Advocacy

Call For Engagement

COALITION OF ENVIRONMENTAL ORGANISATIONS INTERROGATING THE LEGALITY AND MORALITY OF CONVERTING GAS FLARING TO REVENUE STREAM IN THE OIL AND GAS SECTOR

A Call on His Excellency Bola Ahmed Tinubu GCFR, to Review Executive Order 9 and Exclude Gas Flare Penalties from Revenues Accruable to the Federation Account

BACKGROUND AND THE PROBLEM
Decades of oil and gas exploitation in Nigeria’s Niger Delta have resulted in extensive environmental degradation and public health challenges. A seminal study by Ologunorisa, Temi (2001), published in The International Journal of Sustainable Development & World Ecology, documents the cumulative impacts of gas flaring, including:

Declining agricultural productivity;
Depressed flowering and fruiting of crops such as okro and oil palm;
Increased air pollution and soil and rainwater acidification;
Accelerated corrosion of residential infrastructure, particularly roofing materials;
Elevated concentrations of sulphates, nitrates, and dissolved solids;
Rising incidence of skin and respiratory illnesses; and
Deepening socioeconomic hardship within host communities.

Despite Section 104 of the Petroleum Industry Act (PIA) 2021, which prohibits gas flaring except under strictly regulated circumstances, routine flaring persists at significant levels, exposing host communities to sustained environmental and health risks.
While Executive Order 9 was introduced as part of broader fiscal transparency reforms, its classification of gas flare penalties as revenues payable into the Federation Account raises serious legal, environmental, and policy concerns.
Gas flare penalties, imposed and collected by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), are designed primarily as regulatory deterrents and environmental sanctions, not as income streams for national revenue distribution.
This development therefore raises a fundamental policy question:
Are gas flare penalties intended to generate revenue, or to discourage environmental violations?
Treating environmental sanctions as fiscal revenue risks creating perverse incentives that undermine Nigeria’s environmental protection, climate commitments, and host community rights.

LEGAL AND POLICY CONCERNS

1. Contradiction with the Petroleum Industry Act (PIA)
The PIA clearly conceptualizes gas flare payments as deterrence and remediation mechanisms, not distributable national revenue.
2. Conflict with Environmental Justice Principles
Communities that bear the environmental and health burden of gas flaring risk exclusion from direct remediation benefits when penalties are absorbed into general federal revenue.
3. Erosion of Deterrence Value
When penalties become predictable revenue sources, they risk normalizing non-compliance rather than compelling operators to eliminate flaring.
4. Misalignment with Energy Transition Commitments
Nigeria’s climate and energy transition obligations require the elimination of routine flaring, not its monetization.

OBJECTIVES OF THE ENGAGEMENT
Civil Society Organizations (CSOs) seek constructive engagement with relevant institutions to:

Advocate for the removal of gas flare penalties from revenue classifications under Executive Order 9;
Reinforce the legal intent of gas flare penalties as environmental deterrents;

Promote transparent and accountable deployment of accumulated penalties for host community remediation, consistent with the PIA;
Strengthen regulatory enforcement toward the elimination of routine gas flaring;

Encourage investment in gas commercialization, gas-to-power, and other sustainable alternatives.

ADVOCACY EXPECTED OUTCOMES
1. Presidential Action
Review Executive Order 9 to exclude gas flare penalties from revenues payable into the Federation Account.
2. Host Community Remediation
Secure the release and transparent deployment of accumulated gas flare penalties for environmental remediation and development programmes in host communities.
3. Inclusive Oversight
Ensure the participation of host communities, CSOs, and independent observers in the utilization of gas flare penalty funds.
4. Strengthened Deterrence Framework
Advocate for increased penalties, noting that Nigeria’s current flaring penalties remain comparatively low by global standards.
5. Compliance Accountability
Investigate operator compliance levels and potential defaults as documented in NEITI and related industry reports.
6. Sustainable Alternatives
Promote gas commercialization, gas-to-electricity projects, and clean energy investments as pathways to eliminate routine flaring.

ABOUT GAS FLARE PENALTIES
Data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) indicate that oil and gas companies paid
approximately ₦289.306 billion in gas flare penalties between January and November 2025, representing a 125.27% increase from ₦128.424 billion recorded during the same period in 2024.
These penalties accounted for approximately 3.07% of the Commission’s total collections of ₦9.411 trillion during the review period.
The rising volume of penalties reflects continued flaring activities and underscores the urgent need to reposition penalties as enforcement instruments, not fiscal revenue sources.
CALL FOR NATIONAL ENGAGEMENT
Environmental organizations and allied civil society groups call for urgent national dialogue on:
1. The legality of treating environmental penalties as distributable revenue;
2. The moral implications of monetizing environmental harm borne by host communities; and
3. The imperative to align fiscal policy with environmental justice, climate responsibility, and sustainable development.

TECHNICAL COMMITTEE
There is a technical committee made up of professionals Niger Delta environmental activists, civil society practitioners, legal experts and media consultants etc. The committee is made up of sub committees to drive the engagement process. The sub committee are:
1. Advocacy and Legal Engagement
2. Contacts & Mobilisation
3. Community Engagement &Relations
4. Media Engagement

An Analytical Framework and Recommendations for Host Community Access and Utilization

1. Why Global Standards Matter for Nigeria
Routine gas flaring remains a global environmental and climate emergency. The World Bank estimates that penalties succeed only when they are high enough to make flaring economically unattractive compared to investment in capture, monetization, or utilization. In Nigeria, current penalties (approximately $2 per 28.3 standard cubic metres under the 2018 Regulations) are widely regarded as too low to deter operators, resulting in continued flaring despite Section 104 of the Petroleum Industry Act (PIA) 2021. Executive Order 9’s diversion of these penalties into the Federation Account further undermines the PIA’s intent. Global leaders treat penalties as environmental sanctions, not revenue streams.

2. International Regulatory Benchmarks (Comparative Overview)

Jurisdiction	Penalty Structure	Penalty Level (approx.)	Fund Destination	Community Access Mechanism	Enforcement Outcome
Norway	CO₂-equivalent tax on flared gas + strict prohibition of routine flaring	~US$69 per tonne CO₂ (2023)	Dedicated environmental and climate funds	Multi-stakeholder oversight; direct community projects	Near-zero routine flaring
Canada (Alberta)	Volume-based fees + escalating royalties + non-compliance fines	Tiered penalties + gas capture royalties	Conservation and community development funds	Provincial boards with local representation	70–80% reduction in solution gas flaring
United States (BLM/EPA)	Royalties on flared gas + capture targets (85% → 98%) + $1,000+ per violation	Market-value royalties + daily fines	Mitigation funds & community health/environmental restoration	Federal-state-tribal trust mechanisms with audits	Progressive reduction + innovation
Brazil	Strict prohibition except emergencies; heavy administrative fines	Substantial fines (enforced on Petrobras)	Environmental remediation funds	Participatory governance with local communities	Significant fines collected
World Bank ZRF Standard	Recommended high, inflation-indexed penalties + non-monetary sanctions	Sufficient to exceed cost of flare reduction	Ring-fenced remediation/infrastructure funds	Inclusive oversight involving affected communities	Global benchmark for 2030 target

3. Core Global Principles for Effective Gas Flaring Penalties
• Deterrence Over Revenue: Penalties must make flaring the most expensive option (World Bank GGFR recommendation).
• Ring-Fenced Funds: 100% of penalties must flow into dedicated funds (e.g., Midstream/Downstream Infrastructure Fund in Nigeria’s PIA model) — not the Federation Account.
• Transparency and Escalation: Real-time satellite monitoring (VIIRS), mandatory daily reporting, escalating fines for repeat offenders, and automatic royalty payments on flared volumes.
• Non-Monetary Sanctions: Suspension of operations, licence revocation, or mandatory gas-to-power redirection for chronic violators.
• Carbon Pricing Alignment: Penalties should align with global carbon markets (e.g., equivalent to EU ETS or Norwegian CO₂ tax).

4. How Host Communities Should Access and Utilize Penalty Funds
Global best practice demands that communities — the primary victims of flaring — have direct, transparent, and participatory access to penalty funds. Recommended mechanisms include:
A. Governance Structure
• Establish Host Community Penalty Trusts (independent legal entities) governed by a multi-stakeholder board: 40% host community representatives, 30% CSOs/NGOs, 20% state/regulatory agencies, 10% independent auditors.
• Annual public audits published online with community verification rights.
• Funds ring-fenced and protected from diversion (as currently threatened by Executive Order 9).

B. Access Pathways for Communities

Direct Project Funding: Communities submit proposals for remediation (soil/water restoration, health clinics, clean water, reforestation).
Participatory Budgeting: Annual town-hall meetings where communities prioritize projects (agriculture recovery, skill training, gas-to-power mini-grids)
Automatic Allocation Formula: Minimum 70–80% of penalties from a specific field must be allocated to its host communities within 90 days of collection.
Monitoring & Oversight Fund: 10% reserved for independent satellite monitoring and community-led environmental watchdogs.

C. Priority Uses of Funds (Aligned with Global Standards)

• Environmental Remediation (40–50%): Soil decontamination, acid rain reversal, mangrove restoration, air-quality improvement.
• Public Health (20–25%): Respiratory/skin disease treatment centres, medical outreach, pollution-related compensation.
• Sustainable Livelihoods (15–20%): Agricultural revival (okro/oil palm recovery), alternative income projects, clean energy access.
• Infrastructure & Gas Monetization (10–15%): Gas-to-power plants, mini-grids, and small-scale gas utilization projects that create local jobs.
• Capacity Building (5–10%): Training in environmental monitoring, legal rights, and enterprise development.

5. CEONG Recommendations for Nigeria
1. Immediately amend Executive Order 9 to restore full compliance with PIA Section 104.
2. Raise penalty rates to global standards (minimum equivalent to $10–20 per 28.3 m³, indexed annually).
3. Enact a Host Community Gas Flare Penalty Trust Fund Act incorporating the governance and access mechanisms above.
4. Mandate real-time digital reporting and satellite verification by NUPRC.
5. Integrate with Nigeria’s ZRF 2030 commitment and climate obligations.

By adopting these global standards, Nigeria can transform gas flaring penalties from a failed revenue tool into a powerful engine for environmental justice, community development, and sustainable energy. CEONG stands ready to partner with government, regulators, and international institutions to implement this framework.
Join the campaign. Demand penalties for the people — not the Federation Account.
Sources: World Bank GGFR (2022–2025), Zero Routine Flaring by 2030 Initiative, BLM/EPA regulations, Norwegian Petroleum Directorate, and comparative regulatory reviews.