QUALITY CONTROL AND ENVIRONMENTAL IMPACT ASSESSMENT

Independent periodic quality review approach could help to address environmental impact in the oil and gas industry, writes Babatunde Anifowose

Experts have suggested that the global fossil fuel industry risks a loss of about US$33 trillion (that is, £26 trillion or N10,568 trillion equivalent) in income over the next 25 years should oil pollution and climate change impacts force companies to keep untapped oil and gas reserves in the ground. Also McGlade and Ekins in a study published in Nature, show that in order to avoid a greater than two degrees centigrade average global temperature rise, the world will have to keep 33% of oil reserves, 50% of gas reserves and over 80% of current coal reserves in-situ from 2010 to 2050. Some of these suggestions presently appear inconceivable for many reasons. First, the current (and probably future) levels of renewable feedstock cannot truly guarantee the magnitude of change or switch required globally given the ever rising population growth rate and the voracious quest for economic emancipation. Second, most developing nations (like Nigeria) lack the requisite infrastructure and resources to midwife a carbon-neutral economy; and third, the potential implications of losing US$33 trillion (N10,568 trillion) in revenue and locking-out billions of capital expenditure (CAPEX) remain unclear, particularly for the vulnerable third world nations. So, what alternatives are there for managing oil and gas-related environmental impacts? How can such alternatives better manage environmental issues in developing nations with antecedents of environmental pollution like in Nigeria’s Niger Delta? Environmental Impact Assessment (EIA) is a proactive methodical process that investigates and predicts the potential direct, indirect and cumulative impacts of proposed project activities on environmental receptors, ideally from project initiation to decommissioning, and offers plausible mitigation strategies. Though EIA decree in Nigeria was only enacted in 1992, it does mirror the US NEPA Act of 1969 in certain areas. The EIA report, also known as Environmental Impact Statement (EIS), is a key document for reporting the anticipated impacts of projects, their mitigation and management plans. In most countries, the EIA process is part of the project permit or project approval procedure stipulated by the relevant authorities. Also, financial institutions like the World Bank and the International Finance Corporation often require the submission of a detailed EIS as part of environmental due diligence in project financing. Therefore, it is safe to assume that the relevant national (or indeed multilateral) requirement which supports decision-making in granting project permits/approval or development consents is predicated on the understanding that: one, an EIA study, including fieldwork and laboratory analysis (where necessary), has been undertaken; and two, the subsequent EIS or EIA report is of high quality, and contains ‘accurate’ assessment of the environmental impacts.

However, past studies show that EIS quality is not always satisfactory (e.g. see European Commission 2009). For instance, Backlund stated that the quality of impact assessments in the EU suffered from applications of overly simple methodologies, and incomplete assessment of environmental impacts. Furthermore, in the US, Eilperin and the National Commission found that major oil and gas projects (e.g. BP’s Macondo well drilling project in the GoM) were exempted from detailed environmental impact analysis. Nigeria, like other parts of the world, has its fair share of quality issues in EIA including the oil and gas sector. In the first empirical study of the quality of EISs for both onshore and offshore oil and gas projects with tested hypothesis and funded by the PTDF (2007-2010), an independent Periodic Systematic Quality Review (PSQR) of EISs was demonstrated as a potential solution. This PSQR – a quality control tool – involves the sampling and methodical evaluation of past project EISs using an adaptable review model. No doubt, performance review of EISs can help to strengthen quality control within EIA systems and a strong link exists between EIA process and EIS quality.

Because the leaderships of both the Federal Ministry of Environment and the Federal Ministry of Petroleum Resources/Department of Petroleum Resources mean well for Nigeria, this article hopes to publicly draw their attention to the schematic illustration of a plausible implementation framework for the PSQR in Nigeria’s oil and gas industry with strong lessons for the burgeoning mining sector.

The implementation of the PSQR in Nigeria has a number of advantages including: it will serve as a periodic stage-gate and stock-taking process to assess the development of EIA and quality issues in the oil and gas industry while identifying strengths/ good practices that can be shared and the key weaknesses requiring urgent attention; training for FME & DPR on the concept – first of its kind as adapted for the oil & gas industry, modified for Nigeria; policy update to reflect independent periodic systematic quality review (c. every five years). The process is owned and managed by a steering committee five years from date of policy initiation. No. Continuous stakeholder engagement on the process and possibly a pilot run? Yes. Conduct an appropriate statistical sampling from the list of all approved project EISs during the five-year period. Undertake an independent review of the sample and feedback to FME and DPR on areas of strengths, weaknesses and action plan and timing for improvement five years from the last quality review process? Yes.

Finance to run the process e.g. a small levy per EIA submission saved up over a five-year period. Other funding sources can also be explored. No. PSQR will serve as a ‘third-eye’ and a positive but firm way to further enforce the implementation of EIA policy as stakeholders would ordinarily want to maintain a positive reputation by ensuring good quality EISs; generally improve impact analysis, especially quantitative impact prediction – often a major problem area globally – since stakeholders are aware of the periodic independent quality review process; increase the propensity for ‘near-accurate’ decision-making since the content of EISs / EIA reports is normally one of the key bases of project approval. Hence, the resultant EMPs are more likely to represent reality as garbage in is garbage out; and, PSQR will promote the principles of environmental sustainability i.e. inclusivity, integrity, stewardship and transparency – all in line with the agenda of the present federal government.

Furthermore, Sir Nicholas Stern – former World Bank chief economist and author of the Stern review of the economics of climate change posited that a two to three degrees centigrade rise in global temperature could reduce global economic output by three per cent and suggested that one per cent of global GDP (approx. $US 702 billion (NB: Global GDP as of 2015 stands at US$74,152,476 million, according to the World Bank has to be spent per year to avert dangerous climate change. He later reviewed this upward to two per cent of global GDP which translates to roughly $US1.4 trillion per year. This is only looking at climate change impacts on a global scale; and when the localised impacts of oil and gas activities such as oil spills and others are considered, the odds are really stacked against developing oil producing nations. Therefore, the fundamental question is: where will such huge sum of money as US$1.4 trillion per year come from and what percentage of it should be expected from Nigeria? – all in the name of reducing environmental pollution and minimising climate change impacts? One of the few practicable solutions to the dilemma of managing oil and gas-related environmental impacts is, in fact, imbibing the principles of sustainability as a means of improving business performance and that’s what the independent Periodic Systematic Quality Review (PSQR) of EISs can deliver. Otherwise, can the world afford a $33 trillion (N10,568 trillion) loss in income over the next 25 years or keep 33% of oil reserves, 50% of gas reserves and over 80% of current coal reserves in-situ from 2010 to 2050 and atrophy billions of dollars’ worth of CAPEX? Of course, Nigeria and even the developed nations cannot afford such luxury. Meanwhile, our government and its populace have long realised the need for economic diversification but this may remain a phantasmagoria if left without a sustained funding stream; yet building up foreign debts through loans is not a sustainable option as it can easily mortgage future generations. Therefore, harnessing our Godgiven natural resources (e.g. oil, natural gas, mining, etc.) in a truly sustainable and responsible manner could help channel the needed investments (e.g. oil & gas revenue earnings) for economic diversification and the much-touted carbon-neutral economy in the long run.

In conclusion, the Federal Ministries of Environment and Petroleum Resources/Department of Petroleum Resources can do their bit by ensuring that the new PSQR quality control approach is carefully considered and acted upon. Albert Einstein is credited with the saying that “insanity is doing the same thing over and over again, but expecting different results”. So, let’s try the new PSQR approach in the ongoing attempt/s to address environmental impacts of the oil and gas industry, after all the empirical study that led to the said PSQR was funded by the PTDF. The Vice- President, Professor Yemi Osinbajo, has in recent weeks visited the Niger Delta area seeking to broker peace with militants whose interdiction of strategic oil and gas facilities had its roots in the historic environmental degradation of the region. The PSQR is a quality control tool that can further support the federal government’s mission in this respect, especially in the ongoing and future exploration, production and transportation of oil and gas resources as well as the burgeoning mining sector. Dr. Anifowose wrote from the United Kingdom