GAS FLARING REGULATION IN THE OIL AND GAS INDUSTRY: A Comparative Analysis of Nigeria and Texas Regulations.

By Dennis Otiotio

University of Tulsa College of Law May 2013

GAS FLARING REGULATION IN THE OIL AND GAS INDUSTRY: A Comparative Analysis of Nigeria and Texas Regulations. TABLE OF CONTENT
1. INRODUCTION page 2 1.1 Background 1.2 Study Area 1.3 Research Objective 1.4 Research Question 1.5 Methodology 2. UNDERSTANDING THE BASICS OF GAS FLARING page 10 2.1 What is gas flaring? 2.2 What are the reasons for flaring gas? 2.3 What are the environmental impacts of gas flaring? 3. International framework for gas flaring reduction page 13 3.1 International convention on the environment 3.2 The United Nations Framework Convention on Climate Change (UNFCCC) 3.3 The Kyoto Protocol 3.4 Global Gas Flaring Reduction Initiative (GGFR) 4. The Nigerian Institutional and Regulatory Framework page 22 4.1 Background history on the regulation of gas flaring in Nigeria 4.2 The legislative and regulatory framework in Nigeria 4.3 The institutional framework for regulating gas flaring in Nigeria 4.4 The challenges, successes and failures at reducing gas flaring in Nigeria 5. The Texas Institutional and Regulatory Framework page 34 5.1 Background history on the regulation of gas flaring in Texas 5.2 The legislative and regulatory framework in Texas 5.3 The Institutional framework for regulating gas flaring in Texas 5.4 The challenges, successes and failures at reducing gas flaring in Texas 6. ANALYSIS AND CONCLUSION page 48

1. INTRODUCTION
1.1. Background of the Study.

The production of oil and gas generate waste gases that need to be controlled in a manner that protects the environment. But a major problem with oil and gas exploration activities is the inability of governments and their regulatory agencies to control and prevent environmental pollution and other associated problems. Oil spillage, gas flaring and venting have caused loss of lives, and have adversely affected human health and the environment. These adverse effects have led to the clamor for strict environmental regulation of oil and gas operations, in order to control, reduce or prevent pollutions arising from exploration and exploitation activities. Gas flaring is one of the most contentious energy and environmental issues facing the world that has persisted for decades. The World Bank estimated that the annual volume of natural gas being flared and vented globally in 2011 is about 140 billion cubic meters (bcm).1 This is enough to provide for the annual gas consumption of Central and South America. The World Bank had warned that efforts to reduce gas flaring needs to be sustained because there has been a slight increase in global gas flaring from 138 bcm in 2010 to 140 bcm in 2011. The World Bank figures shows that Russia tops the worlds flaring countries with 37.4 bcm, followed by Nigeria with 14.6 bcm, while the United States is fifth flaring country in the world with 7.1 bcm.
1

World Bank Press Release dated July 3, 2012, available at www.worldbank.org.

Gas flaring is a waste of valuable non- renewable source of clean energy and causes the wasteful emission of greenhouse gases (GHG), which is directly linked to global warming. The international community has realized the potential impact of gas flaring on the environment and seriously seeks to address it through the United Nations Framework Convention on Climate Change (UNFCCC)2 and other conventions, including the Kyoto Protocol,3 made pursuant to the UNFCCC. In 2002, the World Bank, in furtherance of its poverty reduction policy started a public- private partnership initiative called Global Gas Flaring Reduction (GGFR). This initiative was launched formally at the World Summit on Sustainable Development (WSSD), in Johannesburg, South Africa, with the aim of reducing gas flaring and venting worldwide by supporting national governments, development agencies, and oil producing companies in their efforts to reduce environmentally damaging flaring and venting of associated gas. A World Bank GGFR study identifies the lack of an effective regulatory framework, non-availability of local and international gas market, and financial constraints for the execution of gas reduction projects as the three main barriers to natural gas conservation4. It is generally believed that the enactment of environmental and conservation laws, coupled with the establishment of independent regulatory and enforcement framework will change the general behavior and attitude towards environmental protection and invariably reduce gas flaring. However some economists have

2
3

Printed in 31 ILM (1992) Printed in 37ILM (1997) 4 World Bank, Report on Consultation with Stakeholders. Global Gas Flaring Reduction - GGFR Report No. 1 (Washington: World Bank 2002)

argued that regulation is not the best approach to encourage the oil and gas industry to reduce gas flaring but rather market incentives aimed at reducing cost and stimulating innovations.5

1.2.

Study Area

The area of study of this research is the Federal Republic of Nigeria and the State of Texas in the United States of America. Nigeria and Texas are both rich in oil and gas resources and have had the problem of gas flaring in the course of oil and gas production. In Nigeria, flaring of associated gas continues to generate adverse environmental and energy consequences against the backdrop of sustainable development. Presently Nigeria is still the second largest gas flaring country in the world despite legislation enacted to phase out gas flaring in 2008. In Nigeria there are several legislation and regulatory institutions regulating gas flaring in the oil and gas industry and Nigeria is also signatory to several international conventions and protocols aimed at reducing gas flaring. But these regulatory efforts have been unsuccessful as gas flaring continues unabated, and it remains the accepted industry practice, even though gas flaring has been illegal since 1984. As at 2012, it is believed that about 25 percent of gas production in Nigeria was flared, while only 75 percent of gas production was utilized. Though the MPR states that only 18 percent is being flared.

Jack I. Knetsch, Environmental Economics, Environmental Law: An Intensive Short Course for Practitioners. (1992), 32, cited in Roger Cotton & Cara Clairman, The Effect of Environmental Regulation in Technological Innovation in Canada 21 Canada- U.S. L.J. 239

In contrast to Nigeria, Texas, the largest oil and gas producing state in the United States has recorded tremendous success in reducing gas flaring. Although United States is the fifth largest gas flaring country in the world, with a total flare of 7.4 bcm, Texas flared gas accounted for only 4.2 percent of that figure. Since 1866 when the first oil well was drilled, Texas had enacted legislations and created institutions to regulate gas flaring in the oil and gas industry. The states efforts are complimented by national environmental legislations and regulatory institutions, which have successfully reduced gas flaring to a minimum level. Texas has long had a history of best practices with regards to gas flaring regulation. Texas regulators strictly enforce the rules and operators fully comply with existing regulations. As at 2012, 0.5 percent of the gas production in Texas was flared, while 95.5 percent of gas produced was utilized.

1.3. Research Objective. This research will do a comparative analysis of all existing legislation regulating gas flaring in the oil and gas industry, the institutions created to regulate gas flaring and how the institutions regulations affect the operations of oil and gas companies. This research will assess the applicable enforcement strategies and its efficacy in the control of gas flaring in the oil and gas industry in Nigeria and Texas. The research will also conduct a comparative analysis of the enforcement provisions of various statutes and regulations so as to determine the powers conferred on the regulatory agencies in Nigeria and Texas.

A comparative study of gas flaring regulations in the oil and gas industry in Nigeria and Texas is imperative to the glaring difference in the regulatory framework between Nigeria and Texas, despite their similarity as big producers of oil and gas. The difference in the oil and gas jurisprudence as it relates to ownership structure of oil and gas is also instructive. While Nigeria lacks effective and efficient legislation and regulatory institutions to reduce gas flaring, Texas has an efficient regulatory regime aimed at reducing gas flaring. The lesson that Nigeria can learn from Texass success will be explored to ascertain if similar regulatory framework can be replicated in the Nigerian oil and gas industry with little modification. The research will also make recommendations that will be helpful in the establishment of an effective legal regime and functional regulatory institutions in Nigeria. There has been no known comparative study of gas flaring regulation in Nigeria and Texas and this research will be the first and it will provide lawyers in both jurisdictions a comparative perspective and understanding of the law on the issue. In addition the findings in this paper might create avenue for further research.

1.4. Research Question. In order to achieve the aim of this research, the paper will address the following research question: 1. What are the legal issues regarding gas flaring regulatory framework in Nigeria and Texas?

2. What are the available legislative and institutional framework and enforcement strategies in Nigeria and Texas? 3. What are the factors responsible for the success of Texas gas flaring reduction efforts? 4. What are the factors affecting gas flaring phase-out regulations in Nigeria? 5. What lessons can Nigeria learn from Texas in order to achieve complete gas flaring phase-out?

1.5. Literature Review. The issue of gas flaring is a global phenomenon with its attendant environmental consequences. Its importance has propelled lawyers and non-lawyers alike to write articles on the subject. Garba I. Malumfashi,6 wrote on the review of the regulatory, environmental and socio- economic issues relating to gas flaring in Nigeria and concluded that phase-out of gas flaring in Nigeria in 2008 was feasible, depending on the commitment of the government in achieving that objective. Ismail O. Saheed and Umukoro G. Ezaina7 conducted research on the multi faceted impact of gas flaring on a global scale and the different approaches employed by researchers to measure gas flared and its resulting emissions. The outcome of the research shows that there is no single global methods by which emission factors and estimation procedures in the oil and gas industry all over the world can be used to determine

6Garba

I. Malumfashi, Phase Out of Gas Flaring in Nigeria by 2008: The Prospect of a Multi- Win Project, University of Dundee, Scotland, United Kingdom 7 Ismail O. Sahad and Umukoro G. Ezaina, Global Impact of Gas flaring, Energy & Power Engineer, 290-302, vol.4 issue 4, (July 2012)

the volume of gas flared. Christen Kris,8 focused on the environmental impact of gas flaring, venting and efforts by the world bank and governments to commercialize associated gas, including developing domestic markets and access to international markets, and creating legal and fiscal regulations for associated gas. Ologunorisa E. Temi9 wrote on the impact of gas flaring on the Niger Delta region of Nigeria and concluded that there is urgent need for scientific study and analysis of the effect of gas flaring on the different environmental compartments in the Niger Delta, which is a necessary ingredient for achieving sustainable development. David F. Prindle10 conducted a study on the efforts of the Texas Railroad Commission in reducing gas flaring from 1930 to 1949. He stated that the Commission was one of the most important regulatory bodies in the United States, and that it successfully prevented the destruction of the states natural gas reserve through strict regulations. The article enumerated the challenges faced by the commission and how it overcame those challenges. Howard R. Williamss article11 focused on various methods applied by the different states in the United States to conserve oil and gas, and discussed the steps taken by regulatory agencies to regulate the flaring of gas in some states including Texas, but concluded that they are not inclined to enter an order unless convinced that it is economically feasible to dispose of the residue of the casinghead

Christen Kris, Environmental Impacts of Gas Flaring, Venting Add Up Environmental Science &Technology, vol. 38, issue 24, 480 (2004) 9 Ologunorisa E. Temi, A Review of Gas Flaring on the Niger Delta Environment IJSD&WE, Vol. 8, 249 (2001) 10 David F. Prindle, The Railroad Commission and the Elimination of the Flaring of Nat ural Gas 1930 - 1949 The Southern Historical Quarterly, vol. 84, 293 - 308 (1981) 11 Howard R. Williams, Conservation of Oil and Gas Harvard Law Review, vol. 65, no.7, 1155 -1183 (1952)
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gas by sale or reinjection. Moses 12 discussed extensively on the state of the law on gas flaring in the United States leading up 1945. There is no research that has been conducted to do a comparative analysis of gas flaring regulations in Nigeria and Texas, and this research will abridge that gap and serve to be immensely beneficial to the oil and gas jurisprudence of both jurisdictions.

1.6. Research Methodology. This research will undertake an indebt study and comparative analysis of all legislations that regulate gas flaring in Nigeria and Texas, their respective regulatory institutions, their composition, powers and ability to perform their respective functions. In addition this research is intended to identify the major environmental regulatory issues as it relates to gas flaring in the oil and gas industry in Nigeria and the state of Texas in the United States. This research will also undertake a comparative analysis of the existing regal regime and institutions for the regulation of gas flaring in Nigeria and Texas, and analyze the lapses in existing legislation, the failure of Nigerian regulatory agencies to administer and enforce gas flaring regulations, and the role of major regulatory institutions such as the Ministry of Petroleum Resources, the Department of Petroleum Resources (DPR), and the Federal Ministry of Environment. The legislative framework and existing institutional approach by Texas and the United States Federal Government in controlling gas flaring will be critically examined,

12

Moses, Statutory Regulations in the Carbon Black Industry 20 TULANE L. Rev. vol. 83, (1945)

including the role of the main oil and gas regulatory agency, The Texas Railroad Commission, and its environmental counterpart, the Texas Commission for Environmental Quality in reducing gas flaring in the industry. The research will be largely library based and will rely on both primary and secondary source materials in statutes, journal, case reports, historical records, books, legislative code, administrative regulations, conference papers, newspapers/ magazines and other internet based sources such as Westlaw, LexisNexis, Cali, Loislaw, Lawriter, Fastcase, Quardry online , nigerialawonline, Nigeria- Law, Nigeria Washlaw, Nigerialawreport and etc.

2. 2.1.

UNDERSTANDING THE BASICS OF GAS FLARING What is Gas Flaring? In the early development of oil and gas production, operators did not consider natural gas as a useful product and therefore burned it off at the well or vented it into the atmosphere, through a process called gas flaring. Gas flaring is the controlled burning of unutilized natural gas that is associated with crude oil when it is pumped from the ground.13 A flare system which is similar to the lighting of a burner tip on a gas stove,14 is made up of a flare stack and pipes that feed gas back to the stack, and the gas flows into a vertical pipe and is immediately lit to burn off. In the night the flame of the flared gas is easily seen in the sky. The flare size and brightness depends on the amount and type of liquid in the stack.

Justice in Nigeria, Gas Flaring in Nigeria: an Overview Newsletter, 1 (April 2010) Chesapeake Energy, Gas Flaring in the Barnett Shale: A safe and regulated practice March 2009, p1. Retrieved from www.askchesapeake.com on 1/19/2013.
13 14

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Gas flaring takes place at oil drill sites, refineries, natural gas plants, chemical plants, and landfills. The process emits gas from pipes in oil or gas wells, or through smoke stacks at industrial plants and burns it.15 But this paper is concerned primarily with the flaring of associated or casinghead gas that is produced along with crude oil.

2.2.

What are the reasons for flaring gas? In most developed countries natural gas is valuable and 95 percent of natural gas is captured and utilized. However there are several reasons why natural gas is flared in those countries during drilling or production process. It might be necessary to flare gas during well production testing after the completion of drilling, in order to release unsafe pressure levels in wells during maintenance and emergencies, for managing gas compression, processing and to recover oil.16 Flaring of casinghead gas might be necessary in a new area of exploration, while awaiting the construction of gas gathering pipeline to connect the well to major pipeline or sales outlet. In contrast, gas flaring goes beyond normal industry practices in Russia and most developing countries in Africa and Middle East.17 Gas is continuously flared in high volumes because it is the cheapest means of separating the associated gas from the crude oil. The non-availability of a viable domestic

15
16

Definition of gas flaring, retrieved at www.ehow.com on 3/6/2013. Ohio EPA, Understanding the Basics of Gas Flaring. Newsletter (May, 2012). Retrieved at www.epa.ohio.gov on 1/19/2013. 17 Gerner, Franz; Svensson, Bent; Djumena, Sascha, Gas Flaring and Venting: A Regulatory Framework and Incentive for gas Utilization World Bank, Washington, DC. 2 (2004). Retrieved at www.openknowledge.worldbank.org on 3/7/2013.

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gas market and the lack of requisite infrastructure such as liquefied natural gas facilities and pipelines are a major obstacle to many developing countries effort in reducing gas flaring.18 Therefore, gas flaring is allowed to burn the associated gas that is produced along with the crude oil, and thereby guarantees continued production, which results in increase revenue to the government. The low domestic gas prices also contribute to gas flaring because it makes utilization of the gas unattractive.

2.3.

Environmental Impact of gas flaring. Gas flaring is a waste of potentially valuable source energy and a global source of black carbons, because the process emits a considerable amount of carbon dioxide into the atmosphere, which causes global warming. In most developing countries like Nigeria, gas flaring occurs on a daily basis on the oil production platforms, thereby adversely affecting the environment and health of the people living in the communities that are situated near the oil wells. The associated gas flared into the atmosphere contains GHGs, as well as other poisonous substances such as dioxins, benzene, toluene, nitrogen, and sulphur dioxide19. These poisonous gases cause serious health problems such as cancer, asthma, blood disorder, chronic bronchitis, and respiratory illness to the people living near the gas flaring points.20

Ibid at p3. Intergovernmental Panel on Climate Change, The Report of the Working Group 1 of the IPCC, Survey for Policy Makers. (IPCC. 2001) 20 Environmental Rights Action, Fact Sheet: Harmful Gas Flaring in Nigeria. ( ERA 2008)
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The sulphur and nitrogen emitted from the flared gas causes acid rain, which adversely impact soil fertility, thereby reducing crop yield. The roofs of houses in the area are also susceptible to accelerated rusting because of the acid rain from the flared gas.21 According to Nwankwo and Ogagarue,22 waters in gas flaring environment contains higher concentration of harmful metals such as barium, cyanide, selenium, chromium, iron, manganese and copper, which have concentration levels above permissible limits by the World Health Organization. Gas flaring negatively affects the human development of the people living near the flare points as a result of disease, low crop yield, environmental degradation and other socio-economic impacts.23 According to the United States Environmental Protection Agency (EPA)24, the effects of gas flaring are complex, not well summarized by a global warming potential. 3. 3.1. INTERNATIONAL FRAMEWORK FOR GAS FLARING REDUCTION International Convention on the Environment. Nations were not seriously concerned about environmental issues until 1972, when the United Nations Conference on the Human Environment was held in Stockholm Sweden. At the conference, nations met for the first time to deliberate on global environment and development issues. This conference was seen as a success, because it brought together developed countries who
21
22

Amnesty International, Nigeria: Petroleum Pollution and Poverty in the Niger Delta. 18. (2009) C.N. Nwankwo and D.O. Ogagarue, Effects of Gas Flaring on Surface and Groung Waters in Delta State Nigeria. Journal of Geology and Mining Research. vol. 3 no.5, 131-136 (May 2011) . 23 Friends of the Earth, Gas Flaring in Nigeria Media Briefing. 4. (October, 2004) 24 US EPA Report to US Congress, (March 2012).

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laid emphasis on environmental protection and developing countries who laid emphasis on social and economic development, to the discussion table. The Conference came up with 26 Principles, calling on states and international organizations to play a coordinated, efficient and dynamic role for the protection and improvement of the environment. In 1973, the United Nations, pursuant to the proposal of the Stockholm Conference, established the United Nations Environment Programme (UNEP), with a mandate to coordinate UN environmental activities, and assist developing countries in implementing environmentally sound policies and practices. In 1988, UNEP and the World Meteorological Organization established the Intergovernmental Panel on Climate Change (IPCC). In 1985, the Vienna Convention on the Protection of the Ozone Layer was agreed upon at the Vienna Conference, and it entered into force in 1988. The convention enjoins parties to appropriate measures to protect human health and the environment against negative effects that will modify the ozone layer due to the human activities. Article 2.1. Unfortunately the Convention did not include legally binding goals for the reduction of CFCs. The Montreal Protocol on Substance that Deplete the Ozone Layer, which is a protocol to the Vienna Convention is a treaty established to protect the ozone layer by phasing out the production of chemicals that deplete ozone layer while searching for ozone friendly alternatives. The treaty was opened for signature in September 16, 1987 and entered into force on January 1, 1989.

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197 states and the EU have since ratified the two ozone treaties, thus they are regarded as the most successful international agreements in the history of the United Nations. But significant progress in creating international awareness on the impact of gas flaring was achieved in 1992, in the United Nations Conference on Environment and Development (UNCED), commonly referred to as the Earth Summit. The conference was held in Rio de Janeiro, Brazil from 3rd June to 14th June 1992. The conference, which was attended by about 172 governments, and 2400 representatives of non- governmental organizations (NGOs), addressed urgent problems of environmental protection and socioeconomic development. The Earth Summit influenced subsequent UN conferences, and its major achievements were the agreement on Climate Change Convention, which subsequently led to the Kyoto Protocol, and the Convention on Biological Diversity (CBD). The Summit also endorsed the Rio Declaration on the Environment and Development which contained 27 Principles to help guide international action, and Agenda 21 which is a non binding, voluntary implementation action plan of the UN, multilateral organizations and national governments that demands new ways of investing in our future to be executed at local, national, and international levels.

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The Summit balanced the aspirations of both the supporters of economic development and environmental conservation by proclaiming the concept of sustainable development as a workable objective for all concerned. 25 Furthermore, success was achieved in the 2002 World Summit on Sustainable Development or Rio + 10 (Johannesburg Summit) which is the fourth major environmental conference held under the auspices of the United Nations since 1972. The summit was the follow up to the 1992 Earth Summit, was the first environment and development conference to allow formal input from non-state parties identified as stakeholder in the Rio conference. Although the Summit did not produce any new treaty or financial commitment, it nevertheless provided an opportunity for concrete steps to be taken towards implementing the principles agreed at earlier environmental conferences.26 The Summit encouraged and recognized a total of 266 partnerships on sustainable development.27 The most significant of which was the Global Gas Flaring Reduction Initiative (GGFR). The most recent international attempt at resolving environmental problem was the 2012 United Nations Conference on Sustainable Development (UNCSD), also known as Rio + 20 held in Rio de Janeiro from 13 to 22 June 2012. It was the third international conference on sustainable development targeted at resolving the global conflicting issues of economic development
25

United Nations, Johannesburg Summit 2002 Basic Information. 2. Retrieved from www.un.org/jsummit/html/basic_info/unced.html on 3/15/13. 26 Gill Seyfang and Andrew Jordan, The Johannesburg Summit and Sustainable Development: How Effective are Environmental Mega-Conferences? Yearbook of International Co-operation on Environment and Development. 3 (2002/2003). 27 The UN Secretary-General, Report of the Secretary-General on Partnership, P3, delivered to the Economic & Social Council, UN Doc. E/CN.17/2004/16. (February 10, 2004)

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and environmental protection. The main outcome of the Summit was the adoption by world policy makers of a series of sustainable development goals (SDGs), the 49 page document contained many loosely define steps aimed at addressing the challenges of poverty eradication, environmental protection, and sustainable consumption and production. The SDGs are to complement the UNs Millennium Development Goals (MDGs) and aimed at providing the foundation for a global green economy. However some environmentalists have lambasted the outcome document as being inadequate to tackle the challenges posed by a deteriorating environment. Nonetheless it is a step in the right direction.

3.2.

United Nations Framework Convention on Climate Change (UNFCCC). One of the two legally binding agreements adopted at the 1992 United Nations Conference on Environment and Development (UNCED) was the United Nations Framework Convention on Climate Change (UNFCCC).28 The UNFCCC was the first international effort to address the problem of climate change caused by the emission of greenhouse gases through human activities. The ultimate objective of the Convention is to stabilize the emission of greenhouse gases, at a level that would prevent dangerous anthropogenic

(1992) 31 I.L.M. 849.the Convention was adopted on May 1992, opened for signature in June 1992 and came into force in March 21, 1994, after deposit of the 50th instrument of ratification.
28

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interference with the climate system.29 It went further to state that, such a level should be achieved within a time frame to allow ecosystems to adapt naturally to climate change, to ensure that food production is not threatened, and to enable economic development to proceed in a sustainable manner.30 It is important to note that the UNFCCC specifies that the human interference must be dangerous not simply interference that will impact the environment. There are a number of requirements built into the Conventions. First, industrialized countries are required to reduce their overall emissions of greenhouse gases to 1990 levels by the year 2000.31 Secondly, industrialized countries have a general commitment to make financial and technological transfers to developing countries.32 Thirdly, all parties are required to periodically report the emission of greenhouse gases (GHGs), as well as national mitigation and adaptation programs, although different timetables are specified for annex 1 and non-annex 1 parties.33 The Convention explicitly embraces the concept of common, but differentiated responsibilities (CBDR),34 which puts the greater share of responsibility and cost for battling climate change on the industrialized nations.35 The United States, since signing the Convention as an Annex I party, has been taking actions to address the serious challenges of climate change, and to
UNFCCC, Art. 2. Ibid. 31 Id. art. 4(2)(a) & 4(2)(b). 32 Id. art 3(2), 4(1)(c), & 4(2)-(4). 33 Id art. 4. 34 Id art. 3(1). 35 These are mostly UNFCCC Annex 1 Parties.
29 30

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promote a sustainable and prosperous clean energy future.36 These efforts are occurring at all levels of government, and in the private sector. Over the past decade, United States has promulgated several legislation and regulation to provide a comprehensive long -term framework for combating climate change. While Nigeria, which became a signatory as an Annex II Party in June 13, 1992, has the responsibility to perform its obligations under the Convention. This includes a duty to promote and cooperate in the conservation and enhancement, as appropriate, of sinks and reservoirs of all greenhouse gases.37 Which duty also include the phasing out of gas flaring within its capabilities with regards to finance, manpower and technology. In 1994, Nigeria ratified its commitments to the convention, and thereafter entered the agreement and commitments of the convention into force. The United States and Nigeria are active participants in the Conference of Parties (COP), which functions as the supreme organ of the UNFCCC and has the legislative powers to create additional protocols and amendments to the Convention, as well as the power to make other decisions necessary to promote the effective implementation of the Convention.38

3.3.

The Kyoto Protocol The Kyoto Protocol was signed at COP 3 in 1997 as a protocol to the UNFCCC and entered into force on February 14, 2005. The detailed principles

United States, U.S. Climate Action Report 2010, 1 (2010 CAR) UNFCCC, art. 4(1)(d). 38 Id. art. 7(2).
36 37

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of implementing the protocol were adopted in COP 17 at Marrakesh in 2001. The Protocol constitutes the most important move by the international community to strengthen undertakings embodied in the UNFCCC. The Protocol recognizes that the industrialized nations are responsible for the high level of greenhouse gases as a result of years of industrial activities, and it sets binding targets for industrialized nations to reduce their greenhouse gases emissions below 1990 levels by 5% over a period of five years beginning from 2008 to 2012.39 The Protocol covers the emission of six primary greenhouse gases: carbon dioxide, methane, nitrous oxide, hydro fluorocarbons, and sulfur hexafluoride. In 1998, parties adopted the Buenos Aires Plan of Action, which established a list of 140 items that must be agreed upon before a country could ratify the Protocol. One important element of the Kyoto Protocol is its flexibility mechanisms that enable nations to achieve their emission target by means other than reducing their domestic emission of greenhouse gases. Such mechanisms are the Clean Development, Join Implementation, and Emission Trading Mechanisms. The United States signed the Protocol in November 12, 1998, but the Clinton Administration did not submit it to the Senate for advice and consent, due to the Byrd Hagel Resolution.40 This resolution declared that the United States should not be party to any mandatory reductions of GHGs unless developing
39 40

Birnie, P. W. and Boyle, A. E., International Law and Environment, 2 nd Ed. 526 (2002). U.S. Senate Res. 98, 105th Congress (1997) 143 Cong. Rec. S8113 05 (daily ed. July 25, 1997).

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countries are also parties to such an agreement. Thus the United States is not a party to the Kyoto protocol, even though it came into force after Russias ratification in 2005. Nigeria became a signatory to the Kyoto Protocol on the 23rd of October 1998, and ratified the Protocol in 30th of September 2004. Nigeria, as a nonAnnex I country has the possibility and the potentials to benefit from the market-based mechanism created by the Protocol. Nigeria has indeed collaborated with the United Nations Industrial Development Organization (UNIDO) and CDM Secretariat in accessing some projects targeted at reducing gas flaring such as the West African Gas Pipeline project and other gas utilization projects. 3.4. The Global Gas Flaring Reduction Initiative (GGFR). The Global Gas Flaring Initiative was launched formally at the World Summit on Sustainable Development (WSSD), in Johannesburg, South Africa, on August 30, 2002, with the objective of reducing carbon emissions and environmental impact of flaring, monetization of wasted resource, and improve energy efficiency and access to energy. It was the World Bank Group, in collaboration with the Government of Norway that initiated this global public private partnership to facilitate gas flaring reduction with a view to reducing air pollution, save energy and money, and reduce associated poverty. The membership consists of government representatives from oil producing countries, state owned companies and major international oil companies who are committed to reducing wasteful and undesirable

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practices of gas flaring and venting through policy change, stakeholder facilitation and project implementation. The GGFR has already achieved specific results aimed a reducing flaring. Some of these results include: endorsement of a Global Standard for gas flaring reduction, implementation of demonstration projects for associated gas utilization in seven countries; assistance to Nigeria, Equatorial Guinea, Cameron, Algeria, Kazakhstan, and Qatar in meeting flaring out targets by specific dates; potential avoided flared gas, through GGFR facilitated carbon projects, which is approximately 12 billion cubic meters per year; and development of a web- based tool to report flared and vented data on country basis. The GGFR work program, managed and facilitated by a World Bank team, focuses on four key areas to overcome the obstacles to gas flaring reduction in partner countries namely; commercialization of associated gas; regulation of associated gas; implementation of the global flaring and venting standard; and capacity building to obtain carbon credits for gas flaring and venting projects. The United States is a sponsoring member, while Nigeria is a member of the partnership. The work program in Nigeria has continued to focus on supporting the ongoing dialogue between the Nigerian government, the international oil companies, and other relevant stakeholders in developing a

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feasible approach to flare reduction through the Nigerian flare Reduction Committee (NFRC).41

4. 4.1.

THE NIGERIAN INSTITUTIONAL AND REGULATORY FRAMEWORK Background History of Gas Flaring Regulation in Nigeria Gas flaring started in Nigeria with the discovery of oil in commercial quantity at Oloibiri, in the Niger Delta Region, in 1956. Since then the flaring of associated gas has continued unabated, as the oil companies regard the practice as the cheapest method of removing the associated gas and a majority of the wells in the Niger Delta produces oil in association with gas. The increase in oil production has proportionately increased gas flaring in Nigeria. It is estimated that about 45% of Nigerias gas is flared as it is produced in 2011, thereby accounting for 12.5% of the worlds flared gas second to Russia.42 The Nigerian economy is largely dependent on the oil and gas sector, which accounts for about 95% of its foreign exchange earnings, 40% of its GDP, and 75% of federal government total revenue.43 This prompted the federal government to initiate policies and regulatory framework to attract more investment, guarantee increased production and ensure a sustainable environment.

41
42

Omeke Chukwuebuka, A Critique on the Legal Regime Governing Gas Flaring in Nigeria Gbite Adeniji, Approaches to Gas Flare Reduction in Nigeria, Paper presented at GGFR Global Forum, London, (October 25, 2012). 43 IMF Country Report No. 12/194, 2011 Article IV Consultation Report on Nigeria, (July, 2012).

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Initially government interest in the oil industry was limited to the collection of royalties, lease rentals and taxes, but that changed with the United Nations Resolution on Permanent sovereignty over Natural Resources,44 which spurred the federal government into enacting legislation to regulate the oil industry. Consequently in 1969, the Nigerian government enacted the Petroleum Act,45 which vested the ownership and control of all petroleum resources in the Federal Government of Nigeria.46 Subsequently Nigeria joined the Organization of Petroleum Exporting Countries (OPEC) in 1971, and in furtherance of OPECs resolution urging member states to acquire controlling interest in concessions held by foreign companies, the Nigerian Military Government in 1971, established the Nigerian National Oil Corporation (NNOC).47 Pursuant to the powers granted the NNOC, it acquired controlling interests in the oil companies operating in the country, thereby making the government a majority shareholder in the oil and gas produced. The provisions of the Petroleum Act was reinforced by 44(3) of the 1999 Constitution of the Federal Republic of Nigeria that, the entire property in, and control of all minerals, mineral oils and natural gas in, under, or upon any land in Nigeria or in, under or upon the territorial waters and the Exclusive Economic Zone of Nigeria vests in the Government of the Federation and the Federal Government is to manage such minerals in such manner as may be prescribed by the National Assembly. Thus the
UNGA Res. 1803 (XVIII), UN GAOS, 17th Sess., Supp. No17, UN Doc. A/5217, 15 (1962). Cap. P. 10 LFN 2004. 46 Id 1(1). 47 Decree No. 18 of 1971. But the NNOC later became the Nigerian National Petroleum Corporation in 1977, as a result of a merger between the NNOC and the Ministry of Petroleum Resources.
44 45

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Constitution confers exclusive jurisdiction on the National Assembly to legislate on matters relating to oil, gas, and other minerals. Due to the impact of the oil and gas production on the environment, the Nigerian Government has promulgated many laws and regulations aimed at abating gas flaring in the country. However, this has not been successful. Some of these laws and regulations are: The Petroleum Drilling and Production Regulations of 1969,48 The Associated Gas Re-Injection Act of 197949 as amended and the Regulations made pursuant thereto, The DPR Effluent Limitation Regulations 1991, and The Environmental Impact Assessment Act of 1992.

4.2.

The Gas Flaring Legislative and Regulatory Framework in Nigeria. The Petroleum Act remains the primary law regulating oil and gas exploratory activities in Nigeria. The Petroleum (Drilling and Production) Regulations,50 made pursuant to the Petroleum Act provides that the Licensee or lessee of an Oil Mining License (OML) shall not later than five years after the commencement of production, submit to the Minister of Petroleum Resources, a feasibility study, program, or proposals that it may have for the utilization of any natural gas that has been discovered in the relevant area.51 Although the regulation require oil companies to submit

Decree No. 51 of 1969. Decree No. 99 of 1979. 50 The Regulations are made pursuant to 9 of the Petroleum Act, see Note 49. 51 Regulation 42.
48 49

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their strategies for gas utilization, the provision was not seen to be mandatory and no penalty was provided for defaulters. The regulation also allowed producers to flare gas for a period of five years before submitting the feasibility study. A concrete step at regulating gas flaring was reached in 1979 with the enactment of the Associated Gas Re-Injection Act (AGRA),52 which is a legal framework for gas utilization that applies to both land and the Exclusive Economic Zone (EEZ). The Act imposes a duty on oil and gas companies to submit, not later than April 1st 1980, a preliminary program providing for schemes for the viable utilization of all associated gas produced from a field, and projects to re-inject all non- utilized associated gas in an industrial project, not withstanding the provisions of Regulation 42.53 Thus, this section transformed Regulation 42 into a mandatory provision. The Act also makes it illegal for any oil and gas company to flare gas after January 1st 1984, without the written permission of the Minister.54 The penalty was forfeiture of concession and the Ministers discretion to order the withholding of all or part of any entitlement of an offender.55 However, the Act also empowers the Minister to issue a certificate specifying such terms and conditions for the continued flaring of gas in a particular field, if the Minister is satisfied that

Decree No. 99 of 1979. (Cap. A.25 LFN 2004) Id 1(a) & (b). 54 Id 3(1). 55 Id 4(1) & (2).
52 53

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gas re-injection is not feasible.56 In addition the Act also reserves the right to the Government to take gas at the flare free of cost. The huge financial resources required for gas re-injection and the inability of the Government to meet their financial obligations in the various joint ventures, coupled with the lack of required infrastructural facility, and the insistence by the oil and gas companies of their inability to meet the 1984 deadline,57 led to the promulgation of the Associated Gas Re-Injection (Continued Flaring of Gas) Regulation.58 The Continued Flaring of Gas Regulation, which commenced on January 1st, 1985, gave more powers to the Minister under certain conditions to issue a certificate to oil companies for continue flaring of gas under section 3(2) of the Associated Gas Re-Injection Act. The Act and the attendant regulations could not be enforced, and gas flaring continued unabated in the country, thus prompting the government to amend the Act by resorting to an economic enforcement mechanism. The Associated Gas Re-Injection (Amendment) Act,59 introduced a penalty of two kobo per 1000 standard cubic feet (scf) of gas flared at any place authority to flare was not granted. This amount was increased to fifty kobo per 1000 standard cubic feet of gas in 1990, and the amount was further increased in 1998 to ten Naira per 1000 standard cubic feet of gas. The penalty amount has been further increased in 2008 to $3.50 per 1000

Id 3(2). Akaakar, F.O., The Law and Natural Gas Development in Nigeria, in Natural Gas: The Energy for the Next Millennium. Proceeding of the 29th Annual Conference of the Nigerian Society of Chemical Engineers, 201-210 (November, 1999). 58 S.I. 43 of 1984. 59 Decree No. 7 of 1985.
56 57

27

standard cubic feet of gas flared. The international oil companies are disposed to paying the meager penalty to flare the gas which is comparatively cheaper than utilizing the gas. In 1991 /1992, the Government, in consultation with international oil companies, introduced the Associated Gas Framework Agreement (AGFA),60 which served as a broad based fiscal incentive for natural gas utilization in regard to its processing, production, transmission, and supply to NLNG and other facilities.61 The government also enacted the Nigeria LNG (Fiscal Incentive Guarantee and Assurances) Decree (FIGAD),62 as incentive to encourage and facilitate the development of the Nigerian Liquefied Natural Gas Project (NLNG), which in turn will reduce gas flaring. The Act grants ten years tax holidays to the NLNG companies and also exempts the companies involved in the NLNG project from import duties and certain taxes.63 The government in furtherance of its policy to encourage investment on projects that will facilitate the utilization of gas, entered into a treaty with three west African countries for the West African gas Pipeline Project in January 31, 2003, and the treaty was domesticated into national law by the National Assembly in the Treaty on West African Gas Pipeline Project (Ratification and Enforcement) Act.64 The Treaty established the West

AGFA is incorporated into 11 of the Petroleum Profit Tax Act. Omeke Chukwuebuka, A Critique on the Legal Regime Governing Gas Flaring in Nigeria. University of Nigeria (2011) 62 Decree no 30 of 1990 63 Id. 2 & 7 64 Act of 2004.
60 61

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African Gas Project Authority (WAGP Authority), an international institution having legal personality and financial autonomy with powers to implement the project on behalf of member states. The Petroleum Profit Tax Act65 also provides some tax incentives to companies engaged in gas utilization projects.66 The Nigerian National Assembly in 201067 amended the Associated Gas ReInjection Act by providing that, No company engaged in the production of oil or gas shall after 31st December, 2012, flare gas produced in association with oil, or other than such minimum allowed by the Minister.68 The amendment set December 31, 2012 as the deadline for the abatement of gas flaring,69 but went ahead to provide a new section that permitted companies to continue the flaring of gas on the payment of a temporary gas flaring penalty of $5.00 per 1000scf of gas flared.70 However the President has not signed this amendment into law. A significant legislative effort by the Nigerian Government to combat the menace of gas flaring is the provisions incorporated into the Petroleum Industry Bill, 2012.71 This bill seeks to consolidate all the existing oil and gas laws in the country into one piece of legislation. The fundamental objectives of the bill included amongst others, the prudent management and allocation of petroleum resources and their derivatives in accordance with the
Cap. 354 L.F.N. 1990; Cap. P14 L.F.N. 2010. Id. 10A & 11. 67 Associated Gas Re-Injection Amendment Act of 2010. 68 Id. 3(1). 69 Id. 3(2). 70 Id. 3(2)(b). 71 The Bill was presented to the both Chambers of the National Assembly by the Nigerian President in July 19, 2012.
65 66

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principles of good governance, transparency and the sustainable development of Nigeria.72 The bill provide that natural gas shall not be flared or vented in any oil and gas production operation, block or field after the flare out date to be prescribed by the Minister in regulations to be made pursuant to the Act.73 The bill further provides that any licensee or lessee who flares or vents gas without a permit from the Minister shall pay a fine, which shall not be less than the value of the gas flared.74 The bill prohibits the issuance of a license or lease for the production of oil and gas to any applicant without an acceptable comprehensive program for the utilization or reinjection of natural gas.75 It mandates all operators to install metering equipment within three months of the Act coming into force to measure the volume of gas flared,76 and makes gas flaring without a permit a criminal offence,77 and mandates any person, group of persons or community to lodge a documented report of gas flaring or venting with the nearest office of the Inspectorate.78 An officer of the Inspectorate is required to inspect the facility within forty eight hours of receiving the report, and within seven days submit a verification report to the Inspectorate, which is required to make a determination on the matter, and if satisfied impose a fine or issue a shut

Petroleum Industry Bill 2012. 8 9. Id. 275. 74 Id. 277(3). 75 Id. 278. 76 Id. 279. 77 Id. 281. 78 Id. 280(1)
72 73

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down order.79 The proposed provisions are an innovation to the provisions of the Associated Gas Re-Injection Act. The PIB in addition to the Ministry of Petroleum Resources, provide for the establishment of two regulatory agencies, three funds, three companies and one support bureau namely; Upstream Petroleum Inspectorate, Downstream Petroleum Regulatory Agency, Petroleum Technology Development Fund, Petroleum Equalisation Fund, Petroleum Host Communities Fund, National Oil Co., National Gas Co., National Petroleum Assets Management Co., and Petroleum Technical Bureau. The government also enacted the Environmental Impact Assessment (EIA) Act,80 which requires the developers of major development projects to subject their projects to the provisions of the EIA Act by conducting an environmental impact assessment before commencing work. The National Environmental Standard and Regulations Enforcement Agency (NESREA) Act81 was also promulgated to establish the NESREA as a regulatory and enforcement agency under the Federal Ministry of Environment.

4.3.

The Institutional Framework for Regulating Gas Flaring in Nigeria. There are Institutions established by the Nigerian government to regulate and enforce gas-flaring regulations in the oil and gas industry. Most of these

Id. 280(2) (6). Act No. 86 of 1992. 81 NESREA Act published in FRN Official Gazette No. 92, Vol. 94 of July 31, 2007.
79 80

31

institutions are established by legislation, which prescribe the nature and extent of their powers and functions. Ministry of Petroleum Resources (MPR): The MPR is the main executive organ of the federal government. It is responsible for the articulation and implementation of policies relating to petroleum and other mineral resources, excluding solid minerals. The MPR also maintain standards, monitor quality and quantity, and regulate practices in the industry. The Minister of the MPR is responsible for coordinating the affairs of the MPR and issuing the necessary regulations and permits under the Petroleum Act and other laws heads the MPR. The MPR has several departments and corporations under its control and supervision, including the state oil company the Nigerian National Petroleum Corporation (NNPC), and the Department of Petroleum Resources (DPR). The MPR delegates most of its functions to the DPR to perform.

The Federal Ministry of Environment (FMENV): The FMENV is the federal ministry saddled with the primary responsibility to protect and improve water, air, land, forest, and wildlife of Nigeria. The ministry was established for the first time in 1999 to comprehensively prepare, coordinate and implement environmental policies and programs. It is also mandated to prescribe standards for and make regulations on water quality, effluent limitations, air quality, atmospheric and ozone protection, and monitor and enforce environmental laws and regulations.

32

The FMENV has some parastatals and departments under its control and supervisions, such as the National Environmental Standard and Regulations Enforcement Agency (NESREA), and the Department of Environmental Assessment (DEA). The DEA is charged with implementing the provisions of the EIA Acts No. 86 of 1992. The Department of Petroleum Resources (DPR): I t was the first statutory agency established to supervise and regulate the petroleum industry in Nigeria. In 1975, the DPR was constituted into the MPR and in 1977, the MPR and the Nigerian National Oil Corporation (NNOC) were merged to form the Nigerian National Petroleum Corporation (NNPC).82 But the Decree also created the Petroleum Inspectorate as an integral part of the corporation with a semi autonomous status. In 1988, the NNPC was commercialized and the Petroleum Inspectorate Division was removed from the NNPC and merged with the MPR as the DPR, which became the inspectorate arm of the Ministry. The DPR oversees all the activities of oil companies that are granted leases or licenses to engaged in oil and gas production operations in Nigeria. It ensures that operations are carried out in compliance with the applicable laws and regulations. The DPR also enforces safety and environmental regulations and advise government and relevant agencies on technical matters and policies that would have impact on administration and control of petroleum.

82

Decree No 33 of 1977

33

The National Environmental Standards and Regulations Enforcement Agency (NESREA): This is a parastatal of the FMENV, established by the NESREA (Establishment) Act of 2007.83 NESREA is empowered to enforce all environmental laws, guidelines, policies, standards, and regulations in Nigeria, as well as enforcing compliance with all international treaties, conventions, protocols and agreements on the environment to which Nigeria is a party. It is the regulatory agency of the FMENV. It regulates air quality standards in Nigeria.

5. 5.1.

THE TEXAS INSTITUTIONAL AND REGULATORY FRAMEWORK Background History on the Regulation of Gas Flaring in Texas. In the United States, exploration and production of oil and gas occur in over 33 states. In order to conserve the natural resources and protect the environment from degradation from these activities, the federal and state governments have enacted laws and created agencies to regulate the oil and gas industry. Several conservation and environmental agencies have

NESREA Act, published in FRN Official Gazette No. 92 Vol. 94 of July 31, 2007, repealed the FEPA Act Cap F. 10 LFN 2004.
83

34

promulgated rules and regulations that govern the oil and gas exploration, development, and production process.84 Issues of oil and gas industry regulation in Texas started with the discovery oil near oil springs in Nacogdoches County in 1866, the drilling of the first gas producing well at Young County in 1890, and the discovery of the Corsicana oil fields which was a major oil field that was discovered while the City of Corsicana was drilling for water in 1894.85 These discoveries caused a great oil boom in Texas. The rule of capture motivated operators to engage in unrestrained and competitive production with a view to maximizing output. This caused physical and economic waste of oil and gas resources and a drastic depletion of reservoir pressure in the various fields in the state. The situation prompted the Texas Legislature to pass a law declaring that gas wells are to be shut in within ten days after completion until it can be used for light, fuel, or power purposes.86 The State Legislature in 1905, 1913, and 1917, added further amendments to the statute. In 1917, the People of Texas adopted what is now commonly referred to as the conservation amendment to the Texas Constitution.87 It states that the natural resources of the state are declared public rights and duties; and the Legislature shall

American Petroleum Institute website, Environmental regulations of the Exploration and Production in the Oil and Gas Industry. Retrieved at www.ipo.org on 03/23/13. 85 Ernest O. Thompson, Conservation of Oil and Gas in Texas, 5 th World Petroleum Congress, 13 (New York, May 30 June 5, 1959) 86 Acts 26th Leg. Reg. Session, 1899, Ch. 49, p.8. 87 Tex. Const. art. 16, 59a.
84

35

pass all such laws as may be appropriate thereto. This amendment primarily relates to water but it was broad enough to cover oil and gas.88 Consequently the Legislature passed a comprehensive conservation law in 1919, which requires the conservation of oil and gas and prohibited waste, and granted extensive regulatory and enforcement powers to the Railroad Commission (RRC).89 Thereafter the RRC, in July and November 1919 adopted thirty-eight rules to regulate the oil and gas industry.90 The next several years were eventful years as many famous and prolific oil fields such as Goose Creek, Breckenridge, Ranger Burkburnett and Panhandle were discovered.91 As the production of oil increased, the flaring of gas also continued in an alarming rate, and the efforts to stop it was met with stiff resistance from oil producers who were not ready to lower their profits by spending money on gas utilization, which was considered at that time valueless.92 Though the 1899 statute and its subsequent amendments prohibited the flaring of unassociated gas from a gas well, Texas legislature succumbed to pressure from the oil producers by passing a law in 1925 permitting the flaring of associated or casinghead gas from oil wells in Texas.93 This posed great difficulty to the RRC in regulating and enforcing the laws because of the difficulty in distinguishing between a gas well and an oil

James R. Norvell, The Railroad Commission of Texas; Its Origin and Relation to Oil and Gas Industry, 40 Tex. L. Rev. 230, 239 (1961 1962) 89 Tex. Civ. Stat. art. 6029 (Vernom, 1948) 90 Ernest O. Thompson, see n 96 at 14 15. 91 David F. Prindle, The Texas Railroad Commission and the Elimination of the Flaring of Natural Gas 1930 1949, The Southwestern Hist. Quarterly, vol. 84, no. 3, 293,294 (Jan, 1981). 92 Id. at p 297. 93 Tex. Rev. Civ. Stat. 6008, 6014 (1925).
88

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well.94 The RRC after getting scientific data promptly classified hundreds of wells as gas wells and ordered them to stop flaring. The operators objected to these orders, which led to several litigations commonly known as the Clymore cases95 where the court upheld the commissions orders. After intense lobbying and political maneuvering, the Texas Legislatures in 1935 passed house bill 266, which prohibited the production of gas in any manner that causes underground waste, and gave RRC power to enforce the Act.96 The courts upheld most of the provisions in HB 266 and the RRC quickly adopted rules prohibiting the flaring of unassociated gas in Texas, but flaring of associated gas continued unabated. In 1946, when commissioner Jester was elected Governor of Texas, he immediately appointed William Murray, the foremost waste prevention crusader to serve out his unexpired tenure in the RRC.97 And on April 1947, the RRC issued an order shutting in all 615 oil wells in Seeligson Field in South Texas until flaring of casinghead gas was eliminated and measures taken to utilize the gas. Major operators in the field such as Shell, Magnolia (Mobil), and Sun immediately filed suits challenging the orders. The Texas Supreme Court upheld the RRC orders98 The RRC having won the cases, went further to issue several orders shutting down seventeen fields for gas

Berth P. Walker, What is an Oil Well? What is a Gas Well? What Difference Does it Make? Southwestern Legal Foundation Proceedings of the Fourteenth Annual Institute On Oil and gas Law, and Texation, 173-232 (Albany, 1963). 95 Clymore Production Co., v. Thompson, 13 F. Supp. 469 (W.D. Tex. 1936); Clymore Production Co., v. Thompson, 11 F. Supp. 791 (W.D. Tex. 1935) 96 Tex. Gen Laws. Ch. 120 1935. 97 Oil and Gas Journal, 76 (June 16, 1945 ed). 98 Railroad Commission v. Shell Oil Co., 206 S.W. 2d 235 (Tex. Sup. 1947)
94

37

flaring.99 These orders were also challenged in court, and the Texas Supreme Court once again upheld the RRCs orders.100 Thus by 1949, the RRC had won the battle and from henceforth gas whether unassociated or casinghead could not be flared without a valid permit.101 In the 1963, the United States Congress enacted the Clean Air Act (CAA) to regulate air quality, and in 1967, the Texas Air Control Board adopted its first air quality regulations. In 1969, the Environmental Protection Agency (EPA) was created by a presidential executive order and Texas took over most of the air monitoring responsibilities from the federal government. In 1970 the CAA was amended and states were required to develop a State Implementation Plan (SIP). In 1971 Texas passes its new Clean Air Act. In 1979, Texas submitted its SIP to meet compliance by 1982 except Harris County. While in 1991, the Texas legislature created the Natural Resources Conservation Commission (TNRCC) with effect from September 1, 1993, which consolidated the Texas Water Commission and the Texas Air Control Board. In 1998, the EPA delegated to the TNRCC the National Pollutant Discharge Elimination System (NPDES) program, which became the Texas Pollutant Discharge Elimination System (TPDES), administered by the TNRCC. The Texas Legislature established the Texas Emission Reduction Plan (TERP) program in 2001. The TNRCC in 2002 changed its name to the Texas Commission on Environmental Quality (TCEQ). The Legislature through
David F. Prindle, see note 102, at p 308. Railroad Commission v. Flour Bluff Oil Co., 219 S.W. 2d 506 (Tex. Civ. App. 1949) 101 David F. Prindle, see n 102, at 308.
99 100

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House Bill 1365 provided a stable funding source for TERP programs. 1n 2011, house bill 2694 gave the TCEQ another twelve-year mandate until 2023.

5.2.

The Legislative and Regulatory Framework in Texas. There are four principal legislations that were enacted to prevent wasteful gas flaring and control air quality in Texas by the state and federal government. The 1917 amendment to the Texas Constitution,102 declares that the conservation and development of the natural resources of the state are public rights and duties, and directs the legislature to enact appropriate law to achieve these ends. This provision is seen as given broad powers to the Legislature to enact laws for the conservation of oil and gas, including the prohibition of gas flaring.103 The Oil and Gas Conservation Act of 1919104 prohibited the waste of oil and gas and delegated powers to the RRC to make rules, regulations, and orders to prevent such waste.105 Although the Act had undergone several amendments, its purpose of declaring all waste illegal has been incorporated into each successive amendment, and it is presently codified in chapters 85 and 86, which deals with conservation of oil and gas, and regulation of natural gas, respectively in the Texas Natural Resources Code.

Tex. Const. Art. XVI, 59a. Railroad Commission v. Sterling Oil & Refining Co., 218 S.W. 2d 415, 419 (Tex. 1949). 104 Tex. Laws 1919, Ch. 155. 105 Id. arts 6008, 6014
102 103

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The Act declares waste unlawful by prohibiting the production, storage, or transportation of oil and gas in any manner that constitute waste.106 The Act defined waste among other things to include; operation of any oil well with inefficient gas oil ratio; the permitting of any natural gas well to burn wastefully; and escape of gas into open air.107 The Act also authorizes the RRC to make and enforce rules and orders for the conservation of oil and gas and the prevention of waste.108 It also empowers the RRC to do all necessary things for the conservation and prevention of waste.109 In addition the Act states that, no gas from a gas well may be permitted to escape into the air after the expiration of ten days from the time the gas is encountered in the gas well or from the time of performing the casing opposite a gas bearing zone but the commission may permit the escape of gas into the air for additional time if the operator of the well or other facility present information for the necessity of the escape110 The RRC pursuant to the authority vested on it by the Texas Legislature, adopted Rule 3.32, which states that gas well gas and casinghead gas shall be utilized for legal purposes.111 The rule stipulates that gas must be used for lease operations or sold, if it can be readily measured by devices routinely used in the operation of oil wells, gas wells, gas gathering systems, or gas plants. However there are exceptions to the gas releases.

Tex. Nat. Res. 85.045 and 86.011 Id. 85.046 and 86.012 108 Id. 85.201 109 Id. 85.202(b) 110 Id. 86. 185 111 16 T.A.C. 3.32.
106 107

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All wells that releases gas for more than twenty four hours period must be burnt the gas in a flare, while gas releases of less than a twenty four hours duration may be vented to the air, if not required to be flared for safety reasons. But operators are required to notify the RRC of gas being flared as soon as possible. Operators must accurately measure or estimate all flared or vented gas and obtain a Rule 32 Exception Form for the gas flaring or venting for more than twenty four hour duration. The form must be filed with the RRC on the next business day after the initial twenty-four hours of venting or flaring, and a copy must also be filed with the RRC district office where the operation is taking place. Paragraph h of the Rule authorizes the RRC or its delegate to administratively grant an exception permit to flare or vent gas for a period of one hundred and eighty days. But such an application must be accompanied with the prescribed fees as required by 3.78(b)(5). But if the permit is for a period longer than one hundred and eighty days, and the volume is higher than 50 mcf/day, then the application will require a RRC administrative hearing. Whereas for permanent exception permit of 50mcf/day, the applicant must submit cost benefit analysis, a map showing the nearest pipeline capable of accepting gas, and the estimate of gas reserve, together with a fee of $375.00 per gas well, oil lease, or commingled venting or flare point.

41

Where an operator needs additional time to flare or vent gas, the operator must re-file an application within twenty- one days before the expiration of the existing permit. Once the application is filed within the twenty-one days, the operator is authorized to vent or flare until final approval or denial of the permit extension. The application for extension permit must be accompanied with a fee of $150.00. The Rule 32 exception permits are not transferable upon a change of operatorship. Therefore the new operator must re-file the application for exception permit within ninety days of the approval of the P-4 Transfer.

The Texas Clean Air Act of 1989,112 is another legislation that regulates gas flaring in Texas. The original Act was enacted in 1965 with the purpose of safeguarding the state air resources from pollution and protection of the public health, general welfare and physical property, including the esthetic enjoyment of air resources by the public and the maintenance of adequate visibility.113 The Act had undergone several amendments and its scope enlarged to incorporate changes made to the Federal CAA and its amendments. The TCEQ, which is the successor to the Texas Air Control Board, is empowered to administer and enforce the TCAA, establish and control the level of air quality to be maintained in the state.114 The Act enjoins the TCEQ to use practical and economically feasible methods in

V.T.C.A., Health & Safety Code 382.001 et seq. Id. 382.002 114 Id. 382.011(a)
112 113

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controlling air contaminants,115 and grants it the necessary powers to carry out these responsibilities.116 The Act also authorizes the TCEQ to adopt rules,117 issue orders,118 and issue special permits, general permits and standard permits.119 The TCAA requires all persons planning to construct a new facility or modify an existing facility that may emit air contaminant to obtain permit before commencing such construction.120 The permit process differs in requirement and applicability. The facility may qualify for permit by rule (PBR), if it does not make a significant contribution of air contaminant to the atmosphere.121 But facility that does not qualify for PBR may be eligible for standard permit for oil and gas facilities.122 But the TCEQ is required to conduct a regulatory analysis, determine and establish the emission limits based on the evaluation of credible air quality data before issuing or adopting a new permit by rule on oil and gas facilities.123 No person is allowed to operate a federal source without obtaining a permit from the TCEQ under sections 382.0541, 382.0542, or 382.0543 of the TCAA.124 All major sources of air emissions are subject to Title V of the Federal CAA.

Id. 382.011(b) Id. 382.011(c) 117 Id. 382.017 118 Id. 382.023 119 Id. 382.051 120 Id. 382.0518(a) 121 Id. 382.05196(a) 122 Id. 382.051961(a)
115 116

123 124

Id. 382.051961(b)(1), (2), and (3) Id. 382.054 43

The TCAA also empowers local government or municipalities to enact and enforce ordinance for the control and abatement of pollution that is consistent with the Act.125 The municipalities are also authorized to inspect the air quality, and to enter public or private property to determine whether the level of air contaminants meet the level set by the municipality or TCEQ.126 The TCEQ pursuant to the TCAA had promulgated rules and regulations to establish ambient air quality standards in line with the federal air quality standard and the SIP, and a permitting regime to control air quality in Texas. These permits ordinarily specify the types and maximum amount of contaminant a permit holder may be allowed to discharge into the air or waterways of the state.127 The regulations relevant to oil and gas operations that emit contaminants into the air are codified in chapters 106 and 116 of Title 30 of Texas Administrative Code. The TCEQ regulations are required to be in compliance with the provisions of the Federal CAA.128

The EPAs authority for air pollution control is derived from the 1990 amendment of the CAA. The amendment modified and enlarged the federal authority provided by the Acts of 1963 and 1970. The goal of the Act is to protect and enhance the quality of the Nations air resources so as to

Id. 382.113 Id. 382.111 127 30 TAC101 et seq.

125 126
128

42 U.S.C. 7401 to 7671q (1970)

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promote the public health and welfare and the productive capacity of its population.129 Gas flaring activities of oil and gas companies create air emissions that may be regulated under the CAA. In order to attain the goals of the CAA, the EPA was authorized to establish National Air Quality Standard (NAAQS), and establish the requirement of SIP to achieve the NAAQS. The CAA also authorizes the establishment of New Source Performance Standards (NSPS) for new and modified stationary sources, the establishment of National Emission Standards for Hazardous Air Pollutants (NESHAP), and it also establishes the New Source Review (NSR) permitting program. The oil and gas operators must determine whether their facility requires a permit under the CAA. This involves a determination of the amount of each regulated pollutant the facility is capable of emitting during an operational year, the location of the facility, and the geographical impact of its emissions.130 The CAA regulates major sources of air pollution. However the definition of major source can vary depending upon the location of the emission source and the pollutant involved. Two different regulatory approaches are used to achieve air pollution control. The first approach is the NAAQS approach, which is used to regulate six criteria air pollutants (sulphur oxide, particulate matter, carbon monoxide, ozone, nitrogen dioxide, and lead).131 The second approach is the

Id. 7401(b)(1) John S. Lowe, Owen L. Anderson, Ernest E. Smith and David P. Pierce, Casas and Materials on Oil and Gas Law, 5th ed. 1131 (West, 2008). 131 See 40 CFR Part, 50.
129 130

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NSR permitting program, which is designed to maintain air quality by ensuring that emissions from new and modified major source will be reduced by technically practicable, and economically reasonable air pollution control methods. The CAA in Title V codifies all applicable requirements into a single authorization to ensure ambient air quality standards.132 The EPA pursuant to the CAA had adopted rules and regulations for the control and enforcement of ambient air quality standards.

5.3.

The Institutional Framework for Regulating Gas Flaring in Texas. There are three institutions responsible for regulating and enforcing gas flaring laws in the oil and gas industry in Texas. Two state institutions and one federal institution work in harmony to regulate and enforce oil and gas conservation laws and air quality in the state.

The Texas Railroad Commission (RRC): The RRC is the state conservation agency with primary jurisdiction over the oil and gas industry, while the TCEQ is the state environmental agency responsible for air quality control. There is a Memorandum of Understanding (MOU) between the RRC and the TCEQ detailing areas in which each could exercise jurisdiction.133 The RRC is authorized by statute to prevent waste of oil and gas, and enforce the prohibition of flaring of gas without permit. The Texas Legislature
132 133

For example 40CFR parts 51, 52, 60 and 61. 16 TAC 3.30; 30 TAC 7.117.

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originally created the RRC in 1891 with jurisdiction over rates, operations of railroads, terminals, wharves, and express companies. But when the Oil and Gas Conservation statute was enacted in 1919, authority was granted to the RRC to prevent waste and take all necessary actions to enforce the ACT. Presently the RRC consist of four regulatory divisions; Oil and Gas; transportation and Gas Utilities; Surfacing Mining Reclamation; and Liquefied Petroleum Gas. The Oil and Gas Division maintains ten offices for the purpose of regulating oil and gas operations. The RRC pursuant to the powers delegated to it by the Texas Legislature adopted statewide Rule 32 to regulate gas flaring by oil and gas operators by requiring that gas well gas and casinghead gas must be utilized for lawful purposes. The Texas courts have consistently upheld the authority of the RRC to prevent waste by regulating gas flaring in oil and gas fields.134

The Texas Commission of Environmental quality (TCEQ): The TCEQ is the environmental agency created by Texas Legislature in 1993, by consolidating the Texas Air Control Board (1965 1993) and the Texas Water Commission (1985 1993). The TCEQ is the primary state agency empowered to regulate and enforce air quality standards, and regulates the design of and emissions from flares in oil and gas facilities. It issues air and water operating permits to businesses operating in Texas. The EPA had given the TCEQ authority to enforce federal air quality standards in Texas. The
See Railroad Commission v. Shell oil Co., 206 S.W. 2d 235 (Tex. Sup. 1947); Railroad Commission v. sterling Oil & Refining Co., 218 S.W.2d 415 (Tex. 1949)
134

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TCEQ regulates certain aspects of exploration and production activities of oil and gas operations in Texas. Owners and operators of oil and gas stationary facilities are required to obtain permit from the TCEQ to emit air contaminant from the facility.135 The TCEQ is empowered to issue PBR, where the facility is not a major source pollutant, or a standard permit for oil and gas facilities where the facility does not qualify for PBR, or a NSR permit, where the facility does not qualify for PBR or standard permits. 136 The oil and gas operator with major source emission facilities are also subject to Title V of the CAA and the TCEQ is also authorized to regulate and issue permits under Title V.137 The Environmental Protection Agency (EPA): The EPA is the federal agency responsible for administering the CAA. It was created by an executive order of President Nixon in 1970, with the purpose of protecting human health and the environment by adopting and enforcing rules and regulations pursuant to the authority delegated to it by the United States Congress. The EPA, in order to achieve its objectives collaborates with state environmental agencies to ensure compliance with the CAA. In this regard the EPA had delegated its authority to the TCEQ in Texas. The EPA has ten regional offices and Texas is under region 6 together with Arkansas, Louisiana, New Mexico, and Oklahoma. The regional offices are responsible for implementing the agencys programs within the states under their jurisdiction, and they also enter into MOU with states to specifically
30 TAC 116.10 See 30 TAC 116 Subchapter B. 137 See 30 TAC 112
135 136

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delegate authority to the states to regulate and enforce air quality on behalf of the EPA. The regional offices are responsible for ensuring that states SIP are in conformity with the NAAQS and that the states rules comply with federal rules.

6. 6.1

COMPARATIVE ANALYSIS AND CONCLUSION Comparative Analysis of the Successes, Challenges, and Failures of the

Gas Flaring Reduction Enforcement Mechanisms in Nigeria and Texas. The Nigerian government has since 1999 vigorously pursued the objectives of reducing gas flaring by encouraging accelerated gas development and utilization projects through its pro- gas utilization policy, rather than rely on gas flaring penalties.138 This has led to a drastic reduction of gas flaring in Nigeria. Although Nigeria is still the second largest flaring country in the world, gas flaring has been reduced from 24 percent to 18 percent in the country between 2011 and 2012.139 The MPR has established an accelerated gas development and utilization program, whereby the Ministry will give flared gas to any third party company that is ready to invest in gas utilization and monetization projects. In addition the Nigerian Government has directed more efforts at constructing a network of gas pipelines across the country in order to deliver gas to domestic markets, notable among such pipeline include the East West Interconnector Pipeline, Calabar Umuah Ajaokuta Maiduguri Pipeline, and Ob/Ob Owerri Umuahia Pipeline.
Sarah Ahmed Khan, Nigeria: The Political Economy of Oil, 168 (Oxford University Press, 1994). Ministry of Petroleum Resources Bulletin, Achievements of the Ministry of Petroleum Resources and its Parastatals During Mr. Presidents First One Year in Office. 4 (May 22, 2012).
138 139

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The establishment and the implementation of the National Domestic Gas Supply and Pricing Policy also helped to reduce gas flaring. This policy instituted a domestic gas supply obligation (DGSO) scheme that ensured the supply of an adequate quantity and quality of gas by oil and gas producers to all active power plants in the country. According to the MPR, between 2011 and 2012, one Bscf per day supply of gas to the domestic market was achieved through the scheme.140 The MPR has also commenced implementation of a zero flaring policy for new oil and gas fields. Thus projects are designed and operated from start up without continuous flaring and no permission is granted for gas flaring in new projects. The Ministry had also installed pilot gas flare meters on a few flare lines to help measure the value of the gas being flared accurately and the actual penalty to be paid.

The NLNG project, the Escravos Gas Project and other gas gathering projects embarked upon by the NNPC, in conjunction with other joint venture partners had utilized a large quantity of hitherto flared. The supply of gas to domestic and international markets enormously reduced the quantity of gas flared in the country. The 2008 amendment to the AGRA increased the gas flaring penalty from $0.07 mmscf to $3.50 per mmscf, which is a considerable improvement compared to the initial penalty. But the government had departed from its previous command and control approach to gas flaring reduction, to the provision of incentives to encourage investment in gas utilization projects. Most of the incentive regimes are incorporated into the Finance (Miscellaneous Taxation Provisions) Decree,141 and
140 141

Id. at p6. Decree No 18 of 1988.

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the Finance (Miscellaneous Taxation Provisions) (No. 2) Decree.142 These laws gave legislative force to the 1992 Associated Gas Fiscal Incentive Arrangements. Other incentives include the creation of Export Free Zone to encourage investment in gas utilization projects.143 The government acceded to the Kyoto Protocol in 2004 and established a Designated National Authority, although the awareness of the CDM process is limited with a weak institutional framework. But only a few projects have qualified for CDM. The promulgation of the EIA Decree144 has incorporated EIA as an integral and mandatory part of the planning process for the development of oil and gas fields in Nigeria. Therefore, permit to flare are now granted in consonance with the EIA procedures that are supervised by the FMENV and DPR. Despite these seeming successes in the gas flaring reduction efforts by the Nigerian government, the country is still ranked second in the global gas flaring chart and only a small percentage of gas produced is utilized. This is due to the challenges and the legislative and institutional failures in the system. The 1984 amendments of the AGRA was done to allow for continued flaring of associated gas under permit issued by the Minister, subject to the payment of penalties which is small compared to the cost of gas re-injection or utilization. This was a great drawback to the governments effort to stop gas flaring. Since then, subsequent amendments have continuously postponed the abatement date with the payment of penalty. The penalty is considered meager and does not pose as a
Decree No. 19 of 1988. Oil and Gas Export Free Zone Decree No. 8 of 1996 as amended. 144 Decree No. 86 of 1992.
142 143

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deterrent to oil and gas companies, which find it easier to pay the penalty than utilize the gas.145 The amendments repeatedly pushed back the deadline to end gas flaring. This demonstrates the complete lack of seriousness and political will on the part of government to end gas flaring.146 One of the major challenges of gas flaring reduction in Nigeria is the governments role as a regulator and owner operator in the oil and gas industry. The ownership structure of the Nigerian oil and gas industry greatly impacts on the effectiveness of the regulatory regime. The government owns the oil and gas in place, and through the NNPC, owns major interests in joint ventures with oil and gas companies. Therefore a regulation of the oil and gas operation is an indirect regulation of the NNPC. Oil and gas companies usually blame their inability to meet the gas-flaring deadline on the failure of NNPC to meet its Joint Venture financial obligations.147 Most importantly, since the government takes majority of the oil revenues, a stringent enforcement of gas flaring regulations will adversely affect the revenues that will accrue to the government, So the legislature and the agencies relax the rules to allow for a continuous production of oil and gas. Nigerian oil and gas legislations are not aimed at the conservation of the natural resources and prevention of waste. Therefore the regulators rely merely on safe and good oilfield practice as the standard for enforcement. This allows international oil companies to dictate applicable standards in the industry.

Environmental Right Action, Gas Flaring: Assaulting Communities, Jeopadizing the World, 6 (Dec 10 11, 2008,). 146 Justice in Nigeria Now, Gas Flaring in Nigeria: an Overview, JINN Newsletter, 3 (April, 2010). 147 Ibironke T. Odumosu, Transferring Albertas Gas Flaring Reduction Regulatory Framework to Nigeria: Potentials and Limitations, 44 Alberta L. Rev 863, 877 (June 2007)
145

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A major challenge to the effective enforcement of gas flaring regulations is the lack of autonomy and independence of the regulatory agencies. The DPR is a department of the MPR, and is under the control and direction of the Minister, while the NEASRA is a parastatal under the FMENV. These agencies are subject to political control from their respective supervising Ministers. These agencies lack adequate technical manpower and funds to efficiently discharge their statutory duties. The agencies do not have access to the best available scientific technology to accurately measure, adopt appropriate rules, and enforce gas-flaring regulations. They mostly rely on funds appropriated and remitted to them by their supervising Ministries. The oil and gas companies fund most of the agencies activities thereby raising serious conflict of interest issues. There is also the problem of jurisdictional conflict between the MPR and the FMENV on the one hand, and between MPR and DPR on the other hand. The functions given to the agencies by the various statutes are overlapping, and thereby create conflicts in regulating and enforcing gas flaring laws. There is lack of gas infrastructure, and it takes time and huge resources to build the required pipelines, and gas gathering and treatment plants in the country. The oil and gas companies are not showing interest in committing investments to build the needed infrastructures, and gas pipelines that will transport the gas to domestic and international markets. Although the government, in partnership with some international oil companies, are building pipelines, they appear to be grossly inadequate for the country. The lack of infrastructures greatly affected the development of the domestic gas market. Nigeria has a population of over 150

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million people, with a 50 percent electricity generation capacity. The flared gas would have been a valuable source of energy for the country. Another challenge in the enforcement of gas flaring regulation is the fact that only federal agencies are empowered to regulate and enforce the laws on gas flaring. Petroleum is within the exclusive legislative list in the Nigerian Constitution, which vest exclusive legislative powers to the National Assembly. Although environment is in the concurrent list where the federal and state government has concurrent jurisdiction to enact legislation, the laws have virtually vested powers to solely to federal agencies and these agencies lack the capabilities to establish offices in all the states where oil and gas operations are going on, in order to effectively monitor and enforce the laws. The continues flaring of gas has resulted into a full blown conflict between the host communities, the oil and gas companies and the federal government in the Niger Delta region of the country where the majority of the oil and gas is produced.

During the initial stage of oil and gas exploration and production activities, Texas had serious problems on how to regulate and reduce gas flaring. The oil and gas operators lobbied to ensure that gas flaring was not prohibited. However the success story of the effective regulation of gas flaring started when the RRC took the bold step to issue orders prohibiting the production of oil or gas from the Seeligson Field, until the operators ceased the flaring of casinghead gas, and took measures to utilize the gas. The Texas courts supported the move by declaring that the RRC had the authority to regulate gas flaring in order to prevent waste.

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Presently, Texas is the highest producer and consumer of oil and natural gas in the United States, providing one- fourth of U.S supplies and consuming one- sixth.148 In 2012, Texas produced about 546 million barrels of oil and 7.3 billion mcf of gas. 149 But it has a low gas- flaring ratio of 0.4 percent,150 compared to states like North Dakota with a gas flaring ratio of about 35 percent, and this success is as a result of a plethora of factors. There is an effective and efficient legislative framework in place that is aimed at prevention of waste, and the safeguarding of air resources and protection of the health, general welfare and physical property of the People of Texas. The Texas Constitution declares the preservation and conservation of all natural resources of the state as public rights and duties.151 The Texas Oil and Gas Conservation Act was enacted to conserve and prevent waste of the oil and gas resources, protect correlative rights and promote economic recovery. Pursuant to this Act, the RRC has been able to effectively regulate gas flaring since 1947. The CAA and the TCAA were enacted to safeguard air resources and protection of the health, general welfare, and physical property of the people. One of the main goals of the federal and Texas clean air acts was to set and achieve NAAQS with a view to address the public health and welfare risk posed by some widespread pollutants. These statutes provides for a tripartite regulatory mechanism where the federal, state and local governments were authorized to regulate and enforce the laws. This
Texas Energy Report, Natural Gas Ch. 5, retrieved from www.window.state.tx.us/specialrpt/energy/nonrenewable/gas.php on 2/7/13. 149 Railroad Commission of Texas, Monthly Oil and Gas Production by Year Jan. 2007 Jan. 2013. Retrieved from www. Rrc.state.tx.us/data/production/ogismcon.pdf on 4/20/13. 150 Railroad Commission of Texas, Gas Flaring Frequently Asked Questions (FAQs), P. 3. Retrieved from www.rrc.tx.us/about/faqs/flaringfaq.hph on 4/20/13.
148 151

Tex. Const. Art XVI, 59a

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gives a sense of responsibility to all the tiers of government in making concerted efforts to reduce gas flaring. The Institutions created to enforce these laws at the federal and state levels are independent with guaranteed tenure, and a clear area of authority. The agencies are well funded and adequately staffed with the requisite technical expertise to effectively enforce the laws. Thus, the agencies have been able to evolve operational processes and efficient regulatory procedures aimed at reducing the health, safety and environmental impacts of gas flaring. The EPA, RRC and TCEQ have all adopted comprehensive permit systems that are based on scientific and technological data and evidence. The agencies also coordinate and cooperate with each other in order to achieve their set goals by entering into MOUs that enumerate spheres of authority and cooperation between the agencies. The availability of gas utilization infrastructures and pipelines in Texas and its environments has considerably helped in reducing gas flaring. There are over 1,200 pipeline operators with over 366,274 miles of pipeline in Texas. Natural gas pipeline runs through all the 254 counties in Texas.152 This has encouraged the emergence of a well-developed local and international natural gas market. The operators in the oil and gas industry strive to be in full compliance with existing rules on gas flaring. The operators work to ensure that they comply with all regulations to avoid sanctions and they report to the RRC on a monthly basis the volume of gas flared on the Production Report form (PR form). The agencies also amend their rule regularly to reflect increase in production and take into account
David J. Porter, Effective Regulations for Flaring Reduction GGFR Forum, 3 (London October 24 25, 2012).
152

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latest available technologies that will encourage the use of the most efficient emission reducing flares. The RRC encourages operators to utilize gas for on-lease power generation, instead of flaring, and it collaborates with Texas electricity energy regulators to identify opportunities for the utilization of excess gas as a source of power generation. Despite these successes in reducing gas flaring in Texas, the number of permits to flare gas has more than quadrupled from 2008 to 2012. The RRC issued 1,963 permits in 2012, compared to 651 permits in 2011, 306 permits in 2010, 158 permits in 2009 and 107 permits in 2008.153 The situation prompted some Ranking Members of the U.S. House of Representatives, Henry A. Waxman, Bobby L. Rush, and Diana DeGette to write a letter dated May 14, 2012 to the Chairman of the House Committee on Energy and Commerce, Hon. Fred Upton, requesting for a hearing on the practice of natural gas flaring at oil production facilities in the U.S., and its potential energy and environmental impact. They stressed that Members of the Committee realize the importance of natural gas to the nations energy future, and therefore, they are ready to work together with all stakeholders in order to reduce the harmful waste of precious natural resource. The letter specifically cited the increase in gas flaring permits in Texas.154 Therefore it can be seen that though Texas has not been able to completely solve the problem of gas flaring, it is far ahead of Nigeria in this regard.

See n. 150 at P. 2 Letter retrieved was from http://democrats.energycommerce.house.gov/index.php?q=news/reps-waxman-rush-and-degattecall-for-hearing-on-natural-gas-flaring on 2/14/13.

153 154

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6.2

CONCLUSION

It is obvious from the foregoing discussion on the institutional and regulatory framework of the gas flaring reduction mechanism of Nigeria and Texas, that despite the fact that both are experiencing a boom in oil and gas production, their regulatory regimes have a lot of differences. Texas has been able to record a high degree of success in reducing gas flaring to 0.4 percent due to several factors which includes; purpose driven laws, effective and efficient regulations, independent and capable regulatory institutions, willing and committed operators, well developed gas gathering infrastructures and network of pipelines, available domestic gas market, government non-interference, accurate flare measuring and reporting procedures, investment in new technologies, realistic policy targets, regular update of flaring rules to meet changing circumstances, three tier enforcement system and collaboration amongst agencies and stakeholders. While Nigeria had recorded some results in reducing gas flaring, its effort has not been that successful in eliminating gas flaring because of several factors that have prevented the country from realizing its set goal of abating gas flaring. These factors include ineffective, inefficient, and non transparent gas flaring laws and policies; lack of political will to implement policies that will eliminate gas flaring; the absence of capable, independent and well funded regulatory agencies with the requisite technical and scientific knowledge; conflict of interest on the part of the government, regulatory officials and the oil and gas companies; unavailability of gas infrastructure and market; large scale corruption in the oil and gas industry; no coordination amongst the federal, state, and local governments, and the oil and gas

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producers; lack of proper alignment between incentives and punitive based mechanisms to eliminate gas flaring, absence of accurate and regular flare reporting system; and the delay in passing the PIB into law. For Nigeria to succeed in its effort to eliminate gas flaring, it must adopt the Texas regulatory and enforcement measures. Nigeria must demonstrate the political will by immediately passing the PIB as submitted to the National Assembly. This must be accompanied by the formulation of realistic policy targets aimed at utilization of flared gas by encouraging the construction of gas infrastructure, and development of viable gas market. This could be achieved by resorting to international financial institutions, and reliance on public private partnership to raise the needed funds. The challenge of the Nigerian government is to formulate and adopt a natural resources conservation and management objectives, and introduce a combination of regulatory and non-regulatory measures that balances punitive and incentive based approaches to reduce gas flaring. This study have been able to show that there are competing claims between oil and gas production for economic development and environmental protection in all oil and gas producing countries. And for a country to be able to protect its people and its environment from the impact of the oil and gas industry, the country must have the political will to set a natural resources conservation and management objective and create the appropriate regulatory and institutional framework to regulate the activities of the oil and gas industry. This study had made a comparative analysis of the successes and challenges inherent in the gas flaring laws in Nigeria and the state of Texas, and why Texas had recorded much success than Nigeria. The study had

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enumerated measures Nigeria needs to take in order to attain its target of eliminating gas flaring. This study will be helpful not only to Nigeria but to other countries suffering similar fate with Nigeria, to effectively and adequately enact and establish the right regulatory and institutional framework to reduce or abate gas flaring. This study is relevant to oil rich underdeveloped countries in Africa and other parts of the world with high gas flaring ratio. The study will also be relevant to developed countries like the United States to ensure that the development of gas infrastructure is in tandem with oil development especially in new fields and offshore areas, so as to reduce gas flaring. Though it is obvious that there is no single approach that is considered the best in eliminating gas flaring for all countries, there are basic fundamentals such as an effective and efficient political, legal, and institutional framework that are essential for a country to develop its own regulations to curb the menace.

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