Nigeria considers law to fine oil firms over spills

Fri Nov 8, 2013 11:34am EST

* New law could cost oil firms tens of millions a year

* Hundreds of oil spills occur every year in Niger Delta

* Rights groups criticise regulator, oil firms over spills

By Joe Brock

ABUJA, Nov 8 (Reuters) - Nigerian legislators are considering a law to impose new fines on operators responsible for oil spills, a measure that could face major foreign companies with penalties running into tens of millions of dollars a year.

There are hundreds of leaks every year from pipelines that pass through the creeks and swamplands of the Niger Delta, damaging the environment and the profits of oil companies including Royal Dutch Shell and Italy's Eni.

Many of these spills are caused by oil theft and pipeline sabotage, a crime committed daily in the Niger Delta, where frustrations among millions of people in poverty run high.

There have also been rarer cases of large oil spills in deep offshore projects.

Currently oil companies are required to fund the clean-up of each spill and usually pay compensation to local communities affected, if it was the company's fault.

The law being considered by the national assembly, seen by Reuters on Friday, would impose new fines on oil firms when they are responsible for spills and strengthen the regulator's powers, including being able to force firms to shut operations.

Every barrel of oil spilled onshore or in coastal water would incur a fine of 200,000 naira ($1,300), while shallow water spillages would be penalised 175,000 naira per barrel and deep offshore leaks would cost 150,000 naira a barrel.

Shell's website said that in 2008 more than 50,000 barrels were spilled due to operational issues. Under the new law, this could incur a fine of 10 billion naira ($63 million).

Environmental campaigners say this is an underestimate and the real figure could be several times that.

In later years far less was spilled due to the company's error, it says.

Oil companies would have to report oil spills within 24 hours to the regulator or be fined 500,000 naira per day thereafter. They would also have to submit 0.05 percent of their operating budget to help fund the regulator.

"Only if polluting the environment becomes more costly than cleaning it up will the situation change for the better," said Senator Bukola Saraki, head of the senate's environment board.

Saraki's team said they hoped a vote on the bill would be held by the end of the year.

A Shell spokesman declined to comment on the proposed law.

Legislation is often difficult to enforce in Nigeria, where a patronage culture and widespread corruption create loopholes, according to watchdogs including Transparency International.

Clauses in the new law say the new regulator would set the salaries and benefits for its members itself and it would be allowed to accept gifts, including property and cash.

Amnesty International critized Shell this week, saying it manipulated the results of oil spill investigations to avoid paying fines or damaging its reputation. The company strongly denied the allegations.

Amnesty also criticised the Nigerian government for not having a more well-equipped oil spill regulator.

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