The Petroleum Industry Act (PIA) 2021, Host Communities Development Trust, and the Burden of Community Development.

 The Petroleum Industry Act (PIA) 2021, Host Communities Development Trust, and the Burden of Community Development.

For decades, the relationship between oil companies and their host communities in Nigeria's oil-rich Niger Delta region has been fraught with tensions. Communities bearing the environmental and socio-economic brunt of oil exploration were deprived of their fair share of oil wealth. These oil-producing regions suffer from environmental degradation, poverty, and underdevelopment due to decades of oil operations by multinational companies. Efforts by the government and oil companies to develop these communities through corporate social responsibility (CSR) initiatives were inadequate and unsustainable. The lack of clear regulations outlining oil companies' responsibilities towards host communities resulted in a sense of distrust and community unrest.

The unstructured approach to community development initiatives before the PIA further strained the community-company relationship. Though some companies like Chevron took the initiative to establish the Global Memorandum of Understanding (GMoU) model in 2005 to foster development through community participation, corporate social responsibility (CSR) projects were largely at the discretion of oil companies. Communities had little input in determining their needs, leading to misaligned development priorities. This patronage-based approach to community development failed to deliver sustainable progress.

The Petroleum Industry Act (PIA) 2021 was thus enacted with the aim of reforming the sector and addressing issues of host community development. A key provision is the establishment of Host Communities Development Trusts (HCDTs), funded by oil companies' annual contributions of 3% of operating expenditure to drive development in their host communities. This is a significant shift from the previous CSR model to legally mandated community development funding. The HCDT funding model has been hailed as having immense transformative potential for communities if properly implemented. Key expectations include guaranteed funding for communities that is steady and independent of fluctuating oil prices and companies' profits. Development would also be more needs-based and inclusive, as the firms are mandated to conduct needs assessments and consultations within their host communities. There are hopes for a focus beyond mere infrastructure to human capital development programmes with generational impact. Increased transparency and accountability are also expected with community representation on HCDT boards and other oversight mechanisms. Companies are expected to facilitate the implementation of long-term development plans, moving away from the previous ad-hoc projects. This would allow for more strategic and sustainable community growth. Overall, the PIA model is expected to improve company-community relations and reduce conflict, promoting a better operating environment.

However, two years into PIA implementation, progress has stalled. A majority of oil companies are reportedly yet to remit the 3% annual contribution to the HCDTs. This setback lies in disagreements regarding the HCDT governance structure outlined in the PIA. There have been delays in inaugurating boards, opening trust accounts and other aspects, stalling commencement of development projects. The tensions between communities and companies over implementation issues have escalated in some cases into litigation. There is also some politicization of the PIA process with interference by local elites, stakeholders and state representatives. 

The PIA confers significant powers on oil companies to constitute HCDT boards of trustees in their host communities. Community stakeholders criticize this provision, arguing that the PIA's HCDT framework prioritizes the interests of oil companies over those of the communities it's meant to serve. With no specific guidance in the PIA, the process for determining community representation on trustee boards remains unclear. This lack of clarity has resulted in oil companies appointing representatives in ways perceived as biased by communities. For instance, in Delta and Akwa Ibom states, communities have protested what they view as oil companies' imposition of handpicked cronies to control the HCDTs. In Rivers State, certain traditional rulers were accused of aiding oil companies to hijack the HCDT establishment process, causing deep rifts. Such disputes over the composition of HCDTs persist across the region. The PIA's community development objectives cannot be attained amidst this paralysis. Its notion of "host communities" remains vague and problematic. By not delineating community boundaries, determining community membership, or providing criteria for representing communities, the law leaves identity and participation issues unresolved. These gaps enable the divide-and-rule tactics that have plagued community development efforts pre-PIA to continue, as unbothered stakeholders exploit inter and intra-community differences for their benefit. The HCDT governance structure concentrates powers in the board of trustees without crafting checks and balances to ensure accountability. It risks replicating the elite capture, corruption, and patronage politics that drained CSR efforts of it meaning for ordinary people.

Despite the efforts of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) to expedite the 3% contribution, imposing a $1,825 million penalty on defaulting oil companies at a daily rate of N52,500 per the PIA, most firms remain unresponsive. To achieve the sustainable, self-determined community development envisioned through PIA-mandated HCDTs, specific reforms are necessary. The law should be amended to limit oil companies' role in unilaterally selecting HCDT boards of trustees. Board composition mechanisms must be inclusive, participatory and recognize communities as primary stakeholders. Models like Chevron's GMoU that empower communities to nominate their own representatives could be instructive. Clear definitions and guidelines for identifying host communities, determining membership and representation should be developed by regulators in consultation with communities themselves. Leaving boundary and membership issues ambiguous breeds conflicts.

Also, checks and balances should be instituted within the HCDT governance framework to ensure transparency and accountability to communities. Independent external audits, community general assembly oversight, and social audits could complement financial reporting to the industry regulator.

Grievance redress and dispute resolution mechanisms involving both industry and community representatives should be established by regulators to mediate HCDT establishment disputes and other PIA implementation challenges.

Beyond just funding, a comprehensive legislative and policy framework to deliver education, healthcare, environmental remediation, and local economic opportunities is required to achieve the PIA's goal of fostering sustainable prosperity in host communities. The PIA's mandate certainly signifies progress by dedicating revenues specifically for community development. However, the ongoing standoff over HCDTs shows the burden continues to be on communities to demand accountability and insist on development on their own terms. Correcting the PIA's deficiencies can help the HCDTs fulfill their promise of making oil-producing regions partners rather than bystanders in Nigeria's oil wealth.

Abasiama Umohatah boasts extensive expertise in government and community relations, garnered over numerous years within the oil and gas industry. Currently pursuing a doctoral degree in Petroleum and Gas Law at Nnamdi Azikiwe University in Awka, Nigeria, he stands as a seasoned professional in his field. To connect with him, you can reach out via email at semaumoh@yahoo.com.

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