The function of the Authority is to monitor and regulate exploration,
development, and production of petroleum in Uganda.
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Recommendation:
The
functions of the Minister that are regulatory in nature should be added to
the responsibilities of the functions of the Authority so that the Authority
handles licensing and all oversight work.
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Clause 14
Directions by the Minister
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Provision
(1)
The Minister may give directions in writing to the Authority with respect to
the policy to be observed and implemented by the Authority, and the Authority
shall comply with those directions.
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Recommendation:
The Minister
should be entitled to give advice, rather than directions, to the Authority provided
that such advice given by the Minister shall not adversely affect or
interfere with the performance of the functions and exercise of the duties of
the Authority and shall be in compliance with the Act.
The Minister
should be entitled to give advice, and not directives, which means the Authority,
may accept or reject such advice in its sole discretion.
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Clause 18
Board of Directors of
the Authority
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Provision
(2)
The Board of Directors shall consist of seven members of high moral character
and proven integrity and competence appointed by the Minister with the
approval of the Cabinet.
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Recommendation:
The
composition of the Board should include a representative of each category of
stakeholders in the Oil and Gas sector and each of the relevant professional
bodies.
Appointment
of the members should be done by The President of the Republic and approved
by Parliament.
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Clause 33
Duty not to disclose information
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Provision
(1) A
person who is a member of the Board or a member of staff of the Authority
shall not disclose any information, which he or she may have obtained in the
course of his or her employment.
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Observation:
This
provision contravenes the right of access to information in the Constitution
and in the Access to Information Act 2005.
This
is too broad and risks having a chilling effect on transparency in the oil
sector.
Recommendation:
Disclosure
of information should be governed by Article 41 of the Constitution and the
Access to Information Act 2005 and should allow for disclosure as required by
the Act.
Board
members should also be protected by the Whistle Blowers Protection Act.
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Clauses 34 and 36(3)
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Provision
Authority’s
funding and expenditure rules.
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Recommendation:
The Authority’s
funding and expenditure rules should be strengthened to require compliance
with money laundering protection rules and budgetary processes respectively,
with information on the use of those funds being made public.
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Clause 42
Annual
Report
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Provision
(1)
The Board shall submit to the Minister, as soon as practicable but not later
than four months after the end of each financial year, a report detailing the
activities and operations of the Authority during the year to which the
report relates including audited accounts.
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Recommendation:
The
Annual Reports should be submitted to Parliament and made public, including
using such channels as website, public library, etc.
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Clause 43
National
Oil Company
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Provision
(1) There
shall be incorporated, under the Companies Act, a National Oil Company to
manage Uganda’s commercial aspects of petroleum activities and the
participating interests of the State in the petroleum agreements.
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Observation:
There
is need for clarity on the nature and type of company this oil company will
be.
Recommendation:
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Clauses 45-47
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Provisions
Duties
of the Board of NOC, reporting by NOC and instructions to NOC.
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Recommendation:
NOC’s
Annual Report should be tabled in Parliament and published.
The Board
composition should follow the same rules as those proposed in respect of the
Authority. NOC should be an independent and autonomous corporation.
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Clauses 48-57
Licensing
and allocation of rights
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Provision
Involvement
of the Minister again in licensing and regulatory work.
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Observation:
Licensing,
permits, and surveys should be the duty of the Authority and not the
Minister.
Recommendations:
There should be:
(i)
Firmer
requirements for technical and financial competence and a sound technical and
financial record as a pre-condition for award;
(ii)
Requirements to
propose, as part of any license application and/or during the life of a
license if new facts arise and steps
for mitigating any adverse impact and this should go beyond environmental
impact to cover social impacts as well as including relationships between the
companies and regular security forces or any human rights issues arising from
these relationships.
(iii)
The rationale for
decisions to award a license without a tender should be made public and
published;
(iv)
Application for
licenses should be made to the
Authority;
(v)
There should be
public disclosure of the identity of shareholders and other information on about the
applicants and licensees;
(vi)
There should be a
provision for the use of standard licenses and petroleum agreements;
(vii)
The Authority should give recommendations to
the Minister who submits to Cabinet for approval and then Parliament for
ratification.
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Clauses 126-130
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Provision
Liability
for damage due to pollution
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Recommendations
1.
More
detail on requirements of Environment Impact Assessments and Social Impact
Assessments while making licensing decisions
2.
There
should be standards for prohibiting petroleum activity in sensitive
environmental areas;
3.
Requirement
for the assessment reports before the production license is awarded;
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Clause 184
Supremacy
of this Act
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Provision
This
Act shall take precedence over all existing Acts relating to petroleum activities
in Uganda and where there is a conflict between the provisions of this Act
and any other written law, the provisions of this Act
shall prevail.
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Observation
Any
other written law may be construed to include the Constitution and to say
that this Act will take precedence over any other Observation:
Written
law would seem to purport to abrogate the Constitution. Recommendation
Mention
of "any other written law" should be deleted and a reference to the
Constitution at the beginning of the clause inserted reading:
“In
accordance with the Constitution,……"those of any such other Acts.
Policies and regulation relating to petroleum activities in Uganda".
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We would like also to propose that while reviewing Bill No 2, The
Petroleum (Refining, Gas Processing and Conversion, Transportation and Storage)
Bill 2012, the guiding principles mentioned in this note should be integrated
in Bill No.2 as well.
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