- This is what the gas flare penalty is and should be amended immediately
THE Federal Government may have finally found the answer to the riddle behind the flaring of associated gas despite the so-called penalty imposed on international oil companies. In an interview published by Bloomberg, Minister of Finance Kemi Adeosun was reported to have said: “In the legal framework for the gas-flaring penalty, it was drafted as a charge. A charge is tax deductible.
“So, what do the international oil companies do? They flare; they pay the charge on which they get tax relief. That’s just bad drafting.”
She let it be known that the Federal Government is approaching lawmakers to amend the law and have the word “penalty” replace “charge” even as she stressed that – “Just that one word has potentially cost us billions of dollars.”
Interpreted: the difference between the payment defined in the legal framework as a “charge” (and hence tax deductible), and “penalty” (which is non-tax deductible) is equal to what the flawed gas policy grants with one hand being taken away by the sloppy legal draftsmanship of the justice ministry, with the other.
Were our country not one where anything can happen, the demand citizens ought to be making of the Federal Government is that those behind the scandal be unmasked as a first step towards investigation and possible prosecution. It should ordinarily embarrass all concerned that a law which purports to fly in the face of the clear intendments of the government’s anti-flare policy could pass undetected before its signing into law.
The minister is right to raise the alarm about something that serious – involving potential losses of billions of dollars in revenue. However, we see the issue far more broadly than the dollars and naira losses being raised by the minister. The revelation, in fact, raises troubling questions about the competence of those individuals charged with the duty of crafting our laws on the one hand and their fidelity to the public cause on the other. Is it that the officials could not see the big picture of the devastation caused by the practice on the environment and the imperative to stop it? Could it be a case of the lucre playing a good part in its making? Or, is it simply a case of the drafters not knowing better?
To the extent that none of these casts the justice ministry in good light, the least the Federal Government can do at this time is to move swiftly to get the National Assembly to amend the law. Although that would not necessarily translate to an immediate flare-out, it would certainly be an additional disincentive to the environmentally deleterious practice.
But then, the above is only one half of the picture. The other half is the scandalously low gas flare penalty charge imposed on the operators. The National Gas Policy, approved by the Federal Government last year, admitted that much when it acknowledged that the charge, currently fixed at N10 (approximately US $0.03) per 1,000 standard cubic feet of associated gas flared has “made gas flaring a much cheaper option for operators compared to the alternatives of marketing or re-injection”.
If, as the government has made clear its intention in the National Gas Policy, to “increase the gas flaring penalty to an appropriate level sufficient to dis-incentivise the practice”, now seems the best time to do it. As for the “other measures to encourage efficient gas utilisation” enunciated in the policy, the measures, in our view, will most certainly benefit from closer consultation and collaboration between the government and the oil companies, particularly in the area of investments in gas utilisation infrastructure.
