Liberia: Citizens’ 5% Benefit in Oil Revenues Still In Tact – Senate Judiciary Committee

MONROVIA – The Judiciary Committee of the Liberian Senate has established that the Amended Petroleum Law of 2019 did not tamper with the Liberian people’s right to five percent of all revenues generated from petroleum agreements, instead, it grants Liberian companies the right attain additional five percent in equity of petroleum companies engaged in the exploitation of petroleum reserves of Liberia.

The Senate’s Judiciary Committee’s conclusion is as a result of an investigation into a complaint filed by the Coalition for the Restoration of Liberian Five Percent Equity in Petroleum Agreements (CORLE).

According to CORLE, the “Act to Amend Certain Provisions of the New Petroleum (Exploration and Production) Reform Law of Liberia, 2014”, which was published on October 17, 2019 (herein the “The Petroleum Act Amendments of 2019″) deprives Liberian citizens of the right reserved to Liberian citizens by the New Petroleum (Exploration and Production) Reform Law of Liberia, 2014 (hereinafter the 2014 Petroleum Reform Law”) to five percent (5%) of the revenues from al petroleurn agreements. CORLE seeks to have the Legislature reinstates this right.

CORLE’s complaint was channeled to the Senate through Senator Abraham Darius Dillon and Senator Jonathan Boy Charles Sogbie.

The Hearing

At the public hearing on the matter, the Judiciary Committee invited Mr. Ambulah Maimey, the head of CORLE, Justice Minister Cllr. Frank Musa Dean, NOCAL CEO, Seifua Mai Gray, the Director General of the Liberia Petroleum Regulatory Authority, Mr. Hon. Archie Donmo.

Representing CORLE was Cllr. Findley Karngar and representing the National Oil Company of Liberia (NOCAL) was Dr. Lester Tenny, its Deputy Chief Executive Officer. The Minister of Justice and Attorney General was present in person; and so was the Director General of the Liberia Petroleum Regulatory Authority. Interested members of the public, including the media, were present.

In addition to members of the Judiciary Committee, Sen. Jonathan Boy Charles Sogbie was present and actively participated in the deliberations.

At the hearing, while the Judiciary Committee observed that the issue put forth by CORLE was a matter that needed a judicial interpretation of a law enacted by the legislature, and not a reconstruction of a law already enacted by the Legislature, CORLE maintained that it was imperative for the Committee to continue the hearing and make determination as to whether there is the need to amend and restore the right of Liberian citizens to five percent of revenues from all petroleum agreements.

What the Law Says

Section 36 of the 2014 Petroleum Reform Law reads verbatim, as follows:

36. Citizen participation in revenues from petroleum agreements

“36.1 In addition to the State participation provided in Section 35 above, the State shall have the right to acquire a five per cent (5%) participation in the rights and interests of a contractor under a petroleum agreement for the benefit of a citizen fund which shall be established and managed in accordance with the following provisions of this Section 36.

“36.2 The Director General shall timely exercise this right on behalf of the State by written notice to the contractor which shall be given within the time provided in the relevant petroleum agreement.

“36.3 Any participation acquired pursuant to this Section 36 shall be carried by the contractor until the start of commercial production, which means that (i) all exploration, appraisal and development costs shall be paid by the contractor, (ii) the State shall pay its participation interest share of all costs of carrying out production operations, and (iii) the non-State participants comprising the contractor shall be entitled to recover the State’s participating interest share of all or part of the exploration, appraisal and development costs of the field in question, with or without interest thereon, all under the terms and subject to such conditions as shall be specified in the petroleum agreement.

“36.4 Any citizen participation acquired pursuant to this Section 36 shall be managed by NOCAL which shall become a party to the petroleum agreement under the terms of a joint operating agreement between NOCAL and the other entity or entities comprising the contractor.

“36.5 The citizen participation fund shall be managed by a trustee which shall be a responsible international trust company selected by the Ministry of Finance and Development Planning in consultation with the Central Bank of Liberia, under a trust agreement that provides for the administration of the fund in accordance with the requirements of this Section and is otherwise subject to the approval of the President after consultation with the Legislature.

“36.6 The citizen participation fund shall be used in accordance with a plan that will make the benefits broadly available as widely as practicable to all citizens from both urban and rural areas within the Republic through one or more mechanisms that will ensure that the benefits are extended to the most needed and vulnerable groups of citizens.

The Contrast

The provision of “The Petroleum Act Amendments of 2019”, which CORLE claimed takes away the five percent (5%) equity rights of Liberians in petroleum agreements is Section 36; which reads verbatim, as follows:

“36. Citizen Participation in Revenues from Petroleum Agreements

“a. In addition to local content provisions in the Exploration and Production Act, each Petroleum Agreement shall contain a provision of at least five percent (5%) total equity stake for companies owned by natural persons of Liberian Citizenship. Such interest may be limited to equity interest and may not be carried interest.

“b. The citizen participation fund shall be used in accordance with a plan that will make the benefits broadly available as widely as practicable to all citizens from both urban and rural areas within the Republic through one or more mechanisms that will ensure that the benefits are extended to the neediest and vulnerable groups of citizens.

“c. Additionally, communities hosting or lying adjacent to the petroleum block shall be prioritized in the allocation of funds derived from citizen participation in revenues from petroleum agreements

CORLE’s Argument

The group contended in their complaint that the Section 36.7 of the 2014 Petroleum Reform Act provides in part that in no later than three years from the transfer of completion date referred to in Section 78 of the Act, the Ministry of Finance and Development Planning shall, in consultation with the Liberia Revenue Authority, and other relevant ministries, prepare and submit to the President, and the President shall submit to the Legislature, a draft bill for an act implementing the citizen participation fund, which may be a part of an act adopting petroleum management law.

Such act shall provide a citizenship participation structure complying with the requirements of this Section 36 and shall, in relation to such citizen participation, regulate the administration of the fund, specify the functions and duties of the trustee and provide particulars on the uses and disbursements of moneys from the fund.

CORLE also submitted that the three-year period will soon expire through the effluxion of time and the agencies authorized to draft this bill for enactment into law have not done so; their conduct implying that in the face of Section 36 of “The Petroleum Act Amendments of 2019” there is no need for this new bill as the citizens no longer have a right to five percent (5%) interest in the revenues of petroleum agreements.

CORLE also contended that the only interpretation of Section 36 of “The Petroleum Acts Amendments of 2019” is that it repeals Section 36 of the “2014 Petroleum Reform Law” and substitutes for Section 36 of the “2014 Petroleum Reform Law”. As a basis for this submission, CORLE extended its argument by saying that subsection “b” of Section 36 of “The Petroleum Act Amendments of 2019” is the only subsection of Section 36 of the “2014 Petroleum Reform Law”, which was retained; all other subsections of Section 36 of the “2014 Petroleum Reform Law” were omitted from Section 36 of “The Petroleum Act Amendments of 2019”.

NOCAL/LPRA Argued Contrary

The National Oil Company of Liberia (NOCAL) and the Liberia Petroleum Regulatory Authority contended that from the plain language of subsection “a” of Section 36 of “The Petroleum Act Amendments of 2019”, its provisions are in addition to whatever is provided in Section 36 of the “2014 Petroleum Reform Law”.

NOCAL and the Authority also substantiated their submissions by referring to the form petroleum agreement on their websites, which provide for both five percent (5%) revenues from all petroleum agreements for Liberian citizens and five percent (5%) equity interest for Liberian-owned companies. While this form of petroleum agreement was not readily available to the Judiciary Committee, CORLE did not dispute that submission.

The Committee’s Analysis

The Judiciary Committee, having reviewed the complaint and testimonies, concluded that by enacting “The Petroleum Act Amendments of 2019” the Legislature did not intend to deprive citizens of the right to five percent (5%) of the revenues from petroleum agreements.

According to the Committee, in addition to the five percent of the revenues from petroleum agreements for Liberian citizens, the Legislature intended merely to grant to companies owned by Liberians the right to five percent in the equity of petroleum companies engaged in the exploitation of petroleum reserves of Liberia.

This means that both the provisions of Section 36 of the “2014 Petroleum Reform Act” and Section 36 of “The Petroleum Act Amendments of 2019” can stand together and the repetition of Section 36.7 of the “2014 Petroleum Reform Act” as Section 36.b of “The Petroleum Act Amendments of 2019” does not vitiate from the rights of citizens to five percent (5%) of the revenues from all petroleum agreements.

However, the Committee recommended that the Minister of Finance and Development Planning, the Director General of the Liberia Revenue Authority and the Director General of the Liberia Petroleum Regulatory Authority be invited to show cause, if any, why the bill mandated to be drafted and submitted to the Legislature for enactment into law, which would provide the procedure and mechanism for the enjoyment of the right to five percent (5%) of the revenues from petroleum agreements by Liberian citizens has not been submitted to the Legislature when the three-year limitation period for the enactment of such law will soon expire.

However, the Senate Plenary concluded that it is not the responsibility of the agencies named to draft laws but the Legislature, therefore, the Judiciary Committee was mandated to draft the legislation.

The Judiciary Committee report was unanimously signed. The Committee comprises: Cllr. H. Varney G. Sherman, Chairperson; Sen. Morris G. Saytumah, vice chairperson; Sen. Cllr. Augustine Chea, member; Sen. Cllr. Stephen A. H. Zargo, member; Sen. Atty. Emmanuel Nuquay, member; Sen. Numene T. H. Bartekwa, member and Sen. Abraham Darius Dillon, member.