On a slippery slope
Nagaland government wrests control of oil resources from the Centre; communities cry foul
CHUMTAMO KITHAN folds a towel and wraps it around his mouth and nose before making his way into a dense patch of grass. The withered tufts of grass on the hill in his village Changpang in Wokha district of Nagaland soon give way to a vast barren land, at places covered with thick dry tar. Hot fumes fill the air. Eyes and skin feel the irritation. “You feel it before you see it,” says Kithan as he walks carefully, avoiding stepping on the sticky soil. A few metres ahead, concrete walls surround abandoned oil rigs. One can hear the bubbling sound coming from behind the walls. Kithan picks up a stick, climbs up the boundary wall and dips it into the crude oil leaking from the rig. “It has turned into a 1.5-metre open oil well,” he says. “These leaking rigs are all we have been left with following our historical struggle to assert rights over the land and natural resources.”
The struggle of Kithan’s tribe, Lotha, dates back to the early 1980s. With the state’s permission, the country’s multinational public sector unit, Oil and Natural Gas Corporation (ongc), had just begun extracting crude oil from the rigs it had sunk near Changpang.The area is part of Schuppen Belt that is believed to hold 600 million tonnes of crude oil and natural gas. “ongc over-extracted our oil but gave us very little share in the profits,” alleges Kithan. Irked, the residents of Changpang and adjoining Tsorri formed a union and protested against the oil giant. The Changpang Land Owners’ Union (clou) argued that Nagaland enjoys a special status under Article 371-A of the Constitution, which recognises customary rights of communities over land and its resources. The state cannot allow ongc to exploit the resources without their consent. clou demanded that the company should sign a lease agreement with the village council (traditional decision-making body in a village) or Lotha hoho (the apex body of the tribe).
The Naga Students’ Federation joined the protest, alleging that ongc mined 1.02 million tonnes of oil, which is much more than the amount permitted to it in the exploration lease. ongc shut shop in 1994 following widespread protests and threats from insurgent groups. “It was a watershed event. It was a recognition of Naga people’s rights over natural resources,” says Janbemo Lotha of Green Foundation, a non-profit in Wokha district.
But the euphoria did not last long. “Every summer, as the crude oil heats up at those depths, the rigs start leaking. With the first gush of rain, the spilled oil flows down into villages,” says Kithan.The authorities have unsuccessfully tried to contain the spill by constructing concrete walls around the rigs.
In September 2012, People’s Science Institute, a non-profit in Dehradun, found that the groundwater of Changpang contained oil, grease, phenol and iron beyond the standard limits.The oil spill is affecting the soil quality and health of all living beings in the village, the non-profit said in its report. “Many people in the village now suffer from respiratory and skin problems. Crop yields have also taken a hit,” says Chenithung Kithan, another resident of Changpang.
In 2011,a resident of Tsorri and non-profit dice Foundation in Kohima moved the Gauhati High Court against ongc and the state. They demanded
1,000 crore in compensation for “four decades of pollution” caused by the oil spill. ongc hurriedly abandoned the establishment without decommissioning or capping the rigs properly, they said in the petition.
While the fight continues, the state has once again allowed oil mining in the region. This time around, desperate to earn from its vast hydrocarbon reserves, the state has erred on the side of caution.
Ploy against people
The abandoned oil rigs had divided the community of Changpang into two groups: people on whose land rigs were sunk and those who were affected by oil spill. According to dice Foundation, in 2006 landowners of the rigs signed a deal with srm Exploration Pvt Ltd, a Gurgaon-based oil company, for tapping the treasure beneath their land. They also obtained 25 years of oil and gas lease from the village council. The Lotha hoho and the Naga hoho (the apex body of all Naga tribes) opposed the deal, saying oil belongs to the entire community and not to a few individuals.
Between 2006 and 2007,the Centre again allotted oil blocks in Nagaland to ongc. But the company could not proceed due to community opposition.
The Nagaland government seized the opportunity. “Some politicians came to our village and said we tried to trade in oil but messed it up, so now they would do it for us,”recalls Kithan.
In 2009, the state suspended all activities related to oil and annulled previous exploration and mining leases. It formed a Cabinet Sub Committee (csc) to work out modalities for governing oil and natural gas. But there was another stumbling block. Before Nagaland was formed in 1963, the Centre had introduced the Oil Fields Regulation and Development Act, 1948, and the Petroleum and Natural Gas Rules, 1959, which authorised it to develop and regulate hydrocarbon reserves across the country. States holding the reserve are eligible for a royalty decided by the Centre. Though Article 371-A guarantees that no Central law pertaining to land and its resources applies to Nagaland unless the Assembly ratifies it, the state government did not want to take a chance. In July 2010, it passed
a resolution which allowed it to develop petroleum reserves in the state, acquire mineral-bearing areas, set land compensation rates and landowners’ share in the royalty and issue environmental and forest clearance to projects. In 2012, it introduced Nagaland Petroleum and Natural Gas (npng) Regulations.
This made the Centre jittery. Worried that it might lose control over the vast reserve of petroleum—Nagaland has the potential to increase India’s onshore oil production potential by 75 per cent—the then petroleum minister M Veerappa Moily wrote letters to then chief minister Neiphiu Rio, opposing npng regulations.In June 2013, Moily, on the recommendation of the Union Ministry of Home Affairs, asked Rio to rescind npng regulations and withdraw the notification inviting companies for developing the reserves.He said Article 371-A does not confer on the Nagaland Assembly power to make laws related to oil.
This is when in 2011, the then Union petroleum ministry, replying to a Lok Sabha question, had said that “land and its resources”i n Article 371-A includes minerals and oil. Speaking at a public meeting, Rio accused the Centre of taking a U-turn on the matter.
The state’s firm stand against the Centre, however, was not primarily meant to benefit communities.
As per the benefit-sharing mechanism of npng regulations, for every 100 of crude oil produced, the company will give 16 to the state and the communities.The state will keep 50 per cent of the share, or 8, and pass on 2 to landowners of the rigs.The District Planning and Development Board will get 2 and the remaining 4 will be divided among the community.
A section of Naga communities are opposing this regulation. “It is scientifically wrong to give a higher royalty share to the landowners of rigs,” says Jonas Yanthan, vice-chairperson of the Kohima Lotha hoho. The rig may fall on anybody’s land but the reserves are spread over a vast area.At the most, the landowners of rigs can get a land access fee. Besides, on what basis does the government claim to be the owner of oil along with people and demand the highest royalty share, he asks. “It’s only the caretaker of whatever little land it has acquired for public works,” he adds.
“It is wrong to say that the government has become owner of oil and gas because the (npng) rules clearly state that unless the landowner (of the rig) signs the agreement with the selected company, the oil operations cannot take off in any district,” Chief Minister T R Zeliang told Down To Earth (see ‘State has the right to regulate oil and gas’).
T Methna, former president of Students’ Union of Konyak Tribe in Mon district alleges that the government has manipulated some community leaders by giving them roles in the prospective oil trade to extract consent from the owners of land where rigs are. One rule says the government “will request the president of the Naga hoho to obtain consent of the landowners in writing... for undertaking the operations...”.
The process of awarding contracts to companies is also dubious. Instead of inviting bids, the npng regulations assess a company based on its track record in Nagaland, its experience and how conducive is its financial and operational profile to undertake oil operations. Final selection is simply done by a ministerial group headed by the chief minister.“No technical officer is involved in the selection process,” says an official in the state’s mining department, wondering how the group decides technical aspects of leases.
“While most npng rules are flawed, the state did not follow them while awarding contract,”
alleges a journalist in Kohima. In February 2014, a little-known Metropolitan Oil and Gas Pvt Ltd (mogpl) bagged the contract for developing Wokha and Peren oil zones. The Union corporate affairs ministry’s data shows that mogpl was floated four months before Nagaland invited applications from companies in January 2013. mogpl had claimed that its promoters, Spice Energy, srm Energy and Cals Refineries—all part of one Spice Energy Group according to the Securities and Exchange Board of India (sebi)—have experiences in oil operations.An investigation by Down To Earth (dte) reveals a fraudulent history of its promoters.
MOGPL: flawed before conceived
To establish its experience, mogpl had mentioned in its application that Cals, which holds 91 per cent of its equity, is setting up an oil refinery at Haldia in West Bengal.But Cals has been mired in controversy.
In 2007,Cals issued 7.8 million global depository receipts (gdrs; sets of company shares listed and traded in a foreign country) to generate capital for the Haldia project. The gdrs, worth US $200 million, were immediately subscribed by Honor Finance Ltd owned by Sanjay Malhotra by borrowing US $200 million from a bank in Portugal. Incidentally, Malhotra was a promoter of Spice Energy Group. “This resulted in Cals itself financing its gdrs,” said sebi in a show-cause notice to the company in September last year. This subscription of all gdrs of Cals through “fraudulent arrangement” pushed the demand for its shares in the Indian stock market, said sebi. In another deal in 2009, Cals paid US $92 million to a Hong Kong-listed Asia Texx, owned by Gagan Rastogi, son of Cal’s director and Spice Group promoter Deep Kumar Rastogi ,for purchasing refinery equipment. While no equipment was delivered, Asia Texx used the money to buy back gdrs of Cals from Honor Finance. Malhotra’s company then used the money to pay back its loan. Following the “unfair trade practices”, sebi last year banned Cals from issuing equity shares for eight years.
Another Spice Group company and promoter of Cals, srm Exploration has also been indicted in the gdr forgery case.In March 2012,the Delhi High Court ordered winding up of srm Exploration while hearing a petition by a Czech company against its financial dealings.srm Exploration was hired by landowners of rigs in Changpang for exploring oil in 2006.
In September this year, Kohima Lotha hoho moved the Gauhati High Court against Nagaland for selecting mogpl.Its petition shows the 22 companies that had applied for the contract included experienced firms like Assam Company (India), Prize Petroleum, Deep Industries, Shiv-Vani Oil & Gas and Jubilant Oil & Gas. mogpl has, however, begun operations in Wokha in July.On September 22,the government announced that mogpl will start explorations in Peren, home district of chief minister Zeliang.
Vested interest?
In May this year, Zeliang replaced Neiphiu Rio after the former chief minister got elected as Member of Parliament. A politician in the state alleges that Zeliang could win over the support of mlas against another senior contender for the post because of his involvement in the process of restarting oil trade. As the minister of planning and coordination, Zeliang had played a crucial role in drafting npng regulations.
Kyong (Lotha) Students’ Union of Wokha alleges that the state favours mogpl. “The profile of an adviser with mogpl, Krishna Kumar M B, shows that he is adviser to Zeliang- rong baudi, apex body of chief minister Zeliang’s community in Nagaland, Assam and Manipur,” says Amos Odyuo, president of the union. Documents with dte show Kumar is in the management of mogpl. When dte contacted Kumar, he admitted his association with Zeliang- rong baudi. “But I do not advise Zeliang- rong baudi anymore because people created unnecessary controversies,” he said. Defending mogpl’s promoters, Kumar said, “most companies face such legal cases.”
Next, land targeted for oil
After oil, those in power are eyeing oil-bearing land in the foothills. In March this year, the state prepared a vision document to set up Nagaland Special Development Zones (nsdzs ) in these areas. An internal concept note on nsdz, issued by the chief secretary’s office to deputy district commissioners in November last year, says the idea is to restructure the legal land tenure systems, “that are largely tribal in nature,” to allow “commodification of land as has happened in all other societies...a round the world”. At present, the state laws do not allow non-natives to settle in the state. This arrangement aims to protect Nagas from land alienation. Under nsdz, a system for “permanent settlement of non-Nagas for investment purpose” will be developed. They will also be issued pattas (land titles), according to the note.
“This is a ploy to sell the oil-bearing land to industries,” says a politician in the state. After all, as per the npng rules, the owner of the oil-bearing land will get a share in the revenue earned from oil production.The Bharatiya Janata Party-led government at the Centre is yet to clarify its stand on the matter.