Corporate Divestment and Environmental Liability in the Delta: the Devil in the Details.
The oil industry in the Niger Delta is experiencing seismic activity, pun intended. In October 2024, about ten months after Royal Dutch Shell (RDS) announced that it would sell its Nigerian onshore subsidiary, Shell Petroleum Development Company of Nigeria Limited (SPDC), to Renaissance consortium for up to $2.4 billion, the Nigerian government rejected the application for divestment. Shell’s move highlights a trend of international oil companies selling off their interests in the delta at an accelerated rate after several decades of a menacing presence and operations in the delta. As this essay will demonstrate, at stake are issues of environmental justice, corporate accountability, and the very survival of the region.
■ What is really happening?
It must be made clear from the outset that divestment is not the same as decommissioning. Decommissioning is the timely, safe, and environmentally responsible removal of, or otherwise satisfactorily dealing with, infrastructure from the area that was previously used to support oil and gas operations. There are elaborate provisions for this under sections 232 and 233 of Nigeria’s Petroleum Industry Act (PIA), 2021. In divestment, however, the oil companies are simply selling their stakes in particular fields and facilities to other companies.
Essentially, what is happening currently in the delta can be likened to the same rusty tools changing hands. While section 95 of the PIA, 2021 provides that a divestment application is subject to the approval of the Petroleum Minister, the details of the terms of agreement seem to be left to the parties—true to the doctrine of freedom of contract. The doctrine of freedom of contract holds that parties are free to negotiate and agree on terms, entering contracts voluntarily and being bound by those terms. Thus, it is unclear who—between the old and the new hands—would address the historic damage by the oil and gas infrastructures, especially since the general public is not privy to the contract details.
What is clear, however, is that the damage exists and is ongoing. While they generate billions of dollars and increase the Nigerian purse (with the revenue shared across all the states ), for the delta and its typically agrarian lives, it has come at the great cost of biodiversity loss, food insecurity, loss of landscape, aesthetic degradation, social disharmony, diseases and deaths.
There is no gainsaying the extent of the damage. It is as aptly demonstrated in the recent heartbreaking report by the Bayelsa State Oil and Environmental Commission (BSOEC), An Environmental Genocide: Counting the Human and Environmental Costs of Oil in Bayelsa, which, surprisingly, did not explicitly recommend a moratorium on oil production in the state, at least pending remediation (but I digress).
As the oil companies are now busy interacting with the Federal Government, courting approval in furtherance of the planned divestment, one can reckon that, for the ordinary deltans, who, for no apparent good cause, have been kept out of the loop in the entire process, the pervading questions have been: Will there be restoration in this land indeed? Will cocoyam ever sprout on our farmlands again? Will we get to fish in unpolluted rivers again? Will blue skies replace orange ones again in communities hosting gas flare facilities? If yes—and yes it is, even though it might not be in their lifetime: Who will be responsible for the damage and restoration? And when will it begin?
Thus, what should ordinarily be a source of hope for restoration and healing for the assaulted and weary delta has, in fact, become the source of anxiety about the future. The experience in Nembe, Bayelsa State, where Shell divested in favour of Aiteo, and the debates that followed over responsibility for the 2021 Santa Barbara Well blowout and cleanup alone, is sufficient basis for this anxiety.
■ Is there any respite in the law?
Legally speaking, the general rule is that the polluter pays, but by virtue of the doctrine of freedom of contract, in a sale of oil and gas business, liability for historic environmental damage can pass from the seller to the buyer by explicit agreement. If the historic liability is also bought alongside the assets, the former owners may be absolved, and the new company would be liable. But if what is sold are merely assets without liability, they would be liable for the damage. Thus, one can reckon, as the saying goes, the devil will be in the details—the details of each acquisition or transaction, subject to extant law.
In the absence of an explicit agreement as to liability for historic damage, however, for the buyer to be absolved from liability, it must be established that the environmental damage occurred before the transfer of the assets. But it is, in fact, often difficult if possible to identify the particular spill or flare from a particular asset that caused a particular damage, more so, where there are several companies involved. It’s akin to smoking and cancer; it is impossible to pinpoint the particular cigarette stick that started the cancerous cell.
Yet, look, you’d be surprised that in March 2024, a UK High Court demanded the impossible when it delivered a ruling against over 13,000 members of Bille and Ogale communities in the Niger Delta who sued Shell’s Nigerian subsidiary, SPDC, for destroying their environment and livelihoods through years of oil pollution. The court treated the case as a “Global Claim,” typically used in construction disputes, and ruled that the claimants must prove which specific spills caused which damage.
In short, the court’s reasoning was that if Shell wasn’t responsible for 100% of the pollution, the entire claim would fail. Imagine being 95% responsible for a mess, but getting let off the hook because someone else made a 5% contribution. It’s like saying, “Hey, I spilled 95% of the coffee, but that 5% I didn’t spill means I’m not liable for any of the damage!”
Good thing the ruling was appealed and, in October 2024, overturned by a superior court, which absolved the claimants of the impossible burden of proving which company, out of several companies that operated in the area, was responsible for which pollution and damage. If the ruling had been upheld, it would have sent a message to the polluters that, look, the more mess you make, the harder it’ll be for victims to prove which mess caused their harm.
The ruling of that superior court restores hope and respite to the deltans. One can also gain some further insight into the future of environmental liability in the Niger Delta from cases like the Four Farmers Case (Four Nigerian Farmers and Milieudefensie v. Royal Dutch Shell Plc.), which coincidentally originated from the delta but was finally decided in The Hague. The case encompasses three distinct incidents: underground pipeline leakage in Oruma in 2005, underground pipeline leakage near Goi in 2004, and wellhead leak near Ikot Ada Udo, resulting in three separate yet partially overlapping court judgments.
This case is particularly important not just because Shell’s defence that the respective spills were likely caused by sabotage was rejected, but also because the parent company, RDS was held responsible for the spills from its Nigerian subsidiary, SPDC. In legal speak, the corporate veil was pierced to ensure corporate accountability.
Although these landmark foreign judgments are yet to be enforced in Nigeria, which requires a separate procedure, they are lethal arsenals in the armory of Niger Deltans against oil companies.
■ What role has the Nigerian authorities to play?
Under section 95 of the PIA, 2021, to divest, the license/lease holders must submit applications to the Nigerian Upstream Petroleum Regulatory Commission, which shall, within sixty (60) days, forward same to the Minister of Petroleum for his written approval. The Minister shall, within sixty (60) days, approve the application or reject it. However, the Minister can only refuse to approve the application with reasons. It was reported that Shell’s application was declined because Renaissance could not show it could manage the assets. This only underscores and further validates the anxiety of the delta.
Nonetheless, under section 95 (10), the companies and third parties may make further representations regarding the application. The Nigerian government should not cower from its role; it must ensure that, at least, there is a clear outline of commitments to remediate environmental damage and resolve community disputes as integral components of the divestment agreements, including a comprehensive cleanup of polluted sites and equitable compensation for affected communities. It must also ensure a rigorous assessment of the new companies’ technical, financial, and managerial capacities to responsibly address the Niger Delta’s environmental challenges, including a clear plan for spill prevention, emergency response, and environmental restoration.
The Nigerian government must also learn from the Lago Agrio Case, a lawsuit over the ecological damage and harm to public health in the Lago Agrio region of the Ecuadorian amazon—the result of nearly 30 years of oil operations spearheaded by Texaco Petroleum (Texaco), Chevron’s subsidiary, in partnership with Petroecuador, Ecuador’s state-owned oil company. That suit, after traversing across a quarter century, three continents, and three jurisdictions, transmogrified into the breach of a bilateral investment treaty in which the Lago Agrio plaintiffs had ‘neither voice nor standing’. In this regard, the Nigerian government has the golden opportunity to ensure justice in the Gbemre Case (Suit No. FHC/B/CS/53/05), delivered on 14 November 2005), where the Federal High Court ruled against Shell that gas flaring is a violation of the right to life.
No less important, to show that it cares about the environment and public health, the government must immediately place a moratorium on oil production in the affected areas, at least pending remediation.
To conclude, the Niger Deltans must not be rendered voiceless or stranded. They deserve to live healthy and thriving lives in a restored environment, where the crops bring fruit, the fishes swim freely, and all the skies are blue. The oil companies must address their legacies of ecological assaults and environmental and social disharmony in the region.
